[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 1 Placed on Calendar Senate (PCS)]

<DOC>





                                                       Calendar No. 269
115th CONGRESS
  1st Session
                                  S. 1

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 28, 2017

  Mr. Enzi, from the Committee on the Budget, reported the following 
     original bill; which was read twice and placed on the calendar

_______________________________________________________________________

                                 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,

                                TITLE I

SEC. 11000. SHORT TITLE, ETC.

    (a) Short Title.--This title may be cited as the ``Tax Cuts and 
Jobs Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this title 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.

                   Subtitle A--Individual Tax Reform

                        PART I--TAX RATE REFORM

SEC. 11001. MODIFICATION OF RATES.

    (a) In General.--Section 1 is amended by adding at the end the 
following new subsection:
    ``(j) Modifications for Taxable Years 2018 Through 2025.--
            ``(1) In general.--In the case of a taxable year beginning 
        after December 31, 2017, and before January 1, 2026--
                    ``(A) subsection (i) shall not apply, and
                    ``(B) this section (other than subsection (i)) 
                shall be applied as provided in paragraphs (2) through 
                (7).
            ``(2) Rate tables.--
                    ``(A) Married individuals filing joint returns and 
                surviving spouses.--The following table shall be 
                applied in lieu of the table contained in subsection 
                (a):

``If taxable income is:                                     The tax is:
    Not over $19,050...............
                                        10% of taxable income.
    Over $19,050 but not over 
        $77,400.
                                        $1,905, plus 12% of the excess 
                                                over $19,050.
    Over $77,400 but not over 
        $140,000.
                                        $8,907, plus 22% of the excess 
                                                over $77,400.
    Over $140,000 but not over 
        $320,000.
                                        $22,679, plus 24% of the excess 
                                                over $140,000.
    Over $320,000 but not over 
        $400,000.
                                        $65,879, plus 32% of the excess 
                                                over $320,000.
    Over $400,000 but not over 
        $1,000,000.
                                        $91,479, plus 35% of the excess 
                                                over $400,000.
    Over $1,000,000................
                                        $301,479 plus 38.5% of the 
                                                excess over $1,000,000.
                    ``(B) Heads of households.--The following table 
                shall be applied in lieu of the table contained in 
                subsection (b):

``If taxable income is:                                     The tax is:
    Not over $13,600...............
                                        10% of taxable income.
    Over $13,600 but not over 
        $51,800.
                                        $1,360, plus 12% of the excess 
                                                over $13,600.
    Over $51,800 but not over 
        $70,000.
                                        $5,944, plus 22% of the excess 
                                                over $51,800.
    Over $70,000 but not over 
        $160,000.
                                        $9,948, plus 24% of the excess 
                                                over $70,000.
    Over $160,000 but not over 
        $200,000.
                                        $31,548, plus 32% of the excess 
                                                over $160,000.
    Over $200,000 but not over 
        $500,000.
                                        $44,348, plus 35% of the excess 
                                                over $200,000.
    Over $500,000..................
                                        $149,348, plus 38.5% of the 
                                                excess over $500,000.
                    ``(C) Unmarried individuals other than surviving 
                spouses and heads of households.--The following table 
                shall be applied in lieu of the table contained in 
                subsection (c):

``If taxable income is:                                     The tax is:
    Not over $9,525................
                                        10% of taxable income.
    Over $9,525 but not over 
        $38,700.
                                        $952.50, plus 12% of the excess 
                                                over $9,525.
    Over $38,700 but not over 
        $70,000.
                                        $4,453.50, plus 22% of the 
                                                excess over $38,700.
    Over $70,000 but not over 
        $160,000.
                                        $11,339.50, plus 24% of the 
                                                excess over $70,000.
    Over $160,000 but not over 
        $200,000.
                                        $32,939.50, plus 32% of the 
                                                excess over $160,000.
    Over $200,000 but not over 
        $500,000.
                                        $45,739.50, plus 35% of the 
                                                excess over $200,000.
    Over $500,000..................
                                        $150,739.50, plus 38.5% of the 
                                                excess over $500,000.
                    ``(D) Married individuals filing separate 
                returns.--The following table shall be applied in lieu 
                of the table contained in subsection (d):

``If taxable income is:                                     The tax is:
    Not over $9,525................
                                        10% of taxable income.
    Over $9,525 but not over 
        $38,700.
                                        $952.50, plus 12% of the excess 
                                                over $9,525.
    Over $38,700 but not over 
        $70,000.
                                        $4,453.50, plus 22% of the 
                                                excess over $38,700.
    Over $70,000 but not over 
        $160,000.
                                        $11,339.50, plus 24% of the 
                                                excess over $70,000.
    Over $160,000 but not over 
        $200,000.
                                        $32,939.50, plus 32% of the 
                                                excess over $160,000.
    Over $200,000 but not over 
        $500,000.
                                        $45,739.50, plus 35% of the 
                                                excess over $200,000.
    Over $500,000..................
                                        $150,739.50, plus 38.5% of the 
                                                excess over $500,000.
                    ``(E) Estates and trusts.--The following table 
                shall be applied in lieu of the table contained in 
                subsection (e):

``If taxable income is:                                     The tax is:
    Not over $2,550................
                                        10% of taxable income.
    Over $2,550 but not over $9,150
                                        $255, plus 24% of the excess 
                                                over $2,550.
    Over $9,150 but not over 
        $12,500.
                                        $1,839, plus 35% of the excess 
                                                over $9,150.
    Over $12,500...................
                                        $3,011.50, plus 38.5% of the 
                                                excess over $12,500.
                    ``(F) References to rate tables.--Any reference in 
                this title to a rate of tax under subsection (c) shall 
                be treated as a reference to the corresponding rate 
                bracket under subparagraph (C) of this paragraph, 
                except that the reference in section 3402(q)(1) to the 
                third lowest rate of tax applicable under subsection 
                (c) shall be treated as a reference to the fourth 
                lowest rate of tax under subparagraph (C).
            ``(3) Adjustments, elimination of marriage penalty; etc.--
                    ``(A) No adjustment in 2018.--The tables contained 
                in paragraph (2) shall apply without adjustment for 
                taxable years beginning after December 31, 2017, and 
                before January 1, 2019.
                    ``(B) Subsequent years.--For taxable years 
                beginning after December 31, 2018, the Secretary shall 
                prescribe tables which shall apply in lieu of the 
                tables contained in paragraph (2) in the same manner as 
                under paragraphs (1) and (2) of subsection (f), except 
                that in prescribing such tables--
                            ``(i) subsection (f)(3) shall be applied by 
                        substituting `calendar year 2017' for `calendar 
                        year 2016' in subparagraph (A)(ii) thereof, and
                            ``(ii) subsection (f)(7) shall not apply 
                        and--
                                    ``(I) the maximum taxable income in 
                                each of the rate brackets in the table 
                                contained in paragraph (2)(A) (and the 
                                minimum taxable income in the next 
                                higher taxable income bracket with 
                                respect to each such bracket in such 
                                table) shall be 200 percent of the 
                                maximum taxable income in the 
                                corresponding rate bracket in the table 
                                contained in paragraph (2)(C) (after 
                                any other adjustment under paragraph 
                                (3)), and
                                    ``(II) the comparable taxable 
                                income amounts in the table contained 
                                in paragraph (2)(D) shall be \1/2\ of 
                                the amounts determined under 
                                subparagraph (A).
            ``(4) Special rules for certain children with unearned 
        income.--
                    ``(A) In general.--In the case of a child to whom 
                subsection (g) applies for the taxable year, the rules 
                of subparagraphs (B) and (C) shall apply in lieu of the 
                rule under subsection (g)(1).
                    ``(B) Modifications to applicable rate brackets.--
                In determining the amount of tax imposed by this 
                section for the taxable year on a child described in 
                subparagraph (A), the income tax table otherwise 
                applicable under this subsection to the child shall be 
                applied with the following modifications:
                            ``(i) 24-percent bracket.--The maximum 
                        taxable income which is taxed at a rate below 
                        24 percent shall not be more than the earned 
                        taxable income of such child.
                            ``(ii) 35-percent bracket.--The maximum 
                        taxable income which is taxed at a rate below 
                        35 percent shall not be more than the sum of--
                                    ``(I) the earned taxable income of 
                                such child, plus
                                    ``(II) the minimum taxable income 
                                for the 35-percent bracket in the table 
                                under paragraph (2)(E) (as adjusted 
                                under paragraph (3)) for the taxable 
                                year.
                            ``(iii) 38.5-percent bracket.--The maximum 
                        taxable income which is taxed at a rate below 
                        38.5 percent shall not be more than the sum 
                        of--
                                    ``(I) the earned taxable income of 
                                such child, plus
                                    ``(II) the minimum taxable income 
                                for the 38.5-percent bracket in the 
                                table under paragraph (2)(E) (as 
                                adjusted under paragraph (3)) for the 
                                taxable year.
                    ``(C) Coordination with capital gains rates.--For 
                purposes of applying section 1(h) (after the 
                modifications under paragraph (5))--
                            ``(i) the maximum zero rate amount shall 
                        not be more than the sum of--
                                    ``(I) the earned taxable income of 
                                such child, plus
                                    ``(II) the amount in effect under 
                                paragraph (5)(B)(i)(IV) for the taxable 
                                year, and
                            ``(ii) the maximum 15-percent rate amount 
                        shall not be more than the sum of--
                                    ``(I) the earned taxable income of 
                                such child, plus
                                    ``(II) the amount in effect under 
                                paragraph (5)(B)(ii)(IV) for the 
                                taxable year.
                    ``(D) Earned taxable income.--For purposes of this 
                paragraph, the term `earned taxable income' means, with 
                respect to any child for any taxable year, the taxable 
                income of such child reduced (but not below zero) by 
                the net unearned income (as defined in subsection 
                (g)(4)) of such child.
            ``(5) Application of current income tax brackets to capital 
        gains brackets.--
                    ``(A) In general.--Section 1(h)(1) shall be 
                applied--
                            ``(i) by substituting `below the maximum 
                        zero rate amount' for `which would (without 
                        regard to this paragraph) be taxed at a rate 
                        below 25 percent' in subparagraph (B)(i), and
                            ``(ii) by substituting `below the maximum 
                        15-percent rate amount' for `which would 
                        (without regard to this paragraph) be taxed at 
                        a rate below 39.6 percent' in subparagraph 
                        (C)(ii)(I).
                    ``(B) Maximum amounts defined.--For purposes of 
                applying section 1(h) with the modifications described 
                in subparagraph (A)--
                            ``(i) Maximum zero rate amount.--The 
                        maximum zero rate amount 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 a head of 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.
                            ``(ii) Maximum 15-percent rate amount.--The 
                        maximum 15-percent rate amount 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 clauses (i) and (ii) of subparagraph (B) 
                shall be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under subsection (f)(3) 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.
            ``(6) Section 15 not to apply.--Section 15 shall not apply 
        to any change in a rate of tax by reason of this subsection.''.
    (b) Due Diligence Tax Preparer Requirement With Respect to Head of 
Household Filing Status.--Subsection (g) of section 6695 is amended to 
read as follows:
    ``(g) Failure to Be Diligent in Determining Eligibility for Certain 
Tax Benefits.--Any person who is a tax return preparer with respect to 
any return or claim for refund who fails to comply with due diligence 
requirements imposed by the Secretary by regulations with respect to 
determining--
            ``(1) eligibility to file as a head of household (as 
        defined in section 2(b)) on the return, or
            ``(2) eligibility for, or the amount of, the credit 
        allowable by section 24, 25A(a)(1), or 32,
shall pay a penalty of $500 for each such failure.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 11002. INFLATION ADJUSTMENTS BASED ON CHAINED CPI.

    (a) In General.--Subsection (f) of section 1 is amended by striking 
paragraph (3) and by inserting after paragraph (2) the following new 
paragraph:
            ``(3) 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 CPI for calendar year 2016, 
                        multiplied by the amount determined under 
                        subparagraph (B).
                    ``(B) Amount determined.--The amount determined 
                under this clause is the amount obtained by dividing--
                            ``(i) the C-CPI-U for calendar year 2016, 
                        by
                            ``(ii) the CPI for calendar year 2016.
                    ``(C) Special rule for adjustments with a base year 
                after 2016.--For purposes of any provision of this 
                title which provides for the substitution of a year 
                after 2016 for `2016' in subparagraph (A)(ii), 
                subparagraph (A) shall be applied by substituting `the 
                C-CPI-U for calendar year 2016' for `the CPI for 
                calendar year 2016' and all that follows in clause (ii) 
                thereof.''.
    (b) C-CPI-U.--Subsection (f) of section 1 is amended by striking 
paragraph (7), by redesignating paragraph (6) as paragraph (7), and by 
inserting after paragraph (5) the following new paragraph:
            ``(6) 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.''.
    (c) Application to Permanent Tax Tables.--Section 1(f)(2)(A) is 
amended by inserting ``, determined by substituting `1992' for `2016' 
in paragraph (3)(A)(ii)''.
    (d) Application to Other Internal Revenue Code of 1986 
Provisions.--
            (1) The following sections are each amended by striking 
        ``for `calendar year 1992' in subparagraph (B)'' and inserting 
        ``for `calendar year 2016' in subparagraph (A)(ii)'':
                    (A) Section 23(h)(2).
                    (B) Paragraphs (1)(A)(ii) and (2)(A)(ii) of section 
                25A(h).
                    (C) Section 25B(b)(3)(B).
                    (D) Subsection (b)(2)(B)(ii)(II), and clauses (i) 
                and (ii) of subsection (j)(1)(B), of section 32.
                    (E) Section 36B(f)(2)(B)(ii)(II).
                    (F) Section 41(e)(5)(C)(i).
                    (G) Subsections (e)(3)(D)(ii) and (h)(3)(H)(i)(II) 
                of section 42.
                    (H) Section 45R(d)(3)(B)(ii).
                    (I) Section 62(d)(3)(B).
                    (J) Section 125(i)(2)(B).
                    (K) Section 135(b)(2)(B)(ii).
                    (L) Section 137(f)(2).
                    (M) Section 146(d)(2)(B).
                    (N) Section 147(c)(2)(H)(ii).
                    (O) Section 179(b)(6)(A)(ii).
                    (P) Subsections (b)(5)(C)(i)(II) and (g)(8)(B) of 
                section 219.
                    (Q) Section 220(g)(2).
                    (R) Section 221(f)(1)(B).
                    (S) Section 223(g)(1)(B).
                    (T) Section 408A(c)(3)(D)(ii).
                    (U) Section 430(c)(7)(D)(vii)(II).
                    (V) Section 512(d)(2)(B).
                    (W) Section 513(h)(2)(C)(ii).
                    (X) Section 831(b)(2)(D)(ii).
                    (Y) Section 877A(a)(3)(B)(i)(II).
                    (Z) Section 2010(c)(3)(B)(ii).
                    (AA) Section 2032A(a)(3)(B).
                    (BB) Section 2503(b)(2)(B).
                    (CC) Section 4261(e)(4)(A)(ii).
                    (DD) Section 5000A(c)(3)(D)(ii).
                    (EE) Section 6323(i)(4)(B).
                    (FF) Section 6334(g)(1)(B).
                    (GG) Section 6601(j)(3)(B).
                    (HH) Section 6651(i)(1).
                    (II) Section 6652(c)(7)(A).
                    (JJ) Section 6695(h)(1).
                    (KK) Section 6698(e)(1).
                    (LL) Section 6699(e)(1).
                    (MM) Section 6721(f)(1).
                    (NN) Section 6722(f)(1).
                    (OO) Section 7345(f)(2).
                    (PP) Section 7430(c)(1).
                    (QQ) Section 9831(d)(2)(D)(ii)(II).
            (2) Section 41(e)(5)(C)(ii) is amended--
                    (A) by striking ``1(f)(3)(B)'' and inserting 
                ``1(f)(3)(A)(ii)'', and
                    (B) by striking ``1992'' and inserting ``2016''.
            (3) Section 42(h)(6)(G) is amended--
                    (A) by striking ``for `calendar year 1987''' in 
                clause (i)(II) and inserting ``for `calendar year 2016' 
                in subparagraph (A)(ii) thereof'', and
                    (B) by striking ``if the CPI for any calendar 
                year'' and all that follows in clause (ii) and 
                inserting ``if the C-CPI-U for any calendar year (as 
                defined in section 1(f)(6)) exceeds the C-CPI-U for the 
                preceding calendar year by more than 5 percent, the C-
                CPI-U for the base calendar year shall be increased 
                such that such excess shall never be taken into account 
                under clause (i). In the case of a base calendar year 
                before 2017, the C-CPI-U for such year shall be 
                determined by multiplying the CPI for such year by the 
                amount determined under section 1(f)(3)(B).''.
            (4) Section 132(f)(6)(A)(ii) is amended by striking ``for 
        `calendar year 1992''' and inserting ``for `calendar year 2016' 
        in subparagraph (A)(ii) thereof''.
            (5) Section 162(o)(3) is amended by striking ``adjusted for 
        changes in the Consumer Price Index (as defined in section 
        1(f)(5)) since 1991'' and inserting ``adjusted by increasing 
        any such amount under the 1991 agreement by an amount equal 
        to--
                    ``(A) such amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, by substituting `calendar year 
                1990' for `calendar year 2016' in subparagraph (A)(ii) 
                thereof''.
            (6) So much of clause (ii) of section 213(d)(10)(B) as 
        precedes the last sentence is amended to read as follows:
                            ``(ii) Medical care cost adjustment.--For 
                        purposes of clause (i), the medical care cost 
                        adjustment for any calendar year is the 
                        percentage (if any) by which--
                                    ``(I) the medical care component of 
                                the C-CPI-U (as defined in section 
                                1(f)(6)) for August of the preceding 
                                calendar year, exceeds
                                    ``(II) such component of the CPI 
                                (as defined in section 1(f)(4)) for 
                                August of 1996, multiplied by the 
                                amount determined under section 
                                1(f)(3)(B).''.
            (7) Section 877(a)(2) is amended by striking ``for `1992' 
        in subparagraph (B)'' and inserting ``for `2016' in 
        subparagraph (A)(ii)''.
            (8) Section 911(b)(2)(D)(ii)(II) is amended by striking 
        ``for `1992' in subparagraph (B)'' and inserting ``for `2016' 
        in subparagraph (A)(ii)''.
            (9) Paragraph (2) of section 1274A(d) is amended to read as 
        follows:
            ``(2) Adjustment for inflation.--In the case of any debt 
        instrument arising out of a sale or exchange during any 
        calendar year after 1989, each dollar amount contained in the 
        preceding provisions of this section shall be increased by an 
        amount equal to--
                    ``(A) such amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, by substituting `calendar year 
                1988' for `calendar year 2016' in subparagraph (A)(ii) 
                thereof.
        Any increase under the preceding sentence shall be rounded to 
        the nearest multiple of $100 (or, if such increase is a 
        multiple of $50, such increase shall be increased to the 
        nearest multiple of $100).''.
            (10) Section 4161(b)(2)(C)(i)(II) is amended by striking 
        ``for `1992' in subparagraph (B)'' and inserting ``for `2016' 
        in subparagraph (A)(ii)''.
            (11) Section 4980I(b)(3)(C)(v)(II) is amended by striking 
        ``for `1992' in subparagraph (B)'' and inserting ``for `2016' 
        in subparagraph (A)(ii)''.
            (12) Section 6039F(d) is amended by striking ``subparagraph 
        (B) thereof shall be applied by substituting `1995' for 
        `1992''' and inserting ``subparagraph (A)(ii) thereof shall be 
        applied by substituting `1995' for `2016'''.
            (13) Section 7872(g)(5) is amended to read as follows:
            ``(5) Adjustment of limit for inflation.--In the case of 
        any loan made during any calendar year after 1986, the dollar 
        amount in paragraph (2) shall be increased by an amount equal 
        to--
                    ``(A) such amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, by substituting `calendar year 
                1985' for `calendar year 2016' in subparagraph (A)(ii) 
                thereof.
        Any increase under the preceding sentence shall be rounded to 
        the nearest multiple of $100 (or, if such increase is a 
        multiple of $50, such increase shall be increased to the 
        nearest multiple of $100).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

 PART II--DEDUCTION FOR QUALIFIED BUSINESS INCOME OF PASS-THRU ENTITIES

SEC. 11011. DEDUCTION FOR QUALIFIED BUSINESS INCOME.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
adding at the end the following new section:

``SEC. 199A. QUALIFIED BUSINESS INCOME.

    ``(a) In General.--In the case of a taxpayer other than a 
corporation, there shall be allowed as a deduction for any taxable year 
an amount equal to the lesser of--
            ``(1) the combined qualified business income amount of the 
        taxpayer, or
            ``(2) an amount equal to 17.4 percent of the excess (if 
        any) of--
                    ``(A) the taxable income of the taxpayer for the 
                taxable year, over
                    ``(B) any net capital gain (as defined in section 
                1(h)) of the taxpayer for the taxable year.
    ``(b) Combined Qualified Business Income Amount.--For purposes of 
this section--
            ``(1) In general.--The term `combined qualified business 
        income amount' means, with respect to any taxable year, an 
        amount equal to--
                    ``(A) the sum of the amounts determined under 
                paragraph (2) for each qualified trade or business 
                carried on by the taxpayer, plus
                    ``(B) 17.4 percent of the aggregate amount of the 
                qualified REIT dividends and qualified cooperative 
                dividends of the taxpayer for the taxable year.
            ``(2) Determination of deductible amount for each trade or 
        business.--The amount determined under this paragraph with 
        respect to any qualified trade or business is the lesser of--
                    ``(A) 17.4 percent of the taxpayer's qualified 
                business income with respect to the qualified trade or 
                business, or
                    ``(B) 50 percent of the W-2 wages with respect to 
                the qualified trade or business.
            ``(3) Modifications to the wage limit based on taxable 
        income.--
                    ``(A) Exception from wage limit.--In the case of 
                any taxpayer whose taxable income for the taxable year 
                does not exceed the threshold amount, paragraph (2) 
                shall be applied without regard to subparagraph (B).
                    ``(B) Phase-in of limit for certain taxpayers.--
                            ``(i) In general.--If--
                                    ``(I) the taxable income of a 
                                taxpayer for any taxable year exceeds 
                                the threshold amount, but does not 
                                exceed the sum of the threshold amount 
                                plus $50,000 ($100,000 in the case of a 
                                joint return), and
                                    ``(II) the amount determined under 
                                paragraph (2)(B) (determined without 
                                regard to this subparagraph) with 
                                respect to any qualified trade or 
                                business carried on by the taxpayer is 
                                less than the amount determined under 
                                paragraph (2)(A) with respect such 
                                trade or business,
                        then paragraph (2) shall be applied with 
                        respect to such trade or business without 
                        regard to subparagraph (B) thereof and by 
                        reducing the amount determined under 
                        subparagraph (A) thereof by the amount 
                        determined under clause (ii).
                            ``(ii) Amount of reduction.--The amount 
                        determined under this subparagraph is the 
                        amount which bears the same ratio to the excess 
                        amount as--
                                    ``(I) the amount by which the 
                                taxpayer's taxable income for the 
                                taxable year exceeds the threshold 
                                amount, bears to
                                    ``(II) $50,000 ($100,000 in the 
                                case of a joint return).
                            ``(iii) Excess amount.--For purposes of 
                        clause (ii), the excess amount is the excess 
                        of--
                                    ``(I) the amount determined under 
                                paragraph (2)(A) (determined without 
                                regard to this paragraph), over
                                    ``(II) the amount determined under 
                                paragraph (2)(B) (determined without 
                                regard to this paragraph).
            ``(4) Wages, etc.--
                    ``(A) In general.--The term `W-2 wages' means, with 
                respect to any person for any taxable year of such 
                person, the amounts described in paragraphs (3) and (8) 
                of section 6051(a) paid by such person with respect to 
                employment of employees by such person during the 
                calendar year ending during such taxable year.
                    ``(B) Limitation to wages attributable to qualified 
                business income.--Such term shall not include any 
                amount which is not properly allocable to qualified 
                business income for purposes of subsection (c)(1).
                    ``(C) Return requirement.--Such term shall not 
                include any amount which is not properly included in a 
                return filed with the Social Security Administration on 
                or before the 60th day after the due date (including 
                extensions) for such return.
            ``(5) Acquisitions, dispositions, and short taxable 
        years.--The Secretary shall provide for the application of this 
        subsection in cases of a short taxable year or where the 
        taxpayer acquires, or disposes of, the major portion of a trade 
        or business or the major portion of a separate unit of a trade 
        or business during the taxable year.
    ``(c) Qualified Business Income.--For purposes of this section--
            ``(1) In general.--The term `qualified business income' 
        means, for any taxable year, the net amount of qualified items 
        of income, gain, deduction, and loss with respect to any 
        qualified trade or business of the taxpayer.
            ``(2) Carryover of losses.--If the net amount of qualified 
        income, gain, deduction, and loss with respect to qualified 
        trade or businesses of the taxpayer amount for any taxable year 
        is less than zero, such amount shall be treated as a loss from 
        a qualified trade or business in the succeeding taxable year.
            ``(3) Qualified items of income, gain, deduction, and 
        loss.--For purposes of this subsection--
                    ``(A) In general.--The term `qualified items of 
                income, gain, deduction, and loss' means items of 
                income, gain, deduction, and loss to the extent such 
                items are--
                            ``(i) effectively connected with the 
                        conduct of a trade or business within the 
                        United States (within the meaning of section 
                        864(c), determined by substituting `qualified 
                        trade or business (within the meaning of 
                        section 199A)' for `nonresident alien 
                        individual or a foreign corporation' or for `a 
                        foreign corporation' each place it appears), 
                        and
                            ``(ii) included or allowed in determining 
                        taxable income for the taxable year.
                    ``(B) Exceptions.--The following investment items 
                shall not be taken into account as a qualified item of 
                income, gain, deduction, or loss:
                            ``(i) Any item of short-term capital gain, 
                        short-term capital loss, long-term capital 
                        gain, or long-term capital loss.
                            ``(ii) Any dividend, income equivalent to a 
                        dividend, or payment in lieu of dividends 
                        described in section 954(c)(1)(G).
                            ``(iii) Any interest income other than 
                        interest income which is properly allocable to 
                        a trade or business.
                            ``(iv) Any item of gain or loss described 
                        in subparagraph (C) or (D) of section 954(c)(1) 
                        (applied by substituting `qualified trade or 
                        business' for `controlled foreign 
                        corporation').
                            ``(v) 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)).
                            ``(vi) Any amount received from an annuity 
                        which is not received in connection with the 
                        trade or business.
                            ``(vii) Any item of deduction or loss 
                        properly allocable to an amount described in 
                        any of the preceding clauses.
            ``(4) Treatment of reasonable compensation and guaranteed 
        payments.--Qualified business income shall not include--
                    ``(A) reasonable compensation paid to the taxpayer 
                by any qualified trade or business of the taxpayer for 
                services rendered with respect to the trade or 
                business,
                    ``(B) any guaranteed payment described in section 
                707(c) paid to a partner for services rendered with 
                respect to the trade or business, and
                    ``(C) to the extent provided in regulations, any 
                payment described in section 707(a) to a partner for 
                services rendered with respect to the trade or 
                business.
    ``(d) Qualified Trade or Business.--For purposes of this section--
            ``(1) In general.--The term `qualified trade or business' 
        means any trade or business other than a specified service 
        trade or business.
            ``(2) Specified service trade or business.--
                    ``(A) In general.--The term `specified service 
                trade or business' means--
                            ``(i) any trade or business involving the 
                        performance of services described in section 
                        1202(e)(3)(A), including investing and 
                        investment management, trading, or dealing in 
                        securities (as defined in section 475(c)(2)), 
                        partnership interests, or commodities (as 
                        defined in section 475(e)(2)).
            ``(3) Exception for specified service businesses based on 
        taxpayer's income.--
                    ``(A) In general.--If, for any taxable year, the 
                taxable income of any taxpayer is less than the sum of 
                the threshold amount plus $50,000 ($100,000 in the case 
                of a joint return), then--
                            ``(i) the exception under paragraph (1) 
                        shall not apply to specified service trades or 
                        businesses of the taxpayer for the taxable 
                        year, but
                            ``(ii) only the applicable percentage of 
                        qualified items of income, gain, deduction, or 
                        loss, and the W-2 wages, of the taxpayer 
                        allocable to such specified service trades or 
                        businesses shall be taken into account in 
                        computing the qualified business income and W-2 
                        wages of the taxpayer for the taxable year for 
                        purposes of applying this section.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the term `applicable percentage' 
                means, with respect to any taxable year, 100 percent 
                reduced (not below zero) by the percentage equal to the 
                ratio of--
                            ``(i) the taxable income of the taxpayer 
                        for the taxable year in excess of the threshold 
                        amount, bears to
                            ``(ii) $50,000 ($100,000 in the case of a 
                        joint return).
    ``(e) Other Definitions.--For purposes of this section--
            ``(1) Taxable income.--Taxable income shall be computed 
        without regard to the deduction allowable under this section.
            ``(2) Threshold amount.--
                    ``(A) In general.--The term `threshold amount' 
                means $250,000 (200 percent of such amount in the case 
                of a joint return).
                    ``(B) Inflation adjustment.--In the case of any 
                taxable year beginning after 2018, the dollar amount in 
                paragraph (1) shall be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins.
                If any amount as increased under the preceding sentence 
                is not a multiple of $1,000, such amount shall be 
                rounded to the nearest multiple of $1,000.
            ``(3) Qualified reit dividend.--The term `qualified REIT 
        dividend' means any dividend from a real estate investment 
        trust received during the taxable year which--
                    ``(A) is not a capital gain dividend, as defined in 
                section 857(b)(3), and
                    ``(B) is not qualified dividend income, as defined 
                in section 1(h)(11).
            ``(4) Qualified cooperative dividend.--The term `qualified 
        cooperative dividend' means any patronage dividend (as defined 
        in section 1388(a)), any per-unit retain allocation (as defined 
        in section 1388(f)), and any qualified written notice of 
        allocation (as defined in section 1388(c)), or any similar 
        amount received from an organization described in subparagraph 
        (B)(ii), which--
                    ``(A) is includible in gross income, and
                    ``(B) is received from--
                            ``(i) an organization or corporation 
                        described in section 501(c)(12) or 1381(a), or
                            ``(ii) an organization which is governed 
                        under this title by the rules applicable to 
                        cooperatives under this title before the 
                        enactment of subchapter T.
    ``(f) Special Rules.--
            ``(1) Application to partnerships and s corporations.--
                    ``(A) In general.--In the case of a partnership or 
                S corporation--
                            ``(i) this section shall be applied at the 
                        partner or shareholder level,
                            ``(ii) each partner or shareholder shall 
                        take into account such person's allocable share 
                        of each qualified item of income, gain, 
                        deduction, and loss, and
                            ``(iii) each partner or shareholder shall 
                        be treated for purposes of subsection (b) as 
                        having W-2 wages for the taxable year in an 
                        amount equal to such person's allocable share 
                        of the W-2 wages of the partnership or S 
                        corporation for the taxable year (as determined 
                        under regulations prescribed by the Secretary).
                For purposes of clause (iii), a partner's or 
                shareholder's allocable share of W-2 wages shall be 
                determined in the same manner as the partner's or 
                shareholder's allocable share of wage expenses. For 
                purposes of this subparagraph, in the case of an S 
                corporation, an allocable share shall be the 
                shareholder's pro rata share of an item.
                    ``(B) Application to trusts and estates.--This 
                section shall not apply to any trust or estate.
                    ``(C) Treatment of trades or business in puerto 
                rico.--
                            ``(i) In general.--In the case of any 
                        taxpayer with qualified business income from 
                        sources within the commonwealth of Puerto Rico, 
                        if all such income is taxable under section 1 
                        for such taxable year, then for purposes of 
                        determining the qualified business income of 
                        such taxpayer for such taxable year, the term 
                        `United States' shall include the Commonwealth 
                        of Puerto Rico.
                            ``(ii) Special rule for applying wage 
                        limitation.--In the case of any taxpayer 
                        described in clause (i), the determination of 
                        W-2 wages of such taxpayer with respect to any 
                        qualified trade or business conducted in Puerto 
                        Rico shall be made without regard to any 
                        exclusion under section 3401(a)(8) for 
                        remuneration paid for services in Puerto Rico.
            ``(2) Coordination with minimum tax.--For purposes of 
        determining alternative minimum taxable income under section 
        55, qualified business income shall be determined without 
        regard to any adjustments under sections 56 through 59.
            ``(3) Deduction limited to income taxes.--The deduction 
        under subsection (a) shall only be allowed for purposes of this 
        chapter.
            ``(4) Regulations.--The Secretary shall prescribe such 
        regulations as are necessary to carry out the purposes of this 
        section, including regulations--
                    ``(A) for requiring or restricting the allocation 
                of items and wages under this section and such 
                reporting requirements as the Secretary determines 
                appropriate, and
                    ``(B) for the application of this section in the 
                case of tiered entities.
    ``(g) Termination.--This section shall not apply to taxable years 
beginning after December 31, 2025.''.
    (b) Accuracy-related Penalty on Determination of Applicable 
Percentage.--Section 6662(d)(1) is amended by inserting at the end the 
following new subparagraph:
                    ``(C) Special rule for taxpayers claiming section 
                199a deduction.--In the case of any taxpayer who claims 
                the deduction allowed under section 199A for the 
                taxable year, subparagraph (A) shall be applied by 
                substituting `5 percent' for `10 percent'.''.
    (c) Conforming Amendments.--
            (1) Section 170(b)(2)(D) is amended by striking ``, and'' 
        at the end of clause (iv), by redesignating clause (v) as 
        clause (vi), and by inserting after clause (iv) the following 
        new clause:
                            ``(v) section 199A, and''.
            (2) Section 172(d) is amended by adding at the end the 
        following new paragraph:
            ``(8) Qualified business income deduction.--The deduction 
        under section 199A shall not be allowed.''.
            (3) Section 246(b)(1) is amended by inserting ``199A,'' 
        before ``243(a)(1)''.
            (4) Section 613(a) is amended by inserting ``and without 
        the deduction under section 199A'' after ``and without the 
        deduction under section 199''.
            (5) Section 613A(d)(1) is amended by redesignating 
        subparagraphs (C), (D), and (E) as subparagraphs (D), (E), and 
        (F), respectively, and by inserting after subparagraph (B), the 
        following new subparagraph:
                    ``(C) any deduction allowable under section 
                199A,''.
            (6) The table of sections for part VI of subchapter B of 
        chapter 1 is amended by inserting at the end the following new 
        item:

``Sec. 199A. Qualified business income.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 11012. LIMITATION ON LOSSES FOR TAXPAYERS OTHER THAN CORPORATIONS.

    (a) In General.--Section 461 is amended by adding at the end the 
following new subsection:
    ``(l) Limitation on Excess Business Losses of Noncorporate 
Taxpayers.--
            ``(1) Limitation.--In the case of taxable year of a 
        taxpayer other than a corporation beginning after December 31, 
        2017, and before January 1, 2026--
                    ``(A) subsection (j) (relating to limitation on 
                excess farm losses of certain taxpayers) shall not 
                apply, and
                    ``(B) any excess business loss of the taxpayer for 
                the taxable year shall not be allowed.
            ``(2) Disallowed loss carryover.--Any loss which is 
        disallowed under paragraph (1) shall be treated as a net 
        operating loss carryover to the following taxable year under 
        section 172.
            ``(3) Excess business loss.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `excess business loss' 
                means the excess (if any) of--
                            ``(i) the aggregate deductions of the 
                        taxpayer for the taxable year which are 
                        attributable to trades or businesses of such 
                        taxpayer (determined without regard to whether 
                        or not such deductions are disallowed for such 
                        taxable year under paragraph (1)), over
                            ``(ii) the sum of--
                                    ``(I) the aggregate gross income or 
                                gain of such taxpayer for the taxable 
                                year which is attributable to such 
                                trades or businesses, plus
                                    ``(II) $250,000 (200 percent of 
                                such amount in the case of a joint 
                                return).
                    ``(B) Adjustment for inflation.--In the case of any 
                taxable year beginning after December 31, 2018, the 
                $250,000 amount in subparagraph (A)(ii)(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(f)(3) for the 
                        calendar year in which the taxable year begins.
                        If any amount as increased under the preceding 
                        sentence is not a multiple of $1,000, such 
                        amount shall be rounded to the nearest multiple 
                        of $1,000.
            ``(4) Application of subsection in case of partnerships and 
        s corporations.--In the case of a partnership or S 
        corporation--
                    ``(A) this subsection shall be applied at the 
                partner or shareholder level, and
                    ``(B) each partner's or shareholder's allocable 
                share of the items of income, gain, deduction, or loss 
                of the partnership or S corporation for any taxable 
                year from trades or businesses attributable to the 
                partnership or S corporation shall be taken into 
                account by the partner or shareholder in applying this 
                subsection to the taxable year of such partner or 
                shareholder with or within which the taxable year of 
                the partnership or S corporation ends.
        For purposes of this paragraph, in the case of an S 
        corporation, an allocable share shall be the shareholder's pro 
        rata share of an item.
            ``(5) Additional reporting.--The Secretary shall prescribe 
        such additional reporting requirements as the Secretary 
        determines appropriate to carry out the purposes of this 
        subsection.
            ``(6) Coordination with section 469.--This subsection shall 
        be applied after the application of section 469.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

          PART III--TAX BENEFITS FOR FAMILIES AND INDIVIDUALS

SEC. 11021. INCREASE IN STANDARD DEDUCTION.

    (a) In General.--Subsection (c) of section 63 is amended by adding 
at the end the following new paragraph:
            ``(7) Special rules for taxable years 2018 through 2025.--
        In the case of a taxable year beginning after December 31, 
        2017, and before January 1, 2026--
                    ``(A) Increase in standard deduction.--Paragraph 
                (2) shall be applied--
                            ``(i) by substituting `$18,000' for 
                        `$4,400' in subparagraph (B), and
                            ``(ii) by substituting `$12,000' for 
                        `$3,000' in subparagraph (C).
                    ``(B) Adjustment for inflation.--
                            ``(i) In general.--Paragraph (4) shall not 
                        apply to the dollar amounts contained in 
                        paragraphs (2)(B) and (2)(C).
                            ``(ii) Adjustment of increased amounts.--In 
                        the case of a taxable year beginning after 
                        2018, the $18,000 and $12,000 amounts in 
                        subparagraph (A) shall each be increased by an 
                        amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for the calendar year in which 
                                the taxable year begins, determined by 
                                substituting `2017' for `2016' in 
                                subparagraph (A)(ii) thereof.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 11022. INCREASE IN AND MODIFICATION OF CHILD TAX CREDIT.

    (a) In General.--Section 24 is amended by adding at the end the 
following new subsection:
    ``(h) Special Rules for Taxable Years 2018 Through 2025.--
            ``(1) In general.--In the case of a taxable year beginning 
        after December 31, 2017, and before January 1, 2026, this 
        section shall be applied as provided in paragraphs (2) through 
        (8).
            ``(2) Credit amount.--Subsection (a) shall be applied by 
        substituting `$2,000' for `$1,000'.
            ``(3) Limitation.--In lieu of the amount determined under 
        subsection (b)(2), the threshold amount shall be $500,000.
            ``(4) Definition of qualifying child.--Paragraph (1) of 
        subsection (c) shall be applied by substituting `18' for `17'.
            ``(5) Partial credit allowed for certain other 
        dependents.--
                    ``(A) In general.--The credit determined under 
                subsection (a) (after the application of paragraph (2)) 
                shall be increased by $500 for each dependent of the 
                taxpayer (as defined in section 152) other than a 
                qualifying child described in subsection (c) (after the 
                application of paragraph (4)).
                    ``(B) Exception for certain noncitizens.--
                Subparagraph (A) shall not apply with respect to any 
                individual who would not be a dependent if subparagraph 
                (A) of section 152(b)(3) were applied without regard to 
                all that follows `resident of the United States'.
            ``(6) Maximum amount of refundable credit.--
                    ``(A) In general.--Subsection (d)(1)(A) shall be 
                applied without regard to paragraphs (2) and (5) of 
                this subsection.
                    ``(B) Adjustment for inflation.--In the case of a 
                taxable year beginning after 2017, subsection (d)(1)(A) 
                shall be applied as if the $1,000 amount in subsection 
                (a) were increased (but not to exceed the amount under 
                paragraph (2) of this subsection) by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins.
                Any increase determined under the preceding sentence 
                shall be rounded to the next highest multiple of $100.
            ``(7) Earned income threshold for refundable credit.--
        Subsection (d)(1)(B)(i) shall be applied by substituting 
        `$2,500' for `$3,000'.
            ``(8) Social security number required.--No credit shall be 
        allowed under subsection (d) to a taxpayer with respect to any 
        qualifying child unless the taxpayer includes the social 
        security number of such child on the return of tax for the 
        taxable year. For purposes of the preceding sentence, the term 
        `social security number' means a social security number issued 
        to an individual by the Social Security Administration, but 
        only if the social security number is issued to a citizen of 
        the United States or is issued 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.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 11023. INCREASED LIMITATION FOR CERTAIN CHARITABLE CONTRIBUTIONS.

    (a) In General.--Section 170(b)(1) is amended by redesignating 
subparagraph (G) as subparagraph (H) and by inserting after 
subparagraph (F) the following new subparagraph:
                    ``(G) Increased limitation for cash 
                contributions.--
                            ``(i) In general.--In the case of any 
                        contribution of cash to an organization 
                        described in subparagraph (A), the total amount 
                        of such contributions which may be taken into 
                        account under subsection (a) for any taxable 
                        year beginning after December 31, 2017, and 
                        before January 1, 2026, 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) for any taxable year described in such 
                        clause, 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 for each taxable year described 
                                in clause (i), and each taxable year to 
                                which any contribution under this 
                                subparagraph is carried over under 
                                clause (ii), 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) Effective Date.--The amendment made by this section shall apply 
to contributions in taxable years beginning after December 31, 2017.

SEC. 11024. INCREASED CONTRIBUTIONS TO ABLE ACCOUNTS.

    (a) Increase in Limitation for Contributions From Compensation of 
Individuals With Disabilities.--
            (1) In general.--Section 529A(b)(2)(B) is amended to read 
        as follows:
                    ``(B) except in the case of contributions under 
                subsection (c)(1)(C), if such contribution to an ABLE 
                account would result in aggregate contributions from 
                all contributors to the ABLE account for the taxable 
                year exceeding the sum of--
                            ``(i) the amount in effect under section 
                        2503(b) for the calendar year in which the 
                        taxable year begins, plus
                            ``(ii) in the case of any contribution by a 
                        designated beneficiary described in paragraph 
                        (7) before January 1, 2026, the lesser of--
                                    ``(I) compensation (as defined by 
                                section 219(f)(1)) includible in the 
                                designated beneficiary's gross income 
                                for the preceding taxable year, or
                                    ``(II) an amount equal to the 
                                poverty line for a one-person 
                                household, as determined for the 
                                calendar year preceding the calendar 
                                year in which the taxable year 
                                begins.''.
            (2) Eligible designated beneficiary.--Section 529A(b) is 
        amended by adding at the end the following:
            ``(7) Special rules related to contribution limit.--For 
        purposes of paragraph (2)(B)(ii)--
                    ``(A) Designated beneficiary.--A designated 
                beneficiary described in this paragraph is an employee 
                (including an employee within the meaning of section 
                401(c)) with respect to whom--
                            ``(i) no contribution is made for the 
                        taxable year to a defined contribution plan 
                        (within the meaning of section 414(i)) with 
                        respect to which the requirements of section 
                        401(a) or 403(a) are met,
                            ``(ii) no contribution is made for the 
                        taxable year to an annuity contract described 
                        in section 403(b), and
                            ``(iii) no contribution is made for the 
                        taxable year to an eligible deferred 
                        compensation plan described in section 457(b).
                    ``(B) Poverty line.--The term `poverty line' has 
                the meaning given such term by section 673 of the 
                Community Services Block Grant Act (42 U.S.C. 9902).''.
    (b) Allowance of Saver's Credit for ABLE Contributions by Account 
Holder.--Section 25B(d)(1) is amended by striking ``and'' at the end of 
subparagraph (B)(ii), by striking the period at the end of subparagraph 
(C) and inserting ``, and'', and by inserting at the end the following:
                    ``(D) the amount of contributions made before 
                January 1, 2026, by such individual to the ABLE account 
                (within the meaning of section 529A) of which such 
                individual is the designated beneficiary.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 11025. ROLLOVERS TO ABLE PROGRAMS FROM 529 PROGRAMS.

    (a) In General.--Clause (i) of section 529(c)(3)(C) 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:
                                    ``(III) before January 1, 2026, 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 the date of the enactment of this Act.

SEC. 11026. TREATMENT OF CERTAIN INDIVIDUALS PERFORMING SERVICES IN THE 
              SINAI PENINSULA OF EGYPT.

    (a) In General.--For purposes of the following provisions of the 
Internal Revenue Code of 1986, with respect to the applicable period, a 
qualified hazardous duty area shall be treated in the same manner as if 
it were a combat zone (as determined under section 112 of such Code):
            (1) Section 2(a)(3) (relating to special rule where 
        deceased spouse was in missing status).
            (2) Section 112 (relating to the exclusion of certain 
        combat pay of members of the Armed Forces).
            (3) Section 692 (relating to income taxes of members of 
        Armed Forces on death).
            (4) Section 2201 (relating to members of the Armed Forces 
        dying in combat zone or by reason of combat-zone-incurred 
        wounds, etc.).
            (5) Section 3401(a)(1) (defining wages relating to combat 
        pay for members of the Armed Forces).
            (6) Section 4253(d) (relating to the taxation of phone 
        service originating from a combat zone from members of the 
        Armed Forces).
            (7) Section 6013(f)(1) (relating to joint return where 
        individual is in missing status).
            (8) Section 7508 (relating to time for performing certain 
        acts postponed by reason of service in combat zone).
    (b) Qualified Hazardous Duty Area.--For purposes of this section, 
the term ``qualified hazardous duty area'' means the Sinai Peninsula of 
Egypt, if as of the date of the enactment of this section any member of 
the Armed Forces of the United States is entitled to special pay under 
section 310 of title 37, United States Code (relating to special pay; 
duty subject to hostile fire or imminent danger), for services 
performed in such location. Such term includes such location only 
during the period such entitlement is in effect.
    (c) Applicable Period.--
            (1) In general.--Except as provided in paragraph (2), the 
        applicable period is--
                    (A) the portion of the first taxable year ending 
                after June 9, 2015, which begins on such date, and
                    (B) any subsequent taxable year beginning before 
                January 1, 2026.
            (2) Withholding.--In the case of subsection (a)(5), the 
        applicable period is--
                    (A) the portion of the first taxable year ending 
                after the date of the enactment of this Act which 
                begins on such date, and
                    (B) any subsequent taxable year beginning before 
                January 1, 2026.
    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        provisions of this section shall take effect on June 9, 2015.
            (2) Withholding.--Subsection (a)(5) shall apply to 
        remuneration paid after the date of the enactment of this Act.

SEC. 11027. EXTENSION OF WAIVER OF LIMITATIONS WITH RESPECT TO 
              EXCLUDING FROM GROSS INCOME AMOUNTS RECEIVED BY 
              WRONGFULLY INCARCERATED INDIVIDUALS.

    (a) In General.--Section 304(d) of the Protecting Americans from 
Tax Hikes Act of 2015 (26 U.S.C. 139F note) is amended by striking ``1-
year'' and inserting ``2-year''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 11028. UNBORN CHILDREN ALLOWED AS 529 ACCOUNT BENEFICIARIES.

    (a) In General.--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.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made after December 31, 2017.

SEC. 11029. RELIEF FOR MISSISSIPPI RIVER DELTA FLOOD DISASTER AREA.

