[Congressional Record Volume 163, Number 187 (Wednesday, November 15, 2017)]
[House]
[Pages H9302-H9361]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TAX CUTS AND JOBS ACT
Mr. BRADY of Texas. Mr. Speaker, pursuant to House Resolution 619, I
call up the bill (H.R. 1) to provide for reconciliation pursuant to
title II of the concurrent resolution on the budget for fiscal year
2018, and ask for its immediate consideration.
The Clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to House Resolution 619, in lieu of
the amendment in the nature of a substitute recommended by the
Committee on Ways and Means printed in the bill, an amendment in the
nature of a substitute consisting of the text of Rules Committee Print
115-39 is adopted, and the bill, as amended, is considered read.
The text of the bill, as amended, is as follows
H.R. 1
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Tax Cuts
and Jobs Act''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; etc.
TITLE I--TAX REFORM FOR INDIVIDUALS
Subtitle A--Simplification and Reform of Rates, Standard Deduction, and
Exemptions
Sec. 1001. Reduction and simplification of individual income tax rates.
[[Page H9303]]
Sec. 1002. Enhancement of standard deduction.
Sec. 1003. Repeal of deduction for personal exemptions.
Sec. 1004. Maximum rate on business income of individuals.
Sec. 1005. Conforming amendments related to simplification of
individual income tax rates.
Subtitle B--Simplification and Reform of Family and Individual Tax
Credits
Sec. 1101. Enhancement of child tax credit and new family tax credit.
Sec. 1102. Repeal of nonrefundable credits.
Sec. 1103. Refundable credit program integrity.
Sec. 1104. Procedures to reduce improper claims of earned income
credit.
Sec. 1105. Certain income disallowed for purposes of the earned income
tax credit.
Subtitle C--Simplification and Reform of Education Incentives
Sec. 1201. American opportunity tax credit.
Sec. 1202. Consolidation of education savings rules.
Sec. 1203. Reforms to discharge of certain student loan indebtedness.
Sec. 1204. Repeal of other provisions relating to education.
Sec. 1205. Rollovers between qualified tuition programs and qualified
ABLE programs.
Subtitle D--Simplification and Reform of Deductions
Sec. 1301. Repeal of overall limitation on itemized deductions.
Sec. 1302. Mortgage interest.
Sec. 1303. Repeal of deduction for certain taxes not paid or accrued in
a trade or business.
Sec. 1304. Repeal of deduction for personal casualty losses.
Sec. 1305. Limitation on wagering losses.
Sec. 1306. Charitable contributions.
Sec. 1307. Repeal of deduction for tax preparation expenses.
Sec. 1308. Repeal of medical expense deduction.
Sec. 1309. Repeal of deduction for alimony payments.
Sec. 1310. Repeal of deduction for moving expenses.
Sec. 1311. Termination of deduction and exclusions for contributions to
medical savings accounts.
Sec. 1312. Denial of deduction for expenses attributable to the trade
or business of being an employee.
Subtitle E--Simplification and Reform of Exclusions and Taxable
Compensation
Sec. 1401. Limitation on exclusion for employer-provided housing.
Sec. 1402. Exclusion of gain from sale of a principal residence.
Sec. 1403. Repeal of exclusion, etc., for employee achievement awards.
Sec. 1404. Sunset of exclusion for dependent care assistance programs.
Sec. 1405. Repeal of exclusion for qualified moving expense
reimbursement.
Sec. 1406. Repeal of exclusion for adoption assistance programs.
Subtitle F--Simplification and Reform of Savings, Pensions, Retirement
Sec. 1501. Repeal of special rule permitting recharacterization of Roth
IRA contributions as traditional IRA contributions.
Sec. 1502. Reduction in minimum age for allowable in-service
distributions.
Sec. 1503. Modification of rules governing hardship distributions.
Sec. 1504. Modification of rules relating to hardship withdrawals from
cash or deferred arrangements.
Sec. 1505. Extended rollover period for the rollover of plan loan
offset amounts in certain cases.
Sec. 1506. Modification of nondiscrimination rules to protect older,
longer service participants.
Subtitle G--Estate, Gift, and Generation-skipping Transfer Taxes
Sec. 1601. Increase in credit against estate, gift, and generation-
skipping transfer tax.
Sec. 1602. Repeal of estate and generation-skipping transfer taxes.
TITLE II--ALTERNATIVE MINIMUM TAX REPEAL
Sec. 2001. Repeal of alternative minimum tax.
TITLE III--BUSINESS TAX REFORM
Subtitle A--Tax Rates
Sec. 3001. Reduction in corporate tax rate.
Subtitle B--Cost Recovery
Sec. 3101. Increased expensing.
Subtitle C--Small Business Reforms
Sec. 3201. Expansion of section 179 expensing.
Sec. 3202. Small business accounting method reform and simplification.
Sec. 3203. Small business exception from limitation on deduction of
business interest.
Sec. 3204. Modification of treatment of S corporation conversions to C
corporations.
Subtitle D--Reform of Business-related Exclusions, Deductions, etc.
Sec. 3301. Interest.
Sec. 3302. Modification of net operating loss deduction.
Sec. 3303. Like-kind exchanges of real property.
Sec. 3304. Revision of treatment of contributions to capital.
Sec. 3305. Repeal of deduction for local lobbying expenses.
Sec. 3306. Repeal of deduction for income attributable to domestic
production activities.
Sec. 3307. Entertainment, etc. expenses.
Sec. 3308. Unrelated business taxable income increased by amount of
certain fringe benefit expenses for which deduction is
disallowed.
Sec. 3309. Limitation on deduction for FDIC premiums.
Sec. 3310. Repeal of rollover of publicly traded securities gain into
specialized small business investment companies.
Sec. 3311. Certain self-created property not treated as a capital
asset.
Sec. 3312. Repeal of special rule for sale or exchange of patents.
Sec. 3313. Repeal of technical termination of partnerships.
Sec. 3314. Recharacterization of certain gains in the case of
partnership profits interests held in connection with
performance of investment services.
Sec. 3315. Amortization of research and experimental expenditures.
Sec. 3316. Uniform treatment of expenses in contingency fee cases.
Subtitle E--Reform of Business Credits
Sec. 3401. Repeal of credit for clinical testing expenses for certain
drugs for rare diseases or conditions.
Sec. 3402. Repeal of employer-provided child care credit.
Sec. 3403. Repeal of rehabilitation credit.
Sec. 3404. Repeal of work opportunity tax credit.
Sec. 3405. Repeal of deduction for certain unused business credits.
Sec. 3406. Termination of new markets tax credit.
Sec. 3407. Repeal of credit for expenditures to provide access to
disabled individuals.
Sec. 3408. Modification of credit for portion of employer social
security taxes paid with respect to employee tips.
Subtitle F--Energy Credits
Sec. 3501. Modifications to credit for electricity produced from
certain renewable resources.
Sec. 3502. Modification of the energy investment tax credit.
Sec. 3503. Extension and phaseout of residential energy efficient
property.
Sec. 3504. Repeal of enhanced oil recovery credit.
Sec. 3505. Repeal of credit for producing oil and gas from marginal
wells.
Sec. 3506. Modifications of credit for production from advanced nuclear
power facilities.
Subtitle G--Bond Reforms
Sec. 3601. Termination of private activity bonds.
Sec. 3602. Repeal of advance refunding bonds.
Sec. 3603. Repeal of tax credit bonds.
Sec. 3604. No tax exempt bonds for professional stadiums.
Subtitle H--Insurance
Sec. 3701. Net operating losses of life insurance companies.
Sec. 3702. Repeal of small life insurance company deduction.
Sec. 3703. Surtax on life insurance company taxable income.
Sec. 3704. Adjustment for change in computing reserves.
Sec. 3705. Repeal of special rule for distributions to shareholders
from pre-1984 policyholders surplus account.
Sec. 3706. Modification of proration rules for property and casualty
insurance companies.
Sec. 3707. Modification of discounting rules for property and casualty
insurance companies.
Sec. 3708. Repeal of special estimated tax payments.
Subtitle I--Compensation
Sec. 3801. Modification of limitation on excessive employee
remuneration.
Sec. 3802. Excise tax on excess tax-exempt organization executive
compensation.
Sec. 3803. Treatment of qualified equity grants.
TITLE IV--TAXATION OF FOREIGN INCOME AND FOREIGN PERSONS
Subtitle A--Establishment of Participation Exemption System for
Taxation of Foreign Income
Sec. 4001. Deduction for foreign-source portion of dividends received
by domestic corporations from specified 10-percent owned
foreign corporations.
Sec. 4002. Application of participation exemption to investments in
United States property.
Sec. 4003. Limitation on losses with respect to specified 10-percent
owned foreign corporations.
Sec. 4004. Treatment of deferred foreign income upon transition to
participation exemption system of taxation.
Subtitle B--Modifications Related to Foreign Tax Credit System
Sec. 4101. Repeal of section 902 indirect foreign tax credits;
determination of section 960 credit on current year
basis.
Sec. 4102. Source of income from sales of inventory determined solely
on basis of production activities.
Subtitle C--Modification of Subpart F Provisions
Sec. 4201. Repeal of inclusion based on withdrawal of previously
excluded subpart F income from qualified investment.
Sec. 4202. Repeal of treatment of foreign base company oil related
income as subpart F income.
[[Page H9304]]
Sec. 4203. Inflation adjustment of de minimis exception for foreign
base company income.
Sec. 4204. Look-thru rule for related controlled foreign corporations
made permanent.
Sec. 4205. Modification of stock attribution rules for determining
status as a controlled foreign corporation.
Sec. 4206. Elimination of requirement that corporation must be
controlled for 30 days before subpart F inclusions apply.
Subtitle D--Prevention of Base Erosion
Sec. 4301. Current year inclusion by United States shareholders with
foreign high returns.
Sec. 4302. Limitation on deduction of interest by domestic corporations
which are members of an international financial reporting
group.
Sec. 4303. Excise tax on certain payments from domestic corporations to
related foreign corporations; election to treat such
payments as effectively connected income.
Subtitle E--Provisions Related to Possessions of the United States
Sec. 4401. Extension of deduction allowable with respect to income
attributable to domestic production activities in Puerto
Rico.
Sec. 4402. Extension of temporary increase in limit on cover over of
rum excise taxes to Puerto Rico and the Virgin Islands.
Sec. 4403. Extension of American Samoa economic development credit.
Subtitle F--Other International Reforms
Sec. 4501. Restriction on insurance business exception to passive
foreign investment company rules.
TITLE V--EXEMPT ORGANIZATIONS
Subtitle A--Unrelated Business Income Tax
Sec. 5001. Clarification of unrelated business income tax treatment of
entities treated as exempt from taxation under section
501(a).
Sec. 5002. Exclusion of research income limited to publicly available
research.
Subtitle B--Excise Taxes
Sec. 5101. Simplification of excise tax on private foundation
investment income.
Sec. 5102. Private operating foundation requirements relating to
operation of art museum.
Sec. 5103. Excise tax based on investment income of private colleges
and universities.
Sec. 5104. Exception from private foundation excess business holding
tax for independently-operated philanthropic business
holdings.
Subtitle C--Requirements for Organizations Exempt From Tax
Sec. 5201. 501(c)(3) organizations permitted to make statements
relating to political campaign in ordinary course of
activities.
Sec. 5202. Additional reporting requirements for donor advised fund
sponsoring organizations.
TITLE I--TAX REFORM FOR INDIVIDUALS
Subtitle A--Simplification and Reform of Rates, Standard Deduction, and
Exemptions
SEC. 1001. REDUCTION AND SIMPLIFICATION OF INDIVIDUAL INCOME
TAX RATES.
(a) In General.--Section 1 is amended by striking
subsection (i) and by striking all that precedes subsection
(h) and inserting the following:
``SEC. 1. TAX IMPOSED.
``(a) In General.--There is hereby imposed on the income of
every individual a tax equal to the sum of--
``(1) 12 percent bracket.--12 percent of so much of the
taxable income as does not exceed the 25-percent bracket
threshold amount,
``(2) 25 percent bracket.--25 percent of so much of the
taxable income as exceeds the 25-percent bracket threshold
amount but does not exceed the 35-percent bracket threshold
amount, plus
``(3) 35 percent bracket.--35 percent of so much of taxable
income as exceeds the 35-percent bracket threshold amount but
does not exceed the 39.6 percent bracket threshold amount.
``(4) 39.6 percent bracket.--39.6 percent of so much of
taxable income as exceeds the 39.6-percent bracket threshold
amount.
``(b) Bracket Threshold Amounts.--For purposes of this
section--
``(1) 25-percent bracket threshold amount.--The term `25-
percent bracket threshold amount' means--
``(A) in the case of a joint return or surviving spouse,
$90,000,
``(B) in the case of an individual who is the head of a
household (as defined in section 2(b)), $67,500,
``(C) in the case of any other individual (other than an
estate or trust), an amount equal to \1/2\ of the amount in
effect for the taxable year under subparagraph (A), and
``(D) in the case of an estate or trust, $2,550.
``(2) 35-percent bracket threshold amount.--The term `35-
percent bracket threshold amount' means--
``(A) in the case of a joint return or surviving spouse,
$260,000,
``(B) in the case of a married individual filing a separate
return, an amount equal to \1/2\ of the amount in effect for
the taxable year under subparagraph (A), and
``(C) in the case of any other individual (other than an
estate or trust), $200,000, and
``(D) in the case of an estate or trust, $9,150.
``(3) 39.6-percent bracket threshold amount.--The term
`39.6-percent bracket threshold amount' means--
``(A) in the case of a joint return or surviving spouse,
$1,000,000,
``(B) in the case of any other individual (other than an
estate or trust), an amount equal to \1/2\ of the amount in
effect for the taxable year under subparagraph (A), and
``(C) in the case of an estate or trust, $12,500.
``(c) Inflation Adjustment.--
``(1) In general.--In the case of any taxable year
beginning after 2018, each dollar amount in subsections (b)
and (e)(3) (other than any amount determined by reference to
such a dollar amount) shall be increased by an amount equal
to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under this
subsection for the calendar year in which the taxable year
begins by substituting `2017' for `2016' in paragraph
(2)(A)(ii).
If any increase determined under the preceding sentence is
not a multiple of $100, such increase shall be rounded to the
next lowest multiple of $100.
``(2) Cost-of-living adjustment.--For purposes of this
subsection--
``(A) In general.--The cost-of-living adjustment for any
calendar year is the percentage (if any) by which--
``(i) the C-CPI-U for the preceding calendar year, exceeds
``(ii) the normalized CPI for calendar year 2016.
``(B) Special rule for adjustments with a base year after
2016.--For purposes of any provision which provides for the
substitution of a year after 2016 for `2016' in subparagraph
(A)(ii), subparagraph (A) shall be applied by substituting
`C-CPI-U' for `normalized CPI' in clause (ii).
``(3) Normalized cpi.--For purposes of this subsection, the
normalized CPI for any calendar year is the product of--
``(A) the CPI for such calendar year, multiplied by
``(B) the C-CPI-U transition multiple.
``(4) C-CPI-U transition multiple.--For purposes of this
subsection, the term `C-CPI-U transition multiple' means the
amount obtained by dividing--
``(A) the C-CPI-U for calendar year 2016, by
``(B) the CPI for calendar year 2016.
``(5) C-CPI-U.--For purposes of this subsection--
``(A) In general.--The term `C-CPI-U' means the Chained
Consumer Price Index for All Urban Consumers (as published by
the Bureau of Labor Statistics of the Department of Labor).
The values of the Chained Consumer Price Index for All Urban
Consumers taken into account for purposes of determining the
cost-of-living adjustment for any calendar year under this
subsection shall be the latest values so published as of the
date on which such Bureau publishes the initial value of the
Chained Consumer Price Index for All Urban Consumers for the
month of August for the preceding calendar year.
``(B) Determination for calendar year.--The C-CPI-U for any
calendar year is the average of the C-CPI-U as of the close
of the 12-month period ending on August 31 of such calendar
year.
``(6) CPI.--For purposes of this subsection--
``(A) In general.--The term `Consumer Price Index' means
the last Consumer Price Index for All Urban Consumers
published by the Department of Labor. For purposes of the
preceding sentence, the revision of the Consumer Price Index
which is most consistent with the Consumer Price Index for
calendar year 1986 shall be used.
``(B) Determination for calendar year.--The CPI for any
calendar year is the average of the Consumer Price Index as
of the close of the 12-month period ending on August 31 of
such calendar year.
``(d) Special Rules for Certain Children With Unearned
Income.--
``(1) In general.--In the case of any child to whom this
subsection applies for any taxable year--
``(A) the 25-percent bracket threshold amount shall not be
more than the taxable income of such child for the taxable
year reduced by the net unearned income of such child, and
``(B) the 35-percent bracket threshold amount shall not be
more than the sum of--
``(i) the taxable income of such child for the taxable year
reduced by the net unearned income of such child, plus
``(ii) the dollar amount in effect under subsection
(b)(2)(D) for the taxable year.
``(C) the 39.6-percent bracket threshold amount shall not
be more than the sum of--
``(i) the taxable income of such child for the taxable year
reduced by the net unearned income of such child, plus
``(ii) the dollar amount in effect under subsection
(b)(3)(C).
``(2) Child to whom subsection applies.--This subsection
shall apply to any child for any taxable year if--
``(A) such child--
``(i) has not attained age 18 before the close of the
taxable year, or
``(ii) has attained age 18 before the close of the taxable
year and is described in paragraph (3),
``(B) either parent of such child is alive at the close of
the taxable year, and
``(C) such child does not file a joint return for the
taxable year.
``(3) Certain children whose earned income does not exceed
one-half of individual's support.--A child is described in
this paragraph if--
``(A) such child--
``(i) has not attained age 19 before the close of the
taxable year, or
``(ii) is a student (within the meaning of section
7706(f)(2)) who has not attained age 24 before the close of
the taxable year, and
[[Page H9305]]
``(B) such child's earned income (as defined in section
911(d)(2)) for such taxable year does not exceed one-half of
the amount of the individual's support (within the meaning of
section 7706(c)(1)(D) after the application of section
7706(f)(5) (without regard to subparagraph (A) thereof)) for
such taxable year.
``(4) Net unearned income.--For purposes of this
subsection--
``(A) In general.--The term `net unearned income' means the
excess of--
``(i) the portion of the adjusted gross income for the
taxable year which is not attributable to earned income (as
defined in section 911(d)(2)), over
``(ii) the sum of--
``(I) the amount in effect for the taxable year under
section 63(c)(2)(A) (relating to limitation on standard
deduction in the case of certain dependents), plus
``(II) The greater of the amount described in subclause (I)
or, if the child itemizes his deductions for the taxable
year, the amount of the itemized deductions allowed by this
chapter for the taxable year which are directly connected
with the production of the portion of adjusted gross income
referred to in clause (i).
``(B) Limitation based on taxable income.--The amount of
the net unearned income for any taxable year shall not exceed
the individual's taxable income for such taxable year.
``(e) Phaseout of 12-percent Rate.--
``(1) In general.--The amount of tax imposed by this
section (determined without regard to this subsection) shall
be increased by 6 percent of the excess (if any) of--
``(A) adjusted gross income, over
``(B) the applicable dollar amount.
``(2) Limitation.--The increase determined under paragraph
(1) with respect to any taxpayer for any taxable year shall
not exceed 27.6 percent of the lesser of--
``(A) the taxpayer's taxable income for such taxable year,
or
``(B) the 25-percent bracket threshold amount in effect
with respect to the taxpayer for such taxable year.
``(3) Applicable dollar amount.--For purposes of this
subsection, the term `applicable dollar amount' means--
``(A) in the case of a joint return or a surviving spouse,
$1,200,000,
``(B) in the case of a married individual filing a separate
return, an amount equal to \1/2\ of the amount in effect for
the taxable year under subparagraph (A), and
``(C) in the case of any other individual, $1,000,000.
``(4) Estates and trusts.--Paragraph (1) shall not apply in
the case of an estate or trust.''.
(b) Application of Current Income Tax Brackets to Capital
Gains Brackets.--
(1) In general.--
(A) 0-percent capital gains bracket.--Section 1(h)(1) is
amended by striking ``which would (without regard to this
paragraph) be taxed at a rate below 25 percent'' in
subparagraph (B)(i) and inserting ``below the 15-percent rate
threshold''.
(B) 15-percent capital gains bracket.--Section
1(h)(1)(C)(ii)(I) is amended by striking ``which would
(without regard to this paragraph) be taxed at a rate below
39.6 percent'' and inserting ``below the 20-percent rate
threshold''.
(2) Rate thresholds defined.--Section 1(h) is amended by
adding at the end the following new paragraph:
``(12) Rate thresholds defined.--For purposes of this
subsection--
``(A) 15-percent rate threshold.--The 15-percent rate
threshold shall be--
``(i) in the case of a joint return or surviving spouse,
$77,200 (\1/2\ such amount in the case of a married
individual filing a separate return),
``(ii) in the case of an individual who is the head of a
household (as defined in section 2(b)), $51,700,
``(iii) in the case of any other individual (other than an
estate or trust), an amount equal to \1/2\ of the amount in
effect for the taxable year under clause (i), and
``(iv) in the case of an estate or trust, $2,600.
``(B) 20-percent rate threshold.--The 20-percent rate
threshold shall be--
``(i) in the case of a joint return or surviving spouse,
$479,000 (\1/2\ such amount in the case of a married
individual filing a separate return),
``(ii) in the case of an individual who is the head of a
household (as defined in section 2(b)), $452,400,
``(iii) in the case of any other individual (other than an
estate or trust), $425,800, and
``(iv) in the case of an estate or trust, $12,700.
``(C) Inflation adjustment.--In the case of any taxable
year beginning after 2018, each of the dollar amounts in
subparagraphs (A) and (B) shall be increased by an amount
equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
subsection (c)(2)(A) for the calendar year in which the
taxable year begins, determined by substituting `calendar
year 2017' for `calendar year 2016' in clause (ii)
thereof.''.
(c) Application of Section 15.--
(1) In general.--Subsection (a) of section 15 is amended by
striking ``by this chapter'' and inserting ``by section 11
(or by reference to any such rates)''.
(2) Conforming amendments.--
(A) Section 15 is amended by striking subsections (d) and
(f) and by redesignating subsection (e) as subsection (d).
(B) Section 15(d), as redesignated by subparagraph (A), is
amended by striking ``section 1 or 11(b)'' and inserting
``section 11(b)''.
(C) Section 6013(c) is amended by striking ``sections 15,
443, and 7851(a)(1)(A)'' and inserting ``sections 443 and
7851(a)(1)(A)''.
(3) Application to this act.--Section 15 of the Internal
Revenue Code of 1986 shall not apply to any change in a rate
of tax imposed by chapter 1 of such Code which occurs by
reason of any amendment made by this Act (other than the
amendments made by section 3001).
(d) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
(2) Subsection (c).--The amendments made by subsection (c)
shall take effect on the date of the enactment of this Act.
SEC. 1002. ENHANCEMENT OF STANDARD DEDUCTION.
(a) Increase in Standard Deduction.--Section 63(c) is
amended to read as follows:
``(c) Standard Deduction.--For purposes of this subtitle--
``(1) In general.--Except as otherwise provided in this
subsection, the term `standard deduction' means--
``(A) $24,400, in the case of a joint return (or a
surviving spouse (as defined in section 2(a)),
``(B) three-quarters of the amount in effect under
subparagraph (A) for the taxable year, in the case of the
head of a household (as defined in section 2(b)), and
``(C) one-half of the amount in effect under subparagraph
(A) for the taxable year, in any other case.
``(2) Limitation on standard deduction in the case of
certain dependents.--In the case of an individual who is a
dependent of another taxpayer for a taxable year beginning in
the calendar year in which the individual's taxable year
begins, the standard deduction applicable to such individual
for such individual's taxable year shall not exceed the
greater of--
``(A) $500, or
``(B) the sum of $250 and such individual's earned income
(within the means of section 32).
``(3) Certain individuals, etc., not eligible for standard
deduction.--In the case of--
``(A) a married individual filing a separate return where
either spouse itemizes deductions,
``(B) a nonresident alien individual,
``(C) an individual making a return under section 443(a)(1)
for a period of less than 12 months on account of a change in
his annual accounting period, or
``(D) an estate or trust, common trust fund, or
partnership,
the standard deduction shall be zero.
``(4) Unmarried individual.--For purposes of this section,
the term `unmarried individual' means any individual who--
``(A) is not married as of the close of the taxable year
(as determined by applying section 7703),
``(B) is not a surviving spouse (as defined in section
2(a)) for the taxable year, and
``(C) is not a dependent of another taxpayer for a taxable
year beginning in the calendar year in which the individual's
taxable year begins.
``(5) Inflation adjustments.--
``(A) Standard deduction amount.--In the case of any
taxable year beginning after 2019, the dollar amount in
paragraph (1)(A) shall be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(c)(2)(A) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2018'
for `calendar year 2016' in clause (ii) thereof.
``(B) Limitation amount in case of certain dependents.--In
the case of any taxable year beginning after 2017, each of
the dollar amounts in paragraph (2) shall be increased by an
amount equal to--
``(i) such dollar amount, multiplied by
``(ii)(I) in the case of the dollar amount in paragraph
(2)(A), under section 1(c)(2)(A) for the calendar year in
which the taxable year begins determined by substituting
`calendar year 1987' for `calendar year 2016' in clause (ii)
thereof, and
``(II) in the case of the dollar amount in paragraph
(2)(B), under section 1(c)(2)(A) for the calendar year in
which the taxable year begins determined by substituting
`calendar year 1997' for `calendar year 2016' in clause (ii)
thereof.
If any increase determined under this paragraph is not a
multiple of $100, such increase shall be rounded to the next
lowest multiple of $100.''.
(b) Conforming Amendments.--
(1) Section 63(b) is amended by striking ``, minus--'' and
all that follows and inserting ``minus the standard
deduction''.
(2) Section 63 is amended by striking subsections (f) and
(g).
(3) Section 1398(c) is amended--
(A) by striking ``Basic'' in the heading thereof,
(B) by striking ``Basic standard'' in the heading of
paragraph (3) and inserting ``Standard'', and
(C) by striking ``basic'' in paragraph (3).
(4) Section 3402(m)(3) is amended by striking ``(including
the additional standard deduction under section 63(c)(3) for
the aged and blind)''.
(5) Section 6014(b)(4) is amended by striking ``section
63(c)(5)'' and inserting ``section 63(c)(2)''.
(c) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1003. REPEAL OF DEDUCTION FOR PERSONAL EXEMPTIONS.
(a) In General.--Part V of subchapter B of chapter 1 is
hereby repealed.
(b) Definition of Dependent Retained.--Section 152, prior
to repeal by subsection (a), is hereby redesignated as
section 7706 and moved to the end of chapter 79.
(c) Application to Estates and Trusts.--Subsection (b) of
section 642 is amended--
(1) by striking paragraph (2)(C),
(2) by striking paragraph (3), and
(3) by striking ``Deduction for Personal Exemption'' in the
heading thereof and inserting ``Basic Deduction''.
[[Page H9306]]
(d) Application to Nonresident Aliens.--Section 873(b) is
amended by striking paragraph (3).
(e) Modification of Wage Withholding Rules.--
(1) In general.--Section 3402(a) is amended by striking
paragraph (2).
(2) Conforming amendment.--Section 3402(a) is amended--
(A) by redesignating subparagraphs (A) and (B) of paragraph
(1) as paragraphs (1) and (2) and moving such redesignated
paragraphs 2 ems to the left, and
(B) by striking all that precedes ``otherwise provided in
this section'' and inserting the following:
``(a) Requirement of Withholding.--Except as''.
(3) Number of exemptions.--Section 3402(f)(1) is amended--
(A) in subparagraph (A), by striking ``an individual
described in section 151(d)(2)'' and inserting ``a dependent
of any other taxpayer'', and
(B) in subparagraph (C), by striking ``with respect to
whom, on the basis of facts existing at the beginning of such
day, there may reasonably be expected to be allowable an
exemption under section 151(c)'' and inserting ``who, on the
basis of facts existing at the beginning of such day, is
reasonably expected to be a dependent of the employee''.
(f) Modification of Return Requirement.--
(1) In general.--Paragraph (1) of section 6012(a) is
amended to read as follows:
``(1) Every individual who has gross income for the taxable
year, except that a return shall not be required of--
``(A) an individual who is not married (determined by
applying section 7703) and who has gross income for the
taxable year which does not exceed the standard deduction
applicable to such individual for such taxable year under
section 63, or
``(B) an individual entitled to make a joint return if--
``(i) the gross income of such individual, when combined
with the gross income of such individual's spouse, for the
taxable year does not exceed the standard deduction which
would be applicable to the taxpayer for such taxable year
under section 63 if such individual and such individual's
spouse made a joint return,
``(ii) such individual and such individual's spouse have
the same household as their home at the close of the taxable
year,
``(iii) such individual's spouse does not make a separate
return, and
``(iv) neither such individual nor such individual's spouse
is an individual described in section 63(c)(2) who has income
(other than earned income) in excess of the amount in effect
under section 63(c)(2)(A).''.
(2) Bankruptcy estates.--Paragraph (8) of section 6012(a)
is amended by striking ``the sum of the exemption amount plus
the basic standard deduction under section 63(c)(2)(D)'' and
inserting ``the standard deduction in effect under section
63(c)(1)(B)''.
(g) Conforming Amendments.--
(1) Section 2(a)(1)(B) is amended by striking ``a
dependent'' and all that follows through ``section 151'' and
inserting ``a dependent who (within the meaning of section
7706, determined without regard to subsections (b)(1), (b)(2)
and (d)(1)(B) thereof) is a son, stepson, daughter, or
stepdaughter of the taxpayer''.
(2) Section 36B(b)(2)(A) is amended by striking ``section
152'' and inserting ``section 7706''.
(3) Section 36B(b)(3)(B) is amended by striking ``unless a
deduction is allowed under section 151 for the taxable year
with respect to a dependent'' in the flush matter at the end
and inserting ``unless the taxpayer has a dependent for the
taxable year''.
(4) Section 36B(c)(1)(D) is amended by striking ``with
respect to whom a deduction under section 151 is allowable to
another taxpayer'' and inserting ``who is a dependent of
another taxpayer''.
(5) Section 36B(d)(1) is amended by striking ``equal to the
number of individuals for whom the taxpayer is allowed a
deduction under section 151 (relating to allowance of
deduction for personal exemptions) for the taxable year'' and
inserting ``the sum of 1 (2 in the case of a joint return)
plus the number of the taxpayer's dependents for the taxable
year''.
(6) Section 36B(e)(1) is amended by striking ``1 or more
individuals for whom a taxpayer is allowed a deduction under
section 151 (relating to allowance of deduction for personal
exemptions) for the taxable year (including the taxpayer or
his spouse)'' and inserting ``1 or more of the taxpayer, the
taxpayer's spouse, or any dependent of the taxpayer''.
(7) Section 42(i)(3)(D)(ii)(I) is amended--
(A) by striking ``section 152'' and inserting ``section
7706'', and
(B) by striking the period at the end and inserting a
comma.
(8) Section 72(t)(2)(D)(i)(III) is amended by striking
``section 152'' and inserting ``section 7706''.
(9) Section 72(t)(7)(A)(iii) is amended by striking
``section 152(f)(1)'' and inserting ``section 7706(f)(1)''.
(10) Section 105(b) is amended--
(A) by striking ``as defined in section 152'' and inserting
``as defined in section 7706'',
(B) by striking ``section 152(f)(1)'' and inserting
``section 7706(f)(1)'' and
(C) by striking ``section 152(e)'' and inserting ``section
7706(e)''.
(11) Section 105(c)(1) is amended by striking ``section
152'' and inserting ``section 7706''.
(12) Section 125(e)(1)(D) is amended by striking ``section
152'' and inserting ``section 7706''.
(13) Section 132(h)(2)(B) is amended--
(A) by striking ``section 152(f)(1)'' and inserting
``section 7706(f)(1)'', and
(B) by striking ``section 152(e)'' and inserting ``section
7706(e)''.
(14) Section 139D(c)(5) is amended by striking ``section
152'' and inserting ``section 7706''.
(15) Section 162(l)(1)(D) is amended by striking ``section
152(f)(1)'' and inserting ``section 7706(f)(1)''.
(16) Section 170(g)(1) is amended by striking ``section
152'' and inserting ``section 7706''.
(17) Section 170(g)(3) is amended by striking ``section
152(d)(2)'' and inserting ``section 7706(d)(2)''.
(18) Section 172(d) is amended by striking paragraph (3).
(19) Section 220(b)(6) is amended by striking ``with
respect to whom a deduction under section 151 is allowable
to'' and inserting ``who is a dependent of''.
(20) Section 220(d)(2)(A) is amended by striking ``section
152'' and inserting ``section 7706''.
(21) Section 223(b)(6) is amended by striking ``with
respect to whom a deduction under section 151 is allowable
to'' and inserting ``who is a dependent of''.
(22) Section 223(d)(2)(A) is amended by striking ``section
152'' and inserting ``section 7706''.
(23) Section 401(h) is amended by striking ``section
152(f)(1)'' in the last sentence and inserting ``section
7706(f)(1)''.
(24) Section 402(l)(4)(D) is amended by striking ``section
152'' and inserting ``section 7706''.
(25) Section 409A(a)(2)(B)(ii)(I) is amended by striking
``section 152(a)'' and inserting ``section 7706(a)''.
(26) Section 501(c)(9) is amended by striking ``section
152(f)(1)'' and inserting ``section 7706(f)(1)''.
(27) Section 529(e)(2)(B) is amended by striking ``section
152(d)(2)'' and inserting ``section 7706(d)(2)''.
(28) Section 703(a)(2) is amended by striking subparagraph
(A) and by redesignating subparagraphs (B) through (F) as
subparagraphs (A) through (E), respectively.
(29) Section 874 is amended by striking subsection (b) and
by redesignating subsection (c) as subsection (b).
(30) Section 891 is amended by striking ``under section 151
and''.
(31) Section 904(b) is amended by striking paragraph (1).
(32) Section 931(b)(1) is amended by striking ``(other than
the deduction under section 151, relating to personal
exemptions)''.
(33) Section 933 is amended--
(A) by striking ``(other than the deduction under section
151, relating to personal exemptions)'' in paragraph (1), and
(B) by striking ``(other than the deduction for personal
exemptions under section 151)'' in paragraph (2).
(34) Section 1212(b)(2)(B)(ii) is amended to read as
follows:
``(ii) in the case of an estate or trust, the deduction
allowed for such year under section 642(b).''.
(35) Section 1361(c)(1)(C) is amended by striking ``section
152(f)(1)(C)'' and inserting ``section 7706(f)(1)(C)''.
(36) Section 1402(a) is amended by striking paragraph (7).
(37) Section 2032A(c)(7)(D) is amended by striking
``section 152(f)(2)'' and inserting ``section 7706(f)(2)''.
(38) Section 3402(m)(1) is amended by striking ``other than
the deductions referred to in section 151 and''.
(39) Section 3402(r)(2) is amended by striking ``the sum
of--'' and all that follows and inserting ``the standard
deduction in effect under section 63(c)(1)(B).''.
(40) Section 5000A(b)(3)(A) is amended by striking
``section 152'' and inserting ``section 7706''.
(41) Section 5000A(c)(4)(A) is amended by striking ``the
number of individuals for whom the taxpayer is allowed a
deduction under section 151 (relating to allowance of
deduction for personal exemptions) for the taxable year'' and
inserting ``the sum of 1 (2 in the case of a joint return)
plus the number of the taxpayer's dependents for the taxable
year''.
(42) Section 6013(b)(3)(A) is amended--
(A) by striking ``had less than the exemption amount of
gross income'' in clause (ii) and inserting ``had no gross
income'',
(B) by striking ``had gross income of the exemption amount
or more'' in clause (iii) and inserting ``had any gross
income'', and
(C) by striking the flush language following clause (iii).
(43) Section 6103(l)(21)(A)(iii) is amended to read as
follows:
``(iii) the number of the taxpayer's dependents,''.
(44) Section 6213(g)(2) is amended by striking subparagraph
(H).
(45) Section 6334(d)(2) is amended to read as follows:
``(2) Exempt amount.--
``(A) In general.--For purposes of paragraph (1), the term
`exempt amount' means an amount equal to--
``(i) the standard deduction, divided by
``(ii) 52.
``(B) Verified statement.--Unless the taxpayer submits to
the Secretary a written and properly verified statement
specifying the facts necessary to determine the proper amount
under subparagraph (A), subparagraph (A) shall be applied as
if the taxpayer were a married individual filing a separate
return with no dependents.''.
(46) Section 7702B(f)(2)(C)(iii) is amended by striking
``section 152(d)(2)'' and inserting ``section 7706(d)(2)''.
(47) Section 7703(a) is amended by striking ``part V of
subchapter B of chapter 1 and''.
(48) Section 7703(b)(1) is amended by striking ``section
152(f)(1)'' and all that follows and inserting ``section
7706(f)(1),''.
(49) Section 7706(a), as redesignated by this section, is
amended by striking ``this subtitle'' and inserting
``subtitle A''.
(50)(A) Section 7706(d)(1)(B), as redesignated by this
section, is amended by striking ``the exemption amount (as
defined in section 151(d))'' and inserting ``$4,150''.
[[Page H9307]]
(B) Section 7706(d), as redesignated by this section, is
amended by adding at the end the following new paragraph:
``(6) Inflation adjustment.--In the case of any calendar
year beginning after 2018, the $4,150 amount in paragraph
(1)(B) shall be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(c)(2)(A) for such calendar year, determined by
substituting `calendar year 2017' for `calendar year 2016' in
clause (ii) thereof.
If any increase determined under the preceding sentence is
not a multiple of $100, such increase shall be rounded to the
next lowest multiple of $100.''.
(51) The table of sections for chapter 79 is amended by
adding at the end the following new item:
``Sec. 7706. Dependent defined.''.
(h) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1004. MAXIMUM RATE ON BUSINESS INCOME OF INDIVIDUALS.
(a) In General.--Part I of subchapter A of chapter 1 is
amended by inserting after section 3 the following new
section:
``SEC. 4. 25 PERCENT MAXIMUM RATE ON BUSINESS INCOME OF
INDIVIDUALS.
``(a) Reduction in Tax to Achieve 25 Percent Maximum
Rate.--The tax imposed by section 1 shall be reduced by the
sum of--
``(1) 10 percent of the lesser of--
``(A) qualified business income, or
``(B) the excess (if any) of--
``(i) taxable income reduced by net capital gain (as
defined in section 1(h)(11)(A)), over
``(ii) the maximum dollar amount for the 25-percent rate
bracket which applies to the taxpayer under section 1 for the
taxable year, and
``(2) 4.6 percent of the excess (if any) of--
``(A) the lesser of--
``(i) qualified business income, or
``(ii) the excess (if any) determined under paragraph
(1)(B), over
``(B) the excess of--
``(i) the maximum dollar amount for the 35-percent rate
bracket which applies to the taxpayer under section 1 for the
taxable year, over
``(ii) the maximum dollar amount for the 25-percent rate
bracket which applies to the taxpayer under section 1 for the
taxable year.
``(b) Qualified Business Income.--For purposes of this
section, the term `qualified business income' means the
excess (if any) of--
``(1) the sum of--
``(A) 100 percent of any net business income derived from
any passive business activity, plus
``(B) the capital percentage of any net business income
derived from any active business activity, over
``(2) the sum of--
``(A) 100 percent of any net business loss derived from any
passive business activity,
``(B) except as provided in subsection (e)(3)(A), 30
percent of any net business loss derived from any active
business activity, plus
``(C) any carryover business loss determined for the
preceding taxable year.
``(c) Determination of Net Business Income or Loss.--For
purposes of this section--
``(1) In general.--Net business income or loss shall be
determined with respect to any business activity by
appropriately netting items of income, gain, deduction, and
loss with respect to such business activity.
``(2) Wages, etc.--Any wages (as defined in section 3401),
payments described in subsection (a) or (c) of section 707,
or directors' fees received by the taxpayer which are
properly attributable to any business activity shall be taken
into account under paragraph (1) as an item of income with
respect to such business activity.
``(3) Exception for certain investment-related items.--
There shall not be taken into account under paragraph (1)--
``(A) any item of short-term capital gain, short-term
capital loss, long-term capital gain, or long-term capital
loss,
``(B) any dividend, income equivalent to a dividend, or
payment in lieu of dividends described in section
954(c)(1)(G),
``(C) any interest income other than interest income which
is properly allocable to a trade or business,
``(D) any item of gain or loss described in subparagraph
(C) or (D) of section 954(c)(1) (applied by substituting
`business activity' for `controlled foreign corporation'),
``(E) any item of income, gain, deduction, or loss taken
into account under section 954(c)(1)(F) (determined without
regard to clause (ii) thereof and other than items
attributable to notional principal contracts entered into in
transactions qualifying under section 1221(a)(7)),
``(F) any amount received from an annuity which is not
received in connection with the trade or business of the
business activity, and
``(G) any item of deduction or loss properly allocable to
an amount described in any of the preceding subparagraphs.
``(4) Application of restrictions applicable to determining
taxable income.--Net business income or loss shall be
appropriately adjusted so as only to take into account any
amount of income, gain, deduction, or loss to the extent such
amount affects the determination of taxable income for the
taxable year.
``(5) Carryover business loss.--For purposes of subsection
(b)(2)(C), the carryover business loss determined for any
taxable year is the excess (if any) of the sum described in
subsection (b)(2) over the sum described in subsection (b)(1)
for such taxable year.
``(d) Passive and Active Business Activity.--For purposes
of this section--
``(1) Passive business activity.--The term `passive
business activity' means any passive activity as defined in
section 469(c) determined without regard to paragraphs (3)
and (6)(B) thereof.
``(2) Active business activity.--The term `active business
activity' means any business activity which is not a passive
business activity.
``(3) Business activity.--The term `business activity'
means any activity (within the meaning of section 469) which
involves the conduct of any trade or business.
``(e) Capital Percentage.--For purposes of this section--
``(1) In general.--Except as otherwise provided in this
section, the term `capital percentage' means 30 percent.
``(2) Increased percentage for capital-intensive business
activities.--In the case of a taxpayer who elects the
application of this paragraph with respect to any active
business activity (other than a specified service activity),
the capital percentage shall be equal to the applicable
percentage (as defined in subsection (f)) for each taxable
year with respect to which such election applies. Any
election made under this paragraph shall apply to the taxable
year for which such election is made and each of the 4
subsequent taxable years. Such election shall be made not
later than the due date (including extensions) for the return
of tax for the taxable year for which such election is made,
and, once made, may not be revoked.
``(3) Treatment of specified service activities.--
``(A) In general.--In the case of any active business
activity which is a specified service activity--
``(i) the capital percentage shall be 0 percent, and
``(ii) subsection (b)(2)(B) shall be applied by
substituting `0 percent' for `30 percent'.
``(B) Exception for capital-intensive specified service
activities.--If--
``(i) the taxpayer elects the application of this
subparagraph with respect to such activity for any taxable
year, and
``(ii) the applicable percentage (as defined in subsection
(f)) with respect to such activity for such taxable year is
at least 10 percent,
then subparagraph (A) shall not apply and the capital
percentage with respect to such activity shall be equal to
such applicable percentage.
``(C) Specified service activity.--The term `specified
service activity' means any activity involving the
performance of services described in section 1202(e)(3)(A),
including investing, trading, or dealing in securities (as
defined in section 475(c)(2)), partnership interests, or
commodities (as defined in section 475(e)(2)).
``(4) Reduction in capital percentage in certain cases.--
The capital percentage (determined after the application of
paragraphs (2) and (3)) with respect to any active business
activity shall not exceed 1 minus the quotient (not greater
than 1) of--
``(A) any amounts described in subsection (c)(2) which are
taken into account in determining the net business income
derived from such activity, divided by
``(B) such net business income.
``(f) Applicable Percentage.--For purposes of this
section--
``(1) In general.--The term `applicable percentage' means,
with respect to any active business activity for any taxable
year, the quotient (not greater than 1) of--
``(A) the specified return on capital with respect to such
activity for such taxable year, divided by
``(B) the taxpayer's net business income derived from such
activity for such taxable year.
``(2) Specified return on capital.--The term `specified
return on capital' means, with respect to any active business
activity referred to in paragraph (1), the excess of--
``(A) the product of--
``(i) the deemed rate of return for the taxable year,
multiplied by
``(ii) the asset balance with respect to such activity for
such taxable year, over
``(B) an amount equal to the interest which is paid or
accrued, and for which a deduction is allowed under this
chapter, with respect to such activity for such taxable year.
``(3) Deemed rate of return.--The term `deemed rate of
return' means, with respect to any taxable year, the Federal
short-term rate (determined under section 1274(d) for the
month in which or with which such taxable year ends) plus 7
percentage points.
``(4) Asset balance.--
``(A) In general.--The asset balance with respect to any
active business activity referred to in paragraph (1) for any
taxable year equals the taxpayer's adjusted basis of any
property described in section 1221(a)(2) which is used in
connection with such activity as of the end of the taxable
year (determined without regard to sections 168(k) and 179).
``(B) Application to activities carried on through
partnerships and s corporations.--In the case of any active
business activity carried on through a partnership or S
corporation, the taxpayer shall take into account such
taxpayer's distributive or pro rata share (as the case may
be) of the asset balance with respect to such activity as
determined with respect to such partnership or S corporation
under subparagraph (A) (applied by substituting `the
partnership's or S corporation's adjusted basis' for `the
taxpayer's adjusted basis').
``(g) Reduced Rate for Small Businesses With Net Active
Business Income.--
``(1) In general.--The tax imposed by section 1 shall be
reduced by 3 percent of the excess (if any) of--
``(A) the least of--
``(i) qualified active business income,
``(ii) taxable income reduced by net capital gain (as
defined in section 1(h)(11)(A)), or
``(iii) the 9-percent bracket threshold amount, over
``(B) the excess (if any) of taxable income over the
applicable threshold amount.
[[Page H9308]]
``(2) Phase-in of rate reduction.--In the case of any
taxable year beginning before January 1, 2022, paragraph (1)
shall be applied by substituting for `3 percent'--
``(A) in the case of any taxable year beginning after
December 31, 2017, and before January 1, 2020, `1 percent',
and
``(B) in the case of any taxable year beginning after
December 31, 2019, and before January 1, 2022, `2 percent'.
``(3) Qualified active business income.--For purposes of
this subsection, the term `qualified active business income'
means the excess (if any) of--
``(A) any net business income derived from any active
business activity, over
``(B) any net business loss derived from any active
business activity.
``(4) 9-percent bracket threshold amount.--For purposes of
this subsection, the term `9-percent bracket threshold
amount' means--
``(A) in the case of a joint return or surviving spouse,
$75,000,
``(B) in the case of an individual who is the head of a
household (as defined in section 2(b)), \3/4\ of the amount
in effect for the taxable year under subparagraph (A), and
``(C) in the case of any other individual, \1/2\ of the
amount in effect for the taxable year under subparagraph (A).
``(5) Applicable threshold amount.--For purposes of this
subsection, the term `applicable threshold amount' means--
``(A) in the case of a joint return or surviving spouse,
$150,000,
``(B) in the case of an individual who is the head of a
household (as defined in section 2(b)), \3/4\ of the amount
in effect for the taxable year under subparagraph (A), and
``(C) in the case of any other individual, \1/2\ of the
amount in effect for the taxable year under subparagraph (A).
``(6) Estates and trusts.--Paragraph (1) shall not apply to
any estate or trust.
``(7) Inflation adjustment.--In the case of any taxable
year beginning after 2018, the dollar amounts in paragraphs
(4)(A) and (5)(A) shall each be increased by an amount equal
to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
subsection (c)(2)(A) for the calendar year in which the
taxable year begins, determined by substituting `calendar
year 2017' for `calendar year 2016' in clause (ii) thereof.
If any increase determined under the preceding sentence is
not a multiple of $100, such increase shall be rounded to the
next lowest multiple of $100.
``(h) Regulations.--The Secretary may issue such
regulations or other guidance as may be necessary or
appropriate to carry out the purposes of this section,
including regulations or other guidance--
``(1) which ensures that no amount is taken into account
under subsection (f)(4) with respect to more than one
activity, and
``(2) which treats all specified service activities of the
taxpayer as a single business activity for purposes of this
section to the extent that such activities would be treated
as a single employer under subsection (a) or (b) of section
52 or subsection (m) or (o) of section 414.
``(i) References.--Any reference in this title to section 1
shall be treated as including a reference to this section
unless the context of such reference clearly indicates
otherwise.''.
(b) 25 Percent Rate for Certain Dividends of Real Estate
Investment Trusts and Cooperatives.--Section 1(h), as amended
by the preceding provisions of this Act, is amended by adding
at the end the following new paragraph:
``(13) 25 percent rate for certain dividends of real estate
investment trusts and cooperatives.--
``(A) In general.--For purposes of this subsection, net
capital gain (as defined in paragraph (11)) and unrecaptured
section 1250 gain (as defined in paragraph (6)) shall each be
increased by specified dividend income.
``(B) Specified dividend income.--For purposes of this
paragraph, the term `specified dividend income' means--
``(i) in the case of any dividend received from a real
estate investment trust, the portion of such dividend which
is neither--
``(I) a capital gain dividend (as defined in section
852(b)(3)), nor
``(II) taken into account in determining qualified dividend
income (as defined in paragraph (11)), and
``(ii) any dividend which is includible in gross income and
which is received from an organization or corporation
described in section 501(c)(12) or 1381(a).''.
(c) Clerical Amendment.--The table of sections for part I
of subchapter A of chapter 1 is amended by inserting after
the item relating to section 3 the following new item:
``Sec. 4. 25 percent maximum rate on business income of individuals.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
(e) Transition Rule.--In the case of any taxable year which
includes December 31, 2017, the amendment made by subsection
(a) shall apply with respect to such taxable year adjusted--
(1) so as to apply with respect to the rates of tax in
effect under section 1 of the Internal Revenue Code of 1986
with respect to such taxable year (and so as to achieve a 25
percent effective rate of tax on the business income
(determined without regard to paragraph (2)) in the same
manner as such amendment applies to taxable years beginning
after such date with respect to the rates of tax in effect
for such years), and
(2) by reducing the amount of the reduction in tax (as
otherwise determined under paragraph (1)) by the amount which
bears the same proportion to the amount of such reduction as
the number of days in the taxable year which are before
January 1, 2018, bears to the number of days in the entire
taxable year.
SEC. 1005. CONFORMING AMENDMENTS RELATED TO SIMPLIFICATION OF
INDIVIDUAL INCOME TAX RATES.
(a) Amendments Related to Modification of Inflation
Adjustment.--
(1) Section 32(b)(2)(B)(ii)(II) is amended by striking
``section 1(f)(3) for the calendar year in which the taxable
year begins determined by substituting `calendar year 2008'
for `calendar year 1992' in subparagraph (B) thereof'' and
inserting ``section 1(c)(2)(A) for the calendar year in which
the taxable year begins determined by substituting `calendar
year 2008' for `calendar year 2016' in clause (ii) thereof''.
(2) Section 32(j)(1)(B) is amended--
(A) in the matter preceding clause (i), by striking
``section 1(f)(3)'' and inserting ``section 1(c)(2)(A)'',
(B) in clause (i), by striking ``for `calendar year 1992'
in subparagraph (B) thereof'' and inserting ``for `calendar
year 2016' in clause (ii) thereof'', and
(C) in clause (ii), by striking ``for `calendar year 1992'
in subparagraph (B) of such section 1'' and inserting ``for
`calendar year 2016' in clause (ii) thereof''.
(3) Section 36B(b)(3)(A)(ii)(II) is amended by striking
``consumer price index'' and inserting ``C-CPI-U (as defined
in section 1(c))''.
(4) Section 41(e)(5)(C) is amended to read as follows:
``(C) Cost-of-living adjustment defined.--
``(i) In general.--The cost-of-living adjustment for any
calendar year is the cost-of-living adjustment for such
calendar year determined under section 1(c)(2)(A), by
substituting `calendar year 1987' for `calendar year 2016' in
clause (ii) thereof.
``(ii) Special rule where base period ends in a calendar
year other than 1983 or 1984.--If the base period of any
taxpayer does not end in 1983 or 1984, clause (i) shall be
applied by substituting the calendar year in which such base
period ends for 1987.''.
(5) Section 42(e)(3)(D)(ii) is amended by striking
``section 1(f)(3) for such calendar year by substituting
`calendar year 2008' for `calendar year 1992' in subparagraph
(B) thereof'' and inserting ``section 1(c)(2)(A) for such
calendar year by substituting `calendar year 2008' for
`calendar year 2016' in clause (ii) thereof''.
(6) Section 42(h)(3)(H)(i)(II) is amended by striking
``section 1(f)(3) for such calendar year by substituting
`calendar year 2001' for `calendar year 1992' in subparagraph
(B) thereof'' and inserting ``section 1(c)(2)(A) for such
calendar year by substituting `calendar year 2001' for
`calendar year 2016' in clause (ii) thereof''.
(7) Section 45R(d)(3)(B)(ii) is amended by striking
``section 1(f)(3) for the calendar year, determined by
substituting `calendar year 2012' for `calendar year 1992' in
subparagraph (B) thereof'' and inserting `` `section
1(c)(2)(A) for such calendar year, determined by substituting
``calendar year 2012'' for ``calendar year 2016'' in clause
(ii) thereof' ''.
(8) Section 125(i)(2) is amended--
(A) by striking ``section 1(f)(3) for the calendar year in
which the taxable year begins by substituting `calendar year
2012' for `calendar year 1992' in subparagraph (B) thereof''
in subparagraph (B) and inserting ``section 1(c)(2)(A) for
the calendar year in which the taxable year begins'', and
(B) by striking ``$50'' both places it appears in the last
sentence and inserting ``$100''.
(9) Section 162(o)(3) is amended by inserting ``as in
effect before enactment of the Tax Cuts and Jobs Act'' after
``section 1(f)(5)''.
(10) Section 220(g)(2) is amended by striking ``section
1(f)(3) for the calendar year in which the taxable year
begins by substituting `calendar year 1997' for `calendar
year 1992' in subparagraph (B) thereof'' and inserting
``section 1(c)(2)(A) for the calendar year in which the
taxable year begins, determined by substituting `calendar
year 1997' for `calendar year 2016' in clause (ii) thereof''.
(11) Section 223(g)(1) is amended by striking all that
follows subparagraph (A) and inserting the following:
``(B) the cost-of-living adjustment determined under
section 1(c)(2)(A) for the calendar year in which the taxable
year begins, determined--
``(i) by substituting for `calendar year 2016' in clause
(ii) thereof--
``(I) except as provided in clause (ii), `calendar year
1997', and
``(II) in the case of each dollar amount in subsection
(c)(2)(A), `calendar year 2003', and
``(ii) by substituting `March 31' for `August 31' in
paragraphs (5)(B) and (6)(B) of section 1(c).
The Secretary shall publish the dollar amounts as adjusted
under this subsection for taxable years beginning in any
calendar year no later than June 1 of the preceding calendar
year.''.
(12) Section 430(c)(7)(D)(vii)(II) is amended by striking
``section 1(f)(3) for the calendar year, determined by
substituting `calendar year 2009' for `calendar year 1992' in
subparagraph (B) thereof'' and inserting ``section 1(c)(2)(A)
for the calendar year, determined by substituting `calendar
year 2009' for `calendar year 2016' in clause (ii) thereof''.
(13) Section 512(d)(2)(B) is amended by striking ``section
1(f)(3) for the calendar year in which the taxable year
begins, by substituting `calendar year 1994' for `calendar
year 1992' in subparagraph (B) thereof''and inserting
``section 1(c)(2)(A) for the calendar year in which the
taxable year begins, determined by substituting `calendar
year 1994' for `calendar year 2016' in clause (ii) thereof''.
(14) Section 513(h)(2)(C)(ii) is amended by striking
``section 1(f)(3) for the calendar year in which the taxable
year begins by substituting `calendar year 1987' for
`calendar year 1992' in subparagraph (B) thereof'' and
inserting ``section 1(c)(2)(A) for the calendar year in which
[[Page H9309]]
the taxable year begins, determined by substituting `calendar
year 1987' for `calendar year 2016' in clause (ii) thereof''.
(15) Section 831(b)(2)(D)(ii) is amended by striking
``section 1(f)(3) for such calendar year by substituting
`calendar year 2013' for `calendar year 1992' in subparagraph
(B) thereof'' and inserting ``section 1(c)(2)(A) for such
calendar year by substituting `calendar year 2013' for
`calendar year 2016' in clause (ii) thereof''.
(16) Section 877A(a)(3)(B)(i)(II) is amended by striking
``section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting `calendar year 2007' for
`calendar year 1992' in subparagraph (B) thereof'' and
inserting ``section 1(c)(2)(A) for the calendar year in which
the taxable year begins, determined by substituting `calendar
year 2007' for `calendar year 2016' in clause (ii) thereof''.
(17) Section 911(b)(2)(D)(ii)(II) is amended by striking
``section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `2004' for `1992' in
subparagraph (B) thereof'' and inserting ``section 1(c)(2)(A)
for the calendar year in which the taxable year begins,
determined by substituting `calendar year 2004' for `calendar
year 2016' in clause (ii) thereof''.
(18) Section 1274A(d)(2) is amended to read as follows:
``(2) Inflation adjustment.--
``(A) In general.--In the case of any debt instrument
arising out of a sale or exchange during any calendar year
after 2018, each adjusted dollar amount shall be increased by
an amount equal to--
``(i) such adjusted dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(c)(2)(A) for such calendar year, determined by
substituting `calendar year 2017' for `calendar year 2016' in
clause (ii) thereof.
``(B) Adjusted dollar amounts.--For purposes of this
paragraph, the term `adjusted dollar amount' means the dollar
amounts in subsections (b) and (c), in each case as in effect
for calendar year 2018.
``(C) Rounding.--Any increase under subparagraph (A) shall
be rounded to the nearest multiple of $100.''.
(19) Section 2010(c)(3)(B)(ii) is amended by striking
``section 1(f)(3) for such calendar year by substituting
`calendar year 2010' for `calendar year 1992' in subparagraph
(B) thereof'' and inserting ``section 1(c)(2)(A) for such
calendar year, determined by substituting `calendar year
2010' for `calendar year 2016' in clause (ii) thereof''.
(20) Section 2032A(a)(3)(B) is amended by striking
``section 1(f)(3) for such calendar year by substituting
`calendar year 1997' for `calendar year 1992' in subparagraph
(B) thereof'' and inserting ``section 1(c)(2)(A) for such
calendar year, determined by substituting `calendar year
1997' for `calendar year 2016' in clause (ii) thereof''.
(21) Section 2503(b)(2)(B) is amended by striking ``section
1(f)(3) for such calendar year by substituting `calendar year
1997' for `calendar year 1992' in subparagraph (B) thereof''
and inserting ``section 1(c)(2)(A) for the calendar year,
determined by substituting `calendar year 1997' for `calendar
year 2016' in clause (ii) thereof''.
(22) Section 4161(b)(2)(C)(i)(II) is amended by striking
``section 1(f)(3) for such calendar year, determined by
substituting `2004' for `1992' in subparagraph (B) thereof''
and inserting ``section 1(c)(2)(A) for such calendar year,
determined by substituting `calendar year 2004' for `calendar
year 2016' in clause (ii) thereof''.
(23) Section 4261(e)(4)(A)(ii) is amended by striking
``section 1(f)(3) for such calendar year by substituting the
year before the last nonindexed year for `calendar year 1992'
in subparagraph (B) thereof'' and inserting ``section
1(c)(2)(A) for such calendar year, determined by substituting
the year before the last nonindexed year for `calendar year
2016' in clause (ii) thereof''.
(24) Section 4980I(b)(3)(C)(v)(II) is amended--
(A) by striking ``section 1(f)(3)'' and inserting ``section
1(c)(2)(A)'',
(B) by striking ``subparagraph (B)'' and inserting ``clause
(ii)'', and
(C) by striking ``1992'' and inserting ``2016''.
(25) Section 5000A(c)(3)(D)(ii) is amended--
(A) by striking ``section 1(f)(3)'' and inserting ``section
1(c)(2)(A)'',
(B) by striking ``subparagraph (B)'' and inserting ``clause
(ii)'', and
(C) by striking ``1992'' and inserting ``2016''.
(26) Section 6039F(d) is amended by striking ``section
1(f)(3), except that subparagraph (B) thereof'' and inserting
``section 1(c)(2)(A), except that clause (ii) thereof''.
(27) Section 6323(i)(4)(B) is amended by striking ``section
1(f)(3) for the calendar year, determined by substituting
`calendar year 1996' for `calendar year 1992' in subparagraph
(B) thereof'' and inserting ``section 1(c)(2)(A) for the
calendar year, determined by substituting `calendar year
1996' for `calendar year 2016' in clause (ii) thereof''.
(28) Section 6334(g)(1)(B) is amended by striking ``section
1(f)(3) for such calendar year, by substituting `calendar
year 1998' for `calendar year 1992' in subparagraph (B)
thereof'' and inserting ``section 1(c)(2)(A) for such
calendar year, determined by substituting `calendar year
1999' for `calendar year 2016' in clause (ii) thereof''.
