[Congressional Record Volume 163, Number 196 (Friday, December 1, 2017)]
[Senate]
[Pages S7758-S7805]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SA 1855. Mr. McCONNELL (for Mr. Hatch (for himself and Ms.
Murkowski)) proposed an amendment 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; as
follows:
Strike all after the first word and insert the following:
TITLE I
SEC. 11000. SHORT TITLE, ETC.
(a) Short Title.--This title may be cited as the ``Tax Cuts
and Jobs Act''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this title an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
Subtitle A--Individual Tax Reform
PART I--TAX RATE REFORM
SEC. 11001. MODIFICATION OF RATES.
(a) In General.--Section 1 is amended by adding at the end
the following new subsection:
``(j) Modifications for Taxable Years 2018 Through 2025.--
``(1) In general.--In the case of a taxable year beginning
after December 31, 2017, and before January 1, 2026--
``(A) subsection (i) shall not apply, and
``(B) this section (other than subsection (i)) shall be
applied as provided in paragraphs (2) through (7).
``(2) Rate tables.--
``(A) Married individuals filing joint returns and
surviving spouses.--The following table shall be applied in
lieu of the table contained in subsection (a):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $19,050.......................... 10% of taxable income.
Over $19,050 but not over $77,400......... $1,905, plus 12% of the
excess over $19,050.
Over $77,400 but not over $140,000........ $8,907, plus 22% of the
excess over $77,400.
Over $140,000 but not over $320,000....... $22,679, plus 24% of the
excess over $140,000.
Over $320,000 but not over $400,000....... $65,879, plus 32% of the
excess over $320,000.
Over $400,000 but not over $1,000,000..... $91,479, plus 35% of the
excess over $400,000.
Over $1,000,000........................... $301,479, plus 38.5% of the
excess over $1,000,000.
``(B) Heads of households.--The following table shall be
applied in lieu of the table contained in subsection (b):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $13,600.......................... 10% of taxable income.
Over $13,600 but not over $51,800......... $1,360, plus 12% of the
excess over $13,600.
Over $51,800 but not over $70,000......... $5,944, plus 22% of the
excess over $51,800.
Over $70,000 but not over $160,000........ $9,948, plus 24% of the
excess over $70,000.
Over $160,000 but not over $200,000....... $31,548, plus 32% of the
excess over $160,000.
Over $200,000 but not over $500,000....... $44,348, plus 35% of the
excess over $200,000.
Over $500,000............................. $149,348, plus 38.5% of the
excess over $500,000.
``(C) Unmarried individuals other than surviving spouses
and heads of households.--The following table shall be
applied in lieu of the table contained in subsection (c):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $9,525........................... 10% of taxable income.
Over $9,525 but not over $38,700.......... $952.50, plus 12% of the
excess over $9,525.
Over $38,700 but not over $70,000......... $4,453.50, plus 22% of the
excess over $38,700.
Over $70,000 but not over $160,000........ $11,339.50, plus 24% of the
excess over $70,000.
Over $160,000 but not over $200,000....... $32,939.50, plus 32% of the
excess over $160,000.
Over $200,000 but not over $500,000....... $45,739.50, plus 35% of the
excess over $200,000.
Over $500,000............................. $150,739.50, plus 38.5% of
the excess over $500,000.
``(D) Married individuals filing separate returns.--The
following table shall be applied in lieu of the table
contained in subsection (d):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $9,525........................... 10% of taxable income.
Over $9,525 but not over $38,700.......... $952.50, plus 12% of the
excess over $9,525.
Over $38,700 but not over $70,000......... $4,453.50, plus 22% of the
excess over $38,700.
Over $70,000 but not over $160,000........ $11,339.50, plus 24% of the
excess over $70,000.
Over $160,000 but not over $200,000....... $32,939.50, plus 32% of the
excess over $160,000.
Over $200,000 but not over $500,000....... $45,739.50, plus 35% of the
excess over $200,000.
Over $500,000............................. $150,739.50, plus 38.5% of
the excess over $500,000.