    (a) In General.--For purposes of this section, the term 
``Mississippi River Delta flood disaster area'' means any area--
            (1) with respect to which a major disaster has been 
        declared by the President under section 401 of the Robert T. 
        Stafford Disaster Relief and Emergency Assistance Act before 
        September 3, 2016, by reason of severe storms and flooding 
        occurring in Louisiana during August of 2016, or
            (2) with respect to which a major disaster has been 
        declared by the President under section 401 of the Robert T. 
        Stafford Disaster Relief and Emergency Assistance Act before 
        March 31, 2016, by reason of severe storms and flooding 
        occurring in Louisiana, Texas, and Mississippi during March of 
        2016.
    (b) Special Rules for Use of Retirement Funds With Respect to 
Mississippi Delta Areas Damaged by 2016 Flooding.--
            (1) Tax-favored withdrawals from retirement plans.--
                    (A) In general.--Section 72(t) of the Internal 
                Revenue Code of 1986 shall not apply to any qualified 
                Mississippi River Delta flooding distribution.
                    (B) Aggregate dollar limitation.--
                            (i) In general.--For purposes of this 
                        subsection, the aggregate amount of 
                        distributions received by an individual which 
                        may be treated as qualified Mississippi River 
                        Delta flooding distributions for any taxable 
                        year shall not exceed the excess (if any) of--
                                    (I) $100,000, over
                                    (II) the aggregate amounts treated 
                                as qualified Mississippi River Delta 
                                flooding distributions received by such 
                                individual for all prior taxable years.
                            (ii) Treatment of plan distributions.--If a 
                        distribution to an individual would (without 
                        regard to clause (i)) be a qualified 
                        Mississippi River Delta flooding distribution, 
                        a plan shall not be treated as violating any 
                        requirement of this title merely because the 
                        plan treats such distribution as a qualified 
                        Mississippi River Delta flooding distribution, 
                        unless the aggregate amount of such 
                        distributions from all plans maintained by the 
                        employer (and any member of any controlled 
                        group which includes the employer) to such 
                        individual exceeds $100,000.
                            (iii) Controlled group.--For purposes of 
                        clause (ii), the term ``controlled group'' 
                        means any group treated as a single employer 
                        under subsection (b), (c), (m), or (o) of 
                        section 414 of the Internal Revenue Code of 
                        1986.
                    (C) Amount distributed may be repaid.--
                            (i) In general.--Any individual who 
                        receives a qualified Mississippi River Delta 
                        flooding distribution may, at any time during 
                        the 3-year period beginning on the day after 
                        the date on which such distribution was 
                        received, make one or more contributions in an 
                        aggregate amount not to exceed the amount of 
                        such distribution to an eligible retirement 
                        plan of which such individual is a beneficiary 
                        and to which a rollover contribution of such 
                        distribution could be made under section 
                        402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 
                        457(e)(16) of the Internal Revenue Code of 
                        1986, as the case may be.
                            (ii) Treatment of repayments of 
                        distributions from eligible retirement plans 
                        other than iras.--For purposes of this title, 
                        if a contribution is made pursuant to clause 
                        (i) with respect to a qualified Mississippi 
                        River Delta flooding distribution from an 
                        eligible retirement plan other than an 
                        individual retirement plan, then the taxpayer 
                        shall, to the extent of the amount of the 
                        contribution, be treated as having received the 
                        qualified Mississippi River Delta flooding 
                        distribution in an eligible rollover 
                        distribution (as defined in section 402(c)(4) 
                        of the Internal Revenue Code of 1986) and as 
                        having transferred the amount to the eligible 
                        retirement plan in a direct trustee to trustee 
                        transfer within 60 days of the distribution.
                            (iii) Treatment of repayments for 
                        distributions from iras.--For purposes of the 
                        Internal Revenue Code of 1986, if a 
                        contribution is made pursuant to clause (i) 
                        with respect to a qualified Mississippi River 
                        Delta flooding distribution from an individual 
                        retirement plan (as defined by section 
                        7701(a)(37) of the Internal Revenue Code of 
                        1986), then, to the extent of the amount of the 
                        contribution, the qualified Mississippi River 
                        Delta flooding distribution shall be treated as 
                        a distribution described in section 408(d)(3) 
                        of such Code and as having been transferred to 
                        the eligible retirement plan in a direct 
                        trustee to trustee transfer within 60 days of 
                        the distribution.
                    (D) Definitions.--For purposes of this paragraph--
                            (i) Qualified mississippi river delta 
                        flooding distribution.--Except as provided in 
                        subparagraph (B), the term ``qualified 
                        Mississippi River Delta flooding distribution'' 
                        means--
                                    (I) any distribution from an 
                                eligible retirement plan made on or 
                                after August 11, 2016, and before 
                                January 1, 2018, to an individual whose 
                                principal place of abode on August 11, 
                                2016, was located in the portion of 
                                Mississippi River Delta disaster area 
                                described in subsection (a)(1) and who 
                                has sustained an economic loss by 
                                reason of the severe storms and 
                                flooding giving rise to the 
                                Presidential declaration described in 
                                subsection (a)(1), or
                                    (II) any distribution from an 
                                eligible retirement plan made on or 
                                after March 1, 2016, and before January 
                                1, 2018, to an individual whose 
                                principal place of abode on March 1, 
                                2016, was located in the portion of 
                                Mississippi River Delta disaster area 
                                described in subsection (a)(2) and who 
                                has sustained an economic loss by 
                                reason of the severe storms and 
                                flooding giving rise to the 
                                Presidential declaration described in 
                                subsection (a)(2).
                            (ii) Eligible retirement plan.--The term 
                        ``eligible retirement plan'' shall have the 
                        meaning given such term by section 402(c)(8)(B) 
                        of the Internal Revenue Code of 1986.
                    (E) Income inclusion spread over 3-year period.--
                            (i) In general.--In the case of any 
                        qualified Mississippi River Delta flooding 
                        distribution, unless the taxpayer elects not to 
                        have this subparagraph apply for any taxable 
                        year, any amount required to be included in 
                        gross income for such taxable year shall be so 
                        included ratably over the 3-taxable-year period 
                        beginning with such taxable year.
                            (ii) Special rule.--For purposes of clause 
                        (i), rules similar to the rules of subparagraph 
                        (E) of section 408A(d)(3) of the Internal 
                        Revenue Code of 1986 shall apply.
                    (F) Special rules.--
                            (i) Exemption of distributions from trustee 
                        to trustee transfer and withholding rules.--For 
                        purposes of sections 401(a)(31), 402(f), and 
                        3405 of the Internal Revenue Code of 1986, 
                        qualified Mississippi River Delta flooding 
                        distributions shall not be treated as eligible 
                        rollover distributions.
                            (ii) Qualified mississippi river delta 
                        flooding distributions treated as meeting plan 
                        distribution requirements.--For purposes of the 
                        Internal Revenue Code of 1986, a qualified 
                        Mississippi River Delta flooding distribution 
                        shall be treated as meeting the requirements of 
                        sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 
                        403(b)(11), and 457(d)(1)(A) of the Internal 
                        Revenue Code of 1986.
            (2) Provisions relating to plan amendments.--
                    (A) In general.--If this paragraph applies to any 
                amendment to any plan or annuity contract, such plan or 
                contract shall be treated as being operated in 
                accordance with the terms of the plan during the period 
                described in subparagraph (B)(ii)(I).
                    (B) Amendments to which subsection applies.--
                            (i) In general.--This paragraph shall apply 
                        to any amendment to any plan or annuity 
                        contract which is made--
                                    (I) pursuant to any provision of 
                                this section, or pursuant to any 
                                regulation under any provision of this 
                                section; and
                                    (II) on or before the last day of 
                                the first plan year beginning on or 
                                after January 1, 2018, or such later 
                                date as the Secretary prescribes.
                        In the case of a governmental plan (as defined 
                        in section 414(d) of the Internal Revenue Code 
                        of 1986), subclause (II) shall be applied by 
                        substituting the date which is 2 years after 
                        the date otherwise applied under subclause 
                        (II).
                            (ii) Conditions.--This paragraph shall not 
                        apply to any amendment unless--
                                    (I) during the period--
                                            (aa) beginning on the date 
                                        that this section or the 
                                        regulation described in clause 
                                        (i)(I) takes effect (or in the 
                                        case of a plan or contract 
                                        amendment not required by this 
                                        section or such regulation, the 
                                        effective date specified by the 
                                        plan); and
                                            (bb) ending on the date 
                                        described in clause (i)(II) 
                                        (or, if earlier, the date the 
                                        plan or contract amendment is 
                                        adopted),
                                the plan or contract is operated as if 
                                such plan or contract amendment were in 
                                effect; and
                                    (II) such plan or contract 
                                amendment applies retroactively for 
                                such period.
    (c) Special Rules for Personal Casualty Losses Related to Louisiana 
Severe Storms and Flooding.--
            (1) In general.--If an individual has a net disaster loss 
        for any taxable year beginning after December 31, 2017, and 
        before January 1, 2026--
                    (A) the amount determined under section 
                165(h)(2)(A)(ii) of the Internal Revenue Code of 1986 
                shall be equal to the sum of--
                            (i) such net disaster loss, and
                            (ii) so much of the excess referred to in 
                        the matter preceding clause (i) of section 
                        165(h)(2)(A) of such Code (reduced by the 
                        amount in clause (i) of this subparagraph) as 
                        exceeds 10 percent of the adjusted gross income 
                        of the individual,
                    (B) section 165(h)(1) of such Code shall be applied 
                by substituting ``$500'' for ``$500 ($100 for taxable 
                years beginning after December 31, 2009)'',
                    (C) the standard deduction determined under section 
                63(c) of such Code shall be increased by the net 
                disaster loss, and
                    (D) section 56(b)(1)(E) of such Code shall not 
                apply to so much of the standard deduction as is 
                attributable to the increase under subparagraph (C) of 
                this paragraph.
            (2) Net disaster loss.--For purposes of this subsection, 
        the term ``net disaster loss'' means the excess of qualified 
        disaster-related personal casualty losses over personal 
        casualty gains (as defined in section 165(h)(3)(A) of the 
        Internal Revenue Code of 1986).
            (3) Qualified disaster-related personal casualty losses.--
        For purposes of this paragraph, the term ``qualified disaster-
        related personal casualty losses'' means losses described in 
        section 165(c)(3) of the Internal Revenue Code of 1986 which 
        arise--
                    (A) in the portion of the Mississippi River Delta 
                flood disaster area described in subsection (a)(1) on 
                or after August 11, 2016, and which are attributable to 
                the severe storms and flooding giving rise to the 
                Presidential declaration described in subsection 
                (a)(1), or
                    (B) in the portion of the Mississippi River Delta 
                flood disaster area described in subsection (a)(2) on 
                or after March 1, 2016, and which are attributable to 
                the severe storms and flooding giving rise to the 
                Presidential declaration described in subsection 
                (a)(2).

                           PART IV--EDUCATION

SEC. 11031. TREATMENT OF STUDENT LOANS DISCHARGED ON ACCOUNT OF DEATH 
              OR DISABILITY.

    (a) In General.--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 for any taxable year beginning after 
                December 31, 2017, and before January 1, 2026, does not 
                include any amount which (but for this subsection) 
                would be includible in gross income for such taxable 
                year 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) Effective Date.--The amendment made by this section shall apply 
to discharges of indebtedness after December 31, 2017.

SEC. 11032. INCREASE IN DEDUCTION FOR TEACHER EXPENSES.

    (a) In General.--Subparagraph (D) of section 62(a)(2) is amended by 
striking ``$250'' and inserting ``$250 ($500 in the case of taxable 
years beginning after December 31, 2017, and before January 1, 2026)''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

                   PART V--DEDUCTIONS AND EXCLUSIONS

SEC. 11041. SUSPENSION OF DEDUCTION FOR PERSONAL EXEMPTIONS.

    (a) In General.--Subsection (d) of section 151 is amended--
            (1) by striking ``In the case of'' in paragraph (4) and 
        inserting ``Except as provided in paragraph (5), in the case 
        of'', and
            (2) by adding at the end the following new paragraph:
            ``(5) Special rules for taxable years 2018 through 2025.--
        In the case of a taxable year beginning after December 31, 
        2017, and before January 1, 2026--
                    ``(A) Exemption amount.--The term `exemption 
                amount' means zero.
                    ``(B) References.--For purposes of any other 
                provision of this title, the reduction of the exemption 
                amount to zero under subparagraph (A) shall not be 
                taken into account in determining whether a deduction 
                is allowed or allowable, or whether a taxpayer is 
                entitled to a deduction, under this section.''.
    (b) Application to Estates and Trusts.--Section 642(b)(2)(C) is 
amended by adding at the end the following new clause:
                            ``(iii) Years when personal exemption 
                        amount is zero.--
                                    ``(I) In general.--In the case of 
                                any taxable year in which the exemption 
                                amount under section 151(d) is zero, 
                                clause (i) shall be applied by 
                                substituting `$4,150' for `the 
                                exemption amount under section 151(d)'.
                                    ``(II) Inflation adjustment.--In 
                                the case of any calendar year beginning 
                                after 2018, the $4,150 amount in 
                                subparagraph (A) shall be increased by 
                                an amount equal to--
                                            ``(aa) such dollar amount, 
                                        multiplied by
                                            ``(bb) the cost-of-living 
                                        adjustment determined under 
                                        section 1(f)(3) for the 
                                        calendar year in which the 
                                        taxable year begins, determined 
                                        by substituting `2017' for 
                                        `2016' in subparagraph (A)(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.''.
    (c) Exception for Wage Withholding Rules.--Section 3402(a) is 
amended by adding at the end the following new paragraph:
            ``(3) Years when personal exemption amount is zero.--
                    ``(A) In general.--In the case of any taxable year 
                in which the exemption amount under section 151(d) is 
                zero, paragraph (2) shall be applied by substituting 
                `$4,150' for `the amount of one personal exemption 
                provided in section 151(b)'.
                    ``(B) Inflation adjustment.--In the case of any 
                calendar year beginning after 2018, the $4,150 amount 
                in subparagraph (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(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `2017' for `2016' in 
                        subparagraph (A)(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.''.
    (d) Exception for Determining Property Exempt From Levy.--Section 
6334(d) is amended by adding at the end the following new paragraph:
            ``(4) Years when personal exemption amount is zero.--
                    ``(A) In general.--In the case of any taxable year 
                in which the exemption amount under section 151(d) is 
                zero, paragraph (2) shall not apply and for purposes of 
                paragraph (1) the term `exempt amount' means an amount 
                equal to--
                            ``(i) the sum of the amount determined 
                        under subparagraph (B) and the standard 
                        deduction, divided by
                            ``(ii) 52.
                    ``(B) Amount determined.--For purposes of 
                subparagraph (A), the amount determined under this 
                subparagraph is $4,150 multiplied by the number of the 
                taxpayer's dependents for the taxable year in which the 
                levy occurs.
                    ``(C) Inflation adjustment.--In the case of any 
                taxable year beginning after 2018, the $4,150 amount in 
                subparagraph (B) shall be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `2017' for `2016' in 
                        subparagraph (A)(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.
                    ``(D) 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.''.
    (e) Persons Required to Make Returns of Income.--Section 6012 is 
amended by adding at the end the following new subsection:
    ``(f) Special Rule for Taxable Years 2018 Through 2025.--In the 
case of a taxable year beginning after December 31, 2017, and before 
January 1, 2026, subsection (a)(1) shall not apply, and every 
individual who has gross income for the taxable year shall be required 
to make returns with respect to income taxes under subtitle A, except 
that a return shall not be required of--
            ``(1) 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
            ``(2) an individual entitled to make a joint return if--
                    ``(A) 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,
                    ``(B) such individual and such individual's spouse 
                have the same household as their home at the close of 
                the taxable year,
                    ``(C) such individual's spouse does not make a 
                separate return, and
                    ``(D) neither such individual nor such individual's 
                spouse is an individual described in section 63(c)(5) 
                who has income (other than earned income) in excess of 
                the amount in effect under section 63(c)(5)(A).
        The amount specified in paragraph (1) or (2)(A) shall be 
        increased by the amount of 1 additional standard deduction 
        (within the meaning of section 63(c)(3)) in the case of an 
        individual entitled to such deduction by reason of section 
        63(f)(1)(A) (relating to individuals age 65 or more), and by 
        the amount of each additional standard deduction to which the 
        individual or the individual's spouse is entitled by reason of 
        section 63(f)(1).''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 11042. SUSPENSION OF DEDUCTION FOR STATE AND LOCAL, ETC. TAXES.

    (a) In General.--Subsection (b) of section 164 is amended by adding 
at the end the following new paragraph:
            ``(6) Suspension of individual deductions for taxable years 
        2018 through 2025.--In the case of an individual and a taxable 
        year beginning after December 31, 2017, and before January 1, 
        2026--
                    ``(A) paragraphs (1) and (2) of subsection (a) 
                shall not apply to any real property or personal 
                property taxes, other than taxes which are paid or 
                accrued in carrying on a trade or business or an 
                activity described in section 212, and
                    ``(B) subsection (a)(3) shall not apply to any 
                State or local taxes.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 11043. SUSPENSION OF DEDUCTION FOR HOME EQUITY INTEREST.

    (a) In General.--Section 163(h)(3)(A)(ii) is amended by inserting 
``in the case of taxable years beginning before January 1, 2018, or 
after December 31, 2025,'' before ``home equity indebtedness''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 2017.

SEC. 11044. MODIFICATION OF DEDUCTION FOR PERSONAL CASUALTY LOSSES.

    (a) In General.--Subsection (h) of section 165 is amended by adding 
at the end the following new paragraph:
            ``(5) Limitation for taxable years 2018 through 2025.--In 
        the case of any loss of an individual described in subsection 
        (c)(3) which (but for this paragraph) would be deductible in a 
        taxable year beginning after December 31, 2017, and before 
        January 1, 2026 (without regard to any election under 
        subsection (i), such loss shall be allowed only to the extent 
        it is attributable to a Federally declared disaster (as defined 
        in subsection (i)(5)). The preceding sentence shall not apply 
        to any deduction under section 172 which is carried to such a 
        taxable year from a taxable year beginning before January 1, 
        2018.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to losses incurred in taxable years beginning after December 31, 2017.

SEC. 11045. SUSPENSION OF MISCELLANEOUS ITEMIZED DEDUCTIONS.

    (a) In General.--Section 67 is amended by adding at the end the 
following new subsection:
    ``(g) Suspension for Taxable Years 2018 Through 2025.--
Notwithstanding subsection (a), no miscellaneous itemized deduction 
shall be allowed for any taxable year beginning after December 31, 
2017, and before January 1, 2026.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 11046. SUSPENSION OF OVERALL LIMITATION ON ITEMIZED DEDUCTIONS.

    (a) In General.--Section 68 is amended by adding at the end the 
following new subsection:
    ``(f) Section Not to Apply.--This section shall not apply to any 
taxable year beginning after December 31, 2017, and before January 1, 
2026.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 11047. MODIFICATION OF EXCLUSION OF GAIN FROM SALE OF PRINCIPAL 
              RESIDENCE.

    (a) In General.--Section 121 is amended by adding at the end the 
following new subsection:
    ``(h) Special Rules for Sales or Exchanges in Taxable Years 2018 
Through 2025.--
            ``(1) In general.--In applying this section with respect to 
        sales or exchanges after December 31, 2017, and before January 
        1, 2026--
                    ``(A) `8-year' shall be substituted for `5-year' 
                each place it appears in subsections (a), 
                (b)(5)(C)(ii)(I), and (c)(1)(B)(i)(I) and paragraphs 
                (7), (9), (10), and (12) of subsection (d),
                    ``(B) `5 years' shall be substituted for `2 years' 
                each place it appears in subsections (a), (b)(3), 
                (b)(4), (b)(5)(C)(ii)(III), and (c)(1)(B)(ii), and
                    ``(C) `5-year' shall be substituted for `2-year' in 
                subsection (b)(3).
            ``(2) Exception for binding contracts.--Paragraph (1) shall 
        not apply to any sale or exchange with respect to which there 
        was a written binding contract in effect before January 1, 
        2018, and at all times thereafter before the sale or 
        exchange.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to sales and exchanges after December 31, 2017.

SEC. 11048. SUSPENSION OF EXCLUSION FOR QUALIFIED BICYCLE COMMUTING 
              REIMBURSEMENT.

    (a) In General.--Section 132(f) is amended by adding at the end the 
following new paragraph:
            ``(8) Suspension of qualified bicycle commuting 
        reimbursement exclusion.--Paragraph (1)(D) shall not apply to 
        any taxable year beginning after December 31, 2017, and before 
        January 1, 2026.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 11049. SUSPENSION OF EXCLUSION FOR QUALIFIED MOVING EXPENSE 
              REIMBURSEMENT.

    (a) In General.--Section 132(g) is amended--
            (1) by striking ``For purposes of this section, the term'' 
        and inserting ``For purposes of this section--
            ``(1) In general.--The term'', and
            (2) by adding at the end the following new paragraph:
            ``(2) Suspension for taxable years 2018 through 2025.--
        Except in the case of a member of the Armed Forces of the 
        United States on active duty who moves pursuant to a military 
        order and incident to a permanent change of station, subsection 
        (a)(6) shall not apply to any taxable year beginning after 
        December 31, 2017, and before January 1, 2026.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 11050. SUSPENSION OF DEDUCTION FOR MOVING EXPENSES.

    (a) In General.--Section 217 is amended by adding at the end the 
following new subsection:
    ``(k) Suspension of Deduction for Taxable Years 2018 Through 
2025.--Except in the case of an individual to whom subsection (g) 
applies, this section shall not apply to any taxable year beginning 
after December 31, 2017, and before January 1, 2026.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 11051. 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, in the case of 
taxable years beginning after December 31, 2017, and before January 1, 
2026, 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 amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

           PART VI--INCREASE IN ESTATE AND GIFT TAX EXEMPTION

SEC. 11061. INCREASE IN ESTATE AND GIFT TAX EXEMPTION.

    (a) In General.--Section 2010(c)(3) is amended by adding at the end 
the following new subparagraph:
                    ``(C) Increase in basic exclusion amount.--In the 
                case of estates of decedents dying or gifts made after 
                December 31, 2017, and before January 1, 2026, 
                subparagraph (A) shall be applied by substituting 
                `$10,000,000' for `$5,000,000'.''.
    (b) Conforming Amendment.--Subsection (g) of section 2001 is 
amended to read as follows:
    ``(g) Modifications to Tax Payable.--
            ``(1) Modifications to gift tax payable to reflect 
        different tax rates.--For purposes of applying subsection 
        (b)(2) with respect to 1 or more gifts, the rates of tax under 
        subsection (c) in effect at the decedent's death shall, in lieu 
        of the rates of tax in effect at the time of such gifts, be 
        used both to compute--
                    ``(A) the tax imposed by chapter 12 with respect to 
                such gifts, and
                    ``(B) the credit allowed against such tax under 
                section 2505, including in computing--
                            ``(i) the applicable credit amount under 
                        section 2505(a)(1), and
                            ``(ii) the sum of the amounts allowed as a 
                        credit for all preceding periods under section 
                        2505(a)(2).
            ``(2) Modifications to estate tax payable to reflect 
        different basic exclusion amounts.--The Secretary shall 
        prescribe such regulations as may be necessary or appropriate 
        to carry out this section with respect to any difference 
        between--
                    ``(A) the basic exclusion amount under section 
                2010(c)(3) applicable at the time of the decedent's 
                death, and
                    ``(B) the basic exclusion amount under such section 
                applicable with respect to any gifts made by the 
                decedent.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying and gifts made after December 31, 
2017.

            PART VII--TAXPAYER RIGHTS AND TAX ADMINISTRATION

SEC. 11071. EXTENSION OF TIME LIMIT FOR CONTESTING IRS LEVY.

    (a) Extension of Time for Return of Property Subject to Levy.--
Subsection (b) of section 6343 is amended by striking ``9 months'' and 
inserting ``2 years''.
    (b) Period of Limitation on Suits.--Subsection (c) of section 6532 
is amended--
            (1) by striking ``9 months'' in paragraph (1) and inserting 
        ``2 years'', and
            (2) by striking ``9-month'' in paragraph (2) and inserting 
        ``2-year''.
    (c) Effective Date.--The amendments made by this section shall 
apply to--
            (1) levies made after the date of the enactment of this 
        Act, and
            (2) levies made on or before such date if the 9-month 
        period has not expired under section 6343(b) of the Internal 
        Revenue Code of 1986 (without regard to this section) as of 
        such date.

SEC. 11072. INDIVIDUALS HELD HARMLESS ON IMPROPER LEVY ON RETIREMENT 
              PLANS.

    (a) In General.--Section 6343 is amended by adding at the end the 
following new subsection:
    ``(f) Individuals Held Harmless on Wrongful Levy, etc. on 
Retirement Plan.--
            ``(1) In general.--If the Secretary determines that an 
        individual's account or benefit under an eligible retirement 
        plan (as defined in section 402(c)(8)(B)) has been levied upon 
        in a case to which subsection (b) or (d)(2)(A) applies and 
        property or an amount of money is returned to the individual--
                    ``(A) the individual may contribute such property 
                or an amount equal to the sum of--
                            ``(i) the amount of money so returned by 
                        the Secretary, and
                            ``(ii) interest paid under subsection (c) 
                        on such amount of money,
                into such eligible retirement plan if such contribution 
                is permitted by the plan, or into an individual 
                retirement plan (other than an endowment contract) to 
                which a rollover contribution of a distribution from 
                such eligible retirement plan is permitted, but only if 
                such contribution is made not later than the due date 
                (not including extensions) for filing the return of tax 
                for the taxable year in which such property or amount 
                of money is returned, and
                    ``(B) the Secretary shall, at the time such 
                property or amount of money is returned, notify such 
                individual that a contribution described in 
                subparagraph (A) may be made.
            ``(2) Treatment as rollover.--The distribution on account 
        of the levy and any contribution under paragraph (1) with 
        respect to the return of such distribution shall be treated for 
        purposes of this title as if such distribution and contribution 
        were described in section 402(c), 402A(c)(3), 403(a)(4), 
        403(b)(8), 408(d)(3), 408A(d)(3), or 457(e)(16), whichever is 
        applicable; except that--
                    ``(A) the contribution shall be treated as having 
                been made for the taxable year in which the 
                distribution on account of the levy occurred, and the 
                interest paid under subsection (c) shall be treated as 
                earnings within the plan after the contribution and 
                shall not be included in gross income, and
                    ``(B) such contribution shall not be taken into 
                account under section 408(d)(3)(B).
            ``(3) Refund, etc., of income tax on levy.--
                    ``(A) In general.--If any amount is includible in 
                gross income for a taxable year by reason of a 
                distribution on account of a levy referred to in 
                paragraph (1) and any portion of such amount is treated 
                as a rollover contribution under paragraph (2), any tax 
                imposed by chapter 1 on such portion shall not be 
                assessed, and if assessed shall be abated, and if 
                collected shall be credited or refunded as an 
                overpayment made on the due date for filing the return 
                of tax for such taxable year.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to a rollover contribution under this subsection which 
                is made from an eligible retirement plan which is not a 
                Roth IRA or a designated Roth account (within the 
                meaning of section 402A) to a Roth IRA or a designated 
                Roth account under an eligible retirement plan.
            ``(4) Interest.--Notwithstanding subsection (d), interest 
        shall be allowed under subsection (c) in a case in which the 
        Secretary makes a determination described in subsection 
        (d)(2)(A) with respect to a levy upon an individual retirement 
        plan.
            ``(5) Treatment of inherited accounts.--For purposes of 
        paragraph (1)(A), section 408(d)(3)(C) shall be disregarded in 
        determining whether an individual retirement plan is a plan to 
        which a rollover contribution of a distribution from the plan 
        levied upon is permitted.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid under subsections (b), (c), and (d)(2)(A) of section 
6343 of the Internal Revenue Code of 1986 in taxable years beginning 
after December 31, 2017.

SEC. 11073. MODIFICATION OF USER FEE REQUIREMENTS FOR INSTALLMENT 
              AGREEMENTS.

    (a) In General.--Section 6159 is amended by redesignating 
subsection (f) as subsection (g) and by inserting after subsection (e) 
the following new subsection:
    ``(f) Installment Agreement Fees.--
            ``(1) Limitation on fee amount.--The amount of any fee 
        imposed on an installment agreement under this section may not 
        exceed the amount of such fee as in effect on the date of the 
        enactment of this subsection.
            ``(2) Waiver or reimbursement.--In the case of any taxpayer 
        with an adjusted gross income, as determined for the most 
        recent year for which such information is available, which does 
        not exceed 250 percent of the applicable poverty level (as 
        determined by the Secretary)--
                    ``(A) if the taxpayer has agreed to make payments 
                under the installment agreement by electronic payment 
                through a debit instrument, no fee shall be imposed on 
                an installment agreement under this section, and
                    ``(B) if the taxpayer is unable to make payments 
                under the installment agreement by electronic payment 
                through a debit instrument, the Secretary shall, upon 
                completion of the installment agreement, pay the 
                taxpayer an amount equal to any such fees imposed.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to agreements entered into on or after the date which is 60 days 
after the date of the enactment of this Act.

SEC. 11074. FORM 1040SR FOR SENIORS.

    (a) In General.--The Secretary of the Treasury (or the Secretary's 
delegate) shall make available a form, to be known as ``Form 1040SR'', 
for use by individuals to file the return of tax imposed by chapter 1 
of the Internal Revenue Code of 1986. Such form shall be as similar as 
practicable to Form 1040EZ, except that--
            (1) the form shall be available only to individuals who 
        have attained age 65 as of the close of the taxable year,
            (2) the form may be used even if income for the taxable 
        year includes--
                    (A) social security benefits (as defined in section 
                86(d) of the Internal Revenue Code of 1986),
                    (B) distributions from qualified retirement plans 
                (as defined in section 4974(c) of such Code), annuities 
                or other such deferred payment arrangements,
                    (C) interest and dividends, or
                    (D) capital gains and losses taken into account in 
                determining adjusted net capital gain (as defined in 
                section 1(h)(3) of such Code), and
            (3) the form shall be available without regard to the 
        amount of any item of taxable income or the total amount of 
        taxable income for the taxable year.
    (b) Effective Date.--The form required by subsection (a) shall be 
made available for taxable years beginning after the date of the 
enactment of this Act and ending before January 1, 2026.

SEC. 11075. SENSE OF THE SENATE ON IMPROVING CUSTOMER SERVICE AND 
              PROTECTIONS FOR TAXPAYERS BY REINSTATING APPROPRIATE 
              FUNDING LEVELS.

    It is the sense of the Senate that politically motivated budget 
cuts--
            (1) are counterproductive to deficit reduction,
            (2) diminish the ability of the Internal Revenue Service to 
        adequately serve taxpayers and protect taxpayer information, 
        and
            (3) reduce the ability of the Internal Revenue Service to 
        enforce the law.

SEC. 11076. RETURN PREPARATION PROGRAMS FOR LOW-INCOME TAXPAYERS.

    (a) In General.--Chapter 77 is amended by inserting after section 
7526 the following new section:

``SEC. 7526A. RETURN PREPARATION PROGRAMS FOR LOW-INCOME TAXPAYERS.

    ``(a) Volunteer Income Tax Assistance Matching Grant Program.--
            ``(1) Establishment of program.--The Secretary, through the 
        Internal Revenue Service, shall establish a Community Volunteer 
        Income Tax Assistance Matching Grant Program (hereinafter in 
        this section referred to as the `VITA grant program'). Except 
        as otherwise provided in this section, the VITA grant program 
        shall be administered in a manner which is substantially 
        similar to the Community Volunteer Income Tax Assistance 
        matching grants demonstration program established under title I 
        of division D of the Consolidated Appropriations Act, 2008.
            ``(2) Matching grants.--
                    ``(A) In general.--The Secretary shall, subject to 
                the availability of appropriated funds, make available 
                grants under the VITA grant program to provide matching 
                funds for the development, expansion, or continuation 
                of qualified return preparation programs assisting low-
                income taxpayers and members of underserved 
                populations.
                    ``(B) Application.--
                            ``(i) In general.--Subject to clause (ii), 
                        in order to be eligible for a grant under this 
                        section, a qualified return preparation program 
                        shall submit an application to the Secretary at 
                        such time, in such manner, and containing such 
                        information as the Secretary reasonably 
                        requires.
                            ``(ii) Accuracy review.--In the case of any 
                        qualified return preparation program which was 
                        awarded a grant under this section and was 
                        subsequently subject to a field site visit by 
                        the Internal Revenue Service (including through 
                        the Stakeholder Partnerships, Education, and 
                        Communication office) in which it was 
                        determined that the average accuracy rate for 
                        preparation of tax returns through such program 
                        was less than 90 percent, such program shall 
                        not be eligible for any additional grants under 
                        this section unless such program provides, as 
                        part of their application, sufficient 
                        documentation regarding the corrective measures 
                        established by such program to address the 
                        deficiencies identified following the field 
                        site visit.
                    ``(C) Priority.--In awarding grants under this 
                section, the Secretary shall give priority to 
                applications--
                            ``(i) demonstrating assistance to low-
                        income taxpayers, with emphasis on outreach to 
                        and services for such taxpayers,
                            ``(ii) demonstrating taxpayer outreach and 
                        educational activities relating to eligibility 
                        and availability of income supports available 
                        through the Internal Revenue Code of 1986, such 
                        as the earned income tax credit, and
                            ``(iii) demonstrating specific outreach and 
                        focus on one or more underserved populations.
                    ``(D) Duration of grants.--Upon application of a 
                qualified return preparation program, the Secretary is 
                authorized to award a multi-year grant not to exceed 3 
                years.
            ``(3) Aggregate limitation.--Unless otherwise provided by 
        specific appropriation, the Secretary shall not allocate more 
        than $30,000,000 per fiscal year (exclusive of costs of 
        administering the program) to carry out the purposes of this 
        section.
    ``(b) Use of Funds.--
            ``(1) In general.--Qualified return preparation programs 
        receiving a grant under this section may use the grant for--
                    ``(A) ordinary and necessary costs associated with 
                program operation in accordance with Cost Principles 
                Circulars as set forth by the Office of Management and 
                Budget, including--
                            ``(i) for wages or salaries of persons 
                        coordinating the activities of the program,
                            ``(ii) to develop training materials, 
                        conduct training, and perform quality reviews 
                        of the returns for which assistance has been 
                        provided under the program, and
                            ``(iii) for equipment purchases and 
                        vehicle-related expenses associated with remote 
                        or rural tax preparation services,
                    ``(B) outreach and educational activities described 
                in subsection (a)(2)(C)(ii), and
                    ``(C) services related to financial education and 
                capability, asset development, and the establishment of 
                savings accounts in connection with tax return 
                preparation.
            ``(2) Use of grants for overhead expenses prohibited.--No 
        grant made under this section may be used for overhead expenses 
        that are not directly related to any qualified return 
        preparation program.
    ``(c) Promotion and Referral.--
            ``(1) Promotion.--The Secretary shall promote the benefits 
        of, and encourage the use of, tax preparation through qualified 
        return preparation programs through the use of mass 
        communications, referrals, and other means.
            ``(2) Internal revenue service referrals.--The Secretary 
        shall refer taxpayers to qualified return preparation programs 
        receiving funding under this section.
            ``(3) VITA grantee referral.--Qualified return preparation 
        programs receiving a grant under this section are encouraged to 
        refer, as appropriate, to local or regional Low Income Taxpayer 
        Clinics individuals who are eligible to receive services at 
        such clinics.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified return preparation program.--The term 
        `qualified return preparation program' means any program--
                    ``(A) which provides assistance to individuals, not 
                less than 90 percent of whom are low-income taxpayers, 
                in preparing and filing Federal income tax returns,
                    ``(B) which is administered by a qualified entity,
                    ``(C) in which all of the volunteers who assist in 
                the preparation of Federal income tax returns meet the 
                training requirements prescribed by the Secretary, and
                    ``(D) which uses a quality review process which 
                reviews 100 percent of all returns.
            ``(2) Qualified entity.--
                    ``(A) In general.--The term `qualified entity' 
                means any entity which--
                            ``(i) is an eligible organization (as 
                        described in subparagraph (B)),
                            ``(ii) is in compliance with Federal tax 
                        filing and payment requirements,
                            ``(iii) is not debarred or suspended from 
                        Federal contracts, grants, or cooperative 
                        agreements, and
                            ``(iv) agrees to provide documentation to 
                        substantiate any matching funds provided under 
                        the VITA grant program.
                    ``(B) Eligible organization.--
                            ``(i) In general.--Subject to clause (ii), 
                        the term `eligible organization' means--
                                    ``(I) an institution of higher 
                                education which is described in section 
                                102 (other than subsection (a)(1)(C) 
                                thereof) of the Higher Education Act of 
                                1965 (20 U.S.C. 1088), as in effect on 
                                the date of the enactment of this 
                                section, and which has not been 
                                disqualified from participating in a 
                                program under title IV of such Act,
                                    ``(II) an organization described in 
                                section 501(c) of the Internal Revenue 
                                Code of 1986 and exempt from tax under 
                                section 501(a) of such Code,
                                    ``(III) a local government agency, 
                                including--
                                            ``(aa) a county or 
                                        municipal government agency, 
                                        and
                                            ``(bb) an Indian tribe, as 
                                        defined in section 4(13) of the 
                                        Native American Housing 
                                        Assistance and Self-
                                        Determination Act of 1996 (25 
                                        U.S.C. 4103(13)), including any 
                                        tribally designated housing 
                                        entity (as defined in section 
                                        4(22) of such Act (25 U.S.C. 
                                        4103(22))), tribal subsidiary, 
                                        subdivision, or other wholly 
                                        owned tribal entity, or
                                    ``(IV) a local, State, regional, or 
                                national coalition (with one lead 
                                organization which meets the 
                                eligibility requirements of subclause 
                                (I), (II), or (III) acting as the 
                                applicant organization).
                            ``(ii) Alternative eligible organization.--
                        If no eligible organization described in clause 
                        (i) is available to assist the targeted 
                        population or community, the term `eligible 
                        organization' shall include--
                                    ``(I) a State government agency, 
                                and
                                    ``(II) a Cooperative Extension 
                                Service office.
            ``(3) Low-income taxpayers.--The term `low-income taxpayer' 
        means a taxpayer who has income for the taxable year which does 
        not exceed an amount equal to the completed phaseout amount 
        under section 32(b) for a married couple filing a joint return 
        with three or more qualifying children, as determined in a 
        revenue procedure or other published guidance.
            ``(4) Underserved population.--The term `underserved 
        population' includes populations of persons with disabilities, 
        persons with limited English proficiency, Native Americans, 
        individuals living in rural areas, members of the Armed Forces 
        and their spouses, and the elderly.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by inserting after the item relating to section 7526 the 
following new item:

``7526A. Return preparation programs for low-income taxpayers.''.

SEC. 11077. FREE FILE PROGRAM.

    (a) The Secretary of the Treasury, or the Secretary's delegate, 
shall continue to operate the IRS Free File Program as established by 
the Internal Revenue Service and published in the Federal Register on 
November 4, 2002 (67 Fed. Reg. 67247), including any subsequent 
agreements and governing rules established pursuant thereto.
    (b) The IRS Free File Program shall continue to provide free 
commercial-type online individual income tax preparation and electronic 
filing services to the lowest 70 percent of taxpayers by income. The 
number of taxpayers eligible to receive such services each year shall 
be calculated by the Internal Revenue Service annually based on prior 
year aggregate taxpayer adjusted gross income data.
    (c) In addition to the services described in subsection (b), and in 
the same manner, the IRS Free File Program shall continue to make 
available to all taxpayers (without regard to income) a basic, online 
electronic fillable forms utility.
    (d) The IRS Free File Program shall continue to work cooperatively 
with the private sector to provide the free individual income tax 
preparation and the electronic filing services described in subsections 
(b) and (c).
    (e) The IRS Free File Program shall work cooperatively with State 
government agencies to enhance and expand the use of the program to 
provide needed benefits to the taxpayer while reducing the cost of 
processing returns.
    (f) Nothing in this section is intended to impact the continuity of 
services provided under Taxpayer Assistance Centers, Tax Counseling for 
the Elderly, and Volunteer Income Tax Assistance programs.

SEC. 11078. ATTORNEYS' FEES RELATING TO AWARDS TO WHISTLEBLOWERS.

    (a) In General.--Paragraph (21) of section 62(a) is amended to read 
as follows:
            ``(21) Attorneys' fees relating to awards to 
        whistleblowers.--
                    ``(A) In general.--Any deduction allowable under 
                this chapter for attorney fees and court costs paid by, 
                or on behalf of, the taxpayer in connection with any 
                award under--
                            ``(i) section 7623(b), or
                            ``(ii) in the case of taxable years 
                        beginning after December 31, 2017, and before 
                        January 1, 2026, any action brought under--
                                    ``(I) section 21F of the Securities 
                                Exchange Act of 1934 (15 U.S.C. 78u-6),
                                    ``(II) a State law relating to 
                                false or fraudulent claims that meets 
                                the requirements described in section 
                                1909(b) of the Social Security Act (42 
                                U.S.C. 1396h(b)), or
                                    ``(III) section 23 of the Commodity 
                                Exchange Act (7 U.S.C. 26).
                    ``(B) May not exceed award.--Subparagraph (A) shall 
                not apply to any deduction in excess of the amount 
                includible in the taxpayer's gross income for the 
                taxable year on account of such award.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 11079. CLARIFICATION OF WHISTLEBLOWER AWARDS.

    (a) Definition of Proceeds.--
            (1) In general.--Section 7623 is amended by adding at the 
        end the following new subsection:
    ``(c) Proceeds.--For purposes of this section, the term `proceeds' 
includes--
            ``(1) penalties, interest, additions to tax, and additional 
        amounts provided under the internal revenue laws, and
            ``(2) any proceeds arising from laws for which the Internal 
        Revenue Service is authorized to administer, enforce, or 
        investigate, including--
                    ``(A) criminal fines and civil forfeitures, and
                    ``(B) violations of reporting requirements.''.
            (2) Conforming amendments.--Paragraphs (1) and (2)(A) of 
        section 7623(b) are each amended by striking ``collected 
        proceeds (including penalties, interest, additions to tax, and 
        additional amounts) resulting from the action'' and inserting 
        ``proceeds collected as a result of the action''.
    (b) Amount of Proceeds Determined Without Regard to Availability.--
Paragraphs (1) and (2)(A) of section 7623(b) are each amended by 
inserting ``(determined without regard to whether such proceeds are 
available to the Secretary)'' after ``in response to such action''.
    (c) Disputed Amount Threshold.--Section 7623(b)(5)(B) is amended by 
striking ``tax, penalties, interest, additions to tax, and additional 
amounts'' and inserting ``proceeds''.
    (d) Effective Date.--The amendments made by this section shall 
apply to information provided before, on, or after the date of the 
enactment of this Act with respect to which a final determination for 
an award has not been made before such date of enactment.

                     PART VIII--INDIVIDUAL MANDATE

SEC. 11081. ELIMINATION OF SHARED RESPONSIBILITY PAYMENT FOR 
              INDIVIDUALS FAILING TO MAINTAIN MINIMUM ESSENTIAL 
              COVERAGE.

    (a) In General.--Section 5000A(c) is amended--
            (1) in paragraph (2)(B)(iii), by striking ``2.5 percent'' 
        and inserting ``Zero percent'', and
            (2) in paragraph (3)--
                    (A) by striking ``$695'' in subparagraph (A) and 
                inserting ``$0'', and
                    (B) by striking subparagraph (D).
    (b) Effective Date.--The amendment made by this section shall apply 
to months beginning after December 31, 2018.

                  Subtitle B--Alternative Minimum Tax

SEC. 12001. REPEAL OF TAX FOR CORPORATIONS.

    (a) In General.--Section 55(a) is amended by striking ``There'' and 
inserting ``In the case of a taxpayer other than a corporation, 
there''.
    (b) Conforming Amendments.--
            (1) Section 38(c)(6) is amended by adding at the end the 
        following new subparagraph:
                    ``(E) Corporations.--In the case of a corporation, 
                this subsection shall be applied by treating the 
                corporation as having a tentative minimum tax of 
                zero.''.
            (2)(A) Section 55(b)(1) is amended to read as follows:
            ``(1) Amount of tentative tax.--
                    ``(A) In general.--The tentative minimum tax for 
                the taxable year is the sum of--
                            ``(i) 26 percent of so much of the taxable 
                        excess as does not exceed $175,000, plus
                            ``(ii) 28 percent of so much of the taxable 
                        excess as exceeds $175,000.
                The amount determined under the preceding sentence 
                shall be reduced by the alternative minimum tax foreign 
                tax credit for the taxable year.
                    ``(B) Taxable excess.--For purposes of this 
                subsection, the term `taxable excess' means so much of 
                the alternative minimum taxable income for the taxable 
                year as exceeds the exemption amount.
                    ``(C) Married individual filing separate return.--
                In the case of a married individual filing a separate 
                return, subparagraph (A) shall be applied by 
                substituting 50 percent of the dollar amount otherwise 
                applicable under clause (i) and cause (ii) thereof. For 
                purposes of the preceding sentence, marital status 
                shall be determined under section 7703.''.
            (B) Section 59(a) is amended--
                    (i) by striking ``subparagraph (A)(i) or (B)(i) of 
                section 55(b)(1) (whichever applies) in lieu of the 
                highest rate of tax specified in section 1 or 11 
                (whichever applies)'' in paragraph (1)(C) and inserting 
                ``section 55(b)(1) in lieu of the highest rate of tax 
                specified in section 1'', and
                    (ii) in paragraph (2), by striking ``means'' and 
                all that follows and inserting ``means the amount 
                determined under the first sentence of section 
                55(b)(1).''.
            (C) Section 897(a)(2)(A) is amended by striking ``section 
        55(b)(1)(A)'' and inserting ``section 55(b)(1)''.
            (D) Section 911(f) is amended--
                    (i) in paragraph (1)(B)--
                            (I) by striking ``section 55(b)(1)(A)(ii)'' 
                        and inserting ``section 55(b)(1)(B)'', and
                            (II) by striking ``section 55(b)(1)(A)(i)'' 
                        and inserting ``section 55(b)(1)(A)'', and
                    (ii) in paragraph (2)(B), by striking ``section 
                55(b)(1)(A)(ii)'' each place it appears and inserting 
                ``section 55(b)(1)(B)''.
            (3) Section 55(c)(1) is amended by striking ``, the section 
        936 credit allowable under section 27(b), and the Puerto Rico 
        economic activity credit under section 30A''.
            (4) Section 55(d) is amended--
                    (A) by striking paragraph (2) and redesignating 
                paragraphs (3) and (4) as paragraphs (2) and (3), 
                respectively,
                    (B) in paragraph (2) (as so redesignated), by 
                inserting ``and'' at the end of subparagraph (B), by 
                striking ``, and'' at the end of subparagraph (C) and 
                inserting a period, and by striking subparagraph (D), 
                and
                    (C) in paragraph (3) (as so redesignated)--
                            (i) by striking ``(b)(1)(A)(i)'' in 
                        subparagraph (B)(i) and inserting 
                        ``(b)(1)(A)'', and
                            (ii) by striking ``paragraph (3)'' in 
                        subparagraph (B)(iii) and inserting ``paragraph 
                        (2)''.
            (5) Section 55 is amended by striking subsection (e).
            (6)(A) Section 56 is amended by striking subsections (c) 
        and (g).
            (B) Section 847 is amended by striking the last sentence of 
        paragraph (9).
            (C) Section 848 is amended by striking subsection (i).
            (7) Section 58(a) is amended by striking paragraph (3) and 
        redesignating paragraph (4) as paragraph (3).
            (8) Section 59 is amended by striking subsections (b) and 
        (f).
            (9) Section 11(d) is amended by striking ``the taxes 
        imposed by subsection (a) and section 55'' and inserting ``the 
        tax imposed by subsection (a)''.
            (10) Section 12 is amended by striking paragraph (7).
            (11) Section 168(k) is amended by striking paragraph (4).
            (12) Section 882(a)(1) is amended by striking ``, 55,''.
            (13) Section 962(a)(1) is amended by striking ``sections 11 
        and 55'' and inserting ``section 11''.
            (14) 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.
            (15) Section 6425(c)(1)(A) is amended to read as follows:
                    ``(A) the tax imposed by section 11 or 1201(a), or 
                subchapter L of chapter 1, whichever is applicable, 
                over''.
            (16) Section 6655(e)(2) is amended by striking ``and 
        alternative minimum taxable income'' each place it appears in 
        subparagraphs (A) and (B)(i).
            (17) Section 6655(g)(1)(A) is amended by inserting ``plus'' 
        at the end of clause (i), by striking clause (ii), and by 
        redesignating clause (iii) as clause (ii).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 12002. SUSPENSION OF TAX ON INDIVIDUALS.

