[Congressional Record Volume 163, Number 195 (Thursday, November 30, 2017)]
[Senate]
[Pages S7579-S7581]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SA 1681. Mr. BENNET submitted an amendment intended to be proposed to
amendment SA 1618 proposed by Mr. McConnell (for Mr. Hatch (for himself
and Ms. Murkowski)) to the bill H.R. 1, to provide for reconciliation
pursuant to titles II and V of the concurrent resolution on the budget
for fiscal year 2018; which was ordered to lie on the table; as
follows:
Beginning on page 104, strike line 1 and all that follows
through page 112, line 12 and insert the following:
Subtitle B--Revenue Neutrality
SEC. 12001. ADJUSTMENT OF HIGHEST RATE BRACKETS.
(a) Joint Returns.--The last 2 rows of the table contained
in section 1(j)(2)(A), as added by section 11001(a), are
amended to read as follows:
``Over $400,000 but not over $480,050..... $91,479, plus 35% of the
excess over $400,000.
Over $480,050............................. $119,496.50, plus 39.6% of
the excess over
$480,050.''.
(b) Heads of Households.--The last 2 rows of the table
contained in section 1(j)(2)(B), as added by section
11001(a), are amended to read as follows:
``Over $200,000 but not over $453,350..... $44,348, plus 35% of the
excess over $200,000.
Over $453,350............................. $133,020.50, plus 39.6% of
the excess over
$453,350.''.
(c) Unmarried Individuals.--The last 2 rows of the table
contained in section 1(j)(2)(C), as added by section
11001(a), are amended to read as follows:
``Over $200,000 but not over $426,700..... $45,739.50, plus 35% of the
excess over $200,000.
Over $426,700............................. $125,084.50, plus 39.6% of
the excess over
$426,700.''.
(d) Married Individuals Filing Separate Returns.--The last
2 rows of the table contained in section 1(j)(2)(D), as added
by section 11001(a), are amended to read as follows:
``Over $200,000 but not over $240,026..... $45,739.50, plus 35% of the
excess over $200,000.
Over $240,026............................. $59,748.60, plus 39.6% of
the excess over
$240,026.''.
(e) Estates and Trusts.--The last 2 rows of the table
contained in section 1(j)(2)(E), as added by section
11001(a), are amended to read as follows:
``Over $9,150 but not over $12,700........ $1,839, plus 35% of the
excess over $9,150.
Over $12,700.............................. $3,081.50, plus 39.6% of the
excess over $12,700.''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 12002. CORPORATE TAX RATE.
(a) In General.--Section 11(b), as amended by section
13001, is amended by striking ``20 percent'' and inserting
``28 percent''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2018.
SEC. 12003. DECREASE IN ESTATE AND GIFT TAX EXEMPTION.
(a) In General.--Section 2010(c)(3) is amended by striking
subparagraph (C), as added by this Act.
(b) Conforming Amendment.--Subsection (g) of section 2001
is amended to read as follows:
``(g) Modifications to Gift Tax Payable to Reflect
Different Tax Rates.--For purposes of applying subsection
(b)(2) with respect to 1 or more gifts, the rates of tax
under subsection (c) in effect at the decedent's death shall,
in lieu of the rates of tax in effect at the time of such
gifts, be used both to compute--
``(1) the tax imposed by chapter 12 with respect to such
gifts, and
``(2) the credit allowed against such tax under section
2505, including in computing--
``(A) the applicable credit amount under section
2505(a)(1), and
``(B) the sum of the amounts allowed as a credit for all
preceding periods under section 2505(a)(2).''.
(c) Effective Date.--The amendments made by this section
shall apply to estates of decedents dying and gifts made
after December 31, 2017.
SEC. 12004. ORDINARY INCOME TREATMENT IN THE CASE OF
PARTNERSHIP INTERESTS HELD IN CONNECTION WITH
PERFORMANCE OF SERVICES.
(a) In General.--Section 1061, as amended by section
13310(a) of this Act, is amended to read as follows:
``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, so much of--
``(1) the taxpayer's net capital gain with respect to such
interests for such taxable year, as does not exceed
``(2) the taxpayer's recharacterization account balance for
such taxable year,
shall be treated as ordinary income.
``(b) Net Capital Gain.--
``(1) In general.--For purposes of subsection (a)(1), net
capital gain shall be determined under section 1222, except
that such section shall be applied--
``(A) without regard to the recharacterization of any item
as ordinary income under this section,
``(B) by only taking into account items of gain and loss--
``(i) taken into account by the taxpayer under section 702
with respect to any applicable partnership interest,
``(ii) recognized by the taxpayer on the disposition of any
such interest, or
``(iii) recognized by the taxpayer under paragraph (4) on a
distribution of property with respect to such interest, and
``(C) in the case of a taxable year for which section 1231
gains (as defined in section 1231(a)(3)(A)) exceed section
1231 losses (as defined in section 1231(a)(3)(B)), by
treating property which is taken into account in determining
such gains and losses as capital assets held for more than 1
year.
