[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