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

    <DOC>

                                                     Union Calendar No. 302
    115th CONGRESS
      1st Session
                                     H. R. 1

                              [Report No. 115-409]

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

    _______________________________________________________________________

                        IN THE HOUSE OF REPRESENTATIVES

                                November 2, 2017

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

                               November 13, 2017

    Reported with amendments, committed to the Committee of the Whole House
              on the State of the Union, and ordered to be printed
     [Strike out all after the enacting clause and insert the part printed
                                   in italic]
        [For text of introduced bill, see copy of bill as introduced on
                               November 2, 2017]

    _______________________________________________________________________

                                     A BILL

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

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

    SECTION 1. SHORT TITLE; ETC.

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

    Sec. 1. Short title; etc.

                      TITLE I--TAX REFORM FOR INDIVIDUALS

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

    Sec. 1001. Reduction and simplification of individual income tax rates.
    Sec. 1002. Enhancement of standard deduction.
    Sec. 1003. Repeal of deduction for personal exemptions.
    Sec. 1004. Maximum rate on business income of individuals.
    Sec. 1005. Conforming amendments related to simplification of
                                individual income tax rates.

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

    Sec. 1101. Enhancement of child tax credit and new family tax credit.
    Sec. 1102. Repeal of nonrefundable credits.
    Sec. 1103. Refundable credit program integrity.
    Sec. 1104. Procedures to reduce improper claims of earned income
                                credit.
    Sec. 1105. Certain income disallowed for purposes of the earned income
                                tax credit.

         Subtitle C--Simplification and Reform of Education Incentives

    Sec. 1201. American opportunity tax credit.
    Sec. 1202. Consolidation of education savings rules.
    Sec. 1203. Reforms to discharge of certain student loan indebtedness.
    Sec. 1204. Repeal of other provisions relating to education.
    Sec. 1205. Rollovers between qualified tuition programs and qualified
                                ABLE programs.

              Subtitle D--Simplification and Reform of Deductions

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

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

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

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

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

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

    Sec. 1601. Increase in credit against estate, gift, and generation-
                                skipping transfer tax.
    Sec. 1602. Repeal of estate and generation-skipping transfer taxes.

                    TITLE II--ALTERNATIVE MINIMUM TAX REPEAL

    Sec. 2001. Repeal of alternative minimum tax.

                         TITLE III--BUSINESS TAX REFORM

                             Subtitle A--Tax Rates

    Sec. 3001. Reduction in corporate tax rate.

                           Subtitle B--Cost Recovery

    Sec. 3101. Increased expensing.

                       Subtitle C--Small Business Reforms

    Sec. 3201. Expansion of section 179 expensing.
    Sec. 3202. Small business accounting method reform and simplification.
    Sec. 3203. Small business exception from limitation on deduction of
                                business interest.
    Sec. 3204. Modification of treatment of S corporation conversions to C
                                corporations.

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

    Sec. 3301. Interest.
    Sec. 3302. Modification of net operating loss deduction.
    Sec. 3303. Like-kind exchanges of real property.
    Sec. 3304. Revision of treatment of contributions to capital.
    Sec. 3305. Repeal of deduction for local lobbying expenses.
    Sec. 3306. Repeal of deduction for income attributable to domestic
                                production activities.
    Sec. 3307. Entertainment, etc. expenses.
    Sec. 3308. Unrelated business taxable income increased by amount of
                                certain fringe benefit expenses for which
                                deduction is disallowed.
    Sec. 3309. Limitation on deduction for FDIC premiums.
    Sec. 3310. Repeal of rollover of publicly traded securities gain into
                                specialized small business investment
                                companies.
    Sec. 3311. Certain self-created property not treated as a capital
                                asset.
    Sec. 3312. Repeal of special rule for sale or exchange of patents.
    Sec. 3313. Repeal of technical termination of partnerships.
    Sec. 3314. Recharacterization of certain gains in the case of
                                partnership profits interests held in
                                connection with performance of investment
                                services.
    Sec. 3315. Amortization of research and experimental expenditures.
    Sec. 3316. Uniform treatment of expenses in contingency fee cases.

                     Subtitle E--Reform of Business Credits

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

                           Subtitle F--Energy Credits

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

                            Subtitle G--Bond Reforms

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

                             Subtitle H--Insurance

    Sec. 3701. Net operating losses of life insurance companies.
    Sec. 3702. Repeal of small life insurance company deduction.
    Sec. 3703. Surtax on life insurance company taxable income.
    Sec. 3704. Adjustment for change in computing reserves.
    Sec. 3705. Repeal of special rule for distributions to shareholders
                                from pre-1984 policyholders surplus
                                account.
    Sec. 3706. Modification of proration rules for property and casualty
                                insurance companies.
    Sec. 3707. Modification of discounting rules for property and casualty
                                insurance companies.
    Sec. 3708. Repeal of special estimated tax payments.

                            Subtitle I--Compensation

    Sec. 3801. Modification of limitation on excessive employee
                                remuneration.
    Sec. 3802. Excise tax on excess tax-exempt organization executive
                                compensation.
    Sec. 3803. Treatment of qualified equity grants.

            TITLE IV--TAXATION OF FOREIGN INCOME AND FOREIGN PERSONS

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

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

         Subtitle B--Modifications Related to Foreign Tax Credit System

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

                Subtitle C--Modification of Subpart F Provisions

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

                     Subtitle D--Prevention of Base Erosion

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

       Subtitle E--Provisions Related to Possessions of the United States

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

                    Subtitle F--Other International Reforms

    Sec. 4501. Restriction on insurance business exception to passive
                                foreign investment company rules.

                         TITLE V--EXEMPT ORGANIZATIONS

                   Subtitle A--Unrelated Business Income Tax

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

                            Subtitle B--Excise Taxes

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

           Subtitle C--Requirements for Organizations Exempt From Tax

    Sec. 5201. 501(c)(3) organizations permitted to make statements
                                relating to political campaign in ordinary
                                course of activities.
    Sec. 5202. Additional reporting requirements for donor advised fund
                                sponsoring organizations.

                      TITLE I--TAX REFORM FOR INDIVIDUALS

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

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

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

    ``SEC. 1. TAX IMPOSED.

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

    SEC. 1002. ENHANCEMENT OF STANDARD DEDUCTION.

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

    SEC. 1003. REPEAL OF DEDUCTION FOR PERSONAL EXEMPTIONS.

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

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

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

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

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

        ``(a) Reduction in Tax to Achieve 25 Percent Maximum Rate.--The tax
    imposed by section 1 shall be reduced by the sum of--
                ``(1) 10 percent of the lesser of--
                        ``(A) qualified business income, or
                        ``(B) the excess (if any) of--
                                ``(i) taxable income reduced by net capital
                            gain (as defined in section 1(h)(11)(A)), over
                                ``(ii) the maximum dollar amount for the
                            25-percent rate bracket which applies to the
                            taxpayer under section 1 for the taxable year,
                            and
                ``(2) 4.6 percent of the excess (if any) of--
                        ``(A) the lesser of--
                                ``(i) qualified business income, or
                                ``(ii) the excess (if any) determined under
                            paragraph (1)(B), over
                        ``(B) the excess of--
                                ``(i) the maximum dollar amount for the 35-
                            percent rate bracket which applies to the
                            taxpayer under section 1 for the taxable year,
                            over
                                ``(ii) the maximum dollar amount for the
                            25-percent rate bracket which applies to the
                            taxpayer under section 1 for the taxable year.
        ``(b) Qualified Business Income.--For purposes of this section, the
    term `qualified business income' means the excess (if any) of--
                ``(1) the sum of--
                        ``(A) 100 percent of any net business income
                    derived from any passive business activity, plus
                        ``(B) the capital percentage of any net business
                    income derived from any active business activity, over
                ``(2) the sum of--
                        ``(A) 100 percent of any net business loss derived
                    from any passive business activity,
                        ``(B) except as provided in subsection (e)(3)(A),
                    30 percent of any net business loss derived from any
                    active business activity, plus
                        ``(C) any carryover business loss determined for
                    the preceding taxable year.
        ``(c) Determination of Net Business Income or Loss.--For purposes
    of this section--
                ``(1) In general.--Net business income or loss shall be
            determined with respect to any business activity by
            appropriately netting items of income, gain, deduction, and
            loss with respect to such business activity.
                ``(2) Wages, etc.--Any wages (as defined in section 3401),
            payments described in subsection (a) or (c) of section 707, or
            directors' fees received by the taxpayer which are properly
            attributable to any business activity shall be taken into
            account under paragraph (1) as an item of income with respect
            to such business activity.
                ``(3) Exception for certain investment-related items.--
            There shall not be taken into account under paragraph (1)--
                        ``(A) any item of short-term capital gain, short-
                    term capital loss, long-term capital gain, or long-term
                    capital loss,
                        ``(B) any dividend, income equivalent to a
                    dividend, or payment in lieu of dividends described in
                    section 954(c)(1)(G),
                        ``(C) any interest income other than interest
                    income which is properly allocable to a trade or
                    business,
                        ``(D) any item of gain or loss described in
                    subparagraph (C) or (D) of section 954(c)(1) (applied
                    by substituting `business activity' for `controlled
                    foreign corporation'),
                        ``(E) any item of income, gain, deduction, or loss
                    taken into account under section 954(c)(1)(F)
                    (determined without regard to clause (ii) thereof and
                    other than items attributable to notional principal
                    contracts entered into in transactions qualifying under
                    section 1221(a)(7)),
                        ``(F) any amount received from an annuity which is
                    not received in connection with the trade or business
                    of the business activity, and
                        ``(G) any item of deduction or loss properly
                    allocable to an amount described in any of the
                    preceding subparagraphs.
                ``(4) Application of restrictions applicable to determining
            taxable income.--Net business income or loss shall be
            appropriately adjusted so as only to take into account any
            amount of income, gain, deduction, or loss to the extent such
            amount affects the determination of taxable income for the
            taxable year.
                ``(5) Carryover business loss.--For purposes of subsection
            (b)(2)(C), the carryover business loss determined for any
            taxable year is the excess (if any) of the sum described in
            subsection (b)(2) over the sum described in subsection (b)(1)
            for such taxable year.
        ``(d) Passive and Active Business Activity.--For purposes of this
    section--
                ``(1) Passive business activity.--The term `passive
            business activity' means any passive activity as defined in
            section 469(c) determined without regard to paragraphs (3) and
            (6)(B) thereof.
                ``(2) Active business activity.--The term `active business
            activity' means any business activity which is not a passive
            business activity.
                ``(3) Business activity.--The term `business activity'
            means any activity (within the meaning of section 469) which
            involves the conduct of any trade or business.
        ``(e) Capital Percentage.--For purposes of this section--
                ``(1) In general.--Except as otherwise provided in this
            section, the term `capital percentage' means 30 percent.
                ``(2) Increased percentage for capital-intensive business
            activities.--In the case of a taxpayer who elects the
            application of this paragraph with respect to any active
            business activity (other than a specified service activity),
            the capital percentage shall be equal to the applicable
            percentage (as defined in subsection (f)) for each taxable year
            with respect to which such election applies. Any election made
            under this paragraph shall apply to the taxable year for which
            such election is made and each of the 4 subsequent taxable
            years. Such election shall be made not later than the due date
            (including extensions) for the return of tax for the taxable
            year for which such election is made, and, once made, may not
            be revoked.
                ``(3) Treatment of specified service activities.--
                        ``(A) In general.--In the case of any active
                    business activity which is a specified service
                    activity--
                                ``(i) the capital percentage shall be 0
                            percent, and
                                ``(ii) subsection (b)(2)(B) shall be
                            applied by substituting `0 percent' for `30
                            percent'.
                        ``(B) Exception for capital-intensive specified
                    service activities.--If--
                                ``(i) the taxpayer elects the application
                            of this subparagraph with respect to such
                            activity for any taxable year, and
                                ``(ii) the applicable percentage (as
                            defined in subsection (f)) with respect to such
                            activity for such taxable year is at least 10
                            percent,
                    then subparagraph (A) shall not apply and the capital
                    percentage with respect to such activity shall be equal
                    to such applicable percentage.
                        ``(C) Specified service activity.--The term
                    `specified service activity' means any activity
                    involving the performance of services described in
                    section 1202(e)(3)(A), including investing, trading, or
                    dealing in securities (as defined in section
                    475(c)(2)), partnership interests, or commodities (as
                    defined in section 475(e)(2)).
                ``(4) Reduction in capital percentage in certain cases.--
            The capital percentage (determined after the application of
            paragraphs (2) and (3)) with respect to any active business
            activity shall not exceed 1 minus the quotient (not greater
            than 1) of--
                        ``(A) any amounts described in subsection (c)(2)
                    which are taken into account in determining the net
                    business income derived from such activity, divided by
                        ``(B) such net business income.
        ``(f) Applicable Percentage.--For purposes of this section--
                ``(1) In general.--The term `applicable percentage' means,
            with respect to any active business activity for any taxable
            year, the quotient (not greater than 1) of--
                        ``(A) the specified return on capital with respect
                    to such activity for such taxable year, divided by
                        ``(B) the taxpayer's net business income derived
                    from such activity for such taxable year.
                ``(2) Specified return on capital.--The term `specified
            return on capital' means, with respect to any active business
            activity referred to in paragraph (1), the excess of--
                        ``(A) the product of--
                                ``(i) the deemed rate of return for the
                            taxable year, multiplied by
                                ``(ii) the asset balance with respect to
                            such activity for such taxable year, over
                        ``(B) an amount equal to the interest which is paid
                    or accrued, and for which a deduction is allowed under
                    this chapter, with respect to such activity for such
                    taxable year.
                ``(3) Deemed rate of return.--The term `deemed rate of
            return' means, with respect to any taxable year, the Federal
            short-term rate (determined under section 1274(d) for the month
            in which or with which such taxable year ends) plus 7
            percentage points.
                ``(4) Asset balance.--
                        ``(A) In general.--The asset balance with respect
                    to any active business activity referred to in
                    paragraph (1) for any taxable year equals the
                    taxpayer's adjusted basis of any property described in
                    section 1221(a)(2) which is used in connection with
                    such activity as of the end of the taxable year
                    (determined without regard to sections 168(k) and 179).
                        ``(B) Application to activities carried on through
                    partnerships and s corporations.--In the case of any
                    active business activity carried on through a
                    partnership or S corporation, the taxpayer shall take
                    into account such taxpayer's distributive or pro rata
                    share (as the case may be) of the asset balance with
                    respect to such activity as determined with respect to
                    such partnership or S corporation under subparagraph
                    (A) (applied by substituting `the partnership's or S
                    corporation's adjusted basis' for `the taxpayer's
                    adjusted basis').
        ``(g) Reduced Rate for Small Businesses With Net Active Business
    Income.--
                ``(1) In general.--The tax imposed by section 1 shall be
            reduced by 3 percent of the excess (if any) of--
                        ``(A) the least of--
                                ``(i) qualified active business income,
                                ``(ii) taxable income reduced by net
                            capital gain (as defined in section
                            1(h)(11)(A)), or
                                ``(iii) the 9-percent bracket threshold
                            amount, over
                        ``(B) the excess (if any) of taxable income over
                    the applicable threshold amount.
                ``(2) Phase-in of rate reduction.--In the case of any
            taxable year beginning before January 1, 2022, paragraph (1)
            shall be applied by substituting for `3 percent'--
                        ``(A) in the case of any taxable year beginning
                    after December 31, 2017, and before January 1, 2020, `1
                    percent', and
                        ``(B) in the case of any taxable year beginning
                    after December 31, 2019, and before January 1, 2022, `2
                    percent'.
                ``(3) Qualified active business income.--For purposes of
            this subsection, the term `qualified active business income'
            means the excess (if any) of--
                        ``(A) any net business income derived from any
                    active business activity, over
                        ``(B) any net business loss derived from any active
                    business activity.
                ``(4) 9-percent bracket threshold amount.--For purposes of
            this subsection, the term `9-percent bracket threshold amount'
            means--
                        ``(A) in the case of a joint return or surviving
                    spouse, $75,000,
                        ``(B) in the case of an individual who is the head
                    of a household (as defined in section 2(b)), \3/4\ of
                    the amount in effect for the taxable year under
                    subparagraph (A), and
                        ``(C) in the case of any other individual, \1/2\ of
                    the amount in effect for the taxable year under
                    subparagraph (A).
                ``(5) Applicable threshold amount.--For purposes of this
            subsection, the term `applicable threshold amount' means--
                        ``(A) in the case of a joint return or surviving
                    spouse, $150,000,
                        ``(B) in the case of an individual who is the head
                    of a household (as defined in section 2(b)), \3/4\ of
                    the amount in effect for the taxable year under
                    subparagraph (A), and
                        ``(C) in the case of any other individual, \1/2\ of
                    the amount in effect for the taxable year under
                    subparagraph (A).
                ``(6) Estates and trusts.--Paragraph (1) shall not apply to
            any estate or trust.
                ``(7) Inflation adjustment.--In the case of any taxable
            year beginning after 2018, the dollar amounts in paragraphs
            (4)(A) and (5)(A) shall each be increased by an amount equal
            to--
                        ``(A) such dollar amount, multiplied by
                        ``(B) the cost-of-living adjustment determined
                    under subsection (c)(2)(A) for the calendar year in
                    which the taxable year begins, determined by
                    substituting `calendar year 2017' for `calendar year
                    2016' in clause (ii) thereof.
            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.
        ``(h) Regulations.--The Secretary may issue such regulations or
    other guidance as may be necessary or appropriate to carry out the
    purposes of this section, including regulations or other guidance--
                ``(1) which ensures that no amount is taken into account
            under subsection (f)(4) with respect to more than one activity,
            and
                ``(2) which treats all specified service activities of the
            taxpayer as a single business activity for purposes of this
            section to the extent that such activities would be treated as
            a single employer under subsection (a) or (b) of section 52 or
            subsection (m) or (o) of section 414.
        ``(i) References.--Any reference in this title to section 1 shall
    be treated as including a reference to this section unless the context
    of such reference clearly indicates otherwise.''.
        (b) 25 Percent Rate for Certain Dividends of Real Estate Investment
    Trusts and Cooperatives.--Section 1(h), as amended by the preceding
    provisions of this Act, is amended by adding at the end the following
    new paragraph:
                ``(13) 25 percent rate for certain dividends of real estate
            investment trusts and cooperatives.--
                        ``(A) In general.--For purposes of this subsection,
                    net capital gain (as defined in paragraph (11)) and
                    unrecaptured section 1250 gain (as defined in paragraph
                    (6)) shall each be increased by specified dividend
                    income.
                        ``(B) Specified dividend income.--For purposes of
                    this paragraph, the term `specified dividend income'
                    means--
                                ``(i) in the case of any dividend received
                            from a real estate investment trust, the
                            portion of such dividend which is neither--
                                        ``(I) a capital gain dividend (as
                                    defined in section 852(b)(3)), nor
                                        ``(II) taken into account in
                                    determining qualified dividend income
                                    (as defined in paragraph (11)), and
                                ``(ii) any dividend which is includible in
                            gross income and which is received from an
                            organization or corporation described in
                            section 501(c)(12) or 1381(a).''.
        (c) Clerical Amendment.--The table of sections for part I of
    subchapter A of chapter 1 is amended by inserting after the item
    relating to section 3 the following new item:

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

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

        (a) Amendments Related to Modification of Inflation Adjustment.--
                (1) Section 32(b)(2)(B)(ii)(II) is amended by striking
            ``section 1(f)(3) for the calendar year in which the taxable
            year begins determined by substituting `calendar year 2008' for
            `calendar year 1992' in subparagraph (B) thereof'' and
            inserting ``section 1(c)(2)(A) for the calendar year in which
            the taxable year begins determined by substituting `calendar
            year 2008' for `calendar year 2016' in clause (ii) thereof''.
                (2) Section 32(j)(1)(B) is amended--
                        (A) in the matter preceding clause (i), by striking
                    ``section 1(f)(3)'' and inserting ``section
                    1(c)(2)(A)'',
                        (B) in clause (i), by striking ``for `calendar year
                    1992' in subparagraph (B) thereof'' and inserting ``for
                    `calendar year 2016' in clause (ii) thereof'', and
                        (C) in clause (ii), by striking ``for `calendar
                    year 1992' in subparagraph (B) of such section 1'' and
                    inserting ``for `calendar year 2016' in clause (ii)
                    thereof''.
                (3) Section 36B(b)(3)(A)(ii)(II) is amended by striking
            ``consumer price index'' and inserting ``C-CPI-U (as defined in
            section 1(c))''.
                (4) Section 41(e)(5)(C) is amended to read as follows:
                        ``(C) Cost-of-living adjustment defined.--
                                ``(i) In general.--The cost-of-living
                            adjustment for any calendar year is the cost-
                            of-living adjustment for such calendar year
                            determined under section 1(c)(2)(A), by
                            substituting `calendar year 1987' for `calendar
                            year 2016' in clause (ii) thereof.
                                ``(ii) Special rule where base period ends
                            in a calendar year other than 1983 or 1984.--If
                            the base period of any taxpayer does not end in
                            1983 or 1984, clause (i) shall be applied by
                            substituting the calendar year in which such
                            base period ends for 1987.''.
                (5) Section 42(e)(3)(D)(ii) is amended by striking
            ``section 1(f)(3) for such calendar year by substituting
            `calendar year 2008' for `calendar year 1992' in subparagraph
            (B) thereof'' and inserting ``section 1(c)(2)(A) for such
            calendar year by substituting `calendar year 2008' for
            `calendar year 2016' in clause (ii) thereof''.
                (6) Section 42(h)(3)(H)(i)(II) is amended by striking
            ``section 1(f)(3) for such calendar year by substituting
            `calendar year 2001' for `calendar year 1992' in subparagraph
            (B) thereof'' and inserting ``section 1(c)(2)(A) for such
            calendar year by substituting `calendar year 2001' for
            `calendar year 2016' in clause (ii) thereof''.
                (7) Section 45R(d)(3)(B)(ii) is amended by striking
            ``section 1(f)(3) for the calendar year, determined by
            substituting `calendar year 2012' for `calendar year 1992' in
            subparagraph (B) thereof'' and inserting ```section 1(c)(2)(A)
            for such calendar year, determined by substituting ``calendar
            year 2012'' for ``calendar year 2016'' in clause (ii)
            thereof'''.
                (8) Section 125(i)(2) is amended--
                        (A) by striking ``section 1(f)(3) for the calendar
                    year in which the taxable year begins by substituting
                    `calendar year 2012' for `calendar year 1992' in
                    subparagraph (B) thereof'' in subparagraph (B) and
                    inserting ``section 1(c)(2)(A) for the calendar year in
                    which the taxable year begins'', and
                        (B) by striking ``$50'' both places it appears in
                    the last sentence and inserting ``$100''.
                (9) Section 162(o)(3) is amended by inserting ``as in
            effect before enactment of the Tax Cuts and Jobs Act'' after
            ``section 1(f)(5)''.
                (10) Section 220(g)(2) is amended by striking ``section
            1(f)(3) for the calendar year in which the taxable year begins
            by substituting `calendar year 1997' for `calendar year 1992'
            in subparagraph (B) thereof'' and inserting ``section
            1(c)(2)(A) for the calendar year in which the taxable year
            begins, determined by substituting `calendar year 1997' for
            `calendar year 2016' in clause (ii) thereof''.
                (11) Section 223(g)(1) is amended by striking all that
            follows subparagraph (A) and inserting the following:
                        ``(B) the cost-of-living adjustment determined
                    under section 1(c)(2)(A) for the calendar year in which
                    the taxable year begins, determined--
                                ``(i) by substituting for `calendar year
                            2016' in clause (ii) thereof--
                                        ``(I) except as provided in clause
                                    (ii), `calendar year 1997', and
                                        ``(II) in the case of each dollar
                                    amount in subsection (c)(2)(A),
                                    `calendar year 2003', and
                                ``(ii) by substituting `March 31' for
                            `August 31' in paragraphs (5)(B) and (6)(B) of
                            section 1(c).
                    The Secretary shall publish the dollar amounts as
                    adjusted under this subsection for taxable years
                    beginning in any calendar year no later than June 1 of
                    the preceding calendar year.''.
                (12) Section 430(c)(7)(D)(vii)(II) is amended by striking
            ``section 1(f)(3) for the calendar year, determined by
            substituting `calendar year 2009' for `calendar year 1992' in
            subparagraph (B) thereof'' and inserting ``section 1(c)(2)(A)
            for the calendar year, determined by substituting `calendar
            year 2009' for `calendar year 2016' in clause (ii) thereof''.
                (13) Section 512(d)(2)(B) is amended by striking ``section
            1(f)(3) for the calendar year in which the taxable year begins,
            by substituting `calendar year 1994' for `calendar year 1992'
            in subparagraph (B) thereof''and inserting ``section 1(c)(2)(A)
            for the calendar year in which the taxable year begins,
            determined by substituting `calendar year 1994' for `calendar
            year 2016' in clause (ii) thereof''.
                (14) Section 513(h)(2)(C)(ii) is amended by striking
            ``section 1(f)(3) for the calendar year in which the taxable
            year begins by substituting `calendar year 1987' for `calendar
            year 1992' in subparagraph (B) thereof'' and inserting
            ``section 1(c)(2)(A) for the calendar year in which the taxable
            year begins, determined by substituting `calendar year 1987'
            for `calendar year 2016' in clause (ii) thereof''.
                (15) Section 831(b)(2)(D)(ii) is amended by striking
            ``section 1(f)(3) for such calendar year by substituting
            `calendar year 2013' for `calendar year 1992' in subparagraph
            (B) thereof'' and inserting ``section 1(c)(2)(A) for such
            calendar year by substituting `calendar year 2013' for
            `calendar year 2016' in clause (ii) thereof''.
                (16) Section 877A(a)(3)(B)(i)(II) is amended by striking
            ``section 1(f)(3) for the calendar year in which the taxable
            year begins, by substituting `calendar year 2007' for `calendar
            year 1992' in subparagraph (B) thereof'' and inserting
            ``section 1(c)(2)(A) for the calendar year in which the taxable
            year begins, determined by substituting `calendar year 2007'
            for `calendar year 2016' in clause (ii) thereof''.
                (17) Section 911(b)(2)(D)(ii)(II) is amended by striking
            ``section 1(f)(3) for the calendar year in which the taxable
            year begins, determined by substituting `2004' for `1992' in
            subparagraph (B) thereof'' and inserting ``section 1(c)(2)(A)
            for the calendar year in which the taxable year begins,
            determined by substituting `calendar year 2004' for `calendar
            year 2016' in clause (ii) thereof''.
                (18) Section 1274A(d)(2) is amended to read as follows:
                ``(2) Inflation adjustment.--
                        ``(A) In general.--In the case of any debt
                    instrument arising out of a sale or exchange during any
                    calendar year after 2018, each adjusted dollar amount
                    shall be increased by an amount equal to--
                                ``(i) such adjusted dollar amount,
                            multiplied by
                                ``(ii) the cost-of-living adjustment
                            determined under section 1(c)(2)(A) for such
                            calendar year, determined by substituting
                            `calendar year 2017' for `calendar year 2016'
                            in clause (ii) thereof.
                        ``(B) Adjusted dollar amounts.--For purposes of
                    this paragraph, the term `adjusted dollar amount' means
                    the dollar amounts in subsections (b) and (c), in each
                    case as in effect for calendar year 2018.
                        ``(C) Rounding.--Any increase under subparagraph
                    (A) shall be rounded to the nearest multiple of
                    $100.''.
                (19) Section 2010(c)(3)(B)(ii) is amended by striking
            ``section 1(f)(3) for such calendar year by substituting
            `calendar year 2010' for `calendar year 1992' in subparagraph
            (B) thereof'' and inserting ``section 1(c)(2)(A) for such
            calendar year, determined by substituting `calendar year 2010'
            for `calendar year 2016' in clause (ii) thereof''.
                (20) Section 2032A(a)(3)(B) is amended by striking
            ``section 1(f)(3) for such calendar year by substituting
            `calendar year 1997' for `calendar year 1992' in subparagraph
            (B) thereof'' and inserting ``section 1(c)(2)(A) for such
            calendar year, determined by substituting `calendar year 1997'
            for `calendar year 2016' in clause (ii) thereof''.
                (21) Section 2503(b)(2)(B) is amended by striking ``section
            1(f)(3) for such calendar year by substituting `calendar year
            1997' for `calendar year 1992' in subparagraph (B) thereof''
            and inserting ``section 1(c)(2)(A) for the calendar year,
            determined by substituting `calendar year 1997' for `calendar
            year 2016' in clause (ii) thereof''.
                (22) Section 4161(b)(2)(C)(i)(II) is amended by striking
            ``section 1(f)(3) for such calendar year, determined by
            substituting `2004' for `1992' in subparagraph (B) thereof''
            and inserting ``section 1(c)(2)(A) for such calendar year,
            determined by substituting `calendar year 2004' for `calendar
            year 2016' in clause (ii) thereof''.
                (23) Section 4261(e)(4)(A)(ii) is amended by striking
            ``section 1(f)(3) for such calendar year by substituting the
            year before the last nonindexed year for `calendar year 1992'
            in subparagraph (B) thereof'' and inserting ``section
            1(c)(2)(A) for such calendar year, determined by substituting
            the year before the last nonindexed year for `calendar year
            2016' in clause (ii) thereof''.
                (24) Section 4980I(b)(3)(C)(v)(II) is amended--
                        (A) by striking ``section 1(f)(3)'' and inserting
                    ``section 1(c)(2)(A)'',
                        (B) by striking ``subparagraph (B)'' and inserting
                    ``clause (ii)'', and
                        (C) by striking ``1992'' and inserting ``2016''.
                (25) Section 5000A(c)(3)(D)(ii) is amended--
                        (A) by striking ``section 1(f)(3)'' and inserting
                    ``section 1(c)(2)(A)'',
                        (B) by striking ``subparagraph (B)'' and inserting
                    ``clause (ii)'', and
                        (C) by striking ``1992'' and inserting ``2016''.
                (26) Section 6039F(d) is amended by striking ``section
            1(f)(3), except that subparagraph (B) thereof'' and inserting
            ``section 1(c)(2)(A), except that clause (ii) thereof''.
                (27) Section 6323(i)(4)(B) is amended by striking ``section
            1(f)(3) for the calendar year, determined by substituting
            `calendar year 1996' for `calendar year 1992' in subparagraph
            (B) thereof'' and inserting ``section 1(c)(2)(A) for the
            calendar year, determined by substituting `calendar year 1996'
            for `calendar year 2016' in clause (ii) thereof''.
                (28) Section 6334(g)(1)(B) is amended by striking ``section
            1(f)(3) for such calendar year, by substituting `calendar year
            1998' for `calendar year 1992' in subparagraph (B) thereof''
            and inserting ``section 1(c)(2)(A) for such calendar year,
            determined by substituting `calendar year 1999' for `calendar
            year 2016' in clause (ii) thereof''.
                (29) Section 6601(j)(3)(B) is amended by striking ``section
            1(f)(3) for such calendar year by substituting `calendar year
            1997' for `calendar year 1992' in subparagraph (B) thereof''
            and inserting ``section 1(c)(2)(A) for such calendar year by
            substituting `calendar year 1997' for `calendar year 2016' in
            clause (ii) thereof''.
                (30) Section 6651(i)(1) is amended by striking ``section
            1(f)(3) determined by substituting `calendar year 2013' for
            `calendar year 1992' in subparagraph (B) thereof'' and
            inserting ``section 1(c)(2)(A) determined by substituting
            `calendar year 2013' for `calendar year 2016' in clause (ii)
            thereof''.
                (31) Section 6721(f)(1) is amended--
                        (A) by striking ``section 1(f)(3)'' and inserting
                    ``section 1(c)(2)(A)'',
                        (B) by striking ``subparagraph (B)'' and inserting
                    ``clause (ii)'', and
                        (C) by striking ``1992'' and inserting ``2016''.
                (32) Section 6722(f)(1) is amended--
                        (A) by striking ``section 1(f)(3)'' and inserting
                    ``section 1(c)(2)(A)'',
                        (B) by striking ``subparagraph (B)'' and inserting
                    ``clause (ii)'', and
                        (C) by striking ``1992'' and inserting ``2016''.
                (33) Section 6652(c)(7)(A) is amended by striking ``section
            1(f)(3) determined by substituting `calendar year 2013' for
            `calendar year 1992' in subparagraph (B) thereof'' and
            inserting ``section 1(c)(2)(A) determined by substituting
            `calendar year 2013' for `calendar year 2016' in clause (ii)
            thereof''.
                (34) Section 6695(h)(1) is amended by striking ``section
            1(f)(3) determined by substituting `calendar year 2013' for
            `calendar year 1992' in subparagraph (B) thereof'' and
            inserting ``section 1(c)(2)(A) determined by substituting
            `calendar year 2013' for `calendar year 2016' in clause (ii)
            thereof''.
                (35) Section 6698(e)(1) is amended by striking ``section
            1(f)(3) determined by substituting `calendar year 2013' for
            `calendar year 1992' in subparagraph (B) thereof'' and
            inserting ``section 1(c)(2)(A) determined by substituting
            `calendar year 2013' for `calendar year 2016' in clause (ii)
            thereof''.
                (36) Section 6699(e)(1) is amended by striking ``section
            1(f)(3) determined by substituting `calendar year 2013' for
            `calendar year 1992' in subparagraph (B) thereof'' and
            inserting ``section 1(c)(2)(A) determined by substituting
            `calendar year 2013' for `calendar year 2016' in clause (ii)
            thereof''.
                (37) Section 7345(f)(2) is amended by striking ``section
            1(f)(3) for the calendar year, determined by substituting
            `calendar year 2015' for `calendar year 1992' in subparagraph
            (B) thereof'' and inserting ``section 1(c)(2)(A) for the
            calendar year, determined by substituting `calendar year 2015'
            for `calendar year 2016' in clause (ii) thereof''.
                (38) Section 7430(c)(1) is amended by striking ``section
            1(f)(3) for such calendar year, by substituting `calendar year
            1995' for `calendar year 1992' in subparagraph (B) thereof'' in
            the flush text at the end and inserting ``section 1(c)(2)(A)
            for such calendar year, determined by substituting `calendar
            year 1995' for `calendar year 2016' in clause (ii) thereof''.
                (39) Section 7872(g)(5) is amended to read as follows:
                ``(5) Inflation adjustment.--
                        ``(A) In general.--In the case of any loan made
                    during any calendar year after 2018 to which paragraph
                    (1) applies, the adjusted dollar amount shall be
                    increased by an amount equal to--
                                ``(i) such adjusted dollar amount,
                            multiplied by
                                ``(ii) the cost-of-living adjustment
                            determined under section 1(c)(2)(A) for such
                            calendar year, determined by substituting
                            `calendar year 2017' for `calendar year 2016'
                            in clause (ii) thereof.
                        ``(B) Adjusted dollar amount.--For purposes of this
                    paragraph, the term `adjusted dollar amount' means the
                    dollar amount in paragraph (2) as in effect for
                    calendar year 2018.
                        ``(C) Rounding.--Any increase under subparagraph
                    (A) shall be rounded to the nearest multiple of
                    $100.''.
                (40) Section 219(b)(5)(C)(i)(II) is amended by striking
            ``section 1(f)(3) for the calendar year in which the taxable
            year begins, determined by substituting `calendar year 2007'
            for `calendar year 1992' in subparagraph (B) thereof'' and
            inserting ``section 1(c)(2)(A) for the calendar year in which
            the taxable year begins, determined by substituting `calendar
            year 2007' for `calendar year 2016' in clause (ii) thereof''.
                (41) Section 219(g)(8)(B) is amended by striking ``section
            1(f)(3) for the calendar year in which the taxable year begins,
            determined by substituting `calendar year 2005' for `calendar
            year 1992' in subparagraph (B) thereof'' and inserting
            ``section 1(c)(2)(A) for the calendar year in which the taxable
            year begins, determined by substituting `calendar year 2005'
            for `calendar year 2016' in clause (ii) thereof''.
        (b) Other Conforming Amendments.--
                (1) Section 36B(b)(3)(B)(ii)(I)(aa) is amended to read as
            follows:
                                                ``(aa) who is described in
                                            section 1(b)(1)(B) and who does
                                            not have any dependents for the
                                            taxable year,''.
                (2) Section 486B(b)(1) is amended--
                        (A) by striking ``maximum rate in effect'' and
                    inserting ``highest rate specified'', and
                        (B) by striking ``section 1(e)'' and inserting
                    ``section 1''.
                (3) Section 511(b)(1) is amended by striking ``section
            1(e)'' and inserting ``section 1''.
                (4) Section 641(a) is amended by striking ``section 1(e)
            shall apply to the taxable income'' and inserting ``section 1
            shall apply to the taxable income''.
                (5) Section 641(c)(2)(A) is amended to read as follows:
                        ``(A) Except to the extent provided in section
                    1(h), the rate of tax shall be treated as being the
                    highest rate of tax set forth in section 1(a).''.
                (6) Section 646(b) is amended to read as follows:
        ``(b) Taxation of Income of Trust.--Except as provided in
    subsection (f)(1)(B)(ii), there is hereby imposed on the taxable income
    of an electing Settlement Trust a tax at the rate specified in section
    1(a)(1). Such tax shall be in lieu of the income tax otherwise imposed
    by this chapter on such income.''.
                (7) Section 685(c) is amended by striking ``Section 1(e)''
            and inserting ``Section 1''.
                (8) Section 904(b)(3)(E)(ii)(I) is amended by striking
            ``set forth in subsection (a), (b), (c), (d), or (e) of section
            1 (whichever applies)'' and inserting ``the highest rate of tax
            specified in section 1''.
                (9) Section 1398(c)(2) is amended by striking ``subsection
            (d) of''.
                (10) Section 3402(p)(1)(B) is amended by striking ``any
            percentage applicable to any of the 3 lowest income brackets in
            the table under section 1(c),'' and inserting ``12 percent, 25
            percent,''.
                (11) Section 3402(q)(1) is amended by striking ``the
            product of third lowest rate of tax applicable under section
            1(c) and'' and inserting ``25 percent of''.
                (12) Section 3402(r)(3) is amended by striking ``the amount
            of tax which would be imposed by section 1(c) (determined
            without regard to any rate of tax in excess of the fourth
            lowest rate of tax applicable under section 1(c)) on an amount
            of taxable income equal to'' and inserting ``an amount equal to
            the product of 25 percent multiplied by''.
                (13) Section 3406(a)(1) is amended by striking ``the
            product of the fourth lowest rate of tax applicable under
            section 1(c) and'' and inserting ``25 percent of''.
                (14) Section 6103(e)(1)(A)(iii) is amended by inserting
            ``(as in effect on the day before the date of the enactment of
            the Tax Cuts and Jobs Act)'' after ``section 1(g)''.
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

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

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

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

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

    SEC. 1102. REPEAL OF NONREFUNDABLE CREDITS.

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

    SEC. 1103. REFUNDABLE CREDIT PROGRAM INTEGRITY.

        (a) Identification Requirements for Child and Family Tax Credit.--
                (1) In general.--Section 24(e) is amended to read as
            follows:
        ``(e) Identification Requirements.--
                ``(1) Requirements for qualifying child.--No credit shall
            be allowed under this section to a taxpayer with respect to any
            qualifying child unless the taxpayer includes the name and
            social security number of such qualifying child on the return
            of tax for the taxable year. The preceding sentence shall not
            prevent a qualifying child from being treated as a dependent
            described in subsection (a)(2).
                ``(2) Other identification requirements.--No credit shall
            be allowed under this section with respect to any individual
            unless the taxpayer identification number of such individual is
            included on the return of tax for the taxable year and such
            identifying number was issued before the due date for filing
            the return for the taxable year.
                ``(3) Social security number.--For purposes of this
            subsection, the term `social security number' means a social
            security number issued by the Social Security Administration
            (but only if the social security number is issued to a citizen
            of the United States or pursuant to subclause (I) (or that
            portion of subclause (III) that relates to subclause (I)) of
            section 205(c)(2)(B)(i) of the Social Security Act)).''.
                (2) Omissions treated as mathematical or clerical error.--
                        (A) In general.--Section 6213(g)(2)(I) is amended
                    to read as follows:
                        ``(I) an omission of a correct social security
                    number, or a correct TIN, required under section 24(e)
                    (relating to child tax credit), to be included on a
                    return,''.
        (b) Social Security Number Must Be Provided.--
                (1) In general.--Section 25A(f)(1)(A), as amended by
            section 1201 of this Act, is amended by striking ``taxpayer
            identification number'' each place it appears and inserting
            ``social security number''.
                (2) Omission treated as mathematical or clerical error.--
            Section 6213(g)(2)(J) is amended by striking ``TIN'' and
            inserting ``social security number and employer identification
            number''.
        (c) Individuals Prohibited From Engaging in Employment in United
    States Not Eligible for Earned Income Tax Credit.--Section 32(m) is
    amended--
                (1) by striking ``(other than:'' and all that follows
            through ``of the Social Security Act)'', and
                (2) by inserting before the period at the end the
            following: ``, but only if, in the case of subsection
            (c)(1)(E), the social security number is issued to a citizen of
            the United States or pursuant to subclause (I) (or that portion
            of subclause (III) that relates to subclause (I)) of section
            205(c)(2)(B)(i) of the Social Security Act''.
        (d) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

    SEC. 1104. PROCEDURES TO REDUCE IMPROPER CLAIMS OF EARNED INCOME
                  CREDIT.

        (a) Clarification Regarding Determination of Self-employment Income
    Which Is Treated as Earned Income.--Section 32(c)(2)(B) is amended by
    striking ``and'' at the end of clause (v), by striking the period at
    the end of clause (vi) and inserting ``, and'', and by adding at the
    end the following new clause:
                                ``(vii) in determining the taxpayer's net
                            earnings from self-employment under
                            subparagraph (A)(ii) there shall not fail to be
                            taken into account any deduction which is
                            allowable to the taxpayer under this
                            subtitle.''.
        (b) Required Quarterly Reporting of Wages of Employees.--Section
    6011 is amended by adding at the end the following new subsection:
        ``(i) Employer Reporting of Wages.--Every person required to deduct
    and withhold from an employee a tax under section 3101 or 3402 shall
    include on each return or statement submitted with respect to such tax,
    the name and address of such employee and the amount of wages for such
    employee on which such tax was withheld.''.
        (c) Effective Date.--
                (1) In general.--Except as provided in paragraph (2), the
            amendments made by this section shall apply to taxable years
            ending after the date of the enactment of this Act.
                (2) Reporting.--The Secretary of the Treasury, or his
            designee, may delay the application of the amendment made by
            subsection (b) for such period as such Secretary (or designee)
            determines to be reasonable to allow persons adequate time to
            modify electronic (or other) systems to permit such person to
            comply with the requirements of such amendment.

    SEC. 1105. CERTAIN INCOME DISALLOWED FOR PURPOSES OF THE EARNED INCOME
                  TAX CREDIT.

        (a) Substantiation Requirement.--Section 32 is amended by adding at
    the end the following new subsection:
        ``(n) Inconsistent Income Reporting.--If the earned income of a
    taxpayer claimed on a return for purposes of this section is not
    substantiated by statements or returns under sections 6051, 6052,
    6041(a), or 6050W with respect to such taxpayer, the Secretary may
    require such taxpayer to provide books and records to substantiate such
    income, including for the purpose of preventing fraud.''.
        (b) Exclusion of Unsubstantiated Amount From Earned Income.--
    Section 32(c)(2) is amended by adding at the end the following new
    subparagraph:
                        ``(C) Exclusion.--In the case of a taxpayer with
                    respect to which there is an inconsistency described in
                    subsection (n) who fails to substantiate such
                    inconsistency to the satisfaction of the Secretary, the
                    term `earned income' shall not include amounts to the
                    extent of such inconsistency.''.
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years ending after the date of the enactment of this
    Act.

         Subtitle C--Simplification and Reform of Education Incentives

    SEC. 1201. AMERICAN OPPORTUNITY TAX CREDIT.

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

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

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

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

    SEC. 1202. CONSOLIDATION OF EDUCATION SAVINGS RULES.

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

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

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

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

        (a) In General.--Subchapter B of chapter 1 is amended--
                (1) in part VII by striking sections 221 and 222 (and by
            striking the items relating to such sections in the table of
            sections for such part),
                (2) in part VII by striking sections 135 and 127 (and by
            striking the items relating to such sections in the table of
            sections for such part), and
                (3) by striking subsection (d) of section 117.
        (b) Conforming Amendment Relating to Section 221.--
                (1) Section 62(a) is amended by striking paragraph (17).
                (2) Section 74(d) is amended by striking ``221,''.
                (3) Section 86(b)(2)(A) is amended by striking ``221,''.
                (4) Section 219(g)(3)(A)(ii) is amended by striking
            ``221,''.
                (5) Section 163(h)(2) is amended by striking subparagraph
            (F).
                (6) Section 6050S(a) is amended--
                        (A) by inserting ``or'' at the end of paragraph
                    (1),
                        (B) by striking ``or'' at the end of paragraph (2),
                    and
                        (C) by striking paragraph (3).
                (7) Section 6050S(e) is amended by striking all that
            follows ``thereof)'' and inserting a period.
        (c) Conforming Amendments Related to Section 222.--
                (1) Section 62(a) is amended by striking paragraph (18).
                (2) Section 74(d)(2)(B) is amended by striking ``222,''.
                (3) Section 86(b)(2)(A) is amended by striking ``222,''.
                (4) Section 219(g)(3)(A)(ii) is amended by striking
            ``222,''.
        (d) Conforming Amendments Relating to Section 127.--
                (1) Section 125(f)(1) is amended by striking ``127,''.
                (2) Section 132(j)(8) is amended by striking ``which are
            not excludable from gross income under section 127''.
                (3) Section 414(n)(3)(C) is amended by striking ``127,''.
                (4) Section 414(t)(2) is amended by striking ``127,''.
                (5) Section 3121(a)(18) is amended by striking ``127,''.
                (6) Section 3231(e) is amended by striking paragraph (6).
                (7) Section 3306(b)(13) is amended by ``127,''.
                (8) Section 3401(a)(18) is amended by striking ``127,''.
                (9) Section 6039D(d)(1) is amended by striking ``, 127''.
        (e) Conforming Amendments Relating to Section 117(d).--
                (1) Section 117(c)(1) is amended--
                        (A) by striking ``subsections (a) and (d)'' and
                    inserting ``subsection (a)'', and
                        (B) by striking ``or qualified tuition reduction''.
                (2) Section 414(n)(3)(C) is amended by striking
            ``117(d),''.
                (3) Section 414(t)(2) is amended by striking ``117(d),''.
        (f) Conforming Amendments Related to Section 135.--
                (1) Section 74(d)(2)(B) is amended by striking ``135,''.
                (2) Section 86(b)(2)(A) is amended by striking ``135,''.
                (3) Section 219(g)(3)(A)(ii) is amended by striking
            ``135,''.
        (g) Effective Dates.--
                (1) In general.--Except as otherwise provided in this
            subsection, the amendments made by this section shall apply to
            taxable years beginning after December 31, 2017.
                (2) Amendments relating to section 117(d).--The amendments
            made by subsections (a)(3) and (e) shall apply to amounts paid
            or incurred after December 31, 2017.

    SEC. 1205. ROLLOVERS BETWEEN QUALIFIED TUITION PROGRAMS AND QUALIFIED
                  ABLE PROGRAMS.

        (a) Rollovers From Qualified Tuition Programs to Qualified ABLE
    Programs.--Section 529(c)(3)(C)(i) is amended by striking ``or'' at the
    end of subclause (I), by striking the period at the end of subclause
    (II) and inserting ``, or'', and by adding at the end the following new
    subclause:
                                        ``(III) to an ABLE account (as
                                    defined in section 529A(e)(6)) of the
                                    designated beneficiary or a member of
                                    the family of the designated
                                    beneficiary.
                            Subclause (III) shall not apply to so much of a
                            distribution which, when added to all other
                            contributions made to the ABLE account for the
                            taxable year, exceeds the limitation under
                            section 529A(b)(2)(B).''.
        (b) Effective Date.--The amendments made by this section shall
    apply to distributions after December 31, 2017.

              Subtitle D--Simplification and Reform of Deductions

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

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

    SEC. 1302. MORTGAGE INTEREST.

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

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

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

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

        (a) In General.--Section 165(c) is amended by inserting ``and'' at
    the end of paragraph (1), by striking ``; and'' at the end of paragraph
    (2) and inserting a period, and by striking paragraph (3).
        (b) Conforming Amendments.--
                (1) Section 165(h) is amended to read as follows:
        ``(h) Special Rule Where Personal Casualty Gains Exceed Personal
    Casualty Losses.--
                ``(1) In general.--If the personal casualty gains for any
            taxable year exceed the personal casualty losses for such
            taxable year--
                        ``(A) all such gains shall be treated as gains from
                    sales or exchanges of capital assets, and
                        ``(B) all such losses shall be treated as losses
                    from sales or exchanges of capital assets.
                ``(2) Definitions of personal casualty gain and personal
            casualty loss.--For purposes of this subsection--
                        ``(A) Personal casualty loss.--The term `personal
                    casualty loss' means any loss of property not connected
                    with a trade or business or a transaction entered into
                    for profit, if such loss arises from fire, storm,
                    shipwreck, or other casualty, or from theft.
                        ``(B) Personal casualty gain.--The term `personal
                    casualty gain' means the recognized gain from any
                    involuntary conversion of property which is described
                    in subparagraph (A) arising from fire, storm,
                    shipwreck, or other casualty, or from theft.''.
                (2) Section 165 is amended by striking subsection (k).
                (3)(A) Section 165(l)(1) is amended by striking ``a loss
            described in subsection (c)(3)'' and inserting ``an ordinary
            loss described in subsection (c)(2)''.
                (B) Section 165(l) is amended--
                        (i) by striking paragraph (5),
                        (ii) by redesignating paragraphs (2), (3), and (4)
                    as paragraphs (3), (4), and (5), respectively, and
                        (iii) by inserting after paragraph (1) the
                    following new paragraph:
                ``(2) Limitations.--
                        ``(A) Deposit may not be federally insured.--No
                    election may be made under paragraph (1) with respect
                    to any loss on a deposit in a qualified financial
                    institution if part or all of such deposit is insured
                    under Federal law.
                        ``(B) Dollar limitation.--With respect to each
                    financial institution, the aggregate amount of losses
                    attributable to deposits in such financial institution
                    to which an election under paragraph (1) may be made by
                    the taxpayer for any taxable year shall not exceed
                    $20,000 ($10,000 in the case of a separate return by a
                    married individual). The limitation of the preceding
                    sentence shall be reduced by the amount of any
                    insurance proceeds under any State law which can
                    reasonably be expected to be received with respect to
                    losses on deposits in such institution.''.
                (4) Section 172(b)(1)(E)(ii), prior to amendment under
            title III, is amended by striking subclause (I) and by
            redesignating subclauses (II) and (III) as subclauses (I) and
            (II), respectively.
                (5) Section 172(d)(4)(C) is amended by striking ``paragraph
            (2) or (3) of section 165(c)'' and inserting ``section
            165(c)(2)''.
                (6) Section 274(f) is amended by striking ``Casualty
            Losses,'' in the heading thereof.
                (7) Section 280A(b) is amended by striking ``Casualty
            Losses,'' in the heading thereof.
                (8) Section 873(b), as amended by the preceding provisions
            of this Act, is amended by striking paragraph (1) and by
            redesignating paragraphs (2) and (3) as paragraphs (1) and (2),
            respectively.
                (9) Section 504(b) of the Disaster Tax Relief and Airport
            and Airway Extension Act of 2017 is amended by adding at the
            end the following new paragraph:
                ``(4) Coordination with tax reform.--This subsection shall
            be applied without regard to the amendments made by section
            1304 of the Tax Cuts and Jobs Act.''.
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

    SEC. 1305. LIMITATION ON WAGERING LOSSES.

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

    SEC. 1306. CHARITABLE CONTRIBUTIONS.

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

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

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

    SEC. 1308. REPEAL OF MEDICAL EXPENSE DEDUCTION.

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

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

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

    SEC. 1309. REPEAL OF DEDUCTION FOR ALIMONY PAYMENTS.

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

    SEC. 1310. REPEAL OF DEDUCTION FOR MOVING EXPENSES.