``(2) Allocation to items of gain.--The amount treated as
ordinary income under subsection (a) shall be allocated
ratably among the items of long-term capital gain taken into
account in determining net capital gain under paragraph (1).
``(3) Recognition of gain on disposition of applicable
partnership interests.--Any gain on the disposition of any
applicable partnership interest shall be recognized
notwithstanding any other provision of this title.
[[Page S7580]]
``(4) Recognition of gain on distributions of partnership
property.--
``(A) In general.--In the case of any distribution of
property by a partnership with respect to any applicable
partnership interest, the partner receiving such property
shall recognize gain equal to the excess (if any) of--
``(i) the fair market value of such property at the time of
such distribution, over
``(ii) the adjusted basis of such property in the hands of
such partner (determined without regard to subparagraph (B)).
``(B) Adjustment of basis.--In the case of a distribution
to which subparagraph (A) applies, the basis of the
distributed property in the hands of the distributee partner
shall be the amount determined under subparagraph (A)(i).
``(c) Recharacterization Account Balance.--
``(1) In general.--For purposes of this section, the term
`recharacterization account balance' means, with respect to
any taxpayer for any taxable year, the excess (if any) of--
``(A) the sum of--
``(i) the taxpayer's aggregate annual recharacterization
amounts with respect to applicable partnership interests for
such taxable year, plus
``(ii) the taxpayer's recharacterization account balance
for the taxable year preceding such taxable year, over
``(B) the sum of--
``(i) the taxpayer's net ordinary income with respect to
applicable partnership interests for such taxable year
(determined without regard to this section), plus
``(ii) the amount treated as ordinary income of the
taxpayer under this section for the taxable year preceding
such taxable year.
``(2) Annual recharacterization amount.--For purposes of
this subsection--
``(A) In general.--The term `annual recharacterization
amount' means, with respect to any applicable partnership
interest for any partnership taxable year, an amount equal to
the product of--
``(i) the specified rate determined under subparagraph (B)
for the calendar year in which such taxable year begins,
multiplied by
``(ii) the excess (if any) of--
``(I) an amount equal to the applicable percentage of the
partnership's aggregate invested capital for such taxable
year, over
``(II) the specified capital contribution of the partner
with respect to the applicable partnership interest for such
taxable year.
If a taxpayer holds an applicable partnership interest for
less than the entire taxable year, the amount determined
under the preceding sentence shall be ratably reduced.
``(B) Specified rate.--For purposes of subparagraph (A),
the term `specified rate' means, with respect to any calendar
year, a percentage equal to--
``(i) the Federal long-term rate determined under section
1274(d)(1) for the last month of the calendar year, plus
``(ii) 10 percentage points.
``(C) Applicable percentage.--
``(i) In general.--The term `applicable percentage' means,
with respect to any applicable partnership interest, the
highest percentage of profits of the partnership that could
be allocated with respect to such interest for the taxable
year (consistent with the partnership agreement and assuming
such facts and circumstances with respect to such taxable
year as would result in such highest percentage).
``(ii) Secretarial authority.--The Secretary shall
prescribe rules for the determination of the applicable
percentage in cases in which the percentage of profits of a
partnership that are to be allocated with respect to an
applicable partnership interest varies on the basis of the
aggregate amount of such profits. Such rules may provide a
percentage which may be used in lieu of the highest
percentage determined under clause (i) in cases where such
other percentage is consistent with the purposes of this
section.
``(D) Aggregate invested capital.--
``(i) In general.--The term `aggregate invested capital'
means, with respect to any taxable year, the average daily
amount of invested capital of the partnership for such
taxable year.
``(ii) Invested capital.--The term `invested capital'
means, with respect to any partnership as of any day, the
total cumulative value, determined at the time of
contribution, of all money or other property contributed to
the partnership on or before such day.
``(iii) Reduction for liquidation of partnership
interests.--The invested capital of a partnership shall be
reduced by the aggregate amount distributed in liquidation of
interests in the partnership.
``(iv) Treatment of certain indebtedness as invested
capital.--The following amounts shall be treated as invested
capital:
``(I) Partner loans.--The aggregate value (determined as of
the time of the loan) of money or other property which a
partner loans to the partnership.
``(II) Indebtedness eligible to share in equity of the
partnership.--The face amount of any convertible debt of the
partnership or any debt obligation providing equity
participation in the partnership.