``(E) Estates and trusts.--The following table shall be
applied in lieu of the table contained in subsection (e):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $2,550........................... 10% of taxable income.
Over $2,550 but not over $9,150........... $255, plus 24% of the excess
over $2,550.
Over $9,150 but not over $12,500.......... $1,839, plus 35% of the
excess over $9,150.
Over $12,500.............................. $3,011.50, plus 38.5% of the
excess over $12,500.
``(F) References to rate tables.--Any reference in this
title to a rate of tax under subsection (c) shall be treated
as a reference to the corresponding rate bracket under
subparagraph (C) of this paragraph, except that the reference
in section 3402(q)(1) to the third lowest rate of tax
applicable under subsection (c) shall be treated as a
reference to the fourth lowest rate of tax under subparagraph
(C).
``(3) Adjustments.--
``(A) No adjustment in 2018.--The tables contained in
paragraph (2) shall apply without adjustment for taxable
years beginning after December 31, 2017, and before January
1, 2019.
``(B) Subsequent years.--For taxable years beginning after
December 31, 2018, the Secretary shall prescribe tables which
shall apply in lieu of the tables contained in paragraph (2)
in the same manner as under paragraphs (1) and (2) of
subsection (f), except that in prescribing such tables--
``(i) subsection (f)(3) shall be applied by substituting
`calendar year 2017' for `calendar year 2016' in subparagraph
(A)(ii) thereof,
``(ii) subsection (f)(7)(B) shall apply to any unmarried
individual other than a surviving spouse or head of
household, and
``(iii) subsection (f)(8) shall not apply.
``(4) Special rules for certain children with unearned
income.--
``(A) In general.--In the case of a child to whom
subsection (g) applies for the taxable year, the rules of
subparagraphs (B) and (C) shall apply in lieu of the rule
under subsection (g)(1).
[[Page S7759]]
``(B) Modifications to applicable rate brackets.--In
determining the amount of tax imposed by this section for the
taxable year on a child described in subparagraph (A), the
income tax table otherwise applicable under this subsection
to the child shall be applied with the following
modifications:
``(i) 24-percent bracket.--The maximum taxable income which
is taxed at a rate below 24 percent shall not be more than
the earned taxable income of such child.
``(ii) 35-percent bracket.--The maximum taxable income
which is taxed at a rate below 35 percent shall not be more
than the sum of--
``(I) the earned taxable income of such child, plus
``(II) the minimum taxable income for the 35-percent
bracket in the table under paragraph (2)(E) (as adjusted
under paragraph (3)) for the taxable year.
``(iii) 38.5-percent bracket.--The maximum taxable income
which is taxed at a rate below 38.5 percent shall not be more
than the sum of--
``(I) the earned taxable income of such child, plus
``(II) the minimum taxable income for the 38.5-percent
bracket in the table under paragraph (2)(E) (as adjusted
under paragraph (3)) for the taxable year.
``(C) Coordination with capital gains rates.--For purposes
of applying section 1(h) (after the modifications under
paragraph (5))--
``(i) the maximum zero rate amount shall not be more than
the sum of--
``(I) the earned taxable income of such child, plus
``(II) the amount in effect under paragraph (5)(B)(i)(IV)
for the taxable year, and
``(ii) the maximum 15-percent rate amount shall not be more
than the sum of--
``(I) the earned taxable income of such child, plus
``(II) the amount in effect under paragraph (5)(B)(ii)(IV)
for the taxable year.
``(D) Earned taxable income.--For purposes of this
paragraph, the term `earned taxable income' means, with
respect to any child for any taxable year, the taxable income
of such child reduced (but not below zero) by the net
unearned income (as defined in subsection (g)(4)) of such
child.
``(5) Application of current income tax brackets to capital
gains brackets.--
``(A) In general.--Section 1(h)(1) shall be applied--
``(i) by substituting `below the maximum zero rate amount'
for `which would (without regard to this paragraph) be taxed
at a rate below 25 percent' in subparagraph (B)(i), and
``(ii) by substituting `below the maximum 15-percent rate
amount' for `which would (without regard to this paragraph)
be taxed at a rate below 39.6 percent' in subparagraph
(C)(ii)(I).