        (a) In General.--Part VII of subchapter B is amended by striking by
    striking section 217 (and by striking the item relating to such section
    in the table of sections for such subpart).
        (b) Retention of Moving Expenses for Members of Armed Forces.--
    Section 134(b) is amended by adding at the end the following new
    paragraph:
                ``(7) Moving expenses.--The term `qualified military
            benefit' includes any benefit described in section 217(g) (as
            in effect before the enactment of the Tax Cuts And Jobs
            Act).''.
        (c) Conforming Amendments.--
                (1) Section 62(a) is amended by striking paragraph (15).
                (2) Section 274(m)(3) is amended by striking ``(other than
            section 217)''.
                (3) Section 3121(a) is amended by striking paragraph (11).
                (4) Section 3306(b) is amended by striking paragraph (9).
                (5) Section 3401(a) is amended by striking paragraph (15).
                (6) Section 7872(f) is amended by striking paragraph (11).
        (d) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

        (a) In General.--Section 129 is amended by adding at the end the
    following new subsection:
        ``(f) Termination.--Subsection (a) shall not apply to taxable years
    beginning after December 31, 2022.''.
        (b) Effective Date.--The amendment made by this section shall take
    effect on the date of the enactment of this Act.

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

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

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

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

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

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

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

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

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

    SEC. 1503. MODIFICATION OF RULES GOVERNING HARDSHIP DISTRIBUTIONS.

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

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

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

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

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

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

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

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

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

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

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

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

    ``SEC. 2210. TERMINATION.

        ``(a) In General.--Except as provided in subsection (b), this
    chapter shall not apply to the estates of decedents dying after
    December 31, 2024.
        ``(b) Certain Distributions From Qualified Domestic Trusts.--In
    applying section 2056A with respect to the surviving spouse of a
    decedent dying on or before December 31, 2024--
                ``(1) section 2056A(b)(1)(A) shall not apply to
            distributions made after the 10-year period beginning on such
            date, and
                ``(2) section 2056A(b)(1)(B) shall not apply after such
            date.''.
                (2) Conforming amendments.--Section 1014(b) is amended--
                        (A) in paragraph (6), by striking ``was includible
                    in determining'' and all that follows through the end
                    and inserting ``was includible (or would have been
                    includible without regard to section 2210) in
                    determining the value of the decedent's gross estate
                    under chapter 11 of subtitle B'' ,
                        (B) in paragraph (9), by striking ``required to be
                    included'' through ``Code of 1939'' and inserting
                    ``required to be included (or would have been required
                    to be included without regard to section 2210) in
                    determining the value of the decedent's gross estate
                    under chapter 11 of subtitle B'', and
                        (C) in paragraph (10), by striking ``Property
                    includible in the gross estate'' and inserting
                    ``Property includible (or which would have been
                    includible without regard to section 2210) in the gross
                    estate''.
                (3) Clerical amendment.--The table of sections for
            subchapter C of chapter 11 is amended by adding at the end the
            following new item:

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

    ``SEC. 2664. TERMINATION.

        ``This chapter shall not apply to generation-skipping transfers
    after December 31, 2024.''.
                (2) Clerical amendment.--The table of sections for
            subchapter G of chapter 13 of such Code is amended by adding at
            the end the following new item:

    ``Sec. 2664. Termination.''.
        (c) Conforming Amendments Related to Gift Tax.--
                (1) Computation of gift tax.--Section 2502 is amended by
            adding at the end the following new subsection:
        ``(d) Gifts Made After 2024.--
                ``(1) In general.--In the case of a gift made after
            December 31, 2024, subsection (a) shall be applied by
            substituting `subsection (d)(2)' for `section 2001(c)' and
            `such subsection' for `such section'.
                ``(2) Rate schedule.--

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

                (2) Lifetime gift exemption.--Section 2505 is amended by
            adding at the end the following new subsection:
        ``(d) Gifts Made After 2024.--
                ``(1) In general.--In the case of a gift made after
            December 31, 2024, subsection (a)(1) shall be applied by
            substituting `the amount of the tentative tax which would be
            determined under the rate schedule set forth in section
            2502(a)(2) if the amount with respect to which such tentative
            tax is to be computed were $10,000,000' for `the applicable
            credit amount in effect under section 2010(c) which would apply
            if the donor died as of the end of the calendar year'.
                ``(2) Inflation adjustment.--
                        ``(A) In general.--In the case of any calendar year
                    after 2024, the dollar amount in subsection (a)(1)
                    (after application of this subsection) shall be
                    increased by an amount equal to--
                                ``(i) such dollar amount, multiplied by
                                ``(ii) the cost-of-living adjustment
                            determined under section 1(c)(2)(A) of such
                            calendar year by substituting `calendar year
                            2011' for `calendar year 2016' in clause (ii)
                            thereof.
                        ``(B) Rounding.--If any amount as adjusted under
                    paragraph (1) is not a multiple of $10,000, such amount
                    shall be rounded to the nearest multiple of $10,000.''.
                (3) Other conforming amendments related to gift tax.--
            Section 2801 is amended by adding at the end the following new
            subsection:
        ``(g) Gifts Received After 2024.--In the case of a gift received
    after December 31, 2024, subsection (a)(1) shall be applied by
    substituting `section 2502(a)(2)' for `section 2001(c) as in effect on
    the date of such receipt'.''.
        (d) Effective Date.--The amendments made by this section shall
    apply to estates of decedents dying, generation-skipping transfers, and
    gifts made, after December 31, 2024.

                    TITLE II--ALTERNATIVE MINIMUM TAX REPEAL

    SEC. 2001. REPEAL OF ALTERNATIVE MINIMUM TAX.

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

                         TITLE III--BUSINESS TAX REFORM

                             Subtitle A--Tax Rates

    SEC. 3001. REDUCTION IN CORPORATE TAX RATE.

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

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

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

    ``Sec. 1561. Limitation on accumulated earnings credit in the case of
                                certain controlled corporations.''.
                (7) Section 7518(g)(6)(A) is amended--
                        (A) by striking ``With respect to the portion'' and
                    inserting ``In the case of a taxpayer other than a
                    corporation, with respect to the portion'', and
                        (B) by striking ``(34 percent in the case of a
                    corporation)''.
        (c) Reduction in Dividend Received Deductions to Reflect Lower
    Corporate Income Tax Rates.--
                (1) Dividends received by corporations.--
                        (A) In general.--Section 243(a)(1) is amended by
                    striking ``70 percent'' and inserting ``50 percent''.
                        (B) Dividends from 20-percent owned corporations.--
                    Section 243(c)(1) is amended--
                                (i) by striking ``80 percent'' and
                            inserting ``65 percent'', and
                                (ii) by striking ``70 percent'' and
                            inserting ``50 percent''.
                        (C) Conforming amendment.--The heading for section
                    243(c) is amended by striking ``Retention of 80-percent
                    Dividend Received Deduction'' and inserting ``Increased
                    Percentage''.
                (2) Dividends received from fsc.--Section 245(c)(1)(B) is
            amended--
                        (A) by striking ``70 percent'' and inserting ``50
                    percent'', and
                        (B) by striking ``80 percent'' and inserting ``65
                    percent''.
                (3) Limitation on aggregate amount of deductions.--Section
            246(b)(3) is amended--
                        (A) by striking ``80 percent'' in subparagraph (A)
                    and inserting ``65 percent'', and
                        (B) by striking ``70 percent'' in subparagraph (B)
                    and inserting ``50 percent''.
                (4) Reduction in deduction where portfolio stock is debt-
            financed.--Section 246A(a)(1) is amended--
                        (A) by striking ``70 percent'' and inserting ``50
                    percent'', and
                        (B) by striking ``80 percent'' and inserting ``65
                    percent''.
                (5) Income from sources within the united states.--Section
            861(a)(2) is amended--
                        (A) by striking ``100/70th'' and inserting ``100/
                    50th'' in subparagraph (B), and
                        (B) in the flush sentence at the end--
                                (i) by striking ``100/80th'' and inserting
                            ``100/65th'', and
                                (ii) by striking ``100/70th'' and inserting
                            ``100/50th''.
        (d) Effective Date.--
                (1) In general.--Except as otherwise provided in this
            subsection, the amendments made by this section shall apply to
            taxable years beginning after December 31, 2017.
                (2) Certain conforming amendments.--The amendments made by
            paragraphs (2), (3), and (4) of subsection (b) shall apply to
            distributions after December 31, 2017.
        (e) Normalization Requirements.--
                (1) In general.--A normalization method of accounting shall
            not be treated as being used with respect to any public utility
            property for purposes of section 167 or 168 of the Internal
            Revenue Code of 1986 if the taxpayer, in computing its cost of
            service for ratemaking purposes and reflecting operating
            results in its regulated books of account, reduces the excess
            tax reserve more rapidly or to a greater extent than such
            reserve would be reduced under the average rate assumption
            method.
                (2) Alternative method for certain taxpayers.--If, as of
            the first day of the taxable year that includes the date of
            enactment of this Act--
                        (A) the taxpayer was required by a regulatory
                    agency to compute depreciation for public utility
                    property on the basis of an average life or composite
                    rate method, and
                        (B) the taxpayer's books and underlying records did
                    not contain the vintage account data necessary to apply
                    the average rate assumption method,
            the taxpayer will be treated as using a normalization method of
            accounting if, with respect to such jurisdiction, the taxpayer
            uses the alternative method for public utility property that is
            subject to the regulatory authority of that jurisdiction.
                (3) Definitions.--For purposes of this subsection--
                        (A) Excess tax reserve.--The term ``excess tax
                    reserve'' means the excess of--
                                (i) the reserve for deferred taxes (as
                            described in section 168(i)(9)(A)(ii) of the
                            Internal Revenue Code of 1986 as in effect on
                            the day before the date of the enactment of
                            this Act), over
                                (ii) the amount which would be the balance
                            in such reserve if the amount of such reserve
                            were determined by assuming that the corporate
                            rate reductions provided in this Act were in
                            effect for all prior periods.
                        (B) Average rate assumption method.--The average
                    rate assumption method is the method under which the
                    excess in the reserve for deferred taxes is reduced
                    over the remaining lives of the property as used in its
                    regulated books of account which gave rise to the
                    reserve for deferred taxes. Under such method, if
                    timing differences for the property reverse, the amount
                    of the adjustment to the reserve for the deferred taxes
                    is calculated by multiplying--
                                (i) the ratio of the aggregate deferred
                            taxes for the property to the aggregate timing
                            differences for the property as of the
                            beginning of the period in question, by
                                (ii) the amount of the timing differences
                            which reverse during such period.
                        (C) Alternative method.--The ``alternative method''
                    is the method in which the taxpayer--
                                (i) computes the excess tax reserve on all
                            public utility property included in the plant
                            account on the basis of the weighted average
                            life or composite rate used to compute
                            depreciation for regulatory purposes, and
                                (ii) reduces the excess tax reserve ratably
                            over the remaining regulatory life of the
                            property.
                (4) Tax increased for normalization violation.--If, for any
            taxable year ending after the date of the enactment of this
            Act, the taxpayer does not use a normalization method of
            accounting, the taxpayer's tax for the taxable year shall be
            increased by the amount by which it reduces its excess tax
            reserve more rapidly than permitted under a normalization
            method of accounting.

                           Subtitle B--Cost Recovery

    SEC. 3101. INCREASED EXPENSING.

        (a) 100 Percent Expensing.--Section 168(k)(1)(A) is amended by
    striking ``50 percent'' and inserting ``100 percent''.
        (b) Extension Through January 1, 2023.--Section 168(k)(2) is
    amended--
                (1) in subparagraph (A)(iii), by striking ``January 1,
            2020'' and inserting ``January 1, 2023'',
                (2) in subparagraph (B)(i)(II), by striking ``January 1,
            2021'' and inserting ``January 1, 2024'',
                (3) in subparagraph (B)(i)(III), by striking ``January 1,
            2020'' and inserting ``January 1, 2023'',
                (4) in subparagraph (B)(ii), by striking ``January 1,
            2020'' in each place it appears and inserting ``January 1,
            2023'', and
                (5) in subparagraph (E)(i), by striking ``January 1, 2020''
            and replacing it with ``January 1, 2023''.
        (c) Application to Used Property.--
                (1) In general.--Section 168(k)(2)(A)(ii) is amended to
            read as follows:
                                ``(ii) the original use of which begins
                            with the taxpayer or the acquisition of which
                            by the taxpayer meets the requirements of
                            clause (ii) of subparagraph (E), and''.
                (2) Acquisition requirements.--Section 168(k)(2)(E)(ii) is
            amended to read as follows:
                                ``(ii) Acquisition requirements.--An
                            acquisition of property meets the requirements
                            of this clause if--
                                        ``(I) such property was not used by
                                    the taxpayer at any time prior to such
                                    acquisition, and
                                        ``(II) the acquisition of such
                                    property meets the requirements of
                                    paragraphs (2)(A), (2)(B), (2)(C), and
                                    (3) of section 179(d).'',
                (3) Anti-abuse rules.--Section 168(k)(2)(E) is further
            amended by amending clause (iii)(I) to read as follows:
                                        ``(I) property is used by a lessor
                                    of such property and such use is the
                                    lessor's first use of such property,''.
        (d) Exception for Certain Trades and Businesses Not Subject to
    Limitation on Interest Expense.--Section 168(k)(2), as amended by
    section 2001, is amended by inserting after subparagraph (F) the
    following new subparagraph:
                        ``(G) Exception for property of certain businesses
                    not subject to limitation on interest expense.--The
                    term `qualified property' shall not include any
                    property used in--
                                ``(i) a trade or business described in
                            subparagraph (B) or (C) of section 163(j)(7),
                            or
                                ``(ii) a trade or business that has had
                            floor plan financing indebtedness (as defined
                            in paragraph (9) of section 163(j)), if the
                            floor plan financing interest related to such
                            indebtedness was taken into account under
                            paragraph (1)(C) of such section.''.
        (e) Coordination With Section 280F.--Section 168(k)(2)(F) is
    amended--
                (1) by striking ``$8,000'' in clauses (i) and (iii) and
            inserting ``$16,000'', and
                (2) in clause (iii)--
                        (A) by striking ``placed in service by the taxpayer
                    after December 31, 2017'' and inserting ``acquired by
                    the taxpayer before September 28, 2017, and placed in
                    service by the taxpayer after September 27, 2017'', and
                        (B) by redesignating subclauses (I) and (II) as
                    subclauses (II) and (III) respectively, and inserting
                    before clause (II), as so redesignated, the following
                    new subclause:
                                        ``(I) in the case of a passenger
                                    automobile placed in service before
                                    January 1, 2018, `$8,000',''.
        (f) Conforming Amendments.--
                (1) Section 168(k)(2)(B)(i)(III), as amended, is amended by
            inserting ``binding'' before ``contract''.
                (2) Section 168(k)(5) is amended by--
                        (A) by striking ``January 1, 2020'' in subparagraph
                    (A) and inserting ``January 1, 2023'',
                        (B) by striking ``50 percent'' in subparagraph
                    (A)(i) and inserting ``100 percent'', and
                        (C) by striking subparagraph (F).
                (3) Section 168(k)(6) is amended to read as follows:
                ``(6) Phase down.--In the case of qualified property
            acquired by the taxpayer before September 28, 2017, and placed
            in service by the taxpayer after September 27, 2017, paragraph
            (1)(A) shall be applied by substituting for `100 percent'--
                        ``(A) `50 percent' in the case of--
                                ``(i) property placed in service before
                            January 1, 2018, and
                                ``(ii) property described in subparagraph
                            (B) or (C) of paragraph (2) which is placed in
                            service in 2018,
                        ``(B) `40 percent' in the case of--
                                ``(i) property placed in service in 2018
                            (other than property described in subparagraph
                            (B) or (C) of paragraph (2)), and
                                ``(ii) property described in subparagraph
                            (B) or (C) of paragraph (2) which is placed in
                            service in 2019, and
                        ``(C) `30 percent' in the case of--
                                ``(i) property placed in service in 2019
                            (other than property described in subparagraph
                            (B) or (C) of paragraph (2)), and
                                ``(ii) property described in subparagraph
                            (B) or (C) of paragraph (2) which is placed in
                            service in 2020.''.
                (4) The heading of section 168(k) is amended by striking
            ``Special Allowance for Certain Property Acquired After
            December 31, 2007, and Before January 1, 2020'' and inserting
            ``Full Expensing of Certain Property''.
                (5) Section 460(c)(6)(B)(ii) is amended by striking
            ``January 1, 2020 (January 1, 2021 in the case of property
            described in section 168(k)(2)(B))'' and inserting ``January 1,
            2023 (January 1, 2024 in the case of property described in
            section 168(k)(2)(B))''.
        (g) Effective Date.--
                (1) In general.--Except at provided by paragraph (2), the
            amendments made by this section shall apply to property which--
                        (A) is acquired after September 27, 2017, and
                        (B) is placed in service after such date.
            For purposes of the preceding sentence, property shall not be
            treated as acquired after the date on which a written binding
            contract is entered into for such acquisition.
                (2) Specified plants.--The amendments made by subsection
            (f)(2) shall apply to specified plants planted or grafted after
            September 27, 2017.
                (3) Transition rule.--In the case of any taxpayer's first
            taxable year ending after September 27, 2017, the taxpayer may
            elect (at such time and in such form and manner as the
            Secretary of the Treasury, or his designee, may provide) to
            apply section 168 of the Internal Revenue Code of 1986 without
            regard to the amendments made by this section.
                (4) Limitation on net operating loss carrybacks
            attributable to full expensing.--In the case of any taxable
            year which includes any portion of the period beginning on
            September 28, 2017, and ending on December 31, 2017, the amount
            of any net operating loss for such taxable year which may be
            treated as a net operating loss carryback (including any such
            carryback attributable to any specified liability loss under
            section 172(b)(1)(C), any corporate equity reduction interest
            loss under section 172(b)(1)(D), any eligible loss under
            section 172(b)(1)(E), and any farming loss under section
            172(b)(1)(F)) shall be determined without regard to the
            amendments made by this section. For purposes of this
            paragraph, terms which are used in section 172 of the Internal
            Revenue Code of 1986 (determined without regard to the
            amendments made by section 3302) shall have the same meaning as
            when used in such section.

                       Subtitle C--Small Business Reforms

    SEC. 3201. EXPANSION OF SECTION 179 EXPENSING.

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

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

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

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

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

    SEC. 3204. MODIFICATION OF TREATMENT OF S CORPORATION CONVERSIONS TO C
                  CORPORATIONS.

        (a) Adjustments Attributable to Conversion From S Corporation to C
    Corporation.--Section 481 is amended by adding at the end the following
    new subsection:
        ``(d) Adjustments Attributable to Conversion From S Corporation to
    C Corporation.--
                ``(1) In general.--In the case of an eligible terminated S
            corporation, any adjustment required by subsection (a)(2) which
            is attributable to such corporation's revocation described in
            paragraph (2)(A)(ii) shall be taken into account ratably during
            the 6-taxable year period beginning with the year of change.
                ``(2) Eligible terminated s corporation.--For purposes of
            this subsection, the term `eligible terminated S corporation'
            means any C corporation--
                        ``(A) which--
                                ``(i) was an S corporation on the day
                            before the date of the enactment of the Tax
                            Cuts and Jobs Act, and
                                ``(ii) during the 2-year period beginning
                            on the date of such enactment makes a
                            revocation of its election under section
                            1362(a), and
                        ``(B) the owners of the stock of which, determined
                    on the date such revocation is made, are the same
                    owners (and in identical proportions) as on the date of
                    such enactment.''.
        (b) Cash Distributions Following Post-termination Transition Period
    From S Corporation Status.--Section 1371 is amended by adding at the
    end the following new subsection:
        ``(f) Cash Distributions Following Post-termination Transition
    Period.--In the case of a distribution of money by an eligible
    terminated S corporation (as defined in section 481(d)) after the post-
    termination transition period, the accumulated adjustments account
    shall be allocated to such distribution, and the distribution shall be
    chargeable to accumulated earnings and profits, in the same ratio as
    the amount of such accumulated adjustments account bears to the amount
    of such accumulated earnings and profits.''.

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

    SEC. 3301. INTEREST.

        (a) In General.--Section 163(j) is amended to read as follows:
        ``(j) Limitation on Business Interest.--
                ``(1) In general.--In the case of any taxpayer for any
            taxable year, the amount allowed as a deduction under this
            chapter for business interest shall not exceed the sum of--
                        ``(A) the business interest income of such taxpayer
                    for such taxable year,
                        ``(B) 30 percent of the adjusted taxable income of
                    such taxpayer for such taxable year, plus
                        ``(C) the floor plan financing interest of such
                    taxpayer for such taxable year.
            The amount determined under subparagraph (B) (after any
            increases in such amount under paragraph (3)(A)(iii)) shall not
            be less than zero.
                ``(2) Exemption for certain small businesses.--For
            exemption for certain small businesses, see the amendment made
            by section 3203 of the Tax Cuts and Jobs Act.
                ``(3) Application to partnerships, etc.--
                        ``(A) In general.--In the case of any partnership--
                                ``(i) this subsection shall be applied at
                            the partnership level and any deduction for
                            business interest shall be taken into account
                            in determining the non-separately stated
                            taxable income or loss of the partnership,
                                ``(ii) the adjusted taxable income of each
                            partner of such partnership shall be determined
                            without regard to such partner's distributive
                            share of the non-separately stated taxable
                            income or loss of such partnership, and
                                ``(iii) the amount determined under
                            paragraph (1)(B) with respect to each partner
                            of such partnership shall be increased by such
                            partner's distributive share of such
                            partnership's excess amount.
                        ``(B) Excess amount.--The term `excess amount'
                    means, with respect to any partnership, the excess (if
                    any) of--
                                ``(i) 30 percent of the adjusted taxable
                            income of the partnership, over
                                ``(ii) the amount (if any) by which the
                            business interest of the partnership, reduced
                            by floor plan financing interest, exceeds the
                            business interest income of the partnership.
                        ``(C) Application to s corporations.--Rules similar
                    to the rules of subparagraphs (A) and (B) shall apply
                    with respect to any S corporation and its shareholders.
                ``(4) Business interest.--For purposes of this subsection,
            the term `business interest' means any interest paid or accrued
            on indebtedness properly allocable to a trade or business. Such
            term shall not include investment interest (within the meaning
            of subsection (d)).
                ``(5) Business interest income.--For purposes of this
            subsection, the term `business interest income' means the
            amount of interest includible in the gross income of the
            taxpayer for the taxable year which is properly allocable to a
            trade or business. Such term shall not include investment
            income (within the meaning of subsection (d)).
                ``(6) Adjusted taxable income.--For purposes of this
            subsection, the term `adjusted taxable income' means the
            taxable income of the taxpayer--
                        ``(A) computed without regard to--
                                ``(i) any item of income, gain, deduction,
                            or loss which is not properly allocable to a
                            trade or business,
                                ``(ii) any business interest or business
                            interest income,
                                ``(iii) the amount of any net operating
                            loss deduction under section 172, and
                                ``(iv) any deduction allowable for
                            depreciation, amortization, or depletion, and
                        ``(B) computed with such other adjustments as the
                    Secretary may provide.
                ``(7) Trade or business.--For purposes of this subsection,
            the term `trade or business' shall not include--
                        ``(A) the trade or business of performing services
                    as an employee,
                        ``(B) a real property trade or business (as such
                    term is defined in section 469(c)(7)(C)), or
                        ``(C) the trade or business of the furnishing or
                    sale of--
                                ``(i) electrical energy, water, or sewage
                            disposal services,
                                ``(ii) gas or steam through a local
                            distribution system, or
                                ``(iii) transportation of gas or steam by
                            pipeline,
                    if the rates for such furnishing or sale, as the case
                    may be, have been established or approved by a State or
                    political subdivision thereof, by any agency or
                    instrumentality of the United States, or by a public
                    service or public utility commission or other similar
                    body of any State or political subdivision thereof.
                ``(8) Carryforward of disallowed interest.--For
            carryforward of interest disallowed under paragraph (1), see
            subsection (o).
                ``(9) Floor plan financing interest defined.--For purposes
            of this subsection--
                        ``(A) In general.--The term `floor plan financing
                    interest' means interest paid or accrued on floor plan
                    financing indebtedness.
                        ``(B) Floor plan financing indebtedness.--The term
                    `floor plan financing indebtedness' means
                    indebtedness--
                                ``(i) used to finance the acquisition of
                            motor vehicles held for sale to retail
                            customers, and
                                ``(ii) secured by the inventory so
                            acquired.
                        ``(C) Motor vehicle.--The term `motor vehicle'
                    means a motor vehicle that is any of the following:
                                ``(i) An automobile.
                                ``(ii) A truck.
                                ``(iii) A recreational vehicle.
                                ``(iv) A motorcycle.
                                ``(v) A boat.
                                ``(vi) Farm machinery or equipment.
                                ``(vii) Construction machinery or
                            equipment.''.
        (b) Carryforward of Disallowed Business Interest.--Section 163,
    after amendment by section 4302(a) and before amendment by section
    4302(b), is amended by inserting after subsection (n) the following new
    subsection:
        ``(o) Carryforward of Disallowed Business Interest.--The amount of
    any business interest not allowed as a deduction for any taxable year
    by reason of subsection (j) shall be treated as business interest paid
    or accrued in the succeeding taxable year. Business interest paid or
    accrued in any taxable year (determined without regard to the preceding
    sentence) shall not be carried past the 5th taxable year following such
    taxable year, determined by treating business interest as allowed as a
    deduction on a first-in, first-out basis.''.
        (c) Treatment of Carryforward of Disallowed Business Interest in
    Certain Corporate Acquisitions.--
                (1) In general.--Section 381(c) is amended by inserting
            after paragraph (19) the following new paragraph:
                ``(20) Carryforward of disallowed interest.--The carryover
            of disallowed interest described in section 163(o) to taxable
            years ending after the date of distribution or transfer.''.
                (2) Application of limitation.--Section 382(d) is amended
            by adding at the end the following new paragraph:
                ``(3) Application to carryforward of disallowed interest.--
            The term `pre-change loss' shall include any carryover of
            disallowed interest described in section 163(o) under rules
            similar to the rules of paragraph (1).''.
                (3) Conforming amendment.--Section 382(k)(1) is amended by
            inserting after the first sentence the following: ``Such term
            shall include any corporation entitled to use a carryforward of
            disallowed interest described in section 381(c)(20).''
        (d) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

    SEC. 3302. MODIFICATION OF NET OPERATING LOSS DEDUCTION.