(29) Section 6601(j)(3)(B) is amended by striking ``section
1(f)(3) for such calendar year by substituting `calendar year
1997' for `calendar year 1992' in subparagraph (B) thereof''
and inserting ``section 1(c)(2)(A) for such calendar year by
substituting `calendar year 1997' for `calendar year 2016' in
clause (ii) thereof''.
(30) Section 6651(i)(1) is amended by striking ``section
1(f)(3) determined by substituting `calendar year 2013' for
`calendar year 1992' in subparagraph (B) thereof'' and
inserting ``section 1(c)(2)(A) determined by substituting
`calendar year 2013' for `calendar year 2016' in clause (ii)
thereof''.
(31) Section 6721(f)(1) is amended--
(A) by striking ``section 1(f)(3)'' and inserting ``section
1(c)(2)(A)'',
(B) by striking ``subparagraph (B)'' and inserting ``clause
(ii)'', and
(C) by striking ``1992'' and inserting ``2016''.
(32) Section 6722(f)(1) is amended--
(A) by striking ``section 1(f)(3)'' and inserting ``section
1(c)(2)(A)'',
(B) by striking ``subparagraph (B)'' and inserting ``clause
(ii)'', and
(C) by striking ``1992'' and inserting ``2016''.
(33) Section 6652(c)(7)(A) is amended by striking ``section
1(f)(3) determined by substituting `calendar year 2013' for
`calendar year 1992' in subparagraph (B) thereof'' and
inserting ``section 1(c)(2)(A) determined by substituting
`calendar year 2013' for `calendar year 2016' in clause (ii)
thereof''.
(34) Section 6695(h)(1) is amended by striking ``section
1(f)(3) determined by substituting `calendar year 2013' for
`calendar year 1992' in subparagraph (B) thereof'' and
inserting ``section 1(c)(2)(A) determined by substituting
`calendar year 2013' for `calendar year 2016' in clause (ii)
thereof''.
(35) Section 6698(e)(1) is amended by striking ``section
1(f)(3) determined by substituting `calendar year 2013' for
`calendar year 1992' in subparagraph (B) thereof'' and
inserting ``section 1(c)(2)(A) determined by substituting
`calendar year 2013' for `calendar year 2016' in clause (ii)
thereof''.
(36) Section 6699(e)(1) is amended by striking ``section
1(f)(3) determined by substituting `calendar year 2013' for
`calendar year 1992' in subparagraph (B) thereof'' and
inserting ``section 1(c)(2)(A) determined by substituting
`calendar year 2013' for `calendar year 2016' in clause (ii)
thereof''.
(37) Section 7345(f)(2) is amended by striking ``section
1(f)(3) for the calendar year, determined by substituting
`calendar year 2015' for `calendar year 1992' in subparagraph
(B) thereof'' and inserting ``section 1(c)(2)(A) for the
calendar year, determined by substituting `calendar year
2015' for `calendar year 2016' in clause (ii) thereof''.
(38) Section 7430(c)(1) is amended by striking ``section
1(f)(3) for such calendar year, by substituting `calendar
year 1995' for `calendar year 1992' in subparagraph (B)
thereof'' in the flush text at the end and inserting
``section 1(c)(2)(A) for such calendar year, determined by
substituting `calendar year 1995' for `calendar year 2016' in
clause (ii) thereof''.
(39) Section 7872(g)(5) is amended to read as follows:
``(5) Inflation adjustment.--
``(A) In general.--In the case of any loan made during any
calendar year after 2018 to which paragraph (1) applies, the
adjusted dollar amount shall be increased by an amount equal
to--
``(i) such adjusted dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(c)(2)(A) for such calendar year, determined by
substituting `calendar year 2017' for `calendar year 2016' in
clause (ii) thereof.
``(B) Adjusted dollar amount.--For purposes of this
paragraph, the term `adjusted dollar amount' means the dollar
amount in paragraph (2) as in effect for calendar year 2018.
``(C) Rounding.--Any increase under subparagraph (A) shall
be rounded to the nearest multiple of $100.''.
(40) Section 219(b)(5)(C)(i)(II) is amended by striking
``section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2007'
for `calendar year 1992' in subparagraph (B) thereof'' and
inserting ``section 1(c)(2)(A) for the calendar year in which
the taxable year begins, determined by substituting `calendar
year 2007' for `calendar year 2016' in clause (ii) thereof''.
(41) Section 219(g)(8)(B) is amended by striking ``section
1(f)(3) for the calendar year in which the taxable year
begins, determined by substituting `calendar year 2005' for
`calendar year 1992' in subparagraph (B) thereof'' and
inserting ``section 1(c)(2)(A) for the calendar year in which
the taxable year begins, determined by substituting `calendar
year 2005' for `calendar year 2016' in clause (ii) thereof''.
(b) Other Conforming Amendments.--
(1) Section 36B(b)(3)(B)(ii)(I)(aa) is amended to read as
follows:
``(aa) who is described in section 1(b)(1)(B) and who does
not have any dependents for the taxable year,''.
(2) Section 486B(b)(1) is amended--
(A) by striking ``maximum rate in effect'' and inserting
``highest rate specified'', and
(B) by striking ``section 1(e)'' and inserting ``section
1''.
(3) Section 511(b)(1) is amended by striking ``section
1(e)'' and inserting ``section 1''.
(4) Section 641(a) is amended by striking ``section 1(e)
shall apply to the taxable income'' and inserting ``section 1
shall apply to the taxable income''.
(5) Section 641(c)(2)(A) is amended to read as follows:
``(A) Except to the extent provided in section 1(h), the
rate of tax shall be treated as being the highest rate of tax
set forth in section 1(a).''.
(6) Section 646(b) is amended to read as follows:
``(b) Taxation of Income of Trust.--Except as provided in
subsection (f)(1)(B)(ii), there is hereby imposed on the
taxable income of an electing Settlement Trust a tax at the
rate specified in section 1(a)(1). Such tax shall be in lieu
of the income tax otherwise imposed by this chapter on such
income.''.
(7) Section 685(c) is amended by striking ``Section 1(e)''
and inserting ``Section 1''.
(8) Section 904(b)(3)(E)(ii)(I) is amended by striking
``set forth in subsection (a), (b), (c), (d),
[[Page H9310]]
or (e) of section 1 (whichever applies)'' and inserting ``the
highest rate of tax specified in section 1''.
(9) Section 1398(c)(2) is amended by striking ``subsection
(d) of''.
(10) Section 3402(p)(1)(B) is amended by striking ``any
percentage applicable to any of the 3 lowest income brackets
in the table under section 1(c),'' and inserting ``12
percent, 25 percent,''.
(11) Section 3402(q)(1) is amended by striking ``the
product of third lowest rate of tax applicable under section
1(c) and'' and inserting ``25 percent of''.
(12) Section 3402(r)(3) is amended by striking ``the amount
of tax which would be imposed by section 1(c) (determined
without regard to any rate of tax in excess of the fourth
lowest rate of tax applicable under section 1(c)) on an
amount of taxable income equal to'' and inserting ``an amount
equal to the product of 25 percent multiplied by''.
(13) Section 3406(a)(1) is amended by striking ``the
product of the fourth lowest rate of tax applicable under
section 1(c) and'' and inserting ``25 percent of''.
(14) Section 6103(e)(1)(A)(iii) is amended by inserting
``(as in effect on the day before the date of the enactment
of the Tax Cuts and Jobs Act)'' after ``section 1(g)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
Subtitle B--Simplification and Reform of Family and Individual Tax
Credits
SEC. 1101. ENHANCEMENT OF CHILD TAX CREDIT AND NEW FAMILY TAX
CREDIT.
(a) Increase in Credit Amount and Addition of Other
Dependents.--
(1) In General.--Section 24(a) is amended to read as
follows:
``(a) Allowance of Credit.--There shall be allowed as a
credit against the tax imposed by this chapter for the
taxable year an amount equal to the sum of--
``(1) with respect to each qualifying child of the
taxpayer, $1,600, and
``(2) for taxable years beginning before January 1, 2023,
with respect to the taxpayer (each spouse in the case of a
joint return) and each dependent of the taxpayer to whom
paragraph (1) does not apply, $300.''.
(2) Conforming Amendments.--
(A) Section 24(c) is amended--
(i) by redesignating paragraphs (1) and (2) as paragraphs
(2) and (3), respectively,
(ii) by striking ``152(c)'' in paragraph (2) (as so
redesignated) and inserting ``7706(c)'',
(iii) by inserting before paragraph (2) (as so
redesignated) the following new paragraph:
``(1) Dependent.--
``(A) In general.--The term `dependent' shall have the
meaning given such term by section 7706.
``(B) Certain individuals not treated as dependents.--In
the case of an individual with respect to whom a credit under
this section is allowable to another taxpayer for a taxable
year beginning in the calendar year in which the individual's
taxable year begins, the amount applicable to such individual
under subsection (a) for such individual's taxable year shall
be zero.'',
(iv) in paragraph (3) (as so redesignated)--
(I) by striking ``term `qualifying child' '' and inserting
``terms `qualifying child' and `dependent' '', and
(II) by striking ``152(b)(3)'' and inserting
``7706(b)(3)'', and
(v) in the heading by striking ``Qualifying'' and inserting
``Dependent; Qualifying''.
(B) The heading for section 24 is amended by inserting
``and family'' after ``child''.
(C) The table of sections for subpart A of part IV of
subchapter A of chapter 1 is amended by striking the item
relating to section 24 and inserting the following new item:
``Sec. 24. Child and family tax credit.''.
(b) Elimination of Marriage Penalty.--Section 24(b)(2) is
amended--
(1) by striking ``$110,000'' in subparagraph (A) and
inserting ``$230,000'',
(2) by inserting ``and'' at the end of subparagraph (A),
(3) by striking ``$75,000 in the case of an individual who
is not married'' and all that follows through the period at
the end and inserting ``one-half of the amount in effect
under subparagraph (A) for the taxable year in the case of
any other individual.''.
(c) Credit Refundable up to $1,000 Per Child.--
(1) In General.--Section 24(d)(1)(A) is amended by striking
all that follows ``under this section'' and inserting the
following: ``determined--
``(i) without regard to this subsection and the limitation
under section 26(a),
``(ii) without regard to subsection (a)(2), and
``(iii) by substituting `$1,000' for `$1,600' in subsection
(a)(1), or''.
(2) Inflation Adjustment.--Section 24(d) is amended by
inserting after paragraph (2) the following new paragraph:
``(3) Inflation adjustment.--In the case of any taxable
year beginning in a calendar year after 2017, the $1,000
amount in paragraph (1)(A)(iii) shall be increased by an
amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment under section
1(c)(2)(A) for such calendar year.
Any increase determined under the preceding sentence shall be
rounded to the next highest multiple of $100 and shall not
exceed the amount in effect under subsection (a)(2).''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1102. REPEAL OF NONREFUNDABLE CREDITS.
(a) Repeal of Section 22.--
(1) In general.--Subpart A of part IV of subchapter A of
chapter 1 is amended by striking section 22 (and by striking
the item relating to such section in the table of sections
for such subpart).
(2) Conforming amendment.--
(A) Section 86(f) is amended by striking paragraph (1) and
by redesignating paragraphs (2), (3), and (4) as paragraphs
(1), (2), and (3), respectively.
(B)(i) Subsections (c)(3)(B) and (d)(4)(A) of section 7706,
as redesignated by this Act, are each amended by striking
``(as defined in section 22(e)(3)''.
(ii) Section 7706(f), as redesignated by this Act, is
amended by redesignating paragraph (7) as paragraph (8) and
by inserting after paragraph (6) the following new paragraph:
``(7) Permanent and total disability defined.--An
individual is permanently and totally disabled if he is
unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period
of not less than 12 months. An individual shall not be
considered to be permanently and totally disabled unless he
furnishes proof of the existence thereof in such form and
manner, and at such times, as the Secretary may require.''.
(iii) Section 415(c)(3)(C)(i) is amended by striking
``22(e)(3)'' and inserting ``7706(f)(7)''.
(iv) Section 422(c)(6) is amended by striking ``22(e)(3)''
and inserting ``7706(f)(7)''.
(b) Termination of Section 25.--Section 25, as amended by
section 3601, is amended by adding at the end the following
new subsection:
``(k) Termination.--No credit shall be allowed under this
section with respect to any mortgage credit certificate
issued after December 31, 2017.''.
(c) Repeal of Section 30D.--
(1) In general.--Subpart B of part IV of subchapter A of
chapter 1 is amended by striking section 30D (and by striking
the item relating to such section in the table of sections
for such subpart).
(2) Conforming amendments.--
(A) Section 38(b) is amended by striking paragraph (35).
(B) Section 1016(a) is amended by striking paragraph (37).
(C) Section 6501(m) is amended by striking ``30D(e)(4),''.
(d) Effective Date.--
(1) In general.--Except as provided in paragraphs (2) and
(3), the amendments made by this section shall apply to
taxable years beginning after December 31, 2017.
(2) Subsection (b).--The amendment made by subsection (c)
shall apply to taxable years ending after December 31, 2017.
(3) Subsection (c).--The amendments made by subsection (d)
shall apply to vehicles placed in service in taxable years
beginning after December 31, 2017.
SEC. 1103. REFUNDABLE CREDIT PROGRAM INTEGRITY.
(a) Identification Requirements for Child and Family Tax
Credit.--
(1) In general.--Section 24(e) is amended to read as
follows:
``(e) Identification Requirements.--
``(1) Requirements for qualifying child.--No credit shall
be allowed under this section to a taxpayer with respect to
any qualifying child unless the taxpayer includes the name
and social security number of such qualifying child on the
return of tax for the taxable year. The preceding sentence
shall not prevent a qualifying child from being treated as a
dependent described in subsection (a)(2).
``(2) Other identification requirements.--No credit shall
be allowed under this section with respect to any individual
unless the taxpayer identification number of such individual
is included on the return of tax for the taxable year and
such identifying number was issued before the due date for
filing the return for the taxable year.
``(3) Social security number.--For purposes of this
subsection, the term `social security number' means a social
security number issued by the Social Security Administration
(but only if the social security number is issued to a
citizen of the United States or pursuant to subclause (I) (or
that portion of subclause (III) that relates to subclause
(I)) of section 205(c)(2)(B)(i) of the Social Security
Act)).''.
(2) Omissions treated as mathematical or clerical error.--
(A) In general.--Section 6213(g)(2)(I) is amended to read
as follows:
``(I) an omission of a correct social security number, or a
correct TIN, required under section 24(e) (relating to child
tax credit), to be included on a return,''.
(b) Social Security Number Must Be Provided.--
(1) In general.--Section 25A(f)(1)(A), as amended by
section 1201 of this Act, is amended by striking ``taxpayer
identification number'' each place it appears and inserting
``social security number''.
(2) Omission treated as mathematical or clerical error.--
Section 6213(g)(2)(J) is amended by striking ``TIN'' and
inserting ``social security number and employer
identification number''.
(c) Individuals Prohibited From Engaging in Employment in
United States Not Eligible for Earned Income Tax Credit.--
Section 32(m) is amended--
(1) by striking ``(other than:'' and all that follows
through ``of the Social Security Act)'', and
(2) by inserting before the period at the end the
following: ``, but only if, in the case of subsection
(c)(1)(E), the social security number is issued to a citizen
of the United States or pursuant to subclause (I) (or that
portion of subclause (III) that relates to subclause (I)) of
section 205(c)(2)(B)(i) of the Social Security Act''.
[[Page H9311]]
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1104. PROCEDURES TO REDUCE IMPROPER CLAIMS OF EARNED
INCOME CREDIT.
(a) Clarification Regarding Determination of Self-
employment Income Which Is Treated as Earned Income.--Section
32(c)(2)(B) is amended by striking ``and'' at the end of
clause (v), by striking the period at the end of clause (vi)
and inserting ``, and'', and by adding at the end the
following new clause:
``(vii) in determining the taxpayer's net earnings from
self-employment under subparagraph (A)(ii) there shall not
fail to be taken into account any deduction which is
allowable to the taxpayer under this subtitle.''.
(b) Required Quarterly Reporting of Wages of Employees.--
Section 6011 is amended by adding at the end the following
new subsection:
``(i) Employer Reporting of Wages.--Every person required
to deduct and withhold from an employee a tax under section
3101 or 3402 shall include on each return or statement
submitted with respect to such tax, the name and address of
such employee and the amount of wages for such employee on
which such tax was withheld.''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
ending after the date of the enactment of this Act.
(2) Reporting.--The Secretary of the Treasury, or his
designee, may delay the application of the amendment made by
subsection (b) for such period as such Secretary (or
designee) determines to be reasonable to allow persons
adequate time to modify electronic (or other) systems to
permit such person to comply with the requirements of such
amendment.
SEC. 1105. CERTAIN INCOME DISALLOWED FOR PURPOSES OF THE
EARNED INCOME TAX CREDIT.
(a) Substantiation Requirement.--Section 32 is amended by
adding at the end the following new subsection:
``(n) Inconsistent Income Reporting.--If the earned income
of a taxpayer claimed on a return for purposes of this
section is not substantiated by statements or returns under
sections 6051, 6052, 6041(a), or 6050W with respect to such
taxpayer, the Secretary may require such taxpayer to provide
books and records to substantiate such income, including for
the purpose of preventing fraud.''.
(b) Exclusion of Unsubstantiated Amount From Earned
Income.--Section 32(c)(2) is amended by adding at the end the
following new subparagraph:
``(C) Exclusion.--In the case of a taxpayer with respect to
which there is an inconsistency described in subsection (n)
who fails to substantiate such inconsistency to the
satisfaction of the Secretary, the term `earned income' shall
not include amounts to the extent of such inconsistency.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
Subtitle C--Simplification and Reform of Education Incentives
SEC. 1201. AMERICAN OPPORTUNITY TAX CREDIT.
(a) In General.--Section 25A is amended to read as follows:
``SEC. 25A. AMERICAN OPPORTUNITY TAX CREDIT.
``(a) In General.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this
chapter for the taxable year an amount equal to the sum of--
``(1) 100 percent of so much of the qualified tuition and
related expenses paid by the taxpayer during the taxable year
(for education furnished to any eligible student for whom an
election is in effect under this section for such taxable
year during any academic period beginning in such taxable
year) as does not exceed $2,000, plus
``(2) 25 percent of so much of such expenses so paid as
exceeds the dollar amount in effect under paragraph (1) but
does not exceed twice such dollar amount.
``(b) Portion of Credit Refundable.--40 percent of the
credit allowable under subsection (a)(1) (determined without
regard to this subsection and section 26(a) and after
application of all other provisions of this section) shall be
treated as a credit allowable under subpart C (and not under
this part). The preceding sentence shall not apply to any
taxpayer for any taxable year if such taxpayer is a child to
whom section 1(d) applies for such taxable year.
``(c) Limitation Based on Modified Adjusted Gross Income.--
``(1) In general.--The amount allowable as a credit under
subsection (a) for any taxable year shall be reduced (but not
below zero) by an amount which bears the same ratio to the
amount so allowable (determined without regard to this
subsection and subsection (b) but after application of all
other provisions of this section) as--
``(A) the excess of--
``(i) the taxpayer's modified adjusted gross income for
such taxable year, over
``(ii) $80,000 (twice such amount in the case of a joint
return), bears to
``(B) $10,000 (twice such amount in the case of a joint
return).
``(2) Modified adjusted gross income.--For purposes of this
subsection, the term `modified adjusted gross income' means
the adjusted gross income of the taxpayer for the taxable
year increased by any amount excluded from gross income under
section 911, 931, or 933.
``(d) Other Limitations.--
``(1) Credit allowed only for 5 taxable years.--An election
to have this section apply may not be made for any taxable
year if such an election (by the taxpayer or any other
individual) is in effect with respect to such student for any
5 prior taxable years.
``(2) Credit allowed only for first 5 years of
postsecondary education.--
``(A) In general.--No credit shall be allowed under
subsection (a) for a taxable year with respect to the
qualified tuition and related expenses of an eligible student
if the student has completed (before the beginning of such
taxable year) the first 5 years of postsecondary education at
an eligible educational institution.
``(B) Fifth year limitations.--In the case of an eligible
student with respect to whom an election has been in effect
for 4 preceding taxable years for purposes of the fifth
taxable year--
``(i) the amount of the credit allowed under this section
for the taxable year shall not exceed an amount equal to 50
percent of the credit otherwise determined with respect to
such student under this section (without regard to this
subparagraph), and
``(ii) the amount of the credit determined under subsection
(b) and allowable under subpart C shall not exceed an amount
equal to 40 percent of the amount determined with respect to
such student under clause (i).
``(e) Definitions.--For purposes of this section--
``(1) Eligible student.-- The term `eligible student'
means, with respect to any academic period, a student who--
``(A) meets the requirements of section 484(a)(1) of the
Higher Education Act of 1965 (20 U.S.C. 1091(a)(1)), as in
effect on August 5, 1997, and
``(B) is carrying at least \1/2\ the normal full-time work
load for the course of study the student is pursuing.
``(2) Qualified tuition and related expenses.--
``(A) In general.--The term `qualified tuition and related
expenses' means tuition, fees, and course materials, required
for enrollment or attendance of--
``(i) the taxpayer,
``(ii) the taxpayer's spouse, or
``(iii) any dependent of the taxpayer,
at an eligible educational institution for courses of
instruction of such individual at such institution.
``(B) Exception for education involving sports, etc.--Such
term does not include expenses with respect to any course or
other education involving sports, games, or hobbies, unless
such course or other education is part of the individual's
degree program.
``(C) Exception for nonacademic fees.--Such term does not
include student activity fees, athletic fees, insurance
expenses, or other expenses unrelated to an individual's
academic course of instruction.
``(3) Eligible educational institution.--The term `eligible
educational institution' means an institution--
``(A) which is described in section 481 of the Higher
Education Act of 1965 (20 U.S.C. 1088), as in effect on
August 5, 1997, and
``(B) which is eligible to participate in a program under
title IV of such Act.
``(f) Special Rules.--
``(1) Identification requirements.--
``(A) Student.--No credit shall be allowed under subsection
(a) to a taxpayer with respect to the qualified tuition and
related expenses of an individual unless the taxpayer
includes the name and taxpayer identification number of such
individual on the return of tax for the taxable year, and
such taxpayer identification number was issued on or before
the due date for filing such return.
``(B) Taxpayer.--No credit shall be allowed under this
section if the identifying number of the taxpayer was issued
after the due date for filing the return for the taxable
year.
``(C) Institution.--No credit shall be allowed under this
section unless the taxpayer includes the employer
identification number of any institution to which qualified
tuition and related expenses were paid with respect to the
individual.
``(2) Adjustment for certain scholarships, etc.--The amount
of qualified tuition and related expenses otherwise taken
into account under subsection (a) with respect to an
individual for an academic period shall be reduced (before
the application of subsection (c)) by the sum of any amounts
paid for the benefit of such individual which are allocable
to such period as--
``(A) a qualified scholarship which is excludable from
gross income under section 117,
``(B) an educational assistance allowance under chapter 30,
31, 32, 34, or 35 of title 38, United States Code, or under
chapter 1606 of title 10, United States Code, and
``(C) a payment (other than a gift, bequest, devise, or
inheritance within the meaning of section 102(a)) for such
individual's educational expenses, or attributable to such
individual's enrollment at an eligible educational
institution, which is excludable from gross income under any
law of the United States.
``(3) Treatment of expenses paid by dependent.--If an
individual is a dependent of another taxpayer for a taxable
year beginning in the calendar year in which such individuals
taxable year begins--
``(A) no credit shall be allowed under subsection (a) to
such individual for such individual's taxable year, and
``(B) qualified tuition and related expenses paid by such
individual during such individual's taxable year shall be
treated for purposes of this section as paid by such other
taxpayer.
``(4) Treatment of certain prepayments.--If qualified
tuition and related expenses are paid by the taxpayer during
a taxable year for an academic period which begins during the
first 3 months following such taxable year, such academic
period shall be treated for purposes of this section as
beginning during such taxable year.
``(5) Denial of double benefit.--No credit shall be allowed
under this section for any
[[Page H9312]]
amount for which a deduction is allowed under any other
provision of this chapter.
``(6) No credit for married individuals filing separate
returns.--If the taxpayer is a married individual (within the
meaning of section 7703), this section shall apply only if
the taxpayer and the taxpayer's spouse file a joint return
for the taxable year.
``(7) Nonresident aliens.--If the taxpayer is a nonresident
alien individual for any portion of the taxable year, this
section shall apply only if such individual is treated as a
resident alien of the United States for purposes of this
chapter by reason of an election under subsection (g) or (h)
of section 6013.
``(8) Restrictions on taxpayers who improperly claimed
credit in prior year.--
``(A) Taxpayers making prior fraudulent or reckless
claims.--
``(i) In general.--No credit shall be allowed under this
section for any taxable year in the disallowance period.
``(ii) Disallowance period.--For purposes of clause (i),
the disallowance period is--
``(I) the period of 10 taxable years after the most recent
taxable year for which there was a final determination that
the taxpayer's claim of credit under this section was due to
fraud, and
``(II) the period of 2 taxable years after the most recent
taxable year for which there was a final determination that
the taxpayer's claim of credit under this section was due to
reckless or intentional disregard of rules and regulations
(but not due to fraud).
``(B) Taxpayers making improper prior claims.--In the case
of a taxpayer who is denied credit under this section for any
taxable year as a result of the deficiency procedures under
subchapter B of chapter 63, no credit shall be allowed under
this section for any subsequent taxable year unless the
taxpayer provides such information as the Secretary may
require to demonstrate eligibility for such credit.
``(g) Inflation Adjustment.--
``(1) In general.--In the case of a taxable year beginning
after 2018, the $80,000 amount in subsection (c)(1)(A)(ii)
shall each be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(c)(2)(A) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2017'
for `calendar year 2016' in clause (ii) thereof.
``(2) Rounding.--If any amount as adjusted under paragraph
(1) is not a multiple of $1,000, such amount shall be rounded
to the next lowest multiple of $1,000.
``(h) Regulations.--The Secretary may prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out this section, including regulations
providing for a recapture of the credit allowed under this
section in cases where there is a refund in a subsequent
taxable year of any amount which was taken into account in
determining the amount of such credit.''.
(b) Conforming Amendments.--
(1) Section 72(t)(7)(B) is amended by striking ``section
25A(g)(2)'' and inserting ``section 25A(f)(2)''.
(2) Section 529(c)(3)(B)(v)(I) is amended by striking
``section 25A(g)(2)'' and inserting ``section 25A(f)(2)''.
(3) Section 529(e)(3)(B)(i) is amended by striking
``section 25A(b)(3)'' and inserting ``section 25A(d)''.
(4) Section 530(d)(2)(C) is amended--
(A) by striking ``section 25A(g)(2)'' in clause (i)(I) and
inserting ``section 25A(f)(2)'', and
(B) by striking ``Hope and lifetime learning credits'' in
the heading and inserting ``American opportunity tax
credit''.
(5) Section 530(d)(4)(B)(iii) is amended by striking
``section 25A(g)(2)'' and inserting ``section 25A(d)(4)(B)''.
(6) Section 6050S(e) is amended by striking ``subsection
(g)(2)'' and inserting ``subsection (f)(2)''.
(7) Section 6211(b)(4)(A) is amended by striking
``subsection (i)(6)'' and inserting ``subsection (b)''.
(8) Section 6213(g)(2)(J) is amended by striking ``TIN
required under section 25A(g)(1)'' and inserting ``TIN, and
employer identification number, required under section
25A(f)(1)''.
(9) Section 6213(g)(2)(Q) is amended to read as follows:
``(Q) an omission of information required by section
25A(f)(8)(B) or an entry on the return claiming the credit
determined under section 25A(a) for a taxable year for which
the credit is disallowed under section 25A(f)(8)(A).''.
(10) Section 1004(c) of division B of the American Recovery
and Reinvestment Tax Act of 2009 is amended--
(A) in paragraph (1)--
(i) by striking ``section 25A(i)(6)'' each place it appears
and inserting ``section 25A(b)'', and
(ii) by striking ``with respect to taxable years beginning
after 2008 and before 2018'' each place it appears and
inserting ``with respect to each taxable year'',
(B) in paragraph (2), by striking ``Section 25A(i)(6)'' and
inserting ``Section 25A(b)'', and
(C) in paragraph (3)(C), by striking ``subsection (i)(6)''
and inserting ``subsection (b)''.
(11) The table of sections for subpart A of part IV of
subchapter A of chapter 1 is amended by striking the item
relating to section 25A and inserting the following new item:
``Sec. 25A. American opportunity tax credit.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1202. CONSOLIDATION OF EDUCATION SAVINGS RULES.
(a) No New Contributions to Coverdell Education Savings
Account.--Section 530(b)(1)(A) is amended to read as follows:
``(A) Except in the case of rollover contributions, no
contribution will be accepted after December 31, 2017.''.
(b) Limited Distribution Allowed for Elementary and
Secondary Tuition.--
(1) In general.--Section 529(c) is amended by adding at the
end the following new paragraph:
``(7) Treatment of elementary and secondary tuition.--Any
reference in this subsection to the term `qualified higher
education expense' shall include a reference to expenses for
tuition in connection with enrollment at an elementary or
secondary school.''.
(2) Limitation.--Section 529(e)(3)(A) is amended by adding
at the end the following: ``The amount of cash distributions
from all qualified tuition programs described in subsection
(b)(1)(A)(ii) with respect to a beneficiary during any
taxable year, shall, in the aggregate, include not more than
$10,000 in expenses for tuition incurred during the taxable
year in connection with the enrollment or attendance of the
beneficiary as an elementary or secondary school student at a
public, private, or religious school.''.
(c) Rollovers to Qualified Tuition Programs Permitted.--
Section 530(d)(5) is amended by inserting ``, or into (by
purchase or contribution) a qualified tuition program (as
defined in section 529),'' after ``into another Coverdell
education savings account''.
(d) Distributions From Qualified Tuition Programs for
Certain Expenses Associated With Registered Apprenticeship
Programs.--Section 529(e)(3) is amended by adding at the end
the following new subparagraph:
``(C) Certain expenses associated with registered
apprenticeship programs.--The term `qualified higher
education expenses' shall include books, supplies, and
equipment required for the enrollment or attendance of a
designated beneficiary in an apprenticeship program
registered and certified with the Secretary of Labor under
section 1 of the National Apprenticeship Act (29 U.S.C.
50).''.
(e) Unborn Children Allowed as Account Beneficiaries.--
Section 529(e) is amended by adding at the end the following
new paragraph:
``(6) Treatment of unborn children.--
``(A) In general.--Nothing shall prevent an unborn child
from being treated as a designated beneficiary or an
individual under this section.
``(B) Unborn child.--For purposes of this paragraph--
``(i) In general.--The term `unborn child' means a child in
utero.
``(ii) Child in utero.--The term `child in utero' means a
member of the species homo sapiens, at any stage of
development, who is carried in the womb.''.
(f) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to contributions made after December 31, 2017.
(2) Rollovers to qualified tuition programs.--The
amendments made by subsection (b) shall apply to
distributions after December 31, 2017.
SEC. 1203. REFORMS TO DISCHARGE OF CERTAIN STUDENT LOAN
INDEBTEDNESS.
(a) Treatment of Student Loans Discharged on Account of
Death or Disability.--Section 108(f) is amended by adding at
the end the following new paragraph:
``(5) Discharges on account of death or disability.--
``(A) In general.--In the case of an individual, gross
income does not include any amount which (but for this
subsection) would be includible in gross income by reasons of
the discharge (in whole or in part) of any loan described in
subparagraph (B) if such discharge was--
``(i) pursuant to subsection (a) or (d) of section 437 of
the Higher Education Act of 1965 or the parallel benefit
under part D of title IV of such Act (relating to the
repayment of loan liability),
``(ii) pursuant to section 464(c)(1)(F) of such Act, or
``(iii) otherwise discharged on account of the death or
total and permanent disability of the student.
``(B) Loans described.--A loan is described in this
subparagraph if such loan is--
``(i) a student loan (as defined in paragraph (2)), or
``(ii) a private education loan (as defined in section
140(7) of the Consumer Credit Protection Act (15 U.S.C.
1650(7))).''.
(b) Exclusion From Gross Income for Payments Made Under
Indian Health Service Loan Repayment Program.--
(1) In general.--Section 108(f)(4) is amended by inserting
``under section 108 of the Indian Health Care Improvement
Act,'' after ``338I of such Act,''.
(2) Clerical amendment.--The heading for section 108(f)(4)
is amended by striking ``and certain'' and inserting ``,
indian health service loan repayment program, and certain''.
(c) Effective Dates.--
(1) Subsection (a).--The amendment made by subsection
(a)(1) shall apply to discharges of indebtedness after
December 31, 2017.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to amounts received in taxable years beginning
after December 31, 2017.
SEC. 1204. REPEAL OF OTHER PROVISIONS RELATING TO EDUCATION.
(a) In General.--Subchapter B of chapter 1 is amended--
(1) in part VII by striking sections 221 and 222 (and by
striking the items relating to such sections in the table of
sections for such part),
(2) in part VII by striking sections 135 and 127 (and by
striking the items relating to such sections in the table of
sections for such part), and
(3) by striking subsection (d) of section 117.
(b) Conforming Amendment Relating to Section 221.--
(1) Section 62(a) is amended by striking paragraph (17).
[[Page H9313]]
(2) Section 74(d) is amended by striking ``221,''.
(3) Section 86(b)(2)(A) is amended by striking ``221,''.
(4) Section 219(g)(3)(A)(ii) is amended by striking
``221,''.
(5) Section 163(h)(2) is amended by striking subparagraph
(F).
(6) Section 6050S(a) is amended--
(A) by inserting ``or'' at the end of paragraph (1),
(B) by striking ``or'' at the end of paragraph (2), and
(C) by striking paragraph (3).
(7) Section 6050S(e) is amended by striking all that
follows ``thereof)'' and inserting a period.
(c) Conforming Amendments Related to Section 222.--
(1) Section 62(a) is amended by striking paragraph (18).
(2) Section 74(d)(2)(B) is amended by striking ``222,''.
(3) Section 86(b)(2)(A) is amended by striking ``222,''.
(4) Section 219(g)(3)(A)(ii) is amended by striking
``222,''.
(d) Conforming Amendments Relating to Section 127.--
(1) Section 125(f)(1) is amended by striking ``127,''.
(2) Section 132(j)(8) is amended by striking ``which are
not excludable from gross income under section 127''.
(3) Section 414(n)(3)(C) is amended by striking ``127,''.
(4) Section 414(t)(2) is amended by striking ``127,''.
(5) Section 3121(a)(18) is amended by striking ``127,''.
(6) Section 3231(e) is amended by striking paragraph (6).
(7) Section 3306(b)(13) is amended by ``127,''.
(8) Section 3401(a)(18) is amended by striking ``127,''.
(9) Section 6039D(d)(1) is amended by striking ``, 127''.
(e) Conforming Amendments Relating to Section 117(d).--
(1) Section 117(c)(1) is amended--
(A) by striking ``subsections (a) and (d)'' and inserting
``subsection (a)'', and
(B) by striking ``or qualified tuition reduction''.
(2) Section 414(n)(3)(C) is amended by striking
``117(d),''.
(3) Section 414(t)(2) is amended by striking ``117(d),''.
(f) Conforming Amendments Related to Section 135.--
(1) Section 74(d)(2)(B) is amended by striking ``135,''.
(2) Section 86(b)(2)(A) is amended by striking ``135,''.
(3) Section 219(g)(3)(A)(ii) is amended by striking
``135,''.
(g) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to taxable years beginning after December 31, 2017.
(2) Amendments relating to section 117(d).--The amendments
made by subsections (a)(3) and (e) shall apply to amounts
paid or incurred after December 31, 2017.
SEC. 1205. ROLLOVERS BETWEEN QUALIFIED TUITION PROGRAMS AND
QUALIFIED ABLE PROGRAMS.
(a) Rollovers From Qualified Tuition Programs to Qualified
ABLE Programs.--Section 529(c)(3)(C)(i) is amended by
striking ``or'' at the end of subclause (I), by striking the
period at the end of subclause (II) and inserting ``, or'',
and by adding at the end the following new subclause:
``(III) to an ABLE account (as defined in section
529A(e)(6)) of the designated beneficiary or a member of the
family of the designated beneficiary.
Subclause (III) shall not apply to so much of a distribution
which, when added to all other contributions made to the ABLE
account for the taxable year, exceeds the limitation under
section 529A(b)(2)(B).''.
(b) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2017.
Subtitle D--Simplification and Reform of Deductions
SEC. 1301. REPEAL OF OVERALL LIMITATION ON ITEMIZED
DEDUCTIONS.
(a) In General.--Part 1 of subchapter B of chapter 1 is
amended by striking section 68 (and the item relating to such
section in the table of sections for such part).
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1302. MORTGAGE INTEREST.
(a) Modification of Limitations.--
(1) In general.--Section 163(h)(3) is amended to read as
follows:
``(3) Qualified residence interest.--For purposes of this
subsection--
``(A) In general.--The term `qualified residence interest'
means any interest which is paid or accrued during the
taxable year on indebtedness which--
``(i) is incurred in acquiring, constructing, or
substantially improving any qualified residence (determined
as of the time the interest is accrued) of the taxpayer, and
``(ii) is secured by such residence.
Such term also includes interest on any indebtedness secured
by such residence resulting from the refinancing of
indebtedness meeting the requirements of the preceding
sentence (or this sentence); but only to the extent the
amount of the indebtedness resulting from such refinancing
does not exceed the amount of the refinanced indebtedness.
``(B) Limitation.--The aggregate amount of indebtedness
taken into account under subparagraph (A) for any period
shall not exceed $500,000 (half of such amount in the case of
a married individual filing a separate return).
``(C) Treatment of indebtedness incurred on or before
november 2, 2017.--
``(i) In general.--In the case of any pre-November 2, 2017,
indebtedness, this paragraph shall apply as in effect
immediately before the enactment of the Tax Cuts and Jobs
Act.
``(ii) Pre-november 2, 2017, indebtedness.--For purposes of
this subparagraph, the term `pre-November 2, 2017,
indebtedness' means--
``(I) any principal residence acquisition indebtedness
which was incurred on or before November 2, 2017, or
``(II) any principal residence acquisition indebtedness
which is incurred after November 2, 2017, to refinance
indebtedness described in clause (i) (or refinanced
indebtedness meeting the requirements of this clause) to the
extent (immediately after the refinancing) the principal
amount of the indebtedness resulting from the refinancing
does not exceed the principal amount of the refinanced
indebtedness (immediately before the refinancing).
``(iii) Limitation on period of refinancing.--clause
(ii)(II) shall not apply to any indebtedness after--
``(I) the expiration of the term of the original
indebtedness, or
``(II) if the principal of such original indebtedness is
not amortized over its term, the expiration of the term of
the 1st refinancing of such indebtedness (or if earlier, the
date which is 30 years after the date of such 1st
refinancing).
``(iv) Binding contract exception.--In the case of a
taxpayer who enters into a written binding contract before
November 2, 2017, to close on the purchase of a principal
residence before January 1, 2018, and who purchases such
residence before April 1, 2018, subparagraphs (A) and (B)
shall be applied by substituting `April 1, 2018' for
`November 2, 2017'.''.
(2) Conforming amendments.--
(A) Section 108(h)(2) is by striking ``for `$1,000,000
($500,000' in clause (ii) thereof'' and inserting ``for
`$500,000 ($250,000' in paragraph (2)(A), and `$1,000,000'
for `$500,000' in paragraph (2)(B), thereof''.
(B) Section 163(h) is amended by striking subparagraphs (E)
and (F) in paragraph (4).
(b) Taxpayers Limited to 1 Qualified Residence.--Section
163(h)(4)(A)(i) is amended to read as follows:
``(i) In general.--The term `qualified residence' means the
principal residence (within the meaning of section 121) of
the taxpayer.''.
(c) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to interest paid or accrued in taxable years beginning
after December 31, 2017, with respect to indebtedness
incurred before, on, or after such date.
(2) Treatment of grandfathered indebtedness.--For
application of the amendments made by this section to
grandfathered indebtedness, see paragraph (3)(C) of section
163(h) of the Internal Revenue Code of 1986, as amended by
this section.
SEC. 1303. REPEAL OF DEDUCTION FOR CERTAIN TAXES NOT PAID OR
ACCRUED IN A TRADE OR BUSINESS.
(a) In General.--Section 164(b)(5) is amended to read as
follows:
``(5) Limitation in case of individuals.--In the case of a
taxpayer other than a corporation--
``(A) foreign real property taxes (other than taxes which
are paid or accrued in carrying on a trade or business or an
activity described in section 212) shall not be taken into
account under subsection (a)(1),
``(B) the aggregate amount of taxes (other than taxes which
are paid or accrued in carrying on a trade or business or an
activity described in section 212) taken into account under
subsection (a)(1) for any taxable year shall not exceed
$10,000 ($5,000 in the case of a married individual filing a
separate return),
``(C) subsection (a)(2) shall only apply to taxes which are
paid or accrued in carrying on a trade or business or an
activity described in section 212, and
``(D) subsection (a)(3) shall not apply to State and local
taxes.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1304. REPEAL OF DEDUCTION FOR PERSONAL CASUALTY LOSSES.
(a) In General.--Section 165(c) is amended by inserting
``and'' at the end of paragraph (1), by striking ``; and'' at
the end of paragraph (2) and inserting a period, and by
striking paragraph (3).
(b) Conforming Amendments.--
(1) Section 165(h) is amended to read as follows:
``(h) Special Rule Where Personal Casualty Gains Exceed
Personal Casualty Losses.--
``(1) In general.--If the personal casualty gains for any
taxable year exceed the personal casualty losses for such
taxable year--
``(A) all such gains shall be treated as gains from sales
or exchanges of capital assets, and
``(B) all such losses shall be treated as losses from sales
or exchanges of capital assets.
``(2) Definitions of personal casualty gain and personal
casualty loss.--For purposes of this subsection--
``(A) Personal casualty loss.--The term `personal casualty
loss' means any loss of property not connected with a trade
or business or a transaction entered into for profit, if such
loss arises from fire, storm, shipwreck, or other casualty,
or from theft.
``(B) Personal casualty gain.--The term `personal casualty
gain' means the recognized gain from any involuntary
conversion of property which is described in subparagraph (A)
[[Page H9314]]
arising from fire, storm, shipwreck, or other casualty, or
from theft.''.
(2) Section 165 is amended by striking subsection (k).
(3)(A) Section 165(l)(1) is amended by striking ``a loss
described in subsection (c)(3)'' and inserting ``an ordinary
loss described in subsection (c)(2)''.
(B) Section 165(l) is amended--
(i) by striking paragraph (5),
(ii) by redesignating paragraphs (2), (3), and (4) as
paragraphs (3), (4), and (5), respectively, and
(iii) by inserting after paragraph (1) the following new
paragraph:
``(2) Limitations.--
``(A) Deposit may not be federally insured.--No election
may be made under paragraph (1) with respect to any loss on a
deposit in a qualified financial institution if part or all
of such deposit is insured under Federal law.
``(B) Dollar limitation.--With respect to each financial
institution, the aggregate amount of losses attributable to
deposits in such financial institution to which an election
under paragraph (1) may be made by the taxpayer for any
taxable year shall not exceed $20,000 ($10,000 in the case of
a separate return by a married individual). The limitation of
the preceding sentence shall be reduced by the amount of any
insurance proceeds under any State law which can reasonably
be expected to be received with respect to losses on deposits
in such institution.''.
(4) Section 172(b)(1)(E)(ii), prior to amendment under
title III, is amended by striking subclause (I) and by
redesignating subclauses (II) and (III) as subclauses (I) and
(II), respectively.
(5) Section 172(d)(4)(C) is amended by striking ``paragraph
(2) or (3) of section 165(c)'' and inserting ``section
165(c)(2)''.
(6) Section 274(f) is amended by striking ``Casualty
Losses,'' in the heading thereof.
(7) Section 280A(b) is amended by striking ``Casualty
Losses,'' in the heading thereof.
(8) Section 873(b), as amended by the preceding provisions
of this Act, is amended by striking paragraph (1) and by
redesignating paragraphs (2) and (3) as paragraphs (1) and
(2), respectively.
(9) Section 504(b) of the Disaster Tax Relief and Airport
and Airway Extension Act of 2017 is amended by adding at the
end the following new paragraph:
``(4) Coordination with tax reform.--This subsection shall
be applied without regard to the amendments made by section
1304 of the Tax Cuts and Jobs Act.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1305. LIMITATION ON WAGERING LOSSES.
(a) In General.--Section 165(d) is amended by adding at the
end the following: ``For purposes of the preceding sentence,
the term `losses from wagering transactions' includes any
deduction otherwise allowable under this chapter incurred in
carrying on any wagering transaction.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1306. CHARITABLE CONTRIBUTIONS.
(a) Increased Limitation for Cash Contributions.--Section
170(b)(1) is amended by redesignating subparagraph (G) as
subparagraph (H) and by inserting after subparagraph (F) the
following new subparagraph:
``(G) Increased limitation for cash contributions.--
``(i) In general.--In the case of any contribution of cash
to an organization described in subparagraph (A), the total
amount of such contributions which may be taken into account
under subsection (a) for any taxable year shall not exceed 60
percent of the taxpayer's contribution base for such year.
``(ii) Carryover.--If the aggregate amount of contributions
described in clause (i) exceeds the applicable limitation
under clause (i), such excess shall be treated (in a manner
consistent with the rules of subsection (d)(1)) as a
charitable contribution to which clause (i) applies in each
of the 5 succeeding years in order of time.
``(iii) Coordination with subparagraphs (A) and (B).--
``(I) In general.--Contributions taken into account under
this subparagraph shall not be taken into account under
subparagraph (A).
``(II) Limitation reduction.--Subparagraphs (A) and (B)
shall be applied by reducing (but not below zero) the
aggregate contribution limitation allowed for the taxable
year under each such subparagraph by the aggregate
contributions allowed under this subparagraph for such
taxable year.''.
(b) Denial of Deduction for College Athletic Event Seating
Rights.--Section 170(l)(1) is amended to read as follows:
``(1) In general.--No deduction shall be allowed under this
section for any amount described in paragraph (2).''.
(c) Charitable Mileage Rate Adjusted for Inflation.--
Section 170(i) is amended by striking ``shall be 14 cents per
mile'' and inserting ``shall be a rate which takes into
account the variable cost of operating an automobile''.
(d) Repeal of Substantiation Exception in Case of
Contributions Reported by Donee.--Section 170(f)(8) is
amended by striking subparagraph (D) and by redesignating
subparagraph (E) as subparagraph (D).
(e) Effective Date.--The amendments made by this section
shall apply to contributions made in taxable years beginning
after December 31, 2017.
SEC. 1307. REPEAL OF DEDUCTION FOR TAX PREPARATION EXPENSES.
(a) In General.--Section 212 is amended by adding ``or'' at
the end of paragraph (1), by striking ``; or'' at the end of
paragraph (2) and inserting a period, and by striking
paragraph (3).
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1308. REPEAL OF MEDICAL EXPENSE DEDUCTION.
(a) In General.--Part VII of subchapter B is amended by
striking by striking section 213 (and by striking the item
relating to such section in the table of sections for such
subpart).
(b) Conforming Amendments.--
(1)(A) Section 105(f) is amended to read as follows:
``(f) Medical Care.--For purposes of this section--
``(1) In general.--The term `medical care' means amounts
paid--
``(A) for the diagnosis, cure, mitigation, treatment, or
prevention of disease, or for the purpose of affecting any
structure or function of the body,
``(B) for transportation primarily for and essential to
medical care referred to in subparagraph (A),
``(C) for qualified long-term care services (as defined in
section 7702B(c)), or
``(D) for insurance (including amounts paid as premiums
under part B of title XVIII of the Social Security Act,
relating to supplementary medical insurance for the aged)
covering medical care referred to in subparagraphs (A) and
(B) or for any qualified long-term care insurance contract
(as defined in section 7702B(b)).
In the case of a qualified long-term care insurance contract
(as defined in section 7702B(b)), only eligible long-term
care premiums (as defined in paragraph (7)) shall be taken
into account under subparagraph (D).
``(2) Amounts paid for certain lodging away from home
treated as paid for medical care.--Amounts paid for lodging
(not lavish or extravagant under the circumstances) while
away from home primarily for and essential to medical care
referred to in paragraph (1)(A) shall be treated as amounts
paid for medical care if--
``(A) the medical care referred to in paragraph (1)(A) is
provided by a physician in a licensed hospital (or in a
medical care facility which is related to, or the equivalent
of, a licensed hospital), and
``(B) there is no significant element of personal pleasure,
recreation, or vacation in the travel away from home.
The amount taken into account under the preceding sentence
shall not exceed $50 for each night for each individual.
``(3) Physician.--The term `physician' has the meaning
given to such term by section 1861(r) of the Social Security
Act (42 U.S.C. 1395x(r)).
``(4) Contracts covering other than medical care.--In the
case of an insurance contract under which amounts are payable
for other than medical care referred to in subparagraphs (A),
(B) and (C) of paragraph (1)--
``(A) no amount shall be treated as paid for insurance to
which paragraph (1)(D) applies unless the charge for such
insurance is either separately stated in the contract, or
furnished to the policyholder by the insurance company in a
separate statement,
``(B) the amount taken into account as the amount paid for
such insurance shall not exceed such charge, and
``(C) no amount shall be treated as paid for such insurance
if the amount specified in the contract (or furnished to the
policyholder by the insurance company in a separate
statement) as the charge for such insurance is unreasonably
large in relation to the total charges under the contract.
``(5) Certain pre-paid contracts.--Subject to the
limitations of paragraph (4), premiums paid during the
taxable year by a taxpayer before he attains the age of 65
for insurance covering medical care (within the meaning of
subparagraphs (A), (B), and (C) of paragraph (1)) for the
taxpayer, his spouse, or a dependent after the taxpayer
attains the age of 65 shall be treated as expenses paid
during the taxable year for insurance which constitutes
medical care if premiums for such insurance are payable (on a
level payment basis) under the contract for a period of 10
years or more or until the year in which the taxpayer attains
the age of 65 (but in no case for a period of less than 5
years).
``(6) Cosmetic surgery.--
``(A) In general.--The term `medical care' does not include
cosmetic surgery or other similar procedures, unless the
surgery or procedure is necessary to ameliorate a deformity
arising from, or directly related to, a congenital
abnormality, a personal injury resulting from an accident or
trauma, or disfiguring disease.
``(B) Cosmetic surgery defined .--For purposes of this
paragraph, the term `cosmetic surgery' means any procedure
which is directed at improving the patient's appearance and
does not meaningfully promote the proper function of the body
or prevent or treat illness or disease.
``(7) Eligible long-term care premiums.--
``(A) In general.--For purposes of this section, the term
`eligible long-term care premiums' means the amount paid
during a taxable year for any qualified long-term care
insurance contract (as defined in section 7702B(b)) covering
an individual, to the extent such amount does not exceed the
limitation determined under the following table:
------------------------------------------------------------------------
``In the case of an individual with
an attained age before the close of The limitation is:
the taxable year of:
------------------------------------------------------------------------
40 or less $200
More than 40 but not more than 50 $375
More than 50 but not more than 60 $750
More than 60 but not more than 70 $2,000
More than 70 $2,500
------------------------------------------------------------------------
``(B) Indexing.--
[[Page H9315]]
``(i) In general.--In the case of any taxable year
beginning after 1997, each dollar amount in subparagraph (A)
shall be increased by the medical care cost adjustment of
such amount for such calendar year. Any increase determined
under the preceding sentence shall be rounded to the nearest
multiple of $10.
``(ii) Medical care cost adjustment.--For purposes of
clause (i), the medical care cost adjustment for any calendar
year is the adjustment prescribed by the Secretary, in
consultation with the Secretary of Health and Human Services,
for purposes of such clause. To the extent that CPI (as
defined section 1(c)), or any component thereof, is taken
into account in determining such adjustment, such adjustment
shall be determined by taking into account C-CPI-U (as so
defined), or the corresponding component thereof, in lieu of
such CPI (or component thereof), but only with respect to the
portion of such adjustment which relates to periods after
December 31, 2017.
``(8) Certain payments to relatives treated as not paid for
medical care.--An amount paid for a qualified long-term care
service (as defined in section 7702B(c)) provided to an
individual shall be treated as not paid for medical care if
such service is provided--
``(A) by the spouse of the individual or by a relative
(directly or through a partnership, corporation, or other
entity) unless the service is provided by a licensed
professional with respect to such service, or
``(B) by a corporation or partnership which is related
(within the meaning of section 267(b) or 707(b)) to the
individual.
For purposes of this paragraph, the term `relative' means an
individual bearing a relationship to the individual which is
described in any of subparagraphs (A) through (G) of section
7706(d)(2). This paragraph shall not apply for purposes of
subsection (b) with respect to reimbursements through
insurance.''.
(B) Section 72(t)(2)(D)(i)(III) is amended by striking
``section 213(d)(1)(D)'' and inserting ``section
105(f)(1)(D)''.
(C) Section 104(a) is amended by striking ``section
213(d)(1)'' in the last sentence and inserting ``section
105(f)(1)''.
(D) Section 105(b) is amended by striking ``section
213(d)'' and inserting ``section 105(f)''.
(E) Section 139D is amended by striking ``section 213'' and
inserting ``section 223''.
(F) Section 162(l)(2) is amended by striking ``section
213(d)(10)'' and inserting ``section 105(f)(7)''.
(G) Section 220(d)(2)(A) is amended by striking ``section
213(d)'' and inserting ``section 105(f)''.
(H) Section 223(d)(2)(A) is amended by striking ``section
213(d)'' and inserting ``section 105(f)''.
(I) Section 419A(f)(2) is amended by striking ``section
213(d)'' and inserting ``section 105(f)''.
(J) Section 501(c)(26)(A) is amended by striking ``section
213(d)'' and inserting ``section 105(f)''.
(K) Section 2503(e) is amended by striking ``section
213(d)'' and inserting ``section 105(f)''.
(L) Section 4980B(c)(4)(B)(i)(I) is amended by striking
``section 213(d)'' and inserting ``section 105(f)''.
(M) Section 6041(f) is amended by striking ``section
213(d)'' and inserting ``section 105(f)''.
(N) Section 7702B(a)(2) is amended by striking ``section
213(d)'' and inserting ``section 105(f)''.
(O) Section 7702B(a)(4) is amended by striking ``section
213(d)(1)(D)'' and inserting ``section 105(f)(1)(D)''.
(P) Section 7702B(d)(5) is amended by striking ``section
213(d)(10)'' and inserting ``section 105(f)(7)''.
(Q) Section 9832(d)(3) is amended by striking ``section
213(d)'' and inserting ``section 105(f)''.
(2) Section 72(t)(2)(B) is amended to read as follows:
``(B) Medical expenses.--Distributions made to an
individual (other than distributions described in
subparagraph (A), (C), or (D) to the extent such
distributions do not exceed the excess of--
``(i) the expenses paid by the taxpayer during the taxable
year, not compensated for by insurance or otherwise, for
medical care (as defined in 105(f)) of the taxpayer, his
spouse, or a dependent (as defined in section 7706,
determined without regard to subsections (b)(1), (b)(2), and
(d)(1)(B) thereof), over
``(ii) 10 percent of the taxpayer's adjusted gross
income.''.
(3) Section 162(l) is amended by striking paragraph (3).
(4) Section 402(l) is amended by striking paragraph (7) and
redesignating paragraph (8) as paragraph (7).
(5) Section 220(f) is amended by striking paragraph (6).
(6) Section 223(f) is amended by striking paragraph (6).
(7) Section 7702B(e) is amended by striking paragraph (2).
(8) Section 7706(f)(7), as redesignated by this Act, is
amended by striking ``sections 105(b), 132(h)(2)(B), and
213(d)(5)'' and inserting ``sections 105(b) and
132(h)(2)(B)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1309. REPEAL OF DEDUCTION FOR ALIMONY PAYMENTS.
(a) In General.--Part VII of subchapter B is amended by
striking by striking section 215 (and by striking the item
relating to such section in the table of sections for such
subpart).
(b) Conforming Amendments.--
(1) Corresponding repeal of provisions providing for
inclusion of alimony in gross income.--
(A) Subsection (a) of section 61 is amended by striking
paragraph (8) and by redesignating paragraphs (9) through
(15) as paragraphs (8) through (14), respectively.
(B) Part II of subchapter B of chapter 1 is amended by
striking section 71 (and by striking the item relating to
such section in the table of sections for such part).
(C) Subpart F of part I of subchapter J of chapter 1 is
amended by striking section 682 (and by striking the item
relating to such section in the table of sections for such
subpart).
(2) Related to repeal of section 215.--
(A) Section 62(a) is amended by striking paragraph (10).
(B) Section 3402(m)(1) is amended by striking ``(other than
paragraph (10) thereof)''.
(3) Related to repeal of section 71.--
(A) Section 121(d)(3) is amended--
(i) by striking ``(as defined in section 71(b)(2))'' in
subparagraph (B), and
(ii) by adding at the end the following new subparagraph:
``(C) Divorce or separation instrument.--For purposes of
this paragraph, the term `divorce or separation instrument'
means--
``(i) a decree of divorce or separate maintenance or a
written instrument incident to such a decree,
``(ii) a written separation agreement, or
``(iii) a decree (not described in clause (i)) requiring a
spouse to make payments for the support or maintenance of the
other spouse.''.
(B) Section 220(f)(7) is amended by striking ``subparagraph
(A) of section 71(b)(2)'' and inserting ``clause (i) of
section 121(d)(3)(C)''.
(C) Section 223(f)(7) is amended by striking ``subparagraph
(A) of section 71(b)(2)'' and inserting ``clause (i) of
section 121(d)(3)(C)''.
(D) Section 382(l)(3)(B)(iii) is amended by striking
``section 71(b)(2)'' and inserting ``section 121(d)(3)(C)''.
(E) Section 408(d)(6) is amended by striking ``subparagraph
(A) of section 71(b)(2)'' and inserting ``clause (i) of
section 121(d)(3)(C)''.
(c) Effective Date.--The amendments made by this section
shall apply to--
(1) any divorce or separation instrument (as defined in
section 71(b)(2) of the Internal Revenue Code of 1986 as in
effect before the date of the enactment of this Act) executed
after December 31, 2017, and
(2) any divorce or separation instrument (as so defined)
executed on or before such date and modified after such date
if the modification expressly provides that the amendments
made by this section apply to such modification.
SEC. 1310. REPEAL OF DEDUCTION FOR MOVING EXPENSES.
(a) In General.--Part VII of subchapter B is amended by
striking by striking section 217 (and by striking the item
relating to such section in the table of sections for such
subpart).
(b) Retention of Moving Expenses for Members of Armed
Forces.--Section 134(b) is amended by adding at the end the
following new paragraph:
``(7) Moving expenses.--The term `qualified military
benefit' includes any benefit described in section 217(g) (as
in effect before the enactment of the Tax Cuts And Jobs
Act).''.
(c) Conforming Amendments.--
(1) Section 62(a) is amended by striking paragraph (15).
(2) Section 274(m)(3) is amended by striking ``(other than
section 217)''.
(3) Section 3121(a) is amended by striking paragraph (11).
(4) Section 3306(b) is amended by striking paragraph (9).
(5) Section 3401(a) is amended by striking paragraph (15).
(6) Section 7872(f) is amended by striking paragraph (11).
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1311. TERMINATION OF DEDUCTION AND EXCLUSIONS FOR
CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.
(a) Termination of Income Tax Deduction.--Section 220 is
amended by adding at the end the following new subsection:
``(k) Termination.--No deduction shall be allowed under
subsection (a) with respect to any taxable year beginning
after December 31, 2017.''.
(b) Termination of Exclusion for Employer-Provided
Contributions.--Section 106 is amended by striking subsection
(b).
(c) Conforming Amendments.--
(1) Section 62(a) is amended by striking paragraph (16).
(2) Section 106(d) is amended by striking paragraph (2), by
redesignating paragraph (3) as paragraph (6), and by
inserting after paragraph (1) the following new paragraphs:
``(2) No constructive receipt.--No amount shall be included
in the gross income of any employee solely because the
employee may choose between the contributions referred to in
paragraph (1) and employer contributions to another health
plan of the employer.
``(3) Special rule for deduction of employer
contributions.--Any employer contribution to a health savings
account (as so defined), if otherwise allowable as a
deduction under this chapter, shall be allowed only for the
taxable year in which paid.
``(4) Employer health savings account contribution required
to be shown on return.--Every individual required to file a
return under section 6012 for the taxable year shall include
on such return the aggregate amount contributed by employers
to the health savings accounts (as so defined) of such
individual or such individual's spouse for such taxable year.
``(5) Health savings account contributions not part of
cobra coverage.--Paragraph (1) shall not apply for purposes
of section 4980B.''.