    (a) In General.--Section 55(a) is amended by adding at the end the 
following new flush sentence:
``No tax shall be imposed by this section for any taxable year 
beginning after December 31, 2017, and before January 1, 2026, and the 
tentative minimum tax of any taxpayer for any such taxable year shall 
be zero for purposes of this title.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 12003. CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY.

    (a) 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 2018, 2019, 2020, or 2021, 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 2021) 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.''.
    (b) Treatment of References.--Section 53(d) is amended by adding at 
the end the following new paragraph:
            ``(3) AMT term references.--In the case of a corporation, 
        any references in this subsection to section 55, 56, or 57 
        shall be treated as a reference to such section as in effect 
        before the amendments made by Tax Cuts and Jobs Act.''.
    (c) Conforming Amendment.--Section 1374(b)(3)(B) is amended by 
striking the last sentence thereof.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2017.
            (2) Conforming amendment.--The amendment made by subsection 
        (c) shall apply to taxable years beginning after December 31, 
        2021.

                Subtitle C--Business-related Provisions

                      PART I--CORPORATE PROVISIONS

                     Subpart A--20-percent Tax Rate

SEC. 13001. 20-PERCENT CORPORATE TAX RATE.

    (a) In General.--Subsection (b) of section 11 is amended to read as 
follows:
    ``(b) Amount of Tax.--The amount of the tax imposed by subsection 
(a) shall be 20 percent of taxable income.''.
    (b) Conforming Amendments.--
            (1) The following sections are each amended by striking 
        ``section 11(b)(1)'' and inserting ``section 11(b)'':
                    (A) Section 280C(c)(3)(B)(ii)(II).
                    (B) Paragraphs (2)(B) and (6)(A)(ii) of section 
                860E(e).
                    (C) Section 7874(e)(1)(B)
            (2)(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 paragraphs (4) and 
        (6), and by redesignating paragraph (5) as paragraph (4).
            (C) Section 453A(c)(3) is amended by striking ``or 1201 
        (whichever is appropriate)''.
            (D) 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''.
            (E) Sections 594(a) is amended by striking ``taxes imposed 
        by section 11 or 1201(a)'' and inserting ``tax imposed by 
        section 11''.
            (F) Section 691(c)(4) is amended by striking ``1201,''.
            (G) 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''.
            (H) Section 831(e) is amended by striking paragraph (1) and 
        by redesignating paragraphs (2) and (3) as paragraphs (1) and 
        (2), respectively.
            (I) Sections 832(c)(5) and 834(b)(1)(D) are each amended by 
        striking ``sec. 1201 and following,''.
            (J) Section 852(b)(3)(A) is amended by striking ``section 
        1201(a)'' and inserting ``section 11(b)''.
            (K) 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.''.
            (L) Section 882(a)(1), as amended by section 12001, is 
        amended by striking ``or 1201(a)''.
            (M) Section 904(b) is amended--
                    (i) by striking ``or 1201(a)'' in paragraph (2)(C),
                    (ii) by striking paragraph (3)(D) and inserting the 
                following:
                    ``(D) Capital gain rate differential.--There is a 
                capital gain rate differential for any year if 
                subsection (h) of section 1 applies to such taxable 
                year.'', and
                    (iii) by striking paragraph (3)(E) and inserting 
                the following:
                    ``(E) Rate differential portion.--The rate 
                differential portion of foreign source net capital 
                gain, net capital gain, or the excess of net capital 
                gain from sources within the United States over net 
                capital gain, as the case may be, is the same 
                proportion of such amount as--
                            ``(i) the excess of--
                                    ``(I) the highest rate of tax set 
                                forth in subsection (a), (b), (c), (d), 
                                or (e) of section 1 (whichever 
                                applies), over
                                    ``(II) the alternative rate of tax 
                                determined under section 1(h), bears to
                            ``(ii) that rate referred to in subclause 
                        (I).''.
            (N) Section 1374(b) is amended by striking paragraph (4).
            (O) Section 1381(b) is amended by striking ``taxes imposed 
        by section 11 or 1201'' and inserting ``tax imposed by section 
        11''.
            (P) Sections 6425(c)(1)(A), as amended by section 12001, 
        and 6655(g)(1)(A)(i) are each amended by striking ``or 
        1201(a),''.
            (Q) Section 7518(g)(6)(A) is amended by striking ``or 
        1201(a)''.
            (3)(A) Section 1445(e)(1) is amended--
                    (i) by striking ``35 percent'' and inserting ``the 
                highest rate of tax in effect for the taxable year 
                under section 11(b)'', and
                    (ii) by striking ``of the gain'' and inserting 
                ``multiplied by the gain''.
            (B) Section 1445(e)(2) is amended by striking ``35 percent 
        of the amount'' and inserting ``the highest rate of tax in 
        effect for the taxable year under section 11(b) multiplied by 
        the amount''.
            (C) Section 1445(e)(6) is amended--
                    (i) by striking ``35 percent'' and inserting ``the 
                highest rate of tax in effect for the taxable year 
                under section 11(b)'', and
                    (ii) by striking ``of the amount'' and inserting 
                ``multiplied by the amount''.
            (D) Section 1446(b)(2)(B) is amended by striking ``section 
        11(b)(1)'' and inserting ``section 11(b)''.
            (4) Section 852(b)(1) is amended by striking the last 
        sentence.
            (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 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 section 12001, is 
        amended to read as follows:

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

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

``Sec. 1561. Limitation on accumulated earnings credit in the case of 
                            certain controlled corporations.''.
            (7) Section 7518(g)(6)(A) is amended--
                    (A) by striking ``With respect to the portion'' and 
                inserting ``In the case of a taxpayer other than a 
                corporation, with respect to the portion'', and
                    (B) by striking ``(34 percent in the case of a 
                corporation)''.
    (c) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2018.
            (2) Withholding.--The amendments made by subsection (b)(3) 
        shall apply to distributions made after December 31, 2018.
            (3) Certain transfers.--The amendments made by subsection 
        (b)(6) shall apply to transfers made after December 31, 2018.
    (d) Normalization Requirements.--
            (1) In general.--A normalization method of accounting shall 
        not be treated as being used with respect to any public utility 
        property for purposes of section 167 or 168 of the Internal 
        Revenue Code of 1986 if the taxpayer, in computing its cost of 
        service for ratemaking purposes and reflecting operating 
        results in its regulated books of account, reduces the excess 
        tax reserve more rapidly or to a greater extent than such 
        reserve would be reduced under the average rate assumption 
        method.
            (2) Alternative method for certain taxpayers.--If, as of 
        the first day of the taxable year that includes the date of 
        enactment of this Act--
                    (A) the taxpayer was required by a regulatory 
                agency to compute depreciation for public utility 
                property on the basis of an average life or composite 
                rate method, and
                    (B) the taxpayer's books and underlying records did 
                not contain the vintage account data necessary to apply 
                the average rate assumption method,
        the taxpayer will be treated as using a normalization method of 
        accounting if, with respect to such jurisdiction, the taxpayer 
        uses the alternative method for public utility property that is 
        subject to the regulatory authority of that jurisdiction.
            (3) Definitions.--For purposes of this subsection--
                    (A) Excess tax reserve.--The term ``excess tax 
                reserve'' means the excess of--
                            (i) the reserve for deferred taxes (as 
                        described in section 168(i)(9)(A)(ii) of the 
                        Internal Revenue Code of 1986) as determined 
                        under 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.

SEC. 13002. REDUCTION IN DIVIDEND RECEIVED DEDUCTIONS TO REFLECT LOWER 
              CORPORATE INCOME TAX RATES.

    (a) Dividends Received by Corporations.--
            (1) In general.--Section 243(a)(1) is amended by striking 
        ``70 percent'' and inserting ``50 percent''.
            (2) Dividends from 20-percent owned corporations.--Section 
        243(c)(1) is amended--
                    (A) by striking ``80 percent'' and inserting ``65 
                percent'', and
                    (B) by striking ``70 percent'' and inserting ``50 
                percent''.
            (3) Conforming amendment.--The heading for section 243(c) 
        is amended by striking ``Retention of 80-percent Dividend 
        Received Deduction'' and inserting ``Increased Percentage''.
    (b) Dividends Received From FSC.--Section 245(c)(1)(B) is amended--
            (1) by striking ``70 percent'' and inserting ``50 
        percent'', and
            (2) by striking ``80 percent'' and inserting ``65 
        percent''.
    (c) Limitation on Aggregate Amount of Deductions.--Section 
246(b)(3) is amended--
            (1) by striking ``80 percent'' in subparagraph (A) and 
        inserting ``65 percent'', and
            (2) by striking ``70 percent'' in subparagraph (B) and 
        inserting ``50 percent''.
    (d) Reduction in Deduction Where Portfolio Stock Is Debt-
financed.--Section 246A(a)(1) is amended--
            (1) by striking ``70 percent'' and inserting ``50 
        percent'', and
            (2) by striking ``80 percent'' and inserting ``65 
        percent''.
    (e) Income From Sources Within the United States.--Section 
861(a)(2) is amended--
            (1) by striking ``100/70th'' and inserting ``100/50th'' in 
        subparagraph (B), and
            (2) in the flush sentence at the end--
                    (A) by striking ``100/80th'' and inserting ``100/
                65th'', and
                    (B) by striking ``100/70th'' and inserting ``100/
                50th''.
    (f) Effective Date.--
            (1) In general.--The amendments made by this section (other 
        than subsection (c) thereof) shall apply to dividends received 
        by a corporation after December 31, 2018, in taxable years 
        ending after such date.
            (2) Limitation.--The amendments made by section 102(c) 
        shall apply to taxable years beginning after December 31, 2018.

     Subpart B--Dividends Paid Deduction for Domestic Corporations

SEC. 13011. DIVIDENDS PAID DEDUCTION.

    (a) General Rule.--Part VIII of subchapter B of chapter 1 is 
amended by inserting after section 241 the following:

                 ``Subpart B--Dividends Paid Deduction

``Sec. 242. Dividends paid deduction.

``SEC. 242. DIVIDENDS PAID DEDUCTION.

    ``(a) Allowance of Deduction.--In the case of an eligible 
corporation, there shall be allowed as a deduction an amount equal to 
zero percent of the aggregate amount of applicable dividends paid by 
the corporation during the taxable year.
    ``(b) Applicable Dividend.--For purposes of this section--
            ``(1) In general.--The term `applicable dividend' means, 
        with respect to an eligible corporation, any distribution by 
        the eligible corporation during a taxable year which is--
                    ``(A) treated as a dividend for purposes of this 
                chapter, and
                    ``(B) paid out of its applicable earnings and 
                profits.
            ``(2) Ordering rule for dividend payments.--For purposes of 
        paragraph (1)(B), dividends shall be treated as paid--
                    ``(A) first, out of exempt earnings and profits,
                    ``(B) second, out of applicable earnings and 
                profits, and
                    ``(C) finally, out of earnings and profits not 
                described in subparagraph (A) or (B).
            ``(3) Coordination with other deductions.--Such term shall 
        not include--
                    ``(A) any amount allowed as a deduction under 
                section 591 (relating to deduction for dividends paid 
                by mutual savings banks, etc.), and
                    ``(B) any dividend described in paragraph (2) of 
                section 404(k) (relating to deduction for dividends 
                paid on certain employer securities).
            ``(4) Election to treat certain distributions paid after 
        close of year as paid during year.--For purposes of this title, 
        an eligible corporation may elect on its return of tax for any 
        taxable year to treat any distribution made on or before the 
        15th day of the 4th month following the close of the taxable 
        year as having been made immediately before the close of the 
        taxable year. The preceding sentence shall not apply for 
        purposes of determining the time the distribution was received 
        by the shareholder to whom the distribution was made.
            ``(5) Applicable earnings and profits.--
                    ``(A) In general.--The term `applicable earnings 
                and profits' means, with respect to any corporation for 
                any taxable year, its earnings and profits for the 
                taxable year and its earnings and profits accumulated 
                in prior taxable years beginning after December 31, 
                2018. For purposes of the preceding sentence, earnings 
                and profits for the taxable year shall be determined 
                without regard to the deduction under this section for 
                the taxable year.
                    ``(B) Exempt earnings and profits not treated as 
                applicable earnings and profits.--The applicable 
                earnings and profits of a corporation shall not include 
                any exempt earnings and profits (as defined in 
                paragraph (6)).
                    ``(C) Look-thru in the case of dividends received 
                from controlled foreign corporation or 10/50 
                corporation.--If a corporation which is a United States 
                shareholder in a controlled foreign corporation, or is 
                a shareholder in a foreign corporation with respect to 
                which the shareholder meets the stock ownership 
                requirements of section 902(a), receives a dividend 
                (other than a dividend to which subparagraph (B) 
                applies) from such controlled foreign corporation or 
                such foreign corporation, the earnings and profits from 
                such dividend shall not be treated as applicable 
                earnings and profits of the corporation receiving such 
                dividend to the extent of any portion of the dividend 
                not properly allocable (as determined under section 
                316, as modified by section 959(c) in the case of such 
                controlled foreign corporation) to applicable earnings 
                and profits of such controlled foreign corporation or 
                such foreign corporation.
            ``(6) Exempt earnings and profits.--
                    ``(A) In general.--The term `exempt earnings and 
                profits' means, with respect to any corporation for any 
                taxable year, its earnings and profits for the taxable 
                year and its earnings and profits accumulated in prior 
                taxable years beginning after December 31, 2018, which 
                are properly allocable to exempt amounts received or 
                accrued by the corporation.
                    ``(B) Exempt amounts.--The term `exempt amounts' 
                means, with respect to any corporation--
                            ``(i) any dividend to the extent of the 
                        deduction allowable to the corporation under 
                        section 243, 245, or 245A with respect to the 
                        dividend,
                            ``(ii) any foreign-derived intangible 
                        income (as defined in section 250(b)) or global 
                        intangible low-taxed income (as defined in 
                        section 951A(b)) to the extent of the deduction 
                        allowable to the corporation under section 250 
                        with respect to any such income,
                            ``(iii) any increase in subpart F income by 
                        reason of section 965 to the extent of the 
                        deduction allowable to the corporation under 
                        section 965(c)(1) with respect to any such 
                        income, and
                            ``(iv) any other amount to the extent such 
                        amount is exempt from taxation under this 
                        title.
            ``(7) Proper allocation of dividends to earnings and 
        profits.--
                    ``(A) In general.--The Secretary shall prescribe 
                rules for the proper allocation of dividends to 
                earnings and profits for purposes of applying this 
                subsection.
                    ``(B) Look through rules.--For purposes of 
                paragraph (4)(C), such rules shall include rules 
                requiring in appropriate cases the look through to 
                earnings and profits of members of any affiliated group 
                including a controlled foreign corporation or foreign 
                corporation described in such paragraph where the 
                earnings and profits of such controlled foreign 
                corporation or such foreign corporation are 
                attributable to distributions received from other 
                members of the group.
    ``(c) Eligible Corporation.--For purposes of this section, the term 
`eligible corporation' means any domestic corporation other than--
            ``(1) a regulated investment company,
            ``(2) a real estate investment trust,
            ``(3) an S corporation,
            ``(4) a corporation which is exempt from tax under section 
        501 or 521,
            ``(5) an organization taxable under subchapter T of this 
        chapter (relating to cooperative organizations),
            ``(6) a cooperative governed by the rules applicable to 
        cooperatives as in effect before the enactment of subchapter T, 
        or
            ``(7) a DISC or former DISC.
    ``(d) Reporting Requirement.--
            ``(1) In general.--Each eligible corporation which makes 
        payments of dividends during the reporting period for any 
        taxable year shall make a return, according to the forms and 
        regulations prescribed by the Secretary, setting forth--
                    ``(A) the aggregate amount of such dividends,
                    ``(B) the aggregate amount of such dividends with 
                respect to which the corporation is claiming a 
                deduction under this section for the taxable year,
                    ``(C) the aggregate amount of such dividends which 
                the corporation paid during the period beginning on the 
                1st day of the reporting taxable year and ending on the 
                15th day of the 4th month of such taxable year which 
                the corporation elected under subsection (b)(4) to 
                treat as paid in the preceding taxable year,
                    ``(D) the aggregate amount of such dividends which 
                the corporation paid during the period beginning on the 
                1st day of the taxable year following the reporting 
                taxable year and ending on the 15th day of the 4th 
                month of such following taxable year which the 
                corporation elected under subsection (b)(4) to treat as 
                paid in the reporting taxable year, and
                    ``(E) such other information with respect to such 
                dividends as the Secretary shall require for the 
                administration of this section.
            ``(2) Reporting period; due date.--For purposes of this 
        subsection--
                    ``(A) Reporting period.--The term `reporting 
                period' means with, respect to any taxable year, the 
                period beginning on the 1st day of the taxable year and 
                ending on the 15th day of the 4th month following the 
                close of the taxable year.
                    ``(B) Due date.--Any return under paragraph (1) 
                with respect to any taxable year shall be included with 
                the return of income tax for such taxable year.''.
    (b) Penalty for Failure to Report.--Section 6652, as amended by 
subtitle E of this Act, is amended by adding at the end the following 
new subsection:
    ``(r) Failure to File Returns by Corporations Eligible for 
Dividends Paid Deduction.--
            ``(1) Penalty for failure to file return.--In the case of a 
        failure to make a return required under section 242(d) 
        containing the information required by such section by the due 
        date for the return, the eligible corporation shall pay (on 
        notice and demand by the Secretary and in the same manner as 
        tax) a penalty of $1,000 per day for each day such failure 
        continues unless it is shown that such failure is due to 
        reasonable cause. The maximum amount of the penalty under this 
        paragraph with respect to any failure for a taxable year shall 
        not exceed $250,000.
            ``(2) Eligible corporation.--For purposes of this 
        subsection, the term `eligible corporation' has the meaning 
        given such term by section 242(c).''.
    (c) Dividends Paid Deduction Allowable Only in Taxable Year of 
Dividend Payment.--
            (1) In general.--Subsection (d) of section 172, as amended 
        by section 11011, is amended by adding at the end the following 
        new paragraph:
            ``(9) Dividends paid deduction.--The deduction under 
        section 242 shall not be allowed.''.
            (2) Treatment of carrybacks and carryovers.--Subparagraph 
        (A) of section 172(b)(2), as amended by section 13302, is 
        amended by striking ``and (5)'' and inserting ``(5), and (8)''.
    (d) Other Conforming Amendments.--Part VIII of subchapter B of 
chapter 1 is amended--
            (1) by striking the table of sections and inserting the 
        following:

            ``PART VIII--SPECIAL DEDUCTIONS FOR CORPORATIONS

             ``subpart a. allowance of special deductions.

                 ``subpart b. dividends paid deduction.

              ``subpart c. dividends received deductions.

                     ``subpart d. other deductions.

              ``Subpart A--Allowance of Special Deductions

``Sec. 241. Allowance of special deductions.'',
            (2) by inserting the following before section 243:

               ``Subpart C--Dividends Received Deductions

``Sec. 243. Dividends received by corporations.
``Sec. 245. Dividends received from certain foreign corporations.
``Sec. 245A. Deduction for foreign-source portion of dividends received 
                            by domestic corporations from specified 10-
                            percent owned foreign corporations.
``Sec. 246. Rules applying to deductions for dividends received.
``Sec. 246A. Dividends received deduction reduced where portfolio stock 
                            is debt financed.'', and
            (3) by inserting the following before section 248:

                     ``Subpart D--Other Deductions

``Sec. 248. Organizational expenditures.
``Sec. 249. Limitation of deduction of bond premium on repurchase.
``Sec. 250. Foreign-derived intangible income and global intangible 
                            low-taxed income.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to dividends paid in taxable years of the payor beginning after 
December 31, 2018.

SEC. 13012. TAX EQUIVALENT TO DIVIDENDS PAID DEDUCTION FOR CERTAIN 
              FOREIGN CORPORATIONS.

    (a) Dividends Paid Deduction.--Paragraph (1) of section 882(c) is 
amended by adding at the end the following new subparagraph:
                    ``(C) Special rule for dividends paid deduction.--
                For purposes of subparagraph (A)--
                            ``(i) the deduction under section 242 shall 
                        not be allowed for any taxable year, and
                            ``(ii) there shall be allowed, in lieu of 
                        such deduction, a deduction in an amount equal 
                        to zero percent of the dividend equivalent 
                        amount (as defined in section 884(b)) of the 
                        foreign corporation for the taxable year.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2018.

SEC. 13013. ALLOCATION OF DIVIDEND EXPENSE AMONG MEMBERS OF WORLDWIDE 
              AFFILIATED GROUPS.

    (a) In General.--Paragraph (6) of section 864(e) is amended to read 
as follows:
            ``(6) Allocation and apportionment of other expenses.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), expenses other than interest which 
                are not directly allocable or apportioned to any 
                specific income producing activity shall be allocated 
                and apportioned as if all members of the affiliated 
                group were a single corporation.
                    ``(B) Dividend expense.--The dividend expense of 
                any domestic corporation which is a member of an 
                affiliated group shall be allocated and apportioned to 
                income from sources without the United States in the 
                same proportion which--
                            ``(i) the aggregate amount of income 
                        treated as from sources without the United 
                        States by all domestic corporations which are 
                        members of such group (determined without 
                        regard to such dividend expense), bears to
                            ``(ii) the aggregate income of all such 
                        domestic corporations from sources within and 
                        without the United States (as so 
                        determined).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2018.

                    PART II--SMALL BUSINESS REFORMS

SEC. 13101. MODIFICATIONS OF RULES FOR EXPENSING DEPRECIABLE BUSINESS 
              ASSETS.

    (a) Increase in Limitation.--
            (1) Dollar limitation.--Section 179(b)(1) is amended by 
        striking ``$500,000'' and inserting ``$1,000,000''.
            (2) Reduction in limitation.--Section 179(b)(2) is amended 
        by striking ``$2,000,000'' and inserting ``$2,500,000''.
            (3) Inflation adjustments.--
                    (A) In general.--Subparagraph (A) of section 
                179(b)(6) is amended--
                            (i) by striking ``2015'' and inserting 
                        ``2018'', and
                            (ii) in clause (ii), by striking ``calendar 
                        year 2014'' and inserting ``calendar year 
                        2017''.
                    (B) Sport utility vehicles.--Section 179(b)(6) is 
                amended--
                            (i) in subparagraph (A), by striking 
                        ``paragraphs (1) and (2)'' and inserting 
                        ``paragraphs (1), (2), and (5)(A)'', and
                            (ii) in subparagraph (B), by inserting 
                        ``($100 in the case of any increase in the 
                        amount under paragraph (5)(A))'' after 
                        ``$10,000''.
    (b) Section 179 Property to Include Qualified Real Property.--
            (1) In general.--Subparagraph (B) of section 179(d)(1) is 
        amended to read as follows:
                    ``(B) which is--
                            ``(i) section 1245 property (as defined in 
                        section 1245(a)(3)), or
                            ``(ii) qualified real property (as defined 
                        in subsection (f)), and''.
            (2) Qualified real property defined.--Subsection (f) of 
        section 179 is amended to read as follows:
    ``(f) Qualified Real Property.--For purposes of this subsection, 
the term `qualified real property' means--
            ``(1) any qualified improvement property described in 
        section 168(e)(6), and
            ``(2) any of the following improvements to nonresidential 
        real property placed in service after the date such property 
        was first placed in service:
                    ``(A) Roofs.
                    ``(B) Heating, ventilation, and air-conditioning 
                property.
                    ``(C) Fire protection and alarm systems.
                    ``(D) Security systems.''.
    (c) Repeal of Exclusion for Certain Property.--The last sentence of 
section 179(d)(1) is amended by inserting ``(other than paragraph (2) 
thereof)'' after ``section 50(b)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years beginning after 
December 31, 2017.

SEC. 13102. MODIFICATIONS OF GROSS RECEIPTS TEST FOR USE OF CASH METHOD 
              OF ACCOUNTING BY CORPORATIONS AND PARTNERSHIPS.

    (a) Modifications of Gross Receipts Test.--
            (1) In general.--So much of section 448(c) as precedes 
        paragraph (2) is amended to read as follows:
    ``(c) Gross Receipts Test.--
            ``(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 the applicable dollar 
        limit.''.
            (2) Applicable dollar limit.--Subsection (c) of section 448 
        is amended by adding at the end the following new paragraph:
            ``(4) Applicable dollar limit.--
                    ``(A) In general.--The applicable dollar limit is 
                $15,000,000.
                    ``(B) Adjustment for inflation.--In the case of any 
                taxable year beginning after December 31, 2018, the 
                $15,000,000 amount under subparagraph (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(f)(3) 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, such amount shall be 
                rounded to the next lowest multiple of $1,000.''.
            (3) Change in method of accounting.--Paragraph (7) of 
        section 448(d) is amended--
                    (A) by striking ``In the case of'' and all that 
                follows up to subparagraph (A) and inserting: ``If a 
                taxpayer changes its method of accounting because the 
                taxpayer is prohibited from using the cash receipts and 
                disbursement method of accounting by reason of 
                subsection (a) or is no longer prohibited from using 
                such method by reason of such subsection--'', and
                    (B) by inserting ``and'' at the end of subparagraph 
                (A), by striking ``, and'' at the end of subparagraph 
                (B) and inserting a period, and by striking 
                subparagraph (C).
            (4) Conforming amendment.--Paragraph (3) of section 448(b) 
        is amended to read as follows:
            ``(3) Entities satisfying 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 
        meets the gross receipts test of subsection (c) for the taxable 
        year.''.
    (b) Application of Modifications to Farming Corporations.--
            (1) In general.--Paragraph (1) of section 447(d) is amended 
        to read as follows:
            ``(1) In general.--A corporation meets the requirements of 
        this subsection for any taxable year with respect to its gross 
        receipts if the corporation meets the gross receipts test of 
        section 448(c) for the taxable year.''.
            (2) Family corporations.--Paragraph (2) of section 447(d) 
        is amended--
                    (A) by striking subparagraph (A) and inserting the 
                following:
                    ``(A) In general.--In the case of a family 
                corporation, in applying section 448(c) for purposes of 
                paragraph (1)--
                            ``(i) paragraph (1) of section 448(c) shall 
                        be applied by substituting the applicable 
                        family corporation limit for the applicable 
                        dollar limit, and
                            ``(ii) the rules of subparagraph (B) shall 
                        apply in computing gross receipts.'',
                    (B) Clause (i) of section 447(d)(2)(B) is amended 
                by striking ``the last sentence of paragraph (1)'' and 
                inserting ``paragraph (2) of section 448(c)'', and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(D) Applicable family corporation limit.--
                            ``(i) In general.--The applicable family 
                        corporation limit is $25,000,000.
                            ``(ii) Adjustment for inflation.--In the 
                        case of any taxable year beginning after 
                        December 31, 2018, the $25,000,000 amount under 
                        clause (i) shall be increased by an amount 
                        equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for 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, such 
                        amount shall be rounded to the next lowest 
                        multiple of $1,000.''.
            (3) Exception for certain corporations.--Subsection (c) of 
        section 447 is amended by inserting ``for any taxable year'' 
        after ``not being a corporation''.
            (4) Change in method of accounting.--Section 447(f) is 
        amended--
                    (A) by striking ``In the case of'' and all that 
                follows up to paragraph (1) and inserting the 
                following: ``If a taxpayer changes its method of 
                accounting because the taxpayer is required to use an 
                accrual method of accounting by reason of subsection 
                (a) or is no longer required to use such method by 
                reason of such subsection--'', and
                    (B) by striking paragraph (2) and inserting the 
                following:
            ``(2) such change shall be treated as initiated by the 
        taxpayer, and''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 13103. CLARIFICATION OF INVENTORY ACCOUNTING RULES FOR SMALL 
              BUSINESSES.

    (a) Clarification of Inventory Rules.--
            (1) In general.--Section 471 is amended by redesignating 
        subsection (c) as subsection (d) and by inserting after 
        subsection (b) the following new subsection:
    ``(c) Small Business Taxpayers Not Required to Use Inventories.--
            ``(1) In general.--A qualified taxpayer shall not be 
        required to use inventories under this section for a taxable 
        year.
            ``(2) Treatment of taxpayers not using inventories.--A 
        qualified taxpayer who is not required under this subsection to 
        use inventories with respect to any property for a taxable year 
        beginning after December 31, 2017, may treat such property--
                    ``(A) as a non-incidental material or supply, or
                    ``(B) in a manner which conforms to the taxpayer's 
                method for accounting for such property in--
                            ``(i) an applicable financial statement (as 
                        defined in section 451(b)(1)), or
                            ``(ii) in the case of a taxpayer that does 
                        not have an applicable financial statement, 
                        their books and records used for purposes of 
                        determining tax imposed by this title.
            ``(3) Qualified taxpayer.--For purposes of this subsection, 
        the term `qualified taxpayer' means, with respect to any 
        taxable year, a taxpayer who meets the gross receipts test of 
        section 448(c) for the taxable year (or, in the case of a sole 
        proprietorship, who would meet such test if such proprietorship 
        were a corporation). Such term shall not include a tax shelter 
        prohibited from using the cash receipts and disbursements 
        method of accounting under section 448(a)(3).
            ``(4) Coordination with section 481.--If a taxpayer changes 
        its method of accounting because the taxpayer is not required 
        to use inventories by reason of paragraph (1) or is required to 
        use inventories because such paragraph no longer applies to the 
        taxpayer--
                    ``(A) such change shall be treated as initiated by 
                the taxpayer, and
                    ``(B) such change shall be treated as made with the 
                consent of the Secretary.''.
            (2) Conforming amendment.--Subsection (c) of section 263A 
        is amended by adding at the end the following new paragraph:
            ``(8) Exclusion from inventory rules.--Nothing in this 
        section shall require the use of inventories for any taxable 
        year by a qualified taxpayer (within the meaning of section 
        471(c)(3)) who is not required to use inventories under section 
        471 for such taxable year.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 13104. MODIFICATION OF RULES FOR UNIFORM CAPITALIZATION OF CERTAIN 
              EXPENSES.

    (a) In General.--Section 263A(b) is amended by striking all that 
follows paragraph (1) and inserting the following new paragraphs:
            ``(2) Property acquired for resale.--Real or personal 
        property described in section 1221(a)(1) which is acquired by 
        the taxpayer for resale.
            ``(3) Exception for small businesses.--This section shall 
        not apply to any taxpayer who meets the gross receipts test 
        under section 448(c) for the taxable year (or, in the case of a 
        sole proprietorship, who would meet such test if such 
        proprietorship were a corporation), other than a tax shelter 
        prohibited from using the cash receipts and disbursements 
        method of accounting under section 448(a)(3).
            ``(4) Films, sound recordings, books, etc.--For purposes of 
        this subsection, the term `tangible personal property' shall 
        include a film, sound recording, video tape, book, or similar 
        property.
            ``(5) Coordination with section 481.--If a taxpayer changes 
        its method of accounting because this section does not apply to 
        the taxpayer by reason of the exception under paragraph (3) or 
        this section applies to the taxpayer because such exception no 
        longer applies to the taxpayer--
                    ``(A) such change shall be treated as initiated by 
                the taxpayer, and
                    ``(B) such change shall be treated as 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. 13105. INCREASE IN GROSS RECEIPTS TEST FOR CONSTRUCTION CONTRACT 
              EXCEPTION TO PERCENTAGE OF COMPLETION METHOD.

    (a) Increase.--
            (1) In general.--Section 460(e)(1)(B) is amended--
                    (A) in the matter preceding clause (i), 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'', and
                    (B) by striking clause (ii) and inserting the 
                following:
                            ``(ii) who meets the gross receipts test of 
                        section 448(c) for the taxable year in which 
                        such contract is entered into (or, in the case 
                        of a sole proprietorship, who would meet such 
                        test if such proprietorship were a 
                        corporation).''.
            (2) Conforming amendments.--
                    (A) Section 460(e) is amended by striking 
                paragraphs (2) and (3) and by redesignating paragraphs 
                (4) through (6) as paragraphs (2) through (4), 
                respectively.
                    (B) The last sentence of section 56(a)(3) is 
                amended by striking ``section 460(e)(6)'' and inserting 
                ``section 460(e)(4)''.
    (b) Coordination With Section 481.--Section 460(e), as amended by 
subsection (a), is amended by adding at the end the following:
            ``(5) Coordination with section 481.--If a taxpayer changes 
        its method of accounting because subsections (a), (b), (c)(1), 
        and (c)(2) do not apply by reason of the exception under 
        paragraph (1)(B) or such subsections apply to the taxpayer 
        because such exception no longer applies to the taxpayer--
                    ``(A) such change shall be treated as initiated by 
                the taxpayer,
                    ``(B) such change shall be treated as made with the 
                consent of the Secretary, and
                    ``(C) such change shall be permitted only on a cut-
                off basis for all similarly classified contracts 
                entered into on or after the year of change and no 
                adjustments under section 481(a) shall be made.''.
    (c) Effective Date.--The amendment made by this section shall apply 
to contracts entered into after December 31, 2017, in taxable years 
ending after such date.

             PART III--COST RECOVERY AND ACCOUNTING METHODS

                        Subpart A--Cost Recovery

SEC. 13201. TEMPORARY 100-PERCENT EXPENSING FOR CERTAIN BUSINESS 
              ASSETS.

    (a) In General.--
            (1) 100 percent expensing.--Section 168(k) is amended--
                    (A) in paragraph (1)(A), by striking ``50 percent'' 
                and inserting ``100 percent'', and
                    (B) in paragraph (5)(A)(i), by striking ``50 
                percent'' and inserting ``100 percent''.
            (2) Extension through 2022.--Section 168(k) is amended--
                    (A) in the heading, by striking ``December 31, 
                2007, and Before January 1, 2020'' and inserting 
                ``September 27, 2017, and Before January 1, 2023'',
                    (B) in paragraph (2)--
                            (i) in subparagraph (A)(iii), clauses 
                        (i)(III) and (ii) of subparagraph (B), and 
                        subparagraph (E)(i), by striking ``January 1, 
                        2020'' each place it appears and inserting 
                        ``January 1, 2023'', and
                            (ii) in subparagraph (B)--
                                    (I) in clause (i)(II), by striking 
                                ``January 1, 2021'' and inserting 
                                ``January 1, 2024'', and
                                    (II) in the heading of clause (ii), 
                                by striking ``pre-january 1, 2020'' and 
                                inserting ``pre-january 1, 2023'', and
                    (C) in paragraph (5)(A), by striking ``January 1, 
                2020'' and inserting ``January 1, 2023''.
            (3) Exception for public utilities.--Paragraph (6) of 
        section 168(k) is amended to read as follows:
            ``(6) Exception for certain public utility property.--The 
        term `qualified property' shall not include any property which 
        is primarily used in a trade or business described in clause 
        (iv) of section 163(j)(7)(A).''.
            (4) Special rule.--Section 168(k) is amended by adding at 
        the end the following new paragraph:
            ``(8) Special rule for property placed in service during 
        certain periods.--
                    ``(A) In general.--In the case of qualified 
                property placed in service by the taxpayer during the 
                first taxable year ending after September 27, 2017, if 
                the taxpayer elects to have this paragraph apply for 
                such taxable year, paragraphs (1)(A) and (5)(A)(i) 
                shall be applied by substituting `50 percent' for `100 
                percent'.
                    ``(B) Form of election.--Any election under this 
                paragraph shall be made at such time and in such form 
                and manner as the Secretary may prescribe.''.
            (5) Coordination with section 280f.--Section 168(k)(2)(F) 
        is amended by striking clause (iii).
            (6) Qualified film and television and live theatrical 
        productions.--
                    (A) In general.--Clause (i) of section 
                168(k)(2)(A), as amended by section 13204, is amended--
                            (i) in subclause (II), by striking ``or'',
                            (ii) in subclause (III), by adding ``or'' 
                        after the comma, and
                            (iii) by adding at the end the following:
                            ``(IV) which is a qualified film or 
                        television production (as defined in subsection 
                        (d) of section 181) for which a deduction would 
                        have been allowable under section 181 without 
                        regard to subsections (a)(2) and (g) of such 
                        section or this subsection, or
                            ``(V) which is a qualified live theatrical 
                        production (as defined in subsection (e) of 
                        section 181) for which a deduction would have 
                        been allowable under section 181 without regard 
                        to subsections (a)(2) and (g) of such section 
                        or this subsection,''.
                    (B) Production placed in service.--Paragraph (2) of 
                section 168(k) is amended by adding at the end the 
                following:
                    ``(H) Production placed in service.--For purposes 
                of subparagraph (A)--
                            ``(i) a qualified film or television 
                        production shall be considered to be placed in 
                        service at the time of initial release or 
                        broadcast, and
                            ``(ii) a qualified live theatrical 
                        production shall be considered to be placed in 
                        service at the time of the initial live staged 
                        performance.''.
            (7) Conforming amendments.--
                    (A) Paragraph (5) of section 168(k) is amended by 
                striking subparagraph (F).
                    (B) Clause (ii) of section 460(c)(6)(B) is amended 
                by striking ``January 1, 2020 (January 1, 2021'' and 
                inserting ``January 1, 2023 (January 1, 2024''.
    (b) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by subsection (a) shall apply to property 
        placed in service after September 27, 2017, in taxable years 
        ending after such date.
            (2) Certain plants.--The amendments made by paragraphs 
        (1)(B) and (2)(C) of subsection (a) shall apply to specified 
        plants planted or grafted after September 27, 2017, in taxable 
        years ending after such date.

SEC. 13202. MODIFICATIONS TO DEPRECIATION LIMITATIONS ON LUXURY 
              AUTOMOBILES AND PERSONAL USE PROPERTY.

    (a) Luxury Automobiles.--
            (1) In general.--280F(a)(1)(A) is amended--
                    (A) in clause (i), by striking ``$2,560'' and 
                inserting ``$10,000'',
                    (B) in clause (ii), by striking ``$4,100'' and 
                inserting ``$16,000'',
                    (C) in clause (iii), by striking ``$2,450'' and 
                inserting ``$9,600'', and
                    (D) in clause (iv), by striking ``$1,475'' and 
                inserting ``$5,760''.
            (2) Conforming amendments.--
                    (A) Clause (ii) of section 280F(a)(1)(B) is amended 
                by striking ``$1,475'' in the text and heading and 
                inserting ``$5,760''.
                    (B) Paragraph (7) of section 280F(d) is amended--
                            (i) in subparagraph (A), by striking 
                        ``1988'' and inserting ``2018'', and
                            (ii) in subparagraph (B)(i)(II), by 
                        striking ``1987'' and inserting ``2017''.
    (b) Removal of Computer Equipment From Listed Property.--
            (1) In general.--Section 280F(d)(4)(A) is amended--
                    (A) by inserting ``and'' at the end of clause 
                (iii),
                    (B) by striking clause (iv), and
                    (C) by redesignating clause (v) as clause (iv).
            (2) Conforming amendment.--Section 280F(d)(4) is amended by 
        striking subparagraph (B) and by redesignating subparagraph (C) 
        as subparagraph (B).
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2017, in taxable 
years ending after such date.

SEC. 13203. MODIFICATIONS OF TREATMENT OF CERTAIN FARM PROPERTY.

    (a) Treatment of Certain Farm Property as 5-Year Property.--Clause 
(vii) of section 168(e)(3)(B) is amended by striking ``after December 
31, 2008, and which is placed in service before January 1, 2010'' and 
inserting ``after December 31, 2017''.
    (b) Repeal of Required Use of 150-Percent Declining Balance 
Method.--Section 168(b)(2) is amended by striking subparagraph (B) and 
by redesignating subparagraphs (C) and (D) as subparagraphs (B) and 
(C), respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2017, in taxable 
years ending after such date.

SEC. 13204. APPLICABLE RECOVERY PERIOD FOR REAL PROPERTY.

    (a) Residential Rental Property and Nonresidential Real Property.--
            (1) Reduction of recovery period.--The table contained in 
        section 168(c) is amended--
                    (A) by striking ``27.5 years'' and inserting ``25 
                years'', and
                    (B) by striking ``39 years'' and inserting ``25 
                years''.
            (2) Statutory recovery period.--The table contained in 
        section 467(e)(3)(A) is amended--
                    (A) by inserting ``(other than residential rental 
                property and nonresidential real property)'' after 
                ``15-year and 20-year property'', and
                    (B) by striking ``19 years'' and inserting ``25 
                years''.
            (3) Conforming amendment.--Clause (ii) of section 
        168(e)(2)(B) is amended by striking ``27.5 years'' and 
        inserting ``25 years''.
    (b) Improvements to Real Property.--
            (1) Classification of qualified improvement property as 10-
        year property.--Subparagraph (D) of section 168(e)(3) is 
        amended--
                    (A) in clause (iii), by striking ``and'',
                    (B) in clause (iv), by striking the period and 
                inserting ``, and'', and
                    (C) by adding at the end the following new clause:
                            ``(v) any qualified improvement property 
                        described in subsection (e)(6).''.
            (2) Elimination of qualified leasehold improvement, 
        qualified restaurant, and qualified retail improvement 
        property.--Subsection (e) of section 168 is amended--
                    (A) in subparagraph (E) of paragraph (3)--
                            (i) by striking clauses (iv), (v), and 
                        (ix),
                            (ii) in clause (vii), by inserting ``and'' 
                        at the end,
                            (iii) in clause (viii), by striking ``, 
                        and'' and inserting a period, and
                            (iv) by redesignating clauses (vi), (vii), 
                        and (viii), as so amended, as clauses (iv), 
                        (v), and (vi), respectively, and
                    (B) by striking paragraphs (6), (7), and (8).
            (3) Application of straight line method to qualified 
        improvement property.--Paragraph (3) of section 168(b) is 
        amended--
                    (A) by striking subparagraphs (G), (H), and (I), 
                and
                    (B) by inserting after subparagraph (F) the 
                following new subparagraph:
                    ``(G) Qualified improvement property described in 
                subsection (e)(6).''.
            (4) Alternative depreciation system.--
                    (A) Electing real property trade or business.--
                Subsection (g) of section 168 is amended--
                            (i) in paragraph (1)--
                                    (I) in subparagraph (D), by 
                                striking ``and'' at the end,
                                    (II) in subparagraph (E), by 
                                inserting ``and'' at the end, and
                                    (III) by inserting after 
                                subparagraph (E) the following new 
                                subparagraph:
                    ``(F) any property described in paragraph (8),'', 
                and
                            (ii) by adding at the end the following new 
                        paragraph:
            ``(8) Electing real property trade or business.--The 
        property described in this paragraph shall consist of any 
        nonresidential real property, residential rental property, and 
        qualified improvement property held by an electing real 
        property trade or business (as defined in 163(j)(7)(B)).''.
                    (B) Qualified improvement property.--The table 
                contained in subparagraph (B) of section 168(g)(3) is 
                amended--
                            (i) by inserting after the item relating to 
                        subparagraph (D)(ii) the following new item:
        ``(D)(v)...........................................       20''.
                                    , and
                            (ii) by striking the item relating to 
                        subparagraph (E)(iv) and all that follows 
                        through the item relating to subparagraph 
                        (E)(ix) and inserting the following:
        ``(E)(iv)..........................................         20 
        (E)(v).............................................         30 
        (E)(vi)............................................       35''.
                    (C) Applicable recovery period for residential 
                rental property.--The table contained in subparagraph 
                (C) of section 168(g)(2) is amended by striking clauses 
                (iii) and (iv) and inserting the following:
        ``(iii) Residential rental property................   30 years 
        (iv) Nonresidential real property..................   40 years 
        (v) Any railroad grading or tunnel bore or water    50 years''.
            utility property.
            (5) Conforming amendments.--
                    (A) Clause (i) of section 168(k)(2)(A) is amended--
                            (i) in subclause (II), by inserting ``or'' 
                        after the comma,
                            (ii) in subclause (III), by striking ``or'' 
                        at the end, and
                            (iii) by striking subclause (IV).
                    (B) Section 168 is amended--
                            (i) in subsection (e), as amended by 
                        paragraph (2)(B), by adding at the end the 
                        following:
            ``(6) Qualified improvement property.--
                    ``(A) In general.--The term `qualified improvement 
                property' means any improvement to an interior portion 
                of a building which is nonresidential real property if 
                such improvement is placed in service after the date 
                such building was first placed in service.
                    ``(B) Certain improvements not included.--Such term 
                shall not include any improvement for which the 
                expenditure is attributable to--
                            ``(i) the enlargement of the building,
                            ``(ii) any elevator or escalator, or
                            ``(iii) the internal structural framework 
                        of the building.''.
                            (ii) in subsection (k), by striking 
                        paragraph (3).
    (c) Effective Date.--
            (1) Application.--The amendments made by this section shall 
        apply to property placed in service after December 31, 2017.
            (2) Shorter recovery period or more accelerated 
        depreciation method.--In the case of property placed in service 
        before January 1, 2018, if the amendments made by this section 
        result in--
                    (A) an applicable recovery period which is less 
                than the applicable recovery period for such property 
                before enactment of such amendments, or
                    (B) an applicable depreciation method which is more 
                accelerated than the applicable depreciation method for 
                such property before enactment of such amendments,
        the depreciation deduction for such property shall, for any 
        taxable year beginning after December 31, 2017, be determined 
        as if such property were placed in service on January 1, 2018.

SEC. 13205. USE OF ALTERNATIVE DEPRECIATION SYSTEM FOR ELECTING FARMING 
              BUSINESSES.

    (a) In General.--Section 168(g)(1), as amended by section 13204, is 
amended by striking ``and'' at the end of subparagraph (E), by 
inserting ``and'' at the end of subparagraph (F), and by inserting 
after subparagraph (F) the following new subparagraph:
                    ``(G) any property with a recovery period of 10 
                years or more which is held by an electing farming 
                business (as defined in section 163(j)(7)(C)),''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 13206. 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) Change in Method of Accounting.--The amendments made by 
subsection (a) shall be treated as a change in method of accounting for 
purposes of section 481 of the Internal Revenue Code of 1986 and--
            (1) such change shall be treated as initiated by the 
        taxpayer,
            (2) such change shall be treated as made with the consent 
        of the Secretary, and
            (3) such change shall be applied only on a cut-off basis 
        for any research or experimental expenditures paid or incurred 
        in taxable years beginning after December 31, 2025, and no 
        adjustments under section 481(a) shall be made.
    (c) 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.''.
    (d) Conforming Amendments.--
            (1) Section 41(d)(1)(A) is amended by striking ``expenses 
        under section 174'' and inserting ``specified research or 
        experimental expenditures under section 174''.
            (2) Subsection (c) of section 280C is amended--
                    (A) by striking paragraph (1) and inserting the 
                following:
            ``(1) In general.--If--
                    ``(A) the amount of the credit determined for the 
                taxable year under section 41(a)(1), exceeds
                    ``(B) the amount allowable as a deduction for such 
                taxable year for qualified research expenses or basic 
                research expenses,
        the amount chargeable to capital account for the taxable year 
        for such expenses shall be reduced by the amount of such 
        excess.'',
                    (B) by striking paragraph (2),
                    (C) by redesignating paragraphs (3) (as amended by 
                this Act) and (4) as paragraphs (2) and (3), 
                respectively, and
                    (D) in paragraph (2), as redesignated by 
                subparagraph (C), by striking ``paragraphs (1) and 
                (2)'' and inserting ``paragraph (1)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2025.