``(B) Maximum amounts defined.--For purposes of applying
section 1(h) with the modifications described in subparagraph
(A)--
``(i) Maximum zero rate amount.--The maximum zero rate
amount shall be--
``(I) in the case of a joint return or surviving spouse,
$77,200,
``(II) in the case of an individual who is a head of
household (as defined in section 2(b)), $51,700,
``(III) in the case of any other individual (other than an
estate or trust), an amount equal to \1/2\ of the amount in
effect for the taxable year under subclause (I), and
``(IV) in the case of an estate or trust, $2,600.
``(ii) Maximum 15-percent rate amount.--The maximum 15-
percent rate amount shall be--
``(I) in the case of a joint return or surviving spouse,
$479,000 (\1/2\ such amount in the case of a married
individual filing a separate return),
``(II) in the case of an individual who is the head of a
household (as defined in section 2(b)), $452,400,
``(III) in the case of any other individual (other than an
estate or trust), $425,800, and
``(IV) in the case of an estate or trust, $12,700.
``(C) Inflation adjustment.--In the case of any taxable
year beginning after 2018, each of the dollar amounts in
clauses (i) and (ii) of subparagraph (B) shall be increased
by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
subsection (f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2017'
for `calendar year 2016' in subparagraph (A)(ii) thereof.
``(6) Section 15 not to apply.--Section 15 shall not apply
to any change in a rate of tax by reason of this
subsection.''.
(b) Due Diligence Tax Preparer Requirement With Respect to
Head of Household Filing Status.--Subsection (g) of section
6695 is amended to read as follows:
``(g) Failure to Be Diligent in Determining Eligibility for
Certain Tax Benefits.--Any person who is a tax return
preparer with respect to any return or claim for refund who
fails to comply with due diligence requirements imposed by
the Secretary by regulations with respect to determining--
``(1) eligibility to file as a head of household (as
defined in section 2(b)) on the return, or
``(2) eligibility for, or the amount of, the credit
allowable by section 24, 25A(a)(1), or 32,
shall pay a penalty of $500 for each such failure.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 11002. INFLATION ADJUSTMENTS BASED ON CHAINED CPI.
(a) In General.--Subsection (f) of section 1 is amended by
striking paragraph (3) and by inserting after paragraph (2)
the following new paragraph:
``(3) Cost-of-living adjustment.--For purposes of this
subsection--
``(A) In general.--The cost-of-living adjustment for any
calendar year is the percentage (if any) by which--
``(i) the C-CPI-U for the preceding calendar year, exceeds
``(ii) the CPI for calendar year 2016, multiplied by the
amount determined under subparagraph (B).
``(B) Amount determined.--The amount determined under this
clause is the amount obtained by dividing--
``(i) the C-CPI-U for calendar year 2016, by
``(ii) the CPI for calendar year 2016.
``(C) Special rule for adjustments with a base year after
2016.--For purposes of any provision of this title which
provides for the substitution of a year after 2016 for `2016'
in subparagraph (A)(ii), subparagraph (A) shall be applied by
substituting `the C-CPI-U for calendar year 2016' for `the
CPI for calendar year 2016' and all that follows in clause
(ii) thereof.''.
(b) C-CPI-U.--Subsection (f) of section 1 is amended by
striking paragraph (7), by redesignating paragraph (6) as
paragraph (7), and by inserting after paragraph (5) the
following new paragraph:
``(6) C-CPI-U.--For purposes of this subsection--
``(A) In general.--The term `C-CPI-U' means the Chained
Consumer Price Index for All Urban Consumers (as published by
the Bureau of Labor Statistics of the Department of Labor).