(3) Section 223(b)(4) is amended by striking subparagraph
(A), by redesignating subparagraphs (B) and (C) as
subparagraphs (A) and (B), respectively, and by striking the
second sentence thereof.
(4) Section 223(b)(5) is amended by striking ``under
paragraph (3))'' and all that follows
[[Page H9316]]
through ``shall be divided equally between them'' and
inserting the following: ``under paragraph (3)) shall be
divided equally between the spouses''.
(5) Section 223(c) is amended by striking paragraph (5).
(6) Section 3231(e) is amended by striking paragraph (10).
(7) Section 3306(b) is amended by striking paragraph (17).
(8) Section 3401(a) is amended by striking paragraph (21).
(9) Chapter 43 is amended by striking section 4980E (and by
striking the item relating to such section in the table of
sections for such chapter).
(10) Section 4980G is amended to read as follows:
``SEC. 4980G. FAILURE OF EMPLOYER TO MAKE COMPARABLE HEALTH
SAVINGS ACCOUNT CONTRIBUTIONS.
``(a) In General.--In the case of an employer who makes a
contribution to the health savings account of any employee
during a calendar year, there is hereby imposed a tax on the
failure of such employer to meet the requirements of
subsection (d) for such calendar year.
``(b) Amount of Tax.--The amount of the tax imposed by
subsection (a) on any failure for any calendar year is the
amount equal to 35 percent of the aggregate amount
contributed by the employer to health savings accounts of
employees for taxable years of such employees ending with or
within such calendar year.
``(c) Waiver by Secretary.--In the case of a failure which
is due to reasonable cause and not to willful neglect, the
Secretary may waive part or all of the tax imposed by
subsection (a) to the extent that the payment of such tax
would be excessive relative to the failure involved.
``(d) Employer Required To Make Comparable Health Savings
Account Contributions for All Participating Employees.--
``(1) In general.--An employer meets the requirements of
this subsection for any calendar year if the employer makes
available comparable contributions to the health savings
accounts of all comparable participating employees for each
coverage period during such calendar year.
``(2) Comparable contributions.--
``(A) In general.--For purposes of paragraph (1), the term
`comparable contributions' means contributions--
``(i) which are the same amount, or
``(ii) which are the same percentage of the annual
deductible limit under the high deductible health plan
covering the employees.
``(B) Part-year employees.--In the case of an employee who
is employed by the employer for only a portion of the
calendar year, a contribution to the health savings account
of such employee shall be treated as comparable if it is an
amount which bears the same ratio to the comparable amount
(determined without regard to this subparagraph) as such
portion bears to the entire calendar year.
``(3) Comparable participating employees.--
``(A) In general.--For purposes of paragraph (1), the term
`comparable participating employees' means all employees--
``(i) who are eligible individuals covered under any high
deductible health plan of the employer, and
``(ii) who have the same category of coverage.
``(B) Categories of coverage.--For purposes of subparagraph
(B), the categories of coverage are self-only and family
coverage.
``(4) Part-time employees.--
``(A) In general .--Paragraph (3) shall be applied
separately with respect to part-time employees and other
employees.
``(B) Part-time employee.--For purposes of subparagraph
(A), the term `part-time employee' means any employee who is
customarily employed for fewer than 30 hours per week.
``(5) Special rule for non-highly compensated employees.--
For purposes of applying this section to a contribution to a
health savings account of an employee who is not a highly
compensated employee (as defined in section 414(q)), highly
compensated employees shall not be treated as comparable
participating employees.
``(e) Controlled Groups.--For purposes of this section, all
persons treated as a single employer under subsection (b),
(c), (m), or (o) of section 414 shall be treated as 1
employer.
``(f) Definitions.--Terms used in this section which are
also used in section 223 have the respective meanings given
such terms in section 223.
``(g) Regulations.--The Secretary shall issue regulations
to carry out the purposes of this section.''.
(11) Section 6051(a) is amended by striking paragraph (11).
(12) Section 6051(a)(14)(A) is amended by striking
``paragraphs (11) and (12)'' and inserting ``paragraph
(12)''.
(d) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1312. DENIAL OF DEDUCTION FOR EXPENSES ATTRIBUTABLE TO
THE TRADE OR BUSINESS OF BEING AN EMPLOYEE.
(a) In General.--Part IX of subchapter B of chapter 1 is
amended by inserting after the item relating to section 262
the following new item:
``SEC. 262A. EXPENSES ATTRIBUTABLE TO BEING AN EMPLOYEE.
``(a) In General.--Except as otherwise provided in this
section, no deduction shall be allowed with respect to any
trade or business of the taxpayer which consists of the
performance of services by the taxpayer as an employee.
``(b) Exception for Above-the-line Deductions.--Subsection
(a) shall not apply to any deduction allowable (determined
without regard to subsection (a)) in determining adjusted
gross income.''.
(b) Repeal of Certain Above-the-line Trade and Business
Deductions of Employees.--
(1) In general.--Section 62(a)(2) is amended--
(A) by striking subparagraphs (B), (C), and (D), and
(B) by redesignating subparagraph (E) as subparagraph (B).
(2) Conforming amendments.--
(A) Section 62 is amended by striking subsections (b) and
(d) and by redesignating subsections (c) and (e) as
subsections (b) and (c), respectively.
(B) Section 62(a)(20) is amended by striking ``subsection
(e)'' and inserting ``subsection (c)''.
(c) Continued Exclusion of Working Condition Fringe
Benefits.--Section 132(d) is amended by inserting
``(determined without regard to section 262A)'' after
``section 162''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
Subtitle E--Simplification and Reform of Exclusions and Taxable
Compensation
SEC. 1401. LIMITATION ON EXCLUSION FOR EMPLOYER-PROVIDED
HOUSING.
(a) In General.--Section 119 is amended by adding at the
end the following new subsection:
``(e) Limitation on Exclusion of Lodging.--
``(1) In general.--The aggregate amount excluded from gross
income of the taxpayer under subsections (a) and (d) with
respect to lodging for any taxable year shall not exceed
$50,000 (half such amount in the case of a married individual
filing a separate return).
``(2) Limitation to 1 home.--Subsections (a) and (d)
(separately and in combination) shall not apply with respect
to more than 1 residence of the taxpayer at any given time.
In the case of a joint return, the preceding sentence shall
apply separately to each spouse for any period during which
each spouse resides separate from the other spouse in a
residence which is provided in connection with the employment
of each spouse, respectively.
``(3) Limitation for highly compensated employees.--
``(A) Reduced for excess compensation.--In the case of an
individual whose compensation for the taxable year exceeds
the amount in effect under section 414(q)(1)(B)(i) for the
calendar in which such taxable year begins, the $50,000
amount under paragraph (1) shall be reduced (but not below
zero) by an amount equal to 50 percent of such excess. For
purposes of the preceding sentence, the term `compensation'
means wages (as defined in section 3121(a) (without regard to
the contribution and benefit base limitation in section
3121(a)(1)).
``(B) Exclusion denied for 5-percent owners.--In the case
of an individual who is a 5-percent owner (as defined in
section 416(i)(1)(B)(i)) of the employer at any time during
the taxable year, the amount under paragraph (1) shall be
zero.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL
RESIDENCE.
(a) Requirement That Residence Be Principal Residence for 5
Years During 8-year Period.--Subsection (a) of section 121 is
amended--
(1) by striking ``5-year period'' and inserting ``8-year
period'', and
(2) by striking ``2 years'' and inserting ``5 years''.
(b) Application to Only 1 Sale or Exchange Every 5 Years.--
Paragraph (3) of section 121(b) is amended to read as
follows:
``(3) Application to only 1 sale or exchange every 5
years.--Subsection (a) shall not apply to any sale or
exchange by the taxpayer if, during the 5-year period ending
on the date of such sale or exchange, there was any other
sale or exchange by the taxpayer to which subsection (a)
applied.''.
(c) Phaseout Based on Modified Adjusted Gross Income.--
Section 121 is amended by adding at the end the following new
subsection:
``(h) Phaseout Based on Modified Adjusted Gross Income.--
``(1) In general.--If the average modified adjusted gross
income of the taxpayer for the taxable year and the 2
preceding taxable years exceeds $250,000 (twice such amount
in the case of a joint return), the amount which would (but
for this subsection) be excluded from gross income under
subsection (a) for such taxable year shall be reduced (but
not below zero) by the amount of such excess.
``(2) Modified adjusted gross income.--For purposes of this
subsection, the term `modified adjusted gross income' means,
with respect to any taxable year, adjusted gross income
determined after application of this section (but without
regard to subsection (b)(1) and this subsection).
``(3) Special rule for joint returns.--In the case of a
joint return, the average modified adjusted gross income of
the taxpayer shall be determined without regard to any
taxable year with respect to which the taxpayer did not file
a joint return.''.
(d) Conforming Amendments.--
(1) The following provisions of section 121 are each
amended by striking ``5-year period'' each place it appears
therein and inserting ``8-year period'':
(A) Subsection (b)(5)(C)(ii)(I).
(B) Subsection (c)(1)(B)(i)(I).
(C) Subsection (d)(7)(B).
(D) Subparagraphs (A) and (B) of subsection (d)(9).
(E) Subsection (d)(10).
(F) Subsection (d)(12)(A).
(2) Section 121(c)(1)(B)(ii) is amended by striking ``2
years'' and inserting ``5 years'':
(e) Effective Date.--The amendments made by this section
shall apply to sales and exchanges after December 31, 2017.
[[Page H9317]]
SEC. 1403. REPEAL OF EXCLUSION, ETC., FOR EMPLOYEE
ACHIEVEMENT AWARDS.
(a) In General.--Section 74 is amended by striking
subsection (c).
(b) Repeal of Limitation on Deduction.--Section 274 is
amended by striking subsection (j).
(c) Conforming Amendments.--
(1) Section 102(c)(2) is amended by striking the first
sentence.
(2) Section 414(n)(3)(C) is amended by striking
``274(j),''.
(3) Section 414(t)(2) is amended by striking ``274(j),''.
(4) Section 3121(a)(20) is amended by striking ``74(c)''.
(5) Section 3231(e)(5) is amended by striking ``74(c),''.
(6) Section 3306(b)(16) is amended by striking ``74(c),''.
(7) Section 3401(a)(19) is amended by striking ``74(c),''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1404. SUNSET OF EXCLUSION FOR DEPENDENT CARE ASSISTANCE
PROGRAMS.
(a) In General.--Section 129 is amended by adding at the
end the following new subsection:
``(f) Termination.--Subsection (a) shall not apply to
taxable years beginning after December 31, 2022.''.
(b) Effective Date.--The amendment made by this section
shall take effect on the date of the enactment of this Act.
SEC. 1405. REPEAL OF EXCLUSION FOR QUALIFIED MOVING EXPENSE
REIMBURSEMENT.
(a) In General.--Section 132(a) is amended by striking
paragraph (6).
(b) Conforming Amendments.--
(1) Section 82 is amended by striking ``Except as provided
in section 132(a)(6), there'' and inserting ``There''.
(2) Section 132 is amended by striking subsection (g).
(3) Section 132(l) is amended by striking by striking
``subsections (e) and (g)'' and inserting ``subsection (e)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1406. REPEAL OF EXCLUSION FOR ADOPTION ASSISTANCE
PROGRAMS.
(a) In General.--Part III of subchapter B of chapter 1 is
amended by striking section 137 (and by striking the item
relating to such section in the table of sections for such
part).
(b) Conforming Amendments.--
(1) Sections 414(n)(3)(C), 414(t)(2), 74(d)(2)(B),
86(b)(2)(A), 219(g)(3)(A)(ii) are each amended by striking
``, 137''.
(2) Section 1016(a), as amended by the preceding provision
of this Act, is amended by striking paragraph (26).
(3) Section 6039D(d)(1), as amended by the preceding
provisions of this Act, is amended--
(A) by striking ``, or 137'', and
(B) by inserting ``or'' before ``125''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
Subtitle F--Simplification and Reform of Savings, Pensions, Retirement
SEC. 1501. REPEAL OF SPECIAL RULE PERMITTING
RECHARACTERIZATION OF ROTH IRA CONTRIBUTIONS AS
TRADITIONAL IRA CONTRIBUTIONS.
(a) In General.--Section 408A(d) is amended by striking
paragraph (6) and by redesignating paragraph (7) as paragraph
(6).
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1502. REDUCTION IN MINIMUM AGE FOR ALLOWABLE IN-SERVICE
DISTRIBUTIONS.
(a) In General.--Section 401(a)(36) is amended by striking
``age 62'' and inserting ``age 59 \1/2\''.
(b) Application to Governmental Section 457(b) Plans.--
Clause (i) of section 457(d)(1)(A) is amended by inserting
``(in the case of a plan maintained by an employer described
in subsection (e)(1)(A), age 59 \1/2\)'' before the comma at
the end.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2017.
SEC. 1503. MODIFICATION OF RULES GOVERNING HARDSHIP
DISTRIBUTIONS.
(a) In General.--Not later than 1 year after the date of
the enactment of this Act, the Secretary of the Treasury
shall modify Treasury Regulation section 1.401(k)-
1(d)(3)(iv)(E) to--
(1) delete the 6-month prohibition on contributions imposed
by paragraph (2) thereof, and
(2) make any other modifications necessary to carry out the
purposes of section 401(k)(2)(B)(i)(IV) of the Internal
Revenue Code of 1986.
(b) Effective Date.--The revised regulations under this
section shall apply to plan years beginning after December
31, 2017.
SEC. 1504. MODIFICATION OF RULES RELATING TO HARDSHIP
WITHDRAWALS FROM CASH OR DEFERRED ARRANGEMENTS.
(a) In General.--Section 401(k) is amended by adding at the
end the following:
``(14) Special rules relating to hardship withdrawals.--For
purposes of paragraph (2)(B)(i)(IV)--
``(A) Amounts which may be withdrawn.--The following
amounts may be distributed upon hardship of the employee:
``(i) Contributions to a profit-sharing or stock bonus plan
to which section 402(e)(3) applies.
``(ii) Qualified nonelective contributions (as defined in
subsection (m)(4)(C)).
``(iii) Qualified matching contributions described in
paragraph (3)(D)(ii)(I).
``(iv) Earnings on any contributions described in clause
(i), (ii), or (iii).
``(B) No requirement to take available loan.--A
distribution shall not be treated as failing to be made upon
the hardship of an employee solely because the employee does
not take any available loan under the plan.".''.
(b) Conforming Amendment.--Section 401(k)(2)(B)(i)(IV) is
amended to read as follows:
``(IV) subject to the provisions of paragraph (14), upon
hardship of the employee, or".''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2017.
SEC. 1505. EXTENDED ROLLOVER PERIOD FOR THE ROLLOVER OF PLAN
LOAN OFFSET AMOUNTS IN CERTAIN CASES.
(a) In General.--Paragraph (3) of section 402(c) is amended
by adding at the end the following new subparagraph:
``(C) Rollover of certain plan loan offset amounts.--
``(i) In general.--In the case of a qualified plan loan
offset amount, paragraph (1) shall not apply to any transfer
of such amount made after the due date (including extensions)
for filing the return of tax for the taxable year in which
such amount is treated as distributed from a qualified
employer plan.
``(ii) Qualified plan loan offset amount.--For purposes of
this subparagraph, the term `qualified plan loan offset
amount' means a plan loan offset amount which is treated as
distributed from a qualified employer plan to a participant
or beneficiary solely by reason of--
``(I) the termination of the qualified employer plan, or
``(II) the failure to meet the repayment terms of the loan
from such plan because of the separation from service of the
participant (whether due to layoff, cessation of business,
termination of employment, or otherwise).
``(iii) Plan loan offset amount.--For purposes of clause
(ii), the term `plan loan offset amount' means the amount by
which the participant's accrued benefit under the plan is
reduced in order to repay a loan from the plan.
``(iv) Limitation.--This subparagraph shall not apply to
any plan loan offset amount unless such plan loan offset
amount relates to a loan to which section 72(p)(1) does not
apply by reason of section 72(p)(2).
``(v) Qualified employer plan.--For purposes of this
subsection, the term `qualified employer plan' has the
meaning given such term by section 72(p)(4).''.
(b) Conforming Amendment.--Subparagraph (A) of section
402(c)(3) is amended by striking ``subparagraph (B)'' and
inserting ``subparagraphs (B) and (C)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 1506. MODIFICATION OF NONDISCRIMINATION RULES TO PROTECT
OLDER, LONGER SERVICE PARTICIPANTS.
(a) In General.--Section 401 is amended--
(1) by redesignating subsection (o) as subsection (p), and
(2) by inserting after subsection (n) the following new
subsection:
``(o) Special Rules for Applying Nondiscrimination Rules to
Protect Older, Longer Service and Grandfathered
Participants.--
``(1) Testing of defined benefit plans with closed classes
of participants.--
``(A) Benefits, rights, or features provided to closed
classes.--A defined benefit plan which provides benefits,
rights, or features to a closed class of participants shall
not fail to satisfy the requirements of subsection (a)(4) by
reason of the composition of such closed class or the
benefits, rights, or features provided to such closed class,
if--
``(i) for the plan year as of which the class closes and
the 2 succeeding plan years, such benefits, rights, and
features satisfy the requirements of subsection (a)(4)
(without regard to this subparagraph but taking into account
the rules of subparagraph (I)),
``(ii) after the date as of which the class was closed, any
plan amendment which modifies the closed class or the
benefits, rights, and features provided to such closed class
does not discriminate significantly in favor of highly
compensated employees, and
``(iii) the class was closed before April 5, 2017, or the
plan is described in subparagraph (C).
``(B) Aggregate testing with defined contribution plans
permitted on a benefits basis.--
``(i) In general.--For purposes of determining compliance
with subsection (a)(4) and section 410(b), a defined benefit
plan described in clause (iii) may be aggregated and tested
on a benefits basis with 1 or more defined contribution
plans, including with the portion of 1 or more defined
contribution plans which--
``(I) provides matching contributions (as defined in
subsection (m)(4)(A)),
``(II) provides annuity contracts described in section
403(b) which are purchased with matching contributions or
nonelective contributions, or
``(III) consists of an employee stock ownership plan
(within the meaning of section 4975(e)(7)) or a tax credit
employee stock ownership plan (within the meaning of section
409(a)).
``(ii) Special rules for matching contributions.--For
purposes of clause (i), if a defined benefit plan is
aggregated with a portion of a defined contribution plan
providing matching contributions--
``(I) such defined benefit plan must also be aggregated
with any portion of such defined contribution plan which
provides elective deferrals described in subparagraph (A) or
(C) of section 402(g)(3), and
``(II) such matching contributions shall be treated in the
same manner as nonelective contributions, including for
purposes of applying the rules of subsection (l).
[[Page H9318]]
``(iii) Plans described.--A defined benefit plan is
described in this clause if--
``(I) the plan provides benefits to a closed class of
participants,
``(II) for the plan year as of which the class closes and
the 2 succeeding plan years, the plan satisfies the
requirements of section 410(b) and subsection (a)(4) (without
regard to this subparagraph but taking into account the rules
of subparagraph (I)),
``(III) after the date as of which the class was closed,
any plan amendment which modifies the closed class or the
benefits provided to such closed class does not discriminate
significantly in favor of highly compensated employees, and
``(IV) the class was closed before April 5, 2017, or the
plan is described in subparagraph (C).
``(C) Plans described.--A plan is described in this
subparagraph if, taking into account any predecessor plan--
``(i) such plan has been in effect for at least 5 years as
of the date the class is closed, and
``(ii) during the 5-year period preceding the date the
class is closed, there has not been a substantial increase in
the coverage or value of the benefits, rights, or features
described in subparagraph (A) or in the coverage or benefits
under the plan described in subparagraph (B)(iii) (whichever
is applicable).
``(D) Determination of substantial increase for benefits,
rights, and features.--In applying subparagraph (C)(ii) for
purposes of subparagraph (A)(iii), a plan shall be treated as
having had a substantial increase in coverage or value of the
benefits, rights, or features described in subparagraph (A)
during the applicable 5-year period only if, during such
period--
``(i) the number of participants covered by such benefits,
rights, or features on the date such period ends is more than
50 percent greater than the number of such participants on
the first day of the plan year in which such period began, or
``(ii) such benefits, rights, and features have been
modified by 1 or more plan amendments in such a way that, as
of the date the class is closed, the value of such benefits,
rights, and features to the closed class as a whole is
substantially greater than the value as of the first day of
such 5-year period, solely as a result of such amendments.
``(E) Determination of substantial increase for aggregate
testing on benefits basis.--In applying subparagraph (C)(ii)
for purposes of subparagraph (B)(iii)(IV), a plan shall be
treated as having had a substantial increase in coverage or
benefits during the applicable 5-year period only if, during
such period--
``(i) the number of participants benefitting under the plan
on the date such period ends is more than 50 percent greater
than the number of such participants on the first day of the
plan year in which such period began, or
``(ii) the average benefit provided to such participants on
the date such period ends is more than 50 percent greater
than the average benefit provided on the first day of the
plan year in which such period began.
``(F) Certain employees disregarded.--For purposes of
subparagraphs (D) and (E), any increase in coverage or value
or in coverage or benefits, whichever is applicable, which is
attributable to such coverage and value or coverage and
benefits provided to employees--
``(i) who became participants as a result of a merger,
acquisition, or similar event which occurred during the 7-
year period preceding the date the class is closed, or
``(ii) who became participants by reason of a merger of the
plan with another plan which had been in effect for at least
5 years as of the date of the merger,
shall be disregarded, except that clause (ii) shall apply for
purposes of subparagraph (D) only if, under the merger, the
benefits, rights, or features under 1 plan are conformed to
the benefits, rights, or features of the other plan
prospectively.
``(G) Rules relating to average benefit.--For purposes of
subparagraph (E)--
``(i) the average benefit provided to participants under
the plan will be treated as having remained the same between
the 2 dates described in subparagraph (E)(ii) if the benefit
formula applicable to such participants has not changed
between such dates, and
``(ii) if the benefit formula applicable to 1 or more
participants under the plan has changed between such 2 dates,
then the average benefit under the plan shall be considered
to have increased by more than 50 percent only if--
``(I) the total amount determined under section
430(b)(1)(A)(i) for all participants benefitting under the
plan for the plan year in which the 5-year period described
in subparagraph (E) ends, exceeds
``(II) the total amount determined under section
430(b)(1)(A)(i) for all such participants for such plan year,
by using the benefit formula in effect for each such
participant for the first plan year in such 5-year period, by
more than 50 percent.
In the case of a CSEC plan (as defined in section 414(y)),
the normal cost of the plan (as determined under section
433(j)(1)(B)) shall be used in lieu of the amount determined
under section 430(b)(1)(A)(i).
``(H) Treatment as single plan.--For purposes of
subparagraphs (E) and (G), a plan described in section 413(c)
shall be treated as a single plan rather than as separate
plans maintained by each participating employer.
``(I) Special rules.--For purposes of subparagraphs (A)(i)
and (B)(iii)(II), the following rules shall apply:
``(i) In applying section 410(b)(6)(C), the closing of the
class of participants shall not be treated as a significant
change in coverage under section 410(b)(6)(C)(i)(II).
``(ii) 2 or more plans shall not fail to be eligible to be
aggregated and treated as a single plan solely by reason of
having different plan years.
``(iii) Changes in the employee population shall be
disregarded to the extent attributable to individuals who
become employees or cease to be employees, after the date the
class is closed, by reason of a merger, acquisition,
divestiture, or similar event.
``(iv) Aggregation and all other testing methodologies
otherwise applicable under subsection (a)(4) and section
410(b) may be taken into account.
The rule of clause (ii) shall also apply for purposes of
determining whether plans to which subparagraph (B)(i)
applies may be aggregated and treated as 1 plan for purposes
of determining whether such plans meet the requirements of
subsection (a)(4) and section 410(b).
``(J) Spun-off plans.--For purposes of this paragraph, if a
portion of a defined benefit plan described in subparagraph
(A) or (B)(iii) is spun off to another employer and the spun-
off plan continues to satisfy the requirements of--
``(i) subparagraph (A)(i) or (B)(iii)(II), whichever is
applicable, if the original plan was still within the 3-year
period described in such subparagraph at the time of the spin
off, and
``(ii) subparagraph (A)(ii) or (B)(iii)(III), whichever is
applicable,
the treatment under subparagraph (A) or (B) of the spun-off
plan shall continue with respect to such other employer.
``(2) Testing of defined contribution plans.--
``(A) Testing on a benefits basis.--A defined contribution
plan shall be permitted to be tested on a benefits basis if--
``(i) such defined contribution plan provides make-whole
contributions to a closed class of participants whose
accruals under a defined benefit plan have been reduced or
eliminated,
``(ii) for the plan year of the defined contribution plan
as of which the class eligible to receive such make-whole
contributions closes and the 2 succeeding plan years, such
closed class of participants satisfies the requirements of
section 410(b)(2)(A)(i) (determined by applying the rules of
paragraph (1)(I)),
``(iii) after the date as of which the class was closed,
any plan amendment to the defined contribution plan which
modifies the closed class or the allocations, benefits,
rights, and features provided to such closed class does not
discriminate significantly in favor of highly compensated
employees, and
``(iv) the class was closed before April 5, 2017, or the
defined benefit plan under clause (i) is described in
paragraph (1)(C) (as applied for purposes of paragraph
(1)(B)(iii)(IV)).
``(B) Aggregation with plans including matching
contributions.--
``(i) In general.--With respect to 1 or more defined
contribution plans described in subparagraph (A), for
purposes of determining compliance with subsection (a)(4) and
section 410(b), the portion of such plans which provides
make-whole contributions or other nonelective contributions
may be aggregated and tested on a benefits basis with the
portion of 1 or more other defined contribution plans which--
``(I) provides matching contributions (as defined in
subsection (m)(4)(A)),
``(II) provides annuity contracts described in section
403(b) which are purchased with matching contributions or
nonelective contributions, or
``(III) consists of an employee stock ownership plan
(within the meaning of section 4975(e)(7)) or a tax credit
employee stock ownership plan (within the meaning of section
409(a)).
``(ii) Special rules for matching contributions.--Rules
similar to the rules of paragraph (1)(B)(ii) shall apply for
purposes of clause (i).
``(C) Special rules for testing defined contribution plan
features providing matching contributions to certain older,
longer service participants.--In the case of a defined
contribution plan which provides benefits, rights, or
features to a closed class of participants whose accruals
under a defined benefit plan have been reduced or eliminated,
the plan shall not fail to satisfy the requirements of
subsection (a)(4) solely by reason of the composition of the
closed class or the benefits, rights, or features provided to
such closed class if the defined contribution plan and
defined benefit plan otherwise meet the requirements of
subparagraph (A) but for the fact that the make-whole
contributions under the defined contribution plan are made in
whole or in part through matching contributions.
``(D) Spun-off plans.--For purposes of this paragraph, if a
portion of a defined contribution plan described in
subparagraph (A) or (C) is spun off to another employer, the
treatment under subparagraph (A) or (C) of the spun-off plan
shall continue with respect to the other employer if such
plan continues to comply with the requirements of clauses
(ii) (if the original plan was still within the 3-year period
described in such clause at the time of the spin off) and
(iii) of subparagraph (A), as determined for purposes of
subparagraph (A) or (C), whichever is applicable.
``(3) Definitions.--For purposes of this subsection--
``(A) Make-whole contributions.--Except as otherwise
provided in paragraph (2)(C), the term `make-whole
contributions' means nonelective allocations for each
employee in the class which are reasonably calculated, in a
consistent manner, to replace some or all of the retirement
benefits which the employee would have received under the
defined benefit plan and any other plan or qualified cash or
deferred arrangement under subsection (k)(2) if no change had
been made to such defined benefit plan and such other plan or
arrangement. For purposes of the preceding sentence,
consistency shall not be required with respect to employees
who were subject to different benefit formulas under the
defined benefit plan.
``(B) References to closed class of participants.--
References to a closed class of participants and similar
references to a closed class
[[Page H9319]]
shall include arrangements under which 1 or more classes of
participants are closed, except that 1 or more classes of
participants closed on different dates shall not be
aggregated for purposes of determining the date any such
class was closed.
``(C) Highly compensated employee.--The term `highly
compensated employee' has the meaning given such term in
section 414(q).".''.
(b) Participation Requirements.--Paragraph (26) of section
401(a) is amended by adding at the end the following new
subparagraph:
``(I) Protected participants.--
``(i) In general.--A plan shall be deemed to satisfy the
requirements of subparagraph (A) if--
``(I) the plan is amended--
``(aa) to cease all benefit accruals, or
``(bb) to provide future benefit accruals only to a closed
class of participants,
``(II) the plan satisfies subparagraph (A) (without regard
to this subparagraph) as of the effective date of the
amendment, and
``(III) the amendment was adopted before April 5, 2017, or
the plan is described in clause (ii).
``(ii) Plans described.--A plan is described in this clause
if the plan would be described in subsection (o)(1)(C), as
applied for purposes of subsection (o)(1)(B)(iii)(IV) and by
treating the effective date of the amendment as the date the
class was closed for purposes of subsection (o)(1)(C).
``(iii) Special rules.--For purposes of clause (i)(II), in
applying section 410(b)(6)(C), the amendments described in
clause (i) shall not be treated as a significant change in
coverage under section 410(b)(6)(C)(i)(II).
``(iv) Spun-off plans.--For purposes of this subparagraph,
if a portion of a plan described in clause (i) is spun off to
another employer, the treatment under clause (i) of the spun-
off plan shall continue with respect to the other
employer.''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall take effect on the date
of the enactment of this Act, without regard to whether any
plan modifications referred to in such amendments are adopted
or effective before, on, or after such date of enactment.
(2) Special rules.--
(A) Election of earlier application.--At the election of
the plan sponsor, the amendments made by this section shall
apply to plan years beginning after December 31, 2013.
(B) Closed classes of participants.--For purposes of
paragraphs (1)(A)(iii), (1)(B)(iii)(IV), and (2)(A)(iv) of
section 401(o) of the Internal Revenue Code of 1986 (as added
by this section), a closed class of participants shall be
treated as being closed before April 5, 2017, if the plan
sponsor's intention to create such closed class is reflected
in formal written documents and communicated to participants
before such date.
(C) Certain post-enactment plan amendments.--A plan shall
not be treated as failing to be eligible for the application
of section 401(o)(1)(A), 401(o)(1)(B)(iii), or 401(a)(26) of
such Code (as added by this section) to such plan solely
because in the case of--
(i) such section 401(o)(1)(A), the plan was amended before
the date of the enactment of this Act to eliminate 1 or more
benefits, rights, or features, and is further amended after
such date of enactment to provide such previously eliminated
benefits, rights, or features to a closed class of
participants, or
(ii) such section 401(o)(1)(B)(iii) or section 401(a)(26),
the plan was amended before the date of the enactment of this
Act to cease all benefit accruals, and is further amended
after such date of enactment to provide benefit accruals to a
closed class of participants. Any such section shall only
apply if the plan otherwise meets the requirements of such
section and in applying such section, the date the class of
participants is closed shall be the effective date of the
later amendment.
Subtitle G--Estate, Gift, and Generation-skipping Transfer Taxes
SEC. 1601. INCREASE IN CREDIT AGAINST ESTATE, GIFT, AND
GENERATION-SKIPPING TRANSFER TAX.
(a) In General.--Section 2010(c)(3) is amended by striking
``$5,000,000'' and inserting ``$10,000,000''.
(b) Effective Date.--The amendments made by this section
shall apply to estates of decedents dying, generation-
skipping transfers, and gifts made, after December 31, 2017.
SEC. 1602. REPEAL OF ESTATE AND GENERATION-SKIPPING TRANSFER
TAXES.
(a) Estate Tax Repeal.--
(1) In general.--Subchapter C of chapter 11 is amended by
adding at the end the following new section:
``SEC. 2210. TERMINATION.
``(a) In General.--Except as provided in subsection (b),
this chapter shall not apply to the estates of decedents
dying after December 31, 2024.
``(b) Certain Distributions From Qualified Domestic
Trusts.--In applying section 2056A with respect to the
surviving spouse of a decedent dying on or before December
31, 2024--
``(1) section 2056A(b)(1)(A) shall not apply to
distributions made after the 10-year period beginning on such
date, and
``(2) section 2056A(b)(1)(B) shall not apply after such
date.''.
(2) Conforming amendments.--Section 1014(b) is amended--
(A) in paragraph (6), by striking ``was includible in
determining'' and all that follows through the end and
inserting ``was includible (or would have been includible
without regard to section 2210) in determining the value of
the decedent's gross estate under chapter 11 of subtitle B''
,
(B) in paragraph (9), by striking ``required to be
included'' through ``Code of 1939'' and inserting ``required
to be included (or would have been required to be included
without regard to section 2210) in determining the value of
the decedent's gross estate under chapter 11 of subtitle B'',
and
(C) in paragraph (10), by striking ``Property includible in
the gross estate'' and inserting ``Property includible (or
which would have been includible without regard to section
2210) in the gross estate''.
(3) Clerical amendment.--The table of sections for
subchapter C of chapter 11 is amended by adding at the end
the following new item:
``Sec. 2210. Termination.''.
(b) Generation-skipping Transfer Tax Repeal.--
(1) In general.--Subchapter G of chapter 13 of subtitle B
of such Code is amended by adding at the end the following
new section:
``SEC. 2664. TERMINATION.
``This chapter shall not apply to generation-skipping
transfers after December 31, 2024.''.
(2) Clerical amendment.--The table of sections for
subchapter G of chapter 13 of such Code is amended by adding
at the end the following new item:
``Sec. 2664. Termination.''.
(c) Conforming Amendments Related to Gift Tax.--
(1) Computation of gift tax.--Section 2502 is amended by
adding at the end the following new subsection:
``(d) Gifts Made After 2024.--
``(1) In general.--In the case of a gift made after
December 31, 2024, subsection (a) shall be applied by
substituting `subsection (d)(2)' for `section 2001(c)' and
`such subsection' for `such section'.
``(2) Rate schedule.--
``If the amount with respect to which The tentative tax is:
the tentative tax to be computed is:.
Not over $10,000....................... 18% of such amount.
Over $10,000 but not over $20,000...... $1,800, plus 20% of the excess
over $10,000.
Over $20,000 but not over $40,000...... $3,800, plus 22% of the excess
over $20,000.
Over $40,000 but not over $60,000...... $8,200, plus 24% of the excess
over $40,000.
Over $60,000 but not over $80,000...... $13,000, plus 26% of the excess
over $60,000.
Over $80,000 but not over $100,000..... $18,200, plus 28% of the excess
over $80,000.
Over $100,000 but not over $150,000.... $23,800, plus 30% of the excess
over $100,000.
Over $150,000 but not over $250,000.... $38,800, plus 32% of the excess
of $150,000.
Over $250,000 but not over $500,000.... $70,800, plus 34% of the excess
over $250,000.
Over $500,000.......................... $155,800, plus 35% of the
excess of $500,000.''.
(2) Lifetime gift exemption.--Section 2505 is amended by
adding at the end the following new subsection:
``(d) Gifts Made After 2024.--
``(1) In general.--In the case of a gift made after
December 31, 2024, subsection (a)(1) shall be applied by
substituting `the amount of the tentative tax which would be
determined under the rate schedule set forth in section
2502(a)(2) if the amount with respect to which such tentative
tax is to be computed were $10,000,000' for `the applicable
credit amount in effect under section 2010(c) which would
apply if the donor died as of the end of the calendar year'.
``(2) Inflation adjustment.--
``(A) In general.--In the case of any calendar year after
2024, the dollar amount in subsection (a)(1) (after
application of this subsection) shall be increased by an
amount equal to--
``(i) such dollar amount, multiplied by
[[Page H9320]]
``(ii) the cost-of-living adjustment determined under
section 1(c)(2)(A) of such calendar year by substituting
`calendar year 2011' for `calendar year 2016' in clause (ii)
thereof.
``(B) Rounding.--If any amount as adjusted under paragraph
(1) is not a multiple of $10,000, such amount shall be
rounded to the nearest multiple of $10,000.''.
(3) Other conforming amendments related to gift tax.--
Section 2801 is amended by adding at the end the following
new subsection:
``(g) Gifts Received After 2024.--In the case of a gift
received after December 31, 2024, subsection (a)(1) shall be
applied by substituting `section 2502(a)(2)' for `section
2001(c) as in effect on the date of such receipt'.''.
(d) Effective Date.--The amendments made by this section
shall apply to estates of decedents dying, generation-
skipping transfers, and gifts made, after December 31, 2024.
TITLE II--ALTERNATIVE MINIMUM TAX REPEAL
SEC. 2001. REPEAL OF ALTERNATIVE MINIMUM TAX.
(a) In General.--Subchapter A of chapter 1 is amended by
striking part VI (and by striking the item relating to such
part in the table of parts for subchapter A).
(b) Credit for Prior Year Minimum Tax Liability.--
(1) Limitation.--Subsection (c) of section 53 is amended to
read as follows:
``(c) Limitation.--The credit allowable under subsection
(a) shall not exceed the regular tax liability of the
taxpayer reduced by the sum of the credits allowed under
subparts A, B, and D.''.
(2) Credits treated as refundable.--Section 53 is amended
by adding at the end the following new subsection:
``(e) Portion of Credit Treated as Refundable.--
``(1) In general.--In the case of any taxable year
beginning in 2019, 2020, 2021, or 2022, the limitation under
subsection (c) shall be increased by the AMT refundable
credit amount for such year.
``(2) AMT refundable credit amount.--For purposes of
paragraph (1), the AMT refundable credit amount is an amount
equal to 50 percent (100 percent in the case of a taxable
year beginning in 2022) of the excess (if any) of--
``(A) the minimum tax credit determined under subsection
(b) for the taxable year, over
``(B) the minimum tax credit allowed under subsection (a)
for such year (before the application of this subsection for
such year).
``(3) Credit refundable.--For purposes of this title (other
than this section), the credit allowed by reason of this
subsection shall be treated as a credit allowed under subpart
C (and not this subpart).
``(4) Short taxable years.--In the case of any taxable year
of less than 365 days, the AMT refundable credit amount
determined under paragraph (2) with respect to such taxable
year shall be the amount which bears the same ratio to such
amount determined without regard to this paragraph as the
number of days in such taxable year bears to 365.''.
(3) Treatment of references.--Section 53(d) is amended by
adding at the end the following new paragraph:
``(3) AMT term references.--Any references in this
subsection to section 55, 56, or 57 shall be treated as a
reference to such section as in effect before its repeal by
the Tax Cuts and Jobs Act.''.
(c) Conforming Amendments Related to AMT Repeal.--
(1) Section 2(d) is amended by striking ``sections 1 and
55'' and inserting ``section 1''.
(2) Section 5(a) is amended by striking paragraph (4).
(3) Section 11(d) is amended by striking ``the taxes
imposed by subsection (a) and section 55'' and inserting
``the tax imposed by subsection (a)''.
(4) Section 12 is amended by striking paragraph (7).
(5) Section 26(a) is amended to read as follows:
``(a) Limitation Based on Amount of Tax.--The aggregate
amount of credits allowed by this subpart for the taxable
year shall not exceed the taxpayer's regular tax liability
for the taxable year.''.
(6) Section 26(b)(2) is amended by striking subparagraph
(A).
(7) Section 26 is amended by striking subsection (c).
(8) Section 38(c) is amended--
(A) by striking paragraphs (1) through (5),
(B) by redesignating paragraph (6) as paragraph (2),
(C) by inserting before paragraph (2) (as so redesignated)
the following new paragraph:
``(1) In general.--The credit allowed under subsection (a)
for any taxable year shall not exceed the excess (if any)
of--
``(A) the sum of--
``(i) so much of the regular tax liability as does not
exceed $25,000, plus
``(ii) 75 percent of so much of the regular tax liability
as exceeds $25,000, over
``(B) the sum of the credits allowable under subparts A and
B of this part.'', and
(D) by striking ``subparagraph (B) of paragraph (1)'' each
place it appears in paragraph (2) (as so redesignated) and
inserting ``clauses (i) and (ii) of paragraph (1)(A)''.
(9) Section 39(a) is amended--
(A) by striking ``or the eligible small business credits''
in paragraph (3)(A), and
(B) by striking paragraph (4).
(10) Section 45D(g)(4)(B) is amended by striking ``or for
purposes of section 55''.
(11) Section 54(c)(1) is amended to read as follows:
``(1) regular tax liability (as defined in section 26(b)),
over''.
(12) Section 54A(c)(1)(A) is amended to read as follows:
``(A) regular tax liability (as defined in section 26(b)),
over''.
(13) Section 148(b)(3) is amended to read as follows:
``(3) Tax-exempt bonds not treated as investment
property.--The term `investment property' does not include
any tax-exempt bond.''.
(14) Section 168(k)(2) is amended by striking subparagraph
(G).
(15) Section 168(k) is amended by striking paragraph (4).
(16) Section 168(k)(5) is amended by striking subparagraph
(E).
(17) Section 168(m)(2)(B)(i) is amended by striking
``(determined without regard to paragraph (4) thereof)''.
(18) Section 168(m)(2) is amended by striking subparagraph
(D).
(19) Section 173 is amended by striking subsection (b).
(20) Section 263(c) is amended by striking ``section 59(e)
or 291'' and inserting ``section 291''.
(21) Section 263A(c) is amended by striking paragraph (6)
and by redesignating paragraph (7) (as amended) as paragraph
(6).
(22) Section 382(l) is amended by striking paragraph (7)
and by redesignating paragraph (8) as paragraph (7).
(23) Section 443 is amended by striking subsection (d) and
by redesignating subsection (e) as subsection (d).
(24) Section 616 is amended by striking subsection (e).
(25) Section 617 is amended by striking subsection (i).
(26) Section 641(c) is amended--
(A) in paragraph (2) by striking subparagraph (B) and by
redesignating subparagraphs (C) and (D) as subparagraphs (B)
and (C), respectively, and
(B) in paragraph (3), by striking ``paragraph (2)(C)'' and
inserting ``paragraph (2)(B)''.
(27) Subsections (b) and (c) of section 666 are each
amended by striking ``(other than the tax imposed by section
55)''.
(28) Section 848 is amended by striking subsection (i).
(29) Section 860E(a) is amended by striking paragraph (4).
(30) Section 871(b)(1) is amended by striking ``or 55''.
(31) Section 882(a)(1) is amended by striking ``55,''.
(32) Section 897(a) is amended to read as follows:
``(a) Treatment as Effectively Connected With United States
Trade or Business.--For purposes of this title, gain or loss
of a nonresident alien individual or a foreign corporation
from the disposition of a United States real property
interest shall be taken into account--
``(1) in the case of a nonresident alien individual, under
section 871(b)(1), or
``(2) in the case of a foreign corporation, under section
882(a)(1),
as if the taxpayer were engaged in a trade or business within
the United States during the taxable year and as if such gain
or loss were effectively connected with such trade or
business.''.
(33) Section 904(k) is amended to read as follows:
``(k) Cross Reference.--For increase of limitation under
subsection (a) for taxes paid with respect to amounts
received which were included in the gross income of the
taxpayer for a prior taxable year as a United States
shareholder with respect to a controlled foreign corporation,
see section 960(b).''.
(34) Section 911(f) is amended to read as follows:
``(f) Determination of Tax Liability.--
``(1) In general.--If, for any taxable year, any amount is
excluded from gross income of a taxpayer under subsection
(a), then, notwithstanding section 1, if such taxpayer has
taxable income for such taxable year, the tax imposed by
section 1 for such taxable year shall be equal to the excess
(if any) of--
``(A) the tax which would be imposed by section 1 for such
taxable year if the taxpayer's taxable income were increased
by the amount excluded under subsection (a) for such taxable
year, over
``(B) the tax which would be imposed by section 1 for such
taxable year if the taxpayer's taxable income were equal to
the amount excluded under subsection (a) for such taxable
year.
For purposes of this paragraph, the amount excluded under
subsection (a) shall be reduced by the aggregate amount of
any deductions or exclusions disallowed under subsection
(d)(6) with respect to such excluded amount.
``(2) Treatment of capital gain excess.--
``(A) In general.--In applying section 1(h) for purposes of
determining the tax under paragraph (1)(A) for any taxable
year in which, without regard to this subsection, the
taxpayer's net capital gain exceeds taxable income (hereafter
in this subparagraph referred to as the capital gain
excess)--
``(i) the taxpayer's net capital gain (determined without
regard to section 1(h)(11)) shall be reduced (but not below
zero) by such capital gain excess,
``(ii) the taxpayer's qualified dividend income shall be
reduced by so much of such capital gain excess as exceeds the
taxpayer's net capital gain (determined without regard to
section 1(h)(11) and the reduction under clause (i)), and
``(iii) adjusted net capital gain, unrecaptured section
1250 gain, and 28-percent rate gain shall each be determined
after increasing the amount described in section 1(h)(4)(B)
by such capital gain excess.
``(B) Definitions.--Terms used in this paragraph which are
also used in section 1(h) shall have the respective meanings
given such terms by section 1(h).''.
[[Page H9321]]
(35) Section 962(a)(1) is amended--
(A) by striking ``sections 1 and 55'' and inserting
``section 1'', and
(B) by striking ``sections 11 and 55'' and inserting
``section 11''.
(36) Section 1016(a) is amended by striking paragraph (20).
(37) Section 1202(a)(4) is amended by inserting ``and'' at
the end of subparagraph (A), by striking ``, and'' and
inserting a period at the end of subparagraph (B), and by
striking subparagraph (C).
(38) Section 1374(b)(3)(B) is amended by striking the last
sentence thereof.
(39) Section 1561(a) is amended--
(A) by inserting ``and'' at the end of paragraph (1), by
striking ``, and'' at the end of paragraph (2) and inserting
a period, and by striking paragraph (3), and
(B) by striking the last sentence.
(40) Section 6015(d)(2)(B) is amended by striking ``or
55''.
(41) Section 6211(b)(4)(A) is amended by striking``,
168(k)(4)''.
(42) Section 6425(c)(1)(A) is amended to read as follows:
``(A) the tax imposed under section 11 or subchapter L of
chapter 1, whichever is applicable, over''.
(43) Section 6654(d)(2) is amended--
(A) in clause (i) of subparagraph (B), by striking ``,
alternative minimum taxable income,'', and
(B) in clause (i) of subparagraph (C), by striking ``,
alternative minimum taxable income,''.
(44) Section 6655(e)(2)(B)(i) is amended by striking ``The
taxable income and alternative minimum taxable income shall''
and inserting ``Taxable income shall''.
(45) Section 6655(g)(1)(A) is amended by adding ``plus'' at
the end of clause (i), by striking clause (ii), and by
redesignating clause (iii) as clause (ii).
(46) Section 6662(e)(3)(C) is amended by striking ``the
regular tax (as defined in section 55(c))'' and inserting
``the regular tax liability (as defined in section 26(b))''.
(d) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to taxable years beginning after December 31, 2017.
(2) Prior elections with respect to certain tax
preferences.--So much of the amendment made by subsection (a)
as relates to the repeal of section 59(e) of the Internal
Revenue Code of 1986 shall apply to amounts paid or incurred
after December 31, 2017.
(3) Treatment of net operating loss carrybacks.--For
purposes of section 56(d) of the Internal Revenue Code of
1986 (as in effect before its repeal), the amount of any net
operating loss which may be carried back from a taxable year
beginning after December 31, 2017, to taxable years beginning
before January 1, 2018, shall be determined without regard to
any adjustments under section 56(d)(2)(A) of such Code (as so
in effect).
TITLE III--BUSINESS TAX REFORM
Subtitle A--Tax Rates
SEC. 3001. REDUCTION IN CORPORATE TAX RATE.
(a) In General.--Section 11(b) is amended to read as
follows:
``(b) Amount of Tax.--
``(1) In general.--Except as otherwise provided in this
subsection, the amount of the tax imposed by subsection (a)
shall be 20 percent of taxable income.
``(2) Special rule for personal service corporations.--
``(A) In general.--In the case of a personal service
corporation (as defined in section 448(d)(2)), the amount of
the tax imposed by subsection (a) shall be 25 percent of
taxable income.
``(B) References to corporate rate.--Any reference to the
rate imposed under this section or to the highest rate in
effect under this section (or any similar reference) shall be
determined without regard to the rate imposed with respect to
personal service corporations (as so defined).''.
(b) Conforming Amendments.--
(1)(A) Part I of subchapter P of chapter 1 is amended by
striking section 1201 (and by striking the item relating to
such section in the table of sections for such part).
(B) Section 12 is amended by striking paragraph (4).
(C) Section 527(b) is amended--
(i) by striking paragraph (2), and
(ii) by striking all that precedes ``is hereby imposed''
and inserting:
``(b) Tax Imposed.--A tax''.
(D) Section 594(a) is amended by striking ``taxes imposed
by section 11 or 1201(a)'' and inserting ``tax imposed by
section 11''.
(E) Section 691(c)(4) is amended by striking ``1201,''.
(F) Section 801(a) is amended--
(i) by striking paragraph (2), and
(ii) by striking all that precedes ``is hereby imposed''
and inserting:
``(a) Tax Imposed.--A tax''.
(G) Section 831(e) is amended by striking paragraph (1) and
by redesignating paragraphs (2) and (3) as paragraphs (1) and
(2), respectively.
(H) Sections 832(c)(5) and 834(b)(1)(D) are each amended by
striking ``sec. 1201 and following,''.
(I) Section 852(b)(3)(A) is amended by striking ``section
1201(a)'' and inserting ``section 11(b)(1)''.
(J) Section 857(b)(3) is amended--
(i) by striking subparagraph (A) and redesignating
subparagraphs (B) through (F) as subparagraphs (A) through
(E), respectively,
(ii) in subparagraph (C), as so redesignated--
(I) by striking ``subparagraph (A)(ii)'' in clause (i)
thereof and inserting ``paragraph (1)'',
(II) by striking ``the tax imposed by subparagraph
(A)(ii)'' in clauses (ii) and (iv) thereof and inserting
``the tax imposed by paragraph (1) on undistributed capital
gain'',
(iii) in subparagraph (E), as so redesignated, by striking
``subparagraph (B) or (D)'' and inserting ``subparagraph (A)
or (C)'', and
(iv) by adding at the end the following new subparagraph:
``(F) Undistributed capital gain.--For purposes of this
paragraph, the term `undistributed capital gain' means the
excess of the net capital gain over the deduction for
dividends paid (as defined in section 561) determined with
reference to capital gain dividends only.''.
(K) Section 882(a)(1) is amended by striking ``, or
1201(a)''.
(L) Section 1374(b) is amended by striking paragraph (4).
(M) Section 1381(b) is amended by striking ``taxes imposed
by section 11 or 1201'' and inserting ``tax imposed by
section 11''.
(N) Section 6655(g)(1)(A)(i) is amended by striking ``or
1201(a),''.
(O) Section 7518(g)(6)(A) is amended by striking ``or
1201(a)''.
(2) Section 1445(e)(1) is amended by striking ``35 percent
(or, to the extent provided in regulations, 20 percent)'' and
inserting ``20 percent''.
(3) Section 1445(e)(2) is amended by striking ``35
percent'' and inserting ``20 percent''.
(4) Section 1445(e)(6) is amended by striking ``35 percent
(or, to the extent provided in regulations, 20 percent)'' and
inserting ``20 percent''.
(5)(A) Part I of subchapter B of chapter 5 is amended by
striking section 1551 (and by striking the item relating to
such section in the table of sections for such part).
(B) Section 12 is amended by striking paragraph (6).
(C) Section 535(c)(5) is amended to read as follows:
``(5) Cross reference.--For limitation on credit provided
in paragraph (2) or (3) in the case of certain controlled
corporations, see section 1561.''.
(6)(A) Section 1561, as amended by the preceding provisions
of this Act, is amended to read as follows:
``SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS CREDIT IN THE
CASE OF CERTAIN CONTROLLED CORPORATIONS.
``(a) In General.--The component members of a controlled
group of corporations on a December 31 shall, for their
taxable years which include such December 31, be limited for
purposes of this subtitle to one $250,000 ($150,000 if any
component member is a corporation described in section
535(c)(2)(B)) amount for purposes of computing the
accumulated earnings credit under section 535(c)(2) and (3).
Such amount shall be divided equally among the component
members of such group on such December 31 unless the
Secretary prescribes regulations permitting an unequal
allocation of such amount.
``(b) Certain Short Taxable Years.--If a corporation has a
short taxable year which does not include a December 31 and
is a component member of a controlled group of corporations
with respect to such taxable year, then for purposes of this
subtitle, the amount to be used in computing the accumulated
earnings credit under section 535(c)(2) and (3) of such
corporation for such taxable year shall be the amount
specified in subsection (a) with respect to such group,
divided by the number of corporations which are component
members of such group on the last day of such taxable year.
For purposes of the preceding sentence, section 1563(b) shall
be applied as if such last day were substituted for December
31.''.
(B) The table of sections for part II of subchapter B of
chapter 5 is amended by striking the item relating to section
1561 and inserting the following new item:
``Sec. 1561. Limitation on accumulated earnings credit in the case of
certain controlled corporations.''.
(7) Section 7518(g)(6)(A) is amended--
(A) by striking ``With respect to the portion'' and
inserting ``In the case of a taxpayer other than a
corporation, with respect to the portion'', and
(B) by striking ``(34 percent in the case of a
corporation)''.
(c) Reduction in Dividend Received Deductions to Reflect
Lower Corporate Income Tax Rates.--
(1) Dividends received by corporations.--
(A) In general.--Section 243(a)(1) is amended by striking
``70 percent'' and inserting ``50 percent''.
(B) Dividends from 20-percent owned corporations.--Section
243(c)(1) is amended--
(i) by striking ``80 percent'' and inserting ``65
percent'', and
(ii) by striking ``70 percent'' and inserting ``50
percent''.
(C) Conforming amendment.--The heading for section 243(c)
is amended by striking ``Retention of 80-percent Dividend
Received Deduction'' and inserting ``Increased Percentage''.
(2) Dividends received from fsc.--Section 245(c)(1)(B) is
amended--
(A) by striking ``70 percent'' and inserting ``50
percent'', and
(B) by striking ``80 percent'' and inserting ``65
percent''.
(3) Limitation on aggregate amount of deductions.--Section
246(b)(3) is amended--
(A) by striking ``80 percent'' in subparagraph (A) and
inserting ``65 percent'', and
(B) by striking ``70 percent'' in subparagraph (B) and
inserting ``50 percent''.
(4) Reduction in deduction where portfolio stock is debt-
financed.--Section 246A(a)(1) is amended--
(A) by striking ``70 percent'' and inserting ``50
percent'', and
(B) by striking ``80 percent'' and inserting ``65
percent''.
[[Page H9322]]
(5) Income from sources within the united states.--Section
861(a)(2) is amended--
(A) by striking ``100/70th'' and inserting ``100/50th'' in
subparagraph (B), and
(B) in the flush sentence at the end--
(i) by striking ``100/80th'' and inserting ``100/65th'',
and
(ii) by striking ``100/70th'' and inserting ``100/50th''.
(d) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to taxable years beginning after December 31, 2017.
(2) Certain conforming amendments.--The amendments made by
paragraphs (2), (3), and (4) of subsection (b) shall apply to
distributions after December 31, 2017.
(e) Normalization Requirements.--
(1) In general.--A normalization method of accounting shall
not be treated as being used with respect to any public
utility property for purposes of section 167 or 168 of the
Internal Revenue Code of 1986 if the taxpayer, in computing
its cost of service for ratemaking purposes and reflecting
operating results in its regulated books of account, reduces
the excess tax reserve more rapidly or to a greater extent
than such reserve would be reduced under the average rate
assumption method.
(2) Alternative method for certain taxpayers.--If, as of
the first day of the taxable year that includes the date of
enactment of this Act--
(A) the taxpayer was required by a regulatory agency to
compute depreciation for public utility property on the basis
of an average life or composite rate method, and
(B) the taxpayer's books and underlying records did not
contain the vintage account data necessary to apply the
average rate assumption method,
the taxpayer will be treated as using a normalization method
of accounting if, with respect to such jurisdiction, the
taxpayer uses the alternative method for public utility
property that is subject to the regulatory authority of that
jurisdiction.
(3) Definitions.--For purposes of this subsection--
(A) Excess tax reserve.--The term ``excess tax reserve''
means the excess of--
(i) the reserve for deferred taxes (as described in section
168(i)(9)(A)(ii) of the Internal Revenue Code of 1986 as in
effect on the day before the date of the enactment of this
Act), over
(ii) the amount which would be the balance in such reserve
if the amount of such reserve were determined by assuming
that the corporate rate reductions provided in this Act were
in effect for all prior periods.
(B) Average rate assumption method.--The average rate
assumption method is the method under which the excess in the
reserve for deferred taxes is reduced over the remaining
lives of the property as used in its regulated books of
account which gave rise to the reserve for deferred taxes.
Under such method, if timing differences for the property
reverse, the amount of the adjustment to the reserve for the
deferred taxes is calculated by multiplying--
(i) the ratio of the aggregate deferred taxes for the
property to the aggregate timing differences for the property
as of the beginning of the period in question, by
(ii) the amount of the timing differences which reverse
during such period.
(C) Alternative method.--The ``alternative method'' is the
method in which the taxpayer--
(i) computes the excess tax reserve on all public utility
property included in the plant account on the basis of the
weighted average life or composite rate used to compute
depreciation for regulatory purposes, and
(ii) reduces the excess tax reserve ratably over the
remaining regulatory life of the property.
(4) Tax increased for normalization violation.--If, for any
taxable year ending after the date of the enactment of this
Act, the taxpayer does not use a normalization method of
accounting, the taxpayer's tax for the taxable year shall be
increased by the amount by which it reduces its excess tax
reserve more rapidly than permitted under a normalization
method of accounting.
Subtitle B--Cost Recovery
SEC. 3101. INCREASED EXPENSING.
(a) 100 Percent Expensing.--Section 168(k)(1)(A) is amended
by striking ``50 percent'' and inserting ``100 percent''.
(b) Extension Through January 1, 2023.--Section 168(k)(2)
is amended--
(1) in subparagraph (A)(iii), by striking ``January 1,
2020'' and inserting ``January 1, 2023'',
(2) in subparagraph (B)(i)(II), by striking ``January 1,
2021'' and inserting ``January 1, 2024'',
(3) in subparagraph (B)(i)(III), by striking ``January 1,
2020'' and inserting ``January 1, 2023'',
(4) in subparagraph (B)(ii), by striking ``January 1,
2020'' in each place it appears and inserting ``January 1,
2023'', and
(5) in subparagraph (E)(i), by striking ``January 1, 2020''
and replacing it with ``January 1, 2023''.
(c) Application to Used Property.--
(1) In general.--Section 168(k)(2)(A)(ii) is amended to
read as follows:
``(ii) the original use of which begins with the taxpayer
or the acquisition of which by the taxpayer meets the
requirements of clause (ii) of subparagraph (E), and''.
(2) Acquisition requirements.--Section 168(k)(2)(E)(ii) is
amended to read as follows:
``(ii) Acquisition requirements.--An acquisition of
property meets the requirements of this clause if--
``(I) such property was not used by the taxpayer at any
time prior to such acquisition, and
``(II) the acquisition of such property meets the
requirements of paragraphs (2)(A), (2)(B), (2)(C), and (3) of
section 179(d).'',
(3) Anti-abuse rules.--Section 168(k)(2)(E) is further
amended by amending clause (iii)(I) to read as follows:
``(I) property is used by a lessor of such property and
such use is the lessor's first use of such property,''.
(d) Exception for Certain Trades and Businesses Not Subject
to Limitation on Interest Expense.--Section 168(k)(2), as
amended by section 2001, is amended by inserting after
subparagraph (F) the following new subparagraph:
``(G) Exception for property of certain businesses not
subject to limitation on interest expense.--The term
`qualified property' shall not include any property used in--
``(i) a trade or business described in subparagraph (B) or
(C) of section 163(j)(7), or
``(ii) a trade or business that has had floor plan
financing indebtedness (as defined in paragraph (9) of
section 163(j)), if the floor plan financing interest related
to such indebtedness was taken into account under paragraph
(1)(C) of such section.''.
(e) Coordination With Section 280F.--Section 168(k)(2)(F)
is amended--
(1) by striking ``$8,000'' in clauses (i) and (iii) and
inserting ``$16,000'', and
(2) in clause (iii)--
(A) by striking ``placed in service by the taxpayer after
December 31, 2017'' and inserting ``acquired by the taxpayer
before September 28, 2017, and placed in service by the
taxpayer after September 27, 2017'', and
(B) by redesignating subclauses (I) and (II) as subclauses
(II) and (III) respectively, and inserting before clause
(II), as so redesignated, the following new subclause:
``(I) in the case of a passenger automobile placed in
service before January 1, 2018, `$8,000',''.
(f) Conforming Amendments.--
(1) Section 168(k)(2)(B)(i)(III), as amended, is amended by
inserting ``binding'' before ``contract''.
(2) Section 168(k)(5) is amended by--
(A) by striking ``January 1, 2020'' in subparagraph (A) and
inserting ``January 1, 2023'',
(B) by striking ``50 percent'' in subparagraph (A)(i) and
inserting ``100 percent'', and
(C) by striking subparagraph (F).