SEC. 13207. EXPENSING OF CERTAIN COSTS OF REPLANTING CITRUS PLANTS LOST 
              BY REASON OF CASUALTY.

    (a) In General.--Section 263A(d)(2) is amended by adding at the end 
the following new subparagraph:
                    ``(C) Special temporary rule for citrus plants lost 
                by reason of casualty.--
                            ``(i) In general.--In the case of the 
                        replanting of citrus plants, subparagraph (A) 
                        shall apply to amounts paid or incurred by a 
                        person (other than the taxpayer described in 
                        subparagraph (A)) if--
                                    ``(I) the taxpayer described in 
                                subparagraph (A) has an equity interest 
                                of not less than 50 percent in the 
                                replanted citrus plants at all times 
                                during the taxable year in which such 
                                amounts were paid or incurred and such 
                                other person holds any part of the 
                                remaining equity interest, or
                                    ``(II) such other person acquired 
                                the entirety of such taxpayer's equity 
                                interest in the land on which the lost 
                                or damaged citrus plants were located 
                                at the time of such loss or damage, and 
                                the replanting is on such land.
                            ``(ii) Termination.--Clause (i) shall not 
                        apply to any cost paid or incurred after the 
                        date which is 10 years after the date of the 
                        enactment of the Tax Cuts and Jobs Act.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to costs paid or incurred after the date of the enactment of this Act.

                     Subpart B--Accounting Methods

SEC. 13221. CERTAIN SPECIAL RULES FOR TAXABLE YEAR OF INCLUSION.

    (a) Inclusion Not Later Than for Financial Accounting Purposes.--
Section 451 is amended by redesignating subsections (b) through (i) as 
subsections (c) through (j), respectively, and by inserting after 
subsection (a) the following new subsection:
    ``(b) Inclusion Not Later Than for Financial Accounting Purposes.--
Notwithstanding part V of subchapter P--
            ``(1) Financial statement.--
                    ``(A) In general.--In the case of a taxpayer the 
                taxable income of which is computed under the accrual 
                method of accounting, the amount of any portion of any 
                item of gross income shall be included in gross income 
                not later than the taxable year with respect to which 
                such amount is taken into account as income in--
                            ``(i) an applicable financial statement of 
                        the taxpayer, or
                            ``(ii) such other financial statement as 
                        the Secretary may specify for purposes of this 
                        subsection.
                    ``(B) Exception.--In the case of a taxpayer which 
                does not have a financial statement described in clause 
                (i) or (ii) of subparagraph (A) for a taxable year, 
                such subparagraph shall not apply.
            ``(2) Coordination with special rules for long-term 
        contracts.--Paragraph (1) shall not apply with respect to any 
        item of income to which section 460 applies.
            ``(3) 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 agency for purposes other than 
                        Federal tax purposes, but only if there is no 
                        statement of the taxpayer described in clause 
                        (i) or (ii),
                    ``(B) a financial statement which is made on the 
                basis of international financial reporting standards 
                and is filed by the taxpayer with an agency of a 
                foreign government which is equivalent to the United 
                States Securities and Exchange Commission and which has 
                reporting standards not less stringent than the 
                standards required by such Commission, but only if 
                there is no statement of the taxpayer described in 
                subparagraph (A), or
                    ``(C) a financial statement filed by the taxpayer 
                with any other regulatory or governmental body 
                specified by the Secretary, but only if there is no 
                statement of the taxpayer described in subparagraph (A) 
                or (B).
            ``(4) Allocation of transaction price.--For purposes of 
        this subsection, in the case of a contract which contains 
        multiple performance obligations, the allocation of the 
        transaction price to each performance obligation shall be equal 
        to the amount allocated to each performance obligation for 
        purposes of including such item in revenue in the applicable 
        financial statement of the taxpayer.
            ``(5) Group of entities.--For purposes of paragraph (1), if 
        the financial results of a taxpayer are reported on the 
        applicable financial statement (as defined in paragraph (3)) 
        for a group of entities, such statement may be treated as the 
        applicable financial statement of the taxpayer.''.
    (b) Treatment of Advance Payments.--Section 451, as amended by 
subsection (a), is amended by redesignating subsections (c) through (j) 
as subsections (d) through (k), respectively, and by inserting after 
subsection (b) the following new subsection:
    ``(c) Treatment of Advance Payments.--
            ``(1) In general.--A taxpayer which computes taxable income 
        under the accrual method of accounting, and receives any 
        advance payment during the taxable year, shall--
                    ``(A) except as provided in subparagraph (B), 
                include such advance payment in gross income for such 
                taxable year, or
                    ``(B) if the taxpayer elects the application of 
                this subparagraph with respect to the category of 
                advance payments to which such advance payment belongs, 
                the taxpayer shall--
                            ``(i) to the extent that any portion of 
                        such advance payment is required under 
                        subsection (b) to be included in gross income 
                        in the taxable year in which such payment is 
                        received, so include such portion, and
                            ``(ii) include the remaining portion of 
                        such advance payment in gross income in the 
                        taxable year following the taxable year in 
                        which such payment is received.
            ``(2) Election.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the election under paragraph (1)(B) 
                shall be made at such time, in such form and manner, 
                and with respect to such categories of advance 
                payments, as the Secretary may provide.
                    ``(B) Period to which election applies.--An 
                election under paragraph (1)(B) shall be effective for 
                the taxable year with respect to which it is first made 
                and for all subsequent taxable years, unless the 
                taxpayer secures the consent of the Secretary to revoke 
                such election. For purposes of this title, the 
                computation of taxable income under an election made 
                under paragraph (1)(B) shall be treated as a method of 
                accounting.
            ``(3) Taxpayers ceasing to exist.--Except as otherwise 
        provided by the Secretary, the election under paragraph (1)(B) 
        shall not apply with respect to advance payments received by 
        the taxpayer during a taxable year if such taxpayer ceases to 
        exist during (or with the close of) such taxable year.
            ``(4) Advance payment.--For purposes of this subsection--
                    ``(A) In general.--The term `advance payment' means 
                any payment--
                            ``(i) the full inclusion of which in the 
                        gross income of the taxpayer for the taxable 
                        year of receipt is a permissible method of 
                        accounting under this section (determined 
                        without regard to this subsection),
                            ``(ii) any portion of which is included in 
                        revenue by the taxpayer in a financial 
                        statement described in clause (i) or (ii) of 
                        subsection (b)(1)(A) for a subsequent taxable 
                        year, and
                            ``(iii) which is for goods, services, or 
                        such other items as may be identified by the 
                        Secretary for purposes of this clause.
                    ``(B) Exclusions.--Except as otherwise provided by 
                the Secretary, such term shall not include--
                            ``(i) rent,
                            ``(ii) insurance premiums governed by 
                        subchapter L,
                            ``(iii) payments with respect to financial 
                        instruments,
                            ``(iv) payments with respect to warranty or 
                        guarantee contracts under which a third party 
                        is the primary obligor,
                            ``(v) payments subject to section 871(a), 
                        881, 1441, or 1442,
                            ``(vi) payments in property to which 
                        section 83 applies, and
                            ``(vii) any other payment identified by the 
                        Secretary for purposes of this subparagraph.
                    ``(C) Receipt.--For purposes of this subsection, an 
                item of gross income is received by the taxpayer if it 
                is actually or constructively received, or if it is due 
                and payable to the taxpayer.
                    ``(D) Allocation of transaction price.--For 
                purposes of this subsection, rules similar to 
                subsection (b)(4) shall apply.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
    (d) Coordination With Section 481.--
            (1) In general.--In the case of any qualified change in 
        method of accounting for the taxpayer's first taxable year 
        beginning after December 31, 2017--
                    (A) such change shall be treated as initiated by 
                the taxpayer, and
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury.
            (2) Qualified change in method of accounting.--For purposes 
        of this subsection, the term ``qualified change in method of 
        accounting'' means any change in method of accounting which--
                    (A) is required by the amendments made by this 
                section, or
                    (B) was prohibited under the Internal Revenue Code 
                of 1986 prior to such amendments and is permitted under 
                such Code after such amendments.

          PART IV--BUSINESS-RELATED EXCLUSIONS AND DEDUCTIONS

SEC. 13301. LIMITATION ON DEDUCTION FOR INTEREST.

    (a) In General.--Section 163(j) is amended to read as follows:
    ``(j) Limitation on Business Interest.--
            ``(1) In general.--The amount allowed as a deduction under 
        this chapter for any taxable year for business interest shall 
        not exceed the sum of--
                    ``(A) the business interest income of such taxpayer 
                for such taxable year, plus
                    ``(B) 30 percent of the adjusted taxable income of 
                such taxpayer for such taxable year.
        The amount determined under subparagraph (B) shall not be less 
        than zero.
            ``(2) Carryforward of disallowed business interest.--The 
        amount of any business interest not allowed as a deduction for 
        any taxable year by reason of paragraph (1) shall be treated as 
        business interest paid or accrued in the succeeding taxable 
        year.
            ``(3) 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.
            ``(4) 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, and
                            ``(ii) the adjusted taxable income of each 
                        partner of such partnership--
                                    ``(I) shall be determined without 
                                regard to such partner's distributive 
                                share of the non-separately stated 
                                taxable income or loss of such 
                                partnership, and
                                    ``(II) shall be increased by such 
                                partner's distributive share of such 
                                partnership's excess taxable income.
                        For purposes of clause (ii)(II), a partner's 
                        distributive share of partnership excess 
                        taxable income shall be determined in the same 
                        manner as the partner's distributive share of 
                        nonseparately stated taxable income or loss of 
                        the partnership.
                    ``(B) Special rules for carryforwards.--
                            ``(i) In general.--The amount of any 
                        business interest not allowed as a deduction to 
                        a partnership for any taxable year by reason of 
                        paragraph (1) for any taxable year--
                                    ``(I) shall not be treated under 
                                paragraph (2) as business interest paid 
                                or accrued by the partnership in the 
                                succeeding taxable year, and
                                    ``(II) shall, subject to clause 
                                (ii), be treated as excess business 
                                interest which is allocated to each 
                                partner in the same manner as the non-
                                separately stated taxable income or 
                                loss of the partnership.
                            ``(ii) Treatment of excess business 
                        interest allocated to partners.--If a partner 
                        is allocated any excess business interest from 
                        a partnership under clause (i) for any taxable 
                        year--
                                    ``(I) such excess business interest 
                                shall be treated as business interest 
                                paid or accrued by the partner in the 
                                next succeeding taxable year in which 
                                the partner is allocated excess taxable 
                                income from such partnership, but only 
                                to the extent of such excess taxable 
                                income, and
                                    ``(II) any portion of such excess 
                                business interest remaining after the 
                                application of subclause (I) shall, 
                                subject to the limitations of subclause 
                                (I), be treated as business interest 
                                paid or accrued in succeeding taxable 
                                years.
                        For purposes of applying this paragraph, excess 
                        taxable income allocated to a partner from a 
                        partnership for any taxable year shall not be 
                        taken into account under paragraph (1)(A) with 
                        respect to any business interest other than 
                        excess business interest from the partnership 
                        until all such excess business interest for 
                        such taxable year and all preceding taxable 
                        years has been treated as paid or accrued under 
                        clause (ii).
                            ``(iii) Basis adjustments.--
                                    ``(I) In general.--The adjusted 
                                basis of a partner in a partnership 
                                interest shall be reduced (but not 
                                below zero) by the amount of excess 
                                business interest allocated to the 
                                partner under clause (i)(II).
                                    ``(II) Special rule for 
                                dispositions.--If a partner disposes of 
                                a partnership interest, the adjusted 
                                basis of the partner in the partnership 
                                interest shall be increased immediately 
                                before the disposition by the amount of 
                                the excess (if any) of the amount of 
                                the basis reduction under subclause (I) 
                                over the portion of any excess business 
                                interest allocated to the partner under 
                                clause (i)(II) which has previously 
                                been treated under clause (ii) as 
                                business interest paid or accrued by 
                                the partner. The preceding sentence 
                                shall also apply to transfers of the 
                                partnership interest (including by 
                                reason of death) in a transaction in 
                                which gain is not recognized in whole 
                                or in part. No deduction shall be 
                                allowed to the transferor or transferee 
                                under this chapter for any excess 
                                business interest resulting in a basis 
                                increase under this subclause.
                    ``(C) Excess taxable income.--The term `excess 
                taxable income' means, with respect to any partnership, 
                the amount which bears the same ratio to the 
                partnership's adjusted taxable income as--
                            ``(i) the excess (if any) of--
                                    ``(I) the amount determined for the 
                                partnership under paragraph (1)(B), 
                                over
                                    ``(II) the amount (if any) by which 
                                the business interest of the 
                                partnership exceeds the business 
                                interest income of the partnership, 
                                bears to
                            ``(ii) the amount determined for the 
                        partnership under paragraph (1)(B).
                    ``(D) 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.
            ``(5) 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)).
            ``(6) 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)).
            ``(7) Trade or business.--For purposes of this subsection--
                    ``(A) In general.--The term `trade or business' 
                shall not include--
                            ``(i) the trade or business of performing 
                        services as an employee,
                            ``(ii) any electing real property trade or 
                        business,
                            ``(iii) any electing farming business, or
                            ``(iv) 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, by a public service or 
                        public utility commission or other similar body 
                        of any State or political subdivision thereof, 
                        or by the governing or ratemaking body of an 
                        electric cooperative.
                    ``(B) Electing real property trade or business.--
                For purposes of this paragraph, the term `electing real 
                property trade or business' means any trade or business 
                which is described in section 469(c)(7)(C) and which 
                makes an election under this subparagraph. Any such 
                election shall be made at such time and in such manner 
                as the Secretary shall prescribe, and, once made, shall 
                be irrevocable.
                    ``(C) Electing farming business.--For purposes of 
                this paragraph, the term `electing farming business' 
                means a farming business (as defined in section 
                263A(e)(4)) which makes an election under this 
                subparagraph. Any such election shall be made at such 
                time and in such manner as the Secretary shall 
                prescribe, and, once made, shall be irrevocable.
            ``(8) 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) the amount of any deduction allowed 
                        under section 199 or 199A, and
                    ``(B) computed with such other adjustments as 
                provided by the Secretary.
            ``(9) Cross references.--
                    ``(A) For requirement that an electing real 
                property trade or business use the alternative 
                depreciation system, see section 168(g)(1)(F).
                    ``(B) For requirement that an electing farming 
                business use the alternative depreciation system, see 
                section 168(g)(1)(G).''.
    (b) 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 business interest.--The 
        carryover of disallowed business interest described in section 
        163(j)(2) 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(n) 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).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 13302. MODIFICATION OF NET OPERATING LOSS DEDUCTION.

    (a) Limitation on Deduction.--
            (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 (80 percent in the case of taxable years 
        beginning after December 31, 2022) 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'.''.
    (b) Repeal of Net Operating Loss Carryback; Indefinite 
Carryforward.--
            (1) In general.--Section 172(b)(1)(A) is amended--
                    (A) by striking ``shall be a net operating loss 
                carryback to each of the 2 taxable years'' in clause 
                (i) and inserting ``except as otherwise provided in 
                this paragraph, shall not be a net operating loss 
                carryback to any taxable year'', and
                    (B) by striking ``to each of the 20 taxable years'' 
                in clause (ii) and inserting ``to each taxable year''.
            (2) Conforming amendment.--Section 172(b)(1) is amended by 
        striking subparagraphs (B) through (F).
    (c) Treatment of Farming Losses.--
            (1) Allowance of carrybacks.--Section 172(b)(1), as amended 
        by subsection (b)(2), is amended by adding at the end the 
        following new subparagraph:
                    ``(B) Farming losses.--
                            ``(i) In general.--In the case of any 
                        portion of a net operating loss for the taxable 
                        year which is a farming loss with respect to 
                        the taxpayer, such loss shall be a net 
                        operating loss carryback to each of the 2 
                        taxable years preceding the taxable year of 
                        such loss.
                            ``(ii) Farming loss.--For purposes of this 
                        section, the term `farming loss' means the 
                        lesser of--
                                    ``(I) the amount which would be the 
                                net operating loss for the taxable year 
                                if only income and deductions 
                                attributable to farming businesses (as 
                                defined in section 263A(e)(4)) are 
                                taken into account, or
                                    ``(II) the amount of the net 
                                operating loss for such taxable year.
                            ``(iii) Coordination with paragraph (2).--
                        For purposes of applying paragraph (2), a 
                        farming loss for any taxable year shall be 
                        treated as a separate net operating loss for 
                        such taxable year to be taken into account 
                        after the remaining portion of the net 
                        operating loss for such taxable year.
                            ``(iv) Election.--Any taxpayer entitled to 
                        a 2-year carryback under clause (i) from any 
                        loss year may elect not to have such clause 
                        apply to such loss year. Such election shall be 
                        made in such manner as prescribed by the 
                        Secretary and shall be made by the due date 
                        (including extensions of time) for filing the 
                        taxpayer's return for the taxable year of the 
                        net operating loss. Such election, once made 
                        for any taxable year, shall be irrevocable for 
                        such taxable year.''.
            (2) Conforming amendments.--
                    (A) Section 172 is amended by striking subsections 
                (f), (g), and (h), and by redesignating subsection (i) 
                as subsection (f).
                    (B) Section 537(b)(4) is amended by inserting ``(as 
                in effect before the date of enactment of the Tax Cuts 
                and Jobs Act)'' after ``as defined in section 172(f)''.
    (d) Treatment of Certain Insurance Losses.--
            (1) Treatment of carryforwards and carrybacks.--Section 
        172(b)(1), as amended by subsections (b)(2) and (c)(1), is 
        amended by adding at the end the following new subparagraph:
                    ``(C) Insurance companies.--In the case of an 
                insurance company (as defined in section 816(a)) other 
                than a life insurance company, the net operating loss 
                for any taxable year--
                            ``(i) shall be a net operating loss 
                        carryback to each of the 2 taxable years 
                        preceding the taxable year of such loss, and
                            ``(ii) shall be a net operating loss 
                        carryover to each of the 20 taxable years 
                        following the taxable year of the loss.''.
            (2) Exemption from limitation.--Section 172, as amended by 
        subsection (c)(2)(A), is amended by redesignating subsection 
        (f) as subsection (g) and inserting after subsection (e) the 
        following new subsection:
    ``(f) Special Rule for Insurance Companies.--In the case of an 
insurance company (as defined in section 816(a)) other than a life 
insurance company--
            ``(1) the amount of the deduction allowed under subsection 
        (a) shall be the aggregate of the net operating loss carryovers 
        to such year, plus the net operating loss carrybacks to such 
        year, and
            ``(2) subparagraph (C) of subsection (b)(2) shall not 
        apply.''.
    (e) Effective Date.--
            (1) Net operating loss limitation.--The amendments made by 
        subsections (a) and (d)(2) shall apply to losses arising in 
        taxable years beginning after December 31, 2017.
            (2) Carryforwards and carrybacks.--The amendments made by 
        subsections (b), (c), and (d)(1) shall apply to net operating 
        losses arising in taxable years ending after December 31, 2017.

SEC. 13303. 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).
            (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) Section 1031(i) is amended to read as follows:
    ``(i) Special Rules for Mutual Ditch, Reservoir, or Irrigation 
Company Stock.--For purposes of subsection (a), shares in a mutual 
ditch, reservoir, or irrigation company shall be treated as real 
property if at the time of the exchange--
            ``(1) the mutual ditch, reservoir, or irrigation company is 
        an organization described in section 501(c)(12)(A) (determined 
        without regard to the percentage of its income that is 
        collected from its members for the purpose of meeting losses 
        and expenses), and
            ``(2) the shares in such company have been recognized by 
        the highest court of the State in which such company was 
        organized or by applicable State statute as constituting or 
        representing real property or an interest in real property.''.
            (6) The heading of section 1031 is amended by striking 
        ``property'' and inserting ``real property''.
            (7) 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. 13304. LIMITATION ON DEDUCTION BY EMPLOYERS OF EXPENSES FOR FRINGE 
              BENEFITS.

    (a) No Deduction Allowed for Entertainment Expenses.--
            (1) In general.--Section 274(a) is amended--
                    (A) in paragraph (1)(A), by striking ``unless'' and 
                all that follows through ``trade or business,'',
                    (B) by striking the flush sentence at the end of 
                paragraph (1), and
                    (C) by striking paragraph (2)(C).
            (2) Conforming amendments.--
                    (A) Section 274(d) is amended--
                            (i) by striking paragraph (2) and 
                        redesignating paragraphs (3) and (4) as 
                        paragraphs (2) and (3), respectively, and
                            (ii) in the flush text following paragraph 
                        (3) (as so redesignated)--
                                    (I) by striking ``, entertainment, 
                                amusement, recreation, or use of the 
                                facility or property,'' 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'',
                    (B) Section 274 is amended by striking subsection 
                (l).
                    (C) Section 274(n) is amended by striking ``and 
                Entertainment'' in the heading.
                    (D) Section 274(n)(1) is amended to read as 
                follows:
            ``(1) In general.--The amount allowable as a deduction 
        under this chapter for any expense for food or beverages shall 
        not exceed 50 percent of the amount of such expense which would 
        (but for this paragraph) be allowable as a deduction under this 
        chapter.''.
                    (E) Section 274(n)(2) is amended--
                            (i) in subparagraph (B), by striking ``in 
                        the case of an expense for food or 
                        beverages,'',
                            (ii) by striking subparagraph (C) and 
                        redesignating subparagraphs (D) and (E) as 
                        subparagraphs (C) and (D), respectively,
                            (iii) by striking ``of subparagraph (E)'' 
                        the last sentence and inserting ``of 
                        subparagraph (D)'', and
                            (iv) by striking ``in subparagraph (D)'' in 
                        the last sentence and inserting ``in 
                        subparagraph (C)''.
                    (F) Clause (iv) of section 7701(b)(5)(A) is amended 
                to read as follows:
                            ``(iv) a professional athlete who is 
                        temporarily in the United States to compete in 
                        a sports event--
                                    ``(I) which is organized for the 
                                primary purpose of benefiting an 
                                organization which is described in 
                                section 501(c)(3) and exempt from tax 
                                under section 501(a),
                                    ``(II) all of the net proceeds of 
                                which are contributed to such 
                                organization, and,
                                    ``(III) which utilizes volunteers 
                                for substantially all of the work 
                                performed in carrying out such 
                                event.''.
    (b) Only 50 Percent of Expenses for Meals Provided on or Near 
Business Premises Allowed as Deduction.--Paragraph (2) of section 
274(n), as amended by subsection (a), is amended--
            (1) by striking subparagraph (B),
            (2) by redesignating subparagraphs (C) and (D) as 
        subparagraphs (B) and (C), respectively,
            (3) by striking ``of subparagraph (D)'' in the last 
        sentence and inserting ``of subparagraph (C)'', and
            (4) by striking ``in subparagraph (C)'' in the last 
        sentence and inserting ``in subparagraph (B)''.
    (c) Treatment of Transportation Benefits.--Section 274, as amended 
by subsection (a), is amended--
            (1) in subsection (a)--
                    (A) in the heading, by striking ``or Recreation'' 
                and inserting ``Recreation, or Qualified Transportation 
                Fringes'', and
                    (B) by adding at the end the following new 
                paragraph:
            ``(4) Qualified transportation fringes.--No deduction shall 
        be allowed under this chapter for the expense of any qualified 
        transportation fringe (as defined in section 132(f)) provided 
        to an employee of the taxpayer.'', and
            (2) by inserting after subsection (k) the following new 
        subsection:
    ``(l) Transportation and Commuting Benefits.--No deduction shall be 
allowed under this chapter for any expense incurred for providing any 
transportation, or any payment or reimbursement, to an employee of the 
taxpayer in connection with travel between the employee's residence and 
place of employment, except as necessary for ensuring the safety of the 
employee.''.
    (d) Elimination of Deduction for Meals Provided at Convenience of 
Employer.--Section 274, as amended by subsection (c), is amended--
            (1) by redesignating subsection (o) as subsection (p), and
            (2) by inserting after subsection (n) the following new 
        subsection:
    ``(o) Meals Provided at Convenience of Employer.--No deduction 
shall be allowed under this chapter for--
            ``(1) any expense for the operation of a facility described 
        in section 132(e)(2), and any expense for food or beverages, 
        including under section 132(e)(1), associated with such 
        facility, or
            ``(2) any expense for meals described in section 119(a).''.
    (e) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to amounts incurred 
        or paid after December 31, 2017.
            (2) Effective date for elimination of deduction for meals 
        provided at convenience of employer.--The amendments made by 
        subsection (d) shall apply to amounts incurred or paid after 
        December 31, 2025.

SEC. 13305. 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), 135(c)(4)(A), 
        137(b)(3)(A), 219(g)(3)(A)(ii), 221(b)(2)(C), 222(b)(2)(C), 
        246(b)(1), and 469(i)(3)(F)(iii) are each amended by striking 
        ``199,''.
            (2) Section 170(b)(2)(D), as amended by section 11011, is 
        amended by striking clause (iv) and by redesignating clauses 
        (v) and (vi) as redesignating clauses (iv) as clause (v), 
        respectively.
            (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).
    (c) Effective Date.--The amendments made by this subsection shall 
apply to taxable years beginning after December 31, 2018.

SEC. 13306. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES, AND OTHER 
              AMOUNTS.

    (a) Denial of Deduction.--
            (1) In general.--Subsection (f) of section 162 is amended 
        to read as follows:
    ``(f) Fines, Penalties, and Other Amounts.--
            ``(1) In general.--Except as provided in the following 
        paragraphs of this subsection, no deduction otherwise allowable 
        shall be allowed under this chapter for any amount paid or 
        incurred (whether by suit, agreement, or otherwise) to, or at 
        the direction of, a government or governmental entity in 
        relation to the violation of any law or the investigation or 
        inquiry by such government or entity into the potential 
        violation of any law.
            ``(2) Exception for amounts constituting restitution or 
        paid to come into compliance with law.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any amount that--
                            ``(i) the taxpayer establishes--
                                    ``(I) constitutes restitution 
                                (including remediation of property) for 
                                damage or harm which was or may be 
                                caused by the violation of any law or 
                                the potential violation of any law, or
                                    ``(II) is paid to come into 
                                compliance with any law which was 
                                violated or otherwise involved in the 
                                investigation or inquiry described in 
                                paragraph (1),
                            ``(ii) is identified as restitution or as 
                        an amount paid to come into compliance with 
                        such law, as the case may be, in the court 
                        order or settlement agreement, and
                            ``(iii) in the case of any amount of 
                        restitution for failure to pay any tax imposed 
                        under this title in the same manner as if such 
                        amount were such tax, would have been allowed 
                        as a deduction under this chapter if it had 
                        been timely paid.
                The identification under clause (ii) alone shall not be 
                sufficient to make the establishment required under 
                clause (i).
                    ``(B) Limitation.--Subparagraph (A) shall not apply 
                to any amount paid or incurred as reimbursement to the 
                government or entity for the costs of any investigation 
                or litigation.
            ``(3) Exception for amounts paid or incurred as the result 
        of certain court orders.--Paragraph (1) shall not apply to any 
        amount paid or incurred by reason of any order of a court in a 
        suit in which no government or governmental entity is a party.
            ``(4) Exception for taxes due.--Paragraph (1) shall not 
        apply to any amount paid or incurred as taxes due.
            ``(5) Treatment of certain nongovernmental regulatory 
        entities.--For purposes of this subsection, the following 
        nongovernmental entities shall be treated as governmental 
        entities:
                    ``(A) Any nongovernmental entity which exercises 
                self-regulatory powers (including imposing sanctions) 
                in connection with a qualified board or exchange (as 
                defined in section 1256(g)(7)).
                    ``(B) To the extent provided in regulations, any 
                nongovernmental entity which exercises self-regulatory 
                powers (including imposing sanctions) as part of 
                performing an essential governmental function.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to amounts paid or incurred on or after the date of 
        the enactment of this Act, except that such amendments shall 
        not apply to amounts paid or incurred under any binding order 
        or agreement entered into before such date. Such exception 
        shall not apply to an order or agreement requiring court 
        approval unless the approval was obtained before such date.
    (b) Reporting of Deductible Amounts.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 is amended by inserting after section 6050W the 
        following new section:

``SEC. 6050X. INFORMATION WITH RESPECT TO CERTAIN FINES, PENALTIES, AND 
              OTHER AMOUNTS.

    ``(a) Requirement of Reporting.--
            ``(1) In general.--The appropriate official of any 
        government or any entity described in section 162(f)(5) which 
        is involved in a suit or agreement described in paragraph (2) 
        shall make a return in such form as determined by the Secretary 
        setting forth--
                    ``(A) the amount required to be paid as a result of 
                the suit or agreement to which paragraph (1) of section 
                162(f) applies,
                    ``(B) any amount required to be paid as a result of 
                the suit or agreement which constitutes restitution or 
                remediation of property, and
                    ``(C) any amount required to be paid as a result of 
                the suit or agreement for the purpose of coming into 
                compliance with any law which was violated or involved 
                in the investigation or inquiry.
            ``(2) Suit or agreement described.--
                    ``(A) In general.--A suit or agreement is described 
                in this paragraph if--
                            ``(i) it is--
                                    ``(I) a suit with respect to a 
                                violation of any law over which the 
                                government or entity has authority and 
                                with respect to which there has been a 
                                court order, or
                                    ``(II) an agreement which is 
                                entered into with respect to a 
                                violation of any law over which the 
                                government or entity has authority, or 
                                with respect to an investigation or 
                                inquiry by the government or entity 
                                into the potential violation of any law 
                                over which such government or entity 
                                has authority, and
                            ``(ii) the aggregate amount involved in all 
                        court orders and agreements with respect to the 
                        violation, investigation, or inquiry is $600 or 
                        more.
                    ``(B) Adjustment of reporting threshold.--The 
                Secretary shall adjust the $600 amount in subparagraph 
                (A)(ii) as necessary in order to ensure the efficient 
                administration of the internal revenue laws.
            ``(3) Time of filing.--The return required under this 
        subsection shall be filed at the time the agreement is entered 
        into, as determined by the Secretary.
    ``(b) Statements To Be Furnished to Individuals Involved in the 
Settlement.--Every person required to make a return under subsection 
(a) shall furnish to each person who is a party to the suit or 
agreement a written statement showing--
            ``(1) the name of the government or entity, and
            ``(2) the information supplied to the Secretary under 
        subsection (a)(1).
The written statement required under the preceding sentence shall be 
furnished to the person at the same time the government or entity 
provides the Secretary with the information required under subsection 
(a).
    ``(c) Appropriate Official Defined.--For purposes of this section, 
the term `appropriate official' means the officer or employee having 
control of the suit, investigation, or inquiry or the person 
appropriately designated for purposes of this section.''.
            (2) Conforming amendment.--The table of sections for 
        subpart B of part III of subchapter A of chapter 61 is amended 
        by inserting after the item relating to section 6050W the 
        following new item:

``Sec. 6050X. Information with respect to certain fines, penalties, and 
                            other amounts.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to amounts paid or incurred on or after the date of 
        the enactment of this Act, except that such amendments shall 
        not apply to amounts paid or incurred under any binding order 
        or agreement entered into before such date. Such exception 
        shall not apply to an order or agreement requiring court 
        approval unless the approval was obtained before such date.

SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS SUBJECT TO 
              NONDISCLOSURE AGREEMENTS PAID IN CONNECTION WITH SEXUAL 
              HARASSMENT OR SEXUAL ABUSE.

    (a) Denial of Deduction.--Section 162 is amended by redesignating 
subsection (q) as subsection (r) and by inserting after subsection (p) 
the following new subsection:
    ``(q) Payments Related to Sexual Harassment and Sexual Abuse.--No 
deduction shall be allowed under this chapter for--
            ``(1) any settlement or payment related to sexual 
        harassment or sexual abuse if such settlement or payment is 
        subject to a nondisclosure agreement, or
            ``(2) attorney's fees related to such a settlement or 
        payment.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after the date of the enactment of 
this Act.

SEC. 13308. UNIFORM TREATMENT OF EXPENSES IN CONTINGENCY FEE CASES.

    (a) In General.--Section 162, as amended by section 13307, 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.

SEC. 13309. 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 on or after the date of the enactment 
of this Act.

SEC. 13310. 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, notwithstanding section 83 
or any election in effect under section 83(b).
    ``(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) 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.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

                        PART V--BUSINESS CREDITS

                     Subpart A--General Provisions

SEC. 13401. MODIFICATION OF ORPHAN DRUG CREDIT.

    (a) Credit Rate.--Subsection (a) of section 45C is amended by 
striking ``50 percent'' and inserting ``27.5 percent''.
    (b) Disclosure of Credits.--Section 45C is amended by adding at the 
end the following new subsection:
    ``(e) Disclosure of Credits.--The Secretary shall publicly disclose 
the identity of any taxpayer (in the case of a pass-thru entity, the 
name of the entity) to whom a credit is allowed under this section, as 
well as the amount of such credit, the drug with respect to which the 
qualified clinical testing expenses were taken into account under this 
section, and the rare disease or condition for which such drug was 
being tested.''.
    (c) Election of Reduced Credit.--Subsection (b) of section 280C is 
amended by redesignating paragraph (3) as paragraph (4) and by 
inserting after paragraph (2) the following new paragraph:
            ``(3) Election of reduced credit.--
                    ``(A) In general.--In the case of any taxable year 
                for which an election is made under this paragraph--
                            ``(i) paragraphs (1) and (2) shall not 
                        apply, and
                            ``(ii) the amount of the credit under 
                        section 45C(a) shall be the amount determined 
                        under subparagraph (B).
                    ``(B) Amount of reduced credit.--The amount of 
                credit determined under this subparagraph for any 
                taxable year shall be the amount equal to the excess 
                of--
                            ``(i) the amount of credit determined under 
                        section 45C(a) without regard to this 
                        paragraph, over
                            ``(ii) the product of--
                                    ``(I) the amount described in 
                                clause (i), and
                                    ``(II) the maximum rate of tax 
                                under section 11(b).
                    ``(C) Election.--An election under this paragraph 
                for any taxable year shall be made not later than the 
                time for filing the return of tax for such year 
                (including extensions), shall be made on such return, 
                and shall be made in such manner as the Secretary shall 
                prescribe. Such an election, once made, shall be 
                irrevocable.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 13402. REHABILITATION CREDIT LIMITED TO CERTIFIED HISTORIC 
              STRUCTURES.

    (a) In General.--Subsection (a) of section 47 is amended to read as 
follows:
    ``(a) General Rule.--
            ``(1) In general.--For purposes of section 46, for any 
        taxable year during the 5-year period beginning in the taxable 
        year in which a qualified rehabilitated building is placed in 
        service, the rehabilitation credit for such year is an amount 
        equal to the ratable share for such year.
            ``(2) Ratable share.--For purposes of paragraph (1), the 
        ratable share for any taxable year during the period described 
        in such paragraph is the amount equal to 20 percent of the 
        qualified rehabilitation expenditures with respect to the 
        qualified rehabilitated building, as allocated ratably to each 
        year during such period.''.
    (b) Conforming Amendments.--
            (1) Section 47(c) is amended--
                    (A) in paragraph (1)--
                            (i) in subparagraph (A), by amending clause 
                        (iii) to read as follows:
                            ``(iii) such building is a certified 
                        historic structure, and'',
                            (ii) by striking subparagraph (B), and
                            (iii) by redesignating subparagraphs (C) 
                        and (D) as subparagraphs (B) and (C), 
                        respectively, and
                    (B) in paragraph (2)(B), by amending clause (iv) to 
                read as follows:
                            ``(iv) Certified historic structure.--Any 
                        expenditure attributable to the rehabilitation 
                        of a qualified rehabilitated building unless 
                        the rehabilitation is a certified 
                        rehabilitation (within the meaning of 
                        subparagraph (C)).''.
            (2) Paragraph (4) of section 145(d) is amended--
                    (A) by striking ``of section 47(c)(1)(C)'' each 
                place it appears and inserting ``of section 
                47(c)(1)(B)'', and
                    (B) by striking ``section 47(c)(1)(C)(i)'' and 
                inserting ``section 47(c)(1)(B)(i)''.
    (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 with respect to any building--
                    (A) owned or leased by the taxpayer during the 
                entirety of the period after December 31, 2017, and
                    (B) with respect to which the 24-month period 
                selected by the taxpayer under section 47(c)(1)(B) of 
                the Internal Revenue Code of 1986 (as amended by 
                subsection (b)) begins not later than 180 days after 
                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. 13403. 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. 13404. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE.

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

``SEC. 45S. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE.

    ``(a) Establishment of Credit.--
            ``(1) In general.--For purposes of section 38, in the case 
        of an eligible employer, the paid family and medical leave 
        credit is an amount equal to the applicable percentage of the 
        amount of wages paid to qualifying employees during any period 
        in which such employees are on family and medical leave.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means 12.5 percent 
        increased (but not above 25 percent) by 0.25 percentage points 
        for each percentage point by which the rate of payment (as 
        described under subsection (c)(1)(B)) exceeds 50 percent.
    ``(b) Limitation.--
            ``(1) In general.--The credit allowed under subsection (a) 
        with respect to any employee for any taxable year shall not 
        exceed an amount equal to the product of the normal hourly wage 
        rate of such employee for each hour (or fraction thereof) of 
        actual services performed for the employer and the number of 
        hours (or fraction thereof) for which family and medical leave 
        is taken.
            ``(2) Non-hourly wage rate.--For purposes of paragraph (1), 
        in the case of any employee who is not paid on an hourly wage 
        rate, the wages of such employee shall be prorated to an hourly 
        wage rate under regulations established by the Secretary.
            ``(3) Maximum amount of leave subject to credit.--The 
        amount of family and medical leave that may be taken into 
        account with respect to any employee under subsection (a) for 
        any taxable year shall not exceed 12 weeks.
    ``(c) Eligible Employer.--For purposes of this section--
            ``(1) In general.--The term `eligible employer' means any 
        employer who has in place a policy that meets the following 
        requirements:
                    ``(A) The policy provides--
                            ``(i) in the case of a qualifying employee 
                        who is not a part-time employee (as defined in 
                        section 4980E(d)(4)(B)), not less than 2 weeks 
                        of annual paid family and medical leave, and
                            ``(ii) in the case of a qualifying employee 
                        who is a part-time employee, an amount of 
                        annual paid family and medical leave that is 
                        not less than an amount which bears the same 
                        ratio to the amount of annual paid family and 
                        medical leave that is provided to a qualifying 
                        employee described in clause (i) as--
                                    ``(I) the number of hours the 
                                employee is expected to work during any 
                                week, bears to
                                    ``(II) the number of hours an 
                                equivalent qualifying employee 
                                described in clause (i) is expected to 
                                work during the week.
                    ``(B) The policy requires that the rate of payment 
                under the program is not less than 50 percent of the 
                wages normally paid to such employee for services 
                performed for the employer.
            ``(2) Special rule for certain employers.--
                    ``(A) In general.--An added employer shall not be 
                treated as an eligible employer unless such employer 
                provides paid family and medical leave in compliance 
                with a policy which ensures that the employer--
                            ``(i) will not interfere with, restrain, or 
                        deny the exercise of or the attempt to 
                        exercise, any right provided under the policy, 
                        and
                            ``(ii) will not discharge or in any other 
                        manner discriminate against any individual for 
                        opposing any practice prohibited by the policy.
                    ``(B) Added employer; added employee.--For purposes 
                of this paragraph--
                            ``(i) Added employee.--The term `added 
                        employee' means a qualifying employee who is 
                        not covered by title I of the Family and 
                        Medical Leave Act of 1993, as amended.
                            ``(ii) Added employer.--The term `added 
                        employer' means an eligible employer 
                        (determined without regard to this paragraph), 
                        whether or not covered by that title I, who 
                        offers paid family and medical leave to added 
                        employees.
            ``(3) Aggregation rule.--All persons which are treated as a 
        single employer under subsections (a) and (b) of section 52 
        shall be treated as a single taxpayer.
            ``(4) Treatment of benefits mandated or paid for by state 
        or local governments.--For purposes of this section, any leave 
        which is paid by a State or local government or required by 
        State or local law shall not be taken into account in 
        determining the amount of paid family and medical leave 
        provided by the employer.
            ``(5) No inference.--Nothing in this subsection shall be 
        construed as subjecting an employer to any penalty, liability, 
        or other consequence (other than ineligibility for the credit 
        allowed by reason of subsection (a) or recapturing the benefit 
        of such credit) for failure to comply with the requirements of 
        this subsection.
    ``(d) Qualifying Employees.--For purposes of this section, the term 
`qualifying employee' means any employee (as defined in section 3(e) of 
the Fair Labor Standards Act of 1938, as amended) who--
            ``(1) has been employed by the employer for 1 year or more, 
        and
            ``(2) for the preceding year, had compensation not in 
        excess of an amount equal to 60 percent of the amount 
        applicable for such year under clause (i) of section 
        414(q)(1)(B).
    ``(e) Family and Medical Leave.--
            ``(1) In general.--Except as provided in paragraph (2), for 
        purposes of this section, the term `family and medical leave' 
        means leave for any 1 or more of the purposes described under 
        subparagraph (A), (B), (C), (D), or (E) of paragraph (1), or 
        paragraph (3), of section 102(a) of the Family and Medical 
        Leave Act of 1993, as amended, whether the leave is provided 
        under that Act or by a policy of the employer.
            ``(2) Exclusion.--If an employer provides paid leave as 
        vacation leave, personal leave, or medical or sick leave (other 
        than leave specifically for 1 or more of the purposes referred 
        to in paragraph (1)), that paid leave shall not be considered 
        to be family and medical leave under paragraph (1).
            ``(3) Definitions.--In this subsection, the terms `vacation 
        leave', `personal leave', and `medical or sick leave' mean 
        those 3 types of leave, within the meaning of section 102(d)(2) 
        of that Act.
    ``(f) Wages.--For purposes of this section, the term `wages' has 
the meaning given such term by subsection (b) of section 3306 
(determined without regard to any dollar limitation contained in such 
section). Such term shall not include any amount taken into account for 
purposes of determining any other credit allowed under this subpart.
    ``(g) Election to Have Credit Not Apply.--
            ``(1) In general.--A taxpayer may elect to have this 
        section not apply for any taxable year.
            ``(2) Other rules.--Rules similar to the rules of 
        paragraphs (2) and (3) of section 51(j) shall apply for 
        purposes of this subsection.
    ``(h) Termination.--This section shall not apply to wages paid in 
taxable years beginning after December 31, 2019.''.
    (b) Credit Part of General Business Credit.--Section 38(b) is 
amended by striking ``plus'' at the end of paragraph (35), by striking 
the period at the end of paragraph (36) and inserting ``, plus'', and 
by adding at the end the following new paragraph:
            ``(37) in the case of an eligible employer (as defined in 
        section 45S(c)), the paid family and medical leave credit 
        determined under section 45S(a).''.
    (c) Credit Allowed Against AMT.--Subparagraph (B) of section 
38(c)(4) is amended by redesignating clauses (ix) through (xi) as 
clauses (x) through (xii), respectively, and by inserting after clause 
(viii) the following new clause:
                            ``(ix) the credit determined under section 
                        45S,''.
    (d) Conforming Amendments.--
            (1) Denial of double benefit.--Section 280C(a) is amended 
        by inserting ``45S(a),'' after ``45P(a),''.
            (2) Election to have credit not apply.--Section 6501(m) is 
        amended by inserting ``45S(g),'' after ``45H(g),''.
            (3) Clerical amendment.--The table of sections for subpart 
        D of part IV of subchapter A of chapter 1 is amended by adding 
        at the end the following new item:

``Sec. 45S. Employer credit for paid family and medical leave.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to wages paid in taxable years beginning after December 31, 2017.

      Subpart B--Provisions Relating to Low-income Housing Credit

SEC. 13411. RECONSTRUCTION OR REPLACEMENT PERIOD AFTER CASUALTY LOSS.

    (a) In General.--Subparagraph (E) of section 42(j)(4) is amended by 
striking ``a reasonable period established by the Secretary'' and 
inserting ``a reasonable period established by the applicable housing 
credit agency (not to exceed 25 months from the date on which the 
casualty loss arises). The determination under paragraph (1) shall not 
be made with respect to a property the basis of which is affected by a 
casualty loss until the period described in the preceding sentence with 
respect to such property has expired.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to casualty losses arising after the date of the enactment of this Act.

SEC. 13412. MODIFICATION OF RIGHTS RELATING TO BUILDING PURCHASE.

    (a) In General.--Subparagraph (A) of section 42(i)(7) is amended--
            (1) by striking ``a right of 1st refusal'' and inserting 
        ``an option'', and
            (2) by striking ``the property'' and inserting ``the 
        property or a partnership interest relating to the property''.
    (b) Conforming Amendment.--Subparagraph (B) of section 42(i)(7) is 
amended by adding at the end the following new sentence: ``In the case 
of a purchase of a partnership interest, the minimum purchase price is 
an amount equal to such interest's ratable share of the amount 
determined under the first sentence of this subparagraph.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to agreements entered into or amended after the date of the 
enactment of this Act.

SEC. 13413. DETERMINATION OF COMMUNITY REVITALIZATION PLAN TO BE MADE 
              BY HOUSING CREDIT AGENCY.

    (a) In General.--Subclause (III) of section 42(m)(1)(B)(ii) is 
amended by inserting ``, as determined by the housing credit agency 
according to criteria established by such agency,'' after ``(d)(5)(C)) 
and''.
    (b) Criteria.--Paragraph (1) of section 42(m) is amended by adding 
at the end the following new subparagraph:
                    ``(E) Criteria for determination relating to 
                concerted community revitalization plan.--For purposes 
                of subparagraph (B)(ii)(III), the criteria for 
                determining whether the development of a project 
                contributes to a concerted community development plan 
                shall take into account any factors the agency deems 
                appropriate, including the extent to which the proposed 
                plan--
                            ``(i) is geographically specific,
                            ``(ii) outlines a clear plan for 
                        implementation and goals for outcomes,
                            ``(iii) includes a strategy for applying 
                        for or obtaining commitments of public or 
                        private investment (or both) in nonhousing 
                        infrastructure, amenities, or services, and
                            ``(iv) demonstrates the need for community 
                        revitalization.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to allocations of housing credit dollar amounts made under 
qualified allocation plans (as defined in section 42(m)(1)(B) of the 
Internal Revenue Code of 1986) adopted after December 31, 2017.

SEC. 13414. PROHIBITION OF LOCAL APPROVAL AND CONTRIBUTION 
              REQUIREMENTS.

    (a) In General.--Paragraph (1) of section 42(m), as amended by 
section 13413, is further amended--
            (1) by striking clause (ii) of subparagraph (A) and by 
        redesignating clauses (iii) and (iv) thereof as clauses (ii) 
        and (iii), and
            (2) by adding at the end the following new subparagraph:
                    ``(F) Local approval or contribution not taken into 
                account.--The selection criteria under a qualified 
                allocation plan shall not include consideration of--
                            ``(i) any support or opposition with 
                        respect to the project from local or elected 
                        officials, or
                            ``(ii) any local government contribution to 
                        the project, except to the extent such 
                        contribution is taken into account as part of a 
                        broader consideration of the project's ability 
                        to leverage outside funding sources, and is not 
                        prioritized over any other source of outside 
                        funding.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to allocations of housing credit dollar amounts made after 
December 31, 2017.

SEC. 13415. SELECTION CRITERIA UNDER QUALIFIED ALLOCATION PLANS.

    (a) In General.--Subparagraph (C) of section 42(m)(1) is amended by 
striking ``and'' at the end of clause (ix), by striking the period at 
the end of clause (x) and inserting ``, and'', and by adding at the end 
the following new clause:
                            ``(xi) the affordable housing needs of 
                        individuals in the State who are members of 
                        Indian tribes (as defined in section 
                        45A(c)(6)).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to allocations of credits under section 42 of the Internal 
Revenue Code of 1986 made after December 31, 2017.

