[Congressional Record Volume 163, Number 196 (Friday, December 1, 2017)]
[Senate]
[Page S7722]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

  SA 1814. Mr. DAINES 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 26, strike line 21 and all that follows 
     through page 30, line 14, and insert the following:
       ``(6) Franchise exception.--In the case of a taxpayer 
     utilizing business format franchising as a franchisor or 
     franchisee under part 436 of title 16, Code of Federal 
     Regulations, with respect to any qualified trade or business, 
     paragraph (2) shall be applied without regard to subparagraph 
     (B).
       ``(c) Qualified Business Income.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified business income' 
     means, for any taxable year, the net amount of qualified 
     items of income, gain, deduction, and loss with respect to 
     any qualified trade or business of the taxpayer.
       ``(2) Carryover of losses.--If the net amount of qualified 
     income, gain, deduction, and loss with respect to qualified 
     trade or businesses of the taxpayer amount for any taxable 
     year is less than zero, such amount shall be treated as a 
     loss from a qualified trade or business in the succeeding 
     taxable year.
       ``(3) Qualified items of income, gain, deduction, and 
     loss.--For purposes of this subsection--
       ``(A) In general.--The term `qualified items of income, 
     gain, deduction, and loss' means items of income, gain, 
     deduction, and loss to the extent such items are--
       ``(i) effectively connected with the conduct of a trade or 
     business within the United States (within the meaning of 
     section 864(c), determined by substituting `qualified trade 
     or business (within the meaning of section 199A)' for 
     `nonresident alien individual or a foreign corporation' or 
     for `a foreign corporation' each place it appears), and
       ``(ii) included or allowed in determining taxable income 
     for the taxable year.
       ``(B) Exceptions.--The following investment items shall not 
     be taken into account as a qualified item of income, gain, 
     deduction, or loss:
       ``(i) Any item of short-term capital gain, short-term 
     capital loss, long-term capital gain, or long-term capital 
     loss.
       ``(ii) Any dividend, income equivalent to a dividend, or 
     payment in lieu of dividends described in section 
     954(c)(1)(G).
       ``(iii) Any interest income other than interest income 
     which is properly allocable to a trade or business.
       ``(iv) Any item of gain or loss described in subparagraph 
     (C) or (D) of section 954(c)(1) (applied by substituting 
     `qualified trade or business' for `controlled foreign 
     corporation').
       ``(v) Any item of income, gain, deduction, or loss taken 
     into account under section 954(c)(1)(F) (determined without 
     regard to clause (ii) thereof and other than items 
     attributable to notional principal contracts entered into in 
     transactions qualifying under section 1221(a)(7)).
       ``(vi) Any amount received from an annuity which is not 
     received in connection with the trade or business.
       ``(vii) Any item of deduction or loss properly allocable to 
     an amount described in any of the preceding clauses.
       ``(4) Treatment of reasonable compensation and guaranteed 
     payments.--Qualified business income shall not include--
       ``(A) reasonable compensation paid to the taxpayer by any 
     qualified trade or business of the taxpayer for services 
     rendered with respect to the trade or business,
       ``(B) any guaranteed payment described in section 707(c) 
     paid to a partner for services rendered with respect to the 
     trade or business, and
       ``(C) to the extent provided in regulations, any payment 
     described in section 707(a) to a partner for services 
     rendered with respect to the trade or business.
       ``(d) Qualified Trade or Business.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified trade or business' 
     means any trade or business other than a specified service 
     trade or business.
       ``(2) Specified service trade or business.--
       ``(A) In general.--The term `specified service trade or 
     business' means any trade or business involving the 
     performance of services described in section 1202(e)(3)(A), 
     including investing and investment management, trading, or 
     dealing in securities (as defined in section 475(c)(2)), 
     partnership interests, or commodities (as defined in section 
     475(e)(2)).
       ``(B) Franchise exception.--Such term does not include any 
     trade or business utilizing business format franchising as a 
     franchisor or franchisee under part 436 of title 16, Code of 
     Federal Regulations.
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