(3) Section 168(k)(6) is amended to read as follows:
``(6) Phase down.--In the case of qualified property
acquired by the taxpayer before September 28, 2017, and
placed in service by the taxpayer after September 27, 2017,
paragraph (1)(A) shall be applied by substituting for `100
percent'--
``(A) `50 percent' in the case of--
``(i) property placed in service before January 1, 2018,
and
``(ii) property described in subparagraph (B) or (C) of
paragraph (2) which is placed in service in 2018,
``(B) `40 percent' in the case of--
``(i) property placed in service in 2018 (other than
property described in subparagraph (B) or (C) of paragraph
(2)), and
``(ii) property described in subparagraph (B) or (C) of
paragraph (2) which is placed in service in 2019, and
``(C) `30 percent' in the case of--
``(i) property placed in service in 2019 (other than
property described in subparagraph (B) or (C) of paragraph
(2)), and
``(ii) property described in subparagraph (B) or (C) of
paragraph (2) which is placed in service in 2020.''.
(4) The heading of section 168(k) is amended by striking
``Special Allowance for Certain Property Acquired After
December 31, 2007, and Before January 1, 2020'' and inserting
``Full Expensing of Certain Property''.
(5) Section 460(c)(6)(B)(ii) is amended by striking
``January 1, 2020 (January 1, 2021 in the case of property
described in section 168(k)(2)(B))'' and inserting ``January
1, 2023 (January 1, 2024 in the case of property described in
section 168(k)(2)(B))''.
(g) Effective Date.--
(1) In general.--Except at provided by paragraph (2), the
amendments made by this section shall apply to property
which--
(A) is acquired after September 27, 2017, and
(B) is placed in service after such date.
For purposes of the preceding sentence, property shall not be
treated as acquired after the date on which a written binding
contract is entered into for such acquisition.
(2) Specified plants.--The amendments made by subsection
(f)(2) shall apply to specified plants planted or grafted
after September 27, 2017.
(3) Transition rule.--In the case of any taxpayer's first
taxable year ending after September 27, 2017, the taxpayer
may elect (at such time and in such form and manner as the
Secretary of the Treasury, or his designee, may provide) to
apply section 168 of the Internal Revenue Code of 1986
without regard to the amendments made by this section.
(4) Limitation on net operating loss carrybacks
attributable to full expensing.--In the case of any taxable
year which includes any portion of the period beginning on
September 28, 2017, and ending on December 31, 2017, the
amount of any net operating loss for such taxable year which
may be treated as a net operating loss carryback (including
any such carryback attributable to any specified liability
loss under section 172(b)(1)(C), any corporate equity
reduction interest loss under section 172(b)(1)(D), any
eligible loss under section 172(b)(1)(E), and any farming
loss under section 172(b)(1)(F)) shall be determined without
regard to the amendments made by this section. For purposes
of this paragraph, terms which are used in section 172 of the
Internal Revenue Code of 1986 (determined without regard to
the
[[Page H9323]]
amendments made by section 3302) shall have the same meaning
as when used in such section.
Subtitle C--Small Business Reforms
SEC. 3201. EXPANSION OF SECTION 179 EXPENSING.
(a) Increased Dollar Limitations.--
(1) In general.--Section 179(b) is amended--
(A) by inserting ``($5,000,000, in the case of taxable
years beginning before January 1, 2023)'' after ``$500,000''
in paragraph (1), and
(B) by inserting ``($20,000,000, in the case of taxable
years beginning before January 1, 2023)'' after
``$2,000,000'' in paragraph (2).
(2) Inflation adjustment.--Section 179(b)(6) is amended to
read as follows:
``(6) Inflation adjustment.--
``(A) In general.--In the case of a taxable year beginning
after 2015 (2018 in the case of the $5,000,000 and
$20,000,000 amounts in subsection (b)), each dollar amount in
subsection (b) shall be increased by an amount equal to such
dollar amount multiplied by--
``(i) in the case of the $500,000 and $2,000,000 amounts in
subsection (b), the cost-of-living adjustment determined
under section 1(c)(2) for the calendar year in which the
taxable year begins, determined by substituting `calendar
year 2014' for `calendar year 2016' in subparagraph (A)(ii)
thereof, and
``(ii) in the case of the $5,000,000 and $20,000,000
amounts in subsection (b), the cost-of-living adjustment
determined under section 1(c)(2) for the calendar year in
which the taxable year begins, determined by substituting
`calendar year 2017' for `calendar year 2016' in subparagraph
(A)(ii) thereof.
``(B) Rounding.--The amount of any increase under
subparagraph (A) shall be rounded to the nearest multiple of
$10,000 ($100,000 in the case of the $5,000,000 and
$20,000,000 amounts in subsection (b)).''.
(b) Application to Qualified Energy Efficient Heating and
Air-conditioning Property.--
(1) In general.--Section 179(f)(2) is amended by striking
``and'' at the end of subparagraph (B), by striking the
period at the end of subparagraph (C) and inserting ``,
and'', and by adding at the end the following new
subparagraph:
``(D) qualified energy efficient heating and air-
conditioning property.''.
(2) Qualified energy efficient heating and air-conditioning
property.--Section 179(f) is amended by adding at the end the
following new paragraph:
``(3) Qualified energy efficient heating and air-
conditioning property.--For purposes of this subsection--
``(A) In general.--The term `qualified energy efficient
heating and air-conditioning property' means any section 1250
property--
``(i) with respect to which depreciation (or amortization
in lieu of depreciation) is allowable,
``(ii) which is installed as part of a building's heating,
cooling, ventilation, or hot water system, and
``(iii) which is within the scope of Standard 90.1-2007 or
any successor standard.
``(B) Standard 90.1-2007.--The term `Standard 90.1-2007'
means Standard 90.1-2007 of the American Society of Heating,
Refrigerating and Air-Conditioning Engineers and the
Illuminating Engineering Society of North America (as in
effect on the day before the date of the adoption of Standard
90.1-2010 of such Societies).''.
(c) Effective Date.--
(1) Increased dollar limitations.--The amendments made by
subsection (a) shall apply to taxable years beginning after
December 31, 2017.
(2) Application to qualified energy efficient heating and
air-conditioning property.--The amendments made by subsection
(b) shall apply to property acquired and placed in service
after November 2, 2017. For purposes of the preceding
sentence, property shall not be treated as acquired after the
date on which a written binding contract is entered into for
such acquisition.
SEC. 3202. SMALL BUSINESS ACCOUNTING METHOD REFORM AND
SIMPLIFICATION.
(a) Modification of Limitation on Cash Method of
Accounting.--
(1) Increased limitation.--So much of section 448(c) as
precedes paragraph (2) is amended to read as follows:
``(c) Gross Receipts Test.--For purposes of this section--
``(1) In general.--A corporation or partnership meets the
gross receipts test of this subsection for any taxable year
if the average annual gross receipts of such entity for the
3-taxable-year period ending with the taxable year which
precedes such taxable year does not exceed $25,000,000.''.
(2) Application of exception on annual basis.--Section
448(b)(3) is amended to read as follows:
``(3) Entities which meet gross receipts test.--Paragraphs
(1) and (2) of subsection (a) shall not apply to any
corporation or partnership for any taxable year if such
entity (or any predecessor) meets the gross receipts test of
subsection (c) for such taxable year.''.
(3) Inflation adjustment.--Section 448(c) is amended by
adding at the end the following new paragraph:
``(4) Adjustment for inflation.--In the case of any taxable
year beginning after December 31, 2018, the dollar amount in
paragraph (1) shall be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(c)(2) for the calendar year in which the taxable
year begins, by substituting `calendar year 2017' for
`calendar year 2016' in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is
not a multiple of $1,000,000, such amount shall be rounded to
the nearest multiple of $1,000,000.''.
(4) Coordination with section 481.--Section 448(d)(7) is
amended to read as follows:
``(7) Coordination with section 481.--Any change in method
of accounting made pursuant to this section shall be treated
for purposes of section 481 as initiated by the taxpayer and
made with the consent of the Secretary.''.
(5) Application of exception to corporations engaged in
farming.--
(A) In general.--Section 447(c) is amended--
(i) by inserting ``for any taxable year'' after ``not being
a corporation'' in the matter preceding paragraph (1), and
(ii) by amending paragraph (2) to read as follows:
``(2) a corporation which meets the gross receipts test of
section 448(c) for such taxable year.''.
(B) Coordination with section 481.--Section 447(f) is
amended to read as follows:
``(f) Coordination With Section 481.--Any change in method
of accounting made pursuant to this section shall be treated
for purposes of section 481 as initiated by the taxpayer and
made with the consent of the Secretary.''.
(C) Conforming amendments.--Section 447 is amended--
(i) by striking subsections (d), (e), (h), and (i), and
(ii) by redesignating subsections (f) and (g) (as amended
by subparagraph (B)) as subsections (d) and (e),
respectively.
(b) Exemption From UNICAP Requirements.--
(1) In general.--Section 263A is amended by redesignating
subsection (i) as subsection (j) and by inserting after
subsection (h) the following new subsection:
``(i) Exemption for Certain Small Businesses.--
``(1) In general.--In the case of any taxpayer (other than
a tax shelter prohibited from using the cash receipts and
disbursements method of accounting under section 448(a)(3))
which meets the gross receipts test of section 448(c) for any
taxable year, this section shall not apply with respect to
such taxpayer for such taxable year.
``(2) Application of gross receipts test to individuals,
etc.-- In the case of any taxpayer which is not a corporation
or a partnership, the gross receipts test of section 448(c)
shall be applied in the same manner as if each trade or
business of such taxpayer were a corporation or partnership.
``(3) Coordination with section 481.--Any change in method
of accounting made pursuant to this subsection shall be
treated for purposes of section 481 as initiated by the
taxpayer and made with the consent of the Secretary.''.
(2) Conforming amendment.--Section 263A(b)(2) is amended to
read as follows:
``(2) Property acquired for resale.--Real or personal
property described in section 1221(a)(1) which is acquired by
the taxpayer for resale.''.
(c) Exemption From Inventories.--Section 471 is amended by
redesignating subsection (c) as subsection (d) and by
inserting after subsection (b) the following new subsection:
``(c) Exemption for Certain Small Businesses.--
``(1) In general.--In the case of any taxpayer (other than
a tax shelter prohibited from using the cash receipts and
disbursements method of accounting under section 448(a)(3))
which meets the gross receipts test of section 448(c) for any
taxable year--
``(A) subsection (a) shall not apply with respect to such
taxpayer for such taxable year, and
``(B) the taxpayer's method of accounting for inventory for
such taxable year shall not be treated as failing to clearly
reflect income if such method either--
``(i) treats inventory as non-incidental materials and
supplies, or
``(ii) conforms to such taxpayer's method of accounting
reflected in an applicable financial statement of the
taxpayer with respect to such taxable year or, if the
taxpayer does not have any applicable financial statement
with respect to such taxable year, the books and records of
the taxpayer prepared in accordance with the taxpayer's
accounting procedures.
``(2) Applicable financial statement.--For purposes of this
subsection, the term `applicable financial statement' means--
``(A) a financial statement which is certified as being
prepared in accordance with generally accepted accounting
principles and which is--
``(i) a 10-K (or successor form), or annual statement to
shareholders, required to be filed by the taxpayer with the
United States Securities and Exchange Commission,
``(ii) an audited financial statement of the taxpayer which
is used for--
``(I) credit purposes,
``(II) reporting to shareholders, partners, or other
proprietors, or to beneficiaries, or
``(III) any other substantial nontax purpose,
but only if there is no statement of the taxpayer described
in clause (i), or
``(iii) filed by the taxpayer with any other Federal or
State agency for nontax purposes, but only if there is no
statement of the taxpayer described in clause (i) or (ii), or
``(B) a financial statement of the taxpayer which--
``(i) is used for a purpose described in subclause (I),
(II), or (III) of subparagraph (A)(ii), or
``(ii) filed by the taxpayer with any regulatory or
governmental body (whether domestic or foreign) specified by
the Secretary,
but only if there is no statement of the taxpayer described
in subparagraph (A).
``(3) Application of gross receipts test to individuals,
etc.--In the case of any taxpayer which is not a corporation
or a partnership, the gross receipts test of section 448(c)
shall be applied in the same manner as if each trade or
[[Page H9324]]
business of such taxpayer were a corporation or partnership.
``(4) Coordination with section 481.--Any change in method
of accounting made pursuant to this subsection shall be
treated for purposes of section 481 as initiated by the
taxpayer and made with the consent of the Secretary.''.
(d) Exemption From Percentage Completion for Long-term
Contracts.--
(1) In general.--Section 460(e)(1)(B) is amended--
(A) by inserting ``(other than a tax shelter prohibited
from using the cash receipts and disbursements method of
accounting under section 448(a)(3))'' after ``taxpayer'' in
the matter preceding clause (i), and
(B) by amending clause (ii) to read as follows:
``(ii) who meets the gross receipts test of section 448(c)
for the taxable year in which such contract is entered
into.''.
(2) Conforming amendments.--Section 460(e) is amended by
striking paragraphs (2) and (3), by redesignating paragraphs
(4), (5), and (6) as paragraphs (3), (4), and (5),
respectively, and by inserting after paragraph (1) the
following new paragraph:
``(2) Rules related to gross receipts test.--
``(A) Application of gross receipts test to individuals,
etc.-- For purposes of paragraph (1)(B)(ii), in the case of
any taxpayer which is not a corporation or a partnership, the
gross receipts test of section 448(c) shall be applied in the
same manner as if each trade or business of such taxpayer
were a corporation or partnership.
``(B) Coordination with section 481.--Any change in method
of accounting made pursuant to paragraph (1)(B)(ii) shall be
treated as initiated by the taxpayer and made with the
consent of the Secretary. Such change shall be effected on a
cut-off basis for all similarly classified contracts entered
into on or after the year of change.''.
(e) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to taxable years beginning after December 31, 2017.
(2) Preservation of suspense account rules with respect to
any existing suspense accounts.--So much of the amendments
made by subsection (a)(5)(C) as relate to section 447(i) of
the Internal Revenue Code of 1986 shall not apply with
respect to any suspense account established under such
section before the date of the enactment of this Act.
(3) Exemption from percentage completion for long-term
contracts.--The amendments made by subsection (d) shall apply
to contracts entered into after December 31, 2017, in taxable
years ending after such date.
SEC. 3203. SMALL BUSINESS EXCEPTION FROM LIMITATION ON
DEDUCTION OF BUSINESS INTEREST.
(a) In General.--Section 163(j)(2), as amended by section
3301, is amended to read as follows:
``(2) Exemption for certain small businesses.--In the case
of any taxpayer (other than a tax shelter prohibited from
using the cash receipts and disbursements method of
accounting under section 448(a)(3)) which meets the gross
receipts test of section 448(c) for any taxable year,
paragraph (1) shall not apply to such taxpayer for such
taxable year. In the case of any taxpayer which is not a
corporation or a partnership, the gross receipts test of
section 448(c) shall be applied in the same manner as if such
taxpayer were a corporation or partnership.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 3204. MODIFICATION OF TREATMENT OF S CORPORATION
CONVERSIONS TO C CORPORATIONS.
(a) Adjustments Attributable to Conversion From S
Corporation to C Corporation.--Section 481 is amended by
adding at the end the following new subsection:
``(d) Adjustments Attributable to Conversion From S
Corporation to C Corporation.--
``(1) In general.--In the case of an eligible terminated S
corporation, any adjustment required by subsection (a)(2)
which is attributable to such corporation's revocation
described in paragraph (2)(A)(ii) shall be taken into account
ratably during the 6-taxable year period beginning with the
year of change.
``(2) Eligible terminated s corporation.--For purposes of
this subsection, the term `eligible terminated S corporation'
means any C corporation--
``(A) which--
``(i) was an S corporation on the day before the date of
the enactment of the Tax Cuts and Jobs Act, and
``(ii) during the 2-year period beginning on the date of
such enactment makes a revocation of its election under
section 1362(a), and
``(B) the owners of the stock of which, determined on the
date such revocation is made, are the same owners (and in
identical proportions) as on the date of such enactment.''.
(b) Cash Distributions Following Post-termination
Transition Period From S Corporation Status.--Section 1371 is
amended by adding at the end the following new subsection:
``(f) Cash Distributions Following Post-termination
Transition Period.--In the case of a distribution of money by
an eligible terminated S corporation (as defined in section
481(d)) after the post-termination transition period, the
accumulated adjustments account shall be allocated to such
distribution, and the distribution shall be chargeable to
accumulated earnings and profits, in the same ratio as the
amount of such accumulated adjustments account bears to the
amount of such accumulated earnings and profits.''.
Subtitle D--Reform of Business-related Exclusions, Deductions, etc.
SEC. 3301. INTEREST.
(a) In General.--Section 163(j) is amended to read as
follows:
``(j) Limitation on Business Interest.--
``(1) In general.--In the case of any taxpayer for any
taxable year, the amount allowed as a deduction under this
chapter for business interest shall not exceed the sum of--
``(A) the business interest income of such taxpayer for
such taxable year,
``(B) 30 percent of the adjusted taxable income of such
taxpayer for such taxable year, plus
``(C) the floor plan financing interest of such taxpayer
for such taxable year.
The amount determined under subparagraph (B) (after any
increases in such amount under paragraph (3)(A)(iii)) shall
not be less than zero.
``(2) Exemption for certain small businesses.--For
exemption for certain small businesses, see the amendment
made by section 3203 of the Tax Cuts and Jobs Act.
``(3) Application to partnerships, etc.--
``(A) In general.--In the case of any partnership--
``(i) this subsection shall be applied at the partnership
level and any deduction for business interest shall be taken
into account in determining the non-separately stated taxable
income or loss of the partnership,
``(ii) the adjusted taxable income of each partner of such
partnership shall be determined without regard to such
partner's distributive share of the non-separately stated
taxable income or loss of such partnership, and
``(iii) the amount determined under paragraph (1)(B) with
respect to each partner of such partnership shall be
increased by such partner's distributive share of such
partnership's excess amount.
``(B) Excess amount.--The term `excess amount' means, with
respect to any partnership, the excess (if any) of--
``(i) 30 percent of the adjusted taxable income of the
partnership, over
``(ii) the amount (if any) by which the business interest
of the partnership, reduced by floor plan financing interest,
exceeds the business interest income of the partnership.
``(C) Application to s corporations.--Rules similar to the
rules of subparagraphs (A) and (B) shall apply with respect
to any S corporation and its shareholders.
``(4) Business interest.--For purposes of this subsection,
the term `business interest' means any interest paid or
accrued on indebtedness properly allocable to a trade or
business. Such term shall not include investment interest
(within the meaning of subsection (d)).
``(5) Business interest income.--For purposes of this
subsection, the term `business interest income' means the
amount of interest includible in the gross income of the
taxpayer for the taxable year which is properly allocable to
a trade or business. Such term shall not include investment
income (within the meaning of subsection (d)).
``(6) Adjusted taxable income.--For purposes of this
subsection, the term `adjusted taxable income' means the
taxable income of the taxpayer--
``(A) computed without regard to--
``(i) any item of income, gain, deduction, or loss which is
not properly allocable to a trade or business,
``(ii) any business interest or business interest income,
``(iii) the amount of any net operating loss deduction
under section 172, and
``(iv) any deduction allowable for depreciation,
amortization, or depletion, and
``(B) computed with such other adjustments as the Secretary
may provide.
``(7) Trade or business.--For purposes of this subsection,
the term `trade or business' shall not include--
``(A) the trade or business of performing services as an
employee,
``(B) a real property trade or business (as such term is
defined in section 469(c)(7)(C)), or
``(C) the trade or business of the furnishing or sale of--
``(i) electrical energy, water, or sewage disposal
services,
``(ii) gas or steam through a local distribution system, or
``(iii) transportation of gas or steam by pipeline,
if the rates for such furnishing or sale, as the case may be,
have been established or approved by a State or political
subdivision thereof, by any agency or instrumentality of the
United States, or by a public service or public utility
commission or other similar body of any State or political
subdivision thereof.
``(8) Carryforward of disallowed interest.--For
carryforward of interest disallowed under paragraph (1), see
subsection (o).
``(9) Floor plan financing interest defined.--For purposes
of this subsection--
``(A) In general.--The term `floor plan financing interest'
means interest paid or accrued on floor plan financing
indebtedness.
``(B) Floor plan financing indebtedness.--The term `floor
plan financing indebtedness' means indebtedness--
``(i) used to finance the acquisition of motor vehicles
held for sale to retail customers, and
``(ii) secured by the inventory so acquired.
``(C) Motor vehicle.--The term `motor vehicle' means a
motor vehicle that is any of the following:
``(i) An automobile.
``(ii) A truck.
``(iii) A recreational vehicle.
``(iv) A motorcycle.
``(v) A boat.
``(vi) Farm machinery or equipment.
``(vii) Construction machinery or equipment.''.
(b) Carryforward of Disallowed Business Interest.--Section
163, after amendment by section 4302(a) and before amendment
by section
[[Page H9325]]
4302(b), is amended by inserting after subsection (n) the
following new subsection:
``(o) Carryforward of Disallowed Business Interest.--The
amount of any business interest not allowed as a deduction
for any taxable year by reason of subsection (j) shall be
treated as business interest paid or accrued in the
succeeding taxable year. Business interest paid or accrued in
any taxable year (determined without regard to the preceding
sentence) shall not be carried past the 5th taxable year
following such taxable year, determined by treating business
interest as allowed as a deduction on a first-in, first-out
basis.''.
(c) Treatment of Carryforward of Disallowed Business
Interest in Certain Corporate Acquisitions.--
(1) In general.--Section 381(c) is amended by inserting
after paragraph (19) the following new paragraph:
``(20) Carryforward of disallowed interest.--The carryover
of disallowed interest described in section 163(o) to taxable
years ending after the date of distribution or transfer.''.
(2) Application of limitation.--Section 382(d) is amended
by adding at the end the following new paragraph:
``(3) Application to carryforward of disallowed interest.--
The term `pre-change loss' shall include any carryover of
disallowed interest described in section 163(o) under rules
similar to the rules of paragraph (1).''.
(3) Conforming amendment.--Section 382(k)(1) is amended by
inserting after the first sentence the following: ``Such term
shall include any corporation entitled to use a carryforward
of disallowed interest described in section 381(c)(20).''
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 3302. MODIFICATION OF NET OPERATING LOSS DEDUCTION.
(a) Indefinite Carryforward of Net Operating Losses.--
Section 172(b)(1)(A)(ii) is amended by striking ``to each of
the 20 taxable years'' and inserting ``to each taxable
year''.
(b) Repeal of Net Operating Loss Carrybacks Other Than 1-
year Carryback of Eligible Disaster Losses.--
(1) In general.--Section 172(b)(1)(A)(i) is amended to read
as follows:
``(i) in the case of any portion of a net operating loss
for the taxable year which is an eligible disaster loss with
respect to the taxpayer, shall be a net operating loss
carryback to the taxable year preceding the taxable year of
such loss, and''.
(2) Conforming amendments.--
(A) Section 172(b)(1) is amended by striking subparagraphs
(B) through (F) and inserting the following:
``(B) Eligible disaster loss.--
``(i) In general.--For purposes of subparagraph (A)(i), the
term `eligible disaster loss' means--
``(I) in the case of a taxpayer which is a small business,
net operating losses attributable to federally declared
disasters (as defined by section 165(i)(5)), and
``(II) in the case of a taxpayer engaged in the trade or
business of farming, net operating losses attributable to
such federally declared disasters.
``(ii) Small business.--For purposes of this subparagraph,
the term `small business' means a corporation or partnership
which meets the gross receipts test of section 448(c)
(determined by substituting `$5,000,000' for `$25,000,000'
each place it appears therein) for the taxable year in which
the loss arose (or, in the case of a sole proprietorship,
which would meet such test if such proprietorship were a
corporation).
``(iii) Trade or business of farming.--For purposes of this
subparagraph, the trade or business of farming shall include
the trade or business of--
``(I) operating a nursery or sod farm, or
``(II) the raising or harvesting of trees bearing fruit,
nuts, or other crops, or ornamental trees.
For purposes of subclause (II), an evergreen tree which is
more than 6 years old at the time severed from the roots
shall not be treated as an ornamental tree.''.
(B) Section 172 is amended by striking subsections (f),
(g), and (h).
(c) Limitation of Net Operating Loss to 90 Percent of
Taxable Income.--
(1) In general.--Section 172(a) is amended to read as
follows:
``(a) Deduction Allowed.--There shall be allowed as a
deduction for the taxable year an amount equal to the lesser
of--
``(1) the aggregate of the net operating loss carryovers to
such year, plus the net operating loss carrybacks to such
year, or
``(2) 90 percent of taxable income computed without regard
to the deduction allowable under this section.
For purposes of this subtitle, the term `net operating loss
deduction' means the deduction allowed by this subsection.''.
(2) Coordination of limitation with carrybacks and
carryovers.--Section 172(b)(2) is amended by striking ``shall
be computed--'' and all that follows and inserting ``shall--
``(A) be computed with the modifications specified in
subsection (d) other than paragraphs (1), (4), and (5)
thereof, and by determining the amount of the net operating
loss deduction without regard to the net operating loss for
the loss year or for any taxable year thereafter,
``(B) not be considered to be less than zero, and
``(C) not exceed the amount determined under subsection
(a)(2) for such prior taxable year.''.
(3) Conforming amendment.--Section 172(d)(6) is amended by
striking ``and'' at the end of subparagraph (A), by striking
the period at the end of subparagraph (B) and inserting ``;
and'', and by adding at the end the following new
subparagraph:
``(C) subsection (a)(2) shall be applied by substituting
`real estate investment trust taxable income (as defined in
section 857(b)(2) but without regard to the deduction for
dividends paid (as defined in section 561))' for `taxable
income'.''.
(d) Annual Increase of Indefinite Carryover Amounts.--
Section 172(b) is amended by redesignating paragraph (3) as
paragraph (4) and by inserting after paragraph (2) the
following new paragraph:
``(3) Annual increase of indefinite carryover amounts.--For
purposes of paragraph (2)--
``(A) the amount of any indefinite net operating loss which
is carried to the next succeeding taxable year after the loss
year (within the meaning of paragraph (2)) shall be increased
by an amount equal to--
``(i) the amount of the loss which may be so carried over
to such succeeding taxable year (determined without regard to
this paragraph), multiplied by
``(ii) the sum of--
``(I) the annual Federal short-term rate (determined under
section 1274(d)) for the last month ending before the
beginning of such taxable year, plus
``(II) 4 percentage points, and
``(B) the amount of any indefinite net operating loss which
is carried to any succeeding taxable year (after such next
succeeding taxable year) shall be an amount equal to--
``(i) the excess of--
``(I) the amount of the loss carried to the prior taxable
year (after any increase under this paragraph with respect to
such amount), over
``(II) the amount by which such loss was reduced under
paragraph (2) by reason of the taxable income for such prior
taxable year, multiplied by
``(ii) a percentage equal to 100 percent plus the
percentage determined under subparagraph (A)(ii) with respect
to such succeeding taxable year.
For purposes of the preceding sentence, the term `indefinite
net operating loss' means any net operating loss arising in a
taxable year beginning after December 31, 2017.''.
(e) Effective Date.--
(1) Carryforwards and carrybacks.--The amendments made by
subsections (a) and (b) shall apply to net operating losses
arising in taxable years beginning after December 31, 2017.
(2) Net operating loss limited to 90 percent of taxable
income.--The amendments made by subsection (c) shall apply to
taxable years beginning after December 31, 2017.
(3) Annual increase in carryover amounts.--The amendments
made by subsection (d) shall apply to amounts carried to
taxable years beginning after December 31, 2017.
(4) Special rule for net disaster losses.--Notwithstanding
paragraph (1), the amendments made by subsection (b) shall
not apply to the portion of the net operating loss for any
taxable year which is a net disaster loss to which section
504(b) of the Disaster Tax Relief and Airport and Airway
Extension Act of 2017 applies.
SEC. 3303. LIKE-KIND EXCHANGES OF REAL PROPERTY.
(a) In General.--Section 1031(a)(1) is amended by striking
``property'' each place it appears and inserting ``real
property''.
(b) Conforming Amendments.--
(1) Paragraph (2) of section 1031(a) is amended to read as
follows:
``(2) Exception for real property held for sale.--This
subsection shall not apply to any exchange of real property
held primarily for sale.''.
(2) Section 1031 is amended by striking subsections (e) and
(i).
(3) Section 1031, as amended by paragraph (2), is amended
by inserting after subsection (d) the following new
subsection:
``(e) Application to Certain Partnerships.--For purposes of
this section, an interest in a partnership which has in
effect a valid election under section 761(a) to be excluded
from the application of all of subchapter K shall be treated
as an interest in each of the assets of such partnership and
not as an interest in a partnership.''.
(4) Section 1031(h) is amended to read as follows:
``(h) Special Rules for Foreign Real Property.--Real
property located in the United States and real property
located outside the United States are not property of a like
kind.''.
(5) The heading of section 1031 is amended by striking
``property'' and inserting ``real property''.
(6) The table of sections for part III of subchapter O of
chapter 1 is amended by striking the item relating to section
1031 and inserting the following new item:
``Sec. 1031. Exchange of real property held for productive use or
investment.''.
(c) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to exchanges completed after December 31, 2017.
(2) Transition rule.--The amendments made by this section
shall not apply to any exchange if--
(A) the property disposed of by the taxpayer in the
exchange is disposed of on or before December 31 2017, or
(B) the property received by the taxpayer in the exchange
is received on or before December 31, 2017.
SEC. 3304. REVISION OF TREATMENT OF CONTRIBUTIONS TO CAPITAL.
(a) Inclusion of Contributions to Capital.--Part II of
subchapter B of chapter 1 is amended by inserting after
section 75 the following new section:
``SEC. 76. CONTRIBUTIONS TO CAPITAL.
``(a) In General.--Gross income includes any contribution
to the capital of any entity.
[[Page H9326]]
``(b) Treatment of Contributions in Exchange for Stock,
etc.--
``(1) In general.--In the case of any contribution of money
or other property to a corporation in exchange for stock of
such corporation--
``(A) such contribution shall not be treated for purposes
of subsection (a) as a contribution to the capital of such
corporation (and shall not be includible in the gross income
of such corporation), and
``(B) no gain or loss shall be recognized to such
corporation upon the issuance of such stock.
``(2) Treatment limited to value of stock.--For purposes of
this subsection, a contribution of money or other property to
a corporation shall be treated as being in exchange for stock
of such corporation only to the extent that the fair market
value of such money and other property does not exceed the
fair market value of such stock.
``(3) Application to entities other than corporations.--In
the case of any entity other than a corporation, rules
similar to the rules of paragraphs (1) and (2) shall apply in
the case of any contribution of money or other property to
such entity in exchange for any interest in such entity.
``(c) Treasury Stock Treated as Stock.--Any reference in
this section to stock shall be treated as including a
reference to treasury stock.''.
(b) Basis of Corporation in Contributed Property.--
(1) Contributions to capital.--Subsection (c) of section
362 is amended to read as follows:
``(c) Contributions to Capital.--If property other than
money is transferred to a corporation as a contribution to
the capital of such corporation (within the meaning of
section 76) then the basis of such property shall be the
greater of--
``(1) the basis determined in the hands of the transferor,
increased by the amount of gain recognized to the transferor
on such transfer, or
``(2) the amount included in gross income by such
corporation under section 76 with respect to such
contribution.''.
(2) Contributions in exchange for stock.--Paragraph (2) of
section 362(a) is amended by striking ``contribution to
capital'' and inserting ``contribution in exchange for stock
of such corporation (determined under rules similar to the
rules of paragraphs (2) and (3) of section 76(b))''.
(c) Conforming Amendments.--
(1) Section 108(e) is amended by striking paragraph (6).
(2) Part III of subchapter B of chapter 1 is amended by
striking section 118 (and by striking the item relating to
such section in the table of sections for such part).
(3) The table of sections for part II of subchapter B of
chapter 1 is amended by inserting after the item relating to
section 75 the following new item:
``Sec. 76. Contributions to capital.''.
(d) Effective Date.--The amendments made by this section
shall apply to contributions made, and transactions entered
into, after the date of the enactment of this Act.
SEC. 3305. REPEAL OF DEDUCTION FOR LOCAL LOBBYING EXPENSES.
(a) In General.--Section 162(e) is amended by striking
paragraphs (2) and (7) and by redesignating paragraphs (3),
(4), (5), (6), and (8) as paragraphs (2), (3), (4), (5), and
(6), respectively.
(b) Conforming Amendment.--Section 6033(e)(1)(B)(ii) is
amended by striking ``section 162(e)(5)(B)(ii)'' and
inserting ``section 162(e)(4)(B)(ii)''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred after December 31,
2017.
SEC. 3306. REPEAL OF DEDUCTION FOR INCOME ATTRIBUTABLE TO
DOMESTIC PRODUCTION ACTIVITIES.
(a) In General.--Part VI of subchapter B of chapter 1 is
amended by striking section 199 (and by striking the item
relating to such section in the table of sections for such
part).
(b) Conforming Amendments.--
(1) Sections 74(d)(2)(B), 86(b)(2)(A), 137(b)(3)(A),
219(g)(3)(A)(ii), and 246(b)(1) are each amended by striking
``199,''.
(2) Section 170(b)(2)(D), as amended by the preceding
provisions of this Act, is amended by striking clause (iv),
by redesignating clause (v) as clause (iv), and by inserting
``and'' at the end of clause (iii).
(3) Section 172(d) is amended by striking paragraph (7).
(4) Section 613(a) is amended by striking ``and without the
deduction under section 199''.
(5) Section 613A(d)(1) is amended by striking subparagraph
(B) and by redesignating subparagraphs (C), (D), and (E) as
subparagraphs (B), (C), and (D), respectively.
(6) Section 1402(a) is amended by adding ``and'' at the end
of paragraph (15) and by striking paragraph (16).
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 3307. ENTERTAINMENT, ETC. EXPENSES.
(a) Denial of Deduction.--Subsection (a) of section 274 is
amended to read as follows:
``(a) Entertainment, Amusement, Recreation, and Other
Fringe Benefits .--
``(1) In general.--No deduction otherwise allowable under
this chapter shall be allowed for amounts paid or incurred
for any of the following items:
``(A) Activity.--With respect to an activity which is of a
type generally considered to constitute entertainment,
amusement, or recreation.
``(B) Membership dues.--With respect to membership in any
club organized for business, pleasure, recreation or other
social purposes.
``(C) Amenity.--With respect to a de minimis fringe (as
defined in section 132(e)(1)) that is primarily personal in
nature and involving property or services that are not
directly related to the taxpayer's trade or business.
``(D) Facility.--With respect to a facility or portion
thereof used in connection with an activity referred to in
subparagraph (A), membership dues or similar amounts referred
to in subparagraph (B), or an amenity referred to in
subparagraph (C).
``(E) Qualified transportation fringe and parking
facility.--Which is a qualified transportation fringe (as
defined in section 132(f)) or which is a parking facility
used in connection with qualified parking (as defined in
section 132(f)(5)(C)).
``(F) On-premises athletic facility.--Which is an on-
premises athletic facility as defined in section
132(j)(4)(B).
``(2) Special rules.--For purposes of applying paragraph
(1), an activity described in section 212 shall be treated as
a trade or business.
``(3) Regulations.--Under the regulations prescribed to
carry out this section, the Secretary shall include
regulations--
``(A) defining entertainment, amenities, recreation,
amusement, and facilities for purposes of this subsection,
``(B) providing for the appropriate allocation of
depreciation and other costs with respect to facilities used
for parking or for on-premises athletic facilities, and
``(C) specifying arrangements a primary purpose of which is
the avoidance of this subsection.''.
(b) Exception for Certain Expenses Includible in Income of
Recipient.--
(1) Expenses treated as compensation.--Paragraph (2) of
section 274(e) is amended to read as follows:
``(2) Expenses treated as compensation.--Expenses for
goods, services, and facilities, to the extent that the
expenses do not exceed the amount of the expenses which are
treated by the taxpayer, with respect to the recipient of the
entertainment, amusement, or recreation, as compensation to
an employee on the taxpayer's return of tax under this
chapter and as wages to such employee for purposes of chapter
24 (relating to withholding of income tax at source on
wages).''.
(2) Expenses includible in income of persons who are not
employees.--Paragraph (9) of section 274(e) is amended by
striking ``to the extent that the expenses'' and inserting
``to the extent that the expenses do not exceed the amount of
the expenses that''.
(c) Exceptions for Reimbursed Expenses.--Paragraph (3) of
section 274(e) is amended to read as follows:
``(3) Reimbursed expenses.--
``(A) In general.--Expenses paid or incurred by the
taxpayer, in connection with the performance by him of
services for another person (whether or not such other person
is the taxpayer's employer), under a reimbursement or other
expense allowance arrangement with such other person, but
this paragraph shall apply--
``(i) where the services are performed for an employer,
only if the employer has not treated such expenses in the
manner provided in paragraph (2), or
``(ii) where the services are performed for a person other
than an employer, only if the taxpayer accounts (to the
extent provided by subsection (d)) to such person.
``(B) Exception.--Except as provided by the Secretary,
subparagraph (A) shall not apply--
``(i) in the case of an arrangement in which the person
other than the employer is an entity described in section
168(h)(2)(A), or
``(ii) to any other arrangement designated by the Secretary
as having the effect of avoiding the limitation under
subparagraph (A).''.
(d) 50 Percent Limitation on Meals and Entertainment
Expenses.--Subsection (n) of section 274 is amended to read
as follows:
``(n) Limitation on Certain Expenses.--
``(1) In general.--The amount allowable as a deduction
under this chapter for any expense for food or beverages
(pursuant to subsection (e)(1)) or business meals (pursuant
to subsection (k)(1)) shall not exceed 50 percent of the
amount of such expense or item which would (but for this
paragraph) be allowable as a deduction under this chapter.
``(2) Exceptions.--Paragraph (1) shall not apply to any
expense if--
``(A) such expense is described in paragraph (2), (3), (6),
(7), or (8) of subsection (e),
``(B) in the case of an expense for food or beverages, such
expense is excludable from the gross income of the recipient
under section 132 by reason of subsection (e) thereof
(relating to de minimis fringes) or under section 119
(relating to meals and lodging furnished for convenience of
employer), or
``(C) in the case of an employer who pays or reimburses
moving expenses of an employee, such expenses are includible
in the income of the employee under section 82.
``(3) Special rule for individuals subject to federal hours
of service.--In the case of any expenses for food or
beverages consumed while away from home (within the meaning
of section 162(a)(2)) by an individual during, or incident
to, the period of duty subject to the hours of service
limitations of the Department of Transportation, paragraph
(1) shall be applied by substituting `80 percent' for `50
percent'.''.
(e) Conforming Amendments.--
(1) Section 274(d) is amended--
(A) by striking paragraph (2) and redesignating paragraphs
(3) and (4) as paragraphs (2) and (3), respectively, and
(B) in the flush material following paragraph (3) (as so
redesignated)--
(i) by striking ``, entertainment, amusement, recreation,
or'' in item (B), and
(ii) by striking ``(D) the business relationship to the
taxpayer of persons entertained, using the facility or
property, or receiving the gift'' and inserting ``(D) the
business relationship to the taxpayer of the person receiving
the benefit''.
[[Page H9327]]
(2) Section 274(e) is amended by striking paragraph (4) and
redesignating paragraphs (5), (6), (7), (8), and (9) as
paragraphs (4), (5), (6), (7), and (8), respectively.
(3) Section 274(k)(2)(A) is amended by striking ``(4), (7),
(8), or (9)'' and inserting ``(6), (7), or (8)''.
(4) Section 274 is amended by striking subsection (l).
(5) Section 274(m)(1)(B)(ii) is amended by striking ``(4),
(7), (8), or (9)'' and inserting ``(6), (7), or (8)''.
(f) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred after December 31,
2017.
SEC. 3308. UNRELATED BUSINESS TAXABLE INCOME INCREASED BY
AMOUNT OF CERTAIN FRINGE BENEFIT EXPENSES FOR
WHICH DEDUCTION IS DISALLOWED.
(a) In General.--Section 512(a) is amended by adding at the
end the following new paragraph:
``(6) Increase in unrelated business taxable income by
disallowed fringe.--Unrelated business taxable income of an
organization shall be increased by any amount for which a
deduction is not allowable under this chapter by reason of
section 274 and which is paid or incurred by such
organization for any qualified transportation fringe (as
defined in section 132(f)), any parking facility used in
connection with qualified parking (as defined in section
132(f)(5)(C)), or any on-premises athletic facility (as
defined in section 132(j)(4)(B)). The preceding sentence
shall not apply to the extent the amount paid or incurred is
directly connected with an unrelated trade or business which
is regularly carried on by the organization. The Secretary
may issue such regulations or other guidance as may be
necessary or appropriate to carry out the purposes of this
paragraph, including regulations or other guidance providing
for the appropriate allocation of depreciation and other
costs with respect to facilities used for parking or for on-
premises athletic facilities.
''.
(b) Effective Date.--The amendment made by this section
shall apply to amounts paid or incurred after December 31,
2017.
SEC. 3309. LIMITATION ON DEDUCTION FOR FDIC PREMIUMS.
(a) In General.--Section 162 is amended by redesignating
subsection (q) as subsection (r) and by inserting after
subsection (p) the following new subsection:
``(q) Disallowance of FDIC Premiums Paid by Certain Large
Financial Institutions.--
``(1) In general.--No deduction shall be allowed for the
applicable percentage of any FDIC premium paid or incurred by
the taxpayer.
``(2) Exception for small institutions.--Paragraph (1)
shall not apply to any taxpayer for any taxable year if the
total consolidated assets of such taxpayer (determined as of
the close of such taxable year) do not exceed
$10,000,000,000.
``(3) Applicable percentage.--For purposes of this
subsection, the term `applicable percentage' means, with
respect to any taxpayer for any taxable year, the ratio
(expressed as a percentage but not greater than 100 percent)
which--
``(A) the excess of--
``(i) the total consolidated assets of such taxpayer
(determined as of the close of such taxable year), over
``(ii) $10,000,000,000, bears to
``(B) $40,000,000,000.
``(4) FDIC premiums.--For purposes of this subsection, the
term `FDIC premium' means any assessment imposed under
section 7(b) of the Federal Deposit Insurance Act (12 U.S.C.
1817(b)).
``(5) Total consolidated assets.--For purposes of this
subsection, the term `total consolidated assets' has the
meaning given such term under section 165 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (12 U.S.C.
5365).
``(6) Aggregation rule.--
``(A) In general.--Members of an expanded affiliated group
shall be treated as a single taxpayer for purposes of
applying this subsection.
``(B) Expanded affiliated group.--For purposes of this
paragraph, the term `expanded affiliated group' means an
affiliated group as defined in section 1504(a), determined--
``(i) by substituting `more than 50 percent' for `at least
80 percent' each place it appears, and
``(ii) without regard to paragraphs (2) and (3) of section
1504(b).
A partnership or any other entity (other than a corporation)
shall be treated as a member of an expanded affiliated group
if such entity is controlled (within the meaning of section
954(d)(3)) by members of such group (including any entity
treated as a member of such group by reason of this
sentence).''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 3310. REPEAL OF ROLLOVER OF PUBLICLY TRADED SECURITIES
GAIN INTO SPECIALIZED SMALL BUSINESS INVESTMENT
COMPANIES.
(a) In General.--Part III of subchapter O of chapter 1 is
amended by striking section 1044 (and by striking the item
relating to such section in the table of sections of such
part).
(b) Conforming Amendments.--Section 1016(a)(23) is
amended--
(1) by striking ``1044,'', and
(2) by striking ``1044(d),''.
(c) Effective Date.--The amendments made by this section
shall apply to sales after December 31, 2017.
SEC. 3311. CERTAIN SELF-CREATED PROPERTY NOT TREATED AS A
CAPITAL ASSET.
(a) Patents, etc.--Section 1221(a)(3) is amended by
inserting ``a patent, invention, model or design (whether or
not patented), a secret formula or process,'' before ``a
copyright''.
(b) Conforming Amendment.--Section 1231(b)(1)(C) is amended
by inserting ``a patent, invention, model or design (whether
or not patented), a secret formula or process,'' before ``a
copyright''.
(c) Effective Date.--The amendments made by this section
shall apply to dispositions after December 31, 2017.
SEC. 3312. REPEAL OF SPECIAL RULE FOR SALE OR EXCHANGE OF
PATENTS.
(a) In General.--Part IV of subchapter P of chapter 1 is
amended by striking section 1235 (and by striking the item
relating to such section in the table of sections of such
part).
(b) Conforming Amendments.--
(1) Section 483(d) is amended by striking paragraph (4).
(2) Section 901(l)(5) is amended by striking ``without
regard to section 1235 or any similar rule'' and inserting
``without regard to any provision which treats a disposition
as a sale or exchange of a capital asset held for more than 1
year or any similar provision''.
(3) Section 1274(c)(3) is amended by striking subparagraph
(E) and redesignating subparagraph (F) as subparagraph (E).
(c) Effective Date.--The amendments made by this section
shall apply to dispositions after December 31, 2017.
SEC. 3313. REPEAL OF TECHNICAL TERMINATION OF PARTNERSHIPS.
(a) In General.--Paragraph (1) of section 708(b) is
amended--
(1) by striking ``, or'' at the end of subparagraph (A) and
all that follows and inserting a period, and
(2) by striking ``only if--'' and all that follows through
``no part of any business'' and inserting the following:
``only if no part of any business''.
(b) Effective Date.--The amendments made by this section
shall apply to partnership taxable years beginning after
December 31, 2017.
SEC. 3314. RECHARACTERIZATION OF CERTAIN GAINS IN THE CASE OF
PARTNERSHIP PROFITS INTERESTS HELD IN
CONNECTION WITH PERFORMANCE OF INVESTMENT
SERVICES.
(a) In General.--Part IV of subchapter O of chapter 1 is
amended--
(1) by redesignating section 1061 as section 1062, and
(2) by inserting after section 1060 the following new
section:
``SEC. 1061. PARTNERSHIP INTERESTS HELD IN CONNECTION WITH
PERFORMANCE OF SERVICES.
``(a) In General.--If one or more applicable partnership
interests are held by a taxpayer at any time during the
taxable year, the excess (if any) of--
``(1) the taxpayer's net long-term capital gain with
respect to such interests for such taxable year, over
``(2) the taxpayer's net long-term capital gain with
respect to such interests for such taxable year computed by
applying paragraphs (3) and (4) of sections 1222 by
substituting `3 years' for `1 year',
shall be treated as short-term capital gain.
``(b) Special Rule.--To the extent provided by the
Secretary, subsection (a) shall not apply to income or gain
attributable to any asset not held for portfolio investment
on behalf of third party investors.
``(c) Applicable Partnership Interest.--For purposes of
this section--
``(1) In general.--Except as provided in this paragraph or
paragraph (4), the term `applicable partnership interest'
means any interest in a partnership which, directly or
indirectly, is transferred to (or is held by) the taxpayer in
connection with the performance of substantial services by
the taxpayer, or any other related person, in any applicable
trade or business. The previous sentence shall not apply to
an interest held by a person who is employed by another
entity that is conducting a trade or business (other than an
applicable trade or business) and only provides services to
such other entity.
``(2) Applicable trade or business.--The term `applicable
trade or business' means any activity conducted on a regular,
continuous, and substantial basis which, regardless of
whether the activity is conducted in one or more entities,
consists, in whole or in part, of--
``(A) raising or returning capital, and
``(B) either--
``(i) investing in (or disposing of) specified assets (or
identifying specified assets for such investing or
disposition), or
``(ii) developing specified assets.
``(3) Specified asset.--The term `specified asset' means
securities (as defined in section 475(c)(2) without regard to
the last sentence thereof), commodities (as defined in
section 475(e)(2)), real estate held for rental or
investment, cash or cash equivalents, options or derivative
contracts with respect to any of the foregoing, and an
interest in a partnership to the extent of the partnership's
proportionate interest in any of the foregoing.
``(4) Exceptions.--The term `applicable partnership
interest' shall not include--
``(A) any interest in a partnership directly or indirectly
held by a corporation, or
``(B) any capital interest in the partnership which
provides the taxpayer with a right to share in partnership
capital commensurate with--
``(i) the amount of capital contributed (determined at the
time of receipt of such partnership interest), or
``(ii) the value of such interest subject to tax under
section 83 upon the receipt or vesting of such interest.
``(5) Third party investor.--The term `third party
investor' means a person who--
``(A) holds an interest in the partnership which does not
constitute property held in connection with an applicable
trade or business; and
[[Page H9328]]
``(B) is not (and has not been) actively engaged, and is
(and was) not related to a person so engaged, in (directly or
indirectly) providing substantial services described in
paragraph (1) for such partnership or any applicable trade or
business.
``(d) Transfer of Applicable Partnership Interest to
Related Person.--
``(1) In general.--If a taxpayer transfers any applicable
partnership interest, directly or indirectly, to a person
related to the taxpayer, the taxpayer shall include in gross
income (as short term capital gain) the excess (if any) of--
``(A) so much of the taxpayer's long-term capital gains
with respect to such interest for such taxable year
attributable to the sale or exchange of any asset held for
not more than 3 years as is allocable to such interest, over
``(B) any amount treated as short term capital gain under
subsection (a) with respect to the transfer of such interest.
``(2) Related person.--For purposes of this paragraph, a
person is related to the taxpayer if--
``(A) the person is a member of the taxpayer's family
within the meaning of section 318(a)(1), or
``(B) the person performed a service within the current
calendar year or the preceding three calendar years in any
applicable trade or business in which or for which the
taxpayer performed a service.
``(e) Reporting.--The Secretary shall require such
reporting (at the time and in the manner prescribed by the
Secretary) as is necessary to carry out the purposes of this
section.
``(f) Regulations.--The Secretary shall issue such
regulations or other guidance as is necessary or appropriate
to carry out the purposes of this section''.
(b) Coordination With Section 83.--Subsection (e) of
section 83 is amended by striking ``or'' at the end of
paragraph (4), by striking the period at the end of paragraph
(5) and inserting ``, or'', and by adding at the end the
following new paragraph:
``(6) a transfer of an applicable partnership interest to
which section 1061 applies.''.
(c) Clerical Amendment.--The table of sections for part IV
of subchapter O of chapter 1 is amended by striking the item
relating to 1061 and inserting the following new items:
``Sec. 1061. Partnership interests held in connection with performance
of services.
``Sec. 1062. Cross references.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 3315. AMORTIZATION OF RESEARCH AND EXPERIMENTAL
EXPENDITURES.
(a) In General.--Section 174 is amended to read as follows:
``SEC. 174. AMORTIZATION OF RESEARCH AND EXPERIMENTAL
EXPENDITURES.
``(a) In General.--In the case of a taxpayer's specified
research or experimental expenditures for any taxable year--
``(1) except as provided in paragraph (2), no deduction
shall be allowed for such expenditures, and
``(2) the taxpayer shall--
``(A) charge such expenditures to capital account, and
``(B) be allowed an amortization deduction of such
expenditures ratably over the 5-year period (15-year period
in the case of any specified research or experimental
expenditures which are attributable to foreign research
(within the meaning of section 41(d)(4)(F))) beginning with
the midpoint of the taxable year in which such expenditures
are paid or incurred.
``(b) Specified Research or Experimental Expenditures.--For
purposes of this section, the term `specified research or
experimental expenditures' means, with respect to any taxable
year, research or experimental expenditures which are paid or
incurred by the taxpayer during such taxable year in
connection with the taxpayer's trade or business.
``(c) Special Rules.--
``(1) Land and other property.--This section shall not
apply to any expenditure for the acquisition or improvement
of land, or for the acquisition or improvement of property to
be used in connection with the research or experimentation
and of a character which is subject to the allowance under
section 167 (relating to allowance for depreciation, etc.) or
section 611 (relating to allowance for depletion); but for
purposes of this section allowances under section 167, and
allowances under section 611, shall be considered as
expenditures.
``(2) Exploration expenditures.--This section shall not
apply to any expenditure paid or incurred for the purpose of
ascertaining the existence, location, extent, or quality of
any deposit of ore or other mineral (including oil and gas).
``(3) Software development.--For purposes of this section,
any amount paid or incurred in connection with the
development of any software shall be treated as a research or
experimental expenditure.
``(d) Treatment Upon Disposition, Retirement, or
Abandonment.--If any property with respect to which specified
research or experimental expenditures are paid or incurred is
disposed, retired, or abandoned during the period during
which such expenditures are allowed as an amortization
deduction under this section, no deduction shall be allowed
with respect to such expenditures on account of such
disposition, retirement, or abandonment and such amortization
deduction shall continue with respect to such
expenditures.''.
(b) Clerical Amendment.--The table of sections for part VI
of subchapter B of chapter 1 is amended by striking the item
relating to section 174 and inserting the following new item:
``Sec. 174. Amortization of research and experimental expenditures.''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred in taxable years
beginning after December 31, 2022.
SEC. 3316. UNIFORM TREATMENT OF EXPENSES IN CONTINGENCY FEE
CASES.
(a) In General.--Section 162, as amended by the preceding
provisions of this Act, is amended by redesignating
subsection (r) as subsection (s) and by inserting after
subsection (q) the following new subsection:
``(r) Expenses in Contingency Fee Cases.--No deduction
shall be allowed under subsection (a) to a taxpayer for any
expense--
``(1) paid or incurred in the course of the trade or
business of practicing law, and
``(2) resulting from a case for which the taxpayer is
compensated primarily on a contingent basis,
until such time as such contingency is resolved.''.
(b) Effective Date.--The amendment made by this section
shall apply to expenses and costs paid or incurred in taxable
years beginning after the date of the enactment of this Act.
Subtitle E--Reform of Business Credits
SEC. 3401. REPEAL OF CREDIT FOR CLINICAL TESTING EXPENSES FOR
CERTAIN DRUGS FOR RARE DISEASES OR CONDITIONS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 is amended by striking section 45C (and by striking
the item relating to such section in the table of sections
for such subpart).
(b) Conforming Amendments.--
(1) Section 38(b) is amended by striking paragraph (12).
(2) Section 280C is amended by striking subsection (b).
(3) Section 6501(m) is amended by striking ``45C(d)(4),''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred in taxable years
beginning after December 31, 2017.
SEC. 3402. REPEAL OF EMPLOYER-PROVIDED CHILD CARE CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 is amended by striking section 45F (and by striking
the item relating to such section in the table of sections
for such subpart).
(b) Conforming Amendments.--
(1) Section 38(b) is amended by striking paragraph (15).
(2) Section 1016(a) is amended by striking paragraph (28).
(c) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to taxable years beginning after December 31, 2017.
(2) Basis adjustments.--The amendment made by subsection
(b)(2) shall apply to credits determined for taxable years
beginning after December 31, 2017.
SEC. 3403. REPEAL OF REHABILITATION CREDIT.
(a) In General.--Subpart E of part IV of subchapter A of
chapter 1 is amended by striking section 47 (and by striking
the item relating to such section in the table of sections
for such subpart).
(b) Conforming Amendments.--
(1) Section 170(f)(14)(A) is amended by inserting ``(as in
effect before its repeal by the Tax Cuts and Jobs Act)''
after ``section 47''.
(2) Section 170(h)(4) is amended--
(A) by striking ``(as defined in section 47(c)(3)(B))'' in
subparagraph (C)(ii), and
(B) by adding at the end the following new subparagraph:
``(D) Registered historic district.--The term `registered
historic district' means--
``(i) any district listed in the National Register, and
``(ii) any district--
``(I) which is designated under a statute of the
appropriate State or local government, if such statute is
certified by the Secretary of the Interior to the Secretary
as containing criteria which will substantially achieve the
purpose of preserving and rehabilitating buildings of
historic significance to the district, and
``(II) which is certified by the Secretary of the Interior
to the Secretary as meeting substantially all of the
requirements for the listing of districts in the National
Register.''.
(3) Section 469(i)(3) is amended by striking subparagraph
(B).
(4) Section 469(i)(6)(B) is amended--
(A) by striking ``in the case of--'' and all that follows
and inserting ``in the case of any credit determined under
section 42 for any taxable year.'', and
(B) by striking ``, rehabilitation credit,'' in the heading
thereof.
(5) Section 469(k)(1) is amended by striking ``, or any
rehabilitation credit determined under section 47,''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to amounts paid
or incurred after December 31, 2017.
(2) Transition rule.--In the case of qualified
rehabilitation expenditures (within the meaning of section 47
of the Internal Revenue Code of 1986 as in effect before its
repeal) with respect to any building--
(A) owned or leased (as permitted by section 47 of the
Internal Revenue Code of 1986 as in effect before its repeal)
by the taxpayer at all times after December 31, 2017, and
(B) with respect to which the 24-month period selected by
the taxpayer under section 47(c)(1)(C) of such Code begins
not later than the end of the 180-day period beginning on the
date of the enactment of this Act,
[[Page H9329]]
the amendments made by this section shall apply to such
expenditures paid or incurred after the end of the taxable
year in which the 24-month period referred to in subparagraph
(B) ends.
SEC. 3404. REPEAL OF WORK OPPORTUNITY TAX CREDIT.
(a) In General.--Subpart F of part IV of subchapter A of
chapter 1 is amended by striking section 51 (and by striking
the item relating to such section in the table of sections
for such subpart).
(b) Clerical Amendment.--The heading of such subpart F (and
the item relating to such subpart in the table of subparts
for part IV of subchapter A of chapter 1) are each amended by
striking ``Rules for Computing Work Opportunity Credit'' and
inserting ``Special Rules''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred to individuals who
begin work for the employer after December 31, 2017.
SEC. 3405. REPEAL OF DEDUCTION FOR CERTAIN UNUSED BUSINESS
CREDITS.
(a) In General.--Part VI of subchapter B of chapter 1 is
amended by striking section 196 (and by striking the item
relating to such section in the table of sections for such
part).
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 3406. TERMINATION OF NEW MARKETS TAX CREDIT.
(a) In General.--Section 45D(f) is amended--
(1) by striking ``2019'' in paragraph (1)(G) and inserting
``2017'', and
(2) by striking ``2024'' in paragraph (3) and inserting
``2022''.
(b) Effective Date.--The amendments made by this section
shall apply to calendar years beginning after December 31,
2017.
SEC. 3407. REPEAL OF CREDIT FOR EXPENDITURES TO PROVIDE
ACCESS TO DISABLED INDIVIDUALS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 is amended by striking section 44 (and by striking
the item relating to such section in the table of sections
for such subpart).
(b) Conforming Amendment.--Section 38(b) is amended by
striking paragraph (7).
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 3408. MODIFICATION OF CREDIT FOR PORTION OF EMPLOYER
SOCIAL SECURITY TAXES PAID WITH RESPECT TO
EMPLOYEE TIPS.
(a) Credit Determined With Respect to Minimum Wage as in
Effect.--Section 45B(b)(1)(B) is amended by striking ``as in
effect on January 1, 2007, and''.
(b) Information Return Requirement.--Section 45B is amended
by redesignating subsections (c) and (d) as subsections (d)
and (e), respectively, and by inserting after subsection (b)
the following new subsection:
``(c) Information Return Requirement.--
``(1) In general.--No credit shall be determined under
subsection (a) with respect to any food or beverage
establishment of any taxpayer for any taxable year unless
such taxpayer has, with respect to the calendar year which
ends in or with such taxable year--
``(A) made a report to the Secretary showing the
information described in section 6053(c)(1) with respect to
such food or beverage establishment, and
``(B) furnished written statements to each employee of such
food or beverage establishment showing the information
described in section 6053(c)(2).
``(2) Allocation of 10 percent of gross receipts.--For
purposes of determining the information referred to in
subparagraphs (A) and (B), section 6053(c)(3)(A)(i) shall be
applied by substituting `10 percent' for `8 percent'. For
purposes of section 6053(c)(5), any reference to section
6053(c)(3)(B) contained therein shall be treated as including
a reference to this paragraph.
``(3) Food or beverage establishment.--For purposes of this
subsection, the term `food or beverage establishment' means
any trade or business (or portion thereof) which would be a
large food or beverage establishment (as defined in section
6053(c)(4)) if such section were applied without regard to
subparagraph (C) thereof.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
Subtitle F--Energy Credits
SEC. 3501. MODIFICATIONS TO CREDIT FOR ELECTRICITY PRODUCED
FROM CERTAIN RENEWABLE RESOURCES.
(a) Termination of Inflation Adjustment.--Section 45(b)(2)
is amended--
(1) by striking ``The 1.5 cent amount'' and inserting the
following:
``(A) In general.--The 1.5 cent amount'', and
(2) by adding at the end the following new subparagraph:
``(B) Termination.--Subparagraph (A) shall not apply with
respect to any electricity or refined coal produced at a
facility the construction of which begins after the date of
the enactment of this subparagraph.''.
(b) Special Rule for Determination of Beginning of
Construction.--Section 45(e) is amended by adding at the end
the following new paragraph:
``(12) Special rule for determining beginning of
construction.--For purposes of subsection (d), the
construction of any facility, modification, improvement,
addition, or other property shall not be treated as beginning
before any date unless there is a continuous program of
construction which begins before such date and ends on the
date that such property is placed in service.''.