SEC. 13416. AFFORDABLE HOUSING TAX CREDIT.

    (a) In General.--The heading of section 42 is amended by striking 
``low-income'' and inserting ``affordable''.
    (b) Conforming Amendments.--
            (1) Subsection (a) of section 42 is amended by striking 
        ``low-income'' and inserting ``affordable''.
            (2) Paragraph (5) of section 38(b) is amended by striking 
        ``low-income'' and inserting ``affordable''.
            (3) The heading of subparagraph (D) of section 469(i)(3) is 
        amended by striking ``low-income'' and inserting 
        ``affordable''.
            (4) The heading of subparagraph (B) of section 469(i)(6) is 
        amended by striking ``low-income'' and inserting 
        ``affordable''.
            (5) Paragraph (7) of section 772(a) is amended by striking 
        ``low-income'' and inserting ``affordable''.
            (6) Paragraph (5) of section 772(d) is amended by striking 
        ``low-income'' and inserting ``affordable''.
    (c) Clerical Amendment.--The item relating to section 42 in the 
table of sections for subpart D of part IV of subchapter A of chapter 1 
is amended to read as follows:

``Sec. 42. Affordable housing credit.''.

    PART VI--PROVISIONS RELATED TO SPECIFIC ENTITIES AND INDUSTRIES

                   Subpart A--Partnership Provisions

SEC. 13501. TREATMENT OF GAIN OR LOSS OF FOREIGN PERSONS FROM SALE OR 
              EXCHANGE OF INTERESTS IN PARTNERSHIPS ENGAGED IN TRADE OR 
              BUSINESS WITHIN THE UNITED STATES.

    (a) In General.--Section 864(c) is amended by adding at the end the 
following:
            ``(8) Gain or loss of foreign persons from sale or exchange 
        of certain partnership interests.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this subtitle, if a nonresident alien 
                individual or foreign corporation owns, directly or 
                indirectly, an interest in a partnership which is 
                engaged in any trade or business within the United 
                States, gain or loss on the sale or exchange of all (or 
                any portion of) such interest shall be treated as 
                effectively connected with the conduct of such trade or 
                business to the extent such gain or loss does not 
                exceed the amount determined under subparagraph (B).
                    ``(B) Amount treated as effectively connected.--The 
                amount determined under this subparagraph with respect 
                to any partnership interest sold or exchanged--
                            ``(i) in the case of any gain on the sale 
                        or exchange of the partnership interest, is--
                                    ``(I) the portion of the partner's 
                                distributive share of the amount of 
                                gain which would have been effectively 
                                connected with the conduct of a trade 
                                or business within the United States if 
                                the partnership had sold all of its 
                                assets at their fair market value as of 
                                the date of the sale or exchange of 
                                such interest, or
                                    ``(II) zero if no gain on such 
                                deemed sale would have been so 
                                effectively connected, and
                            ``(ii) in the case of any loss on the sale 
                        or exchange of the partnership interest, is--
                                    ``(I) the portion of the partner's 
                                distributive share of the amount of 
                                loss on the deemed sale described in 
                                clause (i)(I) which would have been so 
                                effectively connected, or
                                    ``(II) zero if no loss on such 
                                deemed sale would be have been so 
                                effectively connected.
                        For purposes of this subparagraph, a partner's 
                        distributive share of gain or loss on the 
                        deemed sale shall be determined in the same 
                        manner as such partner's distributive share of 
                        the non-separately stated taxable income or 
                        loss of such partnership.
                    ``(C) Coordination with united states real property 
                interests.--If a partnership described in subparagraph 
                (A) holds any United States real property interest (as 
                defined in section 897(c)) at the time of the sale or 
                exchange of the partnership interest, then the gain or 
                loss treated as effectively connected income under 
                subparagraph (A) shall be reduced by the amount so 
                treated with respect to such United States real 
                property interest under section 897.
                    ``(D) Sale or exchange.--For purposes of this 
                paragraph, an individual or corporation shall be 
                treated as having sold or exchanged any interest in a 
                partnership if, under any provision of this subtitle, 
                gain or loss is realized from the sale or exchange of 
                such interest.
                    ``(E) Secretarial authority.--The Secretary shall 
                prescribe such regulations as the Secretary determines 
                appropriate for the application of this paragraph, 
                including regulations which provide that, 
                notwithstanding subparagraph (D), this paragraph 
                applies in a case even if gain or loss from a sale or 
                exchange would not be realized under any other 
                provision of this subtitle.''.
    (b) Withholding Requirements.--Section 1446 is amended by 
redesignating subsection (f) as subsection (g) and by inserting after 
subsection (e) the following:
    ``(f) Special Rules for Withholding on Sales of Partnership 
Interests.--
            ``(1) In general.--Except as provided in this subsection, 
        if any portion of the gain (if any) on any disposition of an 
        interest in a partnership would be treated under section 
        864(c)(8) as effectively connected with the conduct of a trade 
        or business within the United States, the transferee shall be 
        required to deduct and withhold a tax equal to 10 percent of 
        the amount realized on the disposition.
            ``(2) Exception if nonforeign affidavit furnished.--
                    ``(A) In general.--No person shall be required to 
                deduct and withhold any amount under paragraph (1) with 
                respect to any disposition if the transferor furnishes 
                to the transferee an affidavit by the transferor 
                stating, under penalty of perjury, the transferor's 
                United States taxpayer identification number and that 
                the transferor is not a foreign person.
                    ``(B) False affidavit.--Subparagraph (A) shall not 
                apply to any disposition if--
                            ``(i) the transferee has actual knowledge 
                        that the affidavit is false, or the transferee 
                        receives a notice (as described in section 
                        1445(d)) from a transferor's agent or 
                        transferee's agent that such affidavit or 
                        statement is false, or
                            ``(ii) the Secretary by regulations 
                        requires the transferee to furnish a copy of 
                        such affidavit or statement to the Secretary 
                        and the transferee fails to furnish a copy of 
                        such affidavit or statement to the Secretary at 
                        such time and in such manner as required by 
                        such regulations.
                    ``(C) Rules for agents.--The rules of section 
                1445(d) shall apply to a transferor's agent or 
                transferee's agent with respect to any affidavit 
                described in subparagraph (A) in the same manner as 
                such rules apply with respect to the disposition of a 
                United States real property interest under such 
                section.
            ``(3) Authority of secretary to prescribe reduced amount.--
        At the request of the transferor or transferee, the Secretary 
        may prescribe a reduced amount to be withheld under this 
        section if the Secretary determines that to substitute such 
        reduced amount will not jeopardize the collection of the tax 
        imposed under this title with respect to gain treated under 
        section 864(c)(8) as effectively connected with the conduct of 
        a trade or business with in the United States.
            ``(4) Partnership to withhold amounts not withheld by the 
        transferee.--If a transferee fails to withhold any amount 
        required to be withheld under paragraph (1), the partnership 
        shall be required to deduct and withhold from distributions to 
        the transferee a tax in an amount equal to the amount the 
        transferee failed to withhold (plus interest under this title 
        on such amount).
            ``(5) Definitions.--Any term used in this subsection which 
        is also used under section 1445 shall have the same meaning as 
        when used in such section.
            ``(6) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this subsection, including regulations providing for exceptions 
        from the provisions of this subsection.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales and exchanges on or after November 27, 2017.

SEC. 13502. MODIFY DEFINITION OF SUBSTANTIAL BUILT-IN LOSS IN THE CASE 
              OF TRANSFER OF PARTNERSHIP INTEREST.

    (a) In General.--Paragraph (1) of section 743(d) is to read as 
follows:
            ``(1) In general.--For purposes of this section, a 
        partnership has a substantial built-in loss with respect to a 
        transfer of an interest in the partnership if--
                    ``(A) the partnership's adjusted basis in the 
                partnership property exceeds by more than $250,000 the 
                fair market value of such property, or
                    ``(B) the transferee partner would be allocated a 
                loss of more than $250,000 if the partnership assets 
                were sold for cash equal to their fair market value 
                immediately after such transfer.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transfers of partnership interests after December 31, 2017.

SEC. 13503. CHARITABLE CONTRIBUTIONS AND FOREIGN TAXES TAKEN INTO 
              ACCOUNT IN DETERMINING LIMITATION ON ALLOWANCE OF 
              PARTNER'S SHARE OF LOSS.

    (a) In General.--Subsection (d) of section 704 is amended--
            (1) by striking ``A partner's distributive share'' and 
        inserting the following:
            ``(1) In general.--A partner's distributive share'',
            (2) by striking ``Any excess of such loss'' and inserting 
        the following:
            ``(2) Carryover.--Any excess of such loss'', and
            (3) by adding at the end the following new paragraph:
            ``(3) Special rules.--
                    ``(A) In general.--In determining the amount of any 
                loss under paragraph (1), there shall be taken into 
                account the partner's distributive share of amounts 
                described in paragraphs (4) and (6) of section 702(a).
                    ``(B) Exception.--In the case of a charitable 
                contribution of property whose fair market value 
                exceeds its adjusted basis, subparagraph (A) shall not 
                apply to the extent of the partner's distributive share 
                of such excess.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to partnership taxable years beginning after December 31, 2017.

                      Subpart B--Insurance Reforms

SEC. 13511. 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)(A) 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).
            (B) Section 831(b)(3) is amended by striking ``except as 
        provided in section 844,''
            (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 805(b)(2)(A)(iv) is amended to read as follows:
                            ``(iv) any net operating loss carryback to 
                        the taxable year under section 172, and''.
            (7) 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.''.
            (8) Section 1351(i)(3) is amended by striking ``or the 
        operations loss deduction under section 810,''.
    (c) Effective Date.--The amendments made by this section shall 
apply to losses arising in taxable years beginning after December 31, 
2017.

SEC. 13512. 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 this Act, 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), as amended by this Act, 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 13511, 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. 13513. 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. 13514. 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. 13515. MODIFICATION OF PRORATION RULES FOR PROPERTY AND CASUALTY 
              INSURANCE COMPANIES.

    (a) In General.--Section 832(b)(5)(B) is amended--
            (1) by striking ``15 percent'' and inserting ``the 
        applicable percentage'', and
            (2) by inserting at the end the following new sentence: 
        ``For purposes of this subparagraph, the applicable percentage 
        is 5.25 percent divided by the highest rate in effect under 
        section 11(b).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 13516. REPEAL OF SPECIAL ESTIMATED TAX PAYMENTS.

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

SEC. 13517. CAPITALIZATION OF CERTAIN POLICY ACQUISITION EXPENSES.

    (a) Amortization Period.--Section 848 is amended by striking ``120-
month'' each place it appears in subsections (a)(2) and (b)(1) and 
inserting ``600-month''.
    (b) Determination of Expenses.--Paragraph (1) of section 848(c) is 
amended--
            (1) by striking ``1.75 percent'' in subparagraph (A) and 
        inserting ``3.17 percent'',
            (2) by striking ``2.05 percent'' in subparagraph (B) and 
        inserting ``3.72 percent'', and
            (3) by striking ``7.7 percent'' in subparagraph (C) and 
        inserting ``13.97 percent''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 13518. TAX REPORTING FOR LIFE SETTLEMENT TRANSACTIONS.

    (a) In General.--Subpart B of part III of subchapter A of chapter 
61, as amended by section 13305, is amended by adding at the end the 
following new section:

``SEC. 6050Y. RETURNS RELATING TO CERTAIN LIFE INSURANCE CONTRACT 
              TRANSACTIONS.

    ``(a) Requirement of Reporting of Certain Payments.--
            ``(1) In general.--Every person who acquires a life 
        insurance contract or any interest in a life insurance contract 
        in a reportable policy sale during any taxable year shall make 
        a return for such taxable year (at such time and in such manner 
        as the Secretary shall prescribe) setting forth--
                    ``(A) the name, address, and TIN of such person,
                    ``(B) the name, address, and TIN of each recipient 
                of payment in the reportable policy sale,
                    ``(C) the date of such sale,
                    ``(D) the name of the issuer of the life insurance 
                contract sold and the policy number of such contract, 
                and
                    ``(E) the amount of each payment.
            ``(2) Statement to be furnished to persons with respect to 
        whom information is required.--Every person required to make a 
        return under this subsection shall furnish to each person whose 
        name is required to be set forth in such return a written 
        statement showing--
                    ``(A) the name, address, and phone number of the 
                information contact of the person required to make such 
                return, and
                    ``(B) the information required to be shown on such 
                return with respect to such person, except that in the 
                case of an issuer of a life insurance contract, such 
                statement is not required to include the information 
                specified in paragraph (1)(E).
    ``(b) Requirement of Reporting of Seller's Basis in Life Insurance 
Contracts.--
            ``(1) In general.--Upon receipt of the statement required 
        under subsection (a)(2) or upon notice of a transfer of a life 
        insurance contract to a foreign person, each issuer of a life 
        insurance contract shall make a return (at such time and in 
        such manner as the Secretary shall prescribe) setting forth--
                    ``(A) the name, address, and TIN of the seller who 
                transfers any interest in such contract in such sale,
                    ``(B) the investment in the contract (as defined in 
                section 72(e)(6)) with respect to such seller, and
                    ``(C) the policy number of such contract.
            ``(2) Statement to be furnished to persons with respect to 
        whom information is required.--Every person required to make a 
        return under this subsection shall furnish to each person whose 
        name is required to be set forth in such return a written 
        statement showing--
                    ``(A) the name, address, and phone number of the 
                information contact of the person required to make such 
                return, and
                    ``(B) the information required to be shown on such 
                return with respect to each seller whose name is 
                required to be set forth in such return.
    ``(c) Requirement of Reporting With Respect to Reportable Death 
Benefits.--
            ``(1) In general.--Every person who makes a payment of 
        reportable death benefits during any taxable year shall make a 
        return for such taxable year (at such time and in such manner 
        as the Secretary shall prescribe) setting forth--
                    ``(A) the name, address, and TIN of the person 
                making such payment,
                    ``(B) the name, address, and TIN of each recipient 
                of such payment,
                    ``(C) the date of each such payment, and
                    ``(D) the gross amount of each such payment.
                    ``(E) such person's estimate of the investment in 
                the contract (as defined in section 72(e)(6)) with 
                respect to the buyer.
            ``(2) Statement to be furnished to persons with respect to 
        whom information is required.--Every person required to make a 
        return under this subsection shall furnish to each person whose 
        name is required to be set forth in such return a written 
        statement showing--
                    ``(A) the name, address, and phone number of the 
                information contact of the person required to make such 
                return, and
                    ``(B) the information required to be shown on such 
                return with respect to each recipient of payment whose 
                name is required to be set forth in such return.
    ``(d) Definitions.--For purposes of this section:
            ``(1) Payment.--The term `payment' means, with respect to 
        any reportable policy sale, the amount of cash and the fair 
        market value of any consideration transferred in the sale.
            ``(2) Reportable policy sale.--The term `reportable policy 
        sale' has the meaning given such term in section 101(a)(3)(B).
            ``(3) Issuer.--The term `issuer' means any life insurance 
        company that bears the risk with respect to a life insurance 
        contract on the date any return or statement is required to be 
        made under this section.
            ``(4) Reportable death benefits.--The term `reportable 
        death benefits' means amounts paid by reason of the death of 
        the insured under a life insurance contract that has been 
        transferred in a reportable policy sale.''.
    (b) Clerical Amendment.--The table of sections for subpart B of 
part III of subchapter A of chapter 61, as amended by section 13305, is 
amended by inserting after the item relating to section 6050X the 
following new item:

``Sec. 6050Y. Returns relating to certain life insurance contract 
                            transactions.''.
    (c) Conforming Amendments.--
            (1) Subsection (d) of section 6724 is amended--
                    (A) by striking ``or'' at the end of clause (xxiv) 
                of paragraph (1)(B), by striking ``and'' at the end of 
                clause (xxv) of such paragraph and inserting ``or'', 
                and by inserting after such clause (xxv) the following 
                new clause:
                            ``(xxvi) section 6050Y (relating to returns 
                        relating to certain life insurance contract 
                        transactions), and'', and
                    (B) by striking ``or'' at the end of subparagraph 
                (HH) of paragraph (2), by striking the period at the 
                end of subparagraph (II) of such paragraph and 
                inserting ``, or'', and by inserting after such 
                subparagraph (II) the following new subparagraph:
                    ``(JJ) subsection (a)(2), (b)(2), or (c)(2) of 
                section 6050Y (relating to returns relating to certain 
                life insurance contract transactions).''.
            (2) Section 6047 is amended--
                    (A) by redesignating subsection (g) as subsection 
                (h),
                    (B) by inserting after subsection (f) the following 
                new subsection:
    ``(g) Information Relating to Life Insurance Contract 
Transactions.--This section shall not apply to any information which is 
required to be reported under section 6050Y.'', and
                    (C) by adding at the end of subsection (h), as so 
                redesignated, the following new paragraph:
            ``(4) For provisions requiring reporting of information 
        relating to certain life insurance contract transactions, see 
        section 6050Y.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to--
            (1) reportable policy sales (as defined in section 
        6050Y(d)(2) of the Internal Revenue Code of 1986 (as added by 
        subsection (a)) after December 31, 2017, and
            (2) reportable death benefits (as defined in section 
        6050Y(d)(4) of such Code (as added by subsection (a)) paid 
        after December 31, 2017.

SEC. 13519. CLARIFICATION OF TAX BASIS OF LIFE INSURANCE CONTRACTS.

    (a) Clarification With Respect to Adjustments.--Paragraph (1) of 
section 1016(a) is amended by striking subparagraph (A) and all that 
follows and inserting the following:
                    ``(A) for--
                            ``(i) taxes or other carrying charges 
                        described in section 266; or
                            ``(ii) expenditures described in section 
                        173 (relating to circulation expenditures),
                for which deductions have been taken by the taxpayer in 
                determining taxable income for the taxable year or 
                prior taxable years; or
                    ``(B) for mortality, expense, or other reasonable 
                charges incurred under an annuity or life insurance 
                contract;''.
    (b) Effective Date.--The amendment made by this section shall apply 
to transactions entered into after August 25, 2009.

SEC. 13520. EXCEPTION TO TRANSFER FOR VALUABLE CONSIDERATION RULES.

    (a) In General.--Subsection (a) of section 101 is amended by 
inserting after paragraph (2) the following new paragraph:
            ``(3) Exception to valuable consideration rules for 
        commercial transfers.--
                    ``(A) In general.--The second sentence of paragraph 
                (2) shall not apply in the case of a transfer of a life 
                insurance contract, or any interest therein, which is a 
                reportable policy sale.
                    ``(B) Reportable policy sale.--For purposes of this 
                paragraph, the term `reportable policy sale' means the 
                acquisition of an interest in a life insurance 
                contract, directly or indirectly, if the acquirer has 
                no substantial family, business, or financial 
                relationship with the insured apart from the acquirer's 
                interest in such life insurance contract. For purposes 
                of the preceding sentence, the term `indirectly' 
                applies to the acquisition of an interest in a 
                partnership, trust, or other entity that holds an 
                interest in the life insurance contract.''.
    (b) Conforming Amendment.--Paragraph (1) of section 101(a) is 
amended by striking ``paragraph (2)'' and inserting ``paragraphs (2) 
and (3)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transfers after December 31, 2017.

               Subpart C--Banks and Financial Instruments

SEC. 13531. 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.--
                            ``(i) In general.--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).
                            ``(ii) Control of non-corporate entities.--
                        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 clause).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 13532. 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. 13533. COST BASIS OF SPECIFIED SECURITIES DETERMINED WITHOUT 
              REGARD TO IDENTIFICATION.

    (a) In General.--Section 1012 is amended by adding at the end the 
following new subsection:
    ``(e) Cost Basis of Specified Securities Determined Without Regard 
to Identification.--
            ``(1) In general.--Unless the Secretary permits the use of 
        an average basis method for determining cost, in the case of 
        the sale, exchange, or other disposition of a specified 
        security (within the meaning of section 6045(g)(3)(B)), the 
        basis (and holding period) of such security shall be determined 
        on a first-in first-out basis.
            ``(2) Exception.--In the case of a sale, exchange, or other 
        disposition of a specified security by a regulated investment 
        company (as defined in section 851(a)), paragraph (1) shall not 
        apply.''.
    (b) Conforming Amendments.--
            (1) Section 1012(c)(1) is amended by striking ``the 
        conventions prescribed by regulations under this section'' and 
        inserting ``the method applicable for determining the cost of 
        such security''.
            (2) Section 1012(c)(2)(A) is amended by inserting ``(as in 
        effect prior to the enactment of the Tax Cuts and Jobs Act)'' 
        after ``this section''.
            (3) Section 6045(g)(2)(B)(i)(I) is amended by striking 
        ``unless the customer notifies the broker by means of making an 
        adequate identification of the stock sold or transferred''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales, exchanges, and other dispositions after December 31, 
2017.

                       Subpart D--S Corporations

SEC. 13541. EXPANSION OF QUALIFYING BENEFICIARIES OF AN ELECTING SMALL 
              BUSINESS TRUST.

    (a) No Look-Through for Eligibility Purposes.--Section 
1361(c)(2)(B)(v) is amended by adding at the end the following new 
sentence: ``This clause shall not apply for purposes of subsection 
(b)(1)(C).''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on January 1, 2018.

SEC. 13542. CHARITABLE CONTRIBUTION DEDUCTION FOR ELECTING SMALL 
              BUSINESS TRUSTS.

    (a) In General.--Section 641(c)(2) is amended by inserting after 
subparagraph (D) the following new subparagraph:
                    ``(E)(i) Section 642(c) shall not apply.
                    ``(ii) For purposes of section 170(b)(1)(G), 
                adjusted gross income shall be computed in the same 
                manner as in the case of an individual, except that the 
                deductions for costs which are paid or incurred in 
                connection with the administration of the trust and 
                which would not have been incurred if the property were 
                not held in such trust shall be treated as allowable in 
                arriving at adjusted gross income.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

                          PART VII--EMPLOYMENT

                        Subpart A--Compensation

SEC. 13601. 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.--Paragraph (4) of section 162(m) is amended 
        by striking subparagraphs (B) and (C) and by redesignating 
        subparagraphs (D), (E), (F), and (G) as subparagraphs (B), (C), 
        (D), and (E), respectively.
            (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) Modification of Definition of Covered Employees.--Paragraph (3) 
of section 162(m) 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 any individual 
                described in subparagraph (A))'', 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.''.
    (c) Expansion of Applicable Employer.--
            (1) In general.--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)).''.
            (2) Conforming amendment.--Section 162(m)(3), as amended by 
        subsection (b), is amended by adding at the end the following 
        flush sentence:
        ``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.--
Paragraph (4) of section 162(m), 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.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2017.
            (2) Exception for binding contracts.--The amendments made 
        by this section shall not apply to remuneration which is 
        pursuant to a written binding contract which was in effect on 
        November 2, 2017, and which was not modified in any material 
        respect on or after such date.

SEC. 13602. 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.
For purposes of the preceding sentence, remuneration shall be treated 
as paid when there is no substantial risk of forfeiture of the rights 
to such remuneration.
    ``(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 
        which 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)) and shall include 
        amounts required to be included in gross income under section 
        457(f).
            ``(4) Remuneration from related organizations.--
                    ``(A) In general.--Remuneration of a covered 
                employee by an applicable tax-exempt organization shall 
                include any remuneration paid with respect to 
                employment of such employee by any related person or 
                governmental entity.
                    ``(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 
                        which control the organization,
                            ``(iii) is a supported organization (as 
                        defined in section 509(f)(3)) 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 which 
                        is a voluntary employees' beneficiary 
                        association described in section 501(c)(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 of 
        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 tax under this section, 
including regulations preventing employees from being misclassified as 
contractors or from being compensated through a pass-through or other 
entity to avoid such tax.''.
    (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. 13603. TREATMENT OF QUALIFIED EQUITY GRANTS.

    (a) In General.--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--
                    ``(A) Timing of inclusion.--If qualified stock is 
                transferred to a qualified employee who makes an 
                election with respect to such stock under this 
                subsection, subsection (a) shall be applied by 
                including the amount determined under such subsection 
                with respect to such stock in income of the employee in 
                the taxable year determined under subparagraph (B) in 
                lieu of the taxable year described in subsection (a).
                    ``(B) Taxable year determined.--The taxable year 
                determined under this subparagraph is the taxable year 
                of the employee which includes the earliest of--
                            ``(i) the first date such qualified stock 
                        becomes transferable (including, solely for 
                        purposes of this clause, becoming 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 provides) 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 granted 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 made in 
                                a similar manner as 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 
                        are 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 was 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 date 
                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 date 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 subparagraph (B)(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 requires for 
                        purposes of administering this paragraph.
            ``(5) Controlled groups.--For purposes of this subsection, 
        all persons treated as a single employer under section 414(b) 
        shall be treated as 1 corporation.
            ``(6) Notice requirement.--Any corporation which 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 be eligible to 
                        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.''.
    (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)(2)) 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 is 
                amended--
                            (i) by adding at the end of subsection (a) 
                        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).'', and
                            (ii) in subsection (b)(5), by striking 
                        ``and'' before ``the plan'' and by inserting 
                        ``, and the rules of section 83(i) shall apply 
                        in determining which employees have a right to 
                        make an election under such section'' before 
                        the semicolon at the end.
            (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 includible in gross income under 
        subparagraph (A) of section 83(i)(1) with respect to an event 
        described in subparagraph (B) of such section which occurs in 
        such calendar year, and
            ``(16) 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:
    ``(p) 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) issues 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.

SEC. 13604. INCREASE IN EXCISE TAX RATE FOR STOCK COMPENSATION OF 
              INSIDERS IN EXPATRIATED CORPORATIONS.

    (a) In General.--Section 4985(a)(1) is amended by striking 
``section 1(h)(1)(C)'' and inserting ``section 1(h)(1)(D)''.
    (b) Effective Date.--The amendment made by this section shall apply 
to corporations first becoming expatriated corporations (as defined in 
section 4985 of the Internal Revenue Code of 1986) after the date of 
enactment of this Act.

                      Subpart B--Retirement Plans

SEC. 13611. CONFORMITY OF CONTRIBUTION LIMITS FOR EMPLOYER-SPONSORED 
              RETIREMENT PLANS.

    (a) 403(b) Plans.--
            (1) Elimination of special catch-up rule.--Subsection (g) 
        of section 402 is amended by striking paragraph (7) and by 
        redesignating paragraph (8) as paragraph (7).
            (2) Elimination of post termination non-elective 
        contributions.--Subsection (b) of section 403 is amended--
                    (A) in paragraph (3), by striking ``for the most 
                recent period'' and all that follows through ``more 
                than five years'', and
                    (B) by striking paragraph (4).
            (3) Elimination of separate 415(c) limits.--Paragraph (4) 
        of section 415(k) is amended by striking ``each employer with 
        respect to which the participant has the control required'' and 
        inserting ``the employer and each employer which is part of the 
        same controlled group or under common control''.
    (b) 457(b) Plans.--
            (1) Elimination of separate deferral limit.--Paragraph (3) 
        of section 402(g) is amended by striking ``and'' at the end of 
        subparagraph (C), by striking the period at the end of 
        subparagraph (D) and inserting ``, and'', and by inserting 
        after subparagraph (D) the following new subparagraph:
                    ``(E) any amount deferred under an eligible 
                deferred compensation plan (as defined in section 
                457(b)) of an eligible employer described in section 
                457(e)(1)(A).''.
            (2) Taken into account under limitation for defined 
        contribution plans.--
                    (A) In general.--Paragraph (2) of section 415(a) is 
                amended--
                            (i) by striking ``or'' at the end of 
                        subparagraph (B), by inserting ``or'' at the 
                        end of subparagraph (C), and by inserting after 
                        subparagraph (C) the following new 
                        subparagraph:
                    ``(D) an eligible deferred compensation plan (as 
                defined in section 457(b)) of an eligible employer 
                described in section 457(e)(1)(A),'', and
                            (ii) by striking ``or 408(k)'' in the flush 
                        language and inserting ``408(k), or 457(b)''.
                    (B) Definition.--Paragraph (1) of section 415(k) is 
                amended by striking ``or'' at the end of subparagraph 
                (C), by striking the period at the end of subparagraph 
                (D) and inserting ``, or'', and by adding at the end 
                the following new subparagraph:
                    ``(E) an eligible deferred compensation plan (as 
                defined in section 457(b)) of an eligible employer 
                described in section 457(e)(1)(A).''.
            (3) Elimination of special catch-up rule.--Paragraph (3) of 
        section 457(b) is amended by inserting ``in the case of an 
        eligible employer described in subsection (e)(1)(B),'' before 
        ``which''.
    (c) Conforming Amendments.--
            (1) Section 25B(d)(1)(B) is amended--
                    (A) by striking clause (ii), and
                    (B) by striking ``the amount of--'' and all that 
                follows through ``any elective deferrals'' and 
                inserting ``the amount of any elective deferrals''.
            (2) Section 402A(e)(2) is amended by striking ``means--'' 
        and all that follows and inserting ``means any elective 
        deferral described in subparagraph (A), (C), or (E) of section 
        402(g)(3).''
            (3) Section 457(e) is amended by striking paragraph (18).
            (4) Section 414(u)(2)(C) is amended by inserting ``of an 
        eligible employer described in section 457(e)(1)(B)'' after 
        ``(as defined in section 457(b))''.
            (5) Section 414(v)(2)(D) is amended--
                    (A) by striking ``clauses (i), (ii), and (iv) of'', 
                and
                    (B) by striking ``, and plans described in clause 
                (iii)'' and all that follows and inserting a period.
            (6) Section 414(v)(3)(A)(i) is amended by striking 
        ``(determined without regard to section 457(b)(3))''.
            (7) Section 414(v)(6)(B) is amended by striking 
        ``subsection (u)(2)(C)'' and inserting ``section 402(g)(3)''.
            (8) Section 414(v)(6) is amended by striking subparagraph 
        (C).
    (d) Effective Date.--The amendments made by this section shall 
apply to plan years and taxable years beginning after December 31, 
2017.

SEC. 13612. 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. 13613. MODIFICATION OF RULES APPLICABLE TO LENGTH OF SERVICE AWARD 
              PLANS.

    (a) Maximum Deferral Amount.--Clause (ii) of section 457(e)(11)(B) 
is amended by striking ``$3,000'' and inserting ``$6,000''.
    (b) Cost of Living Adjustment.--Subparagraph (B) of section 
457(e)(11) is amended by adding at the end the following:
                            ``(iii) Cost of living adjustment.--In the 
                        case of taxable years beginning after December 
                        31, 2017, the Secretary shall adjust the $6,000 
                        amount under clause (ii) at the same time and 
                        in the same manner as under section 415(d), 
                        except that the base period shall be the 
                        calendar quarter beginning July 1, 2016, and 
                        any increase under this paragraph that is not a 
                        multiple of $500 shall be rounded to the next 
                        lowest multiple of $500.''.
    (c) Application of Limitation on Accruals.--Subparagraph (B) of 
section 457(e)(11), as amended by subsection (b), is amended by adding 
at the end the following:
                            ``(iv) Special rule for application of 
                        limitation on accruals for certain plans.--In 
                        the case of a plan described in subparagraph 
                        (A)(ii) which is a defined benefit plan (as 
                        defined in section 414(j)), the limitation 
                        under clause (ii) shall apply to the actuarial 
                        present value of the aggregate amount of length 
                        of service awards accruing with respect to any 
                        year of service. Such actuarial present value 
                        with respect to any year shall be calculated 
                        using reasonable actuarial assumptions and 
                        methods, assuming payment will be made under 
                        the most valuable form of payment under the 
                        plan with payment commencing at the later of 
                        the earliest age at which unreduced benefits 
                        are payable under the plan or the participant's 
                        age at the time of the calculation.''.
    (d) Effective Date.--The amendments made by this Act shall apply to 
taxable years beginning after December 31, 2017.

SEC. 13614. EXTENDED ROLLOVER PERIOD FOR PLAN LOAN OFFSET AMOUNTS.

    (a) In General.--Paragraph (3) of section 402(c) is amended by 
redesignating subparagraph (B) as subparagraph (C) and by inserting 
after subparagraph (A) the following new subparagraph:
                    ``(B) Rollover of certain plan loan offset 
                amounts.--
                            ``(i) In general.--In the case of an 
                        eligible rollover distribution of a qualified 
                        plan loan offset amount, the requirements of 
                        subparagraph (A) shall be treated as met if 
                        such transfer occurs on or before 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 severance from 
                                employment of the participant.
                            ``(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 plan loan offset amounts which are treated as distributed in 
taxable years beginning after December 31, 2017.

                    PART VIII--EXEMPT ORGANIZATIONS

SEC. 13701. 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. 4968. Excise tax based on investment income of private colleges 
                            and universities.

``SEC. 4968. 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(f)(2))--
                    ``(A) which had at least 500 tuition-paying 
                students during the preceding taxable year,
                    ``(B) which is not described in the first sentence 
                of section 511(a)(2)(B) (relating to State colleges and 
                universities), 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), assets and net investment income of any related 
        organization with respect to an educational institution shall 
        be treated as assets and net investment income, respectively, 
        of the educational institution, except that--
                    ``(A) no such amount shall be taken into account 
                with respect to more than 1 educational institution, 
                and
                    ``(B) unless such organization is controlled by 
                such institution or is described in section 509(a)(3) 
                with respect to such institution for the taxable year, 
                assets and net investment income which are not intended 
                or available for the use or benefit of the educational 
                institution shall not be taken into account.
            ``(2) Related organization.--For purposes of this 
        subsection, the term `related organization' means, with respect 
        to an educational institution, any organization which--
                    ``(A) controls, or is controlled by, such 
                institution,
                    ``(B) is controlled by 1 or more persons which also 
                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. 13702. NAME AND LOGO ROYALTIES TREATED AS UNRELATED BUSINESS 
              TAXABLE INCOME.

    (a) In General.--Section 513 is amended by adding at the end the 
following new subsection:
    ``(k) Name and Logo Royalties.--Any sale or licensing by an 
organization of any name or logo of the organization (including any 
trademark or copyright relating to such name or logo) shall be treated 
as an unrelated trade or business regularly carried on by such 
organization.''.
    (b) Calculation of Unrelated Business Taxable Income.--Subsection 
(b) of section 512 is amended by adding at the end the following new 
paragraph:
            ``(20) Special rule for name and logo royalties.--
        Notwithstanding paragraph (1), (2), (3), or (5), any income 
        derived from any sale or licensing described in section 513(k) 
        shall be included as an item of gross income derived from an 
        unrelated trade or business.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 13703. UNRELATED BUSINESS TAXABLE INCOME SEPARATELY COMPUTED FOR 
              EACH TRADE OR BUSINESS ACTIVITY.

    (a) In General.--Subsection (a) of section 512 is amended by adding 
at the end the following new paragraph:
            ``(6) Special rule for organization with more than 1 
        unrelated trade or business.--In the case of any organization 
        with more than 1 unrelated trade or business--
                    ``(A) unrelated business taxable income, including 
                for purposes of determining any net operating loss 
                deduction, shall be computed separately with respect to 
                each such trade or business and without regard to 
                subsection (b)(12),
                    ``(B) the unrelated business taxable income of such 
                organization shall be the sum of the unrelated business 
                taxable income so computed with respect to each such 
                trade or business, less a specific deduction under 
                subsection (b)(12), and
                    ``(C) for purposes of subparagraph (B), unrelated 
                business taxable income with respect to any such trade 
                or business shall not be less than zero.''.
    (b) Effective Date.--
            (1) In general.--Except to the extent provided in paragraph 
        (2), the amendment made by this section shall apply to taxable 
        years beginning after December 31, 2017.
            (2) Carryovers of net operating losses.--If any net 
        operating loss arising in a taxable year beginning before 
        January 1, 2018, is carried over to a taxable year beginning on 
        or after such date--
                    (A) subparagraph (A) of section 512(a)(6) of the 
                Internal Revenue Code of 1986, as added by this Act, 
                shall not apply to such net operating loss, and
                    (B) the unrelated business taxable income of the 
                organization, after the application of subparagraph (B) 
                of such section, shall be reduced by the amount of such 
                net operating loss.

SEC. 13704. REPEAL OF TAX-EXEMPT STATUS FOR PROFESSIONAL SPORTS 
              LEAGUES.

    (a) In General.--Paragraph (6) of section 501(c) is amended--
            (1) by striking ``, boards of trade, or professional'' and 
        all that follows through ``players)'' and inserting ``, or 
        boards of trade'', and
            (2) by adding at the end the following: ``This paragraph 
        shall not apply to any professional sports league (whether or 
        not administering a pension fund for players).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 13705. MODIFICATION OF TAXES ON EXCESS BENEFIT TRANSACTIONS.

    (a) Organization Level Tax.--Subsection (a) of section 4958 is 
amended by adding at the end the following new paragraph:
            ``(3) On the organization.--In any case in which a tax is 
        imposed by paragraph (1), there is hereby imposed on the 
        organization a tax equal to 10 percent of the excess benefit, 
        unless the participation of the organization in the excess 
        benefit transaction is not willful and is due to reasonable 
        cause.''.
    (b) Minimum Standards of Organization Due Diligence.--Subsection 
(d) of section 4958 is amended by adding at the end the following new 
paragraph:
            ``(3) Minimum standards of organization due diligence.--
                    ``(A) In general.--Subsection (a)(3) shall not 
                apply to a transaction, if--
                            ``(i) the organization establishes that the 
                        minimum standards of due diligence described in 
                        subparagraph (B) were met with respect to the 
                        transaction, or
                            ``(ii) the organization establishes to the 
                        satisfaction of the Secretary that other 
                        reasonable procedures were used to ensure that 
                        no excess benefit was provided.
                    ``(B) Minimum standards.--An organization shall be 
                treated as satisfying the minimum standards of due 
                diligence described in this subparagraph with respect 
                to any transaction, if--
                            ``(i) the transaction was approved in 
                        advance by an authorized body of the 
                        organization composed entirely of individuals 
                        who did not have a conflict of interest with 
                        respect to the transaction,
                            ``(ii) the authorized body obtained and 
                        relied upon appropriate data as to 
                        comparability prior to approval of the 
                        transaction, and
                            ``(iii) the authorized body adequately and 
                        concurrently documented the basis for approving 
                        the transaction.
                    ``(C) No presumption as to reasonableness.--Meeting 
                the requirements of clause (i) or (ii) of subparagraph 
                (A) with respect to a transaction shall not give rise 
                to a presumption of reasonableness for purposes of the 
                taxes imposed by paragraphs (1) of (2) of subsection 
                (a) and shall not, by itself, support a conclusion that 
                a manager did not act knowingly for purposes of 
                subsection (a)(2) or that the organization did not act 
                wilfully or without reasonable cause for purposes of 
                subsection (a)(3).''.
    (c) Repeal of Exception for Manager Reliance on Professional 
Advice.--Section 4958 is amended by adding at the end the following new 
subsection:
    ``(g) No Safe Harbor for Reliance on Professional Advice.--An 
organization manager's reliance on a written opinion of a professional 
with respect to elements of a transaction within the professional's 
expertise shall not, by itself, preclude the manager from being treated 
as participating in the transaction knowingly.''.
    (d) Athletic Coaches and Investment Managers Treated as 
Disqualified Persons.--
            (1) Athletic coaches.--
                    (A) In general.--Paragraph (1) of section 4958(f) 
                is amended by striking ``and'' at the end of 
                subparagraph (E), by striking the period at the end of 
                subparagraph (F) and inserting ``, and'', and by adding 
                at the end the following new subparagraph:
                    ``(G) which involves an eligible educational 
                institution (as defined in section 25A(f)(2)), any 
                person who performs services as an athletic coach for 
                the organization.''.
                    (B) Family members.--Subparagraph (B) of section 
                4958(f)(1) is amended by inserting ``or (G)'' after 
                ``subparagraph (A)''.
            (2) Investment advisors.--
                    (A) In general.--Subparagraph (F) of section 
                4958(f)(1) is amended--
                            (i) by striking ``which involves a 
                        sponsoring organization (as defined in section 
                        4966(d)(1)),'', and
                            (ii) by striking ``such sponsoring 
                        organization (as so defined)'' and inserting 
                        ``the organization''.
                    (B) Investment advisor definition.--Subparagraph 
                (B) of section 4958(f)(8) is amended to read as 
                follows:
                    ``(B) Investment advisor defined.--For purposes of 
                subparagraph (A), the term `investment advisor' means--
                            ``(i) with respect to any organization, any 
                        person who is compensated by such organization 
                        and is primarily responsible for managing the 
                        investment of, or providing investment advice 
                        with respect to, assets of such organization, 
                        and
                            ``(ii) with respect to any sponsoring 
                        organization (as defined in section 
                        4966(d)(1)), any person (other than an employee 
                        of such organization) compensated by such 
                        organization for managing the investment of, or 
                        providing investment advice with respect to, 
                        assets maintained in donor advised funds (as 
                        defined in section 4966(d)(2)) owned by such 
                        organization.''.
    (e) Application to Unions and Trade Associations.--Paragraph (1) of 
section 4958(e) is amended by inserting ``(5), (6),'' after ``(4),''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 13706. 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 meets the requirements of paragraphs (2), (3), 
        and (4) for the taxable year.
            ``(2) Ownership.--The 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 by 
                means other than by purchase.
            ``(3) All profits to charity.--
                    ``(A) In general.--The requirements of this 
                paragraph are 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 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 (as determined under section 4958(f)(4)) 
                of such a contributor 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 persons who are not--
                            ``(i) directors or officers of the business 
                        enterprise, or
                            ``(ii) family members (as so determined) of 
                        a substantial contributor (as so defined) 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 to any family 
                member of such a 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.

SEC. 13707. REPEAL OF DEDUCTION FOR AMOUNTS PAID IN EXCHANGE FOR 
              COLLEGE ATHLETIC EVENT SEATING RIGHTS.

    (a) In General.--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).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made in taxable years beginning after December 31, 
2017.

SEC. 13708. REPEAL OF SUBSTANTIATION EXCEPTION IN CASE OF CONTRIBUTIONS 
              REPORTED BY DONEE.

    (a) In General.--Section 170(f)(8) is amended by striking 
subparagraph (D) and by redesignating subparagraph (E) as subparagraph 
(D).
    (b) Effective Date.--The amendments made by this section shall 
apply to contributions made in taxable years beginning after December 
31, 2016.

                       PART IX--OTHER PROVISIONS

         Subpart A--Craft Beverage Modernization and Tax Reform

SEC. 13801. RULE OF CONSTRUCTION.

    Nothing in this subpart, the amendments made by this subpart, or 
any regulation promulgated under this subpart or the amendments made by 
this subpart, shall be construed to preempt, supersede, or otherwise 
limit or restrict any State, local, or tribal law that prohibits or 
regulates the production or sale of distilled spirits, wine, or malt 
beverages.

SEC. 13802. PRODUCTION PERIOD FOR BEER, WINE, AND DISTILLED SPIRITS.

    (a) In General.--Section 263A(f) is amended--
            (1) by redesignating paragraph (4) as paragraph (5), and
            (2) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) Exemption for aging process of beer, wine, and 
        distilled spirits.--
                    ``(A) In general.--For purposes of this subsection, 
                the production period shall not include the aging 
                period for--
                            ``(i) beer (as defined in section 5052(a)),
                            ``(ii) wine (as described in section 
                        5041(a)), or
                            ``(iii) distilled spirits (as defined in 
                        section 5002(a)(8)), except such spirits that 
                        are unfit for use for beverage purposes.
                    ``(B) Termination.--This paragraph shall not apply 
                to interest costs paid or accrued after December 31, 
                2019.''.
    (b) Conforming Amendment.--Paragraph (5)(B)(ii) of section 263A(f), 
as redesignated by this section, is amended by inserting ``except as 
provided in paragraph (4),'' before ``ending on the date''.
    (c) Effective Date.--The amendments made by this section shall 
apply to interest costs paid or accrued in calendar years beginning 
after December 31, 2017.

SEC. 13803. REDUCED RATE OF EXCISE TAX ON BEER.

    (a) In General.--Paragraph (1) of section 5051(a) is amended to 
read as follows:
            ``(1) In general.--
                    ``(A) Imposition of tax.--A tax is hereby imposed 
                on all beer brewed or produced, and removed for 
                consumption or sale, within the United States, or 
                imported into the United States. Except as provided in 
                paragraph (2), the rate of such tax shall be the amount 
                determined under this paragraph.
                    ``(B) Rate.--Except as provided in subparagraph 
                (B), the rate of tax shall be $18 for per barrel.
                    ``(C) Special rule.--In the case of beer removed 
                after December 31, 2017, and before January 1, 2020, 
                the rate of tax shall be--
                            ``(i) $16 on the first 6,000,000 barrels of 
                        beer--
                                    ``(I) brewed by the brewer and 
                                removed during the calendar year for 
                                consumption or sale, or
                                    ``(II) imported by the importer 
                                into the United States during the 
                                calendar year, and
                            ``(ii) $18 on any barrels of beer to which 
                        clause (i) does not apply.
                    ``(D) Barrel.--For purposes of this section, a 
                barrel shall contain not more than 31 gallons of beer, 
                and any tax imposed under this section shall be applied 
                at a like rate for any other quantity or for fractional 
                parts of a barrel.''.
    (b) Reduced Rate for Certain Domestic Production.--Subparagraph (A) 
of section 5051(a)(2) is amended--
            (1) in the heading, by striking ``$7 a barrel'', and
            (2) by inserting ``($3.50 in the case of beer removed after 
        December 31, 2017, and before January 1, 2020)'' after ``$7''.
    (c) Application of Reduced Tax Rate for Foreign Manufacturers and 
Importers.--Subsection (a) of section 5051 is amended--
            (1) in subparagraph (C)(ii) of paragraph (1), as amended by 
        subsection (a), by inserting ``but only if the importer is an 
        electing importer under paragraph (4) and the barrels have been 
        assigned to the importer pursuant to such paragraph'' after 
        ``during the calendar year'', and
            (2) by adding at the end the following new paragraph:
            ``(4) Reduced tax rate for foreign manufacturers and 
        importers.--
                    ``(A) In general.--In the case of any barrels of 
                beer which have been brewed or produced outside of the 
                United States and imported into the United States, the 
                rate of tax applicable under clause (i) of paragraph 
                (1)(C) (referred to in this paragraph as the `reduced 
                tax rate') may be assigned by the brewer (provided that 
                the brewer makes an election described in subparagraph 
                (B)(ii)) to any electing importer of such barrels 
                pursuant to the requirements established by the 
                Secretary under subparagraph (B).
                    ``(B) Assignment.--The Secretary shall, through 
                such rules, regulations, and procedures as are 
                determined appropriate, establish procedures for 
                assignment of the reduced tax rate provided under this 
                paragraph, which shall include--
                            ``(i) a limitation to ensure that the 
                        number of barrels of beer for which the reduced 
                        tax rate has been assigned by a brewer--
                                    ``(I) to any importer does not 
                                exceed the number of barrels of beer 
                                brewed or produced by such brewer 
                                during the calendar year which were 
                                imported into the United States by such 
                                importer, and
                                    ``(II) to all importers does not 
                                exceed the 6,000,000 barrels to which 
                                the reduced tax rate applies,
                            ``(ii) procedures that allow the election 
                        of a brewer to assign and an importer to 
                        receive the reduced tax rate provided under 
                        this paragraph,
                            ``(iii) requirements that the brewer 
                        provide any information as the Secretary 
                        determines necessary and appropriate for 
                        purposes of carrying out this paragraph, and
                            ``(iv) procedures that allow for revocation 
                        of eligibility of the brewer and the importer 
                        for the reduced tax rate provided under this 
                        paragraph in the case of any erroneous or 
                        fraudulent information provided under clause 
                        (iii) which the Secretary deems to be material 
                        to qualifying for such reduced rate.
                    ``(C) Controlled group.--For purposes of this 
                section, any importer making an election described in 
                subparagraph (B)(ii) shall be deemed to be a member of 
                the controlled group of the brewer, as described under 
                paragraph (5).''.
    (d) Controlled Group and Single Taxpayer Rules.--Subsection (a) of 
section 5051, as amended by this section, is amended--
            (1) in paragraph (2)--
                    (A) by striking subparagraph (B), and
                    (B) by redesignating subparagraph (C) as 
                subparagraph (B), and
            (2) by adding at the end the following new paragraph:
            ``(5) Controlled group and single taxpayer rules.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), in the case of a controlled group, 
                the 6,000,000 barrel quantity specified in paragraph 
                (1)(C)(i) and the 2,000,000 barrel quantity specified 
                in paragraph (2)(A) shall be applied to the controlled 
                group, and the 6,000,000 barrel quantity specified in 
                paragraph (1)(C)(i) and the 60,000 barrel quantity 
                specified in paragraph (2)(A) shall be apportioned 
                among the brewers who are members of such group in such 
                manner as the Secretary or their delegate shall by 
                regulations prescribe. For purposes of the preceding 
                sentence, the term `controlled group' has the meaning 
                assigned to it by subsection (a) of section 1563, 
                except that for such purposes the phrase `more than 50 
                percent' shall be substituted for the phrase `at least 
                80 percent' in each place it appears in such 
                subsection. Under regulations prescribed by the 
                Secretary, principles similar to the principles of the 
                preceding two sentences shall be applied to a group of 
                brewers under common control where one or more of the 
                brewers is not a corporation.
                    ``(B) Foreign manufacturers and importers.--For 
                purposes of paragraph (4), in the case of a controlled 
                group, the 6,000,000 barrel quantity specified in 
                paragraph (1)(C)(i) shall be applied to the controlled 
                group and apportioned among the members of such group 
                in such manner as the Secretary shall by regulations 
                prescribe. For purposes of the preceding sentence, the 
                term `controlled group' has the meaning given such term 
                under subparagraph (A). Under regulations prescribed by 
                the Secretary, principles similar to the principles of 
                the preceding two sentences shall be applied to a group 
                of brewers under common control where one or more of 
                the brewers is not a corporation.
                    ``(C) Single taxpayer.--Pursuant to rules issued by 
                the Secretary, two or more entities (whether or not 
                under common control) that produce beer marketed under 
                a similar brand, license, franchise, or other 
                arrangement shall be treated as a single taxpayer for 
                purposes of the application of this subsection.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to beer removed after December 31, 2017.