``(E) Specified capital contribution.--
``(i) In general.--The term `specified capital
contribution' means, with respect to any applicable
partnership interest for any taxable year, the average daily
amount of contributed capital with respect to such interest
for such year.
``(ii) Contributed capital.--The term `contributed capital'
means, with respect to applicable partnership interest as of
any day, the excess (if any) of--
``(I) the total cumulative value, determined at the time of
contribution, of all money or other property contributed by
the partner to the partnership with respect to such interest
as of such day, over
``(II) the total cumulative value, determined at the time
of distribution, of all money or other property distributed
by the partnership to the partner with respect to such
interest as of such day.
``(iii) Treatment of related party borrowings.--Any amount
borrowed directly or indirectly from the partnership or any
other partner of the partnership or any person related to
such other partner or such partnership shall not be taken
into account under this subparagraph. For purposes of the
preceding sentence, a person shall be treated as related to
another person if the relationship between such persons would
be described in section 267(b) or 707(b) if such sections and
section 267(f) were applied by substituting `10 percent' for
`50 percent' each place it appears.
``(F) Multiple interests.--If at any time during a taxable
year a taxpayer holds directly or indirectly more than 1
applicable partnership interest in a single partnership, such
interests shall be treated as 1 applicable partnership
interest for purposes of applying this paragraph.
``(3) Net ordinary income.--For purposes of this
subsection, the net ordinary income with respect to
applicable partnership interests for any taxable year is the
excess (if any) of--
``(A) the taxpayer's distributive share of items of income
and gain under section 702 with respect to applicable
partnership interests for such taxable year (determined
without regard to any items of gain taken into account in
determining net capital gain under subsection (b)(1)), over
``(B) the taxpayer's distributive share of items of
deduction and loss under section 702 with respect to such
interests for such taxable year (determined without regard to
any items of loss taken into account in determining net
capital gain under subsection (b)(1)).
``(d) Applicable Partnership Interest.--For purposes of
this section--
``(1) In general.--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 services by the
taxpayer, or any other person, in any applicable trade or
business.
``(2) Applicable trade or business.--
``(A) In general.--The term `applicable trade or business'
means any trade or business conducted on a regular,
continuous, and substantial basis which, regardless of
whether the activities are conducted in one or more entities,
consists, in whole or in part, of--
``(i) raising or returning capital,
``(ii) investing in (or disposing of) trades or businesses
(or identifying trades or businesses for such investing or
disposition), and
``(iii) developing such trades or businesses.
``(B) Treatment of research and experimentation
activities.--Any activity involving research or
experimentation (within the meaning of section 469(c)(5))
shall be treated as a trade or business for purposes of
clauses (ii) and (iii) of subparagraph (A).
``(C) Treatment of real property trades or businesses.--Any
activity involving real property development, redevelopment,
construction, reconstruction, acquisition, conversion,
rental, operation, management, leasing, or brokerage shall be
treated as a trade or business for purposes of clauses (ii)
and (iii) of subparagraph (A).
``(e) 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 ordinary income) so much of the taxpayer's
recharacterization account balance for such taxable year as
is allocable to such interest (determined in such manner as
the Secretary may provide and reduced by any amount treated
as ordinary income 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.
``(f) Reporting by Entity of Taxpayer's Annual
Recharacterization Amount.--A partnership shall report to the
Secretary, and include with the information required to be
furnished under section 6031(b) to each partner, the amount
of the partner's annual recharacterization amount for the
taxable year, if any. A similar rule applies to any entity
that receives a report of an annual recharacterization amount
for the taxable year.
``(g) Coordination With Section 199A.--No item of income,
gain, deduction, or loss, or W-2 wages, which are properly
allocable to an applicable partnership interest shall be
[[Page S7581]]
taken into account in computing the qualified business income
of a taxpayer for purposes of section 199A or the amount of
the deduction under such section.
``(h) Regulations.--The Secretary shall issue such
regulations or other guidance as necessary to carry out this
section, including regulations--
``(1) to prevent the abuse of the purposes of this section,
including through--
``(A) the allocation of income to tax indifferent parties,
or
``(B) a reduction in the invested capital of the
partnership (including attempts to undervalue contributed or
loaned property),
``(2) which provide that partnership interests shall not
fail to be treated as transferred or held in connection with
the performance of services merely because the taxpayer also
made contributions to the partnership,
``(3) which provide for the application of this section in
cases where the taxpayer has more than 1 applicable interest
in a partnership, and
``(4) which provide for the application of this section in
cases of tiered structures of entities.''.
(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 a partnership interest to which section
1061 applies.''.
(c) Effective Date.--The amendments made by this section
shall take effect as if included in the amendments made by
section 13310 of this Act.
______