(c) Effective Dates.--
(1) Termination of inflation adjustment.--The amendments
made by subsection (a) shall apply to taxable years ending
after the date of the enactment of this Act.
(2) Special rule for determination of beginning of
construction.--The amendment made by subsection (b) shall
apply to taxable years beginning before, on, or after the
date of the enactment of this Act.
SEC. 3502. MODIFICATION OF THE ENERGY INVESTMENT TAX CREDIT.
(a) Extension of Solar Energy Property.--Section
48(a)(3)(A)(ii) is amended by striking ``periods ending
before January 1, 2017'' and inserting ``property the
construction of which begins before January 1, 2022''.
(b) Extension of Qualified Fuel Cell Property.--Section
48(c)(1)(D) is amended by striking ``for any period after
December 31, 2016'' and inserting ``the construction of which
does not begin before January 1, 2022''.
(c) Extension of Qualified Microturbine Property.--Section
48(c)(2)(D) is amended by striking ``for any period after
December 31, 2016'' and inserting ``the construction of which
does not begin before January 1, 2022''.
(d) Extension of Combined Heat and Power System Property.--
Section 48(c)(3)(A)(iv) is amended by striking ``which is
placed in service before January 1, 2017'' and inserting
``the construction of which begins before January 1, 2022''.
(e) Extension of Qualified Small Wind Energy Property.--
Section 48(c)(4)(C) is amended by striking ``for any period
after December 31, 2016'' and inserting ``the construction of
which does not begin before January 1, 2022''.
(f) Extension of Thermal Energy Property.--Section
48(a)(3)(A)(vii) is amended by striking ``periods ending
before January 1, 2017'' and inserting ``property the
construction of which begins before January 1, 2022''.
(g) Phaseout of 30 Percent Credit Rate for Fuel Cell and
Small Wind Energy Property.--Section 48(a) is amended by
adding at the end the following new paragraph:
``(7) Phaseout for qualified fuel cell property and
qualified small wind energy property.--
``(A) In general.--In the case of qualified fuel cell
property or qualified small wind energy property, the
construction of which begins before January 1, 2022, the
energy percentage determined under paragraph (2) shall be
equal to--
``(i) in the case of any property the construction of which
begins after December 31, 2019, and before January 1, 2021,
26 percent, and
``(ii) in the case of any property the construction of
which begins after December 31, 2020, and before January 1,
2022, 22 percent.
``(B) Placed in service deadline.--In the case of any
qualified fuel cell property or qualified small wind energy
property, the construction of which begins before January 1,
2022, and which is not placed in service before January 1,
2024, the energy percentage determined under paragraph (2)
shall be equal to 10 percent.''.
(h) Phaseout for Fiber-optic Solar Energy Property.--
Subparagraphs (A) and (B) of section 48(a)(6) are each
amended by inserting ``or (3)(A)(ii)'' after ``paragraph
(3)(A)(i)''.
(i) Termination of Solar Energy Property.--Section
48(a)(3)(A)(i) is amended by inserting ``, the construction
of which begins before January 1, 2028, and'' after
``equipment''.
(j) Termination of Geothermal Energy Property.--Section
48(a)(3)(A)(iii) is amended by inserting ``, the construction
of which begins before January 1, 2028, and'' after
``equipment''.
(k) Special Rule for Determination of Beginning of
Construction.--Section 48(c) is amended by adding at the end
the following new paragraph:
``(5) Special rule for determining beginning of
construction.--The construction of any facility,
modification, improvement, addition, or other property shall
not be treated as beginning before any date unless there is a
continuous program of construction which begins before such
date and ends on the date that such property is placed in
service.''.
(l) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to periods after December 31, 2016, under rules similar to
the rules of section 48(m) of the Internal Revenue Code of
1986 (as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990).
(2) Extension of combined heat and power system property.--
The amendment made by subsection (d) shall apply to property
placed in service after December 31, 2016.
(3) Phaseouts and terminations.--The amendments made by
subsections (g), (h), (i), and (j) shall take effect on the
date of the enactment of this Act.
(4) Special rule for determination of beginning of
construction.--The amendment made by subsection (k) shall
apply to taxable years beginning before, on, or after the
date of the enactment of this Act.
SEC. 3503. EXTENSION AND PHASEOUT OF RESIDENTIAL ENERGY
EFFICIENT PROPERTY.
(a) Extension.--Section 25D(h) is amended by striking
``December 31, 2016 (December 31, 2021, in the case of any
qualified solar electric property expenditures and qualified
solar water heating property expenditures)'' and inserting
``December 31, 2021''.
(b) Phaseout.--
(1) In general.--Paragraphs (3), (4), and (5) of section
25D(a) are amended by striking ``30 percent'' each place it
appears and inserting ``the applicable percentage''.
(2) Conforming amendment.--Section 25D(g) of such Code is
amended by striking ``paragraphs (1) and (2) of''.
[[Page H9330]]
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after December 31,
2016.
SEC. 3504. REPEAL OF ENHANCED OIL RECOVERY CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 is amended by striking section 43 (and by striking
the item relating to such section in the table of sections
for such subpart).
(b) Conforming Amendments.--
(1) Section 38(b) is amended by striking paragraph (6).
(2) Section 6501(m) is amended by striking ``43,''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 3505. REPEAL OF CREDIT FOR PRODUCING OIL AND GAS FROM
MARGINAL WELLS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 is amended by striking section 45I (and by striking
the item relating to such section in the table of sections
for such subpart).
(b) Conforming Amendment.--Section 38(b) is amended by
striking paragraph (19).
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 3506. MODIFICATIONS OF CREDIT FOR PRODUCTION FROM
ADVANCED NUCLEAR POWER FACILITIES.
(a) Treatment of Unutilized Limitation Amounts.--Section
45J(b) is amended--
(1) in paragraph (4), by inserting ``or any amendment to''
after ``enactment of''; and
(2) by adding at the end the following new paragraph:
``(5) Allocation of unutilized limitation.--
``(A) In general.--Any unutilized national megawatt
capacity limitation shall be allocated by the Secretary under
paragraph (3) as rapidly as is practicable after December 31,
2020--
``(i) first to facilities placed in service on or before
such date to the extent that such facilities did not receive
an allocation equal to their full nameplate capacity; and
``(ii) then to facilities placed in service after such date
in the order in which such facilities are placed in service.
``(B) Unutilized national megawatt capacity limitation.--
The term `unutilized national megawatt capacity limitation'
means the excess (if any) of--
``(i) 6,000 megawatts, over
``(ii) the aggregate amount of national megawatt capacity
limitation allocated by the Secretary before January 1, 2021,
reduced by any amount of such limitation which was allocated
to a facility which was not placed in service before such
date.
``(C) Coordination with other provisions.--In the case of
any unutilized national megawatt capacity limitation
allocated by the Secretary pursuant to this paragraph--
``(i) such allocation shall be treated for purposes of this
section in the same manner as an allocation of national
megawatt capacity limitation; and
``(ii) subsection (d)(1)(B) shall not apply to any facility
which receives such allocation.''.
(b) Transfer of Credit by Certain Public Entities.--
(1) In general.--Section 45J is amended--
(A) by redesignating subsection (e) as subsection (f); and
(B) by inserting after subsection (d) the following new
subsection:
``(e) Transfer of Credit by Certain Public Entities.--
``(1) In general.--If, with respect to a credit under
subsection (a) for any taxable year--
``(A) the taxpayer would be a qualified public entity; and
``(B) such entity elects the application of this paragraph
for such taxable year with respect to all (or any portion
specified in such election) of such credit,
the eligible project partner specified in such election (and
not the qualified public entity) shall be treated as the
taxpayer for purposes of this title with respect to such
credit (or such portion thereof).
``(2) Definitions.--For purposes of this subsection--
``(A) Qualified public entity.--The term `qualified public
entity' means--
``(i) a Federal, State, or local government entity, or any
political subdivision, agency, or instrumentality thereof;
``(ii) a mutual or cooperative electric company described
in section 501(c)(12) or section 1381(a)(2); or
``(iii) a not-for-profit electric utility which has or had
received a loan or loan guarantee under the Rural
Electrification Act of 1936.
``(B) Eligible project partner.--The term `eligible project
partner' means--
``(i) any person responsible for, or participating in, the
design or construction of the advanced nuclear power facility
to which the credit under subsection (a) relates;
``(ii) any person who participates in the provision of the
nuclear steam supply system to the advanced nuclear power
facility to which the credit under subsection (a) relates;
``(iii) any person who participates in the provision of
nuclear fuel to the advanced nuclear power facility to which
the credit under subsection (a) relates; or
``(iv) any person who has an ownership interest in such
facility.
``(3) Special rules.--
``(A) Application to partnerships.--In the case of a credit
under subsection (a) which is determined at the partnership
level--
``(i) for purposes of paragraph (1)(A), a qualified public
entity shall be treated as the taxpayer with respect to such
entity's distributive share of such credit; and
``(ii) the term `eligible project partner' shall include
any partner of the partnership.
``(B) Taxable year in which credit taken into account.--In
the case of any credit (or portion thereof) with respect to
which an election is made under paragraph (1), such credit
shall be taken into account in the first taxable year of the
eligible project partner ending with, or after, the qualified
public entity's taxable year with respect to which the credit
was determined.
``(C) Treatment of transfer under private use rules.--For
purposes of section 141(b)(1), any benefit derived by an
eligible project partner in connection with an election under
this subsection shall not be taken into account as a private
business use.''.
(2) Special rule for proceeds of transfers for mutual or
cooperative electric companies.--Section 501(c)(12) of such
Code is amended by adding at the end the following new
subparagraph:
``(I) In the case of a mutual or cooperative electric
company described in this paragraph or an organization
described in section 1381(a)(2), income received or accrued
in connection with an election under section 45J(e)(1) shall
be treated as an amount collected from members for the sole
purpose of meeting losses and expenses.''.
(c) Effective Dates.--
(1) Treatment of unutilized limitation amounts.--The
amendment made by subsection (a) shall take effect on the
date of the enactment of this Act.
(2) Transfer of credit by certain public entities.--The
amendments made by subsection (b) shall apply to taxable
years beginning after the date of the enactment of this Act.
Subtitle G--Bond Reforms
SEC. 3601. TERMINATION OF PRIVATE ACTIVITY BONDS.
(a) In General.--Paragraph (1) of section 103(b) is
amended--
(1) by striking ``which is not a qualified bond (within the
meaning of section 141)'', and
(2) by striking ``which is not a qualified bond'' in the
heading thereof.
(b) Conforming Amendments.--
(1) Subpart A of part IV of subchapter B of chapter 1 is
amended by striking sections 142, 143, 144, 145, 146, and 147
(and by striking each of the items relating to such sections
in the table of sections for such subpart).
(2) Section 25 is amended by adding at the end the
following new subsection:
``(j) Coordination With Repeal of Private Activity Bonds.--
Any reference to section 143, 144, or 146 shall be treated as
a reference to such section as in effect before its repeal by
the Tax Cuts and Jobs Act.''.
(3) Section 26(b)(2) is amended by striking subparagraph
(D).
(4) Section 141(b) is amended by striking paragraphs (5)
and (9).
(5) Section 141(d) is amended by striking paragraph (5).
(6) Section 141 is amended by striking subsection (e).
(7) Section 148(f)(4) is amended--
(A) by striking ``(determined in accordance with section
147(b)(2)(A))'' in the flush matter following subparagraph
(A)(ii) and inserting ``(determined by taking into account
the respective issue prices of the bonds issued as part of
the issue)'', and
(B) by striking the last sentence of subparagraph (D)(v).
(8) Clause (iv) of section 148(f)(4)(C) is amended to read
as follows:
``(iv) Construction issue.--For purposes of this
subparagraph--
``(I) In general.--The term `construction issue' means any
issue if at least 75 percent of the available construction
proceeds of such issue are to be used for construction
expenditures.
``(II) Construction.--The term `construction' includes
reconstruction and rehabilitation.''.
(9) Section 149(b)(3) is amended by striking subparagraph
(C).
(10) Section 149(e)(2) is amended--
(A) by striking subparagraphs (C), (D), and (F) and by
redesignating subparagraphs (E) and (G) as subparagraphs (C)
and (D), respectively, and
(B) by striking the second sentence.
(11) Section 149(f)(6) is amended--
(A) by striking subparagraph (B), and
(B) by striking ``For purposes of this subsection'' and all
that follows through ``The term'' and inserting the
following: ``For purposes of this subsection, the term''.
(12) Section 150(e)(3) is amended to read as follows:
``(3) Public approval requirement.--A bond shall not be
treated as part of an issue which meets the requirements of
paragraph (1) unless such bond satisfies the requirements of
section 147(f)(2) (as in effect before its repeal by the Tax
Cuts and Jobs Act).''.
(13) Section 269A(b)(3) is amended by striking
``144(a)(3)'' and inserting ``414(n)(6)(A)''.
(14) Section 414(m)(5) is amended by striking ``section
144(a)(3)'' and inserting ``subsection (n)(6)(A)''.
(15) Section 414(n)(6)(A) is amended to read as follows:
``(A) Related persons.--A person is a related person to
another person if--
``(i) the relationship between such persons would result in
a disallowance of losses under section 267 or 707(b), or
``(ii) such persons are members of the same controlled
group of corporations (as defined in section 1563(a), except
that `more than 50 percent' shall be substituted for `at
least 80 percent' each place it appears therein).''.
(16) Section 6045(e)(4)(B) is amended by inserting ``(as in
effect before its repeal by the Tax Cuts and Jobs Act)''
after ``section 143(m)(3)''.
(17) Section 6654(f)(1) is amended by inserting ``(as in
effect before its repeal by the Tax Cuts and Jobs Act)''
after ``section 143(m)''.
[[Page H9331]]
(18) Section 7871(c) is amended--
(A) by striking paragraphs (2) and (3), and
(B) by striking ``Tax-exempt Bonds.--'' and all that
follows through ``Subsection (a) of section 103'' and
inserting the following: ``Tax-exempt Bonds.--Subsection (a)
of section 103''.
(c) Effective Date.--The amendments made by this section
shall apply to bonds issued after December 31, 2017.
SEC. 3602. REPEAL OF ADVANCE REFUNDING BONDS.
(a) In General.--Paragraph (1) of section 149(d) is amended
by striking ``as part of an issue described in paragraph (2),
(3), or (4).'' and inserting ``to advance refund another
bond.''.
(b) Conforming Amendments.--
(1) Section 149(d) is amended by striking paragraphs (2),
(3), (4), and (6) and by redesignating paragraphs (5) and (7)
as paragraphs (2) and (3).
(2) Section 148(f)(4)(C) is amended by striking clause
(xiv) and by redesignating clauses (xv) to (xvii) as clauses
(xiv) to (xvi).
(c) Effective Date.--The amendments made by this section
shall apply to advance refunding bonds issued after December
31, 2017.
SEC. 3603. REPEAL OF TAX CREDIT BONDS.
(a) In General.--Part IV of subchapter A of chapter 1 is
amended by striking subparts H, I, and J (and by striking the
items relating to such subparts in the table of subparts for
such part).
(b) Payments to Issuers.--Subchapter B of chapter 65 is
amended by striking section 6431 (and by striking the item
relating to such section in the table of sections for such
subchapter).
(c) Conforming Amendments.--
(1) Part IV of subchapter U of chapter 1 is amended by
striking section 1397E (and by striking the item relating to
such section in the table of sections for such part).
(2) Section 54(l)(3)(B) is amended by inserting ``(as in
effect before its repeal by the Tax Cuts and Jobs Act)''
after ``section 1397E(I)''.
(3) Section 6211(b)(4)(A) is amended by striking ``, and
6431'' and inserting ``and'' before ``36B''.
(4) Section 6401(b)(1) is amended by striking ``G, H, I,
and J'' and inserting ``and G''.
(d) Effective Date.--The amendments made by this section
shall apply to bonds issued after December 31, 2017.
SEC. 3604. NO TAX EXEMPT BONDS FOR PROFESSIONAL STADIUMS.
(a) In General.--Section 103(b), as amended by this Act, is
further amended by adding at the end the following new
paragraph:
``(4) Professional stadium bond.--Any professional stadium
bond.''.
(b) Professional Stadium Bond Defined.--Subsection (c) of
section 103 is amended by adding at the end the following new
paragraph:
``(3) Professional stadium bond.--The term `professional
stadium bond' means any bond issued as part of an issue any
proceeds of which are used to finance or refinance capital
expenditures allocable to a facility (or appurtenant real
property) which, during at least 5 days during any calendar
year, is used as a stadium or arena for professional sports
exhibitions, games, or training.''.
(c) Effective Date.--The amendments made by this section
shall apply to bonds issued after November 2, 2017.
Subtitle H--Insurance
SEC. 3701. NET OPERATING LOSSES OF LIFE INSURANCE COMPANIES.
(a) In General.--Section 805(b) is amended by striking
paragraph (4) and by redesignating paragraph (5) as paragraph
(4).
(b) Conforming Amendments.--
(1) Part I of subchapter L of chapter 1 is amended by
striking section 810 (and by striking the item relating to
such section in the table of sections for such part).
(2) Part III of subchapter L of chapter 1 is amended by
striking section 844 (and by striking the item relating to
such section in the table of sections for such part).
(3) Section 381 is amended by striking subsection (d).
(4) Section 805(a)(4)(B)(ii) is amended to read as follows:
``(ii) the deduction allowed under section 172,''.
(5) Section 805(a) is amended by striking paragraph (5).
(6) Section 953(b)(1)(B) is amended to read as follows:
``(B) So much of section 805(a)(8) as relates to the
deduction allowed under section 172.''.
(c) Effective Date.--The amendments made by this section
shall apply to losses arising in taxable years beginning
after December 31, 2017.
SEC. 3702. REPEAL OF SMALL LIFE INSURANCE COMPANY DEDUCTION.
(a) In General.--Part I of subchapter L of chapter 1 is
amended by striking section 806 (and by striking the item
relating to such section in the table of sections for such
part).
(b) Conforming Amendments.--
(1) Section 453B(e) is amended--
(A) by striking ``(as defined in section 806(b)(3))'' in
paragraph (2)(B), and
(B) by adding at the end the following new paragraph:
``(3) Noninsurance business.--
``(A) In general.--For purposes of this subsection, the
term `noninsurance business' means any activity which is not
an insurance business.
``(B) Certain activities treated as insurance businesses.--
For purposes of subparagraph (A), any activity which is not
an insurance business shall be treated as an insurance
business if--
``(i) it is of a type traditionally carried on by life
insurance companies for investment purposes, but only if the
carrying on of such activity (other than in the case of real
estate) does not constitute the active conduct of a trade or
business, or
``(ii) it involves the performance of administrative
services in connection with plans providing life insurance,
pension, or accident and health benefits.''.
(2) Section 465(c)(7)(D)(v)(II) is amended by striking
``section 806(b)(3)'' and inserting ``section 453B(e)(3)''.
(3) Section 801(a)(2) is amended by striking subparagraph
(C).
(4) Section 804 is amended by striking ``means--'' and all
that follows and inserting ``means the general deductions
provided in section 805.''.
(5) Section 805(a)(4)(B), as amended by section 3701, is
amended by striking clause (i) and by redesignating clauses
(ii), (iii), and (iv) as clauses (i), (ii), and (iii),
respectively.
(6) Section 805(b)(2)(A) is amended by striking clause
(iii) and by redesignating clauses (iv) and (v) as clauses
(iii) and (iv), respectively.
(7) Section 842(c) is amended by striking paragraph (1) and
by redesignating paragraphs (2) and (3) as paragraphs (1) and
(2), respectively.
(8) Section 953(b)(1), as amended by section 3701, is
amended by striking subparagraph (A) and by redesignating
subparagraphs (B) and (C) as subparagraphs (A) and (B),
respectively.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 3703. SURTAX ON LIFE INSURANCE COMPANY TAXABLE INCOME.
(a) In General.--Section 801(a)(1) is amended--
(1) by striking ``consist of a tax'' and insert ``consist
of the sum of--
``(A) a tax'', and
(2) by striking the period at the end and inserting ``,
and'', and
(3) by adding at the end the following new subparagraph:
``(B) a tax equal to 8 percent of the life insurance
company taxable income.''.
SEC. 3704. ADJUSTMENT FOR CHANGE IN COMPUTING RESERVES.
(a) In General.--Paragraph (1) of section 807(f) is amended
to read as follows:
``(1) Treatment as change in method of accounting.--If the
basis for determining any item referred to in subsection (c)
as of the close of any taxable year differs from the basis
for such determination as of the close of the preceding
taxable year, then so much of the difference between--
``(A) the amount of the item at the close of the taxable
year, computed on the new basis, and
``(B) the amount of the item at the close of the taxable
year, computed on the old basis,
as is attributable to contracts issued before the taxable
year shall be taken into account under section 481 as
adjustments attributable to a change in method of accounting
initiated by the taxpayer and made with the consent of the
Secretary.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 3705. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS TO
SHAREHOLDERS FROM PRE-1984 POLICYHOLDERS
SURPLUS ACCOUNT.
(a) In General.--Subpart D of part I of subchapter L is
amended by striking section 815 (and by striking the item
relating to such section in the table of sections for such
subpart).
(b) Conforming Amendment.--Section 801 is amended by
striking subsection (c).
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
(d) Phased Inclusion of Remaining Balance of Policyholders
Surplus Accounts.--In the case of any stock life insurance
company which has a balance (determined as of the close of
such company's last taxable year beginning before January 1,
2018) in an existing policyholders surplus account (as
defined in section 815 of the Internal Revenue Code of 1986,
as in effect before its repeal), the tax imposed by section
801 of such Code for the first 8 taxable years beginning
after December 31, 2017, shall be the amount which would be
imposed by such section for such year on the sum of--
(1) life insurance company taxable income for such year
(within the meaning of such section 801 but not less than
zero), plus
(2) \1/8\ of such balance.
SEC. 3706. MODIFICATION OF PRORATION RULES FOR PROPERTY AND
CASUALTY INSURANCE COMPANIES.
(a) In General.--Section 832(b)(5)(B) is amended by
striking ``15 percent'' and inserting ``26.25 percent''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 3707. MODIFICATION OF DISCOUNTING RULES FOR PROPERTY AND
CASUALTY INSURANCE COMPANIES.
(a) Modification of Rate of Interest Used to Discount
Unpaid Losses.--Paragraph (2) of section 846(c) is amended to
read as follows:
``(2) Determination of annual rate.--The annual rate
determined by the Secretary under this paragraph for any
calendar year shall be a rate determined on the basis of the
corporate bond yield curve (as defined in section
430(h)(2)(D)(i)).''.
(b) Modification of Computational Rules for Loss Payment
Patterns.--Section 846(d)(3) is amended by striking
subparagraphs (B) through (G) and inserting the following new
subparagraphs:
``(B) Treatment of certain losses.--Losses which would have
been treated as paid in the last year of the period
applicable under subparagraph (A)(i) or (A)(ii) shall be
treated as paid in the following manner:
``(i) 3-year loss payment pattern.--
``(I) In general.--The period taken into account under
subparagraph (A)(i) shall be extended to the extent required
under subclause (II).
[[Page H9332]]
``(II) Computation of extension.--The amount of losses
which would have been treated as paid in the 3d year after
the accident year shall be treated as paid in such 3d year
and each subsequent year in an amount equal to the average of
the losses treated as paid in the 1st and 2d years after the
accident year (or, if lesser, the portion of the unpaid
losses not theretofore taken into account). To the extent
such unpaid losses have not been treated as paid before the
18th year after the accident year, they shall be treated as
paid in such 18th year.
``(ii) 10-year loss payment pattern.--
``(I) In general.--The period taken into account under
subparagraph (A)(ii) shall be extended to the extent required
under subclause (II).
``(II) Computation of extension.--The amount of losses
which would have been treated as paid in the 10th year after
the accident year shall be treated as paid in such 10th year
and each subsequent year in an amount equal to the amount of
the average of the losses treated as paid in the 7th, 8th,
and 9th years after the accident year (or, if lesser, the
portion of the unpaid losses not theretofore taken into
account). To the extent such unpaid losses have not been
treated as paid before the 25th year after the accident year,
they shall be treated as paid in such 25th year.''.
(c) Repeal of Historical Payment Pattern Election.--Section
846 is amended by striking subsection (e) and by
redesignating subsections (f) and (g) as subsections (e) and
(f), respectively.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
(e) Transitional Rule.--For the first taxable year
beginning after December 31, 2017--
(1) the unpaid losses and the expenses unpaid (as defined
in paragraphs (5)(B) and (6) of section 832(b) of the
Internal Revenue Code of 1986) at the end of the preceding
taxable year, and
(2) the unpaid losses as defined in sections 807(c)(2) and
805(a)(1) of such Code at the end of the preceding taxable
year,
shall be determined as if the amendments made by this section
had applied to such unpaid losses and expenses unpaid in the
preceding taxable year and by using the interest rate and
loss payment patterns applicable to accident years ending
with calendar year 2018, and any adjustment shall be taken
into account ratably in such first taxable year and the 7
succeeding taxable years. For subsequent taxable years, such
amendments shall be applied with respect to such unpaid
losses and expenses unpaid by using the interest rate and
loss payment patterns applicable to accident years ending
with calendar year 2018.
SEC. 3708. REPEAL OF SPECIAL ESTIMATED TAX PAYMENTS.
(a) In General.--Part III of subchapter L of chapter 1 is
amended by striking section 847 (and by striking the item
relating to such section in the table of sections for such
part).
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
Subtitle I--Compensation
SEC. 3801. MODIFICATION OF LIMITATION ON EXCESSIVE EMPLOYEE
REMUNERATION.
(a) Repeal of Performance-based Compensation and Commission
Exceptions for Limitation on Excessive Employee
Remuneration.--
(1) In general.--Section 162(m)(4) is amended by striking
subparagraphs (B) and (C) and by redesignating subparagraphs
(D), (E), (F), and (G) as subparagraphs (B), (C), (D), and
(E), respectively.
(2) Conforming amendments.--
(A) Paragraphs (5)(E) and (6)(D) of section 162(m) are each
amended by striking ``subparagraphs (B), (C), and (D)'' and
inserting ``subparagraph (B)''.
(B) Paragraphs (5)(G) and (6)(G) of section 162(m) are each
amended by striking ``(F) and (G)'' and inserting ``(D) and
(E)''.
(b) Expansion of Applicable Employer.--Section 162(m)(2) is
amended to read as follows:
``(2) Publicly held corporation.--For purposes of this
subsection, the term `publicly held corporation' means any
corporation which is an issuer (as defined in section 3 of
the Securities Exchange Act of 1934 (15 U.S.C. 78c))--
``(A) the securities of which are required to be registered
under section 12 of such Act (15 U.S.C. 78l), or
``(B) that is required to file reports under section 15(d)
of such Act (15 U.S.C. 78o(d)).''.
(c) Modification of Definition of Covered Employees.--
Section 162(m)(3) is amended--
(1) in subparagraph (A), by striking ``as of the close of
the taxable year, such employee is the chief executive
officer of the taxpayer or is'' and inserting ``such employee
is the principal executive officer or principal financial
officer of the taxpayer at any time during the taxable year,
or was'',
(2) in subparagraph (B)--
(A) by striking ``4'' and inserting ``3'', and
(B) by striking ``(other than the chief executive
officer)'' and inserting ``(other than the principal
executive officer or principal financial officer)'', and
(3) by striking ``or'' at the end of subparagraph (A), by
striking the period at the end of subparagraph (B) and
inserting ``, or'', and by adding at the end the following:
``(C) was a covered employee of the taxpayer (or any
predecessor) for any preceding taxable year beginning after
December 31, 2016.
Such term shall include any employee who would be described
in subparagraph (B) if the reporting described in such
subparagraph were required as so described.''.
(d) Special Rule for Remuneration Paid to Beneficiaries,
etc.--Section 162(m)(4), as amended by subsection (a), is
amended by adding at the end the following new subparagraph:
``(F) Special rule for remuneration paid to beneficiaries,
etc.--Remuneration shall not fail to be applicable employee
remuneration merely because it is includible in the income
of, or paid to, a person other than the covered employee,
including after the death of the covered employee.''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 3802. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZATION
EXECUTIVE COMPENSATION.
(a) In General.--Subchapter D of chapter 42 is amended by
adding at the end the following new section:
``SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE
COMPENSATION.
``(a) Tax Imposed.--There is hereby imposed a tax equal to
20 percent of the sum of--
``(1) so much of the remuneration paid (other than any
excess parachute payment) by an applicable tax-exempt
organization for the taxable year with respect to employment
of any covered employee in excess of $1,000,000, plus
``(2) any excess parachute payment paid by such an
organization to any covered employee.
``(b) Liability for Tax.--The employer shall be liable for
the tax imposed under subsection (a).
``(c) Definitions and Special Rules.--For purposes of this
section--
``(1) Applicable tax-exempt organization.--The term
`applicable tax-exempt organization' means any organization
that for the taxable year--
``(A) is exempt from taxation under section 501(a),
``(B) is a farmers' cooperative organization described in
section 521(b)(1),
``(C) has income excluded from taxation under section
115(1), or
``(D) is a political organization described in section
527(e)(1).
``(2) Covered employee.--For purposes of this section, the
term `covered employee' means any employee (including any
former employee) of an applicable tax-exempt organization if
the employee--
``(A) is one of the 5 highest compensated employees of the
organization for the taxable year, or
``(B) was a covered employee of the organization (or any
predecessor) for any preceding taxable year beginning after
December 31, 2016.
``(3) Remuneration.--For purposes of this section, the term
`remuneration' means wages (as defined in section 3401(a)),
except that such term shall not include any designated Roth
contribution (as defined in section 402A(c)).
``(4) Remuneration from related organizations.--
``(A) In general.--Remuneration of a covered employee paid
by an applicable tax-exempt organization shall include any
remuneration paid with respect to employment of such employee
by any related person or governmental entity.
``(B) Related organizations.--A person or governmental
entity shall be treated as related to an applicable tax-
exempt organization if such person or governmental entity--
``(i) controls, or is controlled by, the organization,
``(ii) is controlled by one or more persons that control
the organization,
``(iii) is a supported organization (as defined in section
509(f)(2)) during the taxable year with respect to the
organization,
``(iv) is a supporting organization described in section
509(a)(3) during the taxable year with respect to the
organization, or
``(v) in the case of an organization that is a voluntary
employees' beneficiary association described in section
501(a)(9), establishes, maintains, or makes contributions to
such voluntary employees' beneficiary association.
``(C) Liability for tax.--In any case in which remuneration
from more than one employer is taken into account under this
paragraph in determining the tax imposed by subsection (a),
each such employer shall be liable for such tax in an amount
which bears the same ratio to the total tax determined under
subsection (a) with respect to such remuneration as--
``(i) the amount of remuneration paid by such employer with
respect to such employee, bears to
``(ii) the amount of remuneration paid by all such
employers to such employee.
``(5) Excess parachute payment.--For purposes determining
the tax imposed by subsection (a)(2)--
``(A) In general.--The term `excess parachute payment'
means an amount equal to the excess of any parachute payment
over the portion of the base amount allocated to such
payment.
``(B) Parachute payment.--The term `parachute payment'
means any payment in the nature of compensation to (or for
the benefit of) a covered employee if--
``(i) such payment is contingent on such employee's
separation from employment with the employer, and
``(ii) the aggregate present value of the payments in the
nature of compensation to (or for the benefit of) such
individual which are contingent on such separation equals or
exceeds an amount equal to 3 times the base amount.
Such term does not include any payment described in section
280G(b)(6) (relating to exemption for payments under
qualified plans) or any payment made under or to an annuity
contract described in section 403(b) or a plan described in
section 457(b).
``(C) Base amount.--Rules similar to the rules of
280G(b)(3) shall apply for purposes of determining the base
amount.
``(D) Property transfers; present value.--Rules similar to
the rules of paragraphs (3) and (4) of section 280G(d) shall
apply.
``(6) Coordination with deduction limitation.--Remuneration
the deduction for which is
[[Page H9333]]
not allowed by reason of section 162(m) shall not be taken
into account for purposes of this section.
``(d) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to prevent avoidance of the
purposes of this section through the performance of services
other than as an employee.''.
(b) Clerical Amendment.--The table of sections for
subchapter D of chapter 42 is amended by adding at the end
the following new item:
``Sec. 4960. Tax on excess exempt organization executive
compensation.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 3803. TREATMENT OF QUALIFIED EQUITY GRANTS.
(a) In General.--
(1) Election to defer income.--Section 83 is amended by
adding at the end the following new subsection:
``(i) Qualified Equity Grants.--
``(1) In general.--For purposes of this subtitle, if
qualified stock is transferred to a qualified employee who
makes an election with respect to such stock under this
subsection--
``(A) except as provided in subparagraph (B), no amount
shall be included in income under subsection (a) for the
first taxable year in which the rights of the employee in
such stock are transferable or are not subject to a
substantial risk of forfeiture, whichever is applicable, and
``(B) an amount equal to the amount which would be included
in income of the employee under subsection (a) (determined
without regard to this subsection) shall be included in
income for the taxable year of the employee which includes
the earliest of--
``(i) the first date such qualified stock becomes
transferable (including transferable to the employer),
``(ii) the date the employee first becomes an excluded
employee,
``(iii) the first date on which any stock of the
corporation which issued the qualified stock becomes readily
tradable on an established securities market (as determined
by the Secretary, but not including any market unless such
market is recognized as an established securities market by
the Secretary for purposes of a provision of this title other
than this subsection),
``(iv) the date that is 5 years after the first date the
rights of the employee in such stock are transferable or are
not subject to a substantial risk of forfeiture, whichever
occurs earlier, or
``(v) the date on which the employee revokes (at such time
and in such manner as the Secretary may provide) the election
under this subsection with respect to such stock.
``(2) Qualified stock.--
``(A) In general.--For purposes of this subsection, the
term `qualified stock' means, with respect to any qualified
employee, any stock in a corporation which is the employer of
such employee, if--
``(i) such stock is received--
``(I) in connection with the exercise of an option, or
``(II) in settlement of a restricted stock unit, and
``(ii) such option or restricted stock unit was provided by
the corporation--
``(I) in connection with the performance of services as an
employee, and
``(II) during a calendar year in which such corporation was
an eligible corporation.
``(B) Limitation.--The term `qualified stock' shall not
include any stock if the employee may sell such stock to, or
otherwise receive cash in lieu of stock from, the corporation
at the time that the rights of the employee in such stock
first become transferable or not subject to a substantial
risk of forfeiture.
``(C) Eligible corporation.--For purposes of subparagraph
(A)(ii)(II)--
``(i) In general.--The term `eligible corporation' means,
with respect to any calendar year, any corporation if--
``(I) no stock of such corporation (or any predecessor of
such corporation) is readily tradable on an established
securities market (as determined under paragraph (1)(B)(iii))
during any preceding calendar year, and
``(II) such corporation has a written plan under which, in
such calendar year, not less than 80 percent of all employees
who provide services to such corporation in the United States
(or any possession of the United States) are granted stock
options, or restricted stock units, with the same rights and
privileges to receive qualified stock.
``(ii) Same rights and privileges.--For purposes of clause
(i)(II)--
``(I) except as provided in subclauses (II) and (III), the
determination of rights and privileges with respect to stock
shall be determined in a similar manner as provided under
section 423(b)(5),
``(II) employees shall not fail to be treated as having the
same rights and privileges to receive qualified stock solely
because the number of shares available to all employees is
not equal in amount, so long as the number of shares
available to each employee is more than a de minimis amount,
and
``(III) rights and privileges with respect to the exercise
of an option shall not be treated as the same as rights and
privileges with respect to the settlement of a restricted
stock unit.
``(iii) Employee.--For purposes of clause (i)(II), the term
`employee' shall not include any employee described in
section 4980E(d)(4) or any excluded employee.
``(iv) Special rule for calendar years before 2018.--In the
case of any calendar year beginning before January 1, 2018,
clause (i)(II) shall be applied without regard to whether the
rights and privileges with respect to the qualified stock are
the same.
``(3) Qualified employee; excluded employee.--For purposes
of this subsection--
``(A) In general.--The term `qualified employee' means any
individual who--
``(i) is not an excluded employee, and
``(ii) agrees in the election made under this subsection to
meet such requirements as determined by the Secretary to be
necessary to ensure that the withholding requirements of the
corporation under chapter 24 with respect to the qualified
stock are met.
``(B) Excluded employee.--The term `excluded employee'
means, with respect to any corporation, any individual--
``(i) who was a 1-percent owner (within the meaning of
section 416(i)(1)(B)(ii)) at any time during the 10 preceding
calendar years,
``(ii) who is or has been at any prior time--
``(I) the chief executive officer of such corporation or an
individual acting in such a capacity, or
``(II) the chief financial officer of such corporation or
an individual acting in such a capacity,
``(iii) who bears a relationship described in section
318(a)(1) to any individual described in subclause (I) or
(II) of clause (ii), or
``(iv) who has been for any of the 10 preceding taxable
years one of the 4 highest compensated officers of such
corporation determined with respect to each such taxable year
on the basis of the shareholder disclosure rules for
compensation under the Securities Exchange Act of 1934 (as if
such rules applied to such corporation).
``(4) Election.--
``(A) Time for making election.--An election with respect
to qualified stock shall be made under this subsection no
later than 30 days after the first time the rights of the
employee in such stock are transferable or are not subject to
a substantial risk of forfeiture, whichever occurs earlier,
and shall be made in a manner similar to the manner in which
an election is made under subsection (b).
``(B) Limitations.--No election may be made under this
section with respect to any qualified stock if--
``(i) the qualified employee has made an election under
subsection (b) with respect to such qualified stock,
``(ii) any stock of the corporation which issued the
qualified stock is readily tradable on an established
securities market (as determined under paragraph (1)(B)(iii))
at any time before the election is made, or
``(iii) such corporation purchased any of its outstanding
stock in the calendar year preceding the calendar year which
includes the first time the rights of the employee in such
stock are transferable or are not subject to a substantial
risk of forfeiture, unless--
``(I) not less than 25 percent of the total dollar amount
of the stock so purchased is deferral stock, and
``(II) the determination of which individuals from whom
deferral stock is purchased is made on a reasonable basis.
``(C) Definitions and special rules related to limitation
on stock redemptions.--
``(i) Deferral stock.--For purposes of this paragraph, the
term `deferral stock' means stock with respect to which an
election is in effect under this subsection.
``(ii) Deferral stock with respect to any individual not
taken into account if individual holds deferral stock with
longer deferral period.--Stock purchased by a corporation
from any individual shall not be treated as deferral stock
for purposes of clause (iii) if such individual (immediately
after such purchase) holds any deferral stock with respect to
which an election has been in effect under this subsection
for a longer period than the election with respect to the
stock so purchased.
``(iii) Purchase of all outstanding deferral stock.--The
requirements of subclauses (I) and (II) of subparagraph
(B)(iii) shall be treated as met if the stock so purchased
includes all of the corporation's outstanding deferral stock.
``(iv) Reporting.--Any corporation which has outstanding
deferral stock as of the beginning of any calendar year and
which purchases any of its outstanding stock during such
calendar year shall include on its return of tax for the
taxable year in which, or with which, such calendar year ends
the total dollar amount of its outstanding stock so purchased
during such calendar year and such other information as the
Secretary may require for purposes of administering this
paragraph.
``(5) Controlled groups.--For purposes of this subsection,
all corporations which are members of the same controlled
group of corporations (as defined in section 1563(a)) shall
be treated as one corporation.
``(6) Notice requirement.--Any corporation that transfers
qualified stock to a qualified employee shall, at the time
that (or a reasonable period before) an amount attributable
to such stock would (but for this subsection) first be
includible in the gross income of such employee--
``(A) certify to such employee that such stock is qualified
stock, and
``(B) notify such employee--
``(i) that the employee may elect to defer income on such
stock under this subsection, and
``(ii) that, if the employee makes such an election--
``(I) the amount of income recognized at the end of the
deferral period will be based on the value of the stock at
the time at which the rights of the employee in such stock
first become transferable or not subject to substantial risk
of forfeiture, notwithstanding whether the value of the stock
has declined during the deferral period,
``(II) the amount of such income recognized at the end of
the deferral period will be subject to withholding under
section 3401(i) at the rate determined under section 3402(t),
and
``(III) the responsibilities of the employee (as determined
by the Secretary under paragraph (3)(A)(ii)) with respect to
such withholding.
``(7) Restricted stock units.--This section (other than
this subsection), including any election under subsection
(b), shall not apply to restricted stock units.''.
[[Page H9334]]
(2) Deduction by employer.--Subsection (h) of section 83 is
amended by striking ``or (d)(2)'' and inserting ``(d)(2), or
(i)''.
(b) Withholding.--
(1) Time of withholding.--Section 3401 is amended by adding
at the end the following new subsection:
``(i) Qualified Stock for Which an Election Is in Effect
Under Section 83(i).--For purposes of subsection (a),
qualified stock (as defined in section 83(i)) with respect to
which an election is made under section 83(i) shall be
treated as wages--
``(1) received on the earliest date described in section
83(i)(1)(B), and
``(2) in an amount equal to the amount included in income
under section 83 for the taxable year which includes such
date.''.
(2) Amount of withholding.--Section 3402 is amended by
adding at the end the following new subsection:
``(t) Rate of Withholding for Certain Stock.--In the case
of any qualified stock (as defined in section 83(i)) with
respect to which an election is made under section 83(i)--
``(1) the rate of tax under subsection (a) shall not be
less than the maximum rate of tax in effect under section 1,
and
``(2) such stock shall be treated for purposes of section
3501(b) in the same manner as a non-cash fringe benefit.''.
(c) Coordination With Other Deferred Compensation Rules.--
(1) Election to apply deferral to statutory options.--
(A) Incentive stock options.--Section 422(b) is amended by
adding at the end the following: ``Such term shall not
include any option if an election is made under section 83(i)
with respect to the stock received in connection with the
exercise of such option.''.
(B) Employee stock purchase plans.--Section 423(a) is
amended by adding at the end the following flush sentence:
``The preceding sentence shall not apply to any share of
stock with respect to which an election is made under section
83(i).''.
(2) Exclusion from definition of nonqualified deferred
compensation plan.--Subsection (d) of section 409A is amended
by adding at the end the following new paragraph:
``(7) Treatment of qualified stock.--An arrangement under
which an employee may receive qualified stock (as defined in
section 83(i)(2)) shall not be treated as a nonqualified
deferred compensation plan solely because of an employee's
election, or ability to make an election, to defer
recognition of income under section 83(i).''.
(d) Information Reporting.--Section 6051(a) is amended by
striking ``and'' at the end of paragraph (13), by striking
the period at the end of paragraph (14) and inserting a
comma, and by inserting after paragraph (14) the following
new paragraphs:
``(15) the amount excludable from gross income under
subparagraph (A) of section 83(i)(1),
``(16) the amount includible in gross income under
subparagraph (B) of section 83(i)(1) with respect to an event
described in such subparagraph which occurs in such calendar
year, and
``(17) the aggregate amount of income which is being
deferred pursuant to elections under section 83(i),
determined as of the close of the calendar year.''.
(e) Penalty for Failure of Employer To Provide Notice of
Tax Consequences.--Section 6652 is amended by adding at the
end the following new subsection:
``(o) Failure to Provide Notice Under Section 83(i).--In
the case of each failure to provide a notice as required by
section 83(i)(6), at the time prescribed therefor, unless it
is shown that such failure is due to reasonable cause and not
to willful neglect, there shall be paid, on notice and demand
of the Secretary and in the same manner as tax, by the person
failing to provide such notice, an amount equal to $100 for
each such failure, but the total amount imposed on such
person for all such failures during any calendar year shall
not exceed $50,000.''.
(f) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to stock
attributable to options exercised, or restricted stock units
settled, after December 31, 2017.
(2) Requirement to provide notice.--The amendments made by
subsection (e) shall apply to failures after December 31,
2017.
(g) Transition Rule.--Until such time as the Secretary (or
the Secretary's delegate) issue regulations or other guidance
for purposes of implementing the requirements of paragraph
(2)(C)(i)(II) of section 83(i) of the Internal Revenue Code
of 1986 (as added by this section), or the requirements of
paragraph (6) of such section, a corporation shall be treated
as being in compliance with such requirements (respectively)
if such corporation complies with a reasonable good faith
interpretation of such requirements.
TITLE IV--TAXATION OF FOREIGN INCOME AND FOREIGN PERSONS
Subtitle A--Establishment of Participation Exemption System for
Taxation of Foreign Income
SEC. 4001. DEDUCTION FOR FOREIGN-SOURCE PORTION OF DIVIDENDS
RECEIVED BY DOMESTIC CORPORATIONS FROM
SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.
(a) In General.--Part VIII of subchapter B of chapter 1 is
amended by inserting after section 245 the following new
section:
``SEC. 245A. DEDUCTION FOR FOREIGN-SOURCE PORTION OF
DIVIDENDS RECEIVED BY DOMESTIC CORPORATIONS
FROM SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.
``(a) In General.--In the case of any dividend received
from a specified 10-percent owned foreign corporation by a
domestic corporation which is a United States shareholder
with respect to such foreign corporation, there shall be
allowed as a deduction an amount equal to the foreign-source
portion of such dividend.
``(b) Specified 10-percent Owned Foreign Corporation.--For
purposes of this section, the term `specified 10-percent
owned foreign corporation' means any foreign corporation with
respect to which any domestic corporation is a United States
shareholder. Such term shall not include any passive foreign
investment company (within the meaning of subpart D of part
VI of subchapter P) that is not a controlled foreign
corporation.
``(c) Foreign-source Portion.--For purposes of this
section--
``(1) In general.--The foreign-source portion of any
dividend is an amount which bears the same ratio to such
dividend as--
``(A) the post-1986 undistributed foreign earnings of the
specified 10-percent owned foreign corporation, bears to
``(B) the total post-1986 undistributed earnings of such
foreign corporation.
``(2) Post-1986 undistributed earnings.--The term `post-
1986 undistributed earnings' means the amount of the earnings
and profits of the specified 10-percent owned foreign
corporation (computed in accordance with sections 964(a) and
986) accumulated in taxable years beginning after December
31, 1986--
``(A) as of the close of the taxable year of the specified
10-percent owned foreign corporation in which the dividend is
distributed, and
``(B) without diminution by reason of dividends distributed
during such taxable year.
``(3) Post-1986 undistributed foreign earnings.--The term
`post-1986 undistributed foreign earnings' means the portion
of the post-1986 undistributed earnings which is attributable
to neither--
``(A) income described in subparagraph (A) of section
245(a)(5), nor
``(B) dividends described in subparagraph (B) of such
section (determined without regard to section 245(a)(12)).
``(4) Treatment of distributions from earnings before
1987.--
``(A) In general.--In the case of any dividend paid out of
earnings and profits of the specified 10-percent owned
foreign corporation (computed in accordance with sections
964(a) and 986) accumulated in taxable years beginning before
January 1, 1987--
``(i) paragraphs (1), (2), and (3) shall be applied without
regard to the phrase `post-1986' each place it appears, and
``(ii) paragraph (2) shall be applied by substituting
`after the date specified in section 316(a)(1)' for `in
taxable years beginning after December 31, 1986'.
``(B) Dividends paid first out of post-1986 earnings.--
Dividends shall be treated as paid out of post-1986
undistributed earnings to the extent thereof.
``(5) Treatment of certain dividends in excess of
undistributed earnings.--In the case of any dividend from the
specified 10-percent owned foreign corporation which is in
excess of undistributed earnings (as determined under
paragraph (2) after taking into account the modifications
described in clauses (i) and (ii) of paragraph (4)(A)), the
foreign-source portion of such dividend is an amount which
bears the same ratio to such dividend as--
``(A) the portion of the earnings and profits described in
subparagraph (B) which is attributable to neither income
described in paragraph (3)(A) nor dividends described in
paragraph (3)(B), bears to
``(B) the earnings and profits of such corporation for the
taxable year in which such distribution is made (computed as
of the close of the taxable year without diminution by reason
of any distributions made during the taxable year).
``(d) Disallowance of Foreign Tax Credit, etc.--
``(1) In general.--No credit shall be allowed under section
901 for any taxes paid or accrued (or treated as paid or
accrued) with respect to any dividend for which a deduction
is allowed under this section.
``(2) Denial of deduction.--No deduction shall be allowed
under this chapter for any tax for which credit is not
allowable under section 901 by reason of paragraph (1)
(determined by treating the taxpayer as having elected the
benefits of subpart A of part III of subchapter N).
``(e) Regulations.--The Secretary may prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out the provisions of this section.''.
(b) Application of Holding Period Requirement.--Section
246(c) is amended--
(1) by striking ``or 245'' in paragraph (1) and inserting
``245, or 245A'', and
(2) by adding at the end the following new paragraph:
``(5) Special rules for foreign source portion of dividends
received from specified 10-percent owned foreign
corporations.--
``(A) 6-month holding period requirement.--For purposes of
section 245A--
``(i) paragraph (1)(A) shall be applied--
``(I) by substituting `180 days' for `45 days'each place it
appears, and
``(II) by substituting `361-day period' for `91-day
period', and
``(ii) paragraph (2) shall not apply.
``(B) Status must be maintained during holding period.--For
purposes of applying paragraph (1) with respect to section
245A, the taxpayer shall be treated as holding the stock
referred to in paragraph (1) for any period only if--
``(i) the specified 10-percent owned foreign corporation
referred to in section 245A(a) is a specified 10-percent
owned foreign corporation for such period, and
``(ii) the taxpayer is a United States shareholder with
respect to such specified 10-percent owned foreign
corporation for such period.''.
[[Page H9335]]
(c) Application of Rules Generally Applicable to Deductions
for Dividends Received.--
(1) Treatment of dividends from certain corporations.--
Section 246(a)(1) is amended by striking ``and 245'' and
inserting ``245, and 245A''.
(2) Coordination with section 1059.--Section 1059(b)(2)(B)
is amended by striking ``or 245'' and inserting ``245, or
245A''.
(d) Coordination With Foreign Tax Credit Limitation.--
Section 904(b) is amended by adding at the end the following
new paragraph:
``(5) Treatment of dividends for which deduction is allowed
under section 245a.--For purposes of subsection (a), in the
case of a United States shareholder with respect to a
specified 10-percent owned foreign corporation, such
shareholder's taxable income from sources without the United
States (and entire taxable income) shall be determined
without regard to--
``(A) the foreign-source portion of any dividend received
from such foreign corporation, and
``(B) any deductions properly allocable or apportioned to--
``(i) income (other than subpart F income (as defined in
section 952) and foreign high return amounts (as defined in
section 951A(b)) with respect to stock of such specified 10-
percent owned foreign corporation, or
``(ii) such stock (to the extent income with respect to
such stock is other than subpart F income (as so defined) or
foreign high return amounts (as so defined)).
Any term which is used in section 245A and in this paragraph
shall have the same meaning for purposes of this paragraph as
when used in such section.''.
(e) Conforming Amendments.--
(1) Section 245(a)(4) is amended by striking ``section
902(c)(1)'' and inserting ``section 245A(c)(2) applied by
substituting `qualified 10-percent owned foreign corporation'
for `specified 10-percent owned foreign corporation' each
place it appears''.
(2) Section 951(b) is amended by striking ``subpart'' and
inserting ``title''.
(3) Section 957(a) is amended by striking ``subpart'' in
the matter preceding paragraph (1) and inserting ``title''.
(4) The table of sections for part VIII of subchapter B of
chapter 1 is amended by inserting after section 245 the
following new item:
``Sec. 245A. Deduction for foreign-source portion of dividends received
by domestic corporations from specified 10-percent owned
foreign corporations.''.
(f) Effective Date.--The amendments made by this section
shall apply to distributions made after (and, in the case of
the amendments made by subsection (d), deductions with
respect to taxable years ending after) December 31, 2017.
SEC. 4002. APPLICATION OF PARTICIPATION EXEMPTION TO
INVESTMENTS IN UNITED STATES PROPERTY.
(a) In General.--Section 956(a) is amended in the matter
preceding paragraph (1) by inserting ``(other than a
corporation)'' after ``United States shareholder''.
(b) Regulatory Authority to Prevent Abuse.--Section 956(e)
is amended by striking ``including regulations to prevent''
and inserting ``including regulations--
``(1) to address United States shareholders that are
partnerships with corporate partners, and
``(2) to prevent''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017.
SEC. 4003. LIMITATION ON LOSSES WITH RESPECT TO SPECIFIED 10-
PERCENT OWNED FOREIGN CORPORATIONS.
(a) Basis in Specified 10-percent Owned Foreign Corporation
Reduced by Nontaxed Portion of Dividend for Purposes of
Determining Loss.--
(1) In general.--Section 961 is amended by adding at the
end the following new subsection:
``(d) Basis in Specified 10-percent Owned Foreign
Corporation Reduced by Nontaxed Portion of Dividend for
Purposes of Determining Loss.--If a domestic corporation
received a dividend from a specified 10-percent owned foreign
corporation (as defined in section 245A) in any taxable year,
solely for purposes of determining loss on any disposition of
stock of such foreign corporation in such taxable year or any
subsequent taxable year, the basis of such domestic
corporation in such stock shall be reduced (but not below
zero) by the amount of any deduction allowable to such
domestic corporation under section 245A with respect to such
stock except to the extent such basis was reduced under
section 1059 by reason of a dividend for which such a
deduction was allowable.''.
(2) Effective date.--The amendments made by this subsection
shall apply to distributions made after December 31, 2017.
(b) Treatment of Foreign Branch Losses Transferred to
Specified 10-percent Owned Foreign Corporations.--
(1) In general.--Part II of subchapter B of chapter 1 is
amended by adding at the end the following new section:
``SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANSFERRED TO
SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.
``(a) In General.--If a domestic corporation transfers
substantially all of the assets of a foreign branch (within
the meaning of section 367(a)(3)(C)) to a specified 10-
percent owned foreign corporation (as defined in section
245A) with respect to which it is a United States shareholder
after such transfer, such domestic corporation shall include
in gross income for the taxable year which includes such
transfer an amount equal to the transferred loss amount with
respect to such transfer.
``(b) Transferred Loss Amount.--For purposes of this
section, the term `transferred loss amount' means, with
respect to any transfer of substantially all of the assets of
a foreign branch, the excess (if any) of--
``(1) the sum of losses--
``(A) which were incurred by the foreign branch after
December 31, 2017, and before the transfer, and
``(B) with respect to which a deduction was allowed to the
taxpayer, over
``(2) the sum of--
``(A) any taxable income of such branch for a taxable year
after the taxable year in which the loss was incurred and
through the close of the taxable year of the transfer, and
``(B) any amount which is recognized under section
904(f)(3) on account of the transfer.
``(c) Reduction for Recognized Gains.--
``(1) In general.--In the case of a transfer not described
in section 367(a)(3)(C), the transferred loss amount shall be
reduced (but not below zero) by the amount of gain recognized
by the taxpayer on account of the transfer (other than
amounts taken into account under subsection (c)(2)(B)).
``(2) Coordination with recognition under section 367.--In
the case of a transfer described in section 367(a)(3)(C), the
transferred loss amount shall not exceed the excess (if any)
of--
``(A) the excess of the amount described in section
367(a)(3)(C)(i) over the amount described in section
367(a)(3)(C)(ii) with respect to such transfer, over
``(B) the amount of gain recognized under section
367(a)(3)(C) with respect to such transfer.
``(d) Source of Income.--Amounts included in gross income
under this section shall be treated as derived from sources
within the United States.
``(e) Basis Adjustments.--Consistent with such regulations
or other guidance as the Secretary may prescribe, proper
adjustments shall be made in the adjusted basis of the
taxpayer's stock in the specified 10-percent owned foreign
corporation to which the transfer is made, and in the
transferee's adjusted basis in the property transferred, to
reflect amounts included in gross income under this
section.''.
(2) Amounts recognized under section 367 on transfer of
foreign branch with previously deducted losses treated as
united states source.--Section 367(a)(3)(C) is amended by
striking ``outside'' in the last sentence and inserting
``within''.
(3) Clerical amendment.--The table of sections for part II
of subchapter B of chapter 1 is amended by adding at the end
the following new item:
``Sec. 91. Certain foreign branch losses transferred to specified 10-
percent owned foreign corporations.''.
(4) Effective date.--The amendments made by this subsection
shall apply to transfers after December 31, 2017.
SEC. 4004. TREATMENT OF DEFERRED FOREIGN INCOME UPON
TRANSITION TO PARTICIPATION EXEMPTION SYSTEM OF
TAXATION.
(a) In General.--Section 965 is amended to read as follows:
``SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME UPON
TRANSITION TO PARTICIPATION EXEMPTION SYSTEM OF
TAXATION.
``(a) Treatment of Deferred Foreign Income as Subpart F
Income.--In the case of the last taxable year of a deferred
foreign income corporation which begins before January 1,
2018, the subpart F income of such foreign corporation (as
otherwise determined for such taxable year under section 952)
shall be increased by the greater of--
``(1) the accumulated post-1986 deferred foreign income of
such corporation determined as of November 2, 2017, or
``(2) the accumulated post-1986 deferred foreign income of
such corporation determined as of December 31, 2017.
``(b) Reduction in Amounts Included in Gross Income of
United States Shareholders of Specified Foreign Corporations
With Deficits in Earnings and Profits.--
``(1) In general.--In the case of a taxpayer which is a
United States shareholder with respect to at least one
deferred foreign income corporation and at least one E&P
deficit foreign corporation, the amount which would (but for
this subsection) be taken into account under section
951(a)(1) by reason of subsection (a) as such United States
shareholder's pro rata share of the subpart F income of each
deferred foreign income corporation shall be reduced (but not
below zero) by the amount of such United States shareholder's
aggregate foreign E&P deficit which is allocated under
paragraph (2) to such deferred foreign income corporation.
``(2) Allocation of aggregate foreign e&p deficit.--The
aggregate foreign E&P deficit of any United States
shareholder shall be allocated among the deferred foreign
income corporations of such United States shareholder in an
amount which bears the same proportion to such aggregate as--
``(A) such United States shareholder's pro rata share of
the accumulated post-1986 deferred foreign income of each
such deferred foreign income corporation, bears to
``(B) the aggregate of such United States shareholder's pro
rata share of the accumulated post-1986 deferred foreign
income of all deferred foreign income corporations of such
United States shareholder.
``(3) Definitions related to e&p deficits.--For purposes of
this subsection--
``(A) Aggregate foreign e&p deficit.--The term `aggregate
foreign E&P deficit' means, with respect to any United States
shareholder, the aggregate of such shareholder's pro rata
shares of the specified E&P deficits of the E&P deficit
foreign corporations of such shareholder.
[[Page H9336]]
``(B) E&P deficit foreign corporation.--The term `E&P
deficit foreign corporation' means, with respect to any
taxpayer, any specified foreign corporation with respect to
which such taxpayer is a United States shareholder, if--
``(i) such specified foreign corporation has a deficit in
post-1986 earnings and profits, and
``(ii) as of November 2, 2017--
``(I) such corporation was a specified foreign corporation,
and
``(II) such taxpayer was a United States shareholder of
such corporation.
``(C) Specified e&p deficit.--The term `specified E&P
deficit' means, with respect to any E&P deficit foreign
corporation, the amount of the deficit referred to in
subparagraph (B).
``(4) Netting among united states shareholders in same
affiliated group.--
``(A) In general.--In the case of any affiliated group
which includes at least one E&P net surplus shareholder and
one E&P net deficit shareholder, the amount which would (but
for this paragraph) be taken into account under section
951(a)(1) by reason of subsection (a) by each such E&P net
surplus shareholder shall be reduced (but not below zero) by
such shareholder's applicable share of the affiliated group's
aggregate unused E&P deficit.
``(B) E&P net surplus shareholder.--For purposes of this
paragraph, the term `E&P net surplus shareholder' means any
United States shareholder which would (determined without
regard to this paragraph) take into account an amount greater
than zero under section 951(a)(1) by reason of subsection
(a).
``(C) E&P net deficit shareholder.--For purposes of this
paragraph, the term `E&P net deficit shareholder' means any
United States shareholder if--
``(i) the aggregate foreign E&P deficit with respect to
such shareholder (as defined in paragraph (3)(A)), exceeds
``(ii) the amount which would (but for this subsection) be
taken into account by such shareholder under section
951(a)(1) by reason of subsection (a).
``(D) Aggregate unused e&p deficit.--For purposes of this
paragraph--
``(i) In general.--The term `aggregate unused E&P deficit'
means, with respect to any affiliated group, the lesser of--
``(I) the sum of the excesses described in subparagraph
(C), determined with respect to each E&P net deficit
shareholder in such group, or
``(II) the amount determined under subparagraph (E)(ii).
``(ii) Reduction with respect to e&p net deficit
shareholders which are not wholly owned by the affiliated
group.--If the group ownership percentage of any E&P net
deficit shareholder is less than 100 percent, the amount of
the excess described in subparagraph (C) which is taken into
account under clause (i)(I) with respect to such E&P net
deficit shareholder shall be such group ownership percentage
of such amount.