The values of the Chained Consumer Price Index for All Urban
Consumers taken into account for purposes of determining the
cost-of-living adjustment for any calendar year under this
subsection shall be the latest values so published as of the
date on which such Bureau publishes the initial value of the
Chained Consumer Price Index for All Urban Consumers for the
month of August for the preceding calendar year.
``(B) Determination for calendar year.--The C-CPI-U for any
calendar year is the average of the C-CPI-U as of the close
of the 12-month period ending on August 31 of such calendar
year.''.
(c) Application to Permanent Tax Tables.--Section
1(f)(2)(A) is amended by inserting ``, determined by
substituting `1992' for `2016' in paragraph (3)(A)(ii)''.
(d) Application to Other Internal Revenue Code of 1986
Provisions.--
(1) The following sections are each amended by striking
``for `calendar year 1992' in subparagraph (B)'' and
inserting ``for `calendar year 2016' in subparagraph
(A)(ii)'':
(A) Section 23(h)(2).
(B) Paragraphs (1)(A)(ii) and (2)(A)(ii) of section 25A(h).
(C) Section 25B(b)(3)(B).
(D) Subsection (b)(2)(B)(ii)(II), and clauses (i) and (ii)
of subsection (j)(1)(B), of section 32.
(E) Section 36B(f)(2)(B)(ii)(II).
(F) Section 41(e)(5)(C)(i).
(G) Subsections (e)(3)(D)(ii) and (h)(3)(H)(i)(II) of
section 42.
(H) Section 45R(d)(3)(B)(ii).
(I) Section 55(d)(4)(A)(ii).
(J) Section 62(d)(3)(B).
(K) Section 63(c)(4)(B).
(L) Section 125(i)(2)(B).
(M) Section 135(b)(2)(B)(ii).
(N) Section 137(f)(2).
(O) Section 146(d)(2)(B).
(P) Section 147(c)(2)(H)(ii).
(Q) Section 151(d)(4)(B).
(R) Section 179(b)(6)(A)(ii).
(S) Subsections (b)(5)(C)(i)(II) and (g)(8)(B) of section
219.
(T) Section 220(g)(2).
(U) Section 221(f)(1)(B).
(V) Section 223(g)(1)(B).
(W) Section 408A(c)(3)(D)(ii).
(X) Section 430(c)(7)(D)(vii)(II).
(Y) Section 512(d)(2)(B).
(Z) Section 513(h)(2)(C)(ii).
(AA) Section 831(b)(2)(D)(ii).
(BB) Section 877A(a)(3)(B)(i)(II).
(CC) Section 2010(c)(3)(B)(ii).
(DD) Section 2032A(a)(3)(B).
(EE) Section 2503(b)(2)(B).
(FF) Section 4261(e)(4)(A)(ii).
(GG) Section 5000A(c)(3)(D)(ii).
(HH) Section 6323(i)(4)(B).
(II) Section 6334(g)(1)(B).
(JJ) Section 6601(j)(3)(B).
(KK) Section 6651(i)(1).
(LL) Section 6652(c)(7)(A).
(MM) Section 6695(h)(1).
(NN) Section 6698(e)(1).
(OO) Section 6699(e)(1).
(PP) Section 6721(f)(1).
(QQ) Section 6722(f)(1).
(RR) Section 7345(f)(2).
(SS) Section 7430(c)(1).
(TT) Section 9831(d)(2)(D)(ii)(II).
(2) Sections 41(e)(5)(C)(ii) and 68(b)(2)(B) are each
amended--
(A) by striking ``1(f)(3)(B)'' and inserting
``1(f)(3)(A)(ii)'', and
(B) by striking ``1992'' and inserting ``2016''.
(3) Section 42(h)(6)(G) is amended--
(A) by striking ``for `calendar year 1987' '' in clause
(i)(II) and inserting ``for `calendar year 2016' in
subparagraph (A)(ii) thereof'', and
[[Page S7760]]
(B) by striking ``if the CPI for any calendar year'' and
all that follows in clause (ii) and inserting ``if the C-CPI-
U for any calendar year (as defined in section 1(f)(6))
exceeds the C-CPI-U for the preceding calendar year by more
than 5 percent, the C-CPI-U for the base calendar year shall
be increased such that such excess shall never be taken into
account under clause (i). In the case of a base calendar year
before 2017, the C-CPI-U for such year shall be determined by
multiplying the CPI for such year by the amount determined
under section 1(f)(3)(B).''.