        (a) Indefinite Carryforward of Net Operating Losses.--Section
    172(b)(1)(A)(ii) is amended by striking ``to each of the 20 taxable
    years'' and inserting ``to each taxable year''.
        (b) Repeal of Net Operating Loss Carrybacks Other Than 1-year
    Carryback of Eligible Disaster Losses.--
                (1) In general.--Section 172(b)(1)(A)(i) is amended to read
            as follows:
                                ``(i) in the case of any portion of a net
                            operating loss for the taxable year which is an
                            eligible disaster loss with respect to the
                            taxpayer, shall be a net operating loss
                            carryback to the taxable year preceding the
                            taxable year of such loss, and''.
                (2) Conforming amendments.--
                        (A) Section 172(b)(1) is amended by striking
                    subparagraphs (B) through (F) and inserting the
                    following:
                        ``(B) Eligible disaster loss.--
                                ``(i) In general.--For purposes of
                            subparagraph (A)(i), the term `eligible
                            disaster loss' means--
                                        ``(I) in the case of a taxpayer
                                    which is a small business, net
                                    operating losses attributable to
                                    federally declared disasters (as
                                    defined by section 165(i)(5)), and
                                        ``(II) in the case of a taxpayer
                                    engaged in the trade or business of
                                    farming, net operating losses
                                    attributable to such federally declared
                                    disasters.
                                ``(ii) Small business.--For purposes of
                            this subparagraph, the term `small business'
                            means a corporation or partnership which meets
                            the gross receipts test of section 448(c)
                            (determined by substituting `$5,000,000' for
                            `$25,000,000' each place it appears therein)
                            for the taxable year in which the loss arose
                            (or, in the case of a sole proprietorship,
                            which would meet such test if such
                            proprietorship were a corporation).
                                ``(iii) Trade or business of farming.--For
                            purposes of this subparagraph, the trade or
                            business of farming shall include the trade or
                            business of--
                                        ``(I) operating a nursery or sod
                                    farm, or
                                        ``(II) the raising or harvesting of
                                    trees bearing fruit, nuts, or other
                                    crops, or ornamental trees.
                            For purposes of subclause (II), an evergreen
                            tree which is more than 6 years old at the time
                            severed from the roots shall not be treated as
                            an ornamental tree.''.
                        (B) Section 172 is amended by striking subsections
                    (f), (g), and (h).
        (c) Limitation of Net Operating Loss to 90 Percent of Taxable
    Income.--
                (1) In general.--Section 172(a) is amended to read as
            follows:
        ``(a) Deduction Allowed.--There shall be allowed as a deduction for
    the taxable year an amount equal to the lesser of--
                ``(1) the aggregate of the net operating loss carryovers to
            such year, plus the net operating loss carrybacks to such year,
            or
                ``(2) 90 percent of taxable income computed without regard
            to the deduction allowable under this section.
    For purposes of this subtitle, the term `net operating loss deduction'
    means the deduction allowed by this subsection.''.
                (2) Coordination of limitation with carrybacks and
            carryovers.--Section 172(b)(2) is amended by striking ``shall
            be computed--'' and all that follows and inserting ``shall--
                        ``(A) be computed with the modifications specified
                    in subsection (d) other than paragraphs (1), (4), and
                    (5) thereof, and by determining the amount of the net
                    operating loss deduction without regard to the net
                    operating loss for the loss year or for any taxable
                    year thereafter,
                        ``(B) not be considered to be less than zero, and
                        ``(C) not exceed the amount determined under
                    subsection (a)(2) for such prior taxable year.''.
                (3) Conforming amendment.--Section 172(d)(6) is amended by
            striking ``and'' at the end of subparagraph (A), by striking
            the period at the end of subparagraph (B) and inserting ``;
            and'', and by adding at the end the following new subparagraph:
                        ``(C) subsection (a)(2) shall be applied by
                    substituting `real estate investment trust taxable
                    income (as defined in section 857(b)(2) but without
                    regard to the deduction for dividends paid (as defined
                    in section 561))' for `taxable income'.''.
        (d) Annual Increase of Indefinite Carryover Amounts.--Section
    172(b) is amended by redesignating paragraph (3) as paragraph (4) and
    by inserting after paragraph (2) the following new paragraph:
                ``(3) Annual increase of indefinite carryover amounts.--For
            purposes of paragraph (2)--
                        ``(A) the amount of any indefinite net operating
                    loss which is carried to the next succeeding taxable
                    year after the loss year (within the meaning of
                    paragraph (2)) shall be increased by an amount equal
                    to--
                                ``(i) the amount of the loss which may be
                            so carried over to such succeeding taxable year
                            (determined without regard to this paragraph),
                            multiplied by
                                ``(ii) the sum of--
                                        ``(I) the annual Federal short-term
                                    rate (determined under section 1274(d))
                                    for the last month ending before the
                                    beginning of such taxable year, plus
                                        ``(II) 4 percentage points, and
                        ``(B) the amount of any indefinite net operating
                    loss which is carried to any succeeding taxable year
                    (after such next succeeding taxable year) shall be an
                    amount equal to--
                                ``(i) the excess of--
                                        ``(I) the amount of the loss
                                    carried to the prior taxable year
                                    (after any increase under this
                                    paragraph with respect to such amount),
                                    over
                                        ``(II) the amount by which such
                                    loss was reduced under paragraph (2) by
                                    reason of the taxable income for such
                                    prior taxable year, multiplied by
                                ``(ii) a percentage equal to 100 percent
                            plus the percentage determined under
                            subparagraph (A)(ii) with respect to such
                            succeeding taxable year.
                    For purposes of the preceding sentence, the term
                    `indefinite net operating loss' means any net operating
                    loss arising in a taxable year beginning after December
                    31, 2017.''.
        (e) Effective Date.--
                (1) Carryforwards and carrybacks.--The amendments made by
            subsections (a) and (b) shall apply to net operating losses
            arising in taxable years beginning after December 31, 2017.
                (2) Net operating loss limited to 90 percent of taxable
            income.--The amendments made by subsection (c) shall apply to
            taxable years beginning after December 31, 2017.
                (3) Annual increase in carryover amounts.--The amendments
            made by subsection (d) shall apply to amounts carried to
            taxable years beginning after December 31, 2017.
                (4) Special rule for net disaster losses.--Notwithstanding
            paragraph (1), the amendments made by subsection (b) shall not
            apply to the portion of the net operating loss for any taxable
            year which is a net disaster loss to which section 504(b) of
            the Disaster Tax Relief and Airport and Airway Extension Act of
            2017 applies.

    SEC. 3303. LIKE-KIND EXCHANGES OF REAL PROPERTY.

        (a) In General.--Section 1031(a)(1) is amended by striking
    ``property'' each place it appears and inserting ``real property''.
        (b) Conforming Amendments.--
                (1) Paragraph (2) of section 1031(a) is amended to read as
            follows:
                ``(2) Exception for real property held for sale.--This
            subsection shall not apply to any exchange of real property
            held primarily for sale.''.
                (2) Section 1031 is amended by striking subsections (e) and
            (i).
                (3) Section 1031, as amended by paragraph (2), is amended
            by inserting after subsection (d) the following new subsection:
        ``(e) Application to Certain Partnerships.--For purposes of this
    section, an interest in a partnership which has in effect a valid
    election under section 761(a) to be excluded from the application of
    all of subchapter K shall be treated as an interest in each of the
    assets of such partnership and not as an interest in a partnership.''.
                (4) Section 1031(h) is amended to read as follows:
        ``(h) Special Rules for Foreign Real Property.--Real property
    located in the United States and real property located outside the
    United States are not property of a like kind.''.
                (5) The heading of section 1031 is amended by striking
            ``property'' and inserting ``real property''.
                (6) The table of sections for part III of subchapter O of
            chapter 1 is amended by striking the item relating to section
            1031 and inserting the following new item:

    ``Sec. 1031. Exchange of real property held for productive use or
                                investment.''.
        (c) Effective Date.--
                (1) In general.--Except as otherwise provided in this
            subsection, the amendments made by this section shall apply to
            exchanges completed after December 31, 2017.
                (2) Transition rule.--The amendments made by this section
            shall not apply to any exchange if--
                        (A) the property disposed of by the taxpayer in the
                    exchange is disposed of on or before December 31 2017,
                    or
                        (B) the property received by the taxpayer in the
                    exchange is received on or before December 31, 2017.

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

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

    ``SEC. 76. CONTRIBUTIONS TO CAPITAL.

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

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

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

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

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

        (a) In General.--Part VI of subchapter B of chapter 1 is amended by
    striking section 199 (and by striking the item relating to such section
    in the table of sections for such part).
        (b) Conforming Amendments.--
                (1) Sections 74(d)(2)(B), 86(b)(2)(A), 137(b)(3)(A),
            219(g)(3)(A)(ii), and 246(b)(1) are each amended by striking
            ``199,''.
                (2) Section 170(b)(2)(D), as amended by the preceding
            provisions of this Act, is amended by striking clause (iv), by
            redesignating clause (v) as clause (iv), and by inserting
            ``and'' at the end of clause (iii).
                (3) Section 172(d) is amended by striking paragraph (7).
                (4) Section 613(a) is amended by striking ``and without the
            deduction under section 199''.
                (5) Section 613A(d)(1) is amended by striking subparagraph
            (B) and by redesignating subparagraphs (C), (D), and (E) as
            subparagraphs (B), (C), and (D), respectively.
                (6) Section 1402(a) is amended by adding ``and'' at the end
            of paragraph (15) and by striking paragraph (16).
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

    SEC. 3307. ENTERTAINMENT, ETC. EXPENSES.

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

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

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

    SEC. 3309. LIMITATION ON DEDUCTION FOR FDIC PREMIUMS.

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

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

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

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

        (a) Patents, etc.--Section 1221(a)(3) is amended by inserting ``a
    patent, invention, model or design (whether or not patented), a secret
    formula or process,'' before ``a copyright''.
        (b) Conforming Amendment.--Section 1231(b)(1)(C) is amended by
    inserting ``a patent, invention, model or design (whether or not
    patented), a secret formula or process,'' before ``a copyright''.
        (c) Effective Date.--The amendments made by this section shall
    apply to dispositions after December 31, 2017.

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

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

    SEC. 3313. REPEAL OF TECHNICAL TERMINATION OF PARTNERSHIPS.

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

    SEC. 3314. RECHARACTERIZATION OF CERTAIN GAINS IN THE CASE OF
                  PARTNERSHIP PROFITS INTERESTS HELD IN CONNECTION WITH
                  PERFORMANCE OF INVESTMENT SERVICES.

        (a) In General.--Part IV of subchapter O of chapter 1 is amended--
                (1) by redesignating section 1061 as section 1062, and
                (2) by inserting after section 1060 the following new
            section:

    ``SEC. 1061. PARTNERSHIP INTERESTS HELD IN CONNECTION WITH PERFORMANCE
                  OF SERVICES.

        ``(a) In General.--If one or more applicable partnership interests
    are held by a taxpayer at any time during the taxable year, the excess
    (if any) of--
                ``(1) the taxpayer's net long-term capital gain with
            respect to such interests for such taxable year, over
                ``(2) the taxpayer's net long-term capital gain with
            respect to such interests for such taxable year computed by
            applying paragraphs (3) and (4) of sections 1222 by
            substituting `3 years' for `1 year',
    shall be treated as short-term capital gain.
        ``(b) Special Rule.--To the extent provided by the Secretary,
    subsection (a) shall not apply to income or gain attributable to any
    asset not held for portfolio investment on behalf of third party
    investors.
        ``(c) Applicable Partnership Interest.--For purposes of this
    section--
                ``(1) In general.--Except as provided in this paragraph or
            paragraph (4), the term `applicable partnership interest' 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 substantial services by the taxpayer, or any
            other related person, in any applicable trade or business. The
            previous sentence shall not apply to an interest held by a
            person who is employed by another entity that is conducting a
            trade or business (other than an applicable trade or business)
            and only provides services to such other entity.
                ``(2) Applicable trade or business.--The term `applicable
            trade or business' means any activity conducted on a regular,
            continuous, and substantial basis which, regardless of whether
            the activity is conducted in one or more entities, consists, in
            whole or in part, of--
                        ``(A) raising or returning capital, and
                        ``(B) either--
                                ``(i) investing in (or disposing of)
                            specified assets (or identifying specified
                            assets for such investing or disposition), or
                                ``(ii) developing specified assets.
                ``(3) Specified asset.--The term `specified asset' means
            securities (as defined in section 475(c)(2) without regard to
            the last sentence thereof), commodities (as defined in section
            475(e)(2)), real estate held for rental or investment, cash or
            cash equivalents, options or derivative contracts with respect
            to any of the foregoing, and an interest in a partnership to
            the extent of the partnership's proportionate interest in any
            of the foregoing.
                ``(4) Exceptions.--The term `applicable partnership
            interest' shall not include--
                        ``(A) any interest in a partnership directly or
                    indirectly held by a corporation, or
                        ``(B) any capital interest in the partnership which
                    provides the taxpayer with a right to share in
                    partnership capital commensurate with--
                                ``(i) the amount of capital contributed
                            (determined at the time of receipt of such
                            partnership interest), or
                                ``(ii) the value of such interest subject
                            to tax under section 83 upon the receipt or
                            vesting of such interest.
                ``(5) Third party investor.--The term `third party
            investor' means a person who--
                        ``(A) holds an interest in the partnership which
                    does not constitute property held in connection with an
                    applicable trade or business; and
                        ``(B) is not (and has not been) actively engaged,
                    and is (and was) not related to a person so engaged, in
                    (directly or indirectly) providing substantial services
                    described in paragraph (1) for such partnership or any
                    applicable trade or business.
        ``(d) Transfer of Applicable Partnership Interest to Related
    Person.--
                ``(1) In general.--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 short term capital gain) the excess (if any) of--
                        ``(A) so much of the taxpayer's long-term capital
                    gains with respect to such interest for such taxable
                    year attributable to the sale or exchange of any asset
                    held for not more than 3 years as is allocable to such
                    interest, over
                        ``(B) any amount treated as short term capital gain
                    under subsection (a) with respect to the transfer of
                    such interest.
                ``(2) Related person.--For purposes of this paragraph, a
            person is related to the taxpayer if--
                        ``(A) the person is a member of the taxpayer's
                    family within the meaning of section 318(a)(1), or
                        ``(B) 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.
        ``(e) Reporting.--The Secretary shall require such reporting (at
    the time and in the manner prescribed by the Secretary) as is necessary
    to carry out the purposes of this section.
        ``(f) Regulations.--The Secretary shall issue such regulations or
    other guidance as is necessary or appropriate to carry out the purposes
    of this section''.
        (b) Coordination With Section 83.--Subsection (e) of section 83 is
    amended by striking ``or'' at the end of paragraph (4), by striking the
    period at the end of paragraph (5) and inserting ``, or'', and by
    adding at the end the following new paragraph:
                ``(6) a transfer of an applicable partnership interest to
            which section 1061 applies.''.
        (c) Clerical Amendment.--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:

    ``Sec. 1061. Partnership interests held in connection with performance
                                of services.
    ``Sec. 1062. Cross references.''.
        (d) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

    SEC. 3315. AMORTIZATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.

        (a) In General.--Section 174 is amended to read as follows:

    ``SEC. 174. AMORTIZATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.

        ``(a) In General.--In the case of a taxpayer's specified research
    or experimental expenditures for any taxable year--
                ``(1) except as provided in paragraph (2), no deduction
            shall be allowed for such expenditures, and
                ``(2) the taxpayer shall--
                        ``(A) charge such expenditures to capital account,
                    and
                        ``(B) 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.
        ``(b) Specified Research or Experimental Expenditures.--For
    purposes of this section, the term `specified research or experimental
    expenditures' 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.
        ``(c) Special Rules.--
                ``(1) Land and other property.--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.
                ``(2) Exploration expenditures.--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).
                ``(3) Software development.--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.
        ``(d) Treatment Upon Disposition, Retirement, or Abandonment.--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.''.
        (b) Clerical Amendment.--The table of sections for part VI of
    subchapter B of chapter 1 is amended by striking the item relating to
    section 174 and inserting the following new item:

    ``Sec. 174. Amortization of research and experimental expenditures.''.
        (c) Effective Date.--The amendments made by this section shall
    apply to amounts paid or incurred in taxable years beginning after
    December 31, 2022.

    SEC. 3316. UNIFORM TREATMENT OF EXPENSES IN CONTINGENCY FEE CASES.

        (a) In General.--Section 162, as amended by the preceding
    provisions of this Act, is amended by redesignating subsection (r) as
    subsection (s) and by inserting after subsection (q) the following new
    subsection:
        ``(r) Expenses in Contingency Fee Cases.--No deduction shall be
    allowed under subsection (a) to a taxpayer for any expense--
                ``(1) paid or incurred in the course of the trade or
            business of practicing law, and
                ``(2) resulting from a case for which the taxpayer is
            compensated primarily on a contingent basis,
    until such time as such contingency is resolved.''.
        (b) Effective Date.--The amendment made by this section shall apply
    to expenses and costs paid or incurred in taxable years beginning after
    the date of the enactment of this Act.

                     Subtitle E--Reform of Business Credits

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

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

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

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

    SEC. 3403. REPEAL OF REHABILITATION CREDIT.

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

    SEC. 3404. REPEAL OF WORK OPPORTUNITY TAX CREDIT.

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

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

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

    SEC. 3406. TERMINATION OF NEW MARKETS TAX CREDIT.

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

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

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

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

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

                           Subtitle F--Energy Credits

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

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

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

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

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

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

    SEC. 3504. REPEAL OF ENHANCED OIL RECOVERY CREDIT.

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

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

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

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

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

                            Subtitle G--Bond Reforms

    SEC. 3601. TERMINATION OF PRIVATE ACTIVITY BONDS.

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

    SEC. 3602. REPEAL OF ADVANCE REFUNDING BONDS.

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

    SEC. 3603. REPEAL OF TAX CREDIT BONDS.

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

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

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

                             Subtitle H--Insurance

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

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

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

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

    SEC. 3703. SURTAX ON LIFE INSURANCE COMPANY TAXABLE INCOME.

        (a) In General.--Section 801(a)(1) is amended--
                (1) by striking ``consist of a tax'' and insert ``consist
            of the sum of--
                        ``(A) a tax'', and
                (2) by striking the period at the end and inserting ``,
            and'', and
                (3) by adding at the end the following new subparagraph:
                        ``(B) a tax equal to 8 percent of the life
                    insurance company taxable income.''.

    SEC. 3704. ADJUSTMENT FOR CHANGE IN COMPUTING RESERVES.

        (a) In General.--Paragraph (1) of section 807(f) is amended to read
    as follows:
                ``(1) Treatment as change in method of accounting.--If the
            basis for determining any item referred to in subsection (c) as
            of the close of any taxable year differs from the basis for
            such determination as of the close of the preceding taxable
            year, then so much of the difference between--
                        ``(A) the amount of the item at the close of the
                    taxable year, computed on the new basis, and
                        ``(B) the amount of the item at the close of the
                    taxable year, computed on the old basis,
            as is attributable to contracts issued before the taxable year
            shall be taken into account under section 481 as adjustments
            attributable to a change in method of accounting initiated by
            the taxpayer and made with the consent of the Secretary.''.
        (b) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

    SEC. 3705. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS TO SHAREHOLDERS
                  FROM PRE-1984 POLICYHOLDERS SURPLUS ACCOUNT.

        (a) In General.--Subpart D of part I of subchapter L is amended by
    striking section 815 (and by striking the item relating to such section
    in the table of sections for such subpart).
        (b) Conforming Amendment.--Section 801 is amended by striking
    subsection (c).
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.
        (d) Phased Inclusion of Remaining Balance of Policyholders Surplus
    Accounts.--In the case of any stock life insurance company which has a
    balance (determined as of the close of such company's last taxable year
    beginning before January 1, 2018) in an existing policyholders surplus
    account (as defined in section 815 of the Internal Revenue Code of
    1986, as in effect before its repeal), the tax imposed by section 801
    of such Code for the first 8 taxable years beginning after December 31,
    2017, shall be the amount which would be imposed by such section for
    such year on the sum of--
                (1) life insurance company taxable income for such year
            (within the meaning of such section 801 but not less than
            zero), plus
                (2) \1/8\ of such balance.

    SEC. 3706. MODIFICATION OF PRORATION RULES FOR PROPERTY AND CASUALTY
                  INSURANCE COMPANIES.

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

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

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

    SEC. 3708. REPEAL OF SPECIAL ESTIMATED TAX PAYMENTS.

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

                            Subtitle I--Compensation

    SEC. 3801. MODIFICATION OF LIMITATION ON EXCESSIVE EMPLOYEE
                  REMUNERATION.

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

    SEC. 3802. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE
                  COMPENSATION.

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

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

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

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

    SEC. 3803. TREATMENT OF QUALIFIED EQUITY GRANTS.