``(E) Applicable share.--For purposes of this paragraph,
the term `applicable share' means, with respect to any E&P
net surplus shareholder in any affiliated group, the amount
which bears the same proportion to such group's aggregate
unused E&P deficit as--
``(i) the product of--
``(I) such shareholder's group ownership percentage,
multiplied by
``(II) the amount which would (but for this paragraph) be
taken into account under section 951(a)(1) by reason of
subsection (a) by such shareholder, bears to
``(ii) the aggregate amount determined under clause (i)
with respect to all E&P net surplus shareholders in such
group.
``(F) Group ownership percentage.--For purposes of this
paragraph, the term `group ownership percentage' means, with
respect to any United States shareholder in any affiliated
group, the percentage of the value of the stock of such
United States shareholder which is held by other includible
corporations in such affiliated group. Notwithstanding the
preceding sentence, the group ownership percentage of the
common parent of the affiliated group is 100 percent. Any
term used in this subparagraph which is also used in section
1504 shall have the same meaning as when used in such
section.
``(c) Application of Participation Exemption to Included
Income.--
``(1) In general.--In the case of a United States
shareholder of a deferred foreign income corporation, there
shall be allowed as a deduction for the taxable year in which
an amount is included in the gross income of such United
States shareholder under section 951(a)(1) by reason of this
section an amount equal to the sum of--
``(A) the United States shareholder's 7 percent rate
equivalent percentage of the excess (if any) of--
``(i) the amount so included as gross income, over
``(ii) the amount of such United States shareholder's
aggregate foreign cash position, plus
``(B) the United States shareholder's 14 percent rate
equivalent percentage of so much of the amount described in
subparagraph (A)(ii) as does not exceed the amount described
in subparagraph (A)(i).
``(2) 7 and 14 percent rate equivalent percentages.--For
purposes of this subsection--
``(A) 7 percent rate equivalent percentage.--The term `7
percent rate equivalent percentage' means, with respect to
any United States shareholder for any taxable year, the
percentage which would result in the amount to which such
percentage applies being subject to a 7 percent rate of tax
determined by only taking into account a deduction equal to
such percentage of such amount and the highest rate of tax
specified in section 11 for such taxable year. In the case of
any taxable year of a United States shareholder to which
section 15 applies, the highest rate of tax under section 11
before the effective date of the change in rates and the
highest rate of tax under section 11 after the effective date
of such change shall each be taken into account under the
preceding sentence in the same proportions as the portion of
such taxable year which is before and after such effective
date, respectively.
``(B) 14 percent rate equivalent percentage.--The term `14
percent rate equivalent percentage' means, with respect to
any United States shareholder for any taxable year, the
percentage determined under subparagraph (A) applied by
substituting `14 percent rate of tax' for `7 percent rate of
tax'.
``(3) Aggregate foreign cash position.--For purposes of
this subsection--
``(A) In general.--The term `aggregate foreign cash
position' means, with respect to any United States
shareholder, one-third of the sum of--
``(i) the aggregate of such United States shareholder's pro
rata share of the cash position of each specified foreign
corporation of such United States shareholder determined as
of November 2, 2017,
``(ii) the aggregate described in clause (i) determined as
of the close of the last taxable year of each such specified
foreign corporation which ends before November 2, 2017, and
``(iii) the aggregate described in clause (i) determined as
of the close of the taxable year of each such specified
foreign corporation which precedes the taxable year referred
to in clause (ii).
In the case of any foreign corporation which did not exist as
of the determination date described in clause (ii) or (iii),
this subparagraph shall be applied separately to such foreign
corporation by not taking into account such clause and by
substituting `one-half (100 percent in the case that both
clauses (ii) and (iii) are disregarded)' for `one-third'.
``(B) Cash position.--For purposes of this paragraph, the
cash position of any specified foreign corporation is the sum
of--
``(i) cash held by such foreign corporation,
``(ii) the net accounts receivable of such foreign
corporation, plus
``(iii) the fair market value of the following assets held
by such corporation:
``(I) Actively traded personal property for which there is
an established financial market.
``(II) Commercial paper, certificates of deposit, the
securities of the Federal government and of any State or
foreign government.
``(III) Any foreign currency.
``(IV) Any obligation with a term of less than one year.
``(V) Any asset which the Secretary identifies as being
economically equivalent to any asset described in this
subparagraph.
``(C) Net accounts receivable.--For purposes of this
paragraph, the term `net accounts receivable' means, with
respect to any specified foreign corporation, the excess (if
any) of--
``(i) such corporation's accounts receivable, over
``(ii) such corporation's accounts payable (determined
consistent with the rules of section 461).
``(D) Prevention of double counting.--
``(i) In general.--The applicable percentage of each
specified cash position of a specified foreign corporation
shall not be taken into account by--
``(I) the United States shareholder referred to in clause
(ii) with respect to such position, or
``(II) any United States shareholder which is an includible
corporation in the same affiliated group as such United
States shareholder referred to in clause (ii).
``(ii) Specified cash position.--For purposes of this
subparagraph, the term `specified cash position' means--
``(I) amounts described in subparagraph (B)(ii) to the
extent such amounts are receivable from another specified
foreign corporation with respect to any United States
shareholder,
``(II) amounts described in subparagraph (B)(iii)(I) to the
extent such amounts consist of an equity interest in another
specified foreign corporation with respect to any United
States shareholder, and
``(III) amounts described in subparagraph (B)(iii)(IV) to
the extent that another specified foreign corporation with
respect to any United States shareholder is obligated to
repay such amount.
``(iii) Applicable percentage.--For purposes of this
subparagraph, the term `applicable percentage' means--
``(I) with respect to each specified cash position
described in subclause (I) or (III) of clause (ii), the pro
rata share of the United States shareholder referred to in
clause (ii) with respect to the specified foreign corporation
referred to in such clause, and
``(II) with respect to each specified cash position
described in clause (ii)(II), the ratio (expressed as a
percentage and not in excess of 100 percent) of the United
States shareholder's pro rata share of the cash position of
the specified foreign corporation referred to in such clause
divided by the amount of such specified cash position.
For purposes of this subparagraph, a separate applicable
percentage shall be determined under each of subclauses (I)
and (II) with respect to each specified foreign corporation
referred to in clause (ii) with respect to which a specified
cash position is determined for the specified foreign
corporation referred to in clause (i).
``(iv) Reduction with respect to affiliated group members
not wholly owned by the affiliated group.--For purposes of
clause (i)(II), in the case of an includible corporation the
group ownership percentage of which is less than 100 percent
(as determined under subsection (b)(4)(F)), the amount not
take into account by reason of such clause shall be the
[[Page H9337]]
group ownership percentage of such amount (determined without
regard to this clause).
``(E) Certain blocked assets not taken into account.--A
cash position of a specified foreign corporation shall not be
taken into account under subparagraph (A) if such position
could not (as of the date that it would otherwise have been
taken into account under clause (i), (ii), or (iii) of
subparagraph (A)) have been distributed by such specified
foreign corporation to United States shareholders of such
specified foreign corporation because of currency or other
restrictions or limitations imposed under the laws of any
foreign country (within the meaning of section 964(b)).
``(F) Cash positions of certain non-corporate entities
taken into account.--An entity (other than a domestic
corporation) shall be treated as a specified foreign
corporation of a United States shareholder for purposes of
determining such United States shareholder's aggregate
foreign cash position if any interest in such entity is held
by a specified foreign corporation of such United States
shareholder (determined after application of this
subparagraph) and such entity would be a specified foreign
corporation of such United States shareholder if such entity
were a foreign corporation.
``(G) Time of certain determinations.--For purposes of this
paragraph, the determination of whether a person is a United
States shareholder, whether a person is a specified foreign
corporation, and the pro rata share of a United States
shareholder with respect to a specified foreign corporation,
shall be determined as of the end of the taxable year
described in subsection (a).
``(H) Anti-abuse.--If the Secretary determines that the
principal purpose of any transaction was to reduce the
aggregate foreign cash position taken into account under this
subsection, such transaction shall be disregarded for
purposes of this subsection.
``(d) Deferred Foreign Income Corporation; Accumulated
Post-1986 Deferred Foreign Income.--For purposes of this
section--
``(1) Deferred foreign income corporation.--The term
`deferred foreign income corporation' means, with respect to
any United States shareholder, any specified foreign
corporation of such United States shareholder which has
accumulated post-1986 deferred foreign income (as of the date
referred to in paragraph (1) or (2) of subsection (a),
whichever is applicable with respect to such foreign
corporation) greater than zero.
``(2) Accumulated post-1986 deferred foreign income.--The
term `accumulated post-1986 deferred foreign income' means
the post-1986 earnings and profits except to the extent such
earnings--
``(A) are attributable to income of the specified foreign
corporation which is effectively connected with the conduct
of a trade or business within the United States and subject
to tax under this chapter, or
``(B) if distributed, would be excluded from the gross
income of a United States shareholder under section 959.
To the extent provided in regulations or other guidance
prescribed by the Secretary, in the case of any controlled
foreign corporation which has shareholders which are not
United States shareholders, accumulated post-1986 deferred
foreign income shall be appropriately reduced by amounts
which would be described in subparagraph (B) if such
shareholders were United States shareholders.
``(3) Post-1986 earnings and profits.--The term `post-1986
earnings and profits' means the earnings and profits of the
foreign corporation (computed in accordance with sections
964(a) and 986) accumulated in taxable years beginning after
December 31, 1986, and determined--
``(A) as of the date referred to in paragraph (1) or (2) of
subsection (a), whichever is applicable with respect to such
foreign corporation,
``(B) without diminution by reason of dividends distributed
during the taxable year ending with or including such date,
and
``(C) increased by the amount of any qualified deficit
(within the meaning of section 952(c)(1)(B)(ii)) arising
before January 1, 2018, which is treated as a qualified
deficit (within the meaning of such section as amended by the
Tax Cuts and Jobs Act) for purposes of such foreign
corporation's first taxable year beginning after December 31,
2017.
``(e) Specified Foreign Corporation.--
``(1) In general.--For purposes of this section, the term
`specified foreign corporation' means--
``(A) any controlled foreign corporation, and
``(B) any foreign corporation with respect to which one or
more domestic corporations is a United States shareholder
(determined without regard to section 958(b)(4)).
``(2) Application to certain foreign corporations.--For
purposes of sections 951 and 961, a foreign corporation
described in paragraph (1)(B) shall be treated as a
controlled foreign corporation solely for purposes of taking
into account the subpart F income of such corporation under
subsection (a) (and for purposes of applying subsection (f)).
``(3) Exception for passive foreign investment companies.--
The term `specified foreign corporation' shall not include
any passive foreign investment company (within the meaning of
subpart D of part VI of subchapter P) that is not a
controlled foreign corporation.
``(f) Determinations of Pro Rata Share.--For purposes of
this section, the determination of any United States
shareholder's pro rata share of any amount with respect to
any specified foreign corporation shall be determined under
rules similar to the rules of section 951(a)(2) by treating
such amount in the same manner as subpart F income (and by
treating such specified foreign corporation as a controlled
foreign corporation).
``(g) Disallowance of Foreign Tax Credit, etc.--
``(1) In general.--No credit shall be allowed under section
901 for the applicable percentage of any taxes paid or
accrued (or treated as paid or accrued) with respect to any
amount for which a deduction is allowed under this section.
``(2) Applicable percentage.--For purposes of this
subsection, the term `applicable percentage' means the amount
(expressed as a percentage) equal to the sum of--
``(A) 80 percent of the ratio of--
``(i) the excess to which subsection (c)(1)(A) applies,
divided by
``(ii) the sum of such excess plus the amount to which
subsection (c)(1)(B) applies, plus
``(B) 60 percent of the ratio of--
``(i) the amount to which subsection (c)(1)(B) applies,
divided by
``(ii) the sum described in subparagraph (A)(ii).
``(3) Denial of deduction.--No deduction shall be allowed
under this chapter for any tax for which credit is not
allowable under section 901 by reason of paragraph (1)
(determined by treating the taxpayer as having elected the
benefits of subpart A of part III of subchapter N).
``(4) Coordination with section 78.--With respect to the
taxes treated as paid or accrued by a domestic corporation
with respect to amounts which are includible in gross income
of such domestic corporation by reason of this section,
section 78 shall apply only to so much of such taxes as bears
the same proportion to the amount of such taxes as--
``(A) the excess of--
``(i) the amounts which are includible in gross income of
such domestic corporation by reason of this section, over
``(ii) the deduction allowable under subsection (c) with
respect to such amounts, bears to
``(B) such amounts.
``(5) Extension of foreign tax credit carryover period.--
With respect to any taxes paid or accrued (or treated as paid
or accrued) with respect to any amount for which a deduction
is allowed under this section, section 904(c) shall be
applied by substituting `first 20 succeeding taxable years'
for `first 10 succeeding taxable years'.
``(h) Election to Pay Liability in Installments.--
``(1) In general.--In the case of a United States
shareholder of a deferred foreign income corporation, such
United States shareholder may elect to pay the net tax
liability under this section in 8 equal installments.
``(2) Date for payment of installments.--If an election is
made under paragraph (1), the first installment shall be paid
on the due date (determined without regard to any extension
of time for filing the return) for the return of tax for the
taxable year described in subsection (a) and each succeeding
installment shall be paid on the due date (as so determined)
for the return of tax for the taxable year following the
taxable year with respect to which the preceding installment
was made.
``(3) Acceleration of payment.--If there is an addition to
tax for failure to timely pay any installment required under
this subsection, a liquidation or sale of substantially all
the assets of the taxpayer (including in a title 11 or
similar case), a cessation of business by the taxpayer, or
any similar circumstance, then the unpaid portion of all
remaining installments shall be due on the date of such event
(or in the case of a title 11 or similar case, the day before
the petition is filed). The preceding sentence shall not
apply to the sale of substantially all the assets of a
taxpayer to a buyer if such buyer enters into an agreement
with the Secretary under which such buyer is liable for the
remaining installments due under this subsection in the same
manner as if such buyer were the taxpayer.
``(4) Proration of deficiency to installments.--If an
election is made under paragraph (1) to pay the net tax
liability under this section in installments and a deficiency
has been assessed with respect to such net tax liability, the
deficiency shall be prorated to the installments payable
under paragraph (1). The part of the deficiency so prorated
to any installment the date for payment of which has not
arrived shall be collected at the same time as, and as a part
of, such installment. The part of the deficiency so prorated
to any installment the date for payment of which has arrived
shall be paid upon notice and demand from the Secretary. This
subsection shall not apply if the deficiency is due to
negligence, to intentional disregard of rules and
regulations, or to fraud with intent to evade tax.
``(5) Election.--Any election under paragraph (1) shall be
made not later than the due date for the return of tax for
the taxable year described in subsection (a) and shall be
made in such manner as the Secretary may provide.
``(6) Net tax liability under this section.--For purposes
of this subsection--
``(A) In general.--The net tax liability under this section
with respect to any United States shareholder is the excess
(if any) of--
``(i) such taxpayer's net income tax for the taxable year
in which an amount is included in the gross income of such
United States shareholder under section 951(a)(1) by reason
of this section, over
``(ii) such taxpayer's net income tax for such taxable year
determined--
``(I) without regard to this section, and
``(II) without regard to any income, deduction, or credit,
properly attributable to a dividend received by such United
States shareholder from any deferred foreign income
corporation.
``(B) Net income tax.--The term `net income tax' means the
regular tax liability reduced by the credits allowed under
subparts A, B, and D of part IV of subchapter A.
``(i) Special Rules for S Corporation Shareholders.--
``(1) In general.--In the case of any S corporation which
is a United States shareholder of
[[Page H9338]]
a deferred foreign income corporation, each shareholder of
such S corporation may elect to defer payment of such
shareholder's net tax liability under this section with
respect to such S corporation until the shareholder's taxable
year which includes the triggering event with respect to such
liability. Any net tax liability payment of which is deferred
under the preceding sentence shall be assessed on the return
as an addition to tax in the shareholder's taxable year which
includes such triggering event.
``(2) Triggering event.--
``(A) In general.--In the case of any shareholder's net tax
liability under this section with respect to any S
corporation, the triggering event with respect to such
liability is whichever of the following occurs first:
``(i) Such corporation ceases to be an S corporation
(determined as of the first day of the first taxable year
that such corporation is not an S corporation).
``(ii) A liquidation or sale of substantially all the
assets of such S corporation (including in a title 11 or
similar case), a cessation of business by such S corporation,
such S corporation ceases to exist, or any similar
circumstance.
``(iii) A transfer of any share of stock in such S
corporation by the taxpayer (including by reason of death, or
otherwise).
``(B) Partial transfers of stock.--In the case of a
transfer of less than all of the taxpayer's shares of stock
in the S corporation, such transfer shall only be a
triggering event with respect to so much of the taxpayer's
net tax liability under this section with respect to such S
corporation as is properly allocable to such stock.
``(C) Transfer of liability.--A transfer described in
clause (iii) shall not be treated as a triggering event if
the transferee enters into an agreement with the Secretary
under which such transferee is liable for net tax liability
with respect to such stock in the same manner as if such
transferee were the taxpayer.
``(3) Net tax liability.--A shareholder's net tax liability
under this section with respect to any S corporation is the
net tax liability under this section which would be
determined under subsection (h)(6) if the only subpart F
income taken into account by such shareholder by reason of
this section were allocations from such S corporation.
``(4) Election to pay deferred liability in installments.--
In the case of a taxpayer which elects to defer payment under
paragraph (1)--
``(A) subsection (h) shall be applied separately with
respect to the liability to which such election applies,
``(B) an election under subsection (h) with respect to such
liability shall be treated as timely made if made not later
than the due date for the return of tax for the taxable year
in which the triggering event with respect to such liability
occurs,
``(C) the first installment under subsection (h) with
respect to such liability shall be paid not later than such
due date (but determined without regard to any extension of
time for filing the return), and
``(D) if the triggering event with respect to any net tax
liability is described in paragraph (2)(A)(ii), an election
under subsection (h) with respect to such liability may be
made only with the consent of the Secretary.
``(5) Joint and several liability of s corporation.--If any
shareholder of an S corporation elects to defer payment under
paragraph (1), such S corporation shall be jointly and
severally liable for such payment and any penalty, addition
to tax, or additional amount attributable thereto.
``(6) Extension of limitation on collection.--
Notwithstanding any other provision of law, any limitation on
the time period for the collection of a liability deferred
under this subsection shall not be treated as beginning
before the date of the triggering event with respect to such
liability.
``(7) Annual reporting of net tax liability.--
``(A) In general.--Any shareholder of an S corporation
which makes an election under paragraph (1) shall report the
amount of such shareholder's deferred net tax liability on
such shareholder's return of tax for the taxable year for
which such election is made and on the return of tax for each
taxable year thereafter until such amount has been fully
assessed on such returns.
``(B) Deferred net tax liability.--For purposes of this
paragraph, the term `deferred net tax liability' means, with
respect to any taxable year, the amount of net tax liability
payment of which has been deferred under paragraph (1) and
which has not been assessed on a return of tax for any prior
taxable year.
``(C) Failure to report.--In the case of any failure to
report any amount required to be reported under subparagraph
(A) with respect to any taxable year before the due date for
the return of tax for such taxable year, there shall be
assessed on such return as an addition to tax 5 percent of
such amount.
``(8) Election.--Any election under paragraph (1)--
``(A) shall be made by the shareholder of the S corporation
not later than the due date for such shareholder's return of
tax for the taxable year which includes the close of the
taxable year of such S corporation in which the amount
described in subsection (a) is taken into account, and
``(B) shall be made in such manner as the Secretary may
provide.
``(j) Reporting by S Corporation.--Each S corporation which
is a United States shareholder of a deferred foreign income
corporation shall report in its return of tax under section
6037(a) the amount includible in its gross income for such
taxable year by reason of this section and the amount of the
deduction allowable by subsection (c). Any copy provided to a
shareholder under section 6037(b) shall include a statement
of such shareholder's pro rata share of such amounts.
``(k) Inclusion of Deferred Foreign Income Under This
Section Not to Trigger Recapture of Overall Foreign Loss,
etc.--For purposes of sections 904(f)(1) and 907(c)(4), in
the case of a United States shareholder of a deferred foreign
income corporation, such United States shareholder's taxable
income from sources without the United States and combined
foreign oil and gas income shall be determined without regard
to this section.
``(l) Regulations.--The Secretary may prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out the provisions of this section.''.
(b) Clerical Amendment.--The table of sections for subpart
F of part III of subchapter N of chapter 1 is amended by
striking the item relating to section 965 and inserting the
following:
``Sec. 965. Treatment of deferred foreign income upon transition to
participation exemption system of taxation.''.
Subtitle B--Modifications Related to Foreign Tax Credit System
SEC. 4101. REPEAL OF SECTION 902 INDIRECT FOREIGN TAX
CREDITS; DETERMINATION OF SECTION 960 CREDIT ON
CURRENT YEAR BASIS.
(a) Repeal of Section 902 Indirect Foreign Tax Credits.--
Subpart A of part III of subchapter N of chapter 1 is amended
by striking section 902.
(b) Determination of Section 960 Credit on Current Year
Basis.--Section 960 is amended--
(1) by striking subsection (c), by redesignating subsection
(b) as subsection (c), by striking all that precedes
subsection (c) (as so redesignated) and inserting the
following:
``SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLUSIONS.
``(a) In General.--For purposes of this subpart, if there
is included in the gross income of a domestic corporation any
item of income under section 951(a)(1) with respect to any
controlled foreign corporation with respect to which such
domestic corporation is a United States shareholder, such
domestic corporation shall be deemed to have paid so much of
such foreign corporation's foreign income taxes as are
properly attributable to such item of income.
``(b) Special Rules for Distributions From Previously Taxed
Earnings and Profits.--For purposes of this subpart--
``(1) In general.--If any portion of a distribution from a
controlled foreign corporation to a domestic corporation
which is a United States shareholder with respect to such
controlled foreign corporation is excluded from gross income
under section 959(a), such domestic corporation shall be
deemed to have paid so much of such foreign corporation's
foreign income taxes as--
``(A) are properly attributable to such portion, and
``(B) have not been deemed to have to been paid by such
domestic corporation under this section for the taxable year
or any prior taxable year.
``(2) Tiered controlled foreign corporations.--If section
959(b) applies to any portion of a distribution from a
controlled foreign corporation to another controlled foreign
corporation, such controlled foreign corporation shall be
deemed to have paid so much of such other controlled foreign
corporation's foreign income taxes as--
``(A) are properly attributable to such portion, and
``(B) have not been deemed to have been paid by a domestic
corporation under this section for the taxable year or any
prior taxable year.'',
(2) and by adding after subsection (c) (as so redesignated)
the following new subsections:
``(d) Foreign Income Taxes.--The term `foreign income
taxes' means any income, war profits, or excess profits taxes
paid or accrued to any foreign country or possession of the
United States.
``(e) Regulations.--The Secretary may prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out the provisions of this section.''.
(c) Conforming Amendments.--
(1) Section 78 is amended to read as follows:
``SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX CREDIT.
``If a domestic corporation chooses to have the benefits of
subpart A of part III of subchapter N (relating to foreign
tax credit) for any taxable year, an amount equal to the
taxes deemed to be paid by such corporation under subsections
(a) and (b) of section 960 for such taxable year shall be
treated for purposes of this title (other than sections 959,
960, and 961) as an item of income required to be included in
the gross income of such domestic corporation under section
951(a) for such taxable year.''.
(2) Section 245(a)(10)(C) is amended by striking ``sections
902, 907, and 960'' and inserting ``sections 907 and 960''.
(3) Sections 535(b)(1) and 545(b)(1) are each amended by
striking ``section 902(a) or 960(a)(1)'' and inserting
``section 960''.
(4) Section 814(f)(1) is amended--
(A) by striking subparagraph (B), and
(B) by striking all that precedes ``No income'' and
inserting the following:
``(1) Treatment of foreign taxes.--''.
(5) Section 865(h)(1)(B) is amended by striking ``sections
902, 907, and 960'' and inserting ``sections 907 and 960''.
(6) Section 901(a) is amended by striking ``sections 902
and 960'' and inserting ``section 960''.
(7) Section 901(e)(2) is amended by striking ``but is not
limited to--'' and all that follows through ``that portion''
and inserting ``but is not limited to, that portion''.
(8) Section 901(f) is amended by striking ``sections 902
and 960'' and inserting ``section 960''.
(9) Section 901(j)(1)(A) is amended by striking ``902 or''.
[[Page H9339]]
(10) Section 901(j)(1)(B) is amended by striking ``sections
902 and 960'' and inserting ``section 960''.
(11) Section 901(k)(2) is amended by striking ``section
853, 902, or 960'' and inserting ``section 853 or 960''.
(12) Section 901(k)(6) is amended by striking ``902 or''.
(13) Section 901(m)(1) is amended by striking ``relevant
foreign assets--'' and all that follows and inserting
``relevant foreign assets shall not be taken into account in
determining the credit allowed under subsection (a).''.
(14) Section 904(d)(1) is amended by striking ``sections
902, 907, and 960'' and inserting ``sections 907 and 960''.
(15) Section 904(d)(6)(A) is amended by striking ``sections
902, 907, and 960'' and inserting ``sections 907 and 960''.
(16) Section 904(h)(10)(A) is amended by striking
``sections 902, 907, and 960'' and inserting ``sections 907
and 960''.
(17) Section 904 is amended by striking subsection (k).
(18) Section 905(c)(1) is amended by striking the last
sentence.
(19) Section 905(c)(2)(B)(i) is amended to read as follows:
``(i) shall be taken into account for the taxable year to
which such taxes relate, and''.
(20) Section 906(a) is amended by striking ``(or deemed,
under section 902, paid or accrued during the taxable
year)''.
(21) Section 906(b) is amended by striking paragraphs (4)
and (5).
(22) Section 907(b)(2)(B) is amended by striking ``902
or''.
(23) Section 907(c)(3) is amended--
(A) by striking subparagraph (A) and redesignating
subparagraphs (B) and (C) as subparagraphs (A) and (B),
respectively, and
(B) by striking ``section 960(a)'' in subparagraph (A) (as
so redesignated) and inserting ``section 960''.
(24) Section 907(c)(5) is amended by striking ``902 or''.
(25) Section 907(f)(2)(B)(i) is amended by striking ``902
or''.
(26) Section 908(a) is amended by striking ``902 or''.
(27) Section 909(b) is amended--
(A) by striking ``section 902 corporation'' in the matter
preceding paragraph (1) and inserting ``10/50 corporation'',
(B) by striking ``902 or'' in paragraph (1),
(C) by striking ``by such section 902 corporation'' and all
that follows in the matter following paragraph (2) and
inserting ``by such 10/50 corporation or a domestic
corporation which is a United States shareholder with respect
to such 10/50 corporation.'', and
(D) by striking ``Section 902 Corporations'' in the heading
thereof and inserting ``10/50 Corporations''.
(28) Section 909(d)(5) is amended to read as follows:
``(5) 10/50 corporation.--The term `10/50 corporation'
means any foreign corporation with respect to which one or
more domestic corporations is a United States shareholder.''.
(29) Section 958(a)(1) is amended by striking ``960(a)(1)''
and inserting ``960''.
(30) Section 959(d) is amended by striking ``Except as
provided in section 960(a)(3), any'' and inserting ``Any''.
(31) Section 959(e) is amended by striking ``section
960(b)'' and inserting ``section 960(c)''.
(32) Section 1291(g)(2)(A) is amended by striking ``any
distribution--'' and all that follows through ``but only if''
and inserting ``any distribution, any withholding tax imposed
with respect to such distribution, but only if''.
(33) Section 6038(c)(1)(B) is amended by striking
``sections 902 (relating to foreign tax credit for corporate
stockholder in foreign corporation) and 960 (relating to
special rules for foreign tax credit)'' and inserting
``section 960''.
(34) Section 6038(c)(4) is amended by striking subparagraph
(C).
(35) The table of sections for subpart A of part III of
subchapter N of chapter 1 is amended by striking the item
relating to section 902.
(36) The table of sections for subpart F of part III of
subchapter N of chapter 1 is amended by striking the item
relating to section 960 and inserting the following:
``Sec. 960. Deemed paid credit for subpart F inclusions.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 4102. SOURCE OF INCOME FROM SALES OF INVENTORY
DETERMINED SOLELY ON BASIS OF PRODUCTION
ACTIVITIES.
(a) In General.--Section 863(b) is amended by adding at the
end the following: ``Gains, profits, and income from the sale
or exchange of inventory property described in paragraph (2)
shall be allocated and apportioned between sources within and
without the United States solely on the basis of the
production activities with respect to the property.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
Subtitle C--Modification of Subpart F Provisions
SEC. 4201. REPEAL OF INCLUSION BASED ON WITHDRAWAL OF
PREVIOUSLY EXCLUDED SUBPART F INCOME FROM
QUALIFIED INVESTMENT.
(a) In General.--Subpart F of part III of subchapter N of
chapter 1 is amended by striking section 955.
(b) Conforming Amendments.--
(1)(A) Section 951(a)(1)(A) is amended to read as follows:
``(A) his pro rata share (determined under paragraph (2))
of the corporation's subpart F income for such year, and''.
(B) Section 851(b)(3) is amended by striking ``section
951(a)(1)(A)(i)'' in the flush language at the end and
inserting ``section 951(a)(1)(A)''.
(C) Section 952(c)(1)(B)(i) is amended by striking
``section 951(a)(1)(A)(i)'' and inserting ``section
951(a)(1)(A)''.
(D) Section 953(c)(1)(C) is amended by striking ``section
951(a)(1)(A)(i)'' and inserting ``section 951(a)(1)(A)''.
(2) Section 951(a) is amended by striking paragraph (3).
(3) Section 953(d)(4)(B)(iv)(II) is amended by striking
``or amounts referred to in clause (ii) or (iii) of section
951(a)(1)(A)''.
(4) Section 964(b) is amended by striking ``, 955,''.
(5) Section 970 is amended by striking subsection (b).
(6) The table of sections for subpart F of part III of
subchapter N of chapter 1 is amended by striking the item
relating to section 955.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders in which or with which such
taxable years of foreign corporations end.
SEC. 4202. REPEAL OF TREATMENT OF FOREIGN BASE COMPANY OIL
RELATED INCOME AS SUBPART F INCOME.
(a) In General.--Section 954(a) is amended by striking
paragraph (5), by striking the comma at the end of paragraph
(3) and inserting a period, and by inserting ``and'' at the
end of paragraph (2).
(b) Conforming Amendments.--
(1) Section 952(c)(1)(B)(iii) is amended by striking
subclause (I) and by redesignating subclauses (II) through
(V) as subclauses (I) through (IV), respectively.
(2) Section 954(b)(4) is amended by striking the last
sentence.
(3) Section 954(b)(5) is amended by striking ``the foreign
base company services income, and the foreign base company
oil related income'' and inserting ``and the foreign base
company services income''.
(4) Section 954(b) is amended by striking paragraph (6).
(5) Section 954 is amended by striking subsection (g).
(c) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders in which or with which such
taxable years of foreign corporations end.
SEC. 4203. INFLATION ADJUSTMENT OF DE MINIMIS EXCEPTION FOR
FOREIGN BASE COMPANY INCOME.
(a) In General.--Section 954(b)(3) is amended by adding at
the end the following new subparagraph:
``(D) Inflation adjustment.--In the case of any taxable
year beginning after 2017, the dollar amount in subparagraph
(A)(ii) shall be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(c)(2)(A) for the calendar year in which the taxable
year begins.
Any increase determined under the preceding sentence shall be
rounded to the nearest multiple of $50,000.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders in which or with which such
taxable years of foreign corporations end.
SEC. 4204. LOOK-THRU RULE FOR RELATED CONTROLLED FOREIGN
CORPORATIONS MADE PERMANENT.
(a) In General.--Paragraph (6) of section 954(c) is amended
by striking subparagraph (C).
(b) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2019, and to taxable years of
United States shareholders in which or with which such
taxable years of foreign corporations end.
SEC. 4205. MODIFICATION OF STOCK ATTRIBUTION RULES FOR
DETERMINING STATUS AS A CONTROLLED FOREIGN
CORPORATION.
(a) In General.--Section 958(b) is amended--
(1) by striking paragraph (4), and
(2) by striking ``Paragraphs (1) and (4)'' in the last
sentence and inserting ``Paragraph (1)''.
(b) Application of Certain Reporting Requirements.--Section
6038(e)(2) is amended by striking ``except that--'' and all
that follows through ``in applying subparagraph (C)'' and
inserting ``except that in applying subparagraph (C)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders in which or with which such
taxable years of foreign corporations end.
SEC. 4206. ELIMINATION OF REQUIREMENT THAT CORPORATION MUST
BE CONTROLLED FOR 30 DAYS BEFORE SUBPART F
INCLUSIONS APPLY.
(a) In General.--Section 951(a)(1) is amended by striking
``for an uninterrupted period of 30 days or more'' and
inserting ``at any time''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders with or within which such taxable
years of foreign corporations end.
Subtitle D--Prevention of Base Erosion
SEC. 4301. CURRENT YEAR INCLUSION BY UNITED STATES
SHAREHOLDERS WITH FOREIGN HIGH RETURNS.
(a) In General.--Subpart F of part III of subchapter N of
chapter 1 is amended by inserting after section 951 the
following new section:
[[Page H9340]]
``SEC. 951A. FOREIGN HIGH RETURN AMOUNT INCLUDED IN GROSS
INCOME OF UNITED STATES SHAREHOLDERS.
``(a) In General.--Each person who is a United States
shareholder of any controlled foreign corporation for any
taxable year of such United States shareholder shall include
in gross income for such taxable year 50 percent of such
shareholder's foreign high return amount for such taxable
year.
``(b) Foreign High Return Amount.--For purposes of this
section--
``(1) In general.--The term `foreign high return amount'
means, with respect to any United States shareholder for any
taxable year of such United States shareholder, the excess
(if any) of--
``(A) such shareholder's net CFC tested income for such
taxable year, over
``(B) the excess (if any) of--
``(i) the applicable percentage of the aggregate of such
shareholder's pro rata share of the qualified business asset
investment of each controlled foreign corporation with
respect to which such shareholder is a United States
shareholder for such taxable year (determined for each
taxable year of each such controlled foreign corporation
which ends in or with such taxable year of such United States
shareholder), over
``(ii) the amount of interest expense taken into account
under subsection (c)(2)(A)(ii) in determining the
shareholder's net CFC tested income for the taxable year.
``(2) Applicable percentage.--The term `applicable
percentage' means, with respect to any taxable year, the
Federal short-term rate (determined under section 1274(d) for
the month in which or with which such taxable year ends) plus
7 percentage points.
``(c) Net CFC Tested Income.--For purposes of this
section--
``(1) In general.--The term `net CFC tested income' means,
with respect to any United States shareholder for any taxable
year of such United States shareholder, the excess (if any)
of--
``(A) the aggregate of such shareholder's pro rata share of
the tested income of each controlled foreign corporation with
respect to which such shareholder is a United States
shareholder for such taxable year of such United States
shareholder (determined for each taxable year of such
controlled foreign corporation which ends in or with such
taxable year of such United States shareholder), over
``(B) the aggregate of such shareholder's pro rata share of
the tested loss of each controlled foreign corporation with
respect to which such shareholder is a United States
shareholder for such taxable year of such United States
shareholder (determined for each taxable year of such
controlled foreign corporation which ends in or with such
taxable year of such United States shareholder).
``(2) Tested income; tested loss.--For purposes of this
section--
``(A) Tested income.--The term `tested income' means, with
respect to any controlled foreign corporation for any taxable
year of such controlled foreign corporation, the excess (if
any) of--
``(i) the gross income of such corporation determined
without regard to--
``(I) any item of income which is effectively connected
with the conduct by such corporation of a trade or business
within the United States if subject to tax under this
chapter,
``(II) any gross income taken into account in determining
the subpart F income of such corporation,
``(III) except as otherwise provided by the Secretary, any
amount excluded from the foreign personal holding company
income (as defined in section 954) of such corporation by
reason of section 954(c)(6) but only to the extent that any
deduction allowable for the payment or accrual of such amount
does not result in a reduction in the foreign high return
amount of any United States shareholder (determined without
regard to this subclause),
``(IV) any gross income excluded from the foreign personal
holding company income (as defined in section 954) of such
corporation by reason of subsection (c)(2)(C), (h), or (i) of
section 954,
``(V) any gross income excluded from the insurance income
(as defined in section 953) of such corporation by reason of
section 953(a)(2),
``(VI) any gross income excluded from foreign base company
income (as defined in section 954) or insurance income (as
defined in section 953) of such corporation by reason of
section 954(b)(4),
``(VII) any dividend received from a related person (as
defined in section 954(d)(3)), and
``(VIII) any commodities gross income of such corporation,
over
``(ii) the deductions (including taxes) properly allocable
to such gross income under rules similar to the rules of
section 954(b)(5) (or which would be so properly allocable if
such corporation had such gross income).
``(B) Tested loss.--The term `tested loss' means, with
respect to any controlled foreign corporation for any taxable
year of such controlled foreign corporation, the excess (if
any) of the amount described in subparagraph (A)(ii) over the
amount described in subparagraph (A)(i).
``(d) Qualified Business Asset Investment.--For purposes of
this section--
``(1) In general.--The term `qualified business asset
investment' means, with respect to any controlled foreign
corporation for any taxable year of such controlled foreign
corporation, the aggregate of the corporation's adjusted
bases (determined as of the close of such taxable year and
after any adjustments with respect to such taxable year) in
specified tangible property--
``(A) used in a trade or business of the corporation, and
``(B) of a type with respect to which a deduction is
allowable under section 168.
``(2) Specified tangible property.--The term `specified
tangible property' means any tangible property to the extent
such property is used in the production of tested income or
tested loss.
``(3) Partnership property.--For purposes of this
subsection, if a controlled foreign corporation holds an
interest in a partnership at the close of such taxable year
of the controlled foreign corporation, such controlled
foreign corporation shall take into account under paragraph
(1) the controlled foreign corporation's distributive share
of the aggregate of the partnership's adjusted bases
(determined as of such date in the hands of the partnership)
in tangible property held by such partnership to the extent
such property--
``(A) is used in the trade or business of the partnership,
``(B) is of a type with respect to which a deduction is
allowable under section 168, and
``(C) is used in the production of tested income or tested
loss (determined with respect to such controlled foreign
corporation's distributive share of income or loss with
respect to such property).
For purposes of this paragraph, the controlled foreign
corporation's distributive share of the adjusted basis of any
property shall be the controlled foreign corporation's
distributive share of income and loss with respect to such
property.
``(4) Determination of adjusted basis.--For purposes of
this subsection, the adjusted basis in any property shall be
determined without regard to any provision of this title (or
any other provision of law) which is enacted after the date
of the enactment of this section.
``(5) Regulations.--The Secretary shall issue such
regulations or other guidance as the Secretary determines
appropriate to prevent the avoidance of the purposes of this
subsection, including regulations or other guidance which
provide for the treatment of property if--
``(A) such property is transferred, or held, temporarily,
or
``(B) the avoidance of the purposes of this paragraph is a
factor in the transfer or holding of such property.
``(e) Commodities Gross Income.--For purposes of this
section--
``(1) Commodities gross income.--The term `commodities
gross income' means, with respect to any corporation--
``(A) gross income of such corporation from the disposition
of commodities which are produced or extracted by such
corporation (or a partnership in which such corporation is a
partner), and
``(B) gross income of such corporation from the disposition
of property which gives rise to income described in
subparagraph (A).
``(2) Commodity.--The term `commodity' means any commodity
described in section 475(e)(2)(A) or section 475(e)(2)(D)
(determined without regard to clause (i) thereof and by
substituting `a commodity described in subparagraph (A)' for
`such a commodity' in clause (ii) thereof).
``(f) Taxable Years for Which Persons Are Treated as United
States Shareholders of Controlled Foreign Corporations.--For
purposes of this section--
``(1) In general.--A United States shareholder of a
controlled foreign corporation shall be treated as a United
States shareholder of such controlled foreign corporation for
any taxable year of such United States shareholder if--
``(A) a taxable year of such controlled foreign corporation
ends in or with such taxable year of such person, and
``(B) such person owns (within the meaning of section
958(a)) stock in such controlled foreign corporation on the
last day, in such taxable year of such foreign corporation,
on which the foreign corporation is a controlled foreign
corporation.
``(2) Treatment as a controlled foreign corporation.--
Except for purposes of paragraph (1)(B) and the application
of section 951(a)(2) to this section pursuant to subsection
(g), a foreign corporation shall be treated as a controlled
foreign corporation for any taxable year of such foreign
corporation if such foreign corporation is a controlled
foreign corporation at any time during such taxable year.
``(g) Determination of Pro Rata Share.--For purposes of
this section, pro rata shares shall be determined under the
rules of section 951(a)(2) in the same manner as such section
applies to subpart F income.
``(h) Coordination With Subpart F.--
``(1) Treatment as subpart f income for certain purposes.--
Except as otherwise provided by the Secretary any foreign
high return amount included in gross income under subsection
(a) shall be treated in the same manner as an amount included
under section 951(a)(1)(A) for purposes of applying sections
168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 961, 962,
993(a)(1)(E), 996(f)(1), 1248(b)(1), 1248(d)(1),
6501(e)(1)(C), 6654(d)(2)(D), and 6655(e)(4).
``(2) Entire foreign high return amount taken into account
for purposes of certain sections.--For purposes of applying
paragraph (1) with respect to sections 168(h)(2)(B), 851(b),
959, 961, 962, 1248(b)(1), and 1248(d)(1), the foreign high
return amount included in gross income under subsection (a)
shall be determined by substituting `100 percent' for `50
percent' in such subsection.
``(3) Allocation of foreign high return amount to
controlled foreign corporations.--For purposes of the
sections referred to in paragraph (1), with respect to any
controlled foreign corporation any pro rata amount from which
is taken into account in determining the
[[Page H9341]]
foreign high return amount included in gross income of a
United States shareholder under subsection (a), the portion
of such foreign high return amount which is treated as being
with respect to such controlled foreign corporation is--
``(A) in the case of a controlled foreign corporation with
tested loss, zero, and
``(B) in the case of a controlled foreign corporation with
tested income, the portion of such foreign high return amount
which bears the same ratio to such foreign high return amount
as--
``(i) such United States shareholder's pro rata amount of
the tested income of such controlled foreign corporation,
bears to
``(ii) the aggregate amount determined under subsection
(c)(1)(A) with respect to such United States shareholder.
``(4) Coordination with subpart f to deny double benefit of
losses.--In the case of any United States shareholder of any
controlled foreign corporation, the amount included in gross
income under section 951(a)(1)(A) shall be determined by
increasing the earnings and profits of such controlled
foreign corporation (solely for purposes of determining such
amount) by an amount that bears the same ratio (not greater
than 1) to such shareholder's pro rata share of the tested
loss of such controlled foreign corporation as--
``(A) the aggregate amount determined under subsection
(c)(1)(A) with respect to such shareholder, bears to
``(B) the aggregate amount determined under subsection
(c)(1)(B) with respect to such shareholder.''.
(b) Foreign Tax Credit.--
(1) Application of deemed paid foreign tax credit.--Section
960, as amended by the preceding provisions of this Act, is
amended by redesignating subsections (d) and (e) as
subsections (e) and (f), respectively, and by inserting after
subsection (c) the following new subsection:
``(d) Deemed Paid Credit for Taxes Properly Attributable to
Tested Income.--
``(1) In general.--For purposes of this subpart, if any
amount is includible in the gross income of a domestic
corporation under section 951A, such domestic corporation
shall be deemed to have paid foreign income taxes equal to 80
percent of--
``(A) such domestic corporation's foreign high return
percentage, multiplied by
``(B) the aggregate tested foreign income taxes paid or
accrued by controlled foreign corporations with respect to
which such domestic corporation is a United States
shareholder.
``(2) Foreign high return percentage.--For purposes of
paragraph (1), the term `foreign high return percentage'
means, with respect to any domestic corporation, the ratio
(expressed as a percentage) of--
``(A) such corporation's foreign high return amount (as
defined in section 951A(b)), divided by
``(B) the aggregate amount determined under section
951A(c)(1)(A) with respect to such corporation.
``(3) Tested foreign income taxes.--For purposes of
paragraph (1), the term `tested foreign income taxes' means,
with respect to any domestic corporation which is a United
States shareholder of a controlled foreign corporation, the
foreign income taxes paid or accrued by such foreign
corporation which are properly attributable to gross income
described in section 951A(c)(2)(A)(i).''.
(2) Application of foreign tax credit limitation.--
(A) Separate basket for foreign high return amount.--
Section 904(d)(1) is amended by redesignating subparagraphs
(A) and (B) as subparagraphs (B) and (C), respectively, and
by inserting before subparagraph (B) (as so redesignated) the
following new subparagraph:
``(A) any amount includible in gross income under section
951A,''.
(B) No carryover of excess taxes.--Section 904(c) is
amended by adding at the end the following: ``This subsection
shall not apply to taxes paid or accrued with respect to
amounts described in subsection (d)(1)(A).''
(3) Gross up for deemed paid foreign tax credit.--Section
78, as amended by the preceding provisions of this Act, is
amended--
(A) by striking ``any taxable year, an amount'' and
inserting ``any taxable year--
``(1) an amount'', and
(B) by striking the period at the end and inserting ``, and
``(2) an amount equal to the taxes deemed to be paid by
such corporation under section 960(d) for such taxable year
(determined by substituting `100 percent' for `80 percent' in
such section) shall be treated for purposes of this title
(other than sections 959, 960, and 961) as an increase in the
foreign high return amount of such domestic corporation under
section 951A for such taxable year.''.
(c) Conforming Amendments.--
(1) Section 170(b)(2)(D) is amended by striking ``computed
without regard to'' and all that follows and inserting
``computed--
``(i) without regard to--
``(I) this section,
``(II) part VIII (except section 248),
``(III) any net operating loss carryback to the taxable
year under section 172,
``(IV) any capital loss carryback to the taxable year under
section 1212(a)(1), and
``(ii) by substituting `100 percent' for `50 percent' in
section 951A(a).''.
(2) Section 246(b)(1) is amended by--
(A) striking ``and without regard to'' and inserting
``without regard to'', and
(B) by striking the period at the end and inserting ``, and
by substituting `100 percent' for `50 percent' in section
951A(a).''.
(3) Section 469(i)(3)(F) is amended by striking
``determined without regard to'' and all that follows and
inserting ``determined--
``(i) without regard to--
``(I) any amount includible in gross income under section
86,
``(II) the amounts allowable as a deduction under section
219, and
``(III) any passive activity loss or any loss allowable by
reason of subsection (c)(7), and
``(ii) by substituting `100 percent' for `50 percent' in
section 951A(a).''.
(4) Section 856(c)(2) is amended by striking ``and'' at the
end of subparagraph (H), by adding ``and'' at the end of
subparagraph (I), and by inserting after subparagraph (I) the
following new subparagraph:
``(J) amounts includible in gross income under section
951A(a);''.
(5) Section 856(c)(3)(D) is amended by striking ``dividends
or other distributions on, and gain'' and inserting
``dividends, other distributions on, amounts includible in
gross income under section 951A(a) with respect to, and
gain''.
(6) The table of sections for subpart F of part III of
subchapter N of chapter 1 is amended by inserting after the
item relating to section 951 the following new item:
``Sec. 951A. Foreign high return amount included in gross income of
United States shareholders.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders in which or with which such
taxable years of foreign corporations end.
SEC. 4302. LIMITATION ON DEDUCTION OF INTEREST BY DOMESTIC
CORPORATIONS WHICH ARE MEMBERS OF AN
INTERNATIONAL FINANCIAL REPORTING GROUP.
(a) In General.--Section 163 is amended by redesignating
subsection (n) as subsection (p) and by inserting after
subsection (m) the following new subsection:
``(n) Limitation on Deduction of Interest by Domestic
Corporations in International Financial Reporting Groups.--
``(1) In general.--In the case of any domestic corporation
which is a member of any international financial reporting
group, the deduction under this chapter for interest paid or
accrued during the taxable year shall not exceed the sum of--
``(A) the allowable percentage of 110 percent of the excess
(if any) of --
``(i) the amount of such interest so paid or accrued, over
``(ii) the amount described in subparagraph (B), plus
``(B) the amount of interest includible in gross income of
such corporation for such taxable year.
``(2) International financial reporting group.--
``(A) For purposes of this subsection, the term
`international financial reporting group' means, with respect
to any reporting year, any group of entities which--
``(i) includes--
``(I) at least one foreign corporation engaged in a trade
or business within the United States, or
``(II) at least one domestic corporation and one foreign
corporation,
``(ii) prepares consolidated financial statements with
respect to such year, and
``(iii) reports in such statements average annual gross
receipts (determined in the aggregate with respect to all
entities which are part of such group) for the 3-reporting-
year period ending with such reporting year in excess of
$100,000,000.
``(B) Rules relating to determination of average gross
receipts.--For purposes of subparagraph (A)(iii), rules
similar to the rules of section 448(c)(3) shall apply.
``(3) Allowable percentage.--For purposes of this
subsection--
``(A) In general.--The term `allowable percentage' means,
with respect to any domestic corporation for any taxable
year, the ratio (expressed as a percentage and not greater
than 100 percent) of--
``(i) such corporation's allocable share of the
international financial reporting group's reported net
interest expense for the reporting year of such group which
ends in or with such taxable year of such corporation, over
``(ii) such corporation's reported net interest expense for
such reporting year of such group.
``(B) Reported net interest expense.--The term `reported
net interest expense' means--
``(i) with respect to any international financial reporting
group for any reporting year, the excess of--
``(I) the aggregate amount of interest expense reported in
such group's consolidated financial statements for such
taxable year, over
``(II) the aggregate amount of interest income reported in
such group's consolidated financial statements for such
taxable year, and
``(ii) with respect to any domestic corporation for any
reporting year, the excess of--
``(I) the amount of interest expense of such corporation
reported in the books and records of the international
financial reporting group which are used in preparing such
group's consolidated financial statements for such taxable
year, over
``(II) the amount of interest income of such corporation
reported in such books and records.
``(C) Allocable share of reported net interest expense.--
With respect to any domestic corporation which is a member of
any international financial reporting group, such
corporation's allocable share of such group's reported net
interest expense for any reporting year is the portion of
such expense which bears the same ratio to such expense as--
``(i) the EBITDA of such corporation for such reporting
year, bears to
``(ii) the EBITDA of such group for such reporting year.
``(D) EBITDA.--
[[Page H9342]]
``(i) In general.--The term `EBITDA' means, with respect to
any reporting year, earnings before interest, taxes,
depreciation, and amortization--
``(I) as determined in the international financial
reporting group's consolidated financial statements for such
year, or
``(II) for purposes of subparagraph (A)(i), as determined
in the books and records of the international financial
reporting group which are used in preparing such statements
if not determined in such statements.
``(ii) Treatment of disregarded entities.--The EBITDA of
any domestic corporation shall not fail to include the EBITDA
of any entity which is disregarded for purposes of this
chapter.
``(iii) Treatment of intra-group distributions.--The EBITDA
of any domestic corporation shall be determined without
regard to any distribution received by such corporation from
any other member of the international financial reporting
group.
``(E) Special rules for non-positive ebitda.--
``(i) Non-positive group ebitda.--In the case of any
international financial reporting group the EBITDA of which
is zero or less, paragraph (1) shall not apply to any member
of such group the EBITDA of which is above zero.
``(ii) Non-positive entity ebitda.--In the case of any
group member the EBITDA of which is zero or less, paragraph
(1) shall be applied without regard to subparagraph (A)
thereof.
``(4) Consolidated financial statement.--For purposes of
this subsection, the term `consolidated financial statement'
means any consolidated financial statement described in
paragraph (2)(A)(ii) if such statement is--
``(A) a financial statement which is certified as being
prepared in accordance with generally accepted accounting
principles, international financial reporting standards, or
any other comparable method of accounting identified by the
Secretary, and which is--
``(i) a 10-K (or successor form), or annual statement to
shareholders, required to be filed with the United States
Securities and Exchange Commission,
``(ii) an audited financial statement which is used for--
``(I) credit purposes,
``(II) reporting to shareholders, partners, or other
proprietors, or to beneficiaries, or
``(III) any other substantial nontax purpose,
but only if there is no statement described in clause (i), or
``(iii) filed with any other Federal or State agency for
nontax purposes, but only if there is no statement described
in clause (i) or (ii), or
``(B) a financial statement which--
``(i) is used for a purpose described in subclause (I),
(II), or (III) of subparagraph (A)(ii), or
``(ii) filed with any regulatory or governmental body
(whether domestic or foreign) specified by the Secretary,
but only if there is no statement described in subparagraph
(A).
``(5) Reporting year.--For purposes of this subsection, the
term `reporting year' means, with respect to any
international financial reporting group, the year with
respect to which the consolidated financial statements are
prepared.
``(6) Application to certain entities.--
``(A) Partnerships.--Except as otherwise provided by the
Secretary in paragraph (7), this subsection shall apply to
any partnership which is a member of any international
financial reporting group under rules similar to the rules of
section 163(j)(3).
``(B) Foreign corporations engaged in trade or business
within the united states.--Except as otherwise provided by
the Secretary in paragraph (8), any deduction for interest
paid or accrued by a foreign corporation engaged in a trade
or business within the United States shall be limited in a
manner consistent with the principles of this subsection.
``(C) Consolidated groups.--For purposes of this
subsection, the members of any group that file (or are
required to file) a consolidated return with respect to the
tax imposed by chapter 1 for a taxable year shall be treated
as a single corporation.
``(7) Regulations.--The Secretary may issue such
regulations or other guidance as are necessary or appropriate
to carry out the purposes of this subsection.''.
(b) Carryforward of Disallowed Interest.--
(1) In general.--Section 163(o) is amended to read as
follows:
``(o) Carryforward of Certain Disallowed Interest.--The
amount of any interest not allowed as a deduction for any
taxable year by reason of subsection (j)(1) or (n)(1)
(whichever imposes the lower limitation with respect to such
taxable year) shall be treated as interest (and as business
interest for purposes of subsection (j)(1)) paid or accrued
in the succeeding taxable year. Interest paid or accrued in
any taxable year (determined without regard to the preceding
sentence) shall not be carried past the 5th taxable year
following such taxable year, determined by treating interest
as allowed as a deduction on a first-in, first-out basis.''.
(2) Treatment of carryforward of disallowed interest in
certain corporate acquisitions.--For rules related to the
carryforward of disallowed interest in certain corporate
acquisitions, see the amendments made by section 3301(c).
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 4303. EXCISE TAX ON CERTAIN PAYMENTS FROM DOMESTIC
CORPORATIONS TO RELATED FOREIGN CORPORATIONS;
ELECTION TO TREAT SUCH PAYMENTS AS EFFECTIVELY
CONNECTED INCOME.
(a) Excise Tax on Certain Amounts From Domestic
Corporations to Foreign Affiliates.--
(1) In general.--Chapter 36 is amended by adding at the end
the following new subchapter:
``Subchapter E--Tax on Certain Amounts to Foreign Affiliates
``Sec. 4491. Imposition of tax on certain amounts from domestic
corporations to foreign affiliates.
``SEC. 4491. IMPOSITION OF TAX ON CERTAIN AMOUNTS FROM
DOMESTIC CORPORATIONS TO FOREIGN AFFILIATES.
``(a) In General.--There is hereby imposed on each
specified amount paid or incurred by a domestic corporation
to a foreign corporation which is a member of the same
international financial reporting group as such domestic
corporation a tax equal to the highest rate of tax in effect
under section 11 multiplied by such amount.
``(b) By Whom Paid.--The tax imposed by subsection (a)
shall be paid by the domestic corporation described in such
subsection.
``(c) Exception for Effectively Connected Income.--
Subsection (a) shall not apply to so much of any specified
amount as is effectively connected with the conduct of a
trade or business within the United States if such amount is
subject to tax under chapter 1. In the case of any amount
which is treated as effectively connected with the conduct of
a trade or business within the United States by reason of
section 882(g), the preceding sentence shall apply to such
amount only if the domestic corporation provides to the
Secretary (at such time and in such form and manner as the
Secretary may provide) a copy of the election made under
section 882(g) by the foreign corporation referred to in
subsection (a).
``(d) Definitions and Special Rules.--Terms used in this
section that are also used in section 882(g) shall have the
same meaning as when used in such section and rules similar
to the rules of paragraphs (5) and (6) of such section shall
apply for purposes of this section.''.
(2) Denial of deduction for tax imposed.--Section 275(a) is
amended by inserting after paragraph (6) the following new
paragraph:
``(7) Taxes imposed by section 4491.''.
(3) Clerical amendment.--The table of subchapters for
chapter 36 is amended by adding at the end the following new
item:
``subchapter e. tax on certain amounts to foreign affiliates.''.
(b) Election to Treat Certain Payments From Domestic
Corporations to Related Foreign Corporations as Effectively
Connected Income.--Section 882 is amended by adding at the
end the following new subsection:
``(g) Election to Treat Certain Payments From Domestic
Corporations to Related Foreign Corporations as Effectively
Connected Income.--
``(1) In general.--In the case of any specified amount paid
or incurred by a domestic corporation to a foreign
corporation which is a member of the same international
financial reporting group as such domestic corporation and
which has elected to be subject to the provisions of this
subsection--
``(A) such amount shall be taken into account (other than
for purposes of sections 245, 245A, and 881) in the taxable
year of such foreign corporation during which such amount is
paid or incurred as if--
``(i) such foreign corporation were engaged in a trade or
business within the United States,
``(ii) such foreign corporation had a permanent
establishment in the United States during the taxable year,
and
``(iii) such payment were effectively connected with the
conduct of a trade or business within the United States and
were attributable to such permanent establishment,
``(B) for purposes of subsection (c)(1)(A), no deduction
shall be allowed with respect to such amount and such
subsection shall be applied without regard to such amount,
and
``(C) the foreign corporation shall be allowed a deduction
(for the taxable year referred to in subparagraph (A)) equal
to the deemed expenses with respect to such amount.
``(2) Specified amount.--For purposes of this subsection--
``(A) In general.--The term `specified amount' means any
amount which is, with respect to the payor, allowable as a
deduction or includible in costs of goods sold, inventory, or
the basis of a depreciable or amortizable asset.
``(B) Exceptions.--The term `specified amount' shall not
include--
``(i) interest,
``(ii) any amount paid or incurred for the acquisition of
any security described in section 475(c)(2) (determined
without regard to the last sentence thereof) or any commodity
described in section 475(e)(2),
``(iii) except as provided in subparagraph (C), any amount
with respect to which tax is imposed under section 881(a),
and
``(iv) in the case of a payor which has elected to use a
services cost method for purposes of section 482, any amount
paid or incurred for services if such amount is the total
services cost with no markup.
``(C) Amounts not treated as effectively connected to
extent of gross-basis tax.--Subparagraph (B)(iii) shall only
apply to so much of any specified amount as bears the
proportion to such amount as--
``(i) the rate of tax imposed under section 881(a) with
respect to such amount, bears to
``(ii) 30 percent.
``(3) Deemed expenses.--
``(A) In general.--The deemed expenses with respect to any
specified amount received by a foreign corporation during any
reporting year is the amount of expenses such that the net
income
[[Page H9343]]
ratio of such foreign corporation with respect to such amount
(taking into account only such specified amount and such
deemed expenses) is equal to the net income ratio of the
international financial reporting group determined for such
reporting year with respect to the product line to which the
specified amount relates.
``(B) Net income ratio.--For purposes of this paragraph,
the term `net income ratio' means the ratio of--
``(i) net income determined without regard to interest
income, interest expense, and income taxes, divided by
``(ii) revenues.
``(C) Method of determination.--Amounts described in
subparagraph (B) shall be determined with respect to the
international financial reporting group on the basis of the
consolidated financial statements referred to in paragraph
(4)(A)(i) and the books and records of the members of the
international financial reporting group which are used in
preparing such statements, taking into account only revenues
and expenses of the members of such group (other than the
members of such group which are (or are treated as) a
domestic corporation for purposes of this subsection) derived
from, or incurred with respect to--
``(i) persons who are not members of such group, and
``(ii) members of such group which are (or are treated as)
a domestic corporation for purposes of this subsection.
``(4) International financial reporting group.--For
purposes of this subsection--
``(A) In general.--The term `international financial
reporting group' means any group of entities, with respect to
any specified amount, if such amount is paid or incurred
during a reporting year of such group with respect to which--
``(i) such group prepares consolidated financial statements
(within the meaning of section 163(n)(4)) with respect to
such year, and
``(ii) the average annual aggregate payment amount of such
group for the 3-reporting-year period ending with such
reporting year exceeds $100,000,000.
``(B) Annual aggregate payment amount.--The term `annual
aggregate payment amount' means, with respect to any
reporting year of the group referred to in subparagraph
(A)(i), the aggregate specified amounts to which paragraph
(1) applies (or would apply if such group were an
international financial reporting group).
``(C) Application of certain rules.--Rules similar to the
rules of subparagraphs (A), (B), and (D) of section 448(c)(3)
shall apply for purposes of this paragraph.
