[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