        (a) In General.--
                (1) Election to defer income.--Section 83 is amended by
            adding at the end the following new subsection:
        ``(i) Qualified Equity Grants.--
                ``(1) In general.--For purposes of this subtitle, if
            qualified stock is transferred to a qualified employee who
            makes an election with respect to such stock under this
            subsection--
                        ``(A) except as provided in subparagraph (B), no
                    amount shall be included in income under subsection (a)
                    for the first taxable year in which the rights of the
                    employee in such stock are transferable or are not
                    subject to a substantial risk of forfeiture, whichever
                    is applicable, and
                        ``(B) an amount equal to the amount which would be
                    included in income of the employee under subsection (a)
                    (determined without regard to this subsection) shall be
                    included in income for the taxable year of the employee
                    which includes the earliest of--
                                ``(i) the first date such qualified stock
                            becomes transferable (including transferable to
                            the employer),
                                ``(ii) the date the employee first becomes
                            an excluded employee,
                                ``(iii) the first date on which any stock
                            of the corporation which issued the qualified
                            stock becomes readily tradable on an
                            established securities market (as determined by
                            the Secretary, but not including any market
                            unless such market is recognized as an
                            established securities market by the Secretary
                            for purposes of a provision of this title other
                            than this subsection),
                                ``(iv) the date that is 5 years after the
                            first date the rights of the employee in such
                            stock are transferable or are not subject to a
                            substantial risk of forfeiture, whichever
                            occurs earlier, or
                                ``(v) the date on which the employee
                            revokes (at such time and in such manner as the
                            Secretary may provide) the election under this
                            subsection with respect to such stock.
                ``(2) Qualified stock.--
                        ``(A) In general.--For purposes of this subsection,
                    the term `qualified stock' means, with respect to any
                    qualified employee, any stock in a corporation which is
                    the employer of such employee, if--
                                ``(i) such stock is received--
                                        ``(I) in connection with the
                                    exercise of an option, or
                                        ``(II) in settlement of a
                                    restricted stock unit, and
                                ``(ii) such option or restricted stock unit
                            was provided by the corporation--
                                        ``(I) in connection with the
                                    performance of services as an employee,
                                    and
                                        ``(II) during a calendar year in
                                    which such corporation was an eligible
                                    corporation.
                        ``(B) Limitation.--The term `qualified stock' shall
                    not include any stock if the employee may sell such
                    stock to, or otherwise receive cash in lieu of stock
                    from, the corporation at the time that the rights of
                    the employee in such stock first become transferable or
                    not subject to a substantial risk of forfeiture.
                        ``(C) Eligible corporation.--For purposes of
                    subparagraph (A)(ii)(II)--
                                ``(i) In general.--The term `eligible
                            corporation' means, with respect to any
                            calendar year, any corporation if--
                                        ``(I) no stock of such corporation
                                    (or any predecessor of such
                                    corporation) is readily tradable on an
                                    established securities market (as
                                    determined under paragraph (1)(B)(iii))
                                    during any preceding calendar year, and
                                        ``(II) such corporation has a
                                    written plan under which, in such
                                    calendar year, not less than 80 percent
                                    of all employees who provide services
                                    to such corporation in the United
                                    States (or any possession of the United
                                    States) are granted stock options, or
                                    restricted stock units, with the same
                                    rights and privileges to receive
                                    qualified stock.
                                ``(ii) Same rights and privileges.--For
                            purposes of clause (i)(II)--
                                        ``(I) except as provided in
                                    subclauses (II) and (III), the
                                    determination of rights and privileges
                                    with respect to stock shall be
                                    determined in a similar manner as
                                    provided under section 423(b)(5),
                                        ``(II) employees shall not fail to
                                    be treated as having the same rights
                                    and privileges to receive qualified
                                    stock solely because the number of
                                    shares available to all employees is
                                    not equal in amount, so long as the
                                    number of shares available to each
                                    employee is more than a de minimis
                                    amount, and
                                        ``(III) rights and privileges with
                                    respect to the exercise of an option
                                    shall not be treated as the same as
                                    rights and privileges with respect to
                                    the settlement of a restricted stock
                                    unit.
                                ``(iii) Employee.--For purposes of clause
                            (i)(II), the term `employee' shall not include
                            any employee described in section 4980E(d)(4)
                            or any excluded employee.
                                ``(iv) Special rule for calendar years
                            before 2018.--In the case of any calendar year
                            beginning before January 1, 2018, clause
                            (i)(II) shall be applied without regard to
                            whether the rights and privileges with respect
                            to the qualified stock are the same.
                ``(3) Qualified employee; excluded employee.--For purposes
            of this subsection--
                        ``(A) In general.--The term `qualified employee'
                    means any individual who--
                                ``(i) is not an excluded employee, and
                                ``(ii) agrees in the election made under
                            this subsection to meet such requirements as
                            determined by the Secretary to be necessary to
                            ensure that the withholding requirements of the
                            corporation under chapter 24 with respect to
                            the qualified stock are met.
                        ``(B) Excluded employee.--The term `excluded
                    employee' means, with respect to any corporation, any
                    individual--
                                ``(i) who was a 1-percent owner (within the
                            meaning of section 416(i)(1)(B)(ii)) at any
                            time during the 10 preceding calendar years,
                                ``(ii) who is or has been at any prior
                            time--
                                        ``(I) the chief executive officer
                                    of such corporation or an individual
                                    acting in such a capacity, or
                                        ``(II) the chief financial officer
                                    of such corporation or an individual
                                    acting in such a capacity,
                                ``(iii) who bears a relationship described
                            in section 318(a)(1) to any individual
                            described in subclause (I) or (II) of clause
                            (ii), or
                                ``(iv) who has been for any of the 10
                            preceding taxable years one of the 4 highest
                            compensated officers of such corporation
                            determined with respect to each such taxable
                            year on the basis of the shareholder disclosure
                            rules for compensation under the Securities
                            Exchange Act of 1934 (as if such rules applied
                            to such corporation).
                ``(4) Election.--
                        ``(A) Time for making election.--An election with
                    respect to qualified stock shall be made under this
                    subsection no later than 30 days after the first time
                    the rights of the employee in such stock are
                    transferable or are not subject to a substantial risk
                    of forfeiture, whichever occurs earlier, and shall be
                    made in a manner similar to the manner in which an
                    election is made under subsection (b).
                        ``(B) Limitations.--No election may be made under
                    this section with respect to any qualified stock if--
                                ``(i) the qualified employee has made an
                            election under subsection (b) with respect to
                            such qualified stock,
                                ``(ii) any stock of the corporation which
                            issued the qualified stock is readily tradable
                            on an established securities market (as
                            determined under paragraph (1)(B)(iii)) at any
                            time before the election is made, or
                                ``(iii) such corporation purchased any of
                            its outstanding stock in the calendar year
                            preceding the calendar year which includes the
                            first time the rights of the employee in such
                            stock are transferable or are not subject to a
                            substantial risk of forfeiture, unless--
                                        ``(I) not less than 25 percent of
                                    the total dollar amount of the stock so
                                    purchased is deferral stock, and
                                        ``(II) the determination of which
                                    individuals from whom deferral stock is
                                    purchased is made on a reasonable
                                    basis.
                        ``(C) Definitions and special rules related to
                    limitation on stock redemptions.--
                                ``(i) Deferral stock.--For purposes of this
                            paragraph, the term `deferral stock' means
                            stock with respect to which an election is in
                            effect under this subsection.
                                ``(ii) Deferral stock with respect to any
                            individual not taken into account if individual
                            holds deferral stock with longer deferral
                            period.--Stock purchased by a corporation from
                            any individual shall not be treated as deferral
                            stock for purposes of clause (iii) if such
                            individual (immediately after such purchase)
                            holds any deferral stock with respect to which
                            an election has been in effect under this
                            subsection for a longer period than the
                            election with respect to the stock so
                            purchased.
                                ``(iii) Purchase of all outstanding
                            deferral stock.--The requirements of subclauses
                            (I) and (II) of subparagraph (B)(iii) shall be
                            treated as met if the stock so purchased
                            includes all of the corporation's outstanding
                            deferral stock.
                                ``(iv) Reporting.--Any corporation which
                            has outstanding deferral stock as of the
                            beginning of any calendar year and which
                            purchases any of its outstanding stock during
                            such calendar year shall include on its return
                            of tax for the taxable year in which, or with
                            which, such calendar year ends the total dollar
                            amount of its outstanding stock so purchased
                            during such calendar year and such other
                            information as the Secretary may require for
                            purposes of administering this paragraph.
                ``(5) Controlled groups.--For purposes of this subsection,
            all corporations which are members of the same controlled group
            of corporations (as defined in section 1563(a)) shall be
            treated as one corporation.
                ``(6) Notice requirement.--Any corporation that transfers
            qualified stock to a qualified employee shall, at the time that
            (or a reasonable period before) an amount attributable to such
            stock would (but for this subsection) first be includible in
            the gross income of such employee--
                        ``(A) certify to such employee that such stock is
                    qualified stock, and
                        ``(B) notify such employee--
                                ``(i) that the employee may elect to defer
                            income on such stock under this subsection, and
                                ``(ii) that, if the employee makes such an
                            election--
                                        ``(I) the amount of income
                                    recognized at the end of the deferral
                                    period will be based on the value of
                                    the stock at the time at which the
                                    rights of the employee in such stock
                                    first become transferable or not
                                    subject to substantial risk of
                                    forfeiture, notwithstanding whether the
                                    value of the stock has declined during
                                    the deferral period,
                                        ``(II) the amount of such income
                                    recognized at the end of the deferral
                                    period will be subject to withholding
                                    under section 3401(i) at the rate
                                    determined under section 3402(t), and
                                        ``(III) the responsibilities of the
                                    employee (as determined by the
                                    Secretary under paragraph (3)(A)(ii))
                                    with respect to such withholding.
                ``(7) Restricted stock units.--This section (other than
            this subsection), including any election under subsection (b),
            shall not apply to restricted stock units.''.
                (2) Deduction by employer.--Subsection (h) of section 83 is
            amended by striking ``or (d)(2)'' and inserting ``(d)(2), or
            (i)''.
        (b) Withholding.--
                (1) Time of withholding.--Section 3401 is amended by adding
            at the end the following new subsection:
        ``(i) Qualified Stock for Which an Election Is in Effect Under
    Section 83(i).--For purposes of subsection (a), qualified stock (as
    defined in section 83(i)) with respect to which an election is made
    under section 83(i) shall be treated as wages--
                ``(1) received on the earliest date described in section
            83(i)(1)(B), and
                ``(2) in an amount equal to the amount included in income
            under section 83 for the taxable year which includes such
            date.''.
                (2) Amount of withholding.--Section 3402 is amended by
            adding at the end the following new subsection:
        ``(t) Rate of Withholding for Certain Stock.--In the case of any
    qualified stock (as defined in section 83(i)) with respect to which an
    election is made under section 83(i)--
                ``(1) the rate of tax under subsection (a) shall not be
            less than the maximum rate of tax in effect under section 1,
            and
                ``(2) such stock shall be treated for purposes of section
            3501(b) in the same manner as a non-cash fringe benefit.''.
        (c) Coordination With Other Deferred Compensation Rules.--
                (1) Election to apply deferral to statutory options.--
                        (A) Incentive stock options.--Section 422(b) is
                    amended by adding at the end the following: ``Such term
                    shall not include any option if an election is made
                    under section 83(i) with respect to the stock received
                    in connection with the exercise of such option.''.
                        (B) Employee stock purchase plans.--Section 423(a)
                    is amended by adding at the end the following flush
                    sentence:
    ``The preceding sentence shall not apply to any share of stock with
    respect to which an election is made under section 83(i).''.
                (2) Exclusion from definition of nonqualified deferred
            compensation plan.--Subsection (d) of section 409A is amended
            by adding at the end the following new paragraph:
                ``(7) Treatment of qualified stock.--An arrangement under
            which an employee may receive qualified stock (as defined in
            section 83(i)(2)) shall not be treated as a nonqualified
            deferred compensation plan solely because of an employee's
            election, or ability to make an election, to defer recognition
            of income under section 83(i).''.
        (d) Information Reporting.--Section 6051(a) is amended by striking
    ``and'' at the end of paragraph (13), by striking the period at the end
    of paragraph (14) and inserting a comma, and by inserting after
    paragraph (14) the following new paragraphs:
                ``(15) the amount excludable from gross income under
            subparagraph (A) of section 83(i)(1),
                ``(16) the amount includible in gross income under
            subparagraph (B) of section 83(i)(1) with respect to an event
            described in such subparagraph which occurs in such calendar
            year, and
                ``(17) the aggregate amount of income which is being
            deferred pursuant to elections under section 83(i), determined
            as of the close of the calendar year.''.
        (e) Penalty for Failure of Employer To Provide Notice of Tax
    Consequences.--Section 6652 is amended by adding at the end the
    following new subsection:
        ``(o) Failure to Provide Notice Under Section 83(i).--In the case
    of each failure to provide a notice as required by section 83(i)(6), at
    the time prescribed therefor, unless it is shown that such failure is
    due to reasonable cause and not to willful neglect, there shall be
    paid, on notice and demand of the Secretary and in the same manner as
    tax, by the person failing to provide such notice, an amount equal to
    $100 for each such failure, but the total amount imposed on such person
    for all such failures during any calendar year shall not exceed
    $50,000.''.
        (f) Effective Dates.--
                (1) In general.--Except as provided in paragraph (2), the
            amendments made by this section shall apply to stock
            attributable to options exercised, or restricted stock units
            settled, after December 31, 2017.
                (2) Requirement to provide notice.--The amendments made by
            subsection (e) shall apply to failures after December 31, 2017.
        (g) Transition Rule.--Until such time as the Secretary (or the
    Secretary's delegate) issue regulations or other guidance for purposes
    of implementing the requirements of paragraph (2)(C)(i)(II) of section
    83(i) of the Internal Revenue Code of 1986 (as added by this section),
    or the requirements of paragraph (6) of such section, a corporation
    shall be treated as being in compliance with such requirements
    (respectively) if such corporation complies with a reasonable good
    faith interpretation of such requirements.

            TITLE IV--TAXATION OF FOREIGN INCOME AND FOREIGN PERSONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

        ``(a) Treatment of Deferred Foreign Income as Subpart F Income.--In
    the case of the last taxable year of a deferred foreign income
    corporation which begins before January 1, 2018, the subpart F income
    of such foreign corporation (as otherwise determined for such taxable
    year under section 952) shall be increased by the greater of--
                ``(1) the accumulated post-1986 deferred foreign income of
            such corporation determined as of November 2, 2017, or
                ``(2) the accumulated post-1986 deferred foreign income of
            such corporation determined as of December 31, 2017.
        ``(b) Reduction in Amounts Included in Gross Income of United
    States Shareholders of Specified Foreign Corporations With Deficits in
    Earnings and Profits.--
                ``(1) In general.--In the case of a taxpayer which is a
            United States shareholder with respect to at least one deferred
            foreign income corporation and at least one E&P deficit foreign
            corporation, the amount which would (but for this subsection)
            be taken into account under section 951(a)(1) by reason of
            subsection (a) as such United States shareholder's pro rata
            share of the subpart F income of each deferred foreign income
            corporation shall be reduced (but not below zero) by the amount
            of such United States shareholder's aggregate foreign E&P
            deficit which is allocated under paragraph (2) to such deferred
            foreign income corporation.
                ``(2) Allocation of aggregate foreign e&p deficit.--The
            aggregate foreign E&P deficit of any United States shareholder
            shall be allocated among the deferred foreign income
            corporations of such United States shareholder in an amount
            which bears the same proportion to such aggregate as--
                        ``(A) such United States shareholder's pro rata
                    share of the accumulated post-1986 deferred foreign
                    income of each such deferred foreign income
                    corporation, bears to
                        ``(B) the aggregate of such United States
                    shareholder's pro rata share of the accumulated post-
                    1986 deferred foreign income of all deferred foreign
                    income corporations of such United States shareholder.
                ``(3) Definitions related to e&p deficits.--For purposes of
            this subsection--
                        ``(A) Aggregate foreign e&p deficit.--The term
                    `aggregate foreign E&P deficit' means, with respect to
                    any United States shareholder, the aggregate of such
                    shareholder's pro rata shares of the specified E&P
                    deficits of the E&P deficit foreign corporations of
                    such shareholder.
                        ``(B) E&P deficit foreign corporation.--The term
                    `E&P deficit foreign corporation' means, with respect
                    to any taxpayer, any specified foreign corporation with
                    respect to which such taxpayer is a United States
                    shareholder, if--
                                ``(i) such specified foreign corporation
                            has a deficit in post-1986 earnings and
                            profits, and
                                ``(ii) as of November 2, 2017--
                                        ``(I) such corporation was a
                                    specified foreign corporation, and
                                        ``(II) such taxpayer was a United
                                    States shareholder of such corporation.
                        ``(C) Specified e&p deficit.--The term `specified
                    E&P deficit' means, with respect to any E&P deficit
                    foreign corporation, the amount of the deficit referred
                    to in subparagraph (B).
                ``(4) Netting among united states shareholders in same
            affiliated group.--
                        ``(A) In general.--In the case of any affiliated
                    group which includes at least one E&P net surplus
                    shareholder and one E&P net deficit shareholder, the
                    amount which would (but for this paragraph) be taken
                    into account under section 951(a)(1) by reason of
                    subsection (a) by each such E&P net surplus shareholder
                    shall be reduced (but not below zero) by such
                    shareholder's applicable share of the affiliated
                    group's aggregate unused E&P deficit.
                        ``(B) E&P net surplus shareholder.--For purposes of
                    this paragraph, the term `E&P net surplus shareholder'
                    means any United States shareholder which would
                    (determined without regard to this paragraph) take into
                    account an amount greater than zero under section
                    951(a)(1) by reason of subsection (a).
                        ``(C) E&P net deficit shareholder.--For purposes of
                    this paragraph, the term `E&P net deficit shareholder'
                    means any United States shareholder if--
                                ``(i) the aggregate foreign E&P deficit
                            with respect to such shareholder (as defined in
                            paragraph (3)(A)), exceeds
                                ``(ii) the amount which would (but for this
                            subsection) be taken into account by such
                            shareholder under section 951(a)(1) by reason
                            of subsection (a).
                        ``(D) Aggregate unused e&p deficit.--For purposes
                    of this paragraph--
                                ``(i) In general.--The term `aggregate
                            unused E&P deficit' means, with respect to any
                            affiliated group, the lesser of--
                                        ``(I) the sum of the excesses
                                    described in subparagraph (C),
                                    determined with respect to each E&P net
                                    deficit shareholder in such group, or
                                        ``(II) the amount determined under
                                    subparagraph (E)(ii).
                                ``(ii) Reduction with respect to e&p net
                            deficit shareholders which are not wholly owned
                            by the affiliated group.--If the group
                            ownership percentage of any E&P net deficit
                            shareholder is less than 100 percent, the
                            amount of the excess described in subparagraph
                            (C) which is taken into account under clause
                            (i)(I) with respect to such E&P net deficit
                            shareholder shall be such group ownership
                            percentage of such amount.
                        ``(E) Applicable share.--For purposes of this
                    paragraph, the term `applicable share' means, with
                    respect to any E&P net surplus shareholder in any
                    affiliated group, the amount which bears the same
                    proportion to such group's aggregate unused E&P deficit
                    as--
                                ``(i) the product of--
                                        ``(I) such shareholder's group
                                    ownership percentage, multiplied by
                                        ``(II) the amount which would (but
                                    for this paragraph) be taken into
                                    account under section 951(a)(1) by
                                    reason of subsection (a) by such
                                    shareholder, bears to
                                ``(ii) the aggregate amount determined
                            under clause (i) with respect to all E&P net
                            surplus shareholders in such group.
                        ``(F) Group ownership percentage.--For purposes of
                    this paragraph, the term `group ownership percentage'
                    means, with respect to any United States shareholder in
                    any affiliated group, the percentage of the value of
                    the stock of such United States shareholder which is
                    held by other includible corporations in such
                    affiliated group. Notwithstanding the preceding
                    sentence, the group ownership percentage of the common
                    parent of the affiliated group is 100 percent. Any term
                    used in this subparagraph which is also used in section
                    1504 shall have the same meaning as when used in such
                    section.
        ``(c) Application of Participation Exemption to Included Income.--
                ``(1) In general.--In the case of a United States
            shareholder of a deferred foreign income corporation, there
            shall be allowed as a deduction for the taxable year in which
            an amount is included in the gross income of such United States
            shareholder under section 951(a)(1) by reason of this section
            an amount equal to the sum of--
                        ``(A) the United States shareholder's 7 percent
                    rate equivalent percentage of the excess (if any) of--
                                ``(i) the amount so included as gross
                            income, over
                                ``(ii) the amount of such United States
                            shareholder's aggregate foreign cash position,
                            plus
                        ``(B) the United States shareholder's 14 percent
                    rate equivalent percentage of so much of the amount
                    described in subparagraph (A)(ii) as does not exceed
                    the amount described in subparagraph (A)(i).
                ``(2) 7 and 14 percent rate equivalent percentages.--For
            purposes of this subsection--
                        ``(A) 7 percent rate equivalent percentage.--The
                    term `7 percent rate equivalent percentage' means, with
                    respect to any United States shareholder for any
                    taxable year, the percentage which would result in the
                    amount to which such percentage applies being subject
                    to a 7 percent rate of tax determined by only taking
                    into account a deduction equal to such percentage of
                    such amount and the highest rate of tax specified in
                    section 11 for such taxable year. In the case of any
                    taxable year of a United States shareholder to which
                    section 15 applies, the highest rate of tax under
                    section 11 before the effective date of the change in
                    rates and the highest rate of tax under section 11
                    after the effective date of such change shall each be
                    taken into account under the preceding sentence in the
                    same proportions as the portion of such taxable year
                    which is before and after such effective date,
                    respectively.
                        ``(B) 14 percent rate equivalent percentage.--The
                    term `14 percent rate equivalent percentage' means,
                    with respect to any United States shareholder for any
                    taxable year, the percentage determined under
                    subparagraph (A) applied by substituting `14 percent
                    rate of tax' for `7 percent rate of tax'.
                ``(3) Aggregate foreign cash position.--For purposes of
            this subsection--
                        ``(A) In general.--The term `aggregate foreign cash
                    position' means, with respect to any United States
                    shareholder, one-third of the sum of--
                                ``(i) the aggregate of such United States
                            shareholder's pro rata share of the cash
                            position of each specified foreign corporation
                            of such United States shareholder determined as
                            of November 2, 2017,
                                ``(ii) the aggregate described in clause
                            (i) determined as of the close of the last
                            taxable year of each such specified foreign
                            corporation which ends before November 2, 2017,
                            and
                                ``(iii) the aggregate described in clause
                            (i) determined as of the close of the taxable
                            year of each such specified foreign corporation
                            which precedes the taxable year referred to in
                            clause (ii).
                    In the case of any foreign corporation which did not
                    exist as of the determination date described in clause
                    (ii) or (iii), this subparagraph shall be applied
                    separately to such foreign corporation by not taking
                    into account such clause and by substituting `one-half
                    (100 percent in the case that both clauses (ii) and
                    (iii) are disregarded)' for `one-third'.
                        ``(B) Cash position.--For purposes of this
                    paragraph, the cash position of any specified foreign
                    corporation is the sum of--
                                ``(i) cash held by such foreign
                            corporation,
                                ``(ii) the net accounts receivable of such
                            foreign corporation, plus
                                ``(iii) the fair market value of the
                            following assets held by such corporation:
                                        ``(I) Actively traded personal
                                    property for which there is an
                                    established financial market.
                                        ``(II) Commercial paper,
                                    certificates of deposit, the securities
                                    of the Federal government and of any
                                    State or foreign government.
                                        ``(III) Any foreign currency.
                                        ``(IV) Any obligation with a term
                                    of less than one year.
                                        ``(V) Any asset which the Secretary
                                    identifies as being economically
                                    equivalent to any asset described in
                                    this subparagraph.
                        ``(C) Net accounts receivable.--For purposes of
                    this paragraph, the term `net accounts receivable'
                    means, with respect to any specified foreign
                    corporation, the excess (if any) of--
                                ``(i) such corporation's accounts
                            receivable, over
                                ``(ii) such corporation's accounts payable
                            (determined consistent with the rules of
                            section 461).
                        ``(D) Prevention of double counting.--
                                ``(i) In general.--The applicable
                            percentage of each specified cash position of a
                            specified foreign corporation shall not be
                            taken into account by--
                                        ``(I) the United States shareholder
                                    referred to in clause (ii) with respect
                                    to such position, or
                                        ``(II) any United States
                                    shareholder which is an includible
                                    corporation in the same affiliated
                                    group as such United States shareholder
                                    referred to in clause (ii).
                                ``(ii) Specified cash position.--For
                            purposes of this subparagraph, the term
                            `specified cash position' means--
                                        ``(I) amounts described in
                                    subparagraph (B)(ii) to the extent such
                                    amounts are receivable from another
                                    specified foreign corporation with
                                    respect to any United States
                                    shareholder,
                                        ``(II) amounts described in
                                    subparagraph (B)(iii)(I) to the extent
                                    such amounts consist of an equity
                                    interest in another specified foreign
                                    corporation with respect to any United
                                    States shareholder, and
                                        ``(III) amounts described in
                                    subparagraph (B)(iii)(IV) to the extent
                                    that another specified foreign
                                    corporation with respect to any United
                                    States shareholder is obligated to
                                    repay such amount.
                                ``(iii) Applicable percentage.--For
                            purposes of this subparagraph, the term
                            `applicable percentage' means--
                                        ``(I) with respect to each
                                    specified cash position described in
                                    subclause (I) or (III) of clause (ii),
                                    the pro rata share of the United States
                                    shareholder referred to in clause (ii)
                                    with respect to the specified foreign
                                    corporation referred to in such clause,
                                    and
                                        ``(II) with respect to each
                                    specified cash position described in
                                    clause (ii)(II), the ratio (expressed
                                    as a percentage and not in excess of
                                    100 percent) of the United States
                                    shareholder's pro rata share of the
                                    cash position of the specified foreign
                                    corporation referred to in such clause
                                    divided by the amount of such specified
                                    cash position.
                            For purposes of this subparagraph, a separate
                            applicable percentage shall be determined under
                            each of subclauses (I) and (II) with respect to
                            each specified foreign corporation referred to
                            in clause (ii) with respect to which a
                            specified cash position is determined for the
                            specified foreign corporation referred to in
                            clause (i).
                                ``(iv) Reduction with respect to affiliated
                            group members not wholly owned by the
                            affiliated group.--For purposes of clause
                            (i)(II), in the case of an includible
                            corporation the group ownership percentage of
                            which is less than 100 percent (as determined
                            under subsection (b)(4)(F)), the amount not
                            take into account by reason of such clause
                            shall be the group ownership percentage of such
                            amount (determined without regard to this
                            clause).
                        ``(E) Certain blocked assets not taken into
                    account.--A cash position of a specified foreign
                    corporation shall not be taken into account under
                    subparagraph (A) if such position could not (as of the
                    date that it would otherwise have been taken into
                    account under clause (i), (ii), or (iii) of
                    subparagraph (A)) have been distributed by such
                    specified foreign corporation to United States
                    shareholders of such specified foreign corporation
                    because of currency or other restrictions or
                    limitations imposed under the laws of any foreign
                    country (within the meaning of section 964(b)).
                        ``(F) Cash positions of certain non-corporate
                    entities taken into account.--An entity (other than a
                    domestic corporation) shall be treated as a specified
                    foreign corporation of a United States shareholder for
                    purposes of determining such United States
                    shareholder's aggregate foreign cash position if any
                    interest in such entity is held by a specified foreign
                    corporation of such United States shareholder
                    (determined after application of this subparagraph) and
                    such entity would be a specified foreign corporation of
                    such United States shareholder if such entity were a
                    foreign corporation.
                        ``(G) Time of certain determinations.--For purposes
                    of this paragraph, the determination of whether a
                    person is a United States shareholder, whether a person
                    is a specified foreign corporation, and the pro rata
                    share of a United States shareholder with respect to a
                    specified foreign corporation, shall be determined as
                    of the end of the taxable year described in subsection
                    (a).
                        ``(H) Anti-abuse.--If the Secretary determines that
                    the principal purpose of any transaction was to reduce
                    the aggregate foreign cash position taken into account
                    under this subsection, such transaction shall be
                    disregarded for purposes of this subsection.
        ``(d) Deferred Foreign Income Corporation; Accumulated Post-1986
    Deferred Foreign Income.--For purposes of this section--
                ``(1) Deferred foreign income corporation.--The term
            `deferred foreign income corporation' means, with respect to
            any United States shareholder, any specified foreign
            corporation of such United States shareholder which has
            accumulated post-1986 deferred foreign income (as of the date
            referred to in paragraph (1) or (2) of subsection (a),
            whichever is applicable with respect to such foreign
            corporation) greater than zero.
                ``(2) Accumulated post-1986 deferred foreign income.--The
            term `accumulated post-1986 deferred foreign income' means the
            post-1986 earnings and profits except to the extent such
            earnings--
                        ``(A) are attributable to income of the specified
                    foreign corporation which is effectively connected with
                    the conduct of a trade or business within the United
                    States and subject to tax under this chapter, or
                        ``(B) if distributed, would be excluded from the
                    gross income of a United States shareholder under
                    section 959.
            To the extent provided in regulations or other guidance
            prescribed by the Secretary, in the case of any controlled
            foreign corporation which has shareholders which are not United
            States shareholders, accumulated post-1986 deferred foreign
            income shall be appropriately reduced by amounts which would be
            described in subparagraph (B) if such shareholders were United
            States shareholders.
                ``(3) Post-1986 earnings and profits.--The term `post-1986
            earnings and profits' means the earnings and profits of the
            foreign corporation (computed in accordance with sections
            964(a) and 986) accumulated in taxable years beginning after
            December 31, 1986, and determined--
                        ``(A) as of the date referred to in paragraph (1)
                    or (2) of subsection (a), whichever is applicable with
                    respect to such foreign corporation,
                        ``(B) without diminution by reason of dividends
                    distributed during the taxable year ending with or
                    including such date, and
                        ``(C) increased by the amount of any qualified
                    deficit (within the meaning of section
                    952(c)(1)(B)(ii)) arising before January 1, 2018, which
                    is treated as a qualified deficit (within the meaning
                    of such section as amended by the Tax Cuts and Jobs
                    Act) for purposes of such foreign corporation's first
                    taxable year beginning after December 31, 2017.
        ``(e) Specified Foreign Corporation.--
                ``(1) In general.--For purposes of this section, the term
            `specified foreign corporation' means--
                        ``(A) any controlled foreign corporation, and
                        ``(B) any foreign corporation with respect to which
                    one or more domestic corporations is a United States
                    shareholder (determined without regard to section
                    958(b)(4)).
                ``(2) Application to certain foreign corporations.--For
            purposes of sections 951 and 961, a foreign corporation
            described in paragraph (1)(B) shall be treated as a controlled
            foreign corporation solely for purposes of taking into account
            the subpart F income of such corporation under subsection (a)
            (and for purposes of applying subsection (f)).
                ``(3) Exception for passive foreign investment companies.--
            The term `specified foreign corporation' shall not include any
            passive foreign investment company (within the meaning of
            subpart D of part VI of subchapter P) that is not a controlled
            foreign corporation.
        ``(f) Determinations of Pro Rata Share.--For purposes of this
    section, the determination of any United States shareholder's pro rata
    share of any amount with respect to any specified foreign corporation
    shall be determined under rules similar to the rules of section
    951(a)(2) by treating such amount in the same manner as subpart F
    income (and by treating such specified foreign corporation as a
    controlled foreign corporation).
        ``(g) Disallowance of Foreign Tax Credit, etc.--
                ``(1) In general.--No credit shall be allowed under section
            901 for the applicable percentage of any taxes paid or accrued
            (or treated as paid or accrued) with respect to any amount for
            which a deduction is allowed under this section.
                ``(2) Applicable percentage.--For purposes of this
            subsection, the term `applicable percentage' means the amount
            (expressed as a percentage) equal to the sum of--
                        ``(A) 80 percent of the ratio of--
                                ``(i) the excess to which subsection
                            (c)(1)(A) applies, divided by
                                ``(ii) the sum of such excess plus the
                            amount to which subsection (c)(1)(B) applies,
                            plus
                        ``(B) 60 percent of the ratio of--
                                ``(i) the amount to which subsection
                            (c)(1)(B) applies, divided by
                                ``(ii) the sum described in subparagraph
                            (A)(ii).
                ``(3) Denial of deduction.--No deduction shall be allowed
            under this chapter for any tax for which credit is not
            allowable under section 901 by reason of paragraph (1)
            (determined by treating the taxpayer as having elected the
            benefits of subpart A of part III of subchapter N).
                ``(4) Coordination with section 78.--With respect to the
            taxes treated as paid or accrued by a domestic corporation with
            respect to amounts which are includible in gross income of such
            domestic corporation by reason of this section, section 78
            shall apply only to so much of such taxes as bears the same
            proportion to the amount of such taxes as--
                        ``(A) the excess of--
                                ``(i) the amounts which are includible in
                            gross income of such domestic corporation by
                            reason of this section, over
                                ``(ii) the deduction allowable under
                            subsection (c) with respect to such amounts,
                            bears to
                        ``(B) such amounts.
                ``(5) Extension of foreign tax credit carryover period.--
            With respect to any taxes paid or accrued (or treated as paid
            or accrued) with respect to any amount for which a deduction is
            allowed under this section, section 904(c) shall be applied by
            substituting `first 20 succeeding taxable years' for `first 10
            succeeding taxable years'.
        ``(h) Election to Pay Liability in Installments.--
                ``(1) In general.--In the case of a United States
            shareholder of a deferred foreign income corporation, such
            United States shareholder may elect to pay the net tax
            liability under this section in 8 equal installments.
                ``(2) Date for payment of installments.--If an election is
            made under paragraph (1), the first installment shall be paid
            on the due date (determined without regard to any extension of
            time for filing the return) for the return of tax for the
            taxable year described in subsection (a) and each succeeding
            installment shall be paid on the due date (as so determined)
            for the return of tax for the taxable year following the
            taxable year with respect to which the preceding installment
            was made.
                ``(3) Acceleration of payment.--If there is an addition to
            tax for failure to timely pay any installment required under
            this subsection, a liquidation or sale of substantially all the
            assets of the taxpayer (including in a title 11 or similar
            case), a cessation of business by the taxpayer, or any similar
            circumstance, then the unpaid portion of all remaining
            installments shall be due on the date of such event (or in the
            case of a title 11 or similar case, the day before the petition
            is filed). The preceding sentence shall not apply to the sale
            of substantially all the assets of a taxpayer to a buyer if
            such buyer enters into an agreement with the Secretary under
            which such buyer is liable for the remaining installments due
            under this subsection in the same manner as if such buyer were
            the taxpayer.
                ``(4) Proration of deficiency to installments.--If an
            election is made under paragraph (1) to pay the net tax
            liability under this section in installments and a deficiency
            has been assessed with respect to such net tax liability, the
            deficiency shall be prorated to the installments payable under
            paragraph (1). The part of the deficiency so prorated to any
            installment the date for payment of which has not arrived shall
            be collected at the same time as, and as a part of, such
            installment. The part of the deficiency so prorated to any
            installment the date for payment of which has arrived shall be
            paid upon notice and demand from the Secretary. This subsection
            shall not apply if the deficiency is due to negligence, to
            intentional disregard of rules and regulations, or to fraud
            with intent to evade tax.
                ``(5) Election.--Any election under paragraph (1) shall be
            made not later than the due date for the return of tax for the
            taxable year described in subsection (a) and shall be made in
            such manner as the Secretary may provide.
                ``(6) Net tax liability under this section.--For purposes
            of this subsection--
                        ``(A) In general.--The net tax liability under this
                    section with respect to any United States shareholder
                    is the excess (if any) of--
                                ``(i) such taxpayer's net income tax for
                            the taxable year in which an amount is included
                            in the gross income of such United States
                            shareholder under section 951(a)(1) by reason
                            of this section, over
                                ``(ii) such taxpayer's net income tax for
                            such taxable year determined--
                                        ``(I) without regard to this
                                    section, and
                                        ``(II) without regard to any
                                    income, deduction, or credit, properly
                                    attributable to a dividend received by
                                    such United States shareholder from any
                                    deferred foreign income corporation.
                        ``(B) Net income tax.--The term `net income tax'
                    means the regular tax liability reduced by the credits
                    allowed under subparts A, B, and D of part IV of
                    subchapter A.
        ``(i) Special Rules for S Corporation Shareholders.--
                ``(1) In general.--In the case of any S corporation which
            is a United States shareholder of a deferred foreign income
            corporation, each shareholder of such S corporation may elect
            to defer payment of such shareholder's net tax liability under
            this section with respect to such S corporation until the
            shareholder's taxable year which includes the triggering event
            with respect to such liability. Any net tax liability payment
            of which is deferred under the preceding sentence shall be
            assessed on the return as an addition to tax in the
            shareholder's taxable year which includes such triggering
            event.
                ``(2) Triggering event.--
                        ``(A) In general.--In the case of any shareholder's
                    net tax liability under this section with respect to
                    any S corporation, the triggering event with respect to
                    such liability is whichever of the following occurs
                    first:
                                ``(i) Such corporation ceases to be an S
                            corporation (determined as of the first day of
                            the first taxable year that such corporation is
                            not an S corporation).
                                ``(ii) A liquidation or sale of
                            substantially all the assets of such S
                            corporation (including in a title 11 or similar
                            case), a cessation of business by such S
                            corporation, such S corporation ceases to
                            exist, or any similar circumstance.
                                ``(iii) A transfer of any share of stock in
                            such S corporation by the taxpayer (including
                            by reason of death, or otherwise).
                        ``(B) Partial transfers of stock.--In the case of a
                    transfer of less than all of the taxpayer's shares of
                    stock in the S corporation, such transfer shall only be
                    a triggering event with respect to so much of the
                    taxpayer's net tax liability under this section with
                    respect to such S corporation as is properly allocable
                    to such stock.
                        ``(C) Transfer of liability.--A transfer described
                    in clause (iii) shall not be treated as a triggering
                    event if the transferee enters into an agreement with
                    the Secretary under which such transferee is liable for
                    net tax liability with respect to such stock in the
                    same manner as if such transferee were the taxpayer.
                ``(3) Net tax liability.--A shareholder's net tax liability
            under this section with respect to any S corporation is the net
            tax liability under this section which would be determined
            under subsection (h)(6) if the only subpart F income taken into
            account by such shareholder by reason of this section were
            allocations from such S corporation.
                ``(4) Election to pay deferred liability in installments.--
            In the case of a taxpayer which elects to defer payment under
            paragraph (1)--
                        ``(A) subsection (h) shall be applied separately
                    with respect to the liability to which such election
                    applies,
                        ``(B) an election under subsection (h) with respect
                    to such liability shall be treated as timely made if
                    made not later than the due date for the return of tax
                    for the taxable year in which the triggering event with
                    respect to such liability occurs,
                        ``(C) the first installment under subsection (h)
                    with respect to such liability shall be paid not later
                    than such due date (but determined without regard to
                    any extension of time for filing the return), and
                        ``(D) if the triggering event with respect to any
                    net tax liability is described in paragraph (2)(A)(ii),
                    an election under subsection (h) with respect to such
                    liability may be made only with the consent of the
                    Secretary.
                ``(5) Joint and several liability of s corporation.--If any
            shareholder of an S corporation elects to defer payment under
            paragraph (1), such S corporation shall be jointly and
            severally liable for such payment and any penalty, addition to
            tax, or additional amount attributable thereto.
                ``(6) Extension of limitation on collection.--
            Notwithstanding any other provision of law, any limitation on
            the time period for the collection of a liability deferred
            under this subsection shall not be treated as beginning before
            the date of the triggering event with respect to such
            liability.
                ``(7) Annual reporting of net tax liability.--
                        ``(A) In general.--Any shareholder of an S
                    corporation which makes an election under paragraph (1)
                    shall report the amount of such shareholder's deferred
                    net tax liability on such shareholder's return of tax
                    for the taxable year for which such election is made
                    and on the return of tax for each taxable year
                    thereafter until such amount has been fully assessed on
                    such returns.
                        ``(B) Deferred net tax liability.--For purposes of
                    this paragraph, the term `deferred net tax liability'
                    means, with respect to any taxable year, the amount of
                    net tax liability payment of which has been deferred
                    under paragraph (1) and which has not been assessed on
                    a return of tax for any prior taxable year.
                        ``(C) Failure to report.--In the case of any
                    failure to report any amount required to be reported
                    under subparagraph (A) with respect to any taxable year
                    before the due date for the return of tax for such
                    taxable year, there shall be assessed on such return as
                    an addition to tax 5 percent of such amount.
                ``(8) Election.--Any election under paragraph (1)--
                        ``(A) shall be made by the shareholder of the S
                    corporation not later than the due date for such
                    shareholder's return of tax for the taxable year which
                    includes the close of the taxable year of such S
                    corporation in which the amount described in subsection
                    (a) is taken into account, and
                        ``(B) shall be made in such manner as the Secretary
                    may provide.
        ``(j) Reporting by S Corporation.--Each S corporation which is a
    United States shareholder of a deferred foreign income corporation
    shall report in its return of tax under section 6037(a) the amount
    includible in its gross income for such taxable year by reason of this
    section and the amount of the deduction allowable by subsection (c).
    Any copy provided to a shareholder under section 6037(b) shall include
    a statement of such shareholder's pro rata share of such amounts.
        ``(k) Inclusion of Deferred Foreign Income Under This Section Not
    to Trigger Recapture of Overall Foreign Loss, etc.--For purposes of
    sections 904(f)(1) and 907(c)(4), in the case of a United States
    shareholder of a deferred foreign income corporation, such United
    States shareholder's taxable income from sources without the United
    States and combined foreign oil and gas income shall be determined
    without regard to this section.
        ``(l) Regulations.--The Secretary may prescribe such regulations or
    other guidance as may be necessary or appropriate to carry out the
    provisions of this section.''.
        (b) Clerical Amendment.--The table of sections for subpart F of
    part III of subchapter N of chapter 1 is amended by striking the item
    relating to section 965 and inserting the following:

    ``Sec. 965. Treatment of deferred foreign income upon transition to
                                participation exemption system of
                                taxation.''.

         Subtitle B--Modifications Related to Foreign Tax Credit System

    SEC. 4101. REPEAL OF SECTION 902 INDIRECT FOREIGN TAX CREDITS;
                  DETERMINATION OF SECTION 960 CREDIT ON CURRENT YEAR
                  BASIS.

        (a) Repeal of Section 902 Indirect Foreign Tax Credits.--Subpart A
    of part III of subchapter N of chapter 1 is amended by striking section
    902.
        (b) Determination of Section 960 Credit on Current Year Basis.--
    Section 960 is amended--
                (1) by striking subsection (c), by redesignating subsection
            (b) as subsection (c), by striking all that precedes subsection
            (c) (as so redesignated) and inserting the following:

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

        ``(a) In General.--For purposes of this subpart, if there is
    included in the gross income of a domestic corporation any item of
    income under section 951(a)(1) with respect to any controlled foreign
    corporation with respect to which such domestic corporation is a United
    States shareholder, such domestic corporation shall be deemed to have
    paid so much of such foreign corporation's foreign income taxes as are
    properly attributable to such item of income.
        ``(b) Special Rules for Distributions From Previously Taxed
    Earnings and Profits.--For purposes of this subpart--
                ``(1) In general.--If any portion of a distribution from a
            controlled foreign corporation to a domestic corporation which
            is a United States shareholder with respect to such controlled
            foreign corporation is excluded from gross income under section
            959(a), such domestic corporation shall be deemed to have paid
            so much of such foreign corporation's foreign income taxes as--
                        ``(A) are properly attributable to such portion,
                    and
                        ``(B) have not been deemed to have to been paid by
                    such domestic corporation under this section for the
                    taxable year or any prior taxable year.
                ``(2) Tiered controlled foreign corporations.--If section
            959(b) applies to any portion of a distribution from a
            controlled foreign corporation to another controlled foreign
            corporation, such controlled foreign corporation shall be
            deemed to have paid so much of such other controlled foreign
            corporation's foreign income taxes as--
                        ``(A) are properly attributable to such portion,
                    and
                        ``(B) have not been deemed to have been paid by a
                    domestic corporation under this section for the taxable
                    year or any prior taxable year.'',
                (2) and by adding after subsection (c) (as so redesignated)
            the following new subsections:
        ``(d) Foreign Income Taxes.--The term `foreign income taxes' means
    any income, war profits, or excess profits taxes paid or accrued to any
    foreign country or possession of the United States.
        ``(e) Regulations.--The Secretary may prescribe such regulations or
    other guidance as may be necessary or appropriate to carry out the
    provisions of this section.''.
        (c) Conforming Amendments.--
                (1) Section 78 is amended to read as follows:

    ``SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX CREDIT.

        ``If a domestic corporation chooses to have the benefits of subpart
    A of part III of subchapter N (relating to foreign tax credit) for any
    taxable year, an amount equal to the taxes deemed to be paid by such
    corporation under subsections (a) and (b) of section 960 for such
    taxable year shall be treated for purposes of this title (other than
    sections 959, 960, and 961) as an item of income required to be
    included in the gross income of such domestic corporation under section
    951(a) for such taxable year.''.
                (2) Section 245(a)(10)(C) is amended by striking ``sections
            902, 907, and 960'' and inserting ``sections 907 and 960''.
                (3) Sections 535(b)(1) and 545(b)(1) are each amended by
            striking ``section 902(a) or 960(a)(1)'' and inserting
            ``section 960''.
                (4) Section 814(f)(1) is amended--
                        (A) by striking subparagraph (B), and
                        (B) by striking all that precedes ``No income'' and
                    inserting the following:
                ``(1) Treatment of foreign taxes.--''.
                (5) Section 865(h)(1)(B) is amended by striking ``sections
            902, 907, and 960'' and inserting ``sections 907 and 960''.
                (6) Section 901(a) is amended by striking ``sections 902
            and 960'' and inserting ``section 960''.
                (7) Section 901(e)(2) is amended by striking ``but is not
            limited to--'' and all that follows through ``that portion''
            and inserting ``but is not limited to, that portion''.
                (8) Section 901(f) is amended by striking ``sections 902
            and 960'' and inserting ``section 960''.
                (9) Section 901(j)(1)(A) is amended by striking ``902 or''.
                (10) Section 901(j)(1)(B) is amended by striking ``sections
            902 and 960'' and inserting ``section 960''.
                (11) Section 901(k)(2) is amended by striking ``section
            853, 902, or 960'' and inserting ``section 853 or 960''.
                (12) Section 901(k)(6) is amended by striking ``902 or''.
                (13) Section 901(m)(1) is amended by striking ``relevant
            foreign assets--'' and all that follows and inserting
            ``relevant foreign assets shall not be taken into account in
            determining the credit allowed under subsection (a).''.
                (14) Section 904(d)(1) is amended by striking ``sections
            902, 907, and 960'' and inserting ``sections 907 and 960''.
                (15) Section 904(d)(6)(A) is amended by striking ``sections
            902, 907, and 960'' and inserting ``sections 907 and 960''.
                (16) Section 904(h)(10)(A) is amended by striking
            ``sections 902, 907, and 960'' and inserting ``sections 907 and
            960''.
                (17) Section 904 is amended by striking subsection (k).
                (18) Section 905(c)(1) is amended by striking the last
            sentence.
                (19) Section 905(c)(2)(B)(i) is amended to read as follows:
                                ``(i) shall be taken into account for the
                            taxable year to which such taxes relate, and''.
                (20) Section 906(a) is amended by striking ``(or deemed,
            under section 902, paid or accrued during the taxable year)''.
                (21) Section 906(b) is amended by striking paragraphs (4)
            and (5).
                (22) Section 907(b)(2)(B) is amended by striking ``902
            or''.
                (23) Section 907(c)(3) is amended--
                        (A) by striking subparagraph (A) and redesignating
                    subparagraphs (B) and (C) as subparagraphs (A) and (B),
                    respectively, and
                        (B) by striking ``section 960(a)'' in subparagraph
                    (A) (as so redesignated) and inserting ``section 960''.
                (24) Section 907(c)(5) is amended by striking ``902 or''.
                (25) Section 907(f)(2)(B)(i) is amended by striking ``902
            or''.
                (26) Section 908(a) is amended by striking ``902 or''.
                (27) Section 909(b) is amended--
                        (A) by striking ``section 902 corporation'' in the
                    matter preceding paragraph (1) and inserting ``10/50
                    corporation'',
                        (B) by striking ``902 or'' in paragraph (1),
                        (C) by striking ``by such section 902 corporation''
                    and all that follows in the matter following paragraph
                    (2) and inserting ``by such 10/50 corporation or a
                    domestic corporation which is a United States
                    shareholder with respect to such 10/50 corporation.'',
                    and
                        (D) by striking ``Section 902 Corporations'' in the
                    heading thereof and inserting ``10/50 Corporations''.
                (28) Section 909(d)(5) is amended to read as follows:
                ``(5) 10/50 corporation.--The term `10/50 corporation'
            means any foreign corporation with respect to which one or more
            domestic corporations is a United States shareholder.''.
                (29) Section 958(a)(1) is amended by striking ``960(a)(1)''
            and inserting ``960''.
                (30) Section 959(d) is amended by striking ``Except as
            provided in section 960(a)(3), any'' and inserting ``Any''.
                (31) Section 959(e) is amended by striking ``section
            960(b)'' and inserting ``section 960(c)''.
                (32) Section 1291(g)(2)(A) is amended by striking ``any
            distribution--'' and all that follows through ``but only if''
            and inserting ``any distribution, any withholding tax imposed
            with respect to such distribution, but only if''.
                (33) Section 6038(c)(1)(B) is amended by striking
            ``sections 902 (relating to foreign tax credit for corporate
            stockholder in foreign corporation) and 960 (relating to
            special rules for foreign tax credit)'' and inserting ``section
            960''.
                (34) Section 6038(c)(4) is amended by striking subparagraph
            (C).
                (35) The table of sections for subpart A of part III of
            subchapter N of chapter 1 is amended by striking the item
            relating to section 902.
                (36) The table of sections for subpart F of part III of
            subchapter N of chapter 1 is amended by striking the item
            relating to section 960 and inserting the following:

    ``Sec. 960. Deemed paid credit for subpart F inclusions.''.
        (d) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

    SEC. 4102. SOURCE OF INCOME FROM SALES OF INVENTORY DETERMINED SOLELY
                  ON BASIS OF PRODUCTION ACTIVITIES.

        (a) In General.--Section 863(b) is amended by adding at the end the
    following: ``Gains, profits, and income from the sale or exchange of
    inventory property described in paragraph (2) shall be allocated and
    apportioned between sources within and without the United States solely
    on the basis of the production activities with respect to the
    property.''.
        (b) Effective Date.--The amendment made by this section shall apply
    to taxable years beginning after December 31, 2017.

                Subtitle C--Modification of Subpart F Provisions

    SEC. 4201. REPEAL OF INCLUSION BASED ON WITHDRAWAL OF PREVIOUSLY
                  EXCLUDED SUBPART F INCOME FROM QUALIFIED INVESTMENT.

        (a) In General.--Subpart F of part III of subchapter N of chapter 1
    is amended by striking section 955.
        (b) Conforming Amendments.--
                (1)(A) Section 951(a)(1)(A) is amended to read as follows:
                        ``(A) his pro rata share (determined under
                    paragraph (2)) of the corporation's subpart F income
                    for such year, and''.
                (B) Section 851(b)(3) is amended by striking ``section
            951(a)(1)(A)(i)'' in the flush language at the end and
            inserting ``section 951(a)(1)(A)''.
                (C) Section 952(c)(1)(B)(i) is amended by striking
            ``section 951(a)(1)(A)(i)'' and inserting ``section
            951(a)(1)(A)''.
                (D) Section 953(c)(1)(C) is amended by striking ``section
            951(a)(1)(A)(i)'' and inserting ``section 951(a)(1)(A)''.
                (2) Section 951(a) is amended by striking paragraph (3).
                (3) Section 953(d)(4)(B)(iv)(II) is amended by striking
            ``or amounts referred to in clause (ii) or (iii) of section
            951(a)(1)(A)''.
                (4) Section 964(b) is amended by striking ``, 955,''.
                (5) Section 970 is amended by striking subsection (b).
                (6) The table of sections for subpart F of part III of
            subchapter N of chapter 1 is amended by striking the item
            relating to section 955.
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years of foreign corporations beginning after December
    31, 2017, and to taxable years of United States shareholders in which
    or with which such taxable years of foreign corporations end.

    SEC. 4202. REPEAL OF TREATMENT OF FOREIGN BASE COMPANY OIL RELATED
                  INCOME AS SUBPART F INCOME.

        (a) In General.--Section 954(a) is amended by striking paragraph
    (5), by striking the comma at the end of paragraph (3) and inserting a
    period, and by inserting ``and'' at the end of paragraph (2).
        (b) Conforming Amendments.--
                (1) Section 952(c)(1)(B)(iii) is amended by striking
            subclause (I) and by redesignating subclauses (II) through (V)
            as subclauses (I) through (IV), respectively.
                (2) Section 954(b)(4) is amended by striking the last
            sentence.
                (3) Section 954(b)(5) is amended by striking ``the foreign
            base company services income, and the foreign base company oil
            related income'' and inserting ``and the foreign base company
            services income''.
                (4) Section 954(b) is amended by striking paragraph (6).
                (5) Section 954 is amended by striking subsection (g).
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years of foreign corporations beginning after December
    31, 2017, and to taxable years of United States shareholders in which
    or with which such taxable years of foreign corporations end.

    SEC. 4203. INFLATION ADJUSTMENT OF DE MINIMIS EXCEPTION FOR FOREIGN
                  BASE COMPANY INCOME.

        (a) In General.--Section 954(b)(3) is amended by adding at the end
    the following new subparagraph:
                        ``(D) Inflation adjustment.--In the case of any
                    taxable year beginning after 2017, the dollar amount in
                    subparagraph (A)(ii) shall be increased by an amount
                    equal to--
                                ``(i) such dollar amount, multiplied by
                                ``(ii) the cost-of-living adjustment
                            determined under section 1(c)(2)(A) for the
                            calendar year in which the taxable year begins.
                    Any increase determined under the preceding sentence
                    shall be rounded to the nearest multiple of $50,000.''.
        (b) Effective Date.--The amendments made by this section shall
    apply to taxable years of foreign corporations beginning after December
    31, 2017, and to taxable years of United States shareholders in which
    or with which such taxable years of foreign corporations end.

    SEC. 4204. LOOK-THRU RULE FOR RELATED CONTROLLED FOREIGN CORPORATIONS
                  MADE PERMANENT.

        (a) In General.--Paragraph (6) of section 954(c) is amended by
    striking subparagraph (C).
        (b) Effective Date.--The amendments made by this section shall
    apply to taxable years of foreign corporations beginning after December
    31, 2019, and to taxable years of United States shareholders in which
    or with which such taxable years of foreign corporations end.

    SEC. 4205. MODIFICATION OF STOCK ATTRIBUTION RULES FOR DETERMINING
                  STATUS AS A CONTROLLED FOREIGN CORPORATION.

        (a) In General.--Section 958(b) is amended--
                (1) by striking paragraph (4), and
                (2) by striking ``Paragraphs (1) and (4)'' in the last
            sentence and inserting ``Paragraph (1)''.
        (b) Application of Certain Reporting Requirements.--Section
    6038(e)(2) is amended by striking ``except that--'' and all that
    follows through ``in applying subparagraph (C)'' and inserting ``except
    that in applying subparagraph (C)''.
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years of foreign corporations beginning after December
    31, 2017, and to taxable years of United States shareholders in which
    or with which such taxable years of foreign corporations end.

    SEC. 4206. ELIMINATION OF REQUIREMENT THAT CORPORATION MUST BE
                  CONTROLLED FOR 30 DAYS BEFORE SUBPART F INCLUSIONS APPLY.

        (a) In General.--Section 951(a)(1) is amended by striking ``for an
    uninterrupted period of 30 days or more'' and inserting ``at any
    time''.
        (b) Effective Date.--The amendment made by this section shall apply
    to taxable years of foreign corporations beginning after December 31,
    2017, and to taxable years of United States shareholders with or within
    which such taxable years of foreign corporations end.

                     Subtitle D--Prevention of Base Erosion

    SEC. 4301. CURRENT YEAR INCLUSION BY UNITED STATES SHAREHOLDERS WITH
                  FOREIGN HIGH RETURNS.