``(5) Treatment of partnerships.--Any specified amount
paid, incurred, or received by a partnership which is a
member of any international financial reporting group (and
any amount treated as paid, incurred, or received by a
partnership under this paragraph) shall be treated for
purposes of this subsection as amounts paid, incurred, or
received, respectively, by each partner of such partnership
in an amount equal to such partner's distributive share of
the items of income, gain, deduction, or loss to which such
amounts relate.
``(6) Treatment of amounts in connection with united states
trade or business.--Any specified amount paid, incurred, or
received by a foreign corporation in connection with the
conduct of a trade or business within the United States
(other than a trade or business it is deemed to conduct
pursuant to this subsection) shall be treated for purposes of
this subsection as an amount paid, incurred, or received,
respectively, by a domestic corporation. For purposes of the
preceding sentence, a foreign corporation shall be deemed to
pay, incur, and receive amounts with respect to a trade or
business it conducts within the United States (other than a
trade or business it is deemed to conduct pursuant to this
subsection) to the extent such foreign corporation would be
treated as paying, incurring, or receiving such amounts from
such trade or business if such trade or business were a
domestic corporation.
``(7) Joint and several liability of members of internal
financial reporting group.--In the case of any underpayment
with respect to any taxable year of a foreign corporation
which is a member of an international financial accounting
group, each domestic corporation which is a member of such
group at any time during such taxable year shall be jointly
and severally liable for--
``(A) so much of such underpayment as does not exceed the
excess (if any) of such underpayment over the amount of such
underpayment determined without regard to this subsection,
and
``(B) any penalty, addition to tax, or additional amount
attributable to the amount described in subparagraph (A).
``(8) Foreign tax credit allowed.--The credit allowed under
section 906(a) with respect to amounts taken into account in
income under paragraph (1)(A) shall be limited to 80 percent
of the amount of taxes paid or accrued and determined without
regard to section 906(b)(1).
``(9) Election.--Any election under paragraph (1)--
``(A) shall be made at such time and in such form and
manner as the Secretary may provide, and
``(B) shall apply for the taxable year for which made and
all subsequent taxable years unless revoked with the consent
of the Secretary.
``(10) Regulations.--The Secretary may issue such
regulations or other guidance as are necessary or appropriate
to carry out the purposes of this subsection, including
regulations or other guidance--
``(A) to provide for the proper determination of product
lines, and
``(B) to prevent the avoidance of the purposes of this
subsection through the use of conduit transactions or by
other means.''.
(c) Reporting Requirements.--
(1) Reporting by foreign corporation.--Section 6038C(b) is
amended to read as follows:
``(b) Required Information.--
``(1) In general.--The information described in this
subsection is--
``(A) the information described in section 6038A(b), and
``(B) such other information as the Secretary may prescribe
by regulations relating to any item not directly connected
with a transaction for which information is required under
subparagraph (A).
``(2) Certain payments from related domestic
corporations.--
``(A) In general.--In the case of any reporting corporation
that receives during the taxable year any amount to which
section 882(g)(1) applies, the information described in this
subsection shall include, with respect to each member of the
international financial reporting group from which any such
amount is received--
``(i) the name and taxpayer identification number of such
member,
``(ii) the aggregate amounts received from such member,
``(iii) the product lines to which such amounts relate, the
aggregate amounts relating to each such product line, and the
net income ratio for each such product line (determined under
section 882(g)(3)(B) with respect to the international
financial reporting group), and
``(iv) a summary of any changes in financial accounting
methods that affect the computation of any net income ratio
described in clause (iii).
``(B) Definitions and special rules.--Terms used in this
paragraph that are also used in section 882(g) shall have the
same meaning as when used in such section and rules similar
to the rules of paragraphs (5) and (6) of such section shall
apply for purposes of this paragraph.''.
(2) Reporting by domestic group members.--
(A) In general .--Subpart A of part III of subchapter A of
chapter 61 is amended by inserting after section 6038D the
following new section:
``SEC. 6038E. INFORMATION WITH RESPECT TO CERTAIN PAYMENTS
FROM DOMESTIC CORPORATIONS TO RELATED FOREIGN
CORPORATIONS.
``(a) In General.--In the case of any domestic corporation
which pays or incurs any amount to which section 882(g)(1)
applies, such person shall--
``(1) make a return according to the forms and regulations
prescribed the Secretary, setting forth the information
described in subsection (b), and
``(2) maintain (at the location, in the manner, and to the
extent prescribed in regulations) such records as may be
appropriate to determine liability for tax pursuant to
paragraphs (1) and (7) of section 882(g).
``(b) Required Information.--The information described in
this subsection is--
``(1) the name and taxpayer identification number of the
common parent of the international financial reporting group
in which such domestic corporation is a member, and
``(2) with respect to any person who receives an amount
described in subsection (a) from such domestic corporation--
``(A) the name and taxpayer identification number of such
person,
``(B) the aggregate amounts received by such person,
``(C) the product lines to which such amounts relate, the
aggregate amounts relating to each such product line, and the
net income ratio for each such product line (determined under
section 882(g)(3)(B) with respect to the international
financial reporting group), and
``(D) a summary of any changes in financial accounting
methods that affect the computation of any net income ratios
described in subparagraph (C).
``(c) Definitions and Special Rules.--Terms used in this
paragraph that are also used in section 882(g) shall have the
same meaning as when used in such section and rules similar
to the rules of paragraphs (5) and (6) of such section shall
apply for purposes of this paragraph.''.
(B) Clerical amendment.--The table of sections for subpart
A of part III of subchapter A of chapter 61 is amended by
inserting after the item relating to section 6038D the
following new item:
``Sec. 6038E. Information with respect to certain payments from
domestic corporations to related foreign corporations.''.
(d) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred after December 31,
2018.
Subtitle E--Provisions Related to Possessions of the United States
SEC. 4401. EXTENSION OF DEDUCTION ALLOWABLE WITH RESPECT TO
INCOME ATTRIBUTABLE TO DOMESTIC PRODUCTION
ACTIVITIES IN PUERTO RICO.
(a) In General.--Section 199(d)(8)(C), prior to its repeal
by this Act, is amended--
(1) by striking ``first 11 taxable years'' and inserting
``first 12 taxable years'', and
(2) by striking ``January 1, 2017'' and inserting ``January
1, 2018''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2016.
SEC. 4402. EXTENSION OF TEMPORARY INCREASE IN LIMIT ON COVER
OVER OF RUM EXCISE TAXES TO PUERTO RICO AND THE
VIRGIN ISLANDS.
(a) In General.--Section 7652(f)(1) is amended by striking
``January 1, 2017'' and inserting ``January 1, 2023''.
[[Page H9344]]
(b) Effective Date.--The amendment made by this section
shall apply to distilled spirits brought into the United
States after December 31, 2016.
SEC. 4403. EXTENSION OF AMERICAN SAMOA ECONOMIC DEVELOPMENT
CREDIT.
(a) In General.--Section 119(d) of division A of the Tax
Relief and Health Care Act of 2006 is amended--
(1) by striking ``January 1, 2017'' each place it appears
and inserting ``January 1, 2023'',
(2) by striking ``first 11 taxable years'' in paragraph (1)
and inserting ``first 17 taxable years'', and
(3) by striking ``first 5 taxable years'' in paragraph (2)
and inserting ``first 11 taxable years''.
(b) Treatment of Certain References.--Section 119(e) of
division A of the Tax Relief and Health Care Act of 2006 is
amended by adding at the end the following: ``References in
this subsection to section 199 of the Internal Revenue Code
of 1986 shall be treated as references to such section as in
effect before its repeal by the Tax Cuts and Jobs Act.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2016.
Subtitle F--Other International Reforms
SEC. 4501. RESTRICTION ON INSURANCE BUSINESS EXCEPTION TO
PASSIVE FOREIGN INVESTMENT COMPANY RULES.
(a) In General.--Section 1297(b)(2)(B) is amended to read
as follows:
``(B) derived in the active conduct of an insurance
business by a qualifying insurance corporation (as defined in
subsection (f)),''.
(b) Qualifying Insurance Corporation Defined.--Section 1297
is amended by adding at the end the following new subsection:
``(f) Qualifying Insurance Corporation.--For purposes of
subsection (b)(2)(B)--
``(1) In general.--The term `qualifying insurance
corporation' means, with respect to any taxable year, a
foreign corporation--
``(A) which would be subject to tax under subchapter L if
such corporation were a domestic corporation, and
``(B) the applicable insurance liabilities of which
constitute more than 25 percent of its total assets,
determined on the basis of such liabilities and assets as
reported on the corporation's applicable financial statement
for the last year ending with or within the taxable year.
``(2) Alternative facts and circumstances test for certain
corporations.--If a corporation fails to qualify as a
qualified insurance corporation under paragraph (1) solely
because the percentage determined under paragraph (1)(B) is
25 percent or less, a United States person that owns stock in
such corporation may elect to treat such stock as stock of a
qualifying insurance corporation if--
``(A) the percentage so determined for the corporation is
at least 10 percent, and
``(B) under regulations provided by the Secretary, based on
the applicable facts and circumstances--
``(i) the corporation is predominantly engaged in an
insurance business, and
``(ii) such failure is due solely to runoff-related or
rating-related circumstances involving such insurance
business.
``(3) Applicable insurance liabilities.--For purposes of
this subsection--
``(A) In general.--The term `applicable insurance
liabilities' means, with respect to any life or property and
casualty insurance business--
``(i) loss and loss adjustment expenses, and
``(ii) reserves (other than deficiency, contingency, or
unearned premium reserves) for life and health insurance
risks and life and health insurance claims with respect to
contracts providing coverage for mortality or morbidity
risks.
``(B) Limitations on amount of liabilities.--Any amount
determined under clause (i) or (ii) of subparagraph (A) shall
not exceed the lesser of such amount--
``(i) as reported to the applicable insurance regulatory
body in the applicable financial statement described in
paragraph (4)(A) (or, if less, the amount required by
applicable law or regulation), or
``(ii) as determined under regulations prescribed by the
Secretary.
``(4) Other definitions and rules.--For purposes of this
subsection--
``(A) Applicable financial statement.--The term `applicable
financial statement' means a statement for financial
reporting purposes which--
``(i) is made on the basis of generally accepted accounting
principles,
``(ii) is made on the basis of international financial
reporting standards, but only if there is no statement that
meets the requirement of clause (i), or
``(iii) except as otherwise provided by the Secretary in
regulations, is the annual statement which is required to be
filed with the applicable insurance regulatory body, but only
if there is no statement which meets the requirements of
clause (i) or (ii).
``(B) Applicable insurance regulatory body.--The term
`applicable insurance regulatory body' means, with respect to
any insurance business, the entity established by law to
license, authorize, or regulate such business and to which
the statement described in subparagraph (A) is provided.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
TITLE V--EXEMPT ORGANIZATIONS
Subtitle A--Unrelated Business Income Tax
SEC. 5001. CLARIFICATION OF UNRELATED BUSINESS INCOME TAX
TREATMENT OF ENTITIES TREATED AS EXEMPT FROM
TAXATION UNDER SECTION 501(A).
(a) In General.--Section 511 is amended by adding at the
end the following new subsection:
``(d) Organizations and Trusts Exempt From Taxation Not
Solely by Reason of Section 501(a).--For purposes of
subsections (a)(2) and (b)(2), an organization or trust shall
not fail to be treated as exempt from taxation under this
subtitle by reason of section 501(a) solely because such
organization is also so exempt, or excludes amounts from
gross income, by reason of any other provision of this
title.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 5002. EXCLUSION OF RESEARCH INCOME LIMITED TO PUBLICLY
AVAILABLE RESEARCH.
(a) In General.--Section 512(b)(9) is amended by striking
``from research'' and inserting ``from such research''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
Subtitle B--Excise Taxes
SEC. 5101. SIMPLIFICATION OF EXCISE TAX ON PRIVATE FOUNDATION
INVESTMENT INCOME.
(a) Rate Reduction.--Section 4940(a) is amended by striking
``2 percent'' and inserting ``1.4 percent''.
(b) Repeal of Special Rules for Certain Private
Foundations.--Section 4940 is amended by striking subsection
(e).
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 5102. PRIVATE OPERATING FOUNDATION REQUIREMENTS RELATING
TO OPERATION OF ART MUSEUM.
(a) In General.--Section 4942(j) is amended by adding at
the end the following new paragraph:
``(6) Organization operating art museum.--For purposes of
this section, the term `operating foundation' shall not
include an organization which operates an art museum as a
substantial activity unless such museum is open during normal
business hours to the public for at least 1,000 hours during
the taxable year.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 5103. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE
COLLEGES AND UNIVERSITIES.
(a) In General.--Chapter 42 is amended by adding at the end
the following new subchapter:
``Subchapter H--Excise Tax Based on Investment Income of Private
Colleges and Universities
``Sec. 4969. Excise tax based on investment income of private colleges
and universities.
``SEC. 4969. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE
COLLEGES AND UNIVERSITIES.
``(a) Tax Imposed.--There is hereby imposed on each
applicable educational institution for the taxable year a tax
equal to 1.4 percent of the net investment income of such
institution for the taxable year.
``(b) Applicable Educational Institution.--For purposes of
this subchapter--
``(1) In general.--The term `applicable educational
institution' means an eligible educational institution (as
defined in section 25A(e)(3))--
``(A) which has at least 500 students during the preceding
taxable year,
``(B) which is not described in the first sentence of
section 511(a)(2)(B), and
``(C) the aggregate fair market value of the assets of
which at the end of the preceding taxable year (other than
those assets which are used directly in carrying out the
institution's exempt purpose) is at least $250,000 per
student of the institution.
``(2) Students.--For purposes of paragraph (1), the number
of students of an institution shall be based on the daily
average number of full-time students attending such
institution (with part-time students taken into account on a
full-time student equivalent basis).
``(c) Net Investment Income.--For purposes of this section,
net investment income shall be determined under rules similar
to the rules of section 4940(c).
``(d) Assets and Net Investment Income of Related
Organizations.--
``(1) In general.--For purposes of subsections (b)(1)(C)
and (c), the assets and net investment income of any related
organization shall be treated as the assets and net
investment income of the eligible educational institution.
``(2) Related organization.--For purposes of this
subsection, the term `related organization' means, with
respect to an eligible educational institution, any
organization which--
``(A) controls, or is controlled by, such institution,
``(B) is controlled by one or more persons that control
such institution, or
``(C) is a supported organization (as defined in section
509(f)(3)), or an organization described in section
509(a)(3), during the taxable year with respect to such
institution.''.
(b) Clerical Amendment.--The table of subchapters for
chapter 42 is amended by adding at the end the following new
item:
``subchapter h--excise tax based on investment income of private
colleges and universities''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 5104. EXCEPTION FROM PRIVATE FOUNDATION EXCESS BUSINESS
HOLDING TAX FOR INDEPENDENTLY-OPERATED
PHILANTHROPIC BUSINESS HOLDINGS.
(a) In General.--Section 4943 is amended by adding at the
end the following new subsection:
[[Page H9345]]
``(g) Exception for Certain Holdings Limited to
Independently-operated Philanthropic Business.--
``(1) In general.--Subsection (a) shall not apply with
respect to the holdings of a private foundation in any
business enterprise which for the taxable year meets--
``(A) the ownership requirements of paragraph (2),
``(B) the all profits to charity distribution requirement
of paragraph (3), and
``(C) the independent operation requirements of paragraph
(4).
``(2) Ownership.--The ownership requirements of this
paragraph are met if--
``(A) 100 percent of the voting stock in the business
enterprise is held by the private foundation at all times
during the taxable year, and
``(B) all the private foundation's ownership interests in
the business enterprise were acquired not by purchase.
``(3) All profits to charity.--
``(A) In general.--The all profits to charity distribution
requirement of this paragraph is met if the business
enterprise, not later than 120 days after the close of the
taxable year, distributes an amount equal to its net
operating income for such taxable year to the private
foundation.
``(B) Net operating income.--For purposes of this
paragraph, the net operating income of any business
enterprise for any taxable year is an amount equal to the
gross income of the business enterprise for the taxable year,
reduced by the sum of--
``(i) the deductions allowed by chapter 1 for the taxable
year which are directly connected with the production of such
income,
``(ii) the tax imposed by chapter 1 on the business
enterprise for the taxable year, and
``(iii) an amount for a reasonable reserve for working
capital and other business needs of the business enterprise.
``(4) Independent operation.--The independent operation
requirements of this paragraph are met if, at all times
during the taxable year--
``(A) no substantial contributor (as defined in section
4958(c)(3)(C)) to the private foundation, or family member of
such a contributor (determined under section 4958(f)(4)) is a
director, officer, trustee, manager, employee, or contractor
of the business enterprise (or an individual having powers or
responsibilities similar to any of the foregoing),
``(B) at least a majority of the board of directors of the
private foundation are not--
``(i) also directors or officers of the business
enterprise, or
``(ii) members of the family (determined under section
4958(f)(4)) of a substantial contributor (as defined in
section 4958(c)(3)(C)) to the private foundation, and
``(C) there is no loan outstanding from the business
enterprise to a substantial contributor (as so defined) to
the private foundation or a family member of such contributor
(as so determined).
``(5) Certain deemed private foundations excluded.--This
subsection shall not apply to--
``(A) any fund or organization treated as a private
foundation for purposes of this section by reason of
subsection (e) or (f),
``(B) any trust described in section 4947(a)(1) (relating
to charitable trusts), and
``(C) any trust described in section 4947(a)(2) (relating
to split-interest trusts).''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
Subtitle C--Requirements for Organizations Exempt From Tax
SEC. 5201. 501(C)(3) ORGANIZATIONS PERMITTED TO MAKE
STATEMENTS RELATING TO POLITICAL CAMPAIGN IN
ORDINARY COURSE OF ACTIVITIES.
(a) In General.--Section 501 is amended by adding at the
end the following new subsection:
``(s) Special Rule Relating to Political Campaign
Statements of Organizations Described in Subsection (c)(3).--
``(1) In general.--For purposes of subsection (c)(3) and
sections 170(c)(2), 2055, 2106, 2522, and 4955, an
organization shall not fail to be treated as organized and
operated exclusively for a purpose described in subsection
(c)(3), nor shall it be deemed to have participated in, or
intervened in any political campaign on behalf of (or in
opposition to) any candidate for public office, solely
because of the content of any statement which--
``(A) is made in the ordinary course of the organization's
regular and customary activities in carrying out its exempt
purpose, and
``(B) results in the organization incurring not more than
de minimis incremental expenses.
``(2) Termination.--Paragraph (1) shall not apply to
taxable years beginning after December 31, 2023.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2018.
SEC. 5202. ADDITIONAL REPORTING REQUIREMENTS FOR DONOR
ADVISED FUND SPONSORING ORGANIZATIONS.
(a) In General.--Section 6033(k) is amended by striking
``and'' at the end of paragraph (2), by striking the period
at the end of paragraph (3), and by adding at the end the
following new paragraphs:
``(4) indicate the average amount of grants made from such
funds during such taxable year (expressed as a percentage of
the value of assets held in such funds at the beginning of
such taxable year), and
``(5) indicate whether the organization has a policy with
respect to donor advised funds (as so defined) for frequency
and minimum level of distributions.
Such organization shall include with such return a copy of
any policy described in paragraph (5).''.
(b) Effective Date.--The amendment made by this section
shall apply for returns filed for taxable years beginning
after December 31, 2017.
The SPEAKER pro tempore. The bill shall be debatable for 4 hours,
equally divided and controlled by the chair and ranking minority member
of the Committee on Ways and Means.
The gentleman from Texas (Mr. Brady) and the gentleman from
Massachusetts (Mr. Neal) each will control 2 hours.
The Chair recognizes the gentleman from Texas.
General Leave
Mr. BRADY of Texas. Mr. Speaker, I ask unanimous consent that all
Members may have 5 legislative days within which to revise and extend
their remarks and to include extraneous material on H.R. 1, the bill
currently under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. BRADY of Texas. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, today the full House begins consideration of H.R. 1, the
Tax Cuts and Jobs Act, historic tax reform legislation that will
revitalize our economy and provide lasting tax relief to Americans of
all walks of life.
Over 30 years have gone by since the last overhaul of our Nation's
tax system. In that time, our Tax Code has become one of the most
complicated, unfair, and uncompetitive in the world. Today it is
impacting nearly every aspect of Americans' lives, and not for the
better.
The overwhelming complexity of today's system forces American
taxpayers to spend billions of hours and billions of dollars every year
just filing their taxes. Trillions of dollars in carve-outs and
loopholes give favoritism to Washington special interests while
hardworking Americans get nothing but frustration.
With some of the highest tax rates in the world for our businesses,
we are seeing good-paying American jobs and manufacturing plants move
overseas one after the other.
Today, with the Tax Cuts and Jobs Act, we change all of this. With
this bill, we have an opportunity to deliver the most transformational
tax overhaul in a generation. But make no mistake, this bill is not
about us. It is not about Congress. This bill is about--for the first
time in decades--providing the American people with a simple and fair
tax system, so much so that nine out of ten Americans will be able to
file using a simple postcard-style system. It is about finally
rewarding hard work, growing jobs and paychecks, and allowing Americans
to keep more of their hard-earned money to use on whatever is important
to them.
So if you are one of the millions of Americans who is sick of today's
Tax Code, you are going to see a remarkable difference. You will see
the standard deduction doubled, increasing to protect more of every
paycheck from taxes. You will have a larger child tax credit, providing
more support as you raise a family and care for your loved ones. More
Americans will get help raising their kids.
You will have peace of mind when it comes to life's most important
investments because this bill preserves tax benefits to help you afford
your home, to pay your property taxes, and put your kids through
college.
So if you are a typical middle-income family of four making $59,000 a
year, you are going to get a tax cut of nearly $1,200. More than that,
you are going to enjoy the benefits of a strong, healthy, and growing
American economy. You are going to see more jobs on Main Street.
With this bill, our small businesses will finally have low tax rates
and a fair Tax Code that works with them as they grow and create jobs.
You are going to see our larger businesses--our iconic American brands
and our major manufacturers--win throughout the world and create new,
good-paying jobs right here at home because, with this bill, we are
going to have one of the most modern and one of the most competitive
Tax Codes on the planet. That includes lowering our corporate rate from
35 to 20 percent, which beats many of our international competitors.
Not only are you going to see jobs stop leaving the United States,
you are going to see our Nation become a 21st
[[Page H9346]]
century magnet for job creation and business investment.
With the Tax Cuts and Jobs Act, the American people will see and help
lead the way in launching a new era of Made in America innovation. In
the end, the Tax Cuts and Jobs Act is a striking alternative to the
broken Tax Code we have today. It represents a bold path forward that
will allow us as a country to break out of the slow-growth status quo
once and for all.
Mr. Speaker, the American people have waited years--decades--for a
fair, simple, and competitive Tax Code. Right now, in this moment, we
stand on the doorstep of delivering the most sweeping tax overhaul
since President Reagan's reforms in 1986. Like President Reagan back
then, President Trump is now putting his full support behind this
effort.
Let's pass this historic bill and take another step forward in
delivering bold, pro-growth, pro-family tax reform for Americans
throughout this Nation.
Mr. Speaker, I reserve the balance of my time.
Mr. NEAL. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I am delighted the chairman mentioned President Reagan.
But he made it sound as though President Reagan did tax reform on his
own. Tax reform in 1986 was done in a bipartisan manner. I guess we
just leave out Speaker O'Neill and we just leave out Chairman
Rostenkowski and we just leave out Senator Bradley or Congressman
Gephardt. The reason that they are left out is because even though it
was accomplished in 1986, it started in 1982 when Mr. Gephardt and Mr.
Bradley introduced the first tax reform act.
{time} 1700
What happened in those intervening years?
The Ways and Means Committee took testimony from 50 witnesses. They
held 30 markups and an untold number of hearings.
Contrast that with what we did in the Ways and Means Committee: not
one witness, not one hearing, not one opportunity to hear from renowned
economists, labor leaders, or individuals who would have great
knowledge not just of what happened in 1986, but what could happen in
this Chamber. Instead, we are going forward with this ill-considered
effort.
This is a missed opportunity. This is a bad deal for millions of
Americans in the middle class. The legislation puts the wealthy, the
well-connected, and the strong, once again, at the top. Thirty-six
million Americans are going to receive a tax increase.
When they talk about tax simplification, take a look at the phase-ins
and phase-outs of this measure. That is hardly simplification. It is
greater complexity.
Oh, by the way, the corporate rate is made permanent. The individual
issues phase out after 5 years.
Consider this: 13 million people will lose their health insurance
based on what Republicans are doing in the United States Senate. They
are going to lose their healthcare to pay for a tax cut for people at
the very top.
Let me just walk you through some of these provisions because I think
that they deserve our attention and the magnifying glass of critical
analysis.
We are being asked tonight to borrow $2.3 trillion to pay for this
tax cut. This is from people who regularly lecture the American
electorate on the need for fiscal austerity and balanced budgets.
When Barack Obama was President, the budget should be balanced. When
Bill Clinton was President, the budget should be balanced. But in the
intervening period of time, apparently, we don't have to balance the
budget.
Also, $2.3 trillion is being added to the debt and deficits. We are
witnessing what they are attempting to do because they are going to
scale back the tax benefit for buying a new home by lowering the cap on
mortgage interest deduction to $500,000. That is going to lower home
values.
H.R. 1 repeals the new markets tax credit. The historic tax credit
that has transformed American cities is being eliminated. They beat up
on the municipal bond market.
As a former mayor, I have some knowledge of the municipal bond
market.
They are getting rid of the private activity bonds. Years ago, I
raised the cap so that we might do more intervention and innovation in
terms of rebuilding our airports across the country. Private activity
bonds are a key for financing affordable housing. It is going to go by
the wayside if they have their way. It is going to have a profound
impact on the housing market.
They eliminate several deductions and exclusions that help pay for
college education, including a deduction for interest on student loans.
Pay attention to this number. Student debt in America is at $1.3
trillion, and they are taking away the ability of students to deduct
that interest on those loans.
They also impose a new tax on universities and colleges.
They repeal the above-the-line deduction for teachers' out-of-pocket
expenses. You know, those teachers who, in September, might be short
some school supplies and they are good enough to pack the car up and
bring it to school? We give them a $250 deduction. They are going to
take it away.
They create a health tax, an Alzheimer's tax, by repealing the
medical expense deduction. This change basically scraps a family's
ability to receive financial relief when dealing with serious medical
conditions.
Think of it this way: We celebrate annually the increases in life
expectancy in America--80 for a male, 81 for a female. But if we are
going to celebrate that, we also have to acknowledge something else:
more dementia and more Alzheimer's as people grow older in America. So
their decision is: Let's take away the ability of individuals to deduct
those expenses.
They also want to write off a very important consideration for the
middle class in their ability to deduct real property tax costs up to
$10,000.
Contrast this with what these tax cuts do for the wealthy.
H.R. 1 repeals the estate tax, which is paid by a small number of
families in America. They are going to repeal it. I guess the slogan
becomes: We are rich, and we are not going to take it anymore. That is
not a tax on Conrad Hilton; it is a tax on Paris Hilton. That is what
we should be considering with the greater efforts on their side to
further concentrate wealth.
By the way, there is an issue I have worked on for decades here,
successfully, because 27 million middle class families no longer pay
the alternative minimum tax. But guess what they are going to do? They
are going to eliminate it for 4.5 million of the richest families in
America. They are going to take away that payment.
This is a missed opportunity, Mr. Speaker. This could have been done
the way Chairman Brady indicated in 1986: hearings, markups, a genuine
effort to find common ground on this.
On our side, I have waited all these years to do this. Tonight and
tomorrow, what you are witnessing is that they need a victory. That is
what this is about. It is a victory in search of a policy.
Mr. Speaker, I reserve the balance of my time.
Mr. BRADY of Texas. Mr. Speaker, I yield myself 10 seconds.
Mr. Speaker, I will note that, in the district of my good friend from
Massachusetts, the average family of four making $87,000 will see a tax
cut of $2,032.
Mr. Speaker, I yield 2 minutes to the gentleman from Illinois (Mr.
Roskam), chairman of the Tax Policy Subcommittee and a leader in the
tax reform effort.
Mr. ROSKAM. Mr. Speaker, my friend from Massachusetts said this is a
missed opportunity. This is no missed opportunity. What we are
witnessing is the seizing of an opportunity.
During the debate, our friends on the other side of the aisle, in 25
hours of markup last week, offered amendment after amendment after
amendment. I think it was about 25 amendments.
Do you know what every one of the amendments did, Mr. Speaker? It
restored the status quo. It put something back in, put another thing
back in, defended something else, and so forth. There was no
comprehensive offer of an amendment in the nature of a substitute that
would have been transformational.
There is no exclusion here. We debated. We are now here, and for the
first time since 1986, we are on the cusp of seizing an opportunity and
having a transformational moment.
Here is the transformation:
[[Page H9347]]
When the Tax Code was last amended 30 years ago--think about it--the
internet didn't exist as a commercial enterprise. Yes, it has fully
developed, and we have got a Tax Code that was built for yesterday.
The global nature of supply chains were nowhere nearly as intricately
interlinked, yet we have got a Tax Code that was built for yesterday.
The shared economy--Airbnb, Uber, Lyft, all of those things--didn't
exist, yet we have got a Tax Code that was built for yesterday.
Who does the status quo benefit, Mr. Speaker? It benefits the few. It
benefits the privileged. It benefits the folks at the top of the
economic scale of things.
So what this is doing is proposing a very different approach. It says
we are going to make the United States the most competitive
jurisdiction in the world by giving business tax relief and welcoming
back commercial enterprise and growth and prosperity and ingenuity and
investment--that does what? It creates paychecks and it expands
opportunities.
Kids graduated from college shouldn't have to grub around piecing
together two jobs and living in their parents' basement. How absurd. We
can do much better. We are the biggest, best economy in the world, and
it is time we acted like it.
This is transformational. To lean back and away from this and say,
oh, this Tax Code is a natural disaster; it is too big and too
overwhelming and we can't deal with it is nonsense. We fundamentally
reject that.
We are going to be measured in the future, Mr. Speaker, by this
moment. I thank Chairman Brady for his leadership in creating this
crescendo, because now is the time to act. Let's not defend the status
quo. Let's move forward, and let's transform this economy.
Mr. NEAL. Mr. Speaker, I am for maintaining the status quo by
allowing students to deduct their student interest loans.
Mr. Speaker, I yield 2 minutes to the gentlewoman from Illinois (Ms.
Schakowsky).
Ms. SCHAKOWSKY. Mr. Speaker, everyone knows that the Republican tax
scam gives massive tax cuts to millionaires and billionaires and
corporations, and they do it, in part, by increasing healthcare costs
for millions of Americans. Over 36 million middle class households will
see a tax hike under this bill.
Families with big medical bills will take the hardest hit. That is
because Americans will no longer be able to deduct major medical
expenses such as cancer treatment or Alzheimer's from their Federal
income taxes.
This is a middle class tax hike. Seven in ten households using the
medical expense deduction make under $75,000 a year. Repealing the
deduction would especially hurt seniors who use it for long-term care
expenses.
The bill takes a second swipe at American seniors and people with
disabilities. According to the Congressional Budget Office, by not
paying for tax cuts for the wealthy, Republicans would trigger
automatic cuts to Medicare, slashing $25 billion from Medicare in 2018
alone.
But the $25 billion cut to Medicare is just the beginning. The same
Republican budget that cleared the way for $1.5 trillion in tax cuts
for the superwealthy proposed cutting Medicare and Medicaid by, no
coincidence, $1.5 trillion.
Now, Senate Republicans want to pay for additional tax cuts by
repealing a key part of the Affordable Care Act. This change would
increase the number of uninsured Americans by 13 million and increase
premiums by 10 percent.
Middle class families, people with disabilities, and seniors
struggling to afford healthcare should not foot the bill for
billionaires to get a tax cut. I urge my colleagues to make the healthy
choice for Americans and vote against the Republican tax scam.
Mr. BRADY of Texas. Mr. Speaker, I yield 3 minutes to the gentleman
from Washington (Mr. Reichert), chairman of the Trade Subcommittee and
a champion for working families.
Mr. REICHERT. Mr. Speaker, I thank the chairman for yielding and for
his leadership in bringing this tough piece of legislation. I mean
tough in the sense that it has taken years to put this together and at
least 40 hearings on the legislation that is presented today.
Mr. Speaker, when I travel my district from the suburbs of Auburn,
Washington, to the orchards of Chelan, I hear the same thing from
middle-income, hardworking families, from the apple grower in
Wenatchee, the tech entrepreneur in Issaquah, and the growing family in
Maple Valley, Washington: They want to keep more of their hard-earned
money, plan for the future, and they want to have some certainty in
their future. They want to care for those they love.
They deserve a plan that gives them the opportunity at their first
job or a better job. They deserve a chance to decide how they want to
spend their money.
It is their money. Why wouldn't they deserve that chance?
They want a Tax Code that is simpler, fairer, and that works for
them. They want the same bright future for their children.
This is a bill that is not just a tax bill, but it is a bill that
reignites, in my opinion, the belief in the American Dream.
In the Eighth District of Washington State, the median income family
of four will receive a tax cut of $3,654. In Washington State, 21,875
new jobs will be created.
This plan will change lives. It will energize our economy and get our
economy booming again.
As we went through this process, I asked myself several questions
over the last few years, to be honest with you. Here are the questions:
Will this plan make the American economy boom again?
Will this plan create jobs in America?
Will this plan increase paychecks?
Will this plan put more money in the pockets of hardworking
Americans?
Will this plan make the Tax Code fairer and simpler?
The answer I came to and I think that Americans will come to, Mr.
Speaker, is a resounding ``yes.''
{time} 1715
Mr. NEAL. Mr. Speaker, this bill phases out the deductions that
benefit middle-income families.
Mr. Speaker, I yield 2 minutes to the gentleman from Illinois (Mr.
Schneider).
Mr. SCHNEIDER. Mr. Speaker, we absolutely must reform our outdated
and overly complex Tax Code, but the current bill this House is
considering is not the way to do it. I have heard from constituents and
local elected officials about how this plan will hurt them and their
communities.
Rather than lifting our economy and making our local communities
stronger, this bill before us is an unfair and fiscally reckless step
backwards. My constituents are deeply concerned with the restrictions
placed on the State and local tax, or SALT, deduction. This puts a real
burden on the residents of States like Illinois.
One in three Illinois taxpayers uses the SALT deduction. Let's be
clear. The SALT deduction is not a tax break for the very wealthy. It
is used by the hardworking families we need to be helping with tax
reform, not hurting.
I am also profoundly concerned about what this reform means for our
growing debt. An additional $2.3 trillion in debt is irresponsible in
the extreme, burdening our children and our grandchildren with the
consequences.
Now, with the most recent Senate version, the GOP is taking aim at
the Affordable Care Act, repealing the individual mandate without a
workable replacement to further reduce enrollment in the individual
health insurance markets, making coverage more expensive for millions
of Americans and their families.
There are things we can do to improve the ACA. For example, delaying
the looming taxes on medical devices and health insurance premiums has
broad bipartisan support. We should be focused on solutions like these
that improve, not dismantle, the ACA.
Despite our willingness to work across the aisle, there was virtually
no bipartisan engagement on the plan this House is rushing to vote on.
It is not too late to change course.
I urge my colleagues to take the time for full deliberation in a
complete and bipartisan process. Together, we can produce real tax
reform that is fiscally responsible, prioritizes the middle class, and
grows our economy for the next generation.
Mr. BRADY of Texas. Mr. Speaker, I yield 3 minutes to the gentleman
from
[[Page H9348]]
Nebraska (Mr. Smith), chairman of the Human Resources Subcommittee and
a champion for agriculture.
Mr. SMITH of Nebraska. Mr. Speaker, I thank Chairman Brady for the
time and for his leadership as we continue our efforts to pass this
historic legislation.
Mr. Speaker, after nearly 7 years of work in the Ways and Means
Committee and more than 31 years since our last true tax reform, many
hearings along the way, it is time to pass historic comprehensive tax
reform. Our current Tax Code is antiquated, as we know. It is complex,
and it ignores many of the improvements and competitiveness, which have
been adopted by every other major economy worldwide.
The time for tax reform is now. Others have already outlined many of
the highlights of this bill, but I think they warrant mentioning again.
Simplified compliance and rates for individuals and families means
more than 95 percent of Americans will be able to file their returns on
a postcard. Lower rates for small businesses recognize the important
role they play as job creators in our economy. A 20 percent top
corporate tax rate and transitioning to a territorial system will
ensure our businesses remain competitive with the rest of the world.
In addition to lower rates, expanded expensing will further encourage
entrepreneurs to invest in capital to grow their businesses, and full
repeal of the death tax, including the continuation of step-up in
basis, will ensure our Nation's farmers, ranchers, and small
manufacturers can continue creating opportunity for generations to come
without the threat of double taxation.
Our Tax Code shouldn't reward businesses and investors because they
hired accountants and lawyers to help them avoid taxes, and the estate
tax does exactly that right now. I think it is equally important to
praise what the bill leaves alone in the Tax Code. With our impending
entitlement crisis, we want Americans to save everything they can for
retirement. This bill leaves those incentives intact.
It also excludes a proposal, which had initially been included in the
bill, to apply self-employment taxes to rental income. This could have
had serious repercussions for ag land rental, and I am glad it was
dropped. And I particularly appreciate how this bill continues the
deductibility of State and local taxes for businesses, including
farmers and ranchers.
U.S. producers have made great strides in increasing production on a
per-acre basis, but land remains a primary input as they work to feed
the world. Ensuring the property tax on land and production remains
deductible as business cost is vital to their continued success.
This is the moment to finally provide the tax relief Americans have
been asking for and to make our country competitive again. I urge the
passage of this progrowth bill.
Mr. NEAL. Mr. Speaker, more than 100,000 Nebraska households making
under $137,000 a year will see a tax increase under this bill.
Mr. Speaker, I yield 2 minutes to the gentleman from Massachusetts
(Mr. Capuano), my good friend from Somerville, Massachusetts.
Mr. CAPUANO. Mr. Speaker, I thank the gentleman for yielding. I am a
former tax lawyer. My wife is a practicing CPA. We have heard this
before: simplification is going to help. It has never put a single
accountant out of business, and it won't do it now. It is another part
of the big scam going on.
Why? Sure, I will probably get a tax break out of this; some of my
constituents will. But what do we get in return? We don't get
healthcare. We don't get better roads. We don't get better education.
But we do provide a $5,000 to $10,000 debt for our children. We do tell
our seniors: Too bad if you have a heart attack or cancer; no more
medical deductions for you. We tell our current graduate students: Too
bad, no deductions for you. And on and on and on.
And by the way, we have a new provision in here that I like to call
the ``Dynasty Protection Act.'' Why? Because if you have a dynasty, if
you are worth $30-, $40-, $50-, $100 million, your children get to keep
it all. Not because they have done anything, but because they won the
genetic lottery. Good for them.
And then if they do get up off their butt and get a job, maybe start
a hedge fund with all the money they inherited, they get another tax
credit by not touching the special tax deals--you have the hedge fund
managers. And if they earn a little extra money, they get to keep more
of it because there is no alternative minimum tax left.
I know that President Trump will particularly appreciate that
provision because we all know--the only tax return we have seen--the
AMT cost him $31 million. So thank you from the rich.
Now, I don't have any problem with people being wealthy. I represent
many of them. They don't want this tax cut because they know it is bad
for America.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. NEAL. Mr. Speaker, I yield an additional 15 seconds to the
gentleman from Massachusetts.
Mr. CAPUANO. Mr. Speaker, as a final insult, the corporate tax you
have encourages businesses to send jobs offshore by not taxing profits
made offshore when they expand jobs, if they do. They will do it
offshore, not here in America.
Mr. BRADY of Texas. Mr. Speaker, Massachusetts will gain 24,000 jobs;
families will see a $3,000 increase in their paychecks.
Mr. Speaker, I yield 3 minutes to the gentleman from Minnesota (Mr.
Paulsen), a key member of our committee and a leader in technology and
employee stock options.
Mr. PAULSEN. Mr. Speaker, for the first time in a generation, middle-
income and hardworking Americans are closer to a Tax Code that works
for them rather than against them.
It has been 31 long years since we last reformed our broken tax
system, and, in that time, our Tax Code has become one of the most
complicated, unfair, and uncompetitive in the world. It has led to a
stagnant economy and sluggish growth. American businesses of all sizes
have some of the highest tax rates in the world, sending our jobs, our
manufacturing, our research, and our headquarters overseas.
And you know, the economic recovery hasn't been all that great since
the Great Recession--not that great for a lot of Americans. Half the
population is living paycheck to paycheck. Many either have or are at
risk of having a lower standard of living than their parents. Young
people, like my daughter's generation, will go backwards if this
country is not fundamentally more competitive. And then seniors and
those baby boomers preparing for retirement, who have a lifetime of
savings, are now at risk without a growing economy.
The reforms in this bill today will help real people with tax cuts
aimed to help middle-income families that want to save for the future
and improve their own standard of living. The bill focuses on helping
small businesses, Main Street Minnesota businesses with a simpler,
clearer, and fairer Tax Code that is critical for job creation. It
lowers small business rates to 25 percent and even provides a 9 percent
rate for the smallest Main Street startups.
Modernizing the Tax Code is essential to allowing American businesses
of all sizes to compete around the world and bring those jobs home. We
need to be able to sell where the customers are, and 95 percent of the
world's customers are outside the United States. The international
reforms in this bill will incentivize businesses to bring their money
home to invest in our communities.
And importantly, this bill includes bipartisan legislation that I
authored, the Empowering Employees through Stock Ownership Act, which
helps those entrepreneurs and startups attract and retain talent.
Hardworking taxpayers, Mr. Speaker, deserve a Tax Code that is simpler,
flatter, and fairer so that every American family and employer can file
their taxes without having to hire an Army of lawyers and accountants.
Mr. Speaker, we have a choice. The choice is Americans. We can either
truly grow the economy and put ourselves back on the path to real
prosperity, or we can continue the actual trend we have right now of
weak economic growth, which only benefits the few and the privileged
and will do nothing for regular folks when the next economic downturn
hits.
Tax reform for me is about one thing and one thing only. It is about
restoring hope for a prosperous future for
[[Page H9349]]
ourselves, our parents, and, most importantly, our children. I want to
thank the chairman for his guiding leadership through this effort.
Mr. NEAL. Mr. Speaker, 40 percent of Mr. Paulsen's constituents claim
the SALT deduction, a benefit of over $15,000. They are lucky to break
even after this tax bill.
Mr. Speaker, I yield 2 minutes to the gentleman from Wisconsin (Mr.
Kind), a valued member of the Ways and Means Committee.
Mr. KIND. Mr. Speaker, there are certain phrases that we have learned
to grow to accept with great suspicion: The check is in the mail. It is
not you; it is me. Don't worry, I will respect you in the morning. I
have had just a few drinks; I am fine with driving.
And now we have to add to that: Don't worry. Large tax cuts for the
most wealthy will pay for themselves, and I am a fiscally conservative
Republican who cares about debt and deficits.
The Joint Committee on Taxation has determined that, with interest
payments, this bill will add over $2.3 trillion, with a T, to our
national debt over th next 10 years. That is why last week, in
committee, I was offering an amendment that would expand the endangered
species list to include fiscally conservative Republicans because your
vote on this bill will make you extinct.
And what is unfortunate is, unlike past tax cuts that weren't paid
for, we have run out of time. We no longer have the luxury of time to
recover from a huge fiscal mistake, not with 70 million baby boomers
beginning their massive retirement--10,000 a day joining Social
Security and Medicare. Those programs and the solvency of Social
Security and Medicare will be in jeopardy with another $2.3 trillion of
debt over the next 10 years.
And what is unfortunate, it didn't have to be this way. There was
bipartisan interest in simplifying the Code, making it more
competitive, broadening the base, making it fair for working families
and small businesses and family farmers, but doing it in a fiscally
responsible way.
Asking 34 million Americans to accept a tax increase to pay for a 43
percent marginal rate reduction to the largest companies is hardly
responsible, and it is hardly fair. I encourage my colleagues to let us
take a different approach and reject this bill.
Mr. BRADY of Texas. Mr. Speaker, I yield 2 minutes to the gentlewoman
from Tennessee (Mrs. Black), the chair of the Budget Committee who
cleared the path for this progrowth tax reform.
Mrs. BLACK. Mr. Speaker, I thank the chairman for his endless hours
of work listening to everyday people, listening to small businesses,
listening to large businesses, listening to how what we put in this
bill was going to affect the American people who, at the end of the
day, are going to be the winners.
So it has been more than three decades since Congress has worked with
the White House to modernize our Nation's very confusing and
complicated tax system. Just ask anybody who has filed their taxes on
their own.
But we are closer to changing that day with H.R. 1, the Tax Cuts and
Jobs Act. And with this budget, with the budget passed in both Chambers
and following last week's productive markup in our House Ways and Means
Committee, tax relief is on the horizon.
With this legislation, Republicans clearly recognize the need to do
something about our heavy tax burden weighing down the hardworking
Americans and holding back job creators.
We also recognize the need to bring simplicity to the Tax Code. In
our tax reform plan, we will help low- and middle-income Americans see
more of their hard-earned paychecks by lowering the tax rates and
nearly doubling the standard deduction for individuals and married
couples.
{time} 1730
For instance, for an average middle class family of four, that
translates to a $1,200 tax cut. Now, I will tell you, that is real
money.
We also establish a new family credit that raises the child tax
credit and introduces new credits for family members and other
dependents.
The Tax Code will also become less confusing, making it possible for
most Americans to file their taxes on a single postcard.
Our plan, rightly, provides tax relief for job creators, empowering
entrepreneurs and small businesses to continue opening, operating, and
expanding on Main Street.
For my home State of Tennessee, H.R. 1 will allow families to see an
estimated $2,200 increase in wages. Again, that is real money.
The SPEAKER pro tempore. The time of the gentlewoman has expired.
Mr. BRADY of Texas. Mr. Speaker, I yield an additional 15 seconds to
the gentlewoman.
Mrs. BLACK. According to the nonpartisan Tax Foundation, this bill
would also mean 20,000 new jobs for my State. This will provide a
welcome jolt to our economy, which is badly needed following eight
lackluster years under the Obama administration.
Without question, enacting tax reform is a challenge, but the
benefits of seeing it through will be felt for generations to come.
Mr. Speaker, I am proud to support this legislation, and I urge my
colleagues to do the same. We cannot miss this historic opportunity.
Mr. NEAL. Mr. Speaker, over 350,000 Tennessee households making under
$132,000 will see a tax increase with this bill.
Mr. Speaker, I yield 2 minutes to the gentleman from Connecticut (Mr.
Courtney), a leader on the Higher Education Subcommittee and well known
nationally as a spokesperson on education issues.
Mr. COURTNEY. Mr. Speaker, I rise in strong opposition to H.R. 1.
Mr. Speaker, I thank Mr. Neal for his tireless leadership pointing
out the trail of broken promises that are in this bill for middle class
families, who will pay dearly with higher costs for healthcare, home
ownership, and, in many cases, Federal taxes.
I would like to zero in for a minute during National Apprenticeship
Week on the broken promise that the bill represents to growing the U.S.
economy, which has a shortage of skilled workers. The obliteration of
the student loan interest deduction, which will add $24 billion to the
cost of higher education; the taxation of graduate students' tuition
waivers, 60 percent of which are concentrated in STEM curricula; and
the elimination of tax-free employer-funded tuition assistance, to
enhance workplace skills, often using apprenticeship programs, moves
this country in exactly the wrong direction to close the skills gap in
our workforce, which we all know every Member in this body has heard
about from employers back home.
Indeed, America's CEOs told the President last February at a White
House manufacturing summit: Jobs exist, skills don't.
In fact, the Trump's Labor Department reported 6.1 million job
openings in the month of September, a near record high.
Sadly, this antigrowth tax bill robs American job seekers and
employers of the tools to fill those jobs, ironically, during National
Apprenticeship Week.
Mr. Speaker, I urge the Members of this body to vote ``no.''
Mr. BRADY of Texas. Mr. Speaker, I yield 3 minutes to the gentleman
from Pennsylvania (Mr. Meehan), one of the key members of our Tax
Policy Subcommittee and a champion for working men and women.
Mr. MEEHAN. Mr. Speaker, I rise today to urge my colleagues to take
advantage of this historic opportunity that we have before us.
As I travel across my district, I hear from families that are
struggling to get ahead. I hear from families that can't make ends meet
most months. They don't have a whole lot left over. In fact, 63 percent
of American families don't have $500 to handle an emergency. I hear
from businesses that say they would love to be able to hire, expand, or
buy that new piece of equipment, but they just don't have the cash to
do it.
Our Tax Code is taking too many dollars from Pennsylvania and sending
it to Washington. It is sending good-paying, middle class jobs overseas
and it is holding our economy back, making it harder for so many to get
ahead.
This is our chance to change the status quo. We have an opportunity
to jump-start our economy and let more hardworking families keep what
they earn.
We rewrite the Tax Code for American job creators, taking away the
incentives to send jobs overseas and dollars offshore. Putting those
dollars to
[[Page H9350]]
work will put more Americans to work as businesses expand and invest
here at home--American tax cuts for American workers with American
jobs.
We give these small businesses a break--the mom-and-pop shops that
employ Pennsylvanians. We give entrepreneurs, who have so much
innovation and creativity, a wider cushion to take a risk. We are
putting more money in the pockets of hardworking families. We are
doubling the standard deduction, which means that 94 percent of
taxpayers won't need to itemize at all. Let me say that again: 94
percent of taxpayers won't even need to itemize at all.
By expanding the child tax credit and creating a new $300 credit for
parents and nondependent children, we put an additional $1,800 back in
the pockets of every family of four. That is money that they can use as
they see fit. We have streamlined the maze of education tax credits,
and included in my bipartisan bill are apprenticeship programs that can
now be made affordable.
The taxpayers I hear from say they want to pay less in taxes, not
more. If limiting some deductions and lowering your rates means your
tax bill is lower at the end of the year, that is a good deal for
taxpayers.
We owe it to the hardworking, taxpaying families we represent to
deliver that.
I urge my colleagues to support the Tax Cuts and Jobs Act.
Mr. NEAL. Mr. Speaker, all of those projects in Philadelphia are
about to come to an end with the abolition of the historic tax credit.
Mr. Speaker, I yield 3 minutes to the gentleman from California (Mr.
Sherman), who, incidentally, is a CPA and a tax attorney
Mr. SHERMAN. Mr. Speaker, by 2027, roughly one-third of middle class
families will be paying more in taxes, and that average family will be
paying $1,300 more.
The personal exemption, worth $4,150 per person in a family, that is
$21,000 for a family of five, and they take it away.
The moving expense deduction, if you have to move to keep your job,
you don't get to deduct that. But if you move a factory to China, you
get to deduct all of the moving expenses.
The student loan debt, they won't let you deduct it.
As for the effect on simplicity, my CPA and tax law homeboys are
going to be rolling in big dollars. Just from the provisions that
define the difference between personal service income, passive income,
active business income, the litigation and planning opportunities--talk
about complexity--it is all there, and my homeboys love it.
We currently deduct extraordinary medical expenses. That is important
to those with disabilities and families with children with special
needs. They wipe it out.
The extraordinary casualty loss deduction, they wipe out. That is
very important to people who face floods and fires.
They change the rules so that we don't have adequate indexing for
inflation, so everybody is pushed into a higher tax bracket by
inflation, except those at the very top; they are protected.
But look at the effect on our Nation's economy. This is a job-
killing, deficit-exploding, growth-reducing disaster. Look at what
happened to Kansas. These policies have already devastated one of our
States.
You are going to be taking $1.5 trillion out of the money available
for business investment. The Federal Government will come in and borrow
all of that money, leaving less money for factories, farms, and homes.
As Ron Kind pointed out, there is an extra $800 billion of interest
on top of that just in the next 10 years. Keep in mind, this increase
in our debt is forever. Your grandchildren will be paying taxes on this
debt.
Look at the chart. We had the policies of Ronald Reagan from 1988--
when his 1986 law became effective--through 1993, and we had 2.67
percent growth. In 1994, we got Clinton tax policies and we exploded to
over 4 percent annual growth. Then with George W. Bush, we dropped to
1.7 percent growth. Then when we adopted Obama tax policies, which are
in force today, we are back up to 2.2 percent economic growth.
Which policies give you economic growth?
Let's look internationally. You can manufacture and pay zero percent
on the profits you earn by a factory, but only if it is a foreign
factory.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. NEAL. Mr. Speaker, I yield an additional 15 seconds to the
gentleman.
Mr. SHERMAN. Finally, Mr. Zandi, one of the top economists in the
country, testified before our Financial Services Committee that this
bill means double-digit declines in the value of homes in American
metropolitan areas.
What effect does that have on the economy? Who is going to go out and
spend in the middle class when they are told that the equity in their
home has been virtually wiped out?
So you can vote against this bill because it is unfair, or you can
vote against this bill because it will be a crushing weight on our
economy, but don't engage in the fantasy that you can cut taxes and
make it up through ``economic growth.''
Mr. BRADY of Texas. Mr. Speaker, under tax reform, California will
grow 111,000 new jobs, and paychecks will increase by nearly $3,000.
Mr. Speaker, I yield 3 minutes to the gentlewoman from South Dakota
(Mrs. Noem), a champion of family-owned farms and businesses.
Mrs. NOEM. Mr. Speaker, I thank the chairman for yielding.
Mr. Speaker, today I rise in support of H.R. 1, the Tax Cuts and Jobs
Act of 2017.
We have worked hours--literally hundreds of hours--on this
legislation, and I commend Chairman Brady and the staff of the Ways and
Means Committee for all of their hard work.
Mr. Speaker, we have gone through this bill line by line. I have
personally fought for policies and ideas in this bill to make sure that
it works for families, to make sure that it increases wages, and
creates more opportunity for folks all across America.
My goal in this was two-fold. Number one, I wanted to strengthen
families. Number two, I wanted to create a stronger future for America.
This tax reform package puts us well on our way to achieving these
goals and achieving some remarkable wins for the American people.
I say this because this plan simplifies the Tax Code. It simplifies
it to the point that most people can file their taxes on a form the
size of a postcard. It also gives significantly lower rates. It
dramatically expands the child tax credit. It keeps the child care
credit. It protects flexible spending benefits.
These provisions for working families are important to me. My home
State of South Dakota has the highest rate of working families in the
Nation. The moms and dads in my State aren't working just for fun. They
are working to pay the bills to provide for their families. They need
money to put food on the table and to put a roof over their kids'
heads. These provisions are going to help them pay their bills, take
care of their kids, go to work, and maybe, just maybe, get a little
extra money that they can take their kids off for a weekend and do
something fun together. That is important.
When these kids grow up, I want them to be able to find good, high-
paying jobs. So I fought hard to make sure that our farmers, our
ranchers, and our small businesses could thrive under this new Tax
Code. We got some pretty big wins for those folks.
In this bill, we fully and permanently repeal the death tax--that un-
American, unfair double tax. W give people better expensing tools and
we drive down the rate for small businesses. If we are going to make
sure that our kids can thrive, we need to create opportunities for them
to make sure that they can do it right here in America, and this tax
reform package lets hardworking job creators do that better.
Mr. Speaker, I understand that no tax reform plan is going to be
perfect in everybody's eyes, but this proposal is a strong step
forward. It reflects real, sustainable policy changes that are going to
let people keep more money in their pockets.
I have heard from many throughout this debate, who have spoken up
against these tax cuts and these reforms--people who trust the
government with this money more than they trust the American people.
Mr. Speaker, I fundamentally disagree. The American people deserve
more control over their paychecks.
[[Page H9351]]
They have worked hard to earn that money. They have taken time away
from their families to earn that money. They ought to be the ones
deciding how, where, and when to spend it.
So for the purposes of strengthening families and offering folks a
stronger future here in America, I urge my colleagues to support H.R.
1.
Mr. NEAL. Mr. Speaker, 38,000 South Dakota households making less
than $113,000 a year will see a tax increase under this legislation.
Mr. Speaker, I yield 2 minutes to the highly regarded gentleman from
Virginia (Mr. Connolly), the son of Massachusetts and my friend.
Mr. CONNOLLY. Mr. Speaker, I thank my good friend, the gentleman from
Massachusetts (Mr. Neal) for yielding me this time.
Mr. Speaker, you can put all the lipstick you want on this pig, and
it is still a pig.
Let's be honest, this isn't tax reform. This is a cut on taxes for
corporate America, the corporate friends and my friends on the other
side of the aisle, and they had to squeeze all kinds of things in to
justify it and pay for it. That is why the middle class is going to
suffer. That is why their kids in college are going to start losing
their ability to deduct interest on student loans, and they are going
to pay taxes on waived tuition when they get a teaching assistant
position or a benefit from the university.
{time} 1745
That is why your local municipalities are going to lose tax exemption
for private activity bonds that fund tens of billions of dollars of
public improvements all over the United States.
That is why 8.8 million Americans are going to lose the ability to
deduct medical costs. Good luck to families who have to put people in
nursing homes for long-term care, patients suffering dementia. How will
they work that financing out when they lose this deduction, and how
will they feel when they know the reason they are losing this deduction
is to finance a corporate tax rate?
What about homeowners losing the ability to deduct mortgage interest
or to have it capped artificially so corporate America can get the
biggest tax cut in history?
And, by the way, they get to continue to deduct State and local taxes
and other kinds of financial interest-related expenses, but not you,
not you the middle class.
It adds $1.5 trillion, and that is with dynamic scoring. Dynamic
scoring is another way of saying: We kind of fudged the real number. It
is more than that, at least $200 billion more than that.
I thought my friends on the other side of the aisle were fiscal hawks
dedicated to making sure we didn't have deficits.
This is an inconsistent bill. This is going to harm middle class
America.
Mr. Speaker, I urge my colleagues to defeat this bill, and let's
start over in a bipartisan way.
Mr. BRADY of Texas. Mr. Speaker, the gentleman's constituents in
Virginia's District 11, with average household earnings of $136,000,
with two kids, will see a tax cut of $5,008.
Mr. Speaker, I yield 2 minutes to the gentleman from Kentucky (Mr.
Barr).
Mr. BARR. Mr. Speaker, I rise today to engage in a colloquy.
Mr. Speaker, I want to first commend Chairman Brady and the Ways and
Means Committee for their outstanding work on the Tax Cuts and Jobs
Act, which will provide tax relief to millions of hardworking families
and businesses.
I would like to address a small provision in the bill that
inadvertently impacts Berea College, a small private college in Berea,
Kentucky, that is a member of the federally recognized Work Colleges
Consortium.
Work colleges, by definition, do not charge their students tuition,
and they also require their students to hold jobs. For over 125 years,
Berea College has fulfilled its mission of providing a tuition-free
education to students with limited economic resources, primarily from
Appalachia, and who are often first-generation college students. Berea
pairs its strong academics with a student labor program, honoring the
dignity and utility of all work.
Berea could not fulfill its unique and special mission of providing
free tuition to all students without a healthy endowment. The Tax Cuts
and Jobs Act includes a 1.4 percent excise tax on private college
endowments over $500,000 per student. There are two federally
recognized work colleges with endowments above this level, including
Berea College in my district.
I was pleased to learn that the Senate version of the bill exempts
schools with fewer than 500 tuition-paying students from the excise
tax. This provision would effectively exempt work colleges from the
tax, because they do not charge tuition.
I understand it was never the committee's intent for this legislation
to negatively impact work colleges that use their endowments to provide
tuition-free education. In fact, I understand the intended purpose of
the excise tax is to encourage colleges to use their endowments to keep
college costs down. In this case, Berea College uses its endowments to
defray 100 percent of the cost of tuition.
Mr. Speaker, I thank the chairman for his willingness to work with me
on a solution in conference, either acceding to the Senate position or
another mutually accepted solution that exempts work colleges and
allows them to continue their unique mission.
Mr. BRADY of Texas. Will the gentleman yield?
Mr. BARR. I yield to the gentleman from Texas.
Mr. BRADY of Texas. Mr. Speaker, I wish to thank the gentleman from
Kentucky for his leadership here.
Mr. Speaker, we will work together for a mutually accepted solution
to make sure we exempt work colleges to use their endowments to provide
tuition-free education.
Mr. BARR. Mr. Speaker, I thank the gentleman.
Mr. NEAL. Mr. Speaker, I yield 2 minutes to the gentlewoman from
California (Ms. Lee), a well-regarded champion of middle-income people.
Ms. LEE. Mr. Speaker, I thank the gentleman for yielding and also for
his tremendous leadership on the Ways and Means Committee and for
really telling the truth.
Mr. Speaker, I rise in strong opposition to this bill, H.R. 1, which
really is a tax scam. Republicans are really trying to pull a fast one
on the American people.
This bill would steal from the hard-earned paychecks of millions of
middle-income families to line the pockets of billionaires and
corporations. In fact, 80 percent of the tax breaks would go to the top
1 percent. It also eliminates student loan deductions and eradicates
medical expense deductions.