(4) Section 59(j)(2)(B) is amended by striking ``for `1992'
in subparagraph (B)'' and inserting ``for `2016' in
subparagraph (A)(ii)''.
(5) Section 132(f)(6)(A)(ii) is amended by striking ``for
`calendar year 1992' '' and inserting ``for `calendar year
2016' in subparagraph (A)(ii) thereof''.
(6) Section 162(o)(3) is amended by striking ``adjusted for
changes in the Consumer Price Index (as defined in section
1(f)(5)) since 1991'' and inserting ``adjusted by increasing
any such amount under the 1991 agreement by an amount equal
to--
``(A) such amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting `calendar year 1990' for
`calendar year 2016' in subparagraph (A)(ii) thereof''.
(7) So much of clause (ii) of section 213(d)(10)(B) as
precedes the last sentence is amended to read as follows:
``(ii) Medical care cost adjustment.--For purposes of
clause (i), the medical care cost adjustment for any calendar
year is the percentage (if any) by which--
``(I) the medical care component of the C-CPI-U (as defined
in section 1(f)(6)) for August of the preceding calendar
year, exceeds
``(II) such component of the CPI (as defined in section
1(f)(4)) for August of 1996, multiplied by the amount
determined under section 1(f)(3)(B).''.
(8) Subparagraph (B) of section 280F(d)(7) is amended to
read as follows:
``(B) Automobile price inflation adjustment.--For purposes
of this paragraph--
``(i) In general.--The automobile price inflation
adjustment for any calendar year is the percentage (if any)
by which--
``(I) the C-CPI-U automobile component for October of the
preceding calendar year, exceeds
``(II) the automobile component of the CPI (as defined in
section 1(f)(4)) for October of 1987, multiplied by the
amount determined under 1(f)(3)(B).
``(ii) C-CPI-U automobile component.--The term `C-CPI-U
automobile component' means the automobile component of the
Chained Consumer Price Index for All Urban Consumers (as
described in section 1(f)(6)).''.
(9) Section 911(b)(2)(D)(ii)(II) is amended by striking
``for `1992' in subparagraph (B)'' and inserting ``for `2016'
in subparagraph (A)(ii)''.
(10) Paragraph (2) of section 1274A(d) is amended to read
as follows:
``(2) Adjustment for inflation.--In the case of any debt
instrument arising out of a sale or exchange during any
calendar year after 1989, each dollar amount contained in the
preceding provisions of this section shall be increased by an
amount equal to--
``(A) such amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting `calendar year 1988' for
`calendar year 2016' in subparagraph (A)(ii) thereof.
Any increase under the preceding sentence shall be rounded to
the nearest multiple of $100 (or, if such increase is a
multiple of $50, such increase shall be increased to the
nearest multiple of $100).''.
(11) Section 4161(b)(2)(C)(i)(II) is amended by striking
``for `1992' in subparagraph (B)'' and inserting ``for `2016'
in subparagraph (A)(ii)''.
(12) Section 4980I(b)(3)(C)(v)(II) is amended by striking
``for `1992' in subparagraph (B)'' and inserting ``for `2016'
in subparagraph (A)(ii)''.
(13) Section 6039F(d) is amended by striking ``subparagraph
(B) thereof shall be applied by substituting `1995' for
`1992' '' and inserting ``subparagraph (A)(ii) thereof shall
be applied by substituting `1995' for `2016' ''.
(14) Section 7872(g)(5) is amended to read as follows:
``(5) Adjustment of limit for inflation.--In the case of
any loan made during any calendar year after 1986, the dollar
amount in paragraph (2) shall be increased by an amount equal
to--
``(A) such amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting `calendar year 1985' for
`calendar year 2016' in subparagraph (A)(ii) thereof.