SEC. 13804. SIMPLIFICATION OF RULES REGARDING RECORDS, STATEMENTS, AND 
              RETURNS.

    (a) In General.--Subsection (a) of section 5555 is amended by 
adding at the end the following: ``For calendar quarters beginning 
after December 31, 2017, and before January 1, 2020, the Secretary 
shall permit a person to employ a unified system for any records, 
statements, and returns required to be kept, rendered, or made under 
this section for any beer produced in the brewery for which the tax 
imposed by section 5051 has been determined, including any beer which 
has been removed for consumption on the premises of the brewery.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to any calendar quarters beginning after December 31, 2017.

SEC. 13805. TRANSFER OF BEER BETWEEN BONDED FACILITIES.

    (a) In General.--Section 5414 is amended--
            (1) by striking ``Beer may be removed'' and inserting ``(a) 
        In General.--Beer may be removed'', and
            (2) by adding at the end the following:
    ``(b) Transfer of Beer Between Bonded Facilities.--
            ``(1) In general.--Beer may be removed from one brewery to 
        another bonded brewery, without payment of tax, and may be 
        mingled with beer at the receiving brewery, subject to such 
        conditions, including payment of the tax, and in such 
        containers, as the Secretary by regulations shall prescribe, 
        which shall include--
                    ``(A) any removal from one brewery to another 
                brewery belonging to the same brewer,
                    ``(B) any removal from a brewery owned by one 
                corporation to a brewery owned by another corporation 
                when--
                            ``(i) one such corporation owns the 
                        controlling interest in the other such 
                        corporation, or
                            ``(ii) the controlling interest in each 
                        such corporation is owned by the same person or 
                        persons, and
                    ``(C) any removal from one brewery to another 
                brewery when--
                            ``(i) the proprietors of transferring and 
                        receiving premises are independent of each 
                        other and neither has a proprietary interest, 
                        directly or indirectly, in the business of the 
                        other, and
                            ``(ii) the transferor has divested itself 
                        of all interest in the beer so transferred and 
                        the transferee has accepted responsibility for 
                        payment of the tax.
            ``(2) Transfer of liability for tax.--For purposes of 
        paragraph (1)(C), such relief from liability shall be effective 
        from the time of removal from the transferor's bonded premises, 
        or from the time of divestment of interest, whichever is later.
            ``(3) Termination.--This subsection shall not apply to any 
        calendar quarter beginning after December 31, 2019.''.
    (b) Removal From Brewery by Pipeline.--Section 5412 is amended by 
inserting ``pursuant to section 5414 or'' before ``by pipeline''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any calendar quarters beginning after December 31, 2017.

SEC. 13806. REDUCED RATE OF EXCISE TAX ON CERTAIN WINE.

    (a) In General.--Section 5041(c) is amended by adding at the end 
the following new paragraph:
            ``(8) Special rule for 2018 and 2019.--
                    ``(A) In general.--In the case of wine removed 
                after December 31, 2017, and before January 1, 2020, 
                paragraphs (1) and (2) shall not apply and there shall 
                be allowed as a credit against any tax imposed by this 
                title (other than chapters 2, 21, and 22) an amount 
                equal to the sum of--
                            ``(i) $1 per wine gallon on the first 
                        30,000 wine gallons of wine, plus
                            ``(ii) 90 cents per wine gallon on the 
                        first 100,000 wine gallons of wine to which 
                        clause (i) does not apply, plus
                            ``(iii) 53.5 cents per wine gallon on the 
                        first 620,000 wine gallons of wine to which 
                        clauses (i) and (ii) do not apply,
                which are produced by the producer and removed during 
                the calendar year for consumption or sale, or which are 
                imported by the importer into the United States during 
                the calendar year.
                    ``(B) Adjustment of credit for hard cider.--In the 
                case of wine described in subsection (b)(6), 
                subparagraph (A) of this paragraph shall be applied--
                            ``(i) in clause (i) of such subparagraph, 
                        by substituting `6.2 cents' for `$1',
                            ``(ii) in clause (ii) of such subparagraph, 
                        by substituting `5.6 cents' for `90 cents', and
                            ``(iii) in clause (iii) of such 
                        subparagraph, by substituting `3.3 cents' for 
                        `53.5 cents'.'',
    (b) Controlled Group and Single Taxpayer Rules.--Paragraph (4) of 
section 5041(c) is amended by striking ``section 5051(a)(2)(B)'' and 
inserting ``section 5051(a)(5)''.
    (c) Allowance of Credit for Foreign Manufacturers and Importers.--
Subsection (c) of section 5041, as amended by subsection (a), is 
amended--
            (1) in subparagraph (A) of paragraph (8), by inserting 
        ``but only if the importer is an electing importer under 
        paragraph (9) and the wine gallons of wine have been assigned 
        to the importer pursuant to such paragraph'' after ``into the 
        United States during the calendar year'', and
            (2) by adding at the end the following new paragraph:
            ``(9) Allowance of credit for foreign manufacturers and 
        importers.--
                    ``(A) In general.--In the case of any wine gallons 
                of wine which have been produced outside of the United 
                States and imported into the United States, the credit 
                allowable under paragraph (8) (referred to in this 
                paragraph as the `tax credit') may be assigned by the 
                person who produced such wine (referred to in this 
                paragraph as the `foreign producer'), provided that 
                such person makes an election described in subparagraph 
                (B)(ii), to any electing importer of such wine gallons 
                pursuant to the requirements established by the 
                Secretary under subparagraph (B).
                    ``(B) Assignment.--The Secretary shall, through 
                such rules, regulations, and procedures as are 
                determined appropriate, establish procedures for 
                assignment of the tax credit provided under this 
                paragraph, which shall include--
                            ``(i) a limitation to ensure that the 
                        number of wine gallons of wine for which the 
                        tax credit has been assigned by a foreign 
                        producer--
                                    ``(I) to any importer does not 
                                exceed the number of wine gallons of 
                                wine produced by such foreign producer 
                                during the calendar year which were 
                                imported into the United States by such 
                                importer, and
                                    ``(II) to all importers does not 
                                exceed the 750,000 wine gallons of wine 
                                to which the tax credit applies,
                            ``(ii) procedures that allow the election 
                        of a foreign producer to assign and an importer 
                        to receive the tax credit provided under this 
                        paragraph,
                            ``(iii) requirements that the foreign 
                        producer provide any information as the 
                        Secretary determines necessary and appropriate 
                        for purposes of carrying out this paragraph, 
                        and
                            ``(iv) procedures that allow for revocation 
                        of eligibility of the foreign producer and the 
                        importer for the tax credit provided under this 
                        paragraph in the case of any erroneous or 
                        fraudulent information provided under clause 
                        (iii) which the Secretary deems to be material 
                        to qualifying for such credit.
                    ``(C) Controlled group.--For purposes of this 
                section, any importer making an election described in 
                subparagraph (B)(ii) shall be deemed to be a member of 
                the controlled group of the foreign producer, as 
                described under paragraph (4).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to wine removed after December 31, 2017.

SEC. 13807. ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR APPLICATION OF 
              EXCISE TAX RATES.

    (a) In General.--Paragraphs (1) and (2) of section 5041(b) are each 
amended by inserting ``(16 percent in the case of wine removed after 
December 31, 2017, and before January 1, 2020'' after ``14 percent''.
    (b) Effective Date.--The amendments made by this section shall 
apply to wine removed after December 31, 2017.

SEC. 13808. DEFINITION OF MEAD AND LOW ALCOHOL BY VOLUME WINE.

    (a) In General.--Section 5041 is amended--
            (1) in subsection (a), by striking ``Still wines'' and 
        inserting ``Subject to subsection (h), still wines'', and
            (2) by adding at the end the following new subsection:
    ``(h) Mead and Low Alcohol by Volume Wine.--
            ``(1) In general.--For purposes of subsections (a) and 
        (b)(1), mead and low alcohol by volume wine shall be deemed to 
        be still wines containing not more than 16 percent of alcohol 
        by volume.
            ``(2) Definitions.--
                    ``(A) Mead.--For purposes of this section, the term 
                `mead' means a wine--
                            ``(i) containing not more than 0.64 gram of 
                        carbon dioxide per hundred milliliters of wine, 
                        except that the Secretary shall by regulations 
                        prescribe such tolerances to this limitation as 
                        may be reasonably necessary in good commercial 
                        practice,
                            ``(ii) which is derived solely from honey 
                        and water,
                            ``(iii) which contains no fruit product or 
                        fruit flavoring, and
                            ``(iv) which contains less than 8.5 percent 
                        alcohol by volume.
                    ``(B) Low alcohol by volume wine.--For purposes of 
                this section, the term `low alcohol by volume wine' 
                means a wine--
                            ``(i) containing not more than 0.64 gram of 
                        carbon dioxide per hundred milliliters of wine, 
                        except that the Secretary shall by regulations 
                        prescribe such tolerances to this limitation as 
                        may be reasonably necessary in good commercial 
                        practice,
                            ``(ii) which is derived--
                                    ``(I) primarily from grapes, or
                                    ``(II) from grape juice concentrate 
                                and water,
                            ``(iii) which contains no fruit product or 
                        fruit flavoring other than grape, and
                            ``(iv) which contains less than 8.5 percent 
                        alcohol by volume.
            ``(3) Termination.--This subsection shall not apply to wine 
        removed after December 31, 2019.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to wine removed after December 31, 2017.

SEC. 13809. REDUCED RATE OF EXCISE TAX ON CERTAIN DISTILLED SPIRITS.

    (a) In General.--Section 5001 is amended by redesignating 
subsection (c) as subsection (d) and by inserting after subsection (b) 
the following new subsection:
    ``(c) Reduced Rate for 2018 and 2019.--
            ``(1) In general.--In the case of a distilled spirits 
        operation, the otherwise applicable tax rate under subsection 
        (a)(1) shall be--
                    ``(A) $2.70 per proof gallon on the first 100,000 
                proof gallons of distilled spirits, and
                    ``(B) $13.34 per proof gallon on the first 
                22,130,000 of proof gallons of distilled spirits to 
                which subparagraph (A) does not apply,
        which have been distilled or processed by such operation and 
        removed during the calendar year for consumption or sale, or 
        which have been imported by the importer into the United States 
        during the calendar year.
            ``(2) Controlled groups.--
                    ``(A) In general.--In the case of a controlled 
                group, the proof gallon quantities specified under 
                subparagraphs (A) and (B) of paragraph (1) shall be 
                applied to such group and apportioned among the members 
                of such group in such manner as the Secretary or their 
                delegate shall by regulations prescribe.
                    ``(B) Definition.--For purposes of subparagraph 
                (A), the term `controlled group' shall have the meaning 
                given such term by subsection (a) of section 1563, 
                except that `more than 50 percent' shall be substituted 
                for `at least 80 percent' each place it appears in such 
                subsection.
                    ``(C) Rules for non-corporations.--Under 
                regulations prescribed by the Secretary, principles 
                similar to the principles of subparagraphs (A) and (B) 
                shall be applied to a group under common control where 
                one or more of the persons is not a corporation.
                    ``(D) Single taxpayer.--Pursuant to rules issued by 
                the Secretary, two or more entities (whether or not 
                under common control) that produce distilled spirits 
                marketed under a similar brand, license, franchise, or 
                other arrangement shall be treated as a single taxpayer 
                for purposes of the application of this subsection.
            ``(3) Termination.--This subsection shall not apply to 
        distilled spirits removed after December 31, 2019.''.
    (b) Conforming Amendment.--Section 7652(f)(2) is amended by 
striking ``section 5001(a)(1)'' and inserting ``subsection (a)(1) of 
section 5001, determined as if subsection (c)(1) of such section did 
not apply''.
    (c) Application of Reduced Tax Rate for Foreign Manufacturers and 
Importers.--Subsection (c) of section 5001, as added by subsection (a), 
is amended--
            (1) in paragraph (1), by inserting ``but only if the 
        importer is an electing importer under paragraph (3) and the 
        proof gallons of distilled spirits have been assigned to the 
        importer pursuant to such paragraph'' after ``into the United 
        States during the calendar year'', and
            (2) by adding at the end the following new paragraph:
            ``(3) Reduced tax rate for foreign manufacturers and 
        importers.--
                    ``(A) In general.--In the case of any proof gallons 
                of distilled spirits which have been produced outside 
                of the United States and imported into the United 
                States, the rate of tax applicable under paragraph (1) 
                (referred to in this paragraph as the `reduced tax 
                rate') may be assigned by the distilled sprits 
                operation (provided that such operation makes an 
                election described in subparagraph (B)(ii)) to any 
                electing importer of such proof gallons pursuant to the 
                requirements established by the Secretary under 
                subparagraph (B).
                    ``(B) Assignment.--The Secretary shall, through 
                such rules, regulations, and procedures as are 
                determined appropriate, establish procedures for 
                assignment of the reduced tax rate provided under this 
                paragraph, which shall include--
                            ``(i) a limitation to ensure that the 
                        number of proof gallons of distilled spirits 
                        for which the reduced tax rate has been 
                        assigned by a distilled spirits operation--
                                    ``(I) to any importer does not 
                                exceed the number of proof gallons 
                                produced by such operation during the 
                                calendar year which were imported into 
                                the United States by such importer, and
                                    ``(II) to all importers does not 
                                exceed the 22,230,000 proof gallons of 
                                distilled spirits to which the reduced 
                                tax rate applies,
                            ``(ii) procedures that allow the election 
                        of a distilled spirits operation to assign and 
                        an importer to receive the reduced tax rate 
                        provided under this paragraph,
                            ``(iii) requirements that the distilled 
                        spirits operation provide any information as 
                        the Secretary determines necessary and 
                        appropriate for purposes of carrying out this 
                        paragraph, and
                            ``(iv) procedures that allow for revocation 
                        of eligibility of the distilled spirits 
                        operation and the importer for the reduced tax 
                        rate provided under this paragraph in the case 
                        of any erroneous or fraudulent information 
                        provided under clause (iii) which the Secretary 
                        deems to be material to qualifying for such 
                        reduced rate.
                    ``(C) Controlled group.--
                            ``(i) In general.--For purposes of this 
                        section, any importer making an election 
                        described in subparagraph (B)(ii) shall be 
                        deemed to be a member of the controlled group 
                        of the distilled spirits operation, as 
                        described under paragraph (2).
                            ``(ii) Apportionment.--For purposes of this 
                        paragraph, in the case of a controlled group, 
                        rules similar to section 5051(a)(5)(B) shall 
                        apply.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to distilled spirits removed after December 31, 2017.

SEC. 13810. BULK DISTILLED SPIRITS.

    (a) In General.--Section 5212 is amended by adding at the end the 
following sentence: ``In the case of distilled spirits transferred in 
bond after December 31, 2017, and before January 1, 2020, this section 
shall be applied without regard to whether distilled spirits are bulk 
distilled spirits.''.
    (b) Effective Date.--The amendments made by this section shall 
apply distilled spirits transferred in bond after December 31, 2017.

                  Subpart B--Miscellaneous Provisions

SEC. 13821. MODIFICATION OF TAX TREATMENT OF ALASKA NATIVE CORPORATIONS 
              AND SETTLEMENT TRUSTS.

    (a) Exclusion for ANCSA Payments Assigned to Alaska Native 
Settlement Trusts.--
            (1) In general.--Part III of subchapter B of chapter 1 is 
        amended by inserting before section 140 the following new 
        section:

``SEC. 139G. ASSIGNMENTS TO ALASKA NATIVE SETTLEMENT TRUSTS.

    ``(a) In General.--In the case of a Native Corporation, gross 
income shall not include the value of any payments that would otherwise 
be made, or treated as being made, to such Native Corporation pursuant 
to, or as required by, any provision of the Alaska Native Claims 
Settlement Act (43 U.S.C. 1601 et seq.), including any payment that 
would otherwise be made to a Village Corporation pursuant to section 
7(j) of the Alaska Native Claims Settlement Act (43 U.S.C. 1606(j)), 
provided that any such payments--
            ``(1) are assigned in writing to a Settlement Trust, and
            ``(2) were not received by such Native Corporation prior to 
        the assignment described in paragraph (1).
    ``(b) Inclusion in Gross Income.--In the case of a Settlement Trust 
which has been assigned payments described in subsection (a), gross 
income shall include such payments when received by such Settlement 
Trust pursuant to the assignment and shall have the same character as 
if such payments were received by the Native Corporation.
    ``(c) Amount and Scope of Assignment.--The amount and scope of any 
assignment under subsection (a) shall be described with reasonable 
particularity and may either be in a percentage of one or more such 
payments or in a fixed dollar amount.
    ``(d) Duration of Assignment; Revocability.--Any assignment under 
subsection (a) shall specify--
            ``(1) a duration either in perpetuity or for a period of 
        time, and
            ``(2) whether such assignment is revocable.
    ``(e) Prohibition on Deduction.--Notwithstanding section 247, no 
deduction shall be allowed to a Native Corporation for purposes of any 
amounts described in subsection (a).
    ``(f) Definitions.--For purposes of this section, the terms `Native 
Corporation' and `Settlement Trust' have the same meaning given such 
terms under section 646(h).''.
            (2) Conforming amendment.--The table of sections for part 
        III of subchapter B of chapter 1 is amended by inserting before 
        the item relating to section 140 the following new item:

``Sec. 139G. Assignments to Alaska Native Settlement Trusts.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2016.
    (b) Deduction of Contributions to Alaska Native Settlement 
Trusts.--
            (1) In general.--Part VIII of subchapter B of chapter 1 is 
        amended by inserting before section 248 the following new 
        section:

``SEC. 247. CONTRIBUTIONS TO ALASKA NATIVE SETTLEMENT TRUSTS.

    ``(a) In General.--In the case of a Native Corporation, there shall 
be allowed a deduction for any contributions made by such Native 
Corporation to a Settlement Trust (regardless of whether an election 
under section 646 is in effect for such Settlement Trust) for which the 
Native Corporation has made an annual election under subsection (e).
    ``(b) Amount of Deduction.--The amount of the deduction under 
subsection (a) shall be equal to--
            ``(1) in the case of a cash contribution (regardless of the 
        method of payment, including currency, coins, money order, or 
        check), the amount of such contribution, or
            ``(2) in the case of a contribution not described in 
        paragraph (1), the lesser of--
                    ``(A) the Native Corporation's adjusted basis in 
                the property contributed, or
                    ``(B) the fair market value of the property 
                contributed.
    ``(c) Limitation and Carryover.--
            ``(1) In general.--Subject to paragraph (2), the deduction 
        allowed under subsection (a) for any taxable year shall not 
        exceed the taxable income (as determined without regard to such 
        deduction) of the Native Corporation for the taxable year in 
        which the contribution was made.
            ``(2) Carryover.--If the aggregate amount of contributions 
        described in subsection (a) for any taxable year exceeds the 
        limitation under paragraph (1), such excess shall be treated as 
        a contribution described in subsection (a) in each of the 15 
        succeeding years in order of time.
    ``(d) Definitions.--For purposes of this section, the terms `Native 
Corporation' and `Settlement Trust' have the same meaning given such 
terms under section 646(h).
    ``(e) Manner of Making Election.--
            ``(1) In general.--For each taxable year, a Native 
        Corporation may elect to have this section apply for such 
        taxable year on the income tax return or an amendment or 
        supplement to the return of the Native Corporation, with such 
        election to have effect solely for such taxable year.
            ``(2) Revocation.--Any election made by a Native 
        Corporation pursuant to this subsection may be revoked pursuant 
        to an amendment or supplement to the income tax return which 
        has been timely filed by such Native Corporation.
    ``(f) Additional Rules.--
            ``(1) Earnings and profits.--Notwithstanding section 
        646(d)(2), in the case of a Native Corporation which claims a 
        deduction under this section for any taxable year, the earnings 
        and profits of such Native Corporation for such taxable year 
        shall be reduced by the amount of such deduction.
            ``(2) Gain or loss.--No gain or loss shall be recognized by 
        the Native Corporation with respect to a contribution of 
        property for which a deduction is allowed under this section.
            ``(3) Income.--Subject to subsection (g), a Settlement 
        Trust shall include in income the amount of any deduction 
        allowed under this section in the taxable year in which the 
        Settlement Trust actually receives such contribution.
            ``(4) Period.--The holding period under section 1223 of the 
        Settlement Trust shall include the period the property was held 
        by the Native Corporation.
            ``(5) Basis.--The basis that a Settlement Trust has for 
        which a deduction is allowed under this section shall be equal 
        to the lesser of--
                    ``(A) the adjusted basis of the Native Corporation 
                in such property immediately before such contribution, 
                or
                    ``(B) the fair market value of the property 
                immediately before such contribution.
            ``(6) Prohibition.--No deduction shall be allowed under 
        this section with respect to any contributions made to a 
        Settlement Trust which are in violation of subsection (a)(2) or 
        (c)(2) of section 39 of the Alaska Native Claims Settlement Act 
        (43 U.S.C. 1629e).
    ``(g) Election by Settlement Trust To Defer Income Recognition.--
            ``(1) In general.--In the case of a contribution which 
        consists of property other than cash, a Settlement Trust may 
        elect to defer recognition of any income related to such 
        property until the sale or exchange of such property, in whole 
        or in part, by the Settlement Trust.
            ``(2) Treatment.--In the case of property described in 
        paragraph (1), any income or gain realized on the sale or 
        exchange of such property shall be treated as--
                    ``(A) for such amount of the income or gain as is 
                equal to or less than the amount of income which would 
                be included in income at the time of contribution under 
                subsection (f)(3) but for the taxpayer's election under 
                this subsection, ordinary income, and
                    ``(B) for any amounts of the income or gain which 
                are in excess of the amount of income which would be 
                included in income at the time of contribution under 
                subsection (f)(3) but for the taxpayer's election under 
                this subsection, having the same character as if this 
                subsection did not apply.
            ``(3) Election.--
                    ``(A) In general.--For each taxable year, a 
                Settlement Trust may elect to apply this subsection for 
                any property described in paragraph (1) which was 
                contributed during such year. Any property to which the 
                election applies shall be identified and described with 
                reasonable particularity on the income tax return or an 
                amendment or supplement to the return of the Settlement 
                Trust, with such election to have effect solely for 
                such taxable year.
                    ``(B) Revocation.--Any election made by a 
                Settlement Trust pursuant to this subsection may be 
                revoked pursuant to an amended income tax return which 
                has been timely filed by such Settlement Trust.
                    ``(C) Certain dispositions.--
                            ``(i) In general.--In the case of any 
                        property for which an election is in effect 
                        under this subsection and which is disposed of 
                        within the first taxable year subsequent to the 
                        taxable year in which such property was 
                        contributed to the Settlement Trust--
                                    ``(I) this section shall be applied 
                                as if the election under this 
                                subsection had not been made,
                                    ``(II) any income or gain which 
                                would have been included in the year of 
                                contribution under subsection (f)(3) 
                                but for the taxpayer's election under 
                                this subsection shall be included in 
                                income for the taxable year of such 
                                contribution, and
                                    ``(III) the Settlement Trust shall 
                                pay any increase in tax resulting from 
                                such inclusion, including any 
                                applicable interest, and increased by 
                                10 percent of the amount of such 
                                increase with interest.
                            ``(ii) Assessment.--Notwithstanding section 
                        6501(a), any amount described in subclause 
                        (III) of clause (i) may be assessed, or a 
                        proceeding in court with respect to such amount 
                        may be initiated without assessment, within 4 
                        years after the date on which the return making 
                        the election under this subsection for such 
                        property was filed.''.
            (2) Conforming amendment.--The table of sections for part 
        VIII of subchapter B of chapter 1 is amended by inserting 
        before the item relating to section 248 the following new item:

``Sec. 247. Contributions to Alaska Native Settlement Trusts.''.
            (3) Permissive amendments to trust agreements establishing 
        settlement trusts.--
                    (A) In general.--Notwithstanding any provision of 
                law, including any provision of the Alaska Native 
                Claims Settlement Act (43 U.S.C. 1601 et seq.), Alaska 
                State law, or the terms of any trust agreement of a 
                Settlement Trust (as defined under section 3(t) of the 
                Alaska Native Claims Settlement Act (43 U.S.C. 
                1602(t))), the terms of any trust agreement of a 
                Settlement Trust may, within the 1-year period 
                following the date of the enactment of this Act, be 
                amended as necessary to allow such Trust to make an 
                election described in subsection (g) of section 247 of 
                the Internal Revenue Code of 1986 (as added by 
                paragraph (1)).
                    (B) Amendment.--An amendment described in 
                subparagraph (A) shall be enacted pursuant to one or 
                more agreements between the Native Corporation that 
                established the Settlement Trust and the trustees of 
                such Trust and shall not require any vote by the 
                beneficiaries of such Trust or the shareholders of such 
                Native Corporation.
                    (C) Registration statement.--Any Settlement Trust 
                which was registered in accordance with Alaska State 
                law prior to the date of the enactment of an amendment 
                described in subparagraph (A) shall not be required to 
                file a new or amended registration statement to reflect 
                such amendment.
            (4) Effective date.--
                    (A) In general.--The amendments made by this 
                subsection shall apply to taxable years for which the 
                period of limitation on refund or credit under section 
                6511 of the Internal Revenue Code of 1986 has not 
                expired.
                    (B) One-year waiver of statute of limitations.--If 
                the period of limitation on a credit or refund 
                resulting from the amendments made by paragraph (1) 
                expires before the end of the 1-year period beginning 
                on the date of the enactment of this Act, refund or 
                credit of such overpayment (to the extent attributable 
                to such amendments) may, nevertheless, be made or 
                allowed if claim therefor is filed before the close of 
                such 1-year period.
    (c) Information Reporting for Deductible Contributions to Alaska 
Native Settlement Trusts.--
            (1) In general.--Section 6039H is amended--
                    (A) in the heading, by striking ``sponsoring'', and
                    (B) by adding at the end the following new 
                subsection:
    ``(e) Deductible Contributions by Native Corporations to Alaska 
Native Settlement Trusts.--
            ``(1) In general.--Any Native Corporation (as defined in 
        subsection (m) of section 3 of the Alaska Native Claims 
        Settlement Act (43 U.S.C. 1602(m))) which has made a 
        contribution to a Settlement Trust (as defined in subsection 
        (t) of such section) to which an election under subsection (e) 
        of section 247 applies shall provide such Settlement Trust with 
        a statement regarding such election not later than January 31 
        of the calendar year subsequent to the calendar year in which 
        the contribution was made.
            ``(2) Content of statement.--The statement described in 
        paragraph (1) shall include--
                    ``(A) the total amount of contributions to which 
                the election under subsection (e) of section 247 
                applies,
                    ``(B) for each contribution, whether such 
                contribution was in cash,
                    ``(C) for each contribution which consists of 
                property other than cash, the date that such property 
                was acquired by the Native Corporation and the adjusted 
                basis of such property on the date such property was 
                contributed to the Settlement Trust,
                    ``(D) the date on which each contribution was made 
                to the Settlement Trust, and
                    ``(E) such information as the Secretary determines 
                to be necessary or appropriate for the identification 
                of each contribution and the accurate inclusion of 
                income relating to such contributions by the Settlement 
                Trust.''.
            (2) Conforming amendment.--The item relating to section 
        6039H in the table of sections for subpart A of part III of 
        subchapter A of chapter 61 is amended to read as follows:

``Sec. 6039H. Information With Respect to Alaska Native Settlement 
                            Trusts and Native Corporations.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2016.
    (d) Statutory Construction.--This section is remedial Indian 
legislation enacted under the plenary authority of the Congress under 
the Constitution of the United States to regulate Indian affairs, and 
any ambiguities in section 139F or 247 of the Internal Revenue Code of 
1986, as added by this Act, shall be resolved in favor of Native 
Corporations attempting to exclude income or claim a deduction 
thereunder.

SEC. 13822. AMOUNTS PAID FOR AIRCRAFT MANAGEMENT SERVICES.

    (a) In General.--Subsection (e) of section 4261 is amended by 
adding at the end the following new paragraph:
            ``(5) Amounts paid for aircraft management services.--
                    ``(A) In general.--No tax shall be imposed by this 
                section or section 4271 on any amounts paid by an 
                aircraft owner for aircraft management services related 
                to--
                            ``(i) maintenance and support of the 
                        aircraft owner's aircraft, or
                            ``(ii) flights on the aircraft owner's 
                        aircraft.
                    ``(B) Aircraft management services.--For purposes 
                of subparagraph (A), the term `aircraft management 
                services' includes--
                            ``(i) assisting an aircraft owner with 
                        administrative and support services, such as 
                        scheduling, flight planning, and weather 
                        forecasting,
                            ``(ii) obtaining insurance,
                            ``(iii) maintenance, storage and fueling of 
                        aircraft,
                            ``(iv) hiring, training, and provision of 
                        pilots and crew,
                            ``(v) establishing and complying with 
                        safety standards, and
                            ``(vi) such other services as are necessary 
                        to support flights operated by an aircraft 
                        owner.
                    ``(C) Lessee treated as aircraft owner.--
                            ``(i) In general.--For purposes of this 
                        paragraph, the term `aircraft owner' includes a 
                        person who leases the aircraft other than under 
                        a disqualified lease.
                            ``(ii) Disqualified lease.--For purposes of 
                        clause (i), the term `disqualified lease' means 
                        a lease from a person providing aircraft 
                        management services with respect to such 
                        aircraft (or a related person (within the 
                        meaning of section 465(b)(3)(C)) to the person 
                        providing such services), if such lease is for 
                        a term of 31 days or less.
                    ``(D) Pro rata allocation.--In the case of amounts 
                paid to any person which (but for this subsection) are 
                subject to the tax imposed by subsection (a), a portion 
                of which consists of amounts described in subparagraph 
                (A), this paragraph shall apply on a pro rata basis 
                only to the portion which consists of amounts described 
                in such subparagraph.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid after the date of the enactment of this Act.

SEC. 13823. OPPORTUNITY ZONES.

    (a) In General.--Chapter 1 is amended by adding at the end the 
following:

                   ``Subchapter Z--Opportunity Zones

``Sec. 1400Z-1. Designation.
``Sec. 1400Z-2. Special rules for capital gains invested in opportunity 
                            zones.

``SEC. 1400Z-1. DESIGNATION.

    ``(a) Qualified Opportunity Zone Defined.--For the purposes of this 
subchapter, the term `qualified opportunity zone' means a population 
census tract that is a low-income community that is designated as a 
qualified opportunity zone.
    ``(b) Designation.--
            ``(1) Governor.--
                    ``(A) In general.--For purposes of subsection (a), 
                a population census tract that is a low-income 
                community is designated as a qualified opportunity zone 
                if--
                            ``(i) not later than the end of the 
                        determination period, the governor of the State 
                        in which the tract is located--
                                    ``(I) nominates the tract for 
                                designation as a qualified opportunity 
                                zone, and
                                    ``(II) notifies the Secretary in 
                                writing of such nomination, and
                            ``(ii) the Secretary certifies such 
                        nomination and designates such tract as a 
                        qualified opportunity zone before the end of 
                        the consideration period.
                    ``(B) Extension of periods.--A governor may request 
                that the Secretary extend either the determination or 
                consideration period, or both (determined without 
                regard to this subparagraph), for an additional 30 
                days.
                    ``(C) Deemed designation if secretary fails to 
                act.--Unless the tracts are ineligible for designation, 
                if the Secretary declines in writing to make such 
                certification and designation or fails to act before 
                the end of the consideration period, such nomination 
                shall be deemed to be certified and designated, 
                effective on the day after the last day of the 
                consideration period.
            ``(2) Secretary.--If a governor fails to make the 
        nominations and notifications by the end of the periods 
        referred to in paragraphs (1)(A) and (1)(B), the Secretary 
        shall designate and certify population census tracts that are 
        low-income communities as qualified opportunity zones, as 
        permitted by subsection (e).
    ``(c) Other Definitions.--For purposes of this subsection--
            ``(1) Low-income communities.--The term `low-income 
        community' has the same meaning as when used in section 45D(e).
            ``(2) Definition of periods.--
                    ``(A) Consideration period.--The term 
                `consideration period' means the 30-day period 
                beginning on the date on which the Secretary receives 
                notice under subsection (b)(1)(A)(i)(II), as extended 
                under subsection (b)(1)(B).
                    ``(B) Determination period.--The term 
                `determination period' means the 90-day period 
                beginning on the date of the enactment of the Tax Cuts 
                and Jobs Act, as extended under subsection (b)(1)(B).
            ``(3) State.--For purposes of this section, the term 
        `State' includes any possession of the United States.
    ``(d) Guidance for Opportunity Zone Nominations.--When considering 
the nomination of qualified opportunity zones, governors should strive 
for the creation of qualified opportunity zones that are geographically 
concentrated and contiguous clusters of population census tracts and 
should give particular consideration to areas that--
            ``(1) are currently the focus of mutually reinforcing 
        State, local, or private economic development initiatives to 
        attract investment and foster startup activity,
            ``(2) have demonstrated success in geographically targeted 
        development programs, such as promise zones, new market tax 
        credit, empowerment zones, and renewal communities, and
            ``(3) have recently experienced significant layoffs due to 
        business closures or relocations.
    ``(e) Number of Designations.--
            ``(1) In general.--Except as provided by paragraph (2), the 
        number of population census tracts in a State that may be 
        designated as qualified opportunity zones under this section 
        may not exceed 25 percent of the number of low-income 
        communities in the State.
            ``(2) Exception.--If the number of low-income communities 
        in a State is less than 100, then a total of 25 of such tracts 
        may be designated as qualified opportunity zones.
    ``(f) Designation of Tracts Contiguous With Low-Income 
Communities.--
            ``(1) In general.--A population census tract that is not a 
        low-income community may be designated as a qualified 
        opportunity zone under this section if--
                    ``(A) the tract is contiguous with the low-income 
                community that is designated as a qualified opportunity 
                zone, and
                    ``(B) the median family income of the tract does 
                not exceed 125 percent of the median family income of 
                the low-income community with which the tract is 
                contiguous.
            ``(2) Limitation.--Not more than 5 percent of the 
        population census tracts designated in a State as a qualified 
        opportunity zone may be designated under paragraph (1).
    ``(g) Period for Which Designation Is in Effect.--A designation as 
a qualified opportunity zone shall remain in effect for the period 
beginning on the date of the designation and ending at the close of the 
10th calendar year beginning on or after such date of designation.

``SEC. 1400Z-2. SPECIAL RULES FOR CAPITAL GAINS INVESTED IN OPPORTUNITY 
              ZONES.

    ``(a) In General.--In the case of gain from the sale to, or 
exchange with, an unrelated person of any property held by the 
taxpayer, at the election of the taxpayer--
            ``(1) gross income for the taxable year shall not include 
        so much of such gain as does not exceed the aggregate amount 
        invested by the taxpayer in a qualified opportunity fund during 
        the 180-day period beginning on the date of such sale or 
        exchange,
            ``(2) the amount of gain excluded by paragraph (1) shall be 
        included in gross income as provided by subsection (b), and
            ``(3) subsection (c) shall apply.
No election may be made under the preceding sentence with respect to a 
sale or exchange if an election previously made with respect to such 
sale or exchange is in effect.
    ``(b) Deferral of Gain Invested in Opportunity Zone Property.--
            ``(1) Year of inclusion.--Gain to which subsection (a)(2) 
        applies shall be included in income in the taxable year which 
        includes the earlier of--
                    ``(A) the date on which such investment is sold or 
                exchanged, or
                    ``(B) December 31, 2026.
            ``(2) Amount includible.--
                    ``(A) In general.--The amount of gain included in 
                gross income under subsection (a)(1) shall be the 
                excess of--
                            ``(i) the lesser of the amount of gain 
                        excluded under paragraph (1) or the fair market 
                        value of the property as of the determined as 
                        of the date described in paragraph (1), over
                            ``(ii) the taxpayer's basis in the 
                        investment.
                    ``(B) Determination of basis.--
                            ``(i) In general.--Except as otherwise 
                        provided in this clause or subsection (c), the 
                        taxpayer's basis in the investment shall be 
                        zero.
                            ``(ii) Increase for gain recognized under 
                        subsection (a)(2).--The basis in the investment 
                        shall be increased by the amount of gain 
                        recognized by reason of subsection (a)(2) with 
                        respect to such property.
                            ``(iii) Investments held for 5 years.--In 
                        the case of any investment held for at least 5 
                        years, the basis of such investment shall be 
                        increased by an amount equal to 10 percent of 
                        the amount of gain deferred by reason of 
                        subsection (a)(1).
                            ``(iv) Investments held for 7 years.--In 
                        the case of any investment held by the taxpayer 
                        for at least 7 years, in addition to any 
                        adjustment made under clause (iii), the basis 
                        of such property shall be increased by an 
                        amount equal to 5 percent of the amount of gain 
                        deferred by reason of subsection (a)(1).
    ``(c) Special Rule for Investments Held for at Least 10 Years.--In 
the case of any investment held by the taxpayer for at least 10 years 
and with respect to which the taxpayer makes an election under this 
clause, the basis of such property shall be equal to the fair market 
value of such investment on the date that the investment is sold or 
exchanged.
    ``(d) Qualified Opportunity Fund.--For purposes of this section--
            ``(1) Qualified opportunity fund.--The term `qualified 
        opportunity fund' means any investment vehicle which is 
        organized as a corporation or a partnership for the purpose of 
        investing in qualified opportunity zone property (other than 
        another qualified opportunity fund) that holds at least 90 
        percent of its assets in qualified opportunity zone property, 
        determined--
                    ``(A) on the last day of the first 6-month period 
                of the taxable year of the fund, and
                    ``(B) on the last day of the taxable year of the 
                fund.
            ``(2) Qualified opportunity zone property.--
                    ``(A) In general.--The term `qualified opportunity 
                zone property' means property which is--
                            ``(i) qualified opportunity zone stock,
                            ``(ii) qualified opportunity zone 
                        partnership interest, or
                            ``(iii) qualified opportunity zone business 
                        property.
                    ``(B) Qualified opportunity zone stock.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the term `qualified opportunity 
                        zone stock' means any stock in a domestic 
                        corporation if--
                                    ``(I) such stock is acquired by the 
                                taxpayer after December 31, 2017, at 
                                its original issue (directly or through 
                                an underwriter) from the corporation 
                                solely in exchange for cash,
                                    ``(II) as of the time such stock 
                                was issued, such corporation was a 
                                qualified opportunity zone business 
                                (or, in the case of a new corporation, 
                                such corporation was being organized 
                                for purposes of being a qualified 
                                opportunity zone business), and
                                    ``(III) during substantially all of 
                                the taxpayer's holding period for such 
                                stock, such corporation qualified as a 
                                qualified opportunity zone business.
                            ``(ii) Redemptions.--A rule similar to the 
                        rule of section 1202(c)(3) shall apply for 
                        purposes of this paragraph.
                    ``(C) Qualified opportunity zone partnership 
                interest.--The term `qualified opportunity zone 
                partnership interest' means any capital or profits 
                interest in a domestic partnership if--
                            ``(i) such interest is acquired by the 
                        taxpayer after December 31, 2017, from the 
                        partnership solely in exchange for cash,
                            ``(ii) as of the time such interest was 
                        acquired, such partnership was a qualified 
                        opportunity zone business (or, in the case of a 
                        new partnership, such partnership was being 
                        organized for purposes of being a qualified 
                        opportunity zone business), and
                            ``(iii) during substantially all of the 
                        taxpayer's holding period for such interest, 
                        such partnership qualified as a qualified 
                        opportunity zone business.
                    ``(D) Qualified opportunity zone business 
                property.--
                            ``(i) In general.--The term `qualified 
                        opportunity zone business property' means 
                        tangible property used in a trade or business 
                        of the taxpayer if--
                                    ``(I) such property was acquired by 
                                the taxpayer by purchase (as defined in 
                                section 179(d)(2)) after December 31, 
                                2017,
                                    ``(II) the original use of such 
                                property in the qualified opportunity 
                                zone commences with the taxpayer or the 
                                taxpayer substantially improves the 
                                property, and
                                    ``(III) during substantially all of 
                                the taxpayer's holding period for such 
                                property, substantially all of the use 
                                of such property was in a qualified 
                                opportunity zone.
                            ``(ii) Substantial improvement.--For 
                        purposes of subparagraph (A)(ii), property 
                        shall be treated as substantially improved by 
                        the taxpayer only if, during any 30-month 
                        period beginning after the date of acquisition 
                        of such property, additions to basis with 
                        respect to such property in the hands of the 
                        taxpayer exceed an amount equal to the adjusted 
                        basis of such property at the beginning of such 
                        30-month period in the hands of the taxpayer.
                            ``(iii) Related party.--For purposes of 
                        subparagraph (A)(i), the related person rule of 
                        section 179(d)(2) shall be applied pursuant to 
                        paragraph (8) of this subsection in lieu of the 
                        application of such rule in section 
                        179(d)(2)(A).
            ``(3) Qualified opportunity zone business.--
                    ``(A) In general.--The term `qualified opportunity 
                zone business' means a trade or business--
                            ``(i) in which substantially all of the 
                        tangible property owned or leased by the 
                        taxpayer is qualified opportunity zone business 
                        property,
                            ``(ii) which satisfies the requirements of 
                        paragraphs (2), (4), and (8) of section 
                        1397C(b), and
                            ``(iii) which is not described in section 
                        144(c)(6)(B).
                    ``(B) Special rule.--For purposes of subparagraph 
                (A), tangible property that ceases to be a qualified 
                opportunity zone business property shall continue to be 
                treated as a qualified opportunity zone business 
                property for the lesser of--
                            ``(i) 5 years after the date on which such 
                        tangible property ceases to be so qualified, or
                            ``(ii) the date on which such tangible 
                        property is no longer held by the qualified 
                        opportunity zone business.
    ``(e) Applicable Rules.--
            ``(1) Treatment of investments with mixed funds.--In the 
        case of any investment in a qualified opportunity fund only a 
        portion of which consists of investments of gain to which an 
        election under subsection (a)(1) is in effect--
                    ``(A) such investment shall be treated as 2 
                separate investments, consisting of--
                            ``(i) one investment that only includes 
                        amounts to which the election under subsection 
                        (a)(1) applies, and
                            ``(ii) a separate investment consisting of 
                        other amounts, and
                    ``(B) subsections (a), (b), and (c) shall only 
                apply to the investment described in subparagraph 
                (A)(i).
            ``(2) Related persons.--For purposes of this section, 
        persons are related to each other if such persons are described 
        in section 267(b) or 707(b)(1), determined by substituting `20 
        percent' for `50 percent' each place it occurs in such 
        sections.
            ``(3) Decedents.--In the case of a decedent, amounts 
        recognized under this section shall, if not properly includible 
        in the gross income of the decedent, be includible in gross 
        income as provided by section 691.
            ``(4) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this section, including--
                    ``(A) rules for the certification of qualified 
                opportunity funds for the purposes of this section, and
                    ``(B) rules to prevent abuse.
    ``(f) Failure of Qualified Opportunity Fund to Maintain Investment 
Standard.--
            ``(1) In general.--If a qualified opportunity fund fails to 
        meet the 90-percent requirement of subsection (c)(1), the 
        qualified opportunity fund shall pay a penalty for each month 
        it fails to meet the requirement in an amount equal to the 
        product of--
                    ``(A) the excess of--
                            ``(i) the amount equal to 90 percent of its 
                        aggregate assets, over
                            ``(ii) the aggregate amount of qualified 
                        opportunity zone property held by the fund, 
                        multiplied by
                    ``(B) the underpayment rate established under 
                section 6621(a)(2) for such month.
            ``(2) Special rule for partnerships.--In the case that the 
        qualified opportunity fund is a partnership, the penalty 
        imposed by paragraph (1) shall be taken into account 
        proportionately as part of the distributive share of each 
        partner of the partnership.
            ``(3) Reasonable cause exception.--No penalty shall be 
        imposed under this subsection with respect to any failure if it 
        is shown that such failure is due to reasonable cause.''.
    (b) Basis Adjustments.--Section 1016(a) is amended by striking 
``and'' at the end of paragraph (36), by striking the period at the end 
of paragraph (37) and inserting ``, and'', and by inserting after 
paragraph (37) the following:
            ``(38) to the extent provided in subsections (b)(2) and (c) 
        of section 1400Z-2.''.
    (c) Report to Congress.--The Secretary of the Treasury, or the 
Secretary's delegate, shall submit a report to Congress on the 
opportunity zone incentives enacted by this section beginning 5 years 
after the date of enactment of this Act and annually thereafter. The 
report shall include an assessment of investments held by qualified 
opportunity funds nationally and at the State level. To the extent such 
information is available, the report shall include the number of 
qualified opportunity funds, the amount of assets held in qualified 
opportunity funds, the composition of qualified opportunity fund 
investments by asset class, the percentage of qualified opportunity 
zone census tracts designated under subchapter Z of the Internal 
Revenue Code of 1986 (as added by this section) that have received 
qualified opportunity fund investments. The report shall also include 
an assessment of the impacts and outcomes of the investments in those 
areas on economic indicators including job creation, poverty reduction, 
and new business starts, and other metrics as determined by the 
Secretary.
    (d) Clerical Amendment.--The table of subchapters for chapter 1 is 
amended by adding at the end the following new item:

                  ``subchapter z. opportunity zones''.