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

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

        ``(a) In General.--Each person who is a United States shareholder
    of any controlled foreign corporation for any taxable year of such
    United States shareholder shall include in gross income for such
    taxable year 50 percent of such shareholder's foreign high return
    amount for such taxable year.
        ``(b) Foreign High Return Amount.--For purposes of this section--
                ``(1) In general.--The term `foreign high return amount'
            means, with respect to any United States shareholder for any
            taxable year of such United States shareholder, the excess (if
            any) of--
                        ``(A) such shareholder's net CFC tested income for
                    such taxable year, over
                        ``(B) the excess (if any) of--
                                ``(i) the applicable percentage of the
                            aggregate of such shareholder's pro rata share
                            of the qualified business asset investment of
                            each controlled foreign corporation with
                            respect to which such shareholder is a United
                            States shareholder for such taxable year
                            (determined for each taxable year of each such
                            controlled foreign corporation which ends in or
                            with such taxable year of such United States
                            shareholder), over
                                ``(ii) the amount of interest expense taken
                            into account under subsection (c)(2)(A)(ii) in
                            determining the shareholder's net CFC tested
                            income for the taxable year.
                ``(2) Applicable percentage.--The term `applicable
            percentage' means, with respect to any taxable year, the
            Federal short-term rate (determined under section 1274(d) for
            the month in which or with which such taxable year ends) plus 7
            percentage points.
        ``(c) Net CFC Tested Income.--For purposes of this section--
                ``(1) In general.--The term `net CFC tested income' means,
            with respect to any United States shareholder for any taxable
            year of such United States shareholder, the excess (if any)
            of--
                        ``(A) the aggregate of such shareholder's pro rata
                    share of the tested income of each controlled foreign
                    corporation with respect to which such shareholder is a
                    United States shareholder for such taxable year of such
                    United States shareholder (determined for each taxable
                    year of such controlled foreign corporation which ends
                    in or with such taxable year of such United States
                    shareholder), over
                        ``(B) the aggregate of such shareholder's pro rata
                    share of the tested loss of each controlled foreign
                    corporation with respect to which such shareholder is a
                    United States shareholder for such taxable year of such
                    United States shareholder (determined for each taxable
                    year of such controlled foreign corporation which ends
                    in or with such taxable year of such United States
                    shareholder).
                ``(2) Tested income; tested loss.--For purposes of this
            section--
                        ``(A) Tested income.--The term `tested income'
                    means, with respect to any controlled foreign
                    corporation for any taxable year of such controlled
                    foreign corporation, the excess (if any) of--
                                ``(i) the gross income of such corporation
                            determined without regard to--
                                        ``(I) any item of income which is
                                    effectively connected with the conduct
                                    by such corporation of a trade or
                                    business within the United States if
                                    subject to tax under this chapter,
                                        ``(II) any gross income taken into
                                    account in determining the subpart F
                                    income of such corporation,
                                        ``(III) except as otherwise
                                    provided by the Secretary, any amount
                                    excluded from the foreign personal
                                    holding company income (as defined in
                                    section 954) of such corporation by
                                    reason of section 954(c)(6) but only to
                                    the extent that any deduction allowable
                                    for the payment or accrual of such
                                    amount does not result in a reduction
                                    in the foreign high return amount of
                                    any United States shareholder
                                    (determined without regard to this
                                    subclause),
                                        ``(IV) any gross income excluded
                                    from the foreign personal holding
                                    company income (as defined in section
                                    954) of such corporation by reason of
                                    subsection (c)(2)(C), (h), or (i) of
                                    section 954,
                                        ``(V) any gross income excluded
                                    from the insurance income (as defined
                                    in section 953) of such corporation by
                                    reason of section 953(a)(2),
                                        ``(VI) any gross income excluded
                                    from foreign base company income (as
                                    defined in section 954) or insurance
                                    income (as defined in section 953) of
                                    such corporation by reason of section
                                    954(b)(4),
                                        ``(VII) any dividend received from
                                    a related person (as defined in section
                                    954(d)(3)), and
                                        ``(VIII) any commodities gross
                                    income of such corporation, over
                                ``(ii) the deductions (including taxes)
                            properly allocable to such gross income under
                            rules similar to the rules of section 954(b)(5)
                            (or which would be so properly allocable if
                            such corporation had such gross income).
                        ``(B) Tested loss.--The term `tested loss' means,
                    with respect to any controlled foreign corporation for
                    any taxable year of such controlled foreign
                    corporation, the excess (if any) of the amount
                    described in subparagraph (A)(ii) over the amount
                    described in subparagraph (A)(i).
        ``(d) Qualified Business Asset Investment.--For purposes of this
    section--
                ``(1) In general.--The term `qualified business asset
            investment' means, with respect to any controlled foreign
            corporation for any taxable year of such controlled foreign
            corporation, the aggregate of the corporation's adjusted bases
            (determined as of the close of such taxable year and after any
            adjustments with respect to such taxable year) in specified
            tangible property--
                        ``(A) used in a trade or business of the
                    corporation, and
                        ``(B) of a type with respect to which a deduction
                    is allowable under section 168.
                ``(2) Specified tangible property.--The term `specified
            tangible property' means any tangible property to the extent
            such property is used in the production of tested income or
            tested loss.
                ``(3) Partnership property.--For purposes of this
            subsection, if a controlled foreign corporation holds an
            interest in a partnership at the close of such taxable year of
            the controlled foreign corporation, such controlled foreign
            corporation shall take into account under paragraph (1) the
            controlled foreign corporation's distributive share of the
            aggregate of the partnership's adjusted bases (determined as of
            such date in the hands of the partnership) in tangible property
            held by such partnership to the extent such property--
                        ``(A) is used in the trade or business of the
                    partnership,
                        ``(B) is of a type with respect to which a
                    deduction is allowable under section 168, and
                        ``(C) is used in the production of tested income or
                    tested loss (determined with respect to such controlled
                    foreign corporation's distributive share of income or
                    loss with respect to such property).
            For purposes of this paragraph, the controlled foreign
            corporation's distributive share of the adjusted basis of any
            property shall be the controlled foreign corporation's
            distributive share of income and loss with respect to such
            property.
                ``(4) Determination of adjusted basis.--For purposes of
            this subsection, the adjusted basis in any property shall be
            determined without regard to any provision of this title (or
            any other provision of law) which is enacted after the date of
            the enactment of this section.
                ``(5) Regulations.--The Secretary shall issue such
            regulations or other guidance as the Secretary determines
            appropriate to prevent the avoidance of the purposes of this
            subsection, including regulations or other guidance which
            provide for the treatment of property if--
                        ``(A) such property is transferred, or held,
                    temporarily, or
                        ``(B) the avoidance of the purposes of this
                    paragraph is a factor in the transfer or holding of
                    such property.
        ``(e) Commodities Gross Income.--For purposes of this section--
                ``(1) Commodities gross income.--The term `commodities
            gross income' means, with respect to any corporation--
                        ``(A) gross income of such corporation from the
                    disposition of commodities which are produced or
                    extracted by such corporation (or a partnership in
                    which such corporation is a partner), and
                        ``(B) gross income of such corporation from the
                    disposition of property which gives rise to income
                    described in subparagraph (A).
                ``(2) Commodity.--The term `commodity' means any commodity
            described in section 475(e)(2)(A) or section 475(e)(2)(D)
            (determined without regard to clause (i) thereof and by
            substituting `a commodity described in subparagraph (A)' for
            `such a commodity' in clause (ii) thereof).
        ``(f) Taxable Years for Which Persons Are Treated as United States
    Shareholders of Controlled Foreign Corporations.--For purposes of this
    section--
                ``(1) In general.--A United States shareholder of a
            controlled foreign corporation shall be treated as a United
            States shareholder of such controlled foreign corporation for
            any taxable year of such United States shareholder if--
                        ``(A) a taxable year of such controlled foreign
                    corporation ends in or with such taxable year of such
                    person, and
                        ``(B) such person owns (within the meaning of
                    section 958(a)) stock in such controlled foreign
                    corporation on the last day, in such taxable year of
                    such foreign corporation, on which the foreign
                    corporation is a controlled foreign corporation.
                ``(2) Treatment as a controlled foreign corporation.--
            Except for purposes of paragraph (1)(B) and the application of
            section 951(a)(2) to this section pursuant to subsection (g), a
            foreign corporation shall be treated as a controlled foreign
            corporation for any taxable year of such foreign corporation if
            such foreign corporation is a controlled foreign corporation at
            any time during such taxable year.
        ``(g) Determination of Pro Rata Share.--For purposes of this
    section, pro rata shares shall be determined under the rules of section
    951(a)(2) in the same manner as such section applies to subpart F
    income.
        ``(h) Coordination With Subpart F.--
                ``(1) Treatment as subpart f income for certain purposes.--
            Except as otherwise provided by the Secretary any foreign high
            return amount included in gross income under subsection (a)
            shall be treated in the same manner as an amount included under
            section 951(a)(1)(A) for purposes of applying sections
            168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 961, 962,
            993(a)(1)(E), 996(f)(1), 1248(b)(1), 1248(d)(1), 6501(e)(1)(C),
            6654(d)(2)(D), and 6655(e)(4).
                ``(2) Entire foreign high return amount taken into account
            for purposes of certain sections.--For purposes of applying
            paragraph (1) with respect to sections 168(h)(2)(B), 851(b),
            959, 961, 962, 1248(b)(1), and 1248(d)(1), the foreign high
            return amount included in gross income under subsection (a)
            shall be determined by substituting `100 percent' for `50
            percent' in such subsection.
                ``(3) Allocation of foreign high return amount to
            controlled foreign corporations.--For purposes of the sections
            referred to in paragraph (1), with respect to any controlled
            foreign corporation any pro rata amount from which is taken
            into account in determining the foreign high return amount
            included in gross income of a United States shareholder under
            subsection (a), the portion of such foreign high return amount
            which is treated as being with respect to such controlled
            foreign corporation is--
                        ``(A) in the case of a controlled foreign
                    corporation with tested loss, zero, and
                        ``(B) in the case of a controlled foreign
                    corporation with tested income, the portion of such
                    foreign high return amount which bears the same ratio
                    to such foreign high return amount as--
                                ``(i) such United States shareholder's pro
                            rata amount of the tested income of such
                            controlled foreign corporation, bears to
                                ``(ii) the aggregate amount determined
                            under subsection (c)(1)(A) with respect to such
                            United States shareholder.
                ``(4) Coordination with subpart f to deny double benefit of
            losses.--In the case of any United States shareholder of any
            controlled foreign corporation, the amount included in gross
            income under section 951(a)(1)(A) shall be determined by
            increasing the earnings and profits of such controlled foreign
            corporation (solely for purposes of determining such amount) by
            an amount that bears the same ratio (not greater than 1) to
            such shareholder's pro rata share of the tested loss of such
            controlled foreign corporation as--
                        ``(A) the aggregate amount determined under
                    subsection (c)(1)(A) with respect to such shareholder,
                    bears to
                        ``(B) the aggregate amount determined under
                    subsection (c)(1)(B) with respect to such
                    shareholder.''.
        (b) Foreign Tax Credit.--
                (1) Application of deemed paid foreign tax credit.--Section
            960, as amended by the preceding provisions of this Act, is
            amended by redesignating subsections (d) and (e) as subsections
            (e) and (f), respectively, and by inserting after subsection
            (c) the following new subsection:
        ``(d) Deemed Paid Credit for Taxes Properly Attributable to Tested
    Income.--
                ``(1) In general.--For purposes of this subpart, if any
            amount is includible in the gross income of a domestic
            corporation under section 951A, such domestic corporation shall
            be deemed to have paid foreign income taxes equal to 80 percent
            of--
                        ``(A) such domestic corporation's foreign high
                    return percentage, multiplied by
                        ``(B) the aggregate tested foreign income taxes
                    paid or accrued by controlled foreign corporations with
                    respect to which such domestic corporation is a United
                    States shareholder.
                ``(2) Foreign high return percentage.--For purposes of
            paragraph (1), the term `foreign high return percentage' means,
            with respect to any domestic corporation, the ratio (expressed
            as a percentage) of--
                        ``(A) such corporation's foreign high return amount
                    (as defined in section 951A(b)), divided by
                        ``(B) the aggregate amount determined under section
                    951A(c)(1)(A) with respect to such corporation.
                ``(3) Tested foreign income taxes.--For purposes of
            paragraph (1), the term `tested foreign income taxes' means,
            with respect to any domestic corporation which is a United
            States shareholder of a controlled foreign corporation, the
            foreign income taxes paid or accrued by such foreign
            corporation which are properly attributable to gross income
            described in section 951A(c)(2)(A)(i).''.
                (2) Application of foreign tax credit limitation.--
                        (A) Separate basket for foreign high return
                    amount.--Section 904(d)(1) is amended by redesignating
                    subparagraphs (A) and (B) as subparagraphs (B) and (C),
                    respectively, and by inserting before subparagraph (B)
                    (as so redesignated) the following new subparagraph:
                        ``(A) any amount includible in gross income under
                    section 951A,''.
                        (B) No carryover of excess taxes.--Section 904(c)
                    is amended by adding at the end the following: ``This
                    subsection shall not apply to taxes paid or accrued
                    with respect to amounts described in subsection
                    (d)(1)(A).''
                (3) Gross up for deemed paid foreign tax credit.--Section
            78, as amended by the preceding provisions of this Act, is
            amended--
                        (A) by striking ``any taxable year, an amount'' and
                    inserting ``any taxable year--
                ``(1) an amount'', and
                        (B) by striking the period at the end and inserting
                    ``, and
                ``(2) an amount equal to the taxes deemed to be paid by
            such corporation under section 960(d) for such taxable year
            (determined by substituting `100 percent' for `80 percent' in
            such section) shall be treated for purposes of this title
            (other than sections 959, 960, and 961) as an increase in the
            foreign high return amount of such domestic corporation under
            section 951A for such taxable year.''.
        (c) Conforming Amendments.--
                (1) Section 170(b)(2)(D) is amended by striking ``computed
            without regard to'' and all that follows and inserting
            ``computed--
                                ``(i) without regard to--
                                        ``(I) this section,
                                        ``(II) part VIII (except section
                                    248),
                                        ``(III) any net operating loss
                                    carryback to the taxable year under
                                    section 172,
                                        ``(IV) any capital loss carryback
                                    to the taxable year under section
                                    1212(a)(1), and
                                ``(ii) by substituting `100 percent' for
                            `50 percent' in section 951A(a).''.
                (2) Section 246(b)(1) is amended by--
                        (A) striking ``and without regard to'' and
                    inserting ``without regard to'', and
                        (B) by striking the period at the end and inserting
                    ``, and by substituting `100 percent' for `50 percent'
                    in section 951A(a).''.
                (3) Section 469(i)(3)(F) is amended by striking
            ``determined without regard to'' and all that follows and
            inserting ``determined--
                                ``(i) without regard to--
                                        ``(I) any amount includible in
                                    gross income under section 86,
                                        ``(II) the amounts allowable as a
                                    deduction under section 219, and
                                        ``(III) any passive activity loss
                                    or any loss allowable by reason of
                                    subsection (c)(7), and
                                ``(ii) by substituting `100 percent' for
                            `50 percent' in section 951A(a).''.
                (4) Section 856(c)(2) is amended by striking ``and'' at the
            end of subparagraph (H), by adding ``and'' at the end of
            subparagraph (I), and by inserting after subparagraph (I) the
            following new subparagraph:
                        ``(J) amounts includible in gross income under
                    section 951A(a);''.
                (5) Section 856(c)(3)(D) is amended by striking ``dividends
            or other distributions on, and gain'' and inserting
            ``dividends, other distributions on, amounts includible in
            gross income under section 951A(a) with respect to, and gain''.
                (6) The table of sections for subpart F of part III of
            subchapter N of chapter 1 is amended by inserting after the
            item relating to section 951 the following new item:

    ``Sec. 951A. Foreign high return amount included in gross income of
                                United States shareholders.''.
        (d) Effective Date.--The amendments made by this section shall
    apply to taxable years of foreign corporations beginning after December
    31, 2017, and to taxable years of United States shareholders in which
    or with which such taxable years of foreign corporations end.

    SEC. 4302. LIMITATION ON DEDUCTION OF INTEREST BY DOMESTIC CORPORATIONS
                  WHICH ARE MEMBERS OF AN INTERNATIONAL FINANCIAL REPORTING
                  GROUP.

        (a) In General.--Section 163 is amended by redesignating subsection
    (n) as subsection (p) and by inserting after subsection (m) the
    following new subsection:
        ``(n) Limitation on Deduction of Interest by Domestic Corporations
    in International Financial Reporting Groups.--
                ``(1) In general.--In the case of any domestic corporation
            which is a member of any international financial reporting
            group, the deduction under this chapter for interest paid or
            accrued during the taxable year shall not exceed the sum of--
                        ``(A) the allowable percentage of 110 percent of
                    the excess (if any) of --
                                ``(i) the amount of such interest so paid
                            or accrued, over
                                ``(ii) the amount described in subparagraph
                            (B), plus
                        ``(B) the amount of interest includible in gross
                    income of such corporation for such taxable year.
                ``(2) International financial reporting group.--
                        ``(A) For purposes of this subsection, the term
                    `international financial reporting group' means, with
                    respect to any reporting year, any group of entities
                    which--
                                ``(i) includes--
                                        ``(I) at least one foreign
                                    corporation engaged in a trade or
                                    business within the United States, or
                                        ``(II) at least one domestic
                                    corporation and one foreign
                                    corporation,
                                ``(ii) prepares consolidated financial
                            statements with respect to such year, and
                                ``(iii) reports in such statements average
                            annual gross receipts (determined in the
                            aggregate with respect to all entities which
                            are part of such group) for the 3-reporting-
                            year period ending with such reporting year in
                            excess of $100,000,000.
                        ``(B) Rules relating to determination of average
                    gross receipts.--For purposes of subparagraph (A)(iii),
                    rules similar to the rules of section 448(c)(3) shall
                    apply.
                ``(3) Allowable percentage.--For purposes of this
            subsection--
                        ``(A) In general.--The term `allowable percentage'
                    means, with respect to any domestic corporation for any
                    taxable year, the ratio (expressed as a percentage and
                    not greater than 100 percent) of--
                                ``(i) such corporation's allocable share of
                            the international financial reporting group's
                            reported net interest expense for the reporting
                            year of such group which ends in or with such
                            taxable year of such corporation, over
                                ``(ii) such corporation's reported net
                            interest expense for such reporting year of
                            such group.
                        ``(B) Reported net interest expense.--The term
                    `reported net interest expense' means--
                                ``(i) with respect to any international
                            financial reporting group for any reporting
                            year, the excess of--
                                        ``(I) the aggregate amount of
                                    interest expense reported in such
                                    group's consolidated financial
                                    statements for such taxable year, over
                                        ``(II) the aggregate amount of
                                    interest income reported in such
                                    group's consolidated financial
                                    statements for such taxable year, and
                                ``(ii) with respect to any domestic
                            corporation for any reporting year, the excess
                            of--
                                        ``(I) the amount of interest
                                    expense of such corporation reported in
                                    the books and records of the
                                    international financial reporting group
                                    which are used in preparing such
                                    group's consolidated financial
                                    statements for such taxable year, over
                                        ``(II) the amount of interest
                                    income of such corporation reported in
                                    such books and records.
                        ``(C) Allocable share of reported net interest
                    expense.--With respect to any domestic corporation
                    which is a member of any international financial
                    reporting group, such corporation's allocable share of
                    such group's reported net interest expense for any
                    reporting year is the portion of such expense which
                    bears the same ratio to such expense as--
                                ``(i) the EBITDA of such corporation for
                            such reporting year, bears to
                                ``(ii) the EBITDA of such group for such
                            reporting year.
                        ``(D) EBITDA.--
                                ``(i) In general.--The term `EBITDA' means,
                            with respect to any reporting year, earnings
                            before interest, taxes, depreciation, and
                            amortization--
                                        ``(I) as determined in the
                                    international financial reporting
                                    group's consolidated financial
                                    statements for such year, or
                                        ``(II) for purposes of subparagraph
                                    (A)(i), as determined in the books and
                                    records of the international financial
                                    reporting group which are used in
                                    preparing such statements if not
                                    determined in such statements.
                                ``(ii) Treatment of disregarded entities.--
                            The EBITDA of any domestic corporation shall
                            not fail to include the EBITDA of any entity
                            which is disregarded for purposes of this
                            chapter.
                                ``(iii) Treatment of intra-group
                            distributions.--The EBITDA of any domestic
                            corporation shall be determined without regard
                            to any distribution received by such
                            corporation from any other member of the
                            international financial reporting group.
                        ``(E) Special rules for non-positive ebitda.--
                                ``(i) Non-positive group ebitda.--In the
                            case of any international financial reporting
                            group the EBITDA of which is zero or less,
                            paragraph (1) shall not apply to any member of
                            such group the EBITDA of which is above zero.
                                ``(ii) Non-positive entity ebitda.--In the
                            case of any group member the EBITDA of which is
                            zero or less, paragraph (1) shall be applied
                            without regard to subparagraph (A) thereof.
                ``(4) Consolidated financial statement.--For purposes of
            this subsection, the term `consolidated financial statement'
            means any consolidated financial statement described in
            paragraph (2)(A)(ii) if such statement is--
                        ``(A) a financial statement which is certified as
                    being prepared in accordance with generally accepted
                    accounting principles, international financial
                    reporting standards, or any other comparable method of
                    accounting identified by the Secretary, and which is--
                                ``(i) a 10-K (or successor form), or annual
                            statement to shareholders, required to be filed
                            with the United States Securities and Exchange
                            Commission,
                                ``(ii) an audited financial statement which
                            is used for--
                                        ``(I) credit purposes,
                                        ``(II) reporting to shareholders,
                                    partners, or other proprietors, or to
                                    beneficiaries, or
                                        ``(III) any other substantial
                                    nontax purpose,
                            but only if there is no statement described in
                            clause (i), or
                                ``(iii) filed with any other Federal or
                            State agency for nontax purposes, but only if
                            there is no statement described in clause (i)
                            or (ii), or
                        ``(B) a financial statement which--
                                ``(i) is used for a purpose described in
                            subclause (I), (II), or (III) of subparagraph
                            (A)(ii), or
                                ``(ii) filed with any regulatory or
                            governmental body (whether domestic or foreign)
                            specified by the Secretary,
                    but only if there is no statement described in
                    subparagraph (A).
                ``(5) Reporting year.--For purposes of this subsection, the
            term `reporting year' means, with respect to any international
            financial reporting group, the year with respect to which the
            consolidated financial statements are prepared.
                ``(6) Application to certain entities.--
                        ``(A) Partnerships.--Except as otherwise provided
                    by the Secretary in paragraph (7), this subsection
                    shall apply to any partnership which is a member of any
                    international financial reporting group under rules
                    similar to the rules of section 163(j)(3).
                        ``(B) Foreign corporations engaged in trade or
                    business within the united states.--Except as otherwise
                    provided by the Secretary in paragraph (8), any
                    deduction for interest paid or accrued by a foreign
                    corporation engaged in a trade or business within the
                    United States shall be limited in a manner consistent
                    with the principles of this subsection.
                        ``(C) Consolidated groups.--For purposes of this
                    subsection, the members of any group that file (or are
                    required to file) a consolidated return with respect to
                    the tax imposed by chapter 1 for a taxable year shall
                    be treated as a single corporation.
                ``(7) Regulations.--The Secretary may issue such
            regulations or other guidance as are necessary or appropriate
            to carry out the purposes of this subsection.''.
        (b) Carryforward of Disallowed Interest.--
                (1) In general.--Section 163(o) is amended to read as
            follows:
        ``(o) Carryforward of Certain Disallowed Interest.--The amount of
    any interest not allowed as a deduction for any taxable year by reason
    of subsection (j)(1) or (n)(1) (whichever imposes the lower limitation
    with respect to such taxable year) shall be treated as interest (and as
    business interest for purposes of subsection (j)(1)) paid or accrued in
    the succeeding taxable year. Interest paid or accrued in any taxable
    year (determined without regard to the preceding sentence) shall not be
    carried past the 5th taxable year following such taxable year,
    determined by treating interest as allowed as a deduction on a first-
    in, first-out basis.''.
                (2) Treatment of carryforward of disallowed interest in
            certain corporate acquisitions.--For rules related to the
            carryforward of disallowed interest in certain corporate
            acquisitions, see the amendments made by section 3301(c).
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

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

        (a) Excise Tax on Certain Amounts From Domestic Corporations to
    Foreign Affiliates.--
                (1) In general.--Chapter 36 is amended by adding at the end
            the following new subchapter:

          ``Subchapter E--Tax on Certain Amounts to Foreign Affiliates

    ``Sec. 4491. Imposition of tax on certain amounts from domestic
                                corporations to foreign affiliates.

    ``SEC. 4491. IMPOSITION OF TAX ON CERTAIN AMOUNTS FROM DOMESTIC
                  CORPORATIONS TO FOREIGN AFFILIATES.