Any increase under the preceding sentence shall be rounded to
the nearest multiple of $100 (or, if such increase is a
multiple of $50, such increase shall be increased to the
nearest multiple of $100).''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
PART II--DEDUCTION FOR QUALIFIED BUSINESS INCOME OF PASS-THRU ENTITIES
SEC. 11011. DEDUCTION FOR QUALIFIED BUSINESS INCOME.
(a) In General.--Part VI of subchapter B of chapter 1 is
amended by adding at the end the following new section:
``SEC. 199A. QUALIFIED BUSINESS INCOME.
``(a) In General.--In the case of a taxpayer other than a
corporation, there shall be allowed as a deduction for any
taxable year an amount equal to the lesser of--
``(1) the combined qualified business income amount of the
taxpayer, or
``(2) an amount equal to 23 percent of the excess (if any)
of--
``(A) the taxable income of the taxpayer for the taxable
year, over
``(B) any net capital gain (as defined in section 1(h)) of
the taxpayer for the taxable year.
``(b) Combined Qualified Business Income Amount.--For
purposes of this section--
``(1) In general.--The term `combined qualified business
income amount' means, with respect to any taxable year, an
amount equal to--
``(A) the sum of the amounts determined under paragraph (2)
for each qualified trade or business carried on by the
taxpayer, plus
``(B) 23 percent of the aggregate amount of the qualified
REIT dividends and qualified cooperative dividends of the
taxpayer for the taxable year.
``(2) Determination of deductible amount for each trade or
business.--The amount determined under this paragraph with
respect to any qualified trade or business is the lesser of--
``(A) 23 percent of the taxpayer's qualified business
income with respect to the qualified trade or business, or
``(B) 50 percent of the W-2 wages with respect to the
qualified trade or business.
``(3) Modifications to the wage limit based on taxable
income.--
``(A) Exception from wage limit.--In the case of any
taxpayer whose taxable income for the taxable year does not
exceed the threshold amount, paragraph (2) shall be applied
without regard to subparagraph (B).
``(B) Phase-in of limit for certain taxpayers.--
``(i) In general.--If--
``(I) the taxable income of a taxpayer for any taxable year
exceeds the threshold amount, but does not exceed the sum of
the threshold amount plus $50,000 ($100,000 in the case of a
joint return), and
``(II) the amount determined under paragraph (2)(B)
(determined without regard to this subparagraph) with respect
to any qualified trade or business carried on by the taxpayer
is less than the amount determined under paragraph (2)(A)
with respect such trade or business,
then paragraph (2) shall be applied with respect to such
trade or business without regard to subparagraph (B) thereof
and by reducing the amount determined under subparagraph (A)
thereof by the amount determined under clause (ii).
``(ii) Amount of reduction.--The amount determined under
this subparagraph is the amount which bears the same ratio to
the excess amount as--
``(I) the amount by which the taxpayer's taxable income for
the taxable year exceeds the threshold amount, bears to
``(II) $50,000 ($100,000 in the case of a joint return).
``(iii) Excess amount.--For purposes of clause (ii), the
excess amount is the excess of--
``(I) the amount determined under paragraph (2)(A)
(determined without regard to this paragraph), over
``(II) the amount determined under paragraph (2)(B)
(determined without regard to this paragraph).
``(4) Wages, etc.--
``(A) In general.--The term `W-2 wages' means, with respect
to any person for any taxable year of such person, the
amounts described in paragraphs (3) and (8) of section
6051(a) paid by such person with respect to employment of
employees by such person during the calendar year ending
during such taxable year.
``(B) Limitation to wages attributable to qualified
business income.--Such term shall not include any amount
which is not properly allocable to qualified business income
for purposes of subsection (c)(1).
``(C) Return requirement.--Such term shall not include any
amount which is not properly included in a return filed with
the Social Security Administration on or before the 60th day
after the due date (including extensions) for such return.