If this isn't cruel enough, this bill makes it easier for
corporations to ship jobs overseas, so people will actually lose their
jobs. This tax plan does nothing to create better jobs or better wages
or a better future for the middle class. It does just the opposite.
In my home State of California, one in five middle-income families
will see a tax hike next year. The State and local tax deduction would
be particularly hard on my State, where 6.1 million households will see
a tax increase.
Public sector jobs, like firefighters, will lose their jobs, not to
mention the vital services our most vulnerable will need. These will be
cut.
This bill really is a disgrace. Stealing from families who need help
the most to give more to donors--millionaires and billionaires and
corporations--this is really a new low.
Thirty-six million middle-income households, working families, will
pay more in taxes.
We can't forget, also, that this tax scam sets the stage, really, for
a heartless $1.5 trillion cut to Medicare and Medicaid, as we saw in
the Republican budget.
We need to reject this mean-spirited tax scam and vote ``no'' and
then come back and look at how we can support middle-income families,
working families, so everyone has a chance and an opportunity at the
American Dream.
Mr. BRADY of Texas. Mr. Speaker, I would note that the constituents
in California's 13th District, a median family of four earning $107,000
will see a tax cut of $2,589.
Mr. Speaker, I yield 2 minutes to the gentleman from West Virginia
(Mr. McKinley).
Mr. McKINLEY. Mr. Speaker, I thank the gentleman for this opportunity
to discuss the historic preservation tax credits that historically have
stimulated nearly $150 billion in private sector investment.
[[Page H9352]]
As we have discussed over the last month, the tax credit is
critically important for economic development and revitalization,
especially in small, rural areas of this country. Without the credit,
projects that transform communities in all 50 States, from West
Virginia to Texas, to Wisconsin, simply will not happen.
Mr. Speaker, the chairman's word means something to me, so I am
asking for his commitment to continue working with me to ensure that
the Federal historic preservation tax credit is preserved in the final
tax reform package.
Mr. BRADY of Texas. Will the gentleman yield?
Mr. McKINLEY. I yield to the gentleman from Texas.
Mr. BRADY of Texas. Mr. Speaker, I thank Mr. McKinley for his passion
about making sure our smaller communities can revitalize and grow and
about the role of the historic preservation tax credit in doing that. I
commit to working with him and continuing to work with him on this
issue because I know the importance of it.
Mr. McKINLEY. Mr. Speaker, I thank the chairman and I look forward to
working with him as well. We have had a good working relationship over
the years. I want to continue this process because I understand this
process. I will be voting to continue the process in anticipation that
it will be in the final bill.
Mr. NEAL. Mr. Speaker, I yield 2 minutes to the gentlewoman from
Massachusetts (Ms. Clark), a valued member of our delegation.
Ms. CLARK of Massachusetts. Mr. Speaker, I thank our ranking member
for yielding and for all of his incredible work on this bill.
Mr. Speaker, we were promised tax reform, but that is not what we are
seeing in this bill. In fact, you don't have to dig far into this 429-
page bill to see that it is a con, a cynical bait and switch for
families at home.
When this bill was released just 2 weeks ago, I started getting calls
from families at home wanting to know how it would affect them. We dug
into it, and I want to share just a few of those examples, but it
didn't take long to see why it was developed in secret and why it is
being rushed to a vote.
On page 254, Republicans propose getting rid of a program that helps
veterans find work when they come home. 300,000 veterans have been
helped by the work opportunity tax credit. The repeal of this provision
to reduce taxes for the very wealthiest is a coldhearted way to say
thank you for your service.
On page 113, this tax scam sends a bill to 9 million households who
have extremely high medical costs. Tax breaks for billionaires are
expensive; we get that. Under this plan, Americans who live in nursing
homes, have a sick child, high medical costs will foot the bill.
On pages 95 and 97, students get added to the list of Americans who
will be forced to pay for the GOP's tax breaks for corporations. They
will see increased debt and taxes.
This bill says: Good luck, students. Building an economy that will
not allow you to pay off the $1.3 trillion of existing student debt
but, instead, will add $2.3 trillion in deficit, this bill was created
for you.
Just yesterday, the President's chief economic strategist was
surprised when the CEOs gathered admitted they would not be investing
their tax cuts in jobs and wages.
The SPEAKER pro tempore (Mr. Garrett). The time of the gentlewoman
has expired.
Mr. NEAL. Mr. Speaker, I yield an additional 30 seconds to the
gentlewoman.
Ms. CLARK of Massachusetts. Mr. Speaker, he should not have been
surprised. Corporations are already sitting on record amounts of cash
while generations of hardworking Americans have had to pay for tax
experiments like this based on disproven economic theories.
Let's not repeat the mistakes of the past. Let's reject this bill and
work together to create bipartisan tax reform that is fair and benefits
all families.
Mr. BRADY of Texas. Mr. Speaker, because of the Tax Cuts and Jobs
Act, in the Fifth District of Massachusetts, a median household of four
earning $143,000 will see a tax cut of $5,208.
Mr. Speaker, I yield 3 minutes to the gentleman from New York (Mr.
Reed), one of our key leaders on tax reform on the Ways and Means
Committee.
Mr. REED. Mr. Speaker, I thank the chairman for all of his hard work
in putting this bill together.
Mr. Speaker, this bill has been in the process for over 7 years in
regards to the time I spent on the committee. There have been multiple
hearings on the issue of tax reform, well over 40-plus. There have been
hours upon hours of debate.
There were efforts done by our former chairman, Dave Camp. I know my
colleagues on the other side of the aisle have recognized, during our
committee markup process, the hard work that Chairman Camp did with
rewriting the entire Code from the bottom up.
These issues have been out there for the American people and for the
people from across the country to look at, to digest. Now is the time
to rise in support of this legislation, Mr. Speaker, because what we
have before you is a new Tax Code for the 21st century.
Mr. Speaker, we have a Tax Code that is going to, for once in 31
years, put our corporations on the multinational level across the world
in a competitive position by lowering the rates and getting to a 21st
century taxing program on a territorial basis.
Most importantly, Mr. Speaker, we deliver tax relief. I know the
folks on the other side aren't going to agree with this because they
are going to say this is a Tax Code for the rich, this is a Tax Code,
tax reform for the rich and the almighty 1 percent.
But, Mr. Speaker, I have done the math. I have looked at this bill
inside and out, and it delivers a simplified Code where $1,600 is left
in the pockets of my constituents in western New York. That is $1,600
that they earned that the government won't have to take from them
anymore; $1,600, Mr. Speaker, that will allow them, as senior citizens,
to go visit their grandkids in the South because New York State has
driven them out of New York State with its high tax policies at the
State capital. That is $1,600 that maybe they can go on a trip with
their family and experience a little relaxation because of the hard
work that generated those moneys and those dollars in their pockets.
Mr. Speaker, these are the people whom we represent, the Perrys. Mr.
and Mrs. Perry are hardworking people of western New York, and those
are their two beautiful children. What this is going to allow them to
do is get a little bit more of their money kept in their pocket so they
can spend a little bit more time with their kids and enjoy the fruits
of their labor.
{time} 1800
Mr. Speaker, I know my colleagues on the other side advocate because
there is another issue with tax reform that I want to highlight real
quick.
The easy approach of government is to spend more money, develop more
programs, and maybe give a little bit in regards to a government
welfare check. But what this Tax Code and reform does is deliver a job
opportunity for these people, and I don't know a better program in
America that serves more people than an honest day's work and an honest
paycheck and an honest job, and that is what this Tax Code will do.
Mr. NEAL. Madam Speaker, correction. Not one hearing was held on this
tax bill. Thirty-eight thousand people in Mr. Reed's district will lose
the student loan interest deduction.
Madam Speaker, I yield 1 minute to the gentlewoman from Ohio (Ms.
Kaptur), a real champion of the working class in America.
Ms. KAPTUR. Madam Speaker, I want to thank the gentleman from
Massachusetts, Ranking Member Richard Neal, for his exceptional
leadership in trying to fix this horrendous bill.
Madam Speaker, the GOP-led tax and deficit disaster rewards the big
corporations and billionaires. It will accelerate job outsourcing.
Indeed, 50 percent of the tax benefits go to the top 1 percent.
This tax scam locks in--get this--a $621,500 tax bonus to each
billionaire in the billionaire class, the top one-tenth of 1 percent.
Do you really think they need it?
Meanwhile, this tax scam raids money from the pockets of 38 million
middle class taxpayers, likely those caring for their sick relatives or
trying to help their kids in college. Do you
[[Page H9353]]
really think the one-tenth of 1 percent need more?
Money-trading Wall Street megabanks like Goldman Sachs and J.P.
Morgan, already making billions, will get more tax bonuses courtesy of
the middle class.
The SPEAKER pro tempore (Ms. Cheney). The time of the gentlewoman has
expired.
Mr. NEAL. I yield the gentlewoman an additional 30 seconds.
Ms. KAPTUR. This job outsourcing tax bill of the rich, by the rich,
and for the rich, well, if it walks like a duck and quacks like a duck,
it must be a duck, and this duck belongs in a swamp, which voters may
have thought they were draining in the last election.
Well, folks, this bill makes the swamp wider and deeper, and the fat
ducks will be even fatter and happier in it.
I urge my colleagues to vote for the middle class, not the
billionaire donor class. Vote ``no.'' Drain the swamp.
Mr. BRADY of Texas. Madam Speaker, I am proud the Tax Cuts and Jobs
Act for that family of four in Ohio, in the Ninth District, a $64,000
household, will see a tax cut of $1,284.
Madam Speaker, I yield 1 minute to the gentleman from Ohio (Mr.
Turner).
Mr. TURNER. Madam Speaker, I thank the chairman for working
diligently to create the Tax Cuts and Jobs Act that will give a tax
break to the middle class.
After speaking to both Speaker Paul Ryan and Ways and Means Committee
member Tom Reed, I believe that an unintended consequence of this bill
would hinder middle class Americans pursuing a higher education degree
in an attempt to better their lives. These consequences will affect the
education of employees of universities, graduate students, and
employees receiving employer-provided education benefits.
Madam Speaker, under current law, higher education institutions can
provide tax-free tuition waivers or reimbursement to employees,
spouses, and dependents.
Secondly, many universities provide graduate students, including
Ph.D. candidates, with tuition relief and stipends, which they can
utilize while pursuing their degree. Several of my constituents,
including my niece, Sarah Schiavone, who is a Ph.D. student, would be
impacted by this.
Thirdly, employer-provided education incentives are currently not
taxed. I offered two amendments, amendments 20 and 21, to H.R. 1 that
would have kept these qualified tuition reduction benefits and
currently would have provided for them to continue.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. BRADY of Texas. Madam Speaker, I inadvertently cut the gentleman
short. I yield the gentleman an additional 2 minutes.
Mr. TURNER. I know the Senate is working on their version of the tax
reform package, and, as of today, the Senate bill does not include the
repeal of these vital education permits.
Mr. Chairman, I would like your assurances that the current status of
these education benefits will be protected during conference debate. I
am requesting you continue to work with my office as we, together,
address this issue.
Mr. RODNEY DAVIS of Illinois. Will the gentleman yield?
Mr. TURNER. I yield to the gentleman from Illinois.
Mr. RODNEY DAVIS of Illinois. It is a privilege to be able to work
with the gentleman on this issue, and, Mr. Chairman, it is a privilege
to work with you.
With eight colleges and universities in my district, I cannot ignore
the impact that eliminating this section that Mr. Turner eloquently
explained--the impact it may have on the students and the employees in
my district at all of those institutions.
The University of Illinois, the largest university in my district,
provided $184 million in tuition waivers to 1,387 faculty and staff
last year alone; 1,100 of those employees made less than $75,000.
I am worried, too, that that is going to have a tremendous impact on
graduate students. I am worried it is going to have an impact on the
custodians and the assistants in the Registrar's Office who are just
working at these institutions to be able to send their son or daughter
to college. So I look forward to working with Mr. Turner and Mr.
Chairman and working toward a solution.
Mr. BRADY of Texas. Will the gentleman yield?
Mr. TURNER. I yield to the gentleman.
Mr. BRADY of Texas. Madam Speaker, I would like to thank Mr. Turner
and Mr. Davis for raising this important issue. On the committee,
Representatives Meehan and Lynn Jenkins led the discussion and share
your sentiments.
I have a keen interest in this issue. I will work with you toward a
positive solution on tuition assistance in conference with the Senate.
Mr. NEAL. Madam Speaker, I yield 2 minutes to the gentleman from
Vermont (Mr. Welch), who is a son of Springfield, Massachusetts, and a
very distinguished gentleman.
Mr. WELCH. Madam Speaker, I have a few questions for the authors of
this bill.
What do you have against students? You are imposing an opportunity
tax. A young Vermonter who wants to get a certificate in welding, or
get a degree from our community college, and gets tuition assistance
from an employer, they have to pay taxes on that. If they borrow money
from the Vermont Student Assistance Corporation, they have to pay more
because they can't deduct that interest.
By the way, the Vermont Student Assistance Corporation has to charge
higher interest because we are eliminating private activity bonds, and
they don't get the benefit of their municipal bonds rate.
I have another question. What do you have against teachers? They
reach in their pocket at the beginning of school to help out with
school supplies. They lose the deduction.
I have another question. What do you have against people who have a
loved one with Alzheimer's? They can't deduct the cost of that medical
care.
The SPEAKER pro tempore. The gentleman will suspend.
Members are reminded to address their remarks to the Chair.
Mr. WELCH. Well, I have another question for the Chair, and I ask it
of the leadership.
What happened to democracy? We were promised an open process. And
there was a model for this. It was President Reagan and Dan
Rostenkowski, 4 months of actual hearings, witnesses testifying about
the bill.
This was written in secret. Oh, by the way, no amendments.
Now, we could ask 435 Members of Congress whether we should stick it
to the students like we are doing in this bill, and 435 of us would all
stand up for the students. But you know what? Not a single one of us is
given the opportunity to ask the question: Do we want to stick it to
our students who want to get a welding degree or a college degree?
That is disgraceful, it is inexcusable, it is within the control of
the majority, and they are denying us the opportunity.
Here is the big deal that we know. This bill was written by and for
the donor class that has flooded and contaminated this political
process with billions of dollars in our campaigns.
Madam Speaker, I say defeat this bill.
Mr. BRADY of Texas. Madam Speaker, the Tax Cuts and Jobs Act for
families of four in Vermont, making $89,000, will see a tax cut of
$2,030.
Madam Speaker, I yield 3 minutes to the gentlewoman from Indiana
(Mrs. Walorski), one of our key leaders championing for small business.
Madam Speaker, I also ask unanimous consent that the gentleman from
Illinois (Mr. Roskam) be permitted to control the balance of my time.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mrs. WALORSKI. Madam Speaker, I thank the chairman for all of his
work.
Madam Speaker, I can't tell you how grateful I am to cast a vote to
move our Tax Code one step closer to its first overhaul in 31 years.
We know the Tax Code is broken. The American people know the Tax Code
is broken. They are reminded every time they look at their paycheck.
The Tax Cuts and Jobs Act will deliver progrowth tax reform to the
families, farmers, manufacturers, and workers in my district.
[[Page H9354]]
For families, we are delivering tax cuts so that hardworking Hoosiers
can keep more of their hard-earned money. We are enhancing the child
tax credit, preserving the Adoption tax credit, encouraging retirement
savings, and streamlining 15 different education tax incentives.
We are delivering a Tax Code so simple that most Americans can file
taxes on a postcard. In my district, 80 percent of filers already take
the standard deduction. They will be able to keep even more of their
money, because the standard deduction is doubled, and most itemizers
will now be able to save time, money, and stress by taking the double
standard deduction instead.
No one is ever excited to file their taxes, but I am all for a
simpler, quicker process that makes it much more pain-free.
H.R. 1 helps job creators grow. Small businesses get a lower rate and
more simplicity. Family businesses passed down for generations won't
have to worry about the estate tax anymore, and America will be a more
attractive place to do business.
Our antiquated Tax Code keeps investment in jobs out. This bill
incentivizes companies to bring profits back, to locate facilities
here, and to grow American jobs and raise wages.
Madam Speaker, I was so proud to vote for this bill in the Ways and
Means Committee, and I am proud to be a part of this House that is
delivering yet another crucial step toward tax cuts, simplicity, and
fairness.
Madam Speaker, I urge all of my colleagues to support this bill.
Mr. NEAL. Madam Speaker, the University of Notre Dame is about to get
slugged with a new tax, and the clock is running out.
Madam Speaker, I yield 2 minutes to the gentleman from Georgia (Mr.
David Scott), who has been a champion of the working class.
Mr. DAVID SCOTT of Georgia. Madam Speaker, I thank Ranking Member
Neal. I appreciate this time.
Madam Speaker, my heart is heavy tonight, and it is heavy because we
are faced with the absolute, most dangerous, destructive, and deceitful
tax reform bill in the history of this Congress. Now, let me tell you
why.
On the other side, you have heard Member after Member on the other
side get up and tell you: This is going to get a tax cut, we are going
to give the wealthy a tax cut, we are going to give the corporations a
tax cut. But none of them have told you, or the American people, how
they are going to pay for it.
And the great tragedy is, the most deceitful thing about what my
colleagues on the other side are doing to the American people is they
are doing these tax cuts for the wealthy, the tax cuts for the
corporations, on the backs of the poor, the middle class. Let me tell
you why.
They won't tell you that they are paying for this tax cut because
on--$1.5 trillion that they will cut from Medicaid, from Medicare.
Madam Speaker, Medicaid is for the children. There are literally
millions of children on there.
You heard one of my colleagues go down. We are losing 20 veterans to
suicide every single day. No mention of that. Yet they will cut the
veterans program designed to help them to pay for this tax cut.
Not to mention the student loan interest rate. Young people across
this country, you need to rise up. Seniors, we need to rise up.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. NEAL. I yield the gentleman an additional 15 seconds.
Mr. DAVID SCOTT of Georgia. We need to rise up and stand and fight
for this country. Let our minds go back to 1770, in Boston, at the
harbor, when they threw the tea over that founded the foundation of our
great democracy.
I ask the American people to stand up and help us Democrats defeat
this dangerous bill.
The SPEAKER pro tempore. Members are reminded to address their
remarks to the Chair.
{time} 1815
Mr. ROSKAM. Madam Speaker, the good news is that the good people of
Georgia's 13th District median household income, family of four, at
$80,000 would receive a $1,700 tax break.
Madam Speaker, I yield 3 minutes to the gentleman from Arizona (Mr.
Schweikert), former treasurer of one of the largest counties in our
country.
Mr. SCHWEIKERT. Madam Speaker, this is one of those moments where--
and forgive me, but I sometimes feel like I live and work in a math-
free zone, because you can't intellectually have it both ways, where
you are talking about the great difficulties coming, and then when you
bring in the actual data and you actually start to look at the charts
that we all see, it isn't in the future, it is right on the cusp of us,
and that is the debt and entitlement crisis.
If we do not start to get some economic growth, we are in so much
trouble. If you really care about Medicare, Medicaid, the children,
this education program, this health research, where is the money coming
from?
It is on the cusp. This is less than a decade away. In just a few
years, we cross 100 percent of GDP, and that is publicly held, and then
the ability to sell the bonds if we do not get economic growth.
But if you look at the last 30 years in the charts and the data--and
I am sorry, I know this is small and I know it is math, so it is
uncomfortable for a lot of people in this body. If you actually look
across here and you see, this is entitlements to GDP, when we have been
in times of economic expansion, all of a sudden our ability to finance,
to maintain the promises we have made as a society, if the math works.
And this is a commonality we both understand, economic growth is our
only path. Because if it is not, are you on your side ready to do
fairly draconian cuts?
If we actually look at some of the data that has come from the Tax
Foundation, the Tax Foundation's modeling says $1 trillion of
additional taxes, but almost $300 billion in additional payroll taxes
over the 10 years.
I have already heard a couple people get behind the microphone here
and use the term that the trillion and a half is dynamically scored.
No. That is a static score. All dynamic scoring is--so we all have a
commonality--you calculate back in the size of the economy. You loop
back in the size of the economy, and you can't have it both ways. You
either support dynamic scoring or you oppose it for global warming. You
oppose it for immigration. You oppose it for the stimulus, because we
actually, as a body, every March, when CBO brings us the numbers, they
give us a number that has been dynamically scored.
I know we all want what is best for this Nation, but as I dig through
the math, if we get the economic growth that I believe this tax model,
so many of the very difficult decisions we as a body have to make over
the next decade get much easier. Let's hope we get there.
Mr. NEAL. Madam Speaker, I appreciate the gentleman's sincerity as we
proceed to watch them borrow $2.3 trillion on the deficit.
Madam Speaker, I yield 2 minutes to the gentleman from Michigan (Mr.
Kildee), from a well-known family.
Mr. KILDEE. Madam Speaker, I thank the gentleman for yielding me time
and for his incredible leadership on this subject.
You can't have it both ways. I just heard it said. You can't have it
both ways. So what I suspect will happen after I get done, as has been
the case with every one of the speakers on this side, the gentleman on
the other side will say that residents in my hometown will get a tax
break of X, $1,000.
I would ask the gentleman if he would add to that the amount of the
debt that is being borne by each one of those families. Because the way
I have got it calculated, it costs a family of four about $20,000 for
your debt that you are willing to levy against our children and
grandchildren in order to give the richest 1 percent of Americans a
massive tax break.
You can't deny the math that almost all the benefit goes to the
people at the top. The top 1 percent are huge beneficiaries. You can't
deny the math that 5,400 families will get a massive tax break. You
can't deny the math that says that every single American will take on
additional debt; a family of four, $20,000 in debt.
I also was intrigued by the colloquy where Members came to ask the
leadership if they will work with them to take out egregious elements
of this tax
[[Page H9355]]
proposal. We get this sort of ``Yes, I will work with the gentleman''
answer.
I have a question: Why did you put it in in the first place? Why are
you cutting brownfield tax credits? Why are you cutting new market tax
credits? Why are you cutting historic tax credits in the first place?
Why did you put it in in the first place?
You just wrote the bill. You just wrote it. It makes no sense. It
makes no sense.
We can't pass debts to our children in order to finance tax breaks
for the people at the very top.
The SPEAKER pro tempore. The Chair would like to remind all Members
that they should address their remarks to the Chair and not to others
in the Chamber.
Mr. ROSKAM. Madam Speaker, I yield myself 30 seconds.
Madam Speaker, the good news is it is not just $1,000 for the
gentleman's district, it is $1,200.
Let's go right to this student issue. It was the Obama administration
that proposed in the 2017 budget for the elimination of the student
deduction. I think the sanctimonious need to just walk out of the
Chamber.
The other thing is, at a tax rate of 15 percent, an annual $2,500
above-the-line deduction is a $375 tax break. We are proposing
something far greater than that with doubling the standard deduction,
lowering the rates and so forth.
Madam Speaker, let's just take the student deduction and chuck it in
the garbage.
Madam Speaker, I yield 1 minute to the gentlewoman from Missouri
(Mrs. Wagner).
Mrs. WAGNER. Madam Speaker, it is about time we ge something real
done for the American people. The people of Missouri's Second District
sent me to Washington to secure their jobs and to keep a little more of
their hard-earned money, and at long last we are finally doing just
that.
I vote ``yes'' to fix our broken tax system. I vote ``yes'' to help
reignite the American economy. I vote ``yes'' to make it a little bit
easier for that single mother of two, that firefighter, that teacher,
that shopowner, that family of four, that veteran. I vote ``yes'' for
bigger paychecks, better savings, and a more secure future.
I ran for Congress to fight for the people of Missouri and to ensure
that every hardworking American can realize their own American Dream.
Mr. NEAL. Madam Speaker, I yield 2 minutes to the gentleman from
Pennsylvania (Mr. Michael F. Doyle), a conscience of the House and a
champion of all things Pittsburgh.
Mr. MICHAEL F. DOYLE of Pennsylvania. Madam Speaker, I rise today in
opposition to this terrible bill. Many of my colleagues have called it
a scam, and they are absolutely right.
Supporters of this bill have said that everyone gets a tax cut. That
is not true. Millions of Americans get a tax increase; more and more
each year, in fact.
Supporters of this bill have called it a middle class tax cut. That
is not true. The lion's share of the money goes to corporations and
households making $1 million or more, not to the family struggling
paycheck to paycheck.
What this bill gives to the middle class in one hand, it takes it
away with the other with devastating consequences for households with
high medical costs, student loans, or high State and local taxes.
Supporters of this bill have claimed that it will keep companies from
moving jobs overseas, create new jobs here at home, raise wages for
American workers. That is not true. While this bill cuts corporate tax
rates, it creates new incentives for shipping our jobs abroad.
Finally, does anyone really believe that tax cuts for corporations
and the rich will trickle down to the rest of us?
It didn't work in the Reagan administration. It didn't work in the
Bush administration. It didn't work in Kansas, and it is not going to
work today.
Make no mistake, this massive tax cut for corporations and the rich
will increase deficits and the national debt by trillions of dollars,
sticking the rest of us, especially our kids, with the bill.
Madam Speaker, this massive tax cut for corporations and the wealthy
is not a middle class tax cut. It won't create jobs or raise wages. It
isn't simple, it isn't reform, and it certainly won't pay for itself.
If we want to increase economic growth, let's give a real break to
the middle class and the small businesses. They will put that money
right back into the economy. That is the way to create jobs and boost
wages.
Madam Speaker, I urge my colleagues to reject this giveaway to the
rich and to start over with a bipartisan bill that truly benefits the
middle class.
Mr. ROSKAM. Madam Speaker, my friends on the other side of the aisle
need to make a decision: Do they want to lionize Ronald Reagan or
criticize Ronald Reagan?
I will leave it to them to decide which.
Madam Speaker, I yield 2 minutes to the gentleman from Kentucky (Mr.
Barr).
Mr. BARR. Madam Speaker, I rise today to adamantly dispute this false
narrative that the Tax Cuts and Jobs Act is only intended to benefit
the wealthiest Americans and does not benefit the middle class.
When you hear this fiction from the other side of the aisle, remember
these facts: this bill lowers tax rates on low- and middle-income
Americans. It takes the lowest 10 percent bracket to zero. It doubles
the standard deduction, meaning hardworking Americans can immediately
take home more of their paychecks. Specifically, the first $24,000 of
family income will be completely tax free under this plan.
By slashing our noncompetitive corporate tax rate, this bill will
result in more jobs and, according to the nonpartisan Tax Foundation,
it will deliver average American households a pay raise of at least
2\1/2\ percent.
With this legislation, a typical family of four earning $59,000, the
median household income, will receive a $1,182 tax cut.
Madam Speaker, that is not a tax cut for the rich. That is a tax cut
for low- and middle-income hardworking Americans, and that is a fact.
This will benefit people like Jared from Frankfort, Kentucky, who
told me: ``The extra income from the tax cut will enable us to have
some breathing room.''
It will also help constituents who are living paycheck to paycheck,
who have told me they would use these tax cuts to save for a rainy day,
make car repairs, occasionally go to a restaurant, and invest in higher
education for their kids.
I heard from my constituent in Lexington named Gary, who told me:
``It doesn't matter how I plan to use my money. By definition, it is my
money to begin with. Trust me to spend it in the way that applies for
me.''
Gary, you are absolutely right, it is your money.
Tax relief is not about handouts. It is simply about allowing the
American people to keep more of the hard-earned income that they made.
On behalf of all of the hardworking people of central Kentucky, I
urge my colleagues to vote for Gary and to vote for all other taxpayers
who deserve to keep more of what they earned. Vote ``yes.''
Mr. NEAL. Madam Speaker, I yield 2 minutes to the gentleman from Ohio
(Mr. Ryan), who is well known and well regarded as he addresses
national economic issues.
Mr. RYAN of Ohio. Madam Speaker, I thank the gentleman for his
leadership on this.
The last time there was tax reform was 31 years ago. Since then, 96
percent of income growth went to the top 10 percent of the people in
the country. Ninety-six percent went to the top 10 percent. The top 1
percent control 90 percent of the wealth in this country.
Sixty-three percent of average families in the United States of
America could not withstand a $500 emergency.
We have pensions collapsing, we have communities that have eroded,
wiped out, and the Republican plan to fix all of this is to go to the
Chinese Government, borrow $2.3 trillion and bring it back to the
United States and give it to the wealthiest people in this country.
That is not going to fix a damn thing in the United States. It is not
going to help Flint, or Springfield, or Youngstown, or Pittsburgh, or
Gary. I am talking about Gary, Indiana, will get hammered from this
thing.
{time} 1830
We have tried this before, and many of you were here. President Bush
did
[[Page H9356]]
this. He said: We are going to cut taxes for the wealthy. It is going
to lead to growth. Wages are going to go up.
We had the most stagnant decade of growth since the Great Depression,
and it ended in a complete economic collapse. This is a canard. This
economic philosophy stinks. It doesn't work, and it hammers working
class people.
To put a little salt in the wound, Madam Speaker, you keep the
deduction that allows a corporation to outsource jobs from our
communities to other countries.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. NEAL. Madam Speaker, I yield an additional 30 seconds to the
gentleman.
Mr. RYAN of Ohio. Madam Speaker, the only place this is going to
create a job is in Beijing, China.
Mr. ROSKAM. Madam Speaker, as you know, the good news is, according
to the Joint Committee on Taxation, 70 percent of the individual tax
relief goes to families earning under $200,000, according to their
publication on November 13.
Madam Speaker, I yield 1 minute to the gentleman from Florida (Mr.
Rutherford).
Mr. RUTHERFORD. Madam Speaker, I thank the gentleman for yielding.
Madam Speaker, I think no one in this Chamber can dispute when I say
that America's Tax Code is broken. I rise today to stand with my
colleagues in support of progrowth tax reform because our Tax Cuts and
Jobs Act works for the middle class.
For too long, a complex Tax Code, high rates, and burdensome
regulations have held back opportunities for hardworking families. The
Tax Cuts and Jobs Act offers much-needed tax relief for low-income and
middle-income Americans.
It focuses on middle class tax cuts that allow hardworking Floridians
to keep more of their paychecks so that they can save for their
children's college fund, so that they can invest in their retirement,
so that they can enjoy vacations with their family.
Florida families know how to spend their money better than the
government, and this plan allows them to keep more of the money that
they earn instead of waiting for tax returns and deductions to give
them their money back.
This bill is profamily. It is probusiness, and it will give our
economy a boost. Nothing will address our debt more than growth.
Madam Speaker, I urge my colleagues to support this bill.
Mr. NEAL. Madam Speaker, I yield 2 minutes to the gentleman from
California (Mr. McNerney), well-known as a champion of America's middle
class.
Mr. McNERNEY. Madam Speaker, I want to thank the ranking member of
the committee for his hard work on this. He has been a great voice.
Madam Speaker, this is a harmful and deceitful bill. It is strictly
partisan. We have learned over the years, if you do something strictly
on a partisan basis, it isn't going to work. It is going to fall apart.
It will come back to you. I am telling you, learn from our mistakes.
Work with us.
There hasn't been a single hearing on this bill.
Is the public out there confused? They should be because they haven't
been informed about what this bill does.
It was rushed through in 1 week. It takes more than a week to name a
post office around here.
What is the deal? What is going on here? No one really understands
the consequences of this bill, but I can tell you what it does.
It will greatly reduce taxes for corporate America. It will reduce
taxes for the wealthy.
So where do you think the money is going to come from to pay for
Social Security? to pay for our roads and highways? to pay for our
education? to pay for Medicare? If you haven't guessed, it is going to
come from the middle class. There is no other way we can pay for this.
So I will be kind and say maybe they are being overoptimistic. Maybe
they don't really understand what is going on there, but don't believe
it. You are going to pay more taxes. It is going to come out of your
hide.
And when I sit down, the Member from Nebraska is going to say that,
in my district, you are going to get $1,200 more or $1,700 more. No.
You are going to pay more. You are not going to get more money back.
In California, 6 million people will lose their tax deductions, the
State income tax deduction. What does that mean? That means you are
going to pay taxes twice on your earned income. In California,
homeowners are going to get hit hard. I don't see how anyone from
California can vote for this bill.
Education will be more expensive; student loans will not be
deductible. This bill will hurt our Nation's ability to compete.
What does that mean? It means lower pay. It means layoffs.
This tax overhaul is a big lie. We should oppose this bill and start
over and do it right.
Mr. ROSKAM. Madam Speaker, the good news is it is not $1,200. It is
not $1,700. It is $1,900 for the median household in California's Ninth
District.
Madam Speaker, I yield 4 minutes to the gentleman from Missouri (Mr.
Smith), a great friend of agriculture and a great friend of small
business.
Mr. SMITH of Missouri. Madam Speaker, a lot has been said today on
the floor about the Tax Cuts and Jobs Act from my friends on the other
side of the aisle. They think that this bill before us will make losers
of the American workers or of the American economy. The truth is the
status quo--our current broken Tax Code--is causing our workers and our
economy to lose.
Back in southeast Missouri--I will give you an example under the
current Tax Code--a machinist in Poplar Bluff, Missouri, working 40
hours a week is fearful to work harder because the more money that they
make, the less that they will have percentagewise unde our current Tax
Code. That is simply not right, Madam Speaker.
Back in southeast Missouri, a cotton farmer in Hayti has worked for
decades to build his family farm hoping to pass it on to his daughter.
Yet, under the current system, his daughter would have to sell portions
of the farm or take out a massive loan to continue the family
operation.
The status quo in our Tax Code is rigged against the American
taxpayer. They can't afford an army of lawyers, accountants, and
lobbyists to find all of the loopholes and the bailouts available only
to a select few.
The status quo are tax rates for businesses that are so high that the
American companies are not able to grow, hire new workers, or be
competitive with other countries around the world.
The other side of the aisle was arguing to keep a broken Tax Code
that is punishing hardworking taxpayers. All of the grandstanding
leaves us with one question that needs to be answered for the American
people: What do these tax cuts mean for you? It means that the
hardworking family in southeast Missouri will keep more of their
paycheck.
Instead of being penalized for success, this bill is about employees.
It is about wages. It is about getting to keep more of what you earn.
For families and couples, the first $24,000 you earn under this bill
will be tax free. You get to keep it. You get to decide how to spend
your own money, not the government.
It means that the small businesses and family farms won't feel the
sting of the IRS and the death tax when tragedy strikes their family.
It means that lobbyists and special interests become the losers. We
close loopholes in handouts that the hardworking taxpayer can't get.
We are ending a Tax Code that isn't built for the everyday American.
We are making it simple and fair. It means that America can now compete
and win again.
With this bill, we lower the business rate to historic levels. We are
making our economy healthy again. We know from history that a healthy
economy takes care of itself. It is more stable and sustainable. It
provides for full employment, better jobs, and higher wages.
Former President John F. Kennedy knew this when he said: ``Our true
choice is not between tax reduction, on the one hand, and the avoidance
of large Federal deficits on the other. It is increasingly clear that
no matter what party is in power, so long as our national security
needs keep rising, an economy hampered by restrictive tax rates will
never produce enough revenue to balance our budget just as it will
never produce enough jobs or enough profits.''
[[Page H9357]]
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. ROSKAM. Madam Speaker, I yield an additional 30 seconds to the
gentleman.
Mr. SMITH of Missouri. Madam Speaker, surely, the lesson of the last
decade is that budget deficits are not caused by wild-eyed spenders but
by slow economic growth and periodic recessions. Any new recession
would break all deficit records.
This bill makes the American worker, the American family, the
American farmer, the American small businesses, and the American
economy winners once again.
Madam Speaker, I urge all of my colleagues to vote ``yes'' on the Tax
Cuts and Jobs Act.
Mr. NEAL. Madam Speaker, 28,000 people will use the student loan
interest deduction in Missouri's Eighth District, claiming nearly $33
million in deductions.
Madam Speaker, I yield 2 minutes to the gentleman from California
(Mr. Ruiz), a medical man and Congressman.
Mr. RUIZ. Madam Speaker, I thank Ranking Member Neal for the
opportunity to speak on this bill.
The fact is I do want to simplify our Tax Code and I do want tax
reform, a tax reform that relieves the burden on our middle class, our
seniors, our veterans, and our students. But let's just see how this
bill fares with the middle class, seniors, veterans, and students.
My middle class constituents in California will be double-taxed on
their income, but big corporations will get tax relief.
Veterans in my district will find it harder to find work or a home
because this bill eliminates tax credits for hiring veterans and harms
efforts to end veterans' homelessness.
Middle class homeowners across California will see the value of their
homes decrease by as much as 10 percent.
Students will get hit with the largest relative tax increase in this
bill.
Seniors will see a Medicare cut by $25 billion a year. That is over
$100 billion of Medicare cuts over the next 4 years.
And 38 million middle class families will see their taxes increase.
They always point to this family of four earning $59,000 getting a
certain amount of tax cuts, but 38 million middle class families will
see their taxes increase, all this while giving tax breaks to
millionaires, billionaires, and corporations who ship jobs overseas and
raise the deficit by $1.44 trillion within 10 years. In fact, nearly 80
percent of the tax cuts in this bill go to millionaires, billionaires,
and multinational corporations that ship jobs overseas.
The bottom line is this bill raises taxes on the middle class and
gives tax breaks to billionaires. This is irresponsible and
unacceptable.
Madam Speaker, I urge my colleagues to oppose this bill and protect
Medicare, protect the middle class, protect seniors, protect veterans,
and protect students.
Mr. ROSKAM. Madam Speaker, if you are in California's 36th District
and your median household income is $58,000, it looks like a tax cut of
$1,090.
I am informed that our friends on the other side have more time, and
my suggestion is that our friends use some of their time to get back in
balance.
I reserve the balance of my time.
Mr. NEAL. Madam Speaker, how much time do I have remaining?
The SPEAKER pro tempore. The gentleman from Massachusetts has 1 hour
16\1/4\ minutes remaining.
Mr. NEAL. Madam Speaker, I just happen to have the nephew of former
President Kennedy here who is going to set the record straight on that
quote that was attributed to President Kennedy just a few moments ago.
Madam Speaker, I yield 2 minutes to the gentleman from Massachusetts
(Mr. Kennedy), a very good member of the Massachusetts congressional
delegation and my friend.
Mr. KENNEDY. Madam Speaker, I thank my friend and mentor in the
House, the dean of our delegation from Massachusetts (Mr. Neal), for
his leadership on this issue and so many others.
Madam Speaker, I am always heartened by the quotes of President
Kennedy offered by any Member of this body. I would like to think that
they would seek to emulate him not just on the marginal tax cuts that
were put forth some 50 years ago, but also on his stance on
immigration, on civil rights, and on Russia.
{time} 1845
But those are issues for another day, Madam Speaker.
The issue today is a vote that we will take on this floor tomorrow to
rewrite an American Tax Code that will touch every single American
life.
True tax reform is complicated, it is cumbersome, and, above all
else, it is deeply personal. But this bill is none of those things. It
is a massive, permanent handout to corporations passed off on American
families. It is a terrifyingly precise attack on patients with chronic
illness, a heartless roadblock for low-income students, and a choice to
value inherited wealth more than hard-earned income.
It is a gift to corporations paid to the richest among us, and it is
paid for by long nights, by double shifts, by vacations not taken, and
of hardworking American families sacrificing for their hope for a
better tomorrow.
You are asking them to fortify your tax cuts and stock options with
their classrooms, your corporate profits with their roads and bridges,
your balance sheets with their hard-earned retirement and healthcare
benefits.
For all the talk about the boost to corporate profits, 80 percent of
the stocks in this country are owned by 10 percent of Americans. Ask
yourself who is going to actually be the beneficiary of all that money.
That is what this bill does.
You have heard from my Republican friends over the course of the past
couple days about how much this will save the average American family,
but not about the 36 million people and families who will experience a
tax hike.
What they aren't telling you is what is going to happen the moment
this bill is passed. Luckily for the American public, one of the chief
economic advisers to the President has said so. He said that after this
bill is done, they are turning directly toward welfare cuts, Social
Security, Medicare, and Medicaid. So when you hear questions about how
much this bill is going to save you, ask how about your retirement.
These cuts go right to Social Security.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. NEAL. Madam Speaker, I yield the gentleman from Massachusetts an
additional 30 seconds.
Mr. KENNEDY. Madam Speaker, ask them how much more money that $1,000
is going to save you when your healthcare benefits are taken away. By
the way, that clause just got added over in the Senate.
Ask them how much more some savings might go for one family when you
gut and shred a social safety net that has powered the greatest
expansion of economic growth that this country has ever seen.
That is what your bill does. That is what this bill means. That is
what this bill is about. It is about the values envisioned of an
America, about a tax structure that should reflect the values of the
American family, not the values of corporate balance sheets.
The SPEAKER pro tempore. Members are reminded to address their
remarks to the Chair.
Mr. NEAL. Madam Speaker, I yield 2 minutes to the gentleman from
Maryland (Mr. Raskin). Congressman Raskin is a well-known champion of
civil liberties and a scholar of the law.
Mr. RASKIN. Madam Speaker, as my friends across the aisle prepare
their statistics about my congressional district where 500 people
rallied against the tax plan this last weekend, I want to invite them
to come to my district and to debate me and several other members of
our caucus. I am happy to come to the gentleman's district and debate
it, too, because the American people should be able to be part of this
decision.
When the majority voted to throw 30 million Americans off of their
health insurance plans, they went over to the White House where they
celebrated like it was Mardi Gras, the Super Bowl, and Herbert Hoover's
birthday all put together. When millions of middle class Americans
rebelled and defeated that monstrosity of a bill, Donald Trump pointed
at them and said that they had all voted for a mean bill; and he was
right.
Now like lambs to the slaughter, they are about to vote for another
mean bill, a tax scam written by corporate lobbyists in the dark of
night
[[Page H9358]]
now moving through Congress at the speed of light.
While our poor colleagues grimly walk the plank for the billionaires,
Wall Street tycoons, and the Trump Cabinet, who are getting ready to
laugh all the way to the bank when middle class Americans rebel again
this week, next week, and the week after that, and this tax scam bites
the dust, President Trump can turn around again and call this
monstrosity not only mean, but greedy.
This mean and greedy tax scam puts $1.5 trillion on America's credit
card so the sons and daughters of the middle class can pay the rest of
their lives for a gigantic corporate tax cut in a period of record
corporate profits.
One-third of the windfall raining down on corporate investors will go
abroad because more than one-third of corporate wealth is owned by
foreign investors. That is more than $500 billion that goes not even to
our own rich people but to Saudi Arabia, China, and other foreign
investor havens, and it will not go to Medicare or Medicaid or other
public purposes at home.
Then they move to the so-called territorial tax system so that
corporate profits moved abroad will escape our normal system, giving
incentive to record job flight. Somebody tell Donald Trump about this
because this tax scam puts foreign jobs first.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. NEAL. Madam Speaker, I yield the gentleman from Maryland an
additional 1 minute.
Mr. RASKIN. In the meantime, Madam Speaker, 34 million middle class
Americans get hit with a tax increase. Good-bye to the healthcare
deduction. Good-bye to the college loan interest deduction. Farewell to
a meaningful State and local tax deduction--oh, and farewell to the
estate tax which applies only to billionaires and the richest
millionaires in the country, 2 out of 1,000 families. Where is the
democracy? Where is the legislative process?
When we had a bipartisan bill in 1986, we took more than 2 years. It
passed with overwhelming support. Now this tax scam has had no
hearings, no experts, and no citizen testimony. What a scandal it is.
We do need tax reform, but we don't need a corporate tax scam imposed
against the middle class.
Mr. NEAL. Madam Speaker, I yield 2 minutes to the gentlewoman from
California (Ms. Maxine Waters), who is the ranking member of the
Financial Services Committee.
Ms. MAXINE WATERS of California. Madam Speaker, I rise today in
opposition to H.R. 1, which is just a continuation of Republicans'
relentless attack on working families. This is not a tax plan; it is a
tax scam.
This President won't disclose how he is going to benefit from this
tax scam. He has disrespected us all. This tax scam will eliminate the
student loan interest deduction. It will eliminate State and local tax
deductions on income. It will restrict the mortgage interest deduction.
It is estimated that 47 million taxpayers face a tax hike. Almost
half of any tax cuts will go to the richest 1 percent. Residents of my
State of California will face the largest net tax increase totaling
$12.1 billion in 2027 alone.
Madam Speaker, I call on the President of the United States of
America to show his tax income and to show his tax plan. He needs to
let us know what he is all about and what his taxes are. From the very
beginning, he said he couldn't show them at the time that he was asked
when he was first inaugurated into this Presidency, but time has
passed. It is time for the President to show us his tax returns, rather
than coming up with a tax scam asking everybody else to pay up, to pay
more, and saying that this is a middle class tax cut when it is not.
We want to know more about him and his plan. So with my 1 minute, my
2 minutes, whatever it is, this evening is all about saying a message
to the President.
Even though I will be cautioned that I am not to talk to the
President, I am calling on the President: Show your tax returns.
The SPEAKER pro tempore. Members are reminded to address their
remarks to the Chair.
Mr. ROSKAM. Madam Speaker, there is a message for California's 43rd
District, and that is a benefit of $1,395 if H.R. 1 is passed into law.
Madam Speaker, I yield 1\1/2\ minutes to the gentleman from Illinois
(Mr. LaHood).
Mr. LaHOOD. Madam Speaker, I want to thank my colleague from Illinois
for his commitment and dedication to this terrific bill that we have
before the House tonight.
Madam Speaker, the people of Illinois are unfortunately all too
familiar with high taxes and the burden they put on families and our
local businesses. At the Federal level, things have become just as bad
with a Tax Code that is over 74,000 pages long and riddled with
loopholes.
Over 30 years have passed since the last time Congress passed
comprehensive tax reform, and you can see the effects of our outdated
Tax Code everywhere. We have stagnant hiring, stagnant wages, and a
stagnant economy that is holding back our middle class instead of
helping them get ahead.
H.R. 1, the Tax Cuts and Jobs Act, is our chance to change all of
this. By simplifying our Tax Code and bringing real relief to everyday
families, we can, once again, jump-start the American economy and get
it back to working for the middle class.
The choice before us is a simple one: Do we support this bill and
support the middle class, or do we embrace the status quo? That is why
I urge my colleagues on both sides of the aisle to come together and
vote for this bill. Let's send a signal that we don't stand for the
status quo. We stand for growth and economic opportunity for the
American people. Let us bring relief to the middle class. Support this
bill.
Mr. NEAL. Madam Speaker, I yield 3 minutes to the gentlewoman from
Alabama (Ms. Sewell). Congresswoman Sewell is an attorney and a
Marshall Scholar.
Ms. SEWELL of Alabama. Madam Speaker, our Tax Code is a statement of
our values, and I can tell you that this tax bill doesn't reflect my
values nor those of the American people. This bill favors the wealthy
over the middle class, it favors corporations over the working
families, and it favors special interests over everyday Americans.
Madam Speaker, this tax bill raises taxes for 36 million middle class
Americans, and it cashes a check for $2.3 trillion worth of debt that
will be left for our children and grandchildren to pay.
This tax bill gives permanent tax cuts for corporations and
multinationals while making the tax cuts for regular taxpayers
temporary.
This tax bill preserves tax deductions for certain industries but
does away with tax cuts in the Code that help everyday Americans. It
eliminates the deduction for State and local taxes. It also limits
mortgage interest deductions and limits the medical expense deduction
affecting 9 million households.
The independent group, the Tax Policy Center, estimates that almost
half of the tax cuts, 47 percent of the tax cuts, will go to the top 1
percent.
Madam Speaker, this bill devastates education. Education is truly the
investment in our human capital, our workforce. It eliminates
deductions for interest on student loans. It eliminates deductions for
teachers who buy supplies. It eliminates lifetime learning credits, and
it eliminates employer tuition assistance.
This bill adds a special tax on the endowments of colleges and
universities which will reduce scholarships and increase the cost of
college for average, everyday Americans.
Cities and towns will be decimated by this bill. This bill eliminates
tax incentives such as private activity bonds, new markets tax credits,
and historic tax credits which dramatically affect the ability to
build libraries and hospitals, and to fund roads, bridges, and
broadband infrastructure. These are critical investments, Madam
Speaker, in the public service that spur economic growth.
Madam Speaker, this tax bill has it backwards. This Congress should
value its constituents first, not Wall Street, and not special
interests--its constituents first.
Madam Speaker, I urge my colleagues to vote against this tax bill
because it doesn't represent the values that our constituents sent us
here to this hallowed place, Congress, to represent. We should be
representing them and not the special interests.
[[Page H9359]]
Mr. ROSKAM. Madam Speaker, I yield myself 30 seconds to just do a
quick, little cleanup.
There was a discussion a minute ago by the gentlewoman from Alabama
where she was talking about teachers, for example. Let's get right to
that. Teachers won't be harmed by shifting the status quo because what
they are getting right now is a $250 deduction which is worth about $37
at the 15 percent tax rate, receipts that they have to keep all year
long in an envelope and apply it at the end in terms of doing their
taxes.
We say: Dump that. Let's get away from that. Let's double their
standard deduction, lower their rates, and give them some real money.
Madam Speaker, I yield 4 minutes to the gentlewoman from California
(Mrs. Mimi Walters).
Madam Speaker, I ask unanimous consent that the gentleman from Texas
(Mr. Brady) control the balance of my time.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Illinois?
There was no objection.
Mrs. MIMI WALTERS of California. Madam Speaker, I rise to engage the
gentleman from Texas (Mr. Brady) in a colloquy.
Madam Speaker, tax reform will result in economic growth across the
country, especially in my home State of California. I thank the
gentleman for his dedication to this important effort.
Madam Speaker, my home State is uniquely positioned in this tax
debate. Due to the liberal tax-and-spend policies enacted by the
California State Legislature, my district in Orange County is one of
the most expensive places to live in this country. California has the
highest personal income tax rate in the country, reaching a crushing
12.3 percent. The median home price in my district is almost $800,000.
California also has the highest gas tax in the country.
While this bill makes important reforms that will grow our economy, I
have serious concerns that some of my constituents may be worse off. As
Sacramento continues to confiscate more and more of California's hard-
earned paychecks, we must ensure that Washington does not put similar
tax burdens on our constituents.
I ask the chairman of the Ways and Means Committee to assure me that
we will ensure that individuals and families in my district are
protected from such unintended outcomes.
Mr. KNIGHT. Will the gentlewoman yield?
Mrs. MIMI WALTERS of California. I yield to the gentleman from
California.
{time} 1900
Mr. KNIGHT. Madam Speaker, if you want to demonize or scare people,
you come down and yell and scream and raise your hand and you say
things that they haven't looked into.
What I did was talk to people in my district and looked at their
rates and said: Let's look at your taxes and kind of work them through.
I found that people in the lower-income rate in my district got
relief. People in the middle-income rate got relief. This happened
right across the board to everyone we kept talking to.
So I would say that, before you come down and yell and scream and try
and scare people on something you might have heard from a talking head,
actually work with your people. It works.
Madam Speaker, if this bill is enacted, it will result in economic
growth across the country, especially in my home State of California.
The lower rates for individuals, families, businesses, and the tax
simplicity and certainty offered by this bill will provide net tax
relief to the middle class and our country's job creators.
We expect this bill to create nearly 1 million jobs nationwide, and
nearly 10 percent of those in California.
While the bill makes commendable strides toward a fair, simpler Tax
Code, I am concerned about how the bill could impact some of my
constituents as a result of the high level of income taxes imposed on
them by our State government.
I would ask the Chairman of the Ways and Means Committee if he can
assure me that we continue our work and ensure the families in my
district are protected from such unintended consequences and that they
will be able to fully enjoy the benefits of this bill.
Mr. BRADY of Texas. Will the gentlewoman yield?
Mrs. MIMI WALTERS of California. I yield to the gentleman.
Mr. BRADY of Texas. Madam Speaker, I thank both the gentlewoman and
the gentleman for stepping forward and being such strong advocates for
taxpayers in a State that taxes its families and businesses, I think,
almost beyond belief.
Our goal in tax reform is to achieve tax relief for families and
individuals across the country, regardless of where you live, and
across all incomes, while, at the same time, unleashing the economic
engine for American economic growth.
California, by the way, under tax reform, is the number one job
creator under the new Tax Code.
So I agree with the gentleman and the gentlewoman. There are still
some areas where we want to make and will make improvements in this
bill. If they will work with us to continue to move this process
forward, I am happy to commit to working with both of them to ensure we
reach a positive outcome for their constituents and families as we
reconcile our differences with the Senate.
Madam Speaker, I reserve the balance of my time.
Mr. NEAL. Madam Speaker, I yield myself such time as I may consume.
Madam Speaker, 33 percent of Mr. Knight's constituents derive a
$16,000 annual benefit from the State and local tax deduction.
In the case of the gentlewoman from California, 37 percent of her
constituents enjoy an $18,200 State and local tax deduction benefit.
Madam Speaker, in closing, more than anything else, this is, as I
opened with, a missed opportunity.
We all know what is wrong with this Tax Code. We could have found
areas of compromise emphasizing the middle class and middle-income
earners. We understand that the Tax Code that American corporations use
is not competitive now internationally, but we wanted some relief for
middle-income people.
So here is where the investment could have taken place. We could have
begun an investment in human capital. You have heard it tonight. We
should all be alarmed by labor participation rates in America. We all
should be alarmed by what has happened in the post-war period where, at
one time, it was 63 percent, and now it is 63.8 percent.
It is about technology; it is about globalization, for sure; but it
is also about skill set. Eighteen thousand precision manufacturing jobs
in New England go unanswered, the smallest geographic region of the
country. The Department of Labor reported this week that 6 million jobs
in America go unanswered. It is part of a skill set issue.
You know what else we need to be concerned about?
Two million people in America are addicted to opioids. That is what
we should be concerned about as well as getting them back into the
workplace through the trampoline effect, where they hit it and bounce
back up into the mainstream. But that is not what we did.
Without any hearings, without any chance for the minority to
participate, in terms of substance, we moved forward.
I want to say to the last two speakers, they are sincere enough. We
have heard now four different people come to the well of this House on
the other side and say to the chairperson of our committee and a
friend: Are you going to fix this after the bill leaves here?
Four different people asked for a fix. I want to tell you, based on
long experience in this House, the path gets more narrow as it leaves
this House. It doesn't grow more expansive. It will be harder to fix
these things because of the budget score that was embraced.
In 2001, we were promised widespread economic growth when President
Bush took the Clinton surplus and offered $1.3 trillion worth of tax
cuts. When you look at the distribution tables, they were right about
one thing: everybody did get a tax cut. But then you look at those
tables and you say: Let me examine who got what.
In 2003, we came back and the President proposed $1 trillion worth of
tax cuts based on the premise of economic growth, which didn't happen.
[[Page H9360]]
By the way, in 2004, there was repatriation, which may be the
granddaddy of them all. Well, we are going to repatriate those holdings
offshore at 5\1/4\ percent o the premise of job growth. And there was
none.
We had this opportunity to do this together, as I described with
worker participation rates, understanding that most families now are
not having large numbers of children any longer. This should have been
about immigration reform attached to it as well. We all know skilled
workers from overseas are going to be an important part of the American
economy, and we should be embracing that, along with sensible tax
policies based upon some relief for the middle class.
Instead, we are taking away the ability of American students to
deduct interest on their loans to pay for a tax cut for people at the
top?
We are taking away a medical expense deduction for people who have
Alzheimer's disease to pay for the tax cut for people at the top?
We are assessing universities and colleges a new, special tax to pay
for tax cuts for people at the top?
We could have had this conversation. We acknowledge what President
Reagan and Speaker O'Neill did because it was based upon good will and
commonality and not needing just a political victory. Day after day
they plowed through with 450 witnesses in front of the Ways and Means
Committee.
How many witnesses did we have in front of the Ways and Means
Committee?
Zero.
How many hearings did we have on this tax bill?
Zero.
We saw the manager's amendment and were given 20 minutes to review
it. I don't mean 25 minutes. I mean 20 minutes. Back to regular order.
We should scrap this bill.
To those who are vulnerable on the other side, I would not be
trusting of the idea that these issues are going to be fixed after you
cast this vote tomorrow morning. There will be an opportunity to go
back and redo this if the other side would say: Let's find a meaningful
path to cooperation between the two parties.
That is all we are asking for on this side: include us in this
discussion so we might invest in community colleges, vocational
education, internship programs, skill set training, and answer the call
of globalization.
We still have innovation and creativity that far surpasses the rest
of the world. There is nothing we can't answer in America without those
healthy investments that we need.
Instead, when you look at these distribution tables that are proposed
as to who is going to get what; taking away the alternative minimum tax
for the 4.5 million families that pay it; asking students to give up
their student interest deduction; the estate tax, which we are
repealing; and we are asking that loved ones who have Alzheimer's and
being cared for at home to give up that medical deduction to pay for
all of that, it makes no sense whatsoever. But there is an opportunity,
Madam Speaker, to reverse course.
In my years here, I can tell you this: Anybody who thinks that the
United States Senate is going to accommodate their wishes, when they
see the goalpost and the goal line of a handful of Members of this
House, they are making a miscalculation.
We have heard tonight they are going to do something about state and
local tax deduction, they are going to do something about the historic
tax credit, and they are going to revisit these issues.
Do you know how difficult that is going to be, Madam Speaker?
That is going to be nearly impossible.
On top of that, they are going to go back and try to appeal the
Affordable Care Act again and take 13 million people away from their
insurance so that we can have a tax cut that further concentrates
wealth for a handful of people in America?
This is the House of Representatives, Madam Speaker, not the House of
Lords. We don't serve here by peerage. We are not entitled to anything
here. Most of us come from pretty modest backgrounds. That is the
principle we should be honoring in this tax debate as we discuss who is
about to pay what and what the rewards ought to be for the hardworking
men and women.
This is last note I am going to express before I yield back my time.
What about those 1 million veterans who have served us honorably in
Iraq and Afghanistan?
New veterans, what about them?
Are we going to eventually cut their benefits with Social Security
and Medicare and Medicaid and put it all on the chopping block as we
attempt to further concentrate wealth in America, particularly for
unearned income, by the way?
That is where we are heading.
We should honor the skills of those men and women who get up every
day and strive and work hard in this country with a sense of purpose
and great patriotism. That is what we should be acknowledging in this
debate.
I am looking forward to tomorrow morning, when we conclude this
debate and spend the 2 hours discussing more of what we have witnessed
here tonight. There will be more than enough enthusiasm on our side.
They will be lined up to RFK Stadium to participate tomorrow morning in
this debate. That is how important this is to the future of the
American people.
Madam Speaker, I reserve the balance of my time.
Mr. BRADY of Texas. Madam Speaker, I yield myself such time as I may
consume.
Madam Speaker, Washington is just hilarious.
Lawmakers back home tell everyone they are for tax reform, until it
comes actually time to do it. Everyone says they want a fairer,
flatter, simpler Tax Code, as long as you keep every special interest
provision in this big, fat, messed-up Tax Code.
Everyone says they want to give people back more of what they earned
and get Main Street businesses going, as long as you don't change
anything in the Tax Code. As long as the lobbyists win and the American
people lose, they are willing to talk about it.
House Republicans are actually acting on tax reform for the first
time in 31 years.
In Washington, they sneer at that family of four back home making
$59,000 a year. That is the average household. Under our tax reform,
they pay $1,182 less that they keep in their pocket. Washington makes
fun of that. That is real money for families.
A firefighter making $48,000 a year keeps over $1,300. That single
mom working hard every day making $30,000 a year has a $700 larger
refund than she gets today.
That Main Street startup business working I don't know how many
hours, making $62,000 a year--that was my Chamber of Commerce member
right there--in that startup business, they keep $3,007 more than they
do today. Washington just laughs at that. But it is real money for real
people.
In my district, a family of four making $90,000--two teachers--keeps
$2,176 more every year of their life from this.
My friends on the Democrat side now worry about the debt. I remember
the first year Democrats took control of the House, they doubled the
deficit. The second year, they tripled it. The third year, it went to
$1 trillion. It stayed that way until the American people gave the
House back to Republicans.
They love spending money and raising the deficit when they let
Washington grow, but when it is time to grow jobs and paychecks, all of
a sudden they are worried about the debt.
The truth of the matter is we want to keep this debt and deficits
going. Don't change anything. Keep this slow-growth economy, keep
spending, and I guarantee you debts and deficits will grow.
We are talking about growing jobs, growing paychecks, and getting
back to a balanced budget by getting this economy moving in a big way.
At the end of the day, it is time to end the status quo in
Washington, D.C. Americans deserve a fair, flatter Tax Code, one that
closes loopholes and ends special interest deductions so that Americans
can keep more of what they earn, so their paychecks can raise and our
businesses can compete and win anywhere in the world, especially here
at home America.
It is time our jobs start coming back to America, rather than
watching them go: our jobs, research, manufacturing patents, our
headquarters. That era is over, and it starts with H.R. 1, the Tax Cuts
and Jobs Act.
[[Page H9361]]
We will continue this debate tomorrow, Madam Speaker, so we will
continue to deliver tax reform and tax cuts for the American people.
Madam Speaker, I reserve the balance of my time.
The SPEAKER pro tempore. Pursuant to clause 1(c) of rule XIX, further
consideration of H.R. 1 is postponed.
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