        ``(a) In General.--There is hereby imposed on each specified amount
    paid or incurred by a domestic corporation to a foreign corporation
    which is a member of the same international financial reporting group
    as such domestic corporation a tax equal to the highest rate of tax in
    effect under section 11 multiplied by such amount.
        ``(b) By Whom Paid.--The tax imposed by subsection (a) shall be
    paid by the domestic corporation described in such subsection.
        ``(c) Exception for Effectively Connected Income.--Subsection (a)
    shall not apply to so much of any specified amount as is effectively
    connected with the conduct of a trade or business within the United
    States if such amount is subject to tax under chapter 1. In the case of
    any amount which is treated as effectively connected with the conduct
    of a trade or business within the United States by reason of section
    882(g), the preceding sentence shall apply to such amount only if the
    domestic corporation provides to the Secretary (at such time and in
    such form and manner as the Secretary may provide) a copy of the
    election made under section 882(g) by the foreign corporation referred
    to in subsection (a).
        ``(d) Definitions and Special Rules.--Terms used in this section
    that are also used in section 882(g) shall have the same meaning as
    when used in such section and rules similar to the rules of paragraphs
    (5) and (6) of such section shall apply for purposes of this
    section.''.
                (2) Denial of deduction for tax imposed.--Section 275(a) is
            amended by inserting after paragraph (6) the following new
            paragraph:
                ``(7) Taxes imposed by section 4491.''.
                (3) Clerical amendment.--The table of subchapters for
            chapter 36 is amended by adding at the end the following new
            item:

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

        (b) Election to Treat Certain Payments From Domestic Corporations
    to Related Foreign Corporations as Effectively Connected Income.--
    Section 882 is amended by adding at the end the following new
    subsection:
        ``(g) Election to Treat Certain Payments From Domestic Corporations
    to Related Foreign Corporations as Effectively Connected Income.--
                ``(1) In general.--In the case of any specified amount paid
            or incurred by a domestic corporation to a foreign corporation
            which is a member of the same international financial reporting
            group as such domestic corporation and which has elected to be
            subject to the provisions of this subsection--
                        ``(A) such amount shall be taken into account
                    (other than for purposes of sections 245, 245A, and
                    881) in the taxable year of such foreign corporation
                    during which such amount is paid or incurred as if--
                                ``(i) such foreign corporation were engaged
                            in a trade or business within the United
                            States,
                                ``(ii) such foreign corporation had a
                            permanent establishment in the United States
                            during the taxable year, and
                                ``(iii) such payment were effectively
                            connected with the conduct of a trade or
                            business within the United States and were
                            attributable to such permanent establishment,
                        ``(B) for purposes of subsection (c)(1)(A), no
                    deduction shall be allowed with respect to such amount
                    and such subsection shall be applied without regard to
                    such amount, and
                        ``(C) the foreign corporation shall be allowed a
                    deduction (for the taxable year referred to in
                    subparagraph (A)) equal to the deemed expenses with
                    respect to such amount.
                ``(2) Specified amount.--For purposes of this subsection--
                        ``(A) In general.--The term `specified amount'
                    means any amount which is, with respect to the payor,
                    allowable as a deduction or includible in costs of
                    goods sold, inventory, or the basis of a depreciable or
                    amortizable asset.
                        ``(B) Exceptions.--The term `specified amount'
                    shall not include--
                                ``(i) interest,
                                ``(ii) any amount paid or incurred for the
                            acquisition of any security described in
                            section 475(c)(2) (determined without regard to
                            the last sentence thereof) or any commodity
                            described in section 475(e)(2),
                                ``(iii) except as provided in subparagraph
                            (C), any amount with respect to which tax is
                            imposed under section 881(a), and
                                ``(iv) in the case of a payor which has
                            elected to use a services cost method for
                            purposes of section 482, any amount paid or
                            incurred for services if such amount is the
                            total services cost with no markup.
                        ``(C) Amounts not treated as effectively connected
                    to extent of gross-basis tax.--Subparagraph (B)(iii)
                    shall only apply to so much of any specified amount as
                    bears the proportion to such amount as--
                                ``(i) the rate of tax imposed under section
                            881(a) with respect to such amount, bears to
                                ``(ii) 30 percent.
                ``(3) Deemed expenses.--
                        ``(A) In general.--The deemed expenses with respect
                    to any specified amount received by a foreign
                    corporation during any reporting year is the amount of
                    expenses such that the net income ratio of such foreign
                    corporation with respect to such amount (taking into
                    account only such specified amount and such deemed
                    expenses) is equal to the net income ratio of the
                    international financial reporting group determined for
                    such reporting year with respect to the product line to
                    which the specified amount relates.
                        ``(B) Net income ratio.--For purposes of this
                    paragraph, the term `net income ratio' means the ratio
                    of--
                                ``(i) net income determined without regard
                            to interest income, interest expense, and
                            income taxes, divided by
                                ``(ii) revenues.
                        ``(C) Method of determination.--Amounts described
                    in subparagraph (B) shall be determined with respect to
                    the international financial reporting group on the
                    basis of the consolidated financial statements referred
                    to in paragraph (4)(A)(i) and the books and records of
                    the members of the international financial reporting
                    group which are used in preparing such statements,
                    taking into account only revenues and expenses of the
                    members of such group (other than the members of such
                    group which are (or are treated as) a domestic
                    corporation for purposes of this subsection) derived
                    from, or incurred with respect to--
                                ``(i) persons who are not members of such
                            group, and
                                ``(ii) members of such group which are (or
                            are treated as) a domestic corporation for
                            purposes of this subsection.
                ``(4) International financial reporting group.--For
            purposes of this subsection--
                        ``(A) In general.--The term `international
                    financial reporting group' means any group of entities,
                    with respect to any specified amount, if such amount is
                    paid or incurred during a reporting year of such group
                    with respect to which--
                                ``(i) such group prepares consolidated
                            financial statements (within the meaning of
                            section 163(n)(4)) with respect to such year,
                            and
                                ``(ii) the average annual aggregate payment
                            amount of such group for the 3-reporting-year
                            period ending with such reporting year exceeds
                            $100,000,000.
                        ``(B) Annual aggregate payment amount.--The term
                    `annual aggregate payment amount' means, with respect
                    to any reporting year of the group referred to in
                    subparagraph (A)(i), the aggregate specified amounts to
                    which paragraph (1) applies (or would apply if such
                    group were an international financial reporting group).
                        ``(C) Application of certain rules.--Rules similar
                    to the rules of subparagraphs (A), (B), and (D) of
                    section 448(c)(3) shall apply for purposes of this
                    paragraph.
                ``(5) Treatment of partnerships.--Any specified amount
            paid, incurred, or received by a partnership which is a member
            of any international financial reporting group (and any amount
            treated as paid, incurred, or received by a partnership under
            this paragraph) shall be treated for purposes of this
            subsection as amounts paid, incurred, or received,
            respectively, by each partner of such partnership in an amount
            equal to such partner's distributive share of the items of
            income, gain, deduction, or loss to which such amounts relate.
                ``(6) Treatment of amounts in connection with united states
            trade or business.--Any specified amount paid, incurred, or
            received by a foreign corporation in connection with the
            conduct of a trade or business within the United States (other
            than a trade or business it is deemed to conduct pursuant to
            this subsection) shall be treated for purposes of this
            subsection as an amount paid, incurred, or received,
            respectively, by a domestic corporation. For purposes of the
            preceding sentence, a foreign corporation shall be deemed to
            pay, incur, and receive amounts with respect to a trade or
            business it conducts within the United States (other than a
            trade or business it is deemed to conduct pursuant to this
            subsection) to the extent such foreign corporation would be
            treated as paying, incurring, or receiving such amounts from
            such trade or business if such trade or business were a
            domestic corporation.
                ``(7) Joint and several liability of members of internal
            financial reporting group.--In the case of any underpayment
            with respect to any taxable year of a foreign corporation which
            is a member of an international financial accounting group,
            each domestic corporation which is a member of such group at
            any time during such taxable year shall be jointly and
            severally liable for--
                        ``(A) so much of such underpayment as does not
                    exceed the excess (if any) of such underpayment over
                    the amount of such underpayment determined without
                    regard to this subsection, and
                        ``(B) any penalty, addition to tax, or additional
                    amount attributable to the amount described in
                    subparagraph (A).
                ``(8) Foreign tax credit allowed.--The credit allowed under
            section 906(a) with respect to amounts taken into account in
            income under paragraph (1)(A) shall be limited to 80 percent of
            the amount of taxes paid or accrued and determined without
            regard to section 906(b)(1).
                ``(9) Election.--Any election under paragraph (1)--
                        ``(A) shall be made at such time and in such form
                    and manner as the Secretary may provide, and
                        ``(B) shall apply for the taxable year for which
                    made and all subsequent taxable years unless revoked
                    with the consent of the Secretary.
                ``(10) Regulations.--The Secretary may issue such
            regulations or other guidance as are necessary or appropriate
            to carry out the purposes of this subsection, including
            regulations or other guidance--
                        ``(A) to provide for the proper determination of
                    product lines, and
                        ``(B) to prevent the avoidance of the purposes of
                    this subsection through the use of conduit transactions
                    or by other means.''.
        (c) Reporting Requirements.--
                (1) Reporting by foreign corporation.--Section 6038C(b) is
            amended to read as follows:
        ``(b) Required Information.--
                ``(1) In general.--The information described in this
            subsection is--
                        ``(A) the information described in section
                    6038A(b), and
                        ``(B) such other information as the Secretary may
                    prescribe by regulations relating to any item not
                    directly connected with a transaction for which
                    information is required under subparagraph (A).
                ``(2) Certain payments from related domestic
            corporations.--
                        ``(A) In general.--In the case of any reporting
                    corporation that receives during the taxable year any
                    amount to which section 882(g)(1) applies, the
                    information described in this subsection shall include,
                    with respect to each member of the international
                    financial reporting group from which any such amount is
                    received--
                                ``(i) the name and taxpayer identification
                            number of such member,
                                ``(ii) the aggregate amounts received from
                            such member,
                                ``(iii) the product lines to which such
                            amounts relate, the aggregate amounts relating
                            to each such product line, and the net income
                            ratio for each such product line (determined
                            under section 882(g)(3)(B) with respect to the
                            international financial reporting group), and
                                ``(iv) a summary of any changes in
                            financial accounting methods that affect the
                            computation of any net income ratio described
                            in clause (iii).
                        ``(B) Definitions and special rules.--Terms used in
                    this paragraph that are also used in section 882(g)
                    shall have the same meaning as when used in such
                    section and rules similar to the rules of paragraphs
                    (5) and (6) of such section shall apply for purposes of
                    this paragraph.''.
                (2) Reporting by domestic group members.--
                        (A) In general .--Subpart A of part III of
                    subchapter A of chapter 61 is amended by inserting
                    after section 6038D the following new section:

    ``SEC. 6038E. INFORMATION WITH RESPECT TO CERTAIN PAYMENTS FROM
                  DOMESTIC CORPORATIONS TO RELATED FOREIGN CORPORATIONS.

        ``(a) In General.--In the case of any domestic corporation which
    pays or incurs any amount to which section 882(g)(1) applies, such
    person shall--
                ``(1) make a return according to the forms and regulations
            prescribed the Secretary, setting forth the information
            described in subsection (b), and
                ``(2) maintain (at the location, in the manner, and to the
            extent prescribed in regulations) such records as may be
            appropriate to determine liability for tax pursuant to
            paragraphs (1) and (7) of section 882(g).
        ``(b) Required Information.--The information described in this
    subsection is--
                ``(1) the name and taxpayer identification number of the
            common parent of the international financial reporting group in
            which such domestic corporation is a member, and
                ``(2) with respect to any person who receives an amount
            described in subsection (a) from such domestic corporation--
                        ``(A) the name and taxpayer identification number
                    of such person,
                        ``(B) the aggregate amounts received by such
                    person,
                        ``(C) the product lines to which such amounts
                    relate, the aggregate amounts relating to each such
                    product line, and the net income ratio for each such
                    product line (determined under section 882(g)(3)(B)
                    with respect to the international financial reporting
                    group), and
                        ``(D) a summary of any changes in financial
                    accounting methods that affect the computation of any
                    net income ratios described in subparagraph (C).
        ``(c) Definitions and Special Rules.--Terms used in this paragraph
    that are also used in section 882(g) shall have the same meaning as
    when used in such section and rules similar to the rules of paragraphs
    (5) and (6) of such section shall apply for purposes of this
    paragraph.''.
                        (B) Clerical amendment.--The table of sections for
                    subpart A of part III of subchapter A of chapter 61 is
                    amended by inserting after the item relating to section
                    6038D the following new item:

    ``Sec. 6038E. Information with respect to certain payments from
                                domestic corporations to related foreign
                                corporations.''.
        (d) Effective Date.--The amendments made by this section shall
    apply to amounts paid or incurred after December 31, 2018.

       Subtitle E--Provisions Related to Possessions of the United States

    SEC. 4401. EXTENSION OF DEDUCTION ALLOWABLE WITH RESPECT TO INCOME
                  ATTRIBUTABLE TO DOMESTIC PRODUCTION ACTIVITIES IN PUERTO
                  RICO.

        (a) In General.--Section 199(d)(8)(C), prior to its repeal by this
    Act, is amended--
                (1) by striking ``first 11 taxable years'' and inserting
            ``first 12 taxable years'', and
                (2) by striking ``January 1, 2017'' and inserting ``January
            1, 2018''.
        (b) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2016.

    SEC. 4402. EXTENSION OF TEMPORARY INCREASE IN LIMIT ON COVER OVER OF
                  RUM EXCISE TAXES TO PUERTO RICO AND THE VIRGIN ISLANDS.

        (a) In General.--Section 7652(f)(1) is amended by striking
    ``January 1, 2017'' and inserting ``January 1, 2023''.
        (b) Effective Date.--The amendment made by this section shall apply
    to distilled spirits brought into the United States after December 31,
    2016.

    SEC. 4403. EXTENSION OF AMERICAN SAMOA ECONOMIC DEVELOPMENT CREDIT.

        (a) In General.--Section 119(d) of division A of the Tax Relief and
    Health Care Act of 2006 is amended--
                (1) by striking ``January 1, 2017'' each place it appears
            and inserting ``January 1, 2023'',
                (2) by striking ``first 11 taxable years'' in paragraph (1)
            and inserting ``first 17 taxable years'', and
                (3) by striking ``first 5 taxable years'' in paragraph (2)
            and inserting ``first 11 taxable years''.
        (b) Treatment of Certain References.--Section 119(e) of division A
    of the Tax Relief and Health Care Act of 2006 is amended by adding at
    the end the following: ``References in this subsection to section 199
    of the Internal Revenue Code of 1986 shall be treated as references to
    such section as in effect before its repeal by the Tax Cuts and Jobs
    Act.''.
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2016.

                    Subtitle F--Other International Reforms

    SEC. 4501. RESTRICTION ON INSURANCE BUSINESS EXCEPTION TO PASSIVE
                  FOREIGN INVESTMENT COMPANY RULES.

        (a) In General.--Section 1297(b)(2)(B) is amended to read as
    follows:
                        ``(B) derived in the active conduct of an insurance
                    business by a qualifying insurance corporation (as
                    defined in subsection (f)),''.
        (b) Qualifying Insurance Corporation Defined.--Section 1297 is
    amended by adding at the end the following new subsection:
        ``(f) Qualifying Insurance Corporation.--For purposes of subsection
    (b)(2)(B)--
                ``(1) In general.--The term `qualifying insurance
            corporation' means, with respect to any taxable year, a foreign
            corporation--
                        ``(A) which would be subject to tax under
                    subchapter L if such corporation were a domestic
                    corporation, and
                        ``(B) the applicable insurance liabilities of which
                    constitute more than 25 percent of its total assets,
                    determined on the basis of such liabilities and assets
                    as reported on the corporation's applicable financial
                    statement for the last year ending with or within the
                    taxable year.
                ``(2) Alternative facts and circumstances test for certain
            corporations.--If a corporation fails to qualify as a qualified
            insurance corporation under paragraph (1) solely because the
            percentage determined under paragraph (1)(B) is 25 percent or
            less, a United States person that owns stock in such
            corporation may elect to treat such stock as stock of a
            qualifying insurance corporation if--
                        ``(A) the percentage so determined for the
                    corporation is at least 10 percent, and
                        ``(B) under regulations provided by the Secretary,
                    based on the applicable facts and circumstances--
                                ``(i) the corporation is predominantly
                            engaged in an insurance business, and
                                ``(ii) such failure is due solely to
                            runoff-related or rating-related circumstances
                            involving such insurance business.
                ``(3) Applicable insurance liabilities.--For purposes of
            this subsection--
                        ``(A) In general.--The term `applicable insurance
                    liabilities' means, with respect to any life or
                    property and casualty insurance business--
                                ``(i) loss and loss adjustment expenses,
                            and
                                ``(ii) reserves (other than deficiency,
                            contingency, or unearned premium reserves) for
                            life and health insurance risks and life and
                            health insurance claims with respect to
                            contracts providing coverage for mortality or
                            morbidity risks.
                        ``(B) Limitations on amount of liabilities.--Any
                    amount determined under clause (i) or (ii) of
                    subparagraph (A) shall not exceed the lesser of such
                    amount--
                                ``(i) as reported to the applicable
                            insurance regulatory body in the applicable
                            financial statement described in paragraph
                            (4)(A) (or, if less, the amount required by
                            applicable law or regulation), or
                                ``(ii) as determined under regulations
                            prescribed by the Secretary.
                ``(4) Other definitions and rules.--For purposes of this
            subsection--
                        ``(A) Applicable financial statement.--The term
                    `applicable financial statement' means a statement for
                    financial reporting purposes which--
                                ``(i) is made on the basis of generally
                            accepted accounting principles,
                                ``(ii) is made on the basis of
                            international financial reporting standards,
                            but only if there is no statement that meets
                            the requirement of clause (i), or
                                ``(iii) except as otherwise provided by the
                            Secretary in regulations, is the annual
                            statement which is required to be filed with
                            the applicable insurance regulatory body, but
                            only if there is no statement which meets the
                            requirements of clause (i) or (ii).
                        ``(B) Applicable insurance regulatory body.--The
                    term `applicable insurance regulatory body' means, with
                    respect to any insurance business, the entity
                    established by law to license, authorize, or regulate
                    such business and to which the statement described in
                    subparagraph (A) is provided.''.
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

                         TITLE V--EXEMPT ORGANIZATIONS

                   Subtitle A--Unrelated Business Income Tax

    SEC. 5001. CLARIFICATION OF UNRELATED BUSINESS INCOME TAX TREATMENT OF
                  ENTITIES TREATED AS EXEMPT FROM TAXATION UNDER SECTION
                  501(A).

        (a) In General.--Section 511 is amended by adding at the end the
    following new subsection:
        ``(d) Organizations and Trusts Exempt From Taxation Not Solely by
    Reason of Section 501(a).--For purposes of subsections (a)(2) and
    (b)(2), an organization or trust shall not fail to be treated as exempt
    from taxation under this subtitle by reason of section 501(a) solely
    because such organization is also so exempt, or excludes amounts from
    gross income, by reason of any other provision of this title.''.
        (b) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

    SEC. 5002. EXCLUSION OF RESEARCH INCOME LIMITED TO PUBLICLY AVAILABLE
                  RESEARCH.

        (a) In General.--Section 512(b)(9) is amended by striking ``from
    research'' and inserting ``from such research''.
        (b) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

                            Subtitle B--Excise Taxes

    SEC. 5101. SIMPLIFICATION OF EXCISE TAX ON PRIVATE FOUNDATION
                  INVESTMENT INCOME.

        (a) Rate Reduction.--Section 4940(a) is amended by striking ``2
    percent'' and inserting ``1.4 percent''.
        (b) Repeal of Special Rules for Certain Private Foundations.--
    Section 4940 is amended by striking subsection (e).
        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

    SEC. 5102. PRIVATE OPERATING FOUNDATION REQUIREMENTS RELATING TO
                  OPERATION OF ART MUSEUM.

        (a) In General.--Section 4942(j) is amended by adding at the end
    the following new paragraph:
                ``(6) Organization operating art museum.--For purposes of
            this section, the term `operating foundation' shall not include
            an organization which operates an art museum as a substantial
            activity unless such museum is open during normal business
            hours to the public for at least 1,000 hours during the taxable
            year.''.
        (b) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

    SEC. 5103. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES
                  AND UNIVERSITIES.

        (a) In General.--Chapter 42 is amended by adding at the end the
    following new subchapter:

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

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

    ``SEC. 4969. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES
                  AND UNIVERSITIES.

        ``(a) Tax Imposed.--There is hereby imposed on each applicable
    educational institution for the taxable year a tax equal to 1.4 percent
    of the net investment income of such institution for the taxable year.
        ``(b) Applicable Educational Institution.--For purposes of this
    subchapter--
                ``(1) In general.--The term `applicable educational
            institution' means an eligible educational institution (as
            defined in section 25A(e)(3))--
                        ``(A) which has at least 500 students during the
                    preceding taxable year,
                        ``(B) which is not described in the first sentence
                    of section 511(a)(2)(B), and
                        ``(C) the aggregate fair market value of the assets
                    of which at the end of the preceding taxable year
                    (other than those assets which are used directly in
                    carrying out the institution's exempt purpose) is at
                    least $250,000 per student of the institution.
                ``(2) Students.--For purposes of paragraph (1), the number
            of students of an institution shall be based on the daily
            average number of full-time students attending such institution
            (with part-time students taken into account on a full-time
            student equivalent basis).
        ``(c) Net Investment Income.--For purposes of this section, net
    investment income shall be determined under rules similar to the rules
    of section 4940(c).
        ``(d) Assets and Net Investment Income of Related Organizations.--
                ``(1) In general.--For purposes of subsections (b)(1)(C)
            and (c), the assets and net investment income of any related
            organization shall be treated as the assets and net investment
            income of the eligible educational institution.
                ``(2) Related organization.--For purposes of this
            subsection, the term `related organization' means, with respect
            to an eligible educational institution, any organization
            which--
                        ``(A) controls, or is controlled by, such
                    institution,
                        ``(B) is controlled by one or more persons that
                    control such institution, or
                        ``(C) is a supported organization (as defined in
                    section 509(f)(3)), or an organization described in
                    section 509(a)(3), during the taxable year with respect
                    to such institution.''.
        (b) Clerical Amendment.--The table of subchapters for chapter 42 is
    amended by adding at the end the following new item:

       ``subchapter h--excise tax based on investment income of private
                          colleges and universities''.

        (c) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

    SEC. 5104. EXCEPTION FROM PRIVATE FOUNDATION EXCESS BUSINESS HOLDING
                  TAX FOR INDEPENDENTLY-OPERATED PHILANTHROPIC BUSINESS
                  HOLDINGS.

        (a) In General.--Section 4943 is amended by adding at the end the
    following new subsection:
        ``(g) Exception for Certain Holdings Limited to Independently-
    operated Philanthropic Business.--
                ``(1) In general.--Subsection (a) shall not apply with
            respect to the holdings of a private foundation in any business
            enterprise which for the taxable year meets--
                        ``(A) the ownership requirements of paragraph (2),
                        ``(B) the all profits to charity distribution
                    requirement of paragraph (3), and
                        ``(C) the independent operation requirements of
                    paragraph (4).
                ``(2) Ownership.--The ownership requirements of this
            paragraph are met if--
                        ``(A) 100 percent of the voting stock in the
                    business enterprise is held by the private foundation
                    at all times during the taxable year, and
                        ``(B) all the private foundation's ownership
                    interests in the business enterprise were acquired not
                    by purchase.
                ``(3) All profits to charity.--
                        ``(A) In general.--The all profits to charity
                    distribution requirement of this paragraph is met if
                    the business enterprise, not later than 120 days after
                    the close of the taxable year, distributes an amount
                    equal to its net operating income for such taxable year
                    to the private foundation.
                        ``(B) Net operating income.--For purposes of this
                    paragraph, the net operating income of any business
                    enterprise for any taxable year is an amount equal to
                    the gross income of the business enterprise for the
                    taxable year, reduced by the sum of--
                                ``(i) the deductions allowed by chapter 1
                            for the taxable year which are directly
                            connected with the production of such income,
                                ``(ii) the tax imposed by chapter 1 on the
                            business enterprise for the taxable year, and
                                ``(iii) an amount for a reasonable reserve
                            for working capital and other business needs of
                            the business enterprise.
                ``(4) Independent operation.--The independent operation
            requirements of this paragraph are met if, at all times during
            the taxable year--
                        ``(A) no substantial contributor (as defined in
                    section 4958(c)(3)(C)) to the private foundation, or
                    family member of such a contributor (determined under
                    section 4958(f)(4)) is a director, officer, trustee,
                    manager, employee, or contractor of the business
                    enterprise (or an individual having powers or
                    responsibilities similar to any of the foregoing),
                        ``(B) at least a majority of the board of directors
                    of the private foundation are not--
                                ``(i) also directors or officers of the
                            business enterprise, or
                                ``(ii) members of the family (determined
                            under section 4958(f)(4)) of a substantial
                            contributor (as defined in section
                            4958(c)(3)(C)) to the private foundation, and
                        ``(C) there is no loan outstanding from the
                    business enterprise to a substantial contributor (as so
                    defined) to the private foundation or a family member
                    of such contributor (as so determined).
                ``(5) Certain deemed private foundations excluded.--This
            subsection shall not apply to--
                        ``(A) any fund or organization treated as a private
                    foundation for purposes of this section by reason of
                    subsection (e) or (f),
                        ``(B) any trust described in section 4947(a)(1)
                    (relating to charitable trusts), and
                        ``(C) any trust described in section 4947(a)(2)
                    (relating to split-interest trusts).''.
        (b) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2017.

           Subtitle C--Requirements for Organizations Exempt From Tax

    SEC. 5201. 501(C)(3) ORGANIZATIONS PERMITTED TO MAKE STATEMENTS
                  RELATING TO POLITICAL CAMPAIGN IN ORDINARY COURSE OF
                  ACTIVITIES.

        (a) In General.--Section 501 is amended by adding at the end the
    following new subsection:
        ``(s) Special Rule Relating to Political Campaign Statements of
    Organizations Described in Subsection (c)(3).--
                ``(1) In general.--For purposes of subsection (c)(3) and
            sections 170(c)(2), 2055, 2106, 2522, and 4955, an organization
            shall not fail to be treated as organized and operated
            exclusively for a purpose described in subsection (c)(3), nor
            shall it be deemed to have participated in, or intervened in
            any political campaign on behalf of (or in opposition to) any
            candidate for public office, solely because of the content of
            any statement which--
                        ``(A) is made in the ordinary course of the
                    organization's regular and customary activities in
                    carrying out its exempt purpose, and
                        ``(B) results in the organization incurring not
                    more than de minimis incremental expenses.
                ``(2) Termination.--Paragraph (1) shall not apply to
            taxable years beginning after December 31, 2023.''.
        (b) Effective Date.--The amendments made by this section shall
    apply to taxable years beginning after December 31, 2018.

    SEC. 5202. ADDITIONAL REPORTING REQUIREMENTS FOR DONOR ADVISED FUND
                  SPONSORING ORGANIZATIONS.

        (a) In General.--Section 6033(k) is amended by striking ``and'' at
    the end of paragraph (2), by striking the period at the end of
    paragraph (3), and by adding at the end the following new paragraphs:
                ``(4) indicate the average amount of grants made from such
            funds during such taxable year (expressed as a percentage of
            the value of assets held in such funds at the beginning of such
            taxable year), and
                ``(5) indicate whether the organization has a policy with
            respect to donor advised funds (as so defined) for frequency
            and minimum level of distributions.
    Such organization shall include with such return a copy of any policy
    described in paragraph (5).''.
        (b) Effective Date.--The amendment made by this section shall apply
    for returns filed for taxable years beginning after December 31, 2017.
                Amend the title so as to read: ``A bill to provide for
            reconciliation pursuant to titles II and V of the concurrent
            resolution on the budget for fiscal year 2018.''.
                                                     Union Calendar No. 302

    115th CONGRESS

      1st Session

                                    H. R. 1

                              [Report No. 115-409]

    _______________________________________________________________________

                                     A BILL

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

    _______________________________________________________________________

                               November 13, 2017

    Reported with amendments, committed to the Committee of the Whole House
              on the State of the Union, and ordered to be printed