    (e) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

                Subtitle D--International Tax Provisions

                     PART I--OUTBOUND TRANSACTIONS

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

SEC. 14101. 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--
            ``(1) In general.--The term `specified 10-percent owned 
        foreign corporation' means any foreign corporation with respect 
        to which any domestic corporation is a United States 
        shareholder with respect to such corporation.
            ``(2) Exclusion of passive foreign investment companies.--
        Such term shall not include any corporation which is a passive 
        foreign investment company (as defined in section 1297) with 
        respect to the shareholder and which 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 from a specified 10-percent owned foreign corporation 
        is an amount which bears the same ratio to such dividend as--
                    ``(A) the undistributed foreign earnings of the 
                specified 10-percent owned foreign corporation, bears 
                to
                    ``(B) the total undistributed earnings of such 
                foreign corporation.
            ``(2) Undistributed earnings.--The term `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)--
                    ``(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) Undistributed foreign earnings.--The term 
        `undistributed foreign earnings' means the portion of the 
        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)).
    ``(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 distribution any portion of which 
        constitutes a 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) Special Rules for Hybrid Dividends.--
            ``(1) In general.--Subsection (a) shall not apply to any 
        dividend received by a United States shareholder from a 
        controlled foreign corporation if the dividend is a hybrid 
        dividend.
            ``(2) Hybrid dividends of tiered corporations.--If a 
        controlled foreign corporation with respect to which a domestic 
        corporation is a United States shareholder receives a hybrid 
        dividend from any other controlled foreign corporation with 
        respect to which such domestic corporation is also a United 
        States shareholder, then, notwithstanding any other provision 
        of this title--
                    ``(A) the hybrid dividend shall be treated for 
                purposes of section 951(a)(1)(A) as subpart F income of 
                the receiving controlled foreign corporation for the 
                taxable year of the controlled foreign corporation in 
                which the dividend was received, and
                    ``(B) the United States shareholder shall include 
                in gross income an amount equal to the shareholder's 
                pro rata share (determined in the same manner as under 
                section 951(a)(2)) of the subpart F income described in 
                subparagraph (A).
            ``(3) Denial of foreign tax credit, etc.--The rules of 
        subsection (d) shall apply to any hybrid dividend received by, 
        or any amount included under paragraph (2) in the gross income 
        of, a United States shareholder.
            ``(4) Hybrid dividend.--The term `hybrid dividend' means an 
        amount received from a controlled foreign corporation--
                    ``(A) for which a deduction would be allowed under 
                subsection (a) but for this subsection, and
                    ``(B) for which the controlled foreign corporation 
                received a deduction (or other tax benefit) from taxes 
                imposed by any foreign country.
    ``(f) Special Rule for Purging Distributions of Passive Foreign 
Investment Companies.--Any amount which is treated as a dividend under 
section 1291(d)(2)(B) shall not be treated as a dividend for purposes 
of this section.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
provisions of this section, including regulations for the treatment of 
United States shareholders owning stock of a specified 10 percent owned 
foreign corporation through a partnership.''.
    (b) Application of Holding Period Requirement.--Subsection (c) of 
section 246 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) 1-year holding period requirement.--For 
                purposes of section 245A--
                            ``(i) paragraph (1)(A) shall be applied--
                                    ``(I) by substituting `365 days' 
                                for `45 days' each place it appears, 
                                and
                                    ``(II) by substituting `731-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 at all times during such period, 
                        and
                            ``(ii) the taxpayer is a United States 
                        shareholder with respect to such specified 10-
                        percent owned foreign corporation at all times 
                        during such period.''.
    (c) Application of Rules Generally Applicable to Deductions for 
Dividends Received.--
            (1) Treatment of dividends from certain corporations.--
        Paragraph (1) of section 246(a) is amended by striking ``and 
        245'' and inserting ``245, and 245A''.
            (2) Assets generating tax-exempt portion of dividend not 
        taken into account in allocating and apportioning deductible 
        expenses.--Paragraph (3) of section 864(e) is amended by 
        striking ``or 245(a)'' and inserting ``, 245(a), or 245A''.
            (3) Coordination with section 1059.--Subparagraph (B) of 
        section 1059(b)(2) is amended by striking ``or 245'' and 
        inserting ``245, or 245A''.
    (d) Coordination With Foreign Tax Credit Limitation.--Subsection 
(b) of section 904 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 domestic corporation which is a United States 
        shareholder with respect to a specified 10-percent owned 
        foreign corporation, such domestic corporation's taxable income 
        from sources without the United States shall be determined 
        without regard to--
                    ``(A) the foreign-source portion of any dividend 
                received from such foreign corporation, and
                    ``(B) any deductions properly allocable to such 
                portion.
        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) Subsection (b) of section 951 is amended by striking 
        ``subpart'' and inserting ``title''.
            (2) Subsection (a) of section 957 is amended by striking 
        ``subpart'' in the matter preceding paragraph (1) and inserting 
        ``title''.
            (3) The table of sections for part VIII of subchapter B of 
        chapter 1 is amended by inserting after the item relating to 
        section 245 the following new item:

``Sec. 245A. Dividends received by domestic corporations from certain 
                            foreign corporations.''.
    (f) 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. 14102. SPECIAL RULES RELATING TO SALES OR TRANSFERS INVOLVING 
              SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATIONS.

    (a) Sales by United States Persons of Stock.--Section 1248 is 
amended by redesignating subsection (j) as subsection (k) and by 
inserting after subsection (i) the following new subsection:
    ``(j) Coordination With Dividends Received Deduction.--In the case 
of the sale or exchange by a domestic corporation of stock in a foreign 
corporation held for 1 year or more, any amount received by the 
domestic corporation which is treated as a dividend by reason of this 
section shall be treated as a dividend for purposes of applying section 
245A.''.
    (b) 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 receives 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.''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to dividends received in taxable years beginning 
        after December 31, 2017.
    (c) Sale by a CFC of a Lower Tier CFC.--Section 964(e) is amended 
by adding at the end the following new paragraph:
            ``(4) Coordination with dividends received deduction.--
                    ``(A) In general.--If, for any taxable year of a 
                controlled foreign corporation beginning after December 
                31, 2017, any amount is treated as a dividend under 
                paragraph (1) by reason of a sale or exchange by the 
                controlled foreign corporation of stock in another 
                foreign corporation held for 1 year or more, then, 
                notwithstanding any other provision of this title--
                            ``(i) the foreign-source portion of such 
                        dividend shall be treated for purposes of 
                        section 951(a)(1)(A) as subpart F income of the 
                        selling controlled foreign corporation for such 
                        taxable year,
                            ``(ii) a United States shareholder with 
                        respect to the selling controlled foreign 
                        corporation shall include in gross income for 
                        the taxable year of the shareholder with or 
                        within which such taxable year of the 
                        controlled foreign corporation ends an amount 
                        equal to the shareholder's pro rata share 
                        (determined in the same manner as under section 
                        951(a)(2)) of the amount treated as subpart F 
                        income under clause (i), and
                            ``(iii) the deduction under section 245A(a) 
                        shall be allowable to the United States 
                        shareholder with respect to the subpart F 
                        income included in gross income under clause 
                        (ii) in the same manner as if such subpart F 
                        income were a dividend received by the 
                        shareholder from the selling controlled foreign 
                        corporation.
                    ``(B) Effect of loss on earnings and profits.--For 
                purposes of this title, in the case of a sale or 
                exchange by a controlled foreign corporation of stock 
                in another foreign corporation in a taxable year of the 
                selling controlled foreign corporation beginning after 
                December 31, 2017, to which this paragraph would apply 
                if gain were recognized, the earnings and profits of 
                the selling controlled foreign corporation shall not be 
                reduced by reason of any loss from such sale or 
                exchange.
                    ``(C) Foreign-source portion.--For purposes of this 
                paragraph, the foreign-source portion of any amount 
                treated as a dividend under paragraph (1) shall be 
                determined in the same manner as under section 
                245A(c).''.
    (d) 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), as in effect before the date of the enactment 
of the Tax Cuts and Jobs Act) 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) Limitation and Carryforward Based on Foreign-source Dividends 
Received.--
            ``(1) In general.--The amount included in the gross income 
        of the taxpayer under subsection (a) for any taxable year shall 
        not exceed the amount allowed as a deduction under section 245A 
        for such taxable year (taking into account dividends received 
        from all specified 10-percent owned foreign corporations with 
        respect to which the taxpayer is a United States shareholder).
            ``(2) Amounts not included carried forward.--Any amount not 
        included in gross income for any taxable year by reason of 
        paragraph (1) shall, subject to the application of paragraph 
        (1) to the succeeding taxable year, be included in gross income 
        for the succeeding taxable year.
    ``(c) 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.
    ``(d) Reduction for Recognized Gains.--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)).
    ``(e) Source of Income.--Amounts included in gross income under 
this section shall be treated as derived from sources within the United 
States.
    ``(f) Basis Adjustments.--Consistent with such regulations or other 
guidance as the Secretary shall 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) 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.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to transfers after December 31, 2017.
    (e) Repeal of Active Trade or Business Exception Under Section 
367.--
            (1) In general.--Section 367(a) is amended by striking 
        paragraph (3) and redesignating paragraphs (4), (5), and (6) as 
        paragraphs (3), (4), and (5), respectively
            (2) Conforming amendments.--Section 367(a)(4), as 
        redesignated by paragraph (1), is amended--
                    (A) by striking ``Paragraphs (2) and (3)'' and 
                inserting ``Paragraph (2)'', and
                    (B) by striking ``Paragraphs (2) and (3)'' in the 
                heading and inserting ``Paragraph (2)''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to transfers after December 31, 2017.

SEC. 14103. 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 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 9, 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 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.--
                            ``(i) In general.--The term `aggregate 
                        foreign E&P deficit' means, with respect to any 
                        United States shareholder, the lesser of--
                                    ``(I) 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, or
                                    ``(II) the amount determined under 
                                paragraph (2)(B).
                            ``(ii) Allocation of deficit.--If the 
                        amount described in clause (i)(II) is less than 
                        the amount described in clause (i)(I), then the 
                        shareholder shall designate, in such form and 
                        manner as the Secretary determines--
                                    ``(I) the amount of the specified 
                                E&P deficit which is to be taken into 
                                account for each E&P deficit 
                                corporation with respect to the 
                                taxpayer, and
                                    ``(II) in the case of an E&P 
                                deficit corporation which has a 
                                qualified deficit (as defined in 
                                section 952), the portion (if any) of 
                                the deficit taken into account under 
                                subclause (I) which is attributable to 
                                a qualified deficit, including the 
                                qualified activities to which such 
                                portion is attributable.
                    ``(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 9, 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) Treatment of earnings and profits in future years.--
                    ``(A) Reduced earnings and profits treated as 
                previously taxed income when distributed.--For purposes 
                of applying section 959 in any taxable year beginning 
                after December 31, 2017, with respect to any United 
                States shareholder of a deferred foreign income 
                corporation, an amount equal to such shareholder's 
                reduction under paragraph (1) which is allocated to 
                such deferred foreign income corporation under this 
                subsection shall be treated as an amount which was 
                included in the gross income of such United States 
                shareholder under section 951(a).
                    ``(B) E&p deficits.--For purposes of this title, a 
                United States shareholder's pro rata share of the 
                earnings and profits of any specified E&P deficit 
                foreign corporation under this subsection shall be 
                increased by the amount of the specified E&P deficit of 
                such corporation taken into account by such shareholder 
                under paragraph (1), and, for purposes of section 952, 
                such increase shall be attributable to the same 
                activity to which the deficit so taken into account was 
                attributable.
    ``(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) 85.7 percent 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) 71.4 percent of so much of the amount 
                described in subparagraph (A)(ii) as does not exceed 
                the amount described in subparagraph (A)(i).
            ``(2) 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, the greater 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 the close of the last taxable year of such 
                        specified foreign corporation which begins 
                        before January 1, 2018, or
                            ``(ii) one half of the sum of--
                                    ``(I) 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 9, 2017, plus
                                    ``(II) the aggregate described in 
                                clause (i) determined as of the close 
                                of the taxable year of each such 
                                specified foreign corporation which 
                                precedes the taxable year referred to 
                                in subclause (I).
                    ``(B) Cash position.--For purposes of this 
                paragraph, the cash position of any specified foreign 
                corporation is the sum of--
                            ``(i) cash and foreign currency 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) Personal property which is of 
                                a type that is actively traded and for 
                                which there is an established financial 
                                market (other than stock in the 
                                specified foreign corporation).
                                    ``(II) Commercial paper, 
                                certificates of deposit, the securities 
                                of the Federal government and of any 
                                State or foreign government.
                                    ``(III) Any obligation with a term 
                                of less than one year.
                                    ``(IV) 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.--Cash 
                positions of a specified foreign corporation described 
                in clause (ii) or (iii)(III) of subparagraph (B) shall 
                not be taken into account by a United States 
                shareholder under subparagraph (A) to the extent that 
                such United States shareholder demonstrates to the 
                satisfaction of the Secretary that such amount is so 
                taken into account by such United States shareholder 
                with respect to another specified foreign corporation.
                    ``(E) Cash positions of certain non-corporate 
                entities taken into account.--An entity 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--
                            ``(i) such entity is a foreign entity which 
                        would be a specified foreign corporation of 
                        such United States shareholder if such entity 
                        were a corporation, or
                            ``(ii) any interest in such entity is held 
                        by a specified foreign corporation of such 
                        United States shareholder (determined after 
                        application of clause (i)) and such entity 
                        would be a specified foreign corporation of 
                        such United States shareholder if such entity 
                        were a foreign corporation.
                    ``(F) Anti-abuse.--If the Secretary determines that 
                a 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 close 
        of the taxable year referred to in subsection (a)) 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) in the case of a controlled foreign 
                corporation, 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, and by only taking into account periods when 
        the foreign corporation was a specified foreign corporation) 
        accumulated in taxable years beginning after December 31, 1986, 
        and determined--
                    ``(A) as of the date of the taxable year referred 
                to in paragraph (1) or (2) of subsection (a), whichever 
                is applicable with respect to such foreign corporation, 
                and
                    ``(B) without diminution by reason of dividends 
                distributed during the taxable year ending with or 
                including such date.
    ``(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 section 902 corporation (as defined in 
                section 909(d)(5) as in effect before the date of the 
                enactment of the Tax Cuts and Jobs Act).
            ``(2) Application to section 902 corporations.--For 
        purposes of sections 951 and 961, a section 902 corporation (as 
        so defined) shall be treated as a controlled foreign 
        corporation solely for purposes of taking into account the 
        subpart F income of such corporation under subsection (a) (and 
        for purposes of applying subsection (e)).
            ``(3) Exclusion of passive foreign investment companies.--
        Such term shall not include any corporation which is a passive 
        foreign investment company (as defined in section 1297) with 
        respect to the shareholder and which 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) 0.857 multiplied by 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) 0.714 multiplied by the ratio of--
                            ``(i) the amount to which subsection 
                        (c)(1)(B) applies, divided by
                            ``(ii) the sum described in subparagraph 
                        (A)(ii).
            ``(3) Denial of deduction.--No deduction shall be allowed 
        under this chapter for any tax for which credit is not 
        allowable under section 901 by reason of paragraph (1) 
        (determined by treating the taxpayer as having elected the 
        benefits of subpart A of part III of subchapter N).
            ``(4) Coordination with section 78.--Section 78 shall not 
        apply to any tax for which credit is not allowable under 
        section 901 by reason of paragraph (1).
    ``(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 installments of the following 
        amounts:
                    ``(A) 8 percent of the net tax liability in the 
                case of each of the first 5 of such installments,
                    ``(B) 15 percent of the net tax liability in the 
                case of the 6th such installment,
                    ``(C) 20 percent of the net tax liability in the 
                case of the 7th such installment, and
                    ``(D) 25 percent of the net tax liability in the 
                case of the 8th such installment.
            ``(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 shall 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 
                                or deduction 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 of tax 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) of subparagraph (A) 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.--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 
                shall provide.
    ``(j) Reporting by S Corporation.--Each S corporation which is a 
United States shareholder of a specified foreign 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 (b). 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) Extension of Limitation on Assessment.--Notwithstanding 
section 6501, the limitation on the time period for the assessment of 
the net tax liability under this section (as defined in subsection 
(h)(6)) shall not expire before the date that is 6 years after the 
return for the taxable year described in such subsection was filed.
    ``(l) Recapture for Expatriated Entities.--
            ``(1) In general.--If a deduction is allowed under 
        subsection (c) to a United States shareholder and such 
        shareholder first becomes an expatriated entity at any time 
        during the 10-year period beginning on the date of the 
        enactment of the Tax Cuts and Jobs Act, then--
                    ``(A) the tax imposed by this chapter shall be 
                increased for the first taxable year in which such 
                taxpayer becomes an expatriated entity by an amount 
                equal to 35 percent of the amount of the deduction 
                allowed to the specified foreign corporation under 
                subsection (c), and
                    ``(B) no credits shall be allowed against the 
                increase in tax under subparagraph (A).
            ``(2) Expatriated entity.--For purposes of this subsection, 
        the term `expatriated entity' has the same meaning given such 
        term under section 7874(a)(2), except that such term shall not 
        include an entity if the surrogate foreign corporation with 
        respect to the entity is treated as a domestic corporation 
        under section 7874(b).
    ``(m) Special Rules for United States Shareholders Which Are Real 
Estate Investment Trusts.--
            ``(1) In general.--If a real estate investment trust is a 
        United States shareholder in 1 or more deferred foreign income 
        corporations--
                    ``(A) any amount required to be taken into account 
                under section 951(a)(1) by reason of this section shall 
                not be taken into account as gross income of the real 
                estate investment trust for purposes of applying 
                paragraphs (2) and (3) of section 856(c) to any taxable 
                year for which such amount is taken into account under 
                section 951(a)(1), and
                    ``(B) if the real estate investment trust elects 
                the application of this subparagraph, notwithstanding 
                subsection (a), any amount required to be taken into 
                account under section 951(a)(1) by reason of this 
                section shall, in lieu of the taxable year in which it 
                would otherwise be included in gross income (for 
                purposes of the computation of real estate investment 
                trust taxable income under section 857(b)), be included 
                in gross income as follows:
                            ``(i) 8 percent of such amount in the case 
                        of each of the taxable years in the 5-taxable 
                        year period beginning with the taxable year in 
                        which such amount would otherwise be included.
                            ``(ii) 15 percent of such amount in the 
                        case of the 1st taxable year following such 
                        period.
                            ``(iii) 20 percent of such amount in the 
                        case of the 2nd taxable year following such 
                        period.
                            ``(iv) 25 percent of such amount in the 
                        case of the 3rd taxable year following such 
                        period.
            ``(2) Rules for trusts electing deferred inclusion.--
                    ``(A) Election.--Any election under paragraph 
                (1)(B) shall be made not later than the due date for 
                the first taxable year in the 5-taxable year period 
                described in clause (i) of paragraph (1)(B) and shall 
                be made in such manner as the Secretary shall provide.
                    ``(B) Special rules.--If an election under 
                paragraph (1)(B) is in effect with respect to any real 
                estate investment trust, the following rules shall 
                apply:
                            ``(i) Application of participation 
                        exemption.--For purposes of subsection (c)(1)--
                                    ``(I) the aggregate amount to which 
                                subparagraph (A) or (B) of subsection 
                                (c)(1) applies shall be determined 
                                without regard to the election,
                                    ``(II) each such aggregate amount 
                                shall be allocated to each taxable year 
                                described in paragraph (1)(B) in the 
                                same proportion as the amount included 
                                in the gross income of such United 
                                States shareholder under section 
                                951(a)(1) by reason of this section is 
                                allocated to each such taxable year.
                                    ``(III) No installment payments.--
                                The real estate investment trust may 
                                not make an election under subsection 
                                (g) for any taxable year described in 
                                paragraph (1)(B).
                            ``(ii) Acceleration of inclusion.--If there 
                        is a liquidation or sale of substantially all 
                        the assets of the real estate investment trust 
                        (including in a title 11 or similar case), a 
                        cessation of business by such trust, or any 
                        similar circumstance, then any amount not yet 
                        included in gross income under paragraph (1)(B) 
                        shall be included in gross income as of the day 
                        before the date of the event and the unpaid 
                        portion of any tax liability with respect to 
                        such inclusion 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).
    ``(n) Election Not to Apply Net Operating Loss Deduction.--
            ``(1) In general.--If a United States shareholder of a 
        deferred foreign income corporation elects the application of 
        this subsection for the taxable year described in subsection 
        (a), then the amount described in paragraph (2) shall not be 
        taken into account--
                    ``(A) in determining the amount of the net 
                operating loss deduction under section 172 of such 
                shareholder for such taxable year, or
                    ``(B) in determining the amount of taxable income 
                for such taxable year which may be reduced by net 
                operating loss carryovers or carrybacks to such taxable 
                year under section 172.
            ``(2) Amount described.--The amount described in this 
        paragraph is the sum of--
                    ``(A) the amount required to be taken into account 
                under section 951(a)(1) by reason of this section 
                (determined after the application of subsection (c)), 
                plus
                    ``(B) in the case of a domestic corporation which 
                chooses to have the benefits of subpart A of part III 
                of subchapter N for the taxable year, the taxes deemed 
                to be paid by such corporation under subsections (a) 
                and (b) of section 960 for such taxable year with 
                respect to the amount described in subparagraph (A) 
                which are treated as a dividends under section 78.
            ``(3) Election.--Any election under this subsection shall 
        be made not later than the due date (including extensions) for 
        filing the return of tax for the taxable year and shall be made 
        in such manner as the Secretary shall prescribe.
    ``(o) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
provisions of this section or to prevent the avoidance of the purposes 
of this section, including through a reduction in earnings and profits 
through changes in entity classification, changes in accounting 
methods, or otherwise.''.
    (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.''.

         Subpart B--Rules Related to Passive and Mobile Income

  CHAPTER 1--TAXATION OF FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL 
                      INTANGIBLE LOW-TAXED INCOME

SEC. 14201. CURRENT YEAR INCLUSION OF GLOBAL INTANGIBLE LOW-TAXED 
              INCOME BY UNITED STATES SHAREHOLDERS.

    (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. GLOBAL INTANGIBLE LOW-TAXED INCOME 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 such 
shareholder's global intangible low-taxed income for such taxable year.
    ``(b) Global Intangible Low-taxed Income.--For purposes of this 
section--
            ``(1) In general.--The term `global intangible low-taxed 
        income' 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) such shareholder's net deemed tangible income 
                return for such taxable year.
            ``(2) Net deemed tangible income return.--The term `net 
        deemed tangible income return' means, with respect to any 
        United States shareholder for any taxable year, an amount equal 
        to 10 percent 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).
    ``(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 described 
                                in section 952(b),
                                    ``(II) any gross income taken into 
                                account in determining the subpart F 
                                income of such corporation,
                                    ``(III) any gross income excluded 
                                from the foreign base company income 
                                (as defined in section 954) and the 
                                insurance income (as defined in section 
                                953) of such corporation by reason of 
                                section 954(b)(4),
                                    ``(IV) any dividend received from a 
                                related person (as defined in section 
                                954(d)(3)), and
                                    ``(V) any foreign oil and gas 
                                extraction income (as defined in 
                                section 907(c)(1)) 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).
                    ``(B) Tested loss.--
                            ``(i) In general.--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).
                            ``(ii) Coordination with subpart f to deny 
                        double benefit of losses.--Section 952(c)(1)(A) 
                        shall be applied by increasing the earnings and 
                        profits of the controlled foreign corporation 
                        by the tested loss of such corporation.
    ``(d) Qualified Business Asset Investment.--For purposes of this 
section--
            ``(1) In general.--The term `qualified business asset 
        investment' means, with respect to any corporation for any 
        taxable year of such controlled foreign corporation, the 
        average of the aggregate of the corporation's adjusted bases as 
        of the close of each quarter of 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 167.
            ``(2) Specified tangible property.--
                    ``(A) In general.--The term `specified tangible 
                property' means, except as provided in subparagraph 
                (B), any tangible property used in the production of 
                tested income.
                    ``(B) Dual use property.--In the case of property 
                used both in the production of tested income and income 
                which is not tested income, such property shall be 
                treated as specified tangible property in the same 
                proportion that the gross income described in 
                subsection (c)(1)(A) produced with respect to such 
                property bears to the total gross income produced with 
                respect to such property.
            ``(3) Determination of adjusted basis.--For purposes of 
        this subsection, notwithstanding any provision of this title 
        (or any other provision of law) which is enacted after the date 
        of the enactment of this section, the adjusted basis in any 
        property shall be determined using the alternative depreciation 
        system under section 168(g).
            ``(4) 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) Determination of Pro Rata Share, etc.--For purposes of this 
section--
            ``(1) In general.--The pro rata shares referred to in 
        subsections (b), (c)(1)(A), and (c)(1)(B), respectively, shall 
        be determined under the rules of section 951(a)(2) in the same 
        manner as such section applies to subpart F income and shall be 
        taken into account in the taxable year of the United States 
        shareholder in which or with which the taxable year of the 
        controlled foreign corporation ends.
            ``(2) Treatment as united states shareholder.--For purposes 
        of paragraph (1), a person shall be treated as a United States 
        shareholder of a controlled foreign corporation for any taxable 
        year only if such person owns (within the meaning of section 
        958(a)) stock in such foreign corporation on the last day, in 
        such year, on which such foreign corporation is a controlled 
        foreign corporation.
            ``(3) Treatment as controlled foreign corporation.--A 
        foreign corporation shall be treated as a controlled foreign 
        corporation for any taxable year if such foreign corporation is 
        a controlled foreign corporation at any time during such 
        taxable year.
    ``(f) Treatment as Subpart F Income for Certain Purposes.--
            ``(1) In general.--
                    ``(A) Application.--Except as provided in 
                subparagraph (B), any global intangible low-taxed 
                income included in gross income under subsection (a) 
                shall be treated in the same manner as an amount 
                included under section 951(a)(1)(A) for purposes of 
                applying sections 168(h)(2)(B), 535(b)(10), 851(b), 
                904(h)(1), 959, 961, 962(c), 962(d), 993(a)(1)(E), 
                996(f)(1), 1248(b)(1), 1248(d)(1), 6501(e)(1)(C), 
                6654(d)(2)(D), and 6655(e)(4).
                    ``(B) Exception.--The Secretary shall provide rules 
                for the application of subparagraph (A) to other 
                provisions of this title in any case in which the 
                determination of subpart F income is required to be 
                made at the level of the controlled foreign 
                corporation.
            ``(2) Allocation of global intangible low-taxed income 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 global intangible low-taxed 
        income included in gross income of a United States shareholder 
        under subsection (a), the portion of such global intangible 
        low-taxed income which is treated as being with respect to such 
        controlled foreign corporation is--
                    ``(A) in the case of a controlled foreign 
                corporation with no tested income, zero, and
                    ``(B) in the case of a controlled foreign 
                corporation with tested income, the portion of such 
                global intangible low-taxed income which bears the same 
                ratio to such global intangible low-taxed income 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 described in 
                        subsection (c)(1)(A) with respect to such 
                        United States shareholder.''.
    (b) Foreign Tax Credit.--
            (1) Application of deemed paid foreign tax credit.--Section 
        960 is amended adding at the end 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 the product of--
                    ``(A) such domestic corporation's inclusion 
                percentage, multiplied by
                    ``(B) the aggregate tested foreign income taxes 
                paid or accrued by controlled foreign corporations.
            ``(2) Inclusion percentage.--For purposes of paragraph (1), 
        the term `inclusion percentage' means, with respect to any 
        domestic corporation, the ratio (expressed as a percentage) 
        of--
                    ``(A) such corporation's global intangible low-
                taxed income (as defined in section 951A(b)), divided 
                by
                    ``(B) the aggregate amount described in 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 the tested 
        income of such foreign corporation taken into account by such 
        domestic corporation under section 951A.''.
            (2) Application of foreign tax credit limitation.--
                    (A) Separate basket for global intangible low-taxed 
                income.--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 (other than passive category income),''.
                    (B) Exclusion from general category income.--
                Section 904(d)(2)(A)(ii) is amended by inserting 
                ``income described in paragraph (1)(A) and'' before 
                ``passive category income''.
                    (C) No carryover or carryback 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).''.
    (c) Clerical Amendment .--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. Global intangible low-taxed income 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. 14202. DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL 
              INTANGIBLE LOW-TAXED INCOME.

    (a) In General.--Part VIII of subchapter B of chapter 1 is amended 
by adding at the end the following new section:

``SEC. 250. FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL INTANGIBLE 
              LOW-TAXED INCOME.

    ``(a) Allowance of Deduction.--
            ``(1) In general.--In the case of a domestic corporation 
        for any taxable year, there shall be allowed as a deduction an 
        amount equal to the sum of--
                    ``(A) 37.5 percent of the foreign-derived 
                intangible income of such domestic corporation for such 
                taxable year, plus
                    ``(B) 50 percent of the global intangible low-taxed 
                income amount (if any) which is included in the gross 
                income of such domestic corporation under section 951A 
                for such taxable year.
            ``(2) Limitation based on taxable income.--
                    ``(A) In general.--If, for any taxable year--
                            ``(i) the sum of the foreign-derived 
                        intangible income and the global intangible 
                        low-taxed income amount otherwise taken into 
                        account by the domestic corporation under 
                        paragraph (1), exceeds
                            ``(ii) the taxable income of the domestic 
                        corporation (determined without regard to this 
                        section),
                then the amount of the foreign-derived intangible 
                income and the global intangible low-taxed income 
                amount so taken into account shall be reduced as 
                provided in subparagraph (B).
                    ``(B) Reduction.--For purposes of subparagraph 
                (A)--
                            ``(i) foreign-derived intangible income 
                        shall be reduced by an amount which bears the 
                        same ratio to the excess described in 
                        subparagraph (A) as such foreign-derived 
                        intangible income bears to the sum described in 
                        subparagraph (A)(i), and
                            ``(ii) the global intangible low-taxed 
                        income amount shall be reduced by the remainder 
                        of such excess.
            ``(3) Reduction in deduction for taxable years after 
        2025.--In the case of any taxable year beginning after December 
        31, 2025, paragraph (1) shall be applied by substituting--
                    ``(A) `21.875 percent' for `37.5 percent' in 
                subparagraph (A), and
                    ``(B) `37.5 percent' for `50 percent' in 
                subparagraph (B).
    ``(b) Foreign-derived Intangible Income.--For purposes of this 
section--
            ``(1) In general.--The foreign-derived intangible income of 
        any domestic corporation is the amount which bears the same 
        ratio to the deemed intangible income of such corporation as--
                    ``(A) the foreign-derived deduction eligible income 
                of such corporation, bears to
                    ``(B) the deduction eligible income of such 
                corporation.
            ``(2) Deemed intangible income.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `deemed intangible 
                income' means the excess (if any) of--
                            ``(i) the deduction eligible income of the 
                        domestic corporation, over
                            ``(ii) the deemed tangible income return of 
                        the corporation.
                    ``(B) Deemed tangible income return.--The term 
                `deemed tangible income return' means, with respect to 
                any corporation, an amount equal to 10 percent of the 
                corporation's qualified business asset investment (as 
                defined in section 951A(d), determined by substituting 
                `deduction eligible income' for `tested income' in 
                paragraph (2) thereof).
            ``(3) Deduction eligible income.--
                    ``(A) In general.--The term `deduction eligible 
                income' means, with respect to any domestic 
                corporation, the excess (if any) of--
                            ``(i) gross income of such corporation 
                        determined without regard to--
                                    ``(I) the subpart F income of such 
                                corporation determined under section 
                                951,
                                    ``(II) the global intangible low-
                                taxed income determined under section 
                                951A,
                                    ``(III) any financial services 
                                income (as defined in section 
                                904(d)(2)(D)) of such corporation which 
                                is not described in clause (ii),
                                    ``(IV) any dividend received from a 
                                corporation which is a controlled 
                                foreign corporation of such domestic 
                                corporation,
                                    ``(V) any domestic oil and gas 
                                extraction income of such corporation, 
                                and
                                    ``(VI) any foreign branch income 
                                (as defined in section 904(d)(2)(J)), 
                                over
                            ``(ii) the deductions (including taxes) 
                        properly allocable to such gross income under 
                        rules similar to the rules of section 
                        954(b)(5).
                    ``(B) Domestic oil and gas extraction income.--For 
                purposes of subparagraph (A), the term `domestic oil 
                and gas extraction income' means income described in 
                section 907(c)(1), determined by substituting `within 
                the United States' for `without the United States'.
            ``(4) Foreign-derived deduction eligible income.--The term 
        `foreign-derived deduction eligible income' means, with respect 
        to any taxpayer for any taxable year, any deduction eligible 
        income of such taxpayer which is derived in connection with--
                    ``(A) property--
                            ``(i) which is sold by the taxpayer to any 
                        person who is not a United States person, and
                            ``(ii) which the taxpayer establishes to 
                        the satisfaction of the Secretary is for a 
                        foreign use, or
                    ``(B) services provided by the taxpayer which the 
                taxpayer establishes to the satisfaction of the 
                Secretary are provided to any person, or with respect 
                to property, not located within the United States.
            ``(5) Rules relating to foreign use property or services.--
        For purposes of this subsection--
                    ``(A) Foreign use.--The term `foreign use' means 
                any use, consumption, or disposition which is not 
                within the United States.
                    ``(B) Property or services provided to domestic 
                intermediaries.--
                            ``(i) Property.--If a taxpayer sells 
                        property to another person (other than a 
                        related party) for further manufacture or other 
                        modification within the United States, such 
                        property shall not be treated as sold for a 
                        foreign use even if such other person 
                        subsequently uses such property for a foreign 
                        use.
                            ``(ii) Services.--If a taxpayer provides 
                        services to another person (other than a 
                        related party) located within the United 
                        States, such services shall not be treated as 
                        described in paragraph (4)(B) even if such 
                        other person uses such services in providing 
                        services which are so described.
                    ``(C) Special rules with respect to related party 
                transactions.--
                            ``(i) Sales to related parties.--If 
                        property is sold to a related party who is not 
                        a United States person, such sale shall not be 
                        treated as for a foreign use unless such 
                        property is sold by the related party to 
                        another person who is an unrelated party who is 
                        not a United States person and the taxpayer 
                        establishes to the satisfaction of the 
                        Secretary that such property is for a foreign 
                        use.
                            ``(ii) Service provided to related 
                        parties.--If a service is provided to a related 
                        party who is not located in the United States, 
                        such service shall be not be treated described 
                        in subparagraph (A)(ii) unless the taxpayer 
                        established to the satisfaction of the 
                        Secretary that such service is not 
                        substantially similar to services provided by 
                        such related party to persons located within 
                        the United States.
                    ``(D) Related party.--For purposes of this 
                paragraph, the term `related party' means any member of 
                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).
                Any person (other than a corporation) shall be treated 
                as a member of such group if such person is controlled 
                by members of such group (including any entity treated 
                as a member of such group by reason of this sentence) 
                or controls any such member. For purposes of the 
                preceding sentence, control shall be determined under 
                the rules of section 954(d)(3).
                    ``(E) Sold.--For purposes of this subsection, the 
                terms `sold', `sells', and `sale' shall include any 
                lease, license, exchange, or other disposition.
    ``(c) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
provisions of this section.''.
    (b) Conforming Amendments.--
            (1) Section 172(d), as amended by section 13011, is amended 
        by adding at the end the following new paragraph:
            ``(10) Deduction for foreign-derived intangible income.--
        The deduction under section 250 shall not be allowed.''.
            (2) Section 246(b)(1) is amended--
                    (A) by striking ``and subsection (a) and (b) of 
                section 245'' the first place it appears and inserting 
                ``, subsection (a) and (b) of section 245, and section 
                250'',
                    (B) by striking ``and subsection (a) and (b) of 
                section 245'' the second place it appears and inserting 
                ``subsection (a) and (b) of section 245, and 250''.
            (3) Section 469(i)(3)(F)(iii) is amended by striking ``and 
        222'' and inserting ``222, and 250''.
            (4) The table of sections for part VIII of subchapter B of 
        chapter 1 is amended by adding at the end the following new 
        item:

``Sec. 250. Foreign-derived intangible income and global intangible 
                            low-taxed income.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 14203. SPECIAL RULES FOR TRANSFERS OF INTANGIBLE PROPERTY FROM 
              CONTROLLED FOREIGN CORPORATIONS TO UNITED STATES 
              SHAREHOLDERS.

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

``SEC. 966. TRANSFERS OF INTANGIBLE PROPERTY TO UNITED STATES 
              SHAREHOLDERS.

    ``(a) In General.--In the case of any distribution of intangible 
property which is held by a controlled foreign corporation on the date 
of enactment of this section and which is described in subsection (b)--
            ``(1) for purposes of part I of subchapter C and any other 
        provision of this title specified by the Secretary, the fair 
        market value of such property on the date of such distribution 
        shall be treated as not exceeding the adjusted basis of such 
        property immediately before such distribution, and
            ``(2) if the distribution is to a United States shareholder 
        and is not a dividend--
                    ``(A) the United States shareholder's adjusted 
                basis in the stock of the controlled foreign 
                corporation with respect to which such distribution is 
                made shall be increased by the amount (if any) of such 
                distribution which would (but for this subsection) be 
                includible in gross income, and
                    ``(B) the adjusted basis of such property in the 
                hands of such United States shareholder immediately 
                after such distribution shall be such adjusted basis 
                immediately before such distribution reduced by the 
                amount of the increase described in subparagraph (A).
    ``(b) Distribution.--A distribution is described in this section if 
the distribution is--
            ``(1) received by a domestic corporation from a controlled 
        foreign corporation with respect to which such corporation is a 
        United States shareholder, and
            ``(2) made by the controlled foreign corporation before the 
        last day of the third taxable year of the controlled foreign 
        corporation beginning after December 31, 2017.
    ``(c) Intangible Property.--For purposes of this subsection, the 
term `intangible property' has the meaning given such term by section 
936(h)(3)(B) or which is computer software described in section 
197(e)(3)(B).''.
    (b) Conforming Amendments.--
            (1) Section 197(f)(2)(B)(i) is amended by inserting 
        ``966(a),'' after ``731,''.
            (2) The table of sections for subpart F of part III of 
        subchapter N of chapter 1 is amended by adding at the end the 
        following new item:

``Sec. 966. Transfers of intangible property to United States 
                            shareholders.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions made in 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.

         CHAPTER 2--OTHER MODIFICATIONS OF SUBPART F PROVISIONS

SEC. 14211. ELIMINATION OF INCLUSION OF FOREIGN BASE COMPANY OIL 
              RELATED INCOME.

    (a) Repeal.--Subsection (a) of section 954 is amended--
            (1) by inserting ``and'' at the end of paragraph (2),
            (2) by striking the comma at the end of paragraph (3) and 
        inserting a period, and
            (3) by striking paragraph (5).
    (b) Conforming Amendments.--
            (1) Section 952(c)(1)(B)(iii) is amended by striking 
        subclause (I) and redesignating subclauses (II) through (V) as 
        subclauses (I) through (IV), respectively.
            (2) Section 954(b) is amended--
                    (A) by striking the second sentence of paragraph 
                (4),
                    (B) by striking ``the foreign base company services 
                income, and the foreign base company oil related 
                income'' in paragraph (5) and inserting ``and the 
                foreign base company services income'', and
                    (C) by striking paragraph (6).
            (3) 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 with or 
within which such taxable years of foreign corporations end.

SEC. 14212. 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(f)(3) 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. 14213. 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) 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. 14214. 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) Effective Date.--The amendments made by this section shall 
apply to--
            (1) the last taxable year of foreign corporations beginning 
        before January 1, 2018, and each subsequent taxable year of 
        such foreign corporations, and
            (2) taxable years of United States shareholders in which or 
        with which such taxable years of foreign corporations end.

SEC. 14215. MODIFICATION OF DEFINITION OF UNITED STATES SHAREHOLDER.

    (a) In General.--Section 951(b) is amended by inserting ``, or 10 
percent or more of the total value of shares of all classes of stock of 
such foreign corporation'' after ``such foreign corporation''.
    (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.

SEC. 14216. 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.

SEC. 14217. 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, 2017, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.

SEC. 14218. CORPORATIONS ELIGIBLE FOR DEDUCTION FOR DIVIDENDS FROM 
              CONTROLLED FOREIGN CORPORATIONS EXEMPT FROM SUBPART F 
              INCLUSION FOR INVESTMENT IN UNITED STATES PROPERTY.

    (a) In General.--Section 956(a) is amended by inserting ``(other 
than a corporation)'' after ``United States shareholder'' in the matter 
preceding paragraph (1).
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years of controlled foreign corporations ending after 
December 31, 2017, and to taxable years of United States shareholders 
with or within which such taxable years of controlled foreign 
corporations end.

                 CHAPTER 3--PREVENTION OF BASE EROSION

SEC. 14221. DENIAL OF DEDUCTION FOR INTEREST EXPENSE OF UNITED STATES 
              SHAREHOLDERS WHICH ARE MEMBERS OF WORLDWIDE AFFILIATED 
              GROUPS WITH EXCESS DOMESTIC INDEBTEDNESS.

    (a) In General.--Section 163 is amended by redesignating subsection 
(n) as subsection (o) and by inserting after subsection (m) the 
following new subsection:
    ``(n) Disallowance of Deduction for Interest Expense of United 
States Shareholders Which Are Members of Worldwide Affiliated Groups 
With Excess Domestic Indebtedness.--
            ``(1) In general.--In the case of any domestic corporation 
        which is a member of a worldwide affiliated group, the 
        deduction allowed under this chapter for interest paid or 
        accrued by such domestic corporation during the taxable year 
        shall be reduced by the product of--
                    ``(A) the net interest expense of such domestic 
                corporation, multiplied by
                    ``(B) the debt-to-equity differential percentage of 
                such worldwide affiliated group.
            ``(2) Carryforward.--Any amount disallowed under paragraph 
        (1) for any taxable year shall be treated as interest paid or 
        accrued in the succeeding taxable year.
            ``(3) Debt-to-equity differential percentage.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `debt-to-equity differential percentage' 
                means, with respect to any worldwide affiliated group, 
                the percentage which the excess domestic indebtedness 
                of such group bears to the total indebtedness of the 
                domestic corporations which are members of such group.
                    ``(B) Excess domestic indebtedness.--For purposes 
                of subparagraph (A), the term `excess domestic 
                indebtedness' means, with respect to any worldwide 
                affiliated group, the excess (if any) of--
                            ``(i) the total indebtedness of the 
                        domestic corporations which are members of such 
                        group, over
                            ``(ii) 110 percent of the amount which the 
                        total indebtedness of such domestic 
                        corporations would be if the ratio of such 
                        indebtedness to the total equity of such 
                        domestic corporations equaled the ratio which--
                                    ``(I) the total indebtedness of 
                                such group, bears to
                                    ``(II) the total equity of such 
                                group.
                    ``(C) Total equity.--For purposes of subparagraph 
                (B), the term `total equity' means, with respect to one 
                or more corporations, the excess (if any) of--
                            ``(i) the money and all other assets of 
                        such corporations, over
                            ``(ii) the total indebtedness of such 
                        corporations.
                    ``(D) Special rules for determining debt and 
                equity.--
                            ``(i) In general.--For purposes of this 
                        paragraph--
                                    ``(I) the amount taken into account 
                                with respect to any asset shall be the 
                                adjusted basis thereof for purposes of 
                                determining gain,
                                    ``(II) the amount taken into 
                                account with respect to any 
                                indebtedness with original issue 
                                discount shall be its issue price plus 
                                the portion of the original issue 
                                discount previously accrued as 
                                determined under the rules of section 
                                1272 (determined without regard to 
                                subsection (a)(7) or (b)(4) thereof), 
                                and
                                    ``(III) there shall be such other 
                                adjustments as the Secretary shall by 
                                regulations prescribe.
                            ``(ii) Intragroup debt and equity interests 
                        disregarded.--For purposes of this paragraph, 
                        the total indebtedness, and the assets, of any 
                        group of corporations shall be determined by 
                        treating all members of such group as one 
                        corporation.
                            ``(iii) Determination of assets of domestic 
                        group.--For purposes of this paragraph, the 
                        assets of the domestic corporations which are 
                        members of any worldwide affiliated group shall 
                        be determined by disregarding any interest held 
                        by any such domestic corporation in any foreign 
                        corporation which is a member of such group.
            ``(4) Other definitions.--For purposes of this subsection--
                    ``(A) Worldwide affiliated group.--The term 
                `worldwide affiliated group' means a group consisting 
                of the includible members of 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 in such section, and
                            ``(ii) without regard to paragraphs (2), 
                        (3), and (4) of section 1504(b).
                    ``(B) Net interest expense.--The term `net interest 
                expense' means the excess (if any) of
                            ``(i) the interest paid or accrued by the 
                        taxpayer during the taxable year, over
                            ``(ii) the amount of interest includible in 
                        the gross income of such taxpayer for such 
                        taxable year.
                The Secretary shall by regulations provide for 
                adjustments in determining the amount of net interest 
                expense if necessary.
            ``(5) Treatment of affiliated group.--For purposes of this 
        subsection, all members of the same affiliated group (within 
        the meaning of section 1504(a) applied by substituting `more 
        than 50 percent' for `at least 80 percent' each place it 
        appears) shall be treated as one taxpayer.
            ``(6) Regulations.--The Secretary shall prescribe such 
        regulations or other guidance as may be appropriate to carry 
        out the purposes of this subsection, including regulations or 
        other guidance--
                    ``(A) to prevent the avoidance of the purposes of 
                this subsection,
                    ``(B) providing such adjustments in the case of 
                corporations which are members of an affiliated group 
                as may be appropriate to carry out the purposes of this 
                subsection,
                    ``(C) providing for the coordination of this 
                subsection with section 884,
                    ``(D) providing for the reallocation of shares of 
                partnership indebtedness, or distributive shares of the 
                partnership's interest income or interest expense, and
                    ``(E) providing for the coordination with the 
                limitation under subsection (j).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 14222. LIMITATIONS ON INCOME SHIFTING THROUGH INTANGIBLE PROPERTY 
              TRANSFERS.

    (a) Definition of Intangible Asset.--Section 936(h)(3)(B) is 
amended--
            (1) by striking ``or'' at the end of clause (v),
            (2) by striking clause (vi) and inserting the following:
                            ``(vi) any goodwill, going concern value, 
                        or workforce in place (including its 
                        composition and terms and conditions 
                        (contractual or otherwise) of its employment); 
                        or
                            ``(vii) any other item the value or 
                        potential value of which is not attributable to 
                        tangible property or the services of any 
                        individual.'', and
            (3) by striking the flush language after clause (vii), as 
        added by paragraph (2).
    (b) Clarification of Allowable Valuation Methods.--
            (1) Foreign corporations.--Section 367(d)(2) is amended by 
        adding at the end the following new subparagraph:
                    ``(D) Regulatory authority.--For purposes of the 
                last sentence of subparagraph (A), the Secretary shall 
                require--
                            ``(i) the valuation of transfers of 
                        intangible property, including intangible 
                        property transferred with other property or 
                        services, on an aggregate basis, or
                            ``(ii) the valuation of such a transfer on 
                        the basis of the realistic alternatives to such 
                        a transfer,
                if the Secretary determines that such basis is the most 
                reliable means of valuation of such transfers.''.
            (2) Allocation among taxpayers.--Section 482 is amended by 
        adding at the end the following: ``For purposes of this 
        section, the Secretary shall require the valuation of transfers 
        of intangible property (including intangible property 
        transferred with other property or services) on an aggregate 
        basis or the valuation of such a transfer on the basis of the 
        realistic alternatives to such a transfer, if the Secretary 
        determines that such basis is the most reliable means of 
        valuation of such transfers.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to transfers in taxable years beginning after December 
        31, 2017.
            (2) No inference.--Nothing in the amendment made by 
        subsection (a) shall be construed to create any inference with 
        respect to the application of section 936(h)(3) of the Internal 
        Revenue Code of 1986, or the authority of the Secretary of the 
        Treasury to provide regulations for such application, with 
        respect to taxable years beginning before January 1, 2018.

SEC. 14223. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED IN HYBRID 
              TRANSACTIONS OR WITH HYBRID ENTITIES.

    (a) In General.--Part IX of subchapter B of chapter 1 is amended by 
inserting after section 267 the following:

``SEC. 267A. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED IN HYBRID 
              TRANSACTIONS OR WITH HYBRID ENTITIES.

    ``(a) In General.--No deduction shall be allowed under this chapter 
for any disqualified related party amount paid or accrued pursuant to a 
hybrid transaction or by, or to, a hybrid entity.
    ``(b) Disqualified Related Party Amount.--For purposes of this 
section--
            ``(1) Disqualified related party amount.--The term 
        `disqualified related party amount' means any interest or 
        royalty paid or accrued to a related party to the extent that--
                    ``(A) such amount is not included in the income of 
                such related party under the tax law of the country of 
                which such related party is a resident for tax purposes 
                or is subject to tax, or
                    ``(B) such related party is allowed a deduction 
                with respect to such amount under the tax law of such 
                country.
        Such term shall not include any payment to the extent such 
        payment is included in the gross income of a United States 
        shareholder under section 951(a).
            ``(2) Related party.--The term `related party' means a 
        related person as defined in section 954(d)(3), except that 
        such section shall be applied with respect to the person making 
        the payment described in paragraph (1) in lieu of the 
        controlled foreign corporation otherwise referred to in such 
        section.
    ``(c) Hybrid Transaction.--For purposes of this section, the term 
`hybrid transaction' means any transaction, series of transactions, 
agreement, or instrument one or more payments with respect to which are 
treated as interest or royalties for purposes of this chapter and which 
are not so treated for purposes the tax law of the foreign country of 
which the recipient of such payment is resident for tax purposes or is 
subject to tax.
    ``(d) Hybrid Entity.--For purposes of this section, the term 
`hybrid entity' means any entity which is either--
            ``(1) treated as fiscally transparent for purposes of this 
        chapter but not so treated for purposes of the tax law of the 
        foreign country of which the entity is resident for tax 
        purposes or is subject to tax, or
            ``(2) treated as fiscally transparent for purposes of such 
        tax law but not so treated for purposes of this chapter.
    ``(e) Regulations.--The Secretary shall 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 
providing for--
            ``(1) rules for treating certain conduit arrangements which 
        involve a hybrid transaction or a hybrid entity as subject to 
        subsection (a),
            ``(2) rules for the application of this section to foreign 
        branches,
            ``(3) rules for treating certain structured transactions as 
        subject to subsection (a),
            ``(4) rules for treating a tax preference as an exclusion 
        from income for purposes of applying subsection (b)(1) if such 
        tax preference has the effect of reducing the generally 
        applicable statutory rate by 25 percent or more,
            ``(5) rules for treating the entire amount of interest or 
        royalty paid or accrued to a related party as a disqualified 
        related party amount if such amount is subject to a 
        participation exemption system or other system which provides 
        for the exclusion or deduction of a substantial portion of such 
        amount,
            ``(6) rules for determining the tax residence of a foreign 
        entity if the entity is otherwise considered a resident of more 
        than one country or of no country,
            ``(7) exceptions from subsection (a) with respect to--
                    ``(A) cases in which the disqualified related party 
                amount is taxed under the laws of a foreign country 
                other than the country of which the related party is a 
                resident for tax purposes, and
                    ``(B) other cases which the Secretary determines do 
                not present a risk of eroding the Federal tax base,
            ``(8) requirements for record keeping and information 
        reporting in addition to any requirements imposed by section 
        6038A.''.
    (b) Conforming Amendment.--The table of sections for part IX of 
subchapter B of chapter 1 is amended by inserting after the item 
relating to section 267 the following new item:

``Sec. 267A. Certain related party amounts paid or accrued in hybrid 
                            transactions or with hybrid entities.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 14224. TERMINATION OF SPECIAL RULES FOR DOMESTIC INTERNATIONAL 
              SALES CORPORATIONS.

    (a) In General.--Part IV of subchapter N of chapter 1 (relating to 
domestic international sales corporations) is amended by adding at the 
end the following new subpart:

                        ``Subpart C--Termination

``Sec. 998. Termination of domestic international sales corporation 
                            provisions.

``SEC. 998. TERMINATION OF DOMESTIC INTERNATIONAL SALES CORPORATION 
              PROVISIONS.

    ``(a) Termination of Election.--Any election under section 992(b) 
in effect for a corporation's last taxable year beginning in 2018 shall 
be terminated effective for such corporation's next succeeding taxable 
year.
    ``(b) No New Election.--No election may be made under section 
992(b) for any taxable year beginning after December 31, 2018.
    ``(c) Effect of Termination.--A shareholder of a corporation whose 
election is terminated by reason of subsection (a) shall be deemed to 
have received a distribution to which section 995(b)(2) applies for the 
first taxable year for which the termination is effective. Such 
distribution (or any actual distribution after termination to the 
extent paid out of the corporation's accumulated DISC income) shall not 
be treated as qualified dividend income (within the meaning of section 
1(h)(11)(B)).''.
    (b) Conforming Amendment.--The table of contents for part IV of 
subchapter N of chapter 1 is amended by adding at the end the following 
new item:

                      ``subpart c--termination''.

SEC. 14225. SHAREHOLDERS OF SURROGATE FOREIGN CORPORATIONS NOT ELIGIBLE 
              FOR REDUCED RATE ON DIVIDENDS.

    (a) In General.--Section 1(h)(11)(C)(iii) is amended--
            (1) by striking ``shall not include any foreign 
        corporation'' and inserting ``shall not include--
                                    ``(I) any foreign corporation'',
            (2) by striking the period at the end and inserting ``, 
        and'', and
            (3) by adding at the end the following new subclause:
                                    ``(II) any corporation which is a 
                                surrogate foreign corporation (as 
                                defined in section 7874(a)(2)(B)) other 
                                than a foreign corporation which is 
                                treated as a domestic corporation under 
                                section 7874(b).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to dividends paid in taxable years beginning after December 31, 
2017.

     Subpart C--Modifications Related to Foreign Tax Credit System

SEC. 14301. 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, as amended by section 14201, 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 any prior 
                taxable year.'',
            (2) and by adding after subsection (d) (as added by section 
        14201) the following new subsections:
    ``(e) 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.
    ``(f) Regulations.--The Secretary shall 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, as amended by section 14201, 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--
            ``(1) 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 section 960) as an item of income required to 
        be included in the gross income of such domestic corporation 
        under section 951(a), and
            ``(2) an amount equal to the aggregate tested foreign 
        income taxes deemed paid by such corporation under section 
        960(d) (determined without regard to the phrase `80 percent of' 
        in paragraph (1) thereof) shall be treated for purposes of this 
        title (other than section 960) as an addition to the global 
        intangible low-taxed income of such domestic corporation under 
        section 951A(a) for such taxable year.''.
            (2) Paragraph (4) of section 245(a) is amended to read as 
        follows:
            ``(4) Post-1986 undistributed earnings.--The term `post-
        1986 undistributed earnings' means the amount of 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--
                    ``(A) as of the close of the taxable year of the 
                foreign corporation in which the dividend is 
                distributed, and
                    ``(B) without diminution by reason of dividends 
                distributed during such taxable year.''.
            (3) Section 245(a)(10)(C) is amended by striking ``902, 
        907, and 960'' and inserting ``907 and 960''.
            (4) Sections 535(b)(1) and 545(b)(1) are each amended by 
        striking ``section 902(a) or 960(a)(1)'' and inserting 
        ``section 960''.
            (5) 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.--''.
            (6) Section 865(h)(1)(B) is amended by striking ``902, 
        907,'' and inserting ``907''.
            (7) Section 901(a) is amended by striking ``sections 902 
        and 960'' and inserting ``section 960''.
            (8) 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''.
            (9) Section 901(f) is amended by striking ``sections 902 
        and 960'' and inserting ``section 960''.
            (10) Section 901(j)(1)(A) is amended by striking ``902 
        or''.
            (11) Section 901(j)(1)(B) is amended by striking ``sections 
        902 and 960'' and inserting ``section 960''.
            (12) Section 901(k)(2) is amended by striking ``, 902,''.
            (13) Section 901(k)(6) is amended by striking ``902 or''.
            (14) 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).''.
            (15) Section 904(d)(6)(A) is amended by striking ``902, 
        907,'' and inserting ``907''.
            (16) Section 904(h)(10)(A) is amended by striking 
        ``sections 902, 907, and 960'' and inserting ``sections 907 and 
        960''.
            (17) Section 904(k) is amended to read as follows:
    ``(k) Cross References.--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(c).''.
            (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 
                ``specified 10-percent owned foreign corporation (as 
                defined in section 245A(b))'',
                    (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 specified 10-percent owned 
                foreign corporation or a domestic corporation which is 
                a United States shareholder with respect to such 
                specified 10-percent owned foreign corporation.'', and
                    (D) by striking ``Section 902 Corporations'' in the 
                heading thereof and inserting ``Specified 10-percent 
                Owned Foreign Corporations''.
            (28) Section 909(d) is amended by striking paragraph (5).
            (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 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. 14302. SEPARATE FOREIGN TAX CREDIT LIMITATION BASKET FOR FOREIGN 
              BRANCH INCOME.

    (a) In General.--Section 904(d)(1), as amended by section 14201, is 
amended by redesignating subparagraphs (B) and (C) as subparagraphs (C) 
and (D), respectively, and by inserting after subparagraph (A) the 
following new subparagraph:
                    ``(B) foreign branch income,''.
    (b) Foreign Branch Income.--
            (1) In general.--Section 904(d)(2) is amended by inserting 
        after subparagraph (I) the following new subparagraph:
                    ``(J) Foreign branch income.--
                            ``(i) In general.--The term `foreign branch 
                        income' means the business profits of such 
                        United States person which are attributable to 
                        1 or more qualified business units (as defined 
                        in section 989(a)) in 1 or more foreign 
                        countries. For purposes of the preceding 
                        sentence, the amount of business profits 
                        attributable to a qualified business unit shall 
                        be determined under rules established by the 
                        Secretary.
                            ``(ii) Exception.--Such term shall not 
                        include any income which is passive category 
                        income.''.
            (2) Conforming amendment.--Section 904(d)(2)(A)(ii), as 
        amended by section 14201, is amended by striking ``income 
        described in paragraph (1)(A) and'' and inserting ``income 
        described in paragraph (1)(A), foreign branch income, and''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 14303. ACCELERATION OF ELECTION TO ALLOCATE INTEREST, ETC., ON A 
              WORLDWIDE BASIS.

    (a) In General.--Section 864(f)(6) is amended by striking 
``December 31, 2020'' and inserting ``December 31, 2017''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 14304. 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.

                     PART II--INBOUND TRANSACTIONS

SEC. 14401. BASE EROSION AND ANTI-ABUSE TAX.

    (a) Imposition of Tax.--Subchapter A of chapter 1 is amended by 
adding at the end the following new part:

              ``PART VII--BASE EROSION AND ANTI-ABUSE TAX

``Sec. 59A. Tax on base erosion payments of taxpayers with substantial 
                            gross receipts.

``SEC. 59A. TAX ON BASE EROSION PAYMENTS OF TAXPAYERS WITH SUBSTANTIAL 
              GROSS RECEIPTS.

    ``(a) Imposition of Tax.--There is hereby imposed on each 
applicable taxpayer for any taxable year a tax equal to the base 
erosion minimum tax amount for the taxable year. Such tax shall be in 
addition to any other tax imposed by this subtitle.
    ``(b) Base Erosion Minimum Tax Amount.--For purposes of this 
section--
            ``(1) In general.--Except as provided in paragraph (2), the 
        term `base erosion minimum tax amount' means, with respect to 
        any applicable taxpayer for any taxable year, the excess (if 
        any) of--
                    ``(A) an amount equal to 10 percent of the modified 
                taxable income of such taxpayer for the taxable year, 
                over
                    ``(B) an amount equal to the regular tax liability 
                (as defined in section 26(b)) of the taxpayer for the 
                taxable year, reduced (but not below zero) by the 
                excess (if any) of--
                            ``(i) the credits allowed under this 
                        chapter against such regular tax liability, 
                        over
                            ``(ii) the credit allowed under section 38 
                        for the taxable year which is properly 
                        allocable to the research credit determined 
                        under section 41(a).
            ``(2) Modifications for taxable years beginning after 
        2025.--In the case of any taxable year beginning after December 
        31, 2025, paragraph (1) shall be applied--
                    ``(A) by substituting `12.5 percent' for `10 
                percent' in subparagraph (A) thereof, and
                    ``(B) by reducing (but not below zero) the regular 
                tax liability (as defined in section 26(b)) for 
                purposes of subparagraph (B) thereof by the aggregate 
                amount of the credits allowed under this chapter 
                against such regular tax liability rather than the 
                excess described in such subparagraph.
    ``(c) Modified Taxable Income.--For purposes of this section--
            ``(1) In general.--The term `modified taxable income' means 
        the taxable income of the taxpayer computed under this chapter 
        for the taxable year, determined without regard to--
                    ``(A) any base erosion tax benefit with respect to 
                any base erosion payment, or
                    ``(B) the base erosion percentage of any net 
                operating loss deduction allowed under section 172 for 
                the taxable year.
            ``(2) Base erosion tax benefit.--
                    ``(A) In general.--The term `base erosion tax 
                benefit' means--
                            ``(i) any deduction described in subsection 
                        (d)(1) which is allowed under this chapter for 
                        the taxable year with respect to any base 
                        erosion payment,
                            ``(ii) in the case of a base erosion 
                        payment described in subsection (d)(2), any 
                        deduction allowed under this chapter for the 
                        taxable year for depreciation (or amortization 
                        in lieu of depreciation) with respect to the 
                        property acquired with such payment, and
                            ``(iii) in the case of a base erosion 
                        payment described in subsection (d)(3), any 
                        reduction in gross receipts with respect to 
                        such payment in computing gross income of the 
                        taxpayer for the taxable year for purposes of 
                        this chapter.
                    ``(B) Tax benefits disregarded if tax withheld on 
                base erosion payment.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), any base erosion tax benefit 
                        attributable to any base erosion payment--
                                    ``(I) on which tax is imposed by 
                                section 871 or 881, and
                                    ``(II) with respect to which tax 
                                has been deducted and withheld under 
                                section 1441 or 1442,
                        shall not be taken into account in computing 
                        modified taxable income under paragraph (1)(A) 
                        or the base erosion percentage under paragraph 
                        (4).
                            ``(ii) Exception.--The amount not taken 
                        into account in computing modified taxable 
                        income by reason of clause (i) shall be reduced 
                        under rules similar to the rules under section 
                        163(j)(5)(B) (as in effect before the date of 
                        the enactment of the Tax Cuts and Jobs Act).
            ``(3) Special rules for determining interest for which 
        deduction allowed.--For purposes of applying paragraph (1), in 
        the case of a taxpayer to which subsection (j) or (n) of 
        section 163 applies for the taxable year, the reduction in the 
        amount of interest for which a deduction is allowed by reason 
        of such subsection shall be treated as allocable first to 
        interest paid or accrued to persons who are not related parties 
        with respect to the taxpayer and then to such related parties.
            ``(4) Base erosion percentage.--For purposes of paragraph 
        (1)(B)--
                    ``(A) In general.--The term `base erosion 
                percentage' means, for any taxable year, the percentage 
                determined by dividing--
                            ``(i) the aggregate amount of base erosion 
                        tax benefits of the taxpayer for the taxable 
                        year, by
                            ``(ii) the aggregate amount of the 
                        deductions allowable to the taxpayer under this 
                        chapter for the taxable year.
                    ``(B) Special rules.--The amount under subparagraph 
                (A)(ii) shall be determined--
                            ``(i) by taking into account base erosion 
                        tax benefits described in clauses (i) and (ii) 
                        of paragraph (2)(A), and
                            ``(ii) by not taking into account any 
                        deduction allowed under section 172, 245A, or 
                        250 for the taxable year.
    ``(d) Base Erosion Payment.--For purposes of this section--
            ``(1) In general.--The term `base erosion payment' means 
        any amount paid or accrued by the taxpayer to a foreign person 
        which is a related party of the taxpayer and with respect to 
        which a deduction is allowable under this chapter.
            ``(2) Purchase of depreciable property.--Such term shall 
        also include any amount paid or accrued by the taxpayer to a 
        foreign person which is a related party of the taxpayer in 
        connection with the acquisition by the taxpayer from such 
        person of property of a character subject to the allowance of 
        depreciation (or amortization in lieu of depreciation).
            ``(3) Certain payments to expatriated entities.--
                    ``(A) In general.--Such term shall also include any 
                amount paid or accrued by the taxpayer with respect to 
                a person described in subparagraph (B) which results in 
                a reduction of the gross receipts of the taxpayer.
                    ``(B) Person described.--A person is described in 
                this subparagraph if such person is a--
                            ``(i) surrogate foreign corporation which 
                        is a related party of the taxpayer, but only if 
                        such person first became a surrogate foreign 
                        corporation after November 9, 2017, or
                            ``(ii) foreign person which is a member of 
                        the same expanded affiliated group as the 
                        surrogate foreign corporation.
                    ``(C) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Surrogate foreign corporation.--The 
                        term `surrogate foreign corporation' has the 
                        meaning given such term by section 7874(a)(2) 
                        but does not include a foreign corporation 
                        treated as a domestic corporation under section 
                        7874(b).
                            ``(ii) Expanded affiliated group.--The term 
                        `expanded affiliated group' has the meaning 
                        given such term by section 7874(c)(1).
            ``(4) Exception for certain amounts with respect to 
        services.--Paragraph (1) shall not apply to any amount paid or 
        accrued by a taxpayer for services if--
                    ``(A) such services are services which meet the 
                requirements for eligibility for use of the services 
                cost method under section 482 (determined without 
                regard to the requirement that the services not 
                contribute significantly to fundamental risks of 
                business success or failure), and
                    ``(B) such amount constitutes the total services 
                cost with no markup.
    ``(e) Applicable Taxpayer.--For purposes of this section--
            ``(1) In general.--The term `applicable taxpayer' means, 
        with respect to any taxable year, a taxpayer--
                    ``(A) which is a corporation other than a regulated 
                investment company, a real estate investment trust, or 
                an S corporation,
                    ``(B) the average annual gross receipts of which 
                for the 3-taxable-year period ending with the preceding 
                taxable year are at least $500,000,000, and
                    ``(C) the base erosion percentage (as determined 
                under subsection (c)(4)) of which for the taxable year 
                is 4 percent or higher.
            ``(2) Gross receipts.--
                    ``(A) Special rule for foreign persons.--In the 
                case of a foreign person the gross receipts of which 
                are taken into account for purposes of paragraph 
                (1)(B), only gross receipts which are taken into 
                account in determining income which is effectively 
                connected with the conduct of a trade or business 
                within the United States shall be taken into account. 
                In the case of a taxpayer which is a foreign person, 
                the preceding sentence shall not apply to the gross 
                receipts of any United States person which are 
                aggregated with the taxpayer's gross receipts by reason 
                of paragraph (3).
                    ``(B) Other rules made applicable.--Rules similar 
                to the rules of subparagraphs (B), (C), and (D) of 
                section 448(c)(3) shall apply in determining gross 
                receipts for purposes of this section.
            ``(3) Aggregation rules.--All persons treated as a single 
        employer under subsection (a) of section 52 shall be treated as 
        1 person for purposes of this subsection and subsection (c)(4), 
        except that in applying section 1563 for purposes of section 
        52, the exception for foreign corporations under section 
        1563(b)(2)(C) shall be disregarded.
    ``(f) Foreign Person.--For purposes of this section, the term 
`foreign person' has the meaning given such term by section 
6038A(c)(3).
    ``(g) Related Party.--For purposes of this section--
            ``(1) In general.--The term `related party' means, with 
        respect to any applicable taxpayer--
                    ``(A) any 25-percent owner of the taxpayer,
                    ``(B) any person who is related (within the meaning 
                of section 267(b) or 707(b)(1)) to the taxpayer or any 
                25-percent owner of the taxpayer, and
                    ``(C) any other person who is related (within the 
                meaning of section 482) to the taxpayer.
            ``(2) 25-percent owner.--The term `25-percent owner' means, 
        with respect to any corporation, any person who owns at least 
        25 percent of--
                    ``(A) the total voting power of all classes of 
                stock of a corporation entitled to vote, or
                    ``(B) the total value of all classes of stock of 
                such corporation.
            ``(3) Section 318 to apply.--Section 318 shall apply for 
        purposes of paragraphs (1) and (2), except that--
                    ``(A) `10 percent' shall be substituted for `50 
                percent' in section 318(a)(2)(C), and
                    ``(B) subparagraphs (A), (B), and (C) of section 
                318(a)(3) shall not be applied so as to consider a 
                United States person as owning stock which is owned by 
                a person who is not a United States person.
    ``(h) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
provisions of this section, including regulations providing for such 
adjustments to the application of this section as are necessary to 
prevent the avoidance of the purposes of this section, including 
through--
            ``(1) the use of unrelated persons, conduit transactions, 
        or other intermediaries, or
            ``(2) transactions or arrangements designed, in whole or in 
        part--
                    ``(A) to characterize payments otherwise subject to 
                this section as payments not subject to this section, 
                or
                    ``(B) to substitute payments not subject to this 
                section for payments otherwise subject to this 
                section.''.
    (b) Reporting Requirements and Penalties.--
            (1) In general.--Subsection (b) of section 6038A is amended 
        to read as follows:
    ``(b) Required Information.--
            ``(1) In general.--For purposes of subsection (a), the 
        information described in this subsection is such information as 
        the Secretary prescribes by regulations relating to--
                    ``(A) the name, principal place of business, nature 
                of business, and country or countries in which 
                organized or resident, of each person which--
                            ``(i) is a related party to the reporting 
                        corporation, and
                            ``(ii) had any transaction with the 
                        reporting corporation during its taxable year,
                    ``(B) the manner in which the reporting corporation 
                is related to each person referred to in subparagraph 
                (A), and
                    ``(C) transactions between the reporting 
                corporation and each foreign person which is a related 
                party to the reporting corporation.
            ``(2) Additional information regarding base erosion 
        payments.--For purposes of subsection (a) and section 6038C, if 
        the reporting corporation or the foreign corporation to whom 
        section 6038C applies is an applicable taxpayer, the 
        information described in this subsection shall include--
                    ``(A) such information as the Secretary determines 
                necessary to determine the base erosion minimum tax 
                amount, base erosion payments, and base erosion tax 
                benefits of the taxpayer for purposes of section 59A 
                for the taxable year, and
                    ``(B) such other information as the Secretary 
                determines necessary to carry out such section.
        For purposes of this paragraph, any term used in this paragraph 
        which is also used in section 59A shall have the same meaning 
        as when used in such section.''.
            (2) Increase in penalty.--Paragraphs (1) and (2) of section 
        6038A(d) are each amended by striking ``$10,000'' and inserting 
        ``$25,000''.
    (c) Disallowance of Credits Against Base Erosion Tax.--Paragraph 
(2) of section 26(b) is amended by inserting after subparagraph (A) the 
following new subparagraph:
                    ``(B) section 59A (relating to base erosion and 
                anti-abuse tax),''.
    (d) Conforming Amendments.--
            (1) The table of parts for subchapter A of chapter 1 is 
        amended by adding after the item relating to part VI the 
        following new item:

``Part VII. Base erosion and anti-abuse tax''.
            (2) Paragraph (1) of section 882(a), as amended by this 
        Act, is amended by inserting `` or 59A,'' after ``section 
        11,''.
            (3) Subparagraph (A) of section 6425(c)(1), as amended by 
        sections 12001 and 13001, is amended to read as follows:
                    ``(A) the sum of--
                            ``(i) the tax imposed by section 11, or 
                        subchapter L of chapter 1, whichever is 
                        applicable, plus
                            ``(ii) the tax imposed by section 59A, 
                        over''.
            (4)(A) Subparagraph (A) of section 6655(g)(1), as amended 
        by sections 12001 and 13001, is amended by striking ``plus'' at 
        the end of clause (i), by redesignating clause (ii) as clause 
        (iii), and by inserting after clause (i) the following new 
        clause:
                            ``(ii) the tax imposed by section 59A, 
                        plus''.
            (B) Subparagraphs (A)(i) and (B)(i) of section 6655(e)(2), 
        as amended by section 13001, are each amended by inserting 
        ``and modified taxable income'' after ``taxable income''.
            (C) Subparagraph (B) of section 6655(e)(2) is amended by 
        adding at the end the following new clause:
                            ``(iii) Modified taxable income.--The term 
                        `modified taxable income' has the meaning given 
                        such term by section 59A(c)(1).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to base erosion payments (as defined in section 59A(d) of the 
Internal Revenue Code of 1986, as added by this section) paid or 
accrued in taxable years beginning after December 31, 2017.

                       PART III--OTHER PROVISIONS

SEC. 14501. TAXATION OF PASSENGER CRUISE GROSS INCOME OF FOREIGN 
              CORPORATIONS AND NONRESIDENT ALIEN INDIVIDUALS.

    (a) In General.--Section 882 is amended by redesignating subsection 
(f) as subsection (g) and by inserting after subsection (e) the 
following new subsection:
    ``(f) Treatment of Passenger Cruise Gross Income.--
            ``(1) In general.--For purposes of this title, the 
        effectively connected passenger cruise gross income of a 
        foreign corporation shall be treated as gross income which is 
        effectively connected with the conduct of a trade or business 
        in the United States.
            ``(2) Effectively connected passenger cruise gross 
        income.--For purposes of this subsection, the term `effectively 
        connected passenger cruise gross income' means, with respect to 
        the operation of any ship in a covered voyage, the United 
        States territorial waters percentage of the gross income 
        (determined without regard to section 883(a)(1)) derived from 
        such operation, including any amount received with respect to 
        the provision of any on- or off-board activities, services, or 
        sales, with respect to passengers incidental to such operation 
        (or with respect to any agreement with any person with respect 
        to the provision of any such activities, services, or sales).
            ``(3) United states territorial waters percentage.--For 
        purposes of this subsection--
                    ``(A) In general.--The term `United States 
                territorial waters percentage' means, with respect to 
                the operation of any ship in any covered voyage, the 
                ratio (expressed as a percentage) of--
                            ``(i) the number of days during such voyage 
                        such ship was operated in the territorial 
                        waters of the United States, divided by
                            ``(ii) the total number of days of such 
                        voyage.
                    ``(B) Calendar day rule.--If a ship--
                            ``(i) is operated in a covered voyage, or
                            ``(ii) is operated in the territorial 
                        waters of the United States during a covered 
                        voyage,
                for any portion of a calendar day, such ship shall be 
                treated as having operated in a covered voyage, or as 
                having operated in such territorial waters, 
                respectively, for the entirety of such day.
                    ``(C) Territorial waters.--The territorial waters 
                of the United States shall be treated as consisting of 
                those waters which are--
                            ``(i) within the international boundary 
                        line between the United States and any 
                        contiguous foreign country, or
                            ``(ii) within 12 nautical miles from low 
                        tide on the coastline of the United States.
            ``(4) Covered voyage.--For purposes of this subsection--
                    ``(A) In general.--The term `covered voyage' has 
                the meaning given such term by section 4472(1).
                    ``(B) Anti-abuse rule.--Except as otherwise 
                provided by the Secretary, if passengers embark a ship 
                in the United States and more than 10 percent of such 
                passengers disembark in the United States, the 
                operation of such ship at all times between such events 
                shall be treated as a covered voyage. Nothing in the 
                preceding sentence shall preclude any operation of a 
                ship (including any operation of a ship before or after 
                such events) which would otherwise be treated as part 
                of a covered voyage from being so treated.
            ``(5) Treatment of otherwise effectively connected 
        income.--Gross income which would, without regard to this 
        subsection, be gross income which is effectively connected with 
        the conduct of a trade or business in the United States--
                    ``(A) shall be so treated, and
                    ``(B) shall not be taken into account as gross 
                income under paragraph (2).''.
    (b) Application to Nonresident Alien Individuals.--Section 871 is 
amended by redesignating subsection (n) as subsection (o) and by 
inserting after subsection (m) the following new subsection:
    ``(n) Treatment of Passenger Cruise Gross Income.--
            ``(1) In general.--For purposes of this title, the 
        effectively connected passenger cruise gross income of a 
        nonresident alien individual shall be treated as gross income 
        which is effectively connected with the conduct of a trade or 
        business in the United States.
            ``(2) Definitions and special rules.--For purposes of this 
        subsection--
                    ``(A) Definitions.--Terms used in this subsection 
                which are also used in section 882(f) shall have the 
                same meaning as when used in such section, except that 
                section 882(f)(2) shall be applied by substituting 
                `section 872(b)(1)' for `section 883(a)(1)'.
                    ``(B) Treatment of otherwise effectively connected 
                income.--Rules similar to the rules of section 
                882(f)(5) shall apply for purposes of this 
                subsection.''.
    (c) Coordination With Reciprocal Exemptions for Shipping Income.--
            (1) In general.--Section 883(a)(1) is amended by striking 
        ``Gross income'' and inserting ``Except as provided in section 
        882(f), gross income''.
            (2) Nonresident alien individuals.--Section 872(b)(1) is 
        amended by striking ``Gross income'' and inserting ``Except as 
        provided in section 871(n), gross income''.
    (d) Coordination With Tax on Gross Transportation Income.--Section 
887(b)(4) is amended by adding at the end the following new flush text:
        ``The preceding sentence shall not apply to any United States 
        source gross transportation income which is effectively 
        connected passenger cruise gross income (within the meaning of 
        section 871(n) or 882(f)).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 14502. RESTRICTION ON INSURANCE BUSINESS EXCEPTION TO PASSIVE 
              FOREIGN INVESTMENT COMPANY RULES.

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

SEC. 14503. REPEAL OF FAIR MARKET VALUE METHOD OF INTEREST EXPENSE 
              APPORTIONMENT.

    (a) In General.--Paragraph (2) of section 864(e) is amended to read 
as follows:
            ``(2) Gross income and fair market value methods may not be 
        used for interest.--All allocations and apportionments of 
        interest expense shall be determined using the adjusted bases 
        of assets rather than on the basis of the fair market value of 
        the assets or gross income.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 14504. MODIFICATION TO SOURCE RULES INVOLVING POSSESSIONS.

    (a) In General.--Subsection (b)(2) of Section 937 of the Internal 
Revenue Code of 1986 is amended by inserting ``, but only to the extent 
such income is attributable to an office or fixed place of business 
within the United States (determined under the rules of Section 
864(c)(5))'' before the period at the end.
    (b) Source Rules for Personal Property Sales.--Subsection (j)(3) of 
section 865 of the Internal Revenue Code of 1986 is amended by 
inserting ``932,'' after ``931,''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2018.

SEC. 14505. REPEAL OF EXCLUSION APPLICABLE TO CERTAIN PASSENGER 
              AIRCRAFT OPERATED BY A FOREIGN CORPORATION.

    (a) In General.--Section 883 is amended--
            (1) by striking ``Gross income'' in subsection (a)(2) and 
        inserting ``Except as provided in subsection (d), gross 
        income'', and
            (2) by adding at the end the following new subsection:
    ``(d) Exception for Aircraft Operated by Foreign Corporations.--
            ``(1) In general.--Subsection (a)(2) shall not apply to any 
        corporation operating a passenger airline if--
                    ``(A) the corporation is organized in a foreign 
                country the residents of which are not eligible for a 
                reduced rate of tax or an exemption from tax under 
                section 881 or 882, and
                    ``(B) such foreign country has fewer than 2 
                arrivals and departures, per week, from passenger 
                airline carriers which--
                            ``(i) are organized under the laws of the 
                        United States or any State, and
                            ``(ii) have annual gross operational 
                        revenues of more than $1,000,000,000.
        For purposes of subparagraph (B), an aircraft that lands in one 
        country and subsequently departs from that country shall be 
        treated as having engaged in 1 arrival and departure.
            ``(2) Inflation adjustment.--In the case of any calendar 
        year beginning after 2018, the dollar amount in subparagraph 
        (A)(ii) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year, determined 
                by substituting `calendar year 2017' for `calendar year 
                2016' in subparagraph (A)(ii) thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $1,000,000.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

                Subtitle E--Revenue Dependent Proposals

SEC. 15001. REPEAL OF INCREASED LIMITATION ON NET OPERATING LOSSES.

    Section 172(a)(2), as amended by section 13302, is amended by 
striking ``(80 percent, in the case of taxable years beginning after 
December 31, 2022)''.

SEC. 15002. REPEAL OF LIMITATION ON DEDUCTION FOR MEALS PROVIDED AT THE 
              CONVENIENCE OF THE EMPLOYER.

    Section 274, as amended by section 13304, is amended by striking 
subsection (o) and redesignating subsection (p) as subsection (o).

SEC. 15003. REPEAL OF REDUCED DEDUCTION FOR GLOBAL INTANGIBLE LOW-TAXED 
              INCOME AND FOREIGN-DERIVED INTANGIBLE INCOME.

    Section 250(a), as added by section 14202, is amended by striking 
paragraph (3).

SEC. 15004. REPEAL OF MODIFICATIONS TO THE BASE EROSION AND ANTI-ABUSE 
              TAX.

    Section 59A(b), as added by section 14401, is amended to read as 
follows:
    ``(b) Base Erosion Minimum Tax Amount.--For purposes of this 
section, the term `base erosion minimum tax amount' means, with respect 
to any applicable taxpayer for any taxable year, the excess (if any) 
of--
            ``(1) an amount equal to 10 percent of the modified taxable 
        income of such taxpayer for the taxable year, over
            ``(2) an amount equal to the regular tax liability (as 
        defined in section 26(b)) of the taxpayer for the taxable year, 
        reduced (but not below zero) by the excess (if any) of--
                    ``(A) the credits allowed under this chapter 
                against such regular tax liability, over
                    ``(B) the credit allowed under section 38 for the 
                taxable year which is properly allocable to the 
                research credit determined under section 41(a).''.

SEC. 15005. REPEAL OF AMORTIZATION OF RESEARCH AND EXPERIMENTAL 
              EXPENDITURES.

    (a) In General.--Section 174, as amended by section 13206, is 
amended to read as follows:

``SEC. 174. RESEARCH AND EXPERIMENTAL EXPENDITURES.

    ``(a) Treatment as Expenses.--
            ``(1) In general.--A taxpayer may treat research or 
        experimental expenditures which are paid or incurred by him 
        during the taxable year in connection with his trade or 
        business as expenses which are not chargeable to capital 
        account. The expenditures so treated shall be allowed as a 
        deduction.
            ``(2) When method may be adopted.--
                    ``(A) Without consent.--A taxpayer may, without the 
                consent of the Secretary, adopt the method provided in 
                this subsection for his first taxable year for which 
                expenditures described in paragraph (1) are paid or 
                incurred.
                    ``(B) With consent.--A taxpayer may, with the 
                consent of the Secretary, adopt at any time the method 
                provided in this subsection.
            ``(3) Scope.--The method adopted under this subsection 
        shall apply to all expenditures described in paragraph (1). The 
        method adopted shall be adhered to in computing taxable income 
        for the taxable year and for all subsequent taxable years 
        unless, with the approval of the Secretary, a change to a 
        different method is authorized with respect to part or all of 
        such expenditures.
    ``(b) Amortization of Certain Research and Experimental 
Expenditures.--
            ``(1) In general.--At the election of the taxpayer, made in 
        accordance with regulations prescribed by the Secretary, 
        research or experimental expenditures which are--
                    ``(A) paid or incurred by the taxpayer in 
                connection with his trade or business,
                    ``(B) not treated as expenses under subsection (a), 
                and
                    ``(C) chargeable to capital account but not 
                chargeable to property 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),
        may be treated as deferred expenses. In computing taxable 
        income, such deferred expenses shall be allowed as a deduction 
        ratably over such period of not less than 60 months as may be 
        selected by the taxpayer (beginning with the month in which the 
        taxpayer first realizes benefits from such expenditures). Such 
        deferred expenses are expenditures properly chargeable to 
        capital account for purposes of section 1016(a)(1) (relating to 
        adjustments to basis of property).
            ``(2) Time for and scope of election.--The election 
        provided by paragraph (1) may be made for any taxable year, but 
        only if made not later than the time prescribed by law for 
        filing the return for such taxable year (including extensions 
        thereof). The method so elected, and the period selected by the 
        taxpayer, shall be adhered to in computing taxable income for 
        the taxable year for which the election is made and for all 
        subsequent taxable years unless, with the approval of the 
        Secretary, a change to a different method (or to a different 
        period) is authorized with respect to part or all of such 
        expenditures. The election shall not apply to any expenditure 
        paid or incurred during any taxable year before the taxable 
        year for which the taxpayer makes the election.
    ``(c) 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.
    ``(d) 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).
    ``(e) Only Reasonable Research Expenditures Eligible.--This section 
shall apply to a research or experimental expenditure only to the 
extent that the amount thereof is reasonable under the circumstances.
    ``(f) Cross References.--
            ``(1) For adjustments to basis of property for amounts 
        allowed as deductions as deferred expenses under subsection 
        (b), see section 1016(a)(14).
            ``(2) For election of 10-year amortization of expenditures 
        allowable as a deduction under subsection (a), see section 
        59(e).''.
    (b) Change in Method of Accounting.--The amendments made by 
subsection (a) shall be treated as a change in method of accounting for 
purposes of section 481 of the Internal Revenue Code of 1986 and--
            (1) such change shall be treated as initiated by the 
        taxpayer,
            (2) such change shall be treated as made with the consent 
        of the Secretary, and
            (3) such change shall be applied only on a cut-off basis 
        for any research or experimental expenditures paid or incurred 
        in taxable years beginning after December 31, 2025, and no 
        adjustments under section 481(a) shall be made.
    (c) Conforming Amendments.--
            (1) Section 41(d)(1)(A), as amended by section 13206, is 
        amended by striking ``specified research or experimental 
        expenditures under section 174'' and inserting ``expenses under 
        section 174''.
            (2) Subsection (c) of section 280C, as amended by section 
        13206, is amended--
                    (A) by redesignating paragraphs (2) and (3) as 
                paragraphs (3) and (4), respectively, and
                    (B) by striking paragraph (1) and inserting the 
                following:
            ``(1) In general.--No deduction shall be allowed for that 
        portion of the qualified research expenses (as defined in 
        section 41(b)) or basic research expenses (as defined in 
        section 41(e)(2)) otherwise allowable as a deduction for the 
        taxable year which is equal to the amount of the credit 
        determined for such taxable year under section 41(a).
            ``(2) Similar rule where taxpayer capitalizes rather than 
        deducts expenses.--If--
                    ``(A) the amount of the credit determined for the 
                taxable year under section 41(a)(1), exceeds
                    ``(B) the amount allowable as a deduction for such 
                taxable year for qualified research expenses or basic 
                research expenses (determined without regard to 
                paragraph (1)),
        the amount chargeable to capital account for the taxable year 
        for such expenses shall be reduced by the amount of such 
        excess.'', and
                    (C) in paragraph (3)(A)(i), as redesignated by 
                subparagraph (A), by striking ``paragraph (1)'' and 
                inserting ``paragraphs (1) and (2)''.
            (3) The table of sections for part VI of subchapter B of 
        chapter 1, as amended by section 13206, is amended by striking 
        the item related to section 174 and inserting the following:

``Sec. 174. Research and experimental expenditures.''.

SEC. 15006. REPORTING.

    (a) In General.--Subpart B of part III of subchapter A of chapter 
61, as amended by this Act, is amended by adding at the end the 
following new section:

``SEC. 6050Z. TRANSACTION AFFECTING REVENUE DEPENDENT PROPOSALS.

    ``(a) Research and Experimental Expenditures.--Any taxpayer who 
makes research and experimental expenditures (within the meaning of 
section 174) during a taxable year shall make a return according to the 
forms and regulations prescribed by the Secretary, setting forth the 
aggregate amount of such expenditures.
    ``(b) Foreign Related Party Payments.--Any taxpayer who makes a 
payment to a foreign person which is a related party (as such terms are 
defined in section 59A) of the taxpayer during the taxable year shall 
make a return according to the forms and regulations prescribed by the 
Secretary, setting forth--
            ``(1) the amount of such payments by type and separately 
        stated, and
            ``(2) any amount paid which results in a reduction of gross 
        receipts to the taxpayer.
    ``(c) Foreign-derived Intangible Income.--Any taxpayer who has 
foreign-derived intangible income (as defined in section 250(b)) for a 
taxable year shall make a return according to the forms and regulations 
prescribed by the Secretary, setting forth--
            ``(1) the aggregate amount of such income,
            ``(2) the amount of foreign-derived deduction eligible 
        income (as defined in section 250(b)(4)), and
            ``(3) a certification that any income described in 
        paragraph (2) does not relate to the sale of products for any 
        use, consumption, or disposition within the United States.''.
    (b) Penalty.--Section 6652, as amended by section 13603, is amended 
by adding at the end the following new subsection:
    ``(q) Failure to File With Respect to Transactions Affecting 
Revenue Dependent Proposals.--In the case of any failure to make a 
return required under section 6050Z containing the information required 
by such section on the date prescribed therefor (determined with regard 
to any extension of time for filing), unless it is shown that such 
failure is due to reasonable cause, there shall be paid (on notice and 
demand by the Secretary and in the same manner as tax) by the person 
failing to file such return, an amount equal to $1,000 for each day 
during which such failure continues, but the total amount imposed under 
this subsection with respect to any return shall not exceed 
$250,000.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2024.

SEC. 15007. EFFECTIVE DATE.

    (a) In General.--The amendments made by this subtitle shall apply 
to taxable years beginning after December 31, 2025.
    (b) Revenue Requirement.--Notwithstanding subsection (a), the 
amendments made by this subtitle shall not take effect unless--
            (1) the excess of--
                    (A) the cumulative aggregate on-budget Federal 
                revenue from all sources for the period beginning on 
                October 1, 2017, and ending on September 30, 2026, (as 
                determined by the Secretary of the Treasury based on 
                amounts reported in the Financial Report of the United 
                States), over
                    (B) $27,487,000,000,000, is greater than or equal 
                to
            (2) $900,000,000,000.

                                TITLE II

SEC. 20001. OIL AND GAS PROGRAM.

    (a) Definitions.--In this section:
            (1) Coastal plain.--The term ``Coastal Plain'' means the 
        area identified as the 1002 Area on the plates prepared by the 
        United States Geological Survey entitled ``ANWR Map - Plate 1'' 
        and ``ANWR Map - Plate 2'', dated October 24, 2017, and on file 
        with the United States Geological Survey and the Office of the 
        Solicitor of the Department of the Interior.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of the Interior, acting through the Bureau of Land Management.
    (b) Oil and Gas Program.--
            (1) In general.--Section 1003 of the Alaska National 
        Interest Lands Conservation Act (16 U.S.C. 3143) is repealed.
            (2) Establishment.--
                    (A) In general.--The Secretary shall establish and 
                administer a competitive oil and gas program for the 
                leasing, development, production, and transportation of 
                oil and gas in and from the Coastal Plain.
                    (B) Purposes.--Section 303(2)(B) of the Alaska 
                National Interest Lands Conservation Act (Public Law 
                96-487; 94 Stat. 2390) is amended--
                            (i) in clause (iii), by striking ``and'' at 
                        the end;
                            (ii) in clause (iv), by striking the period 
                        at the end and inserting ``; and''; and
                            (iii) by adding at the end the following:
                            ``(v) to provide for an oil and gas program 
                        on the Coastal Plain.''.
            (3) Management.--Except as otherwise provided in this 
        section, the Secretary shall manage the oil and gas program on 
        the Coastal Plain in accordance with the Naval Petroleum 
        Reserves Production Act of 1976 (42 U.S.C. 6501 et seq.) 
        (including regulations).
            (4) Royalties.--Notwithstanding the Mineral Leasing Act (30 
        U.S.C. 181 et seq.), the royalty rate for leases issued 
        pursuant to this section shall be 16.67 percent.
            (5) Receipts.--Notwithstanding the Mineral Leasing Act (30 
        U.S.C. 181 et seq.), of the amount of adjusted bonus, rental, 
        and royalty receipts derived from the oil and gas program and 
        operations on Federal land authorized under this section--
                    (A) 50 percent shall be paid to the State of 
                Alaska; and
                    (B) the balance shall be deposited into the 
                Treasury as miscellaneous receipts.
    (c) 2 Lease Sales Within 10 Years.--
            (1) Requirement.--
                    (A) In general.--Subject to subparagraph (B), the 
                Secretary shall conduct not fewer than 2 lease sales 
                area-wide under the oil and gas program under this 
                section by not later than 10 years after the date of 
                enactment of this Act.
                    (B) Sale acreages; schedule.--
                            (i) Acreages.--The Secretary shall offer 
                        for lease under the oil and gas program under 
                        this section--
                                    (I) not fewer than 400,000 acres 
                                area-wide in each lease sale; and
                                    (II) those areas that have the 
                                highest potential for the discovery of 
                                hydrocarbons.
                            (ii) Schedule.--The Secretary shall offer--
                                    (I) the initial lease sale under 
                                the oil and gas program under this 
                                section not later than 4 years after 
                                the date of enactment of this Act; and
                                    (II) a second lease sale under the 
                                oil and gas program under this section 
                                not later than 7 years after the date 
                                of enactment of this Act.
            (2) Rights-of-way.--The Secretary shall issue any rights-
        of-way or easements across the Coastal Plain for the 
        exploration, development, production, or transportation 
        necessary to carry out this section.
            (3) Surface development.--In administering this section, 
        the Secretary shall authorize up to 2,000 surface acres of 
        Federal land on the Coastal Plain to be covered by production 
        and support facilities (including airstrips and any area 
        covered by gravel berms or piers for support of pipelines) 
        during the term of the leases under the oil and gas program 
        under this section.

SEC. 20002. LIMITATIONS ON AMOUNT OF DISTRIBUTED QUALIFIED OUTER 
              CONTINENTAL SHELF REVENUES.

    Section 105(f)(1) of the Gulf of Mexico Energy Security Act of 2006 
(43 U.S.C. 1331 note; Public Law 109-432) is amended by striking 
``exceed $500,000,000 for each of fiscal years 2016 through 2055.'' and 
inserting the following: ``exceed--
                    ``(A) $500,000,000 for each of fiscal years 2016 
                through 2019;
                    ``(B) $650,000,000 for each of fiscal years 2020 
                and 2021; and
                    ``(C) $500,000,000 for each of fiscal years 2022 
                through 2055.''.

SEC. 20003. STRATEGIC PETROLEUM RESERVE DRAWDOWN AND SALE.

    (a) Drawdown and Sale.--
            (1) In general.--Notwithstanding section 161 of the Energy 
        Policy and Conservation Act (42 U.S.C. 6241), except as 
        provided in subsections (b) and (c), the Secretary of Energy 
        shall draw down and sell from the Strategic Petroleum Reserve 
        5,000,000 barrels of crude oil during the period of fiscal 
        years 2026 through 2027.
            (2) Deposit of amounts received from sale.--Amounts 
        received from a sale under paragraph (1) shall be deposited in 
        the general fund of the Treasury during the fiscal year in 
        which the sale occurs.
    (b) Emergency Protection.--The Secretary of Energy shall not draw 
down and sell crude oil under subsection (a) in a quantity that would 
limit the authority to sell petroleum products under subsection (h) of 
section 161 of the Energy Policy and Conservation Act (42 U.S.C. 6241) 
in the full quantity authorized by that subsection.
    (c) Limitation.--The Secretary of Energy shall not drawdown or 
conduct sales of crude oil under subsection (a) after the date on which 
a total of $325,000,000 has been deposited in the general fund of the 
Treasury from sales authorized under that subsection.
                                                       Calendar No. 269

115th CONGRESS

  1st Session

                                  S. 1

_______________________________________________________________________

                                 A BILL

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

_______________________________________________________________________

                           November 28, 2017

                 Read twice and placed on the calendar