``(5) Acquisitions, dispositions, and short taxable
years.--The Secretary shall provide for the application of
this subsection in cases of a short taxable year or where the
taxpayer acquires, or disposes of, the major portion of a
trade or business or the major portion of a separate unit of
a trade or business during the taxable year.
``(c) Qualified Business Income.--For purposes of this
section--
``(1) In general.--The term `qualified business income'
means, for any taxable year, the net amount of qualified
items of income, gain, deduction, and loss with respect to
any qualified trade or business of the taxpayer.
``(2) Carryover of losses.--If the net amount of qualified
income, gain, deduction, and loss with respect to qualified
trade or businesses of the taxpayer amount for any taxable
year is less than zero, such amount shall be treated as a
loss from a qualified trade or business in the succeeding
taxable year.
``(3) Qualified items of income, gain, deduction, and
loss.--For purposes of this subsection--
[[Page S7761]]
``(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 or the trade or business of performing
services as an employee.
``(2) Specified service trade or business.--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)).
``(3) Exception for specified service businesses based on
taxpayer's income.--
``(A) In general.--If, for any taxable year, the taxable
income of any taxpayer is less than the sum of the threshold
amount plus $50,000 ($100,000 in the case of a joint return),
then--
``(i) the exception under paragraph (1) shall not apply to
specified service trades or businesses of the taxpayer for
the taxable year, but
``(ii) only the applicable percentage of qualified items of
income, gain, deduction, or loss, and the W-2 wages, of the
taxpayer allocable to such specified service trades or
businesses shall be taken into account in computing the
qualified business income and W-2 wages of the taxpayer for
the taxable year for purposes of applying this section.
``(B) Applicable percentage.--For purposes of subparagraph
(A), the term `applicable percentage' means, with respect to
any taxable year, 100 percent reduced (not below zero) by the
percentage equal to the ratio of--
``(i) the taxable income of the taxpayer for the taxable
year in excess of the threshold amount, bears to
``(ii) $50,000 ($100,000 in the case of a joint return).
``(e) Other Definitions.--For purposes of this section--
``(1) Taxable income.--Taxable income shall be computed
without regard to the deduction allowable under this section.
``(2) Threshold amount.--
``(A) In general.--The term `threshold amount' means
$250,000 (200 percent of such amount in the case of a joint
return).
``(B) Inflation adjustment.--In the case of any taxable
year beginning after 2018, the dollar amount in paragraph (1)
shall be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2017'
for `calendar year 2016' in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is
not a multiple of $1,000, such amount shall be rounded to the
nearest multiple of $1,000.
``(3) Qualified reit dividend.--The term `qualified REIT
dividend' means any dividend from a real estate investment
trust received during the taxable year which--
``(A) is not a capital gain dividend, as defined in section
857(b)(3), and
``(B) is not qualified dividend income, as defined in
section 1(h)(11).
``(4) Qualified cooperative dividend.--The term `qualified
cooperative dividend' means any patronage dividend (as
defined in section 1388(a)), any per-unit retain allocation
(as defined in section 1388(f)), and any qualified written
notice of allocation (as defined in section 1388(c)), or any
similar amount received from an organization described in
subparagraph (B)(ii), which--
``(A) is includible in gross income, and
``(B) is received from--
``(i) an organization or corporation described in section
501(c)(12) or 1381(a), or
``(ii) an organization which is governed under this title
by the rules applicable to cooperatives under this title
before the enactment of subchapter T.
``(f) Special Rules.--
``(1) Application to partnerships and s corporations.--
``(A) In general.--In the case of a partnership or S
corporation--
``(i) this section shall be applied at the partner or
shareholder level,
``(ii) each partner or shareholder shall take into account
such person's allocable share of each qualified item of
income, gain, deduction, and loss, and
``(iii) each partner or shareholder shall be treated for
purposes of subsection (b) as having W-2 wages for the
taxable year in an amount equal to such person's allocable
share of the W-2 wages of the partnership or S corporation
for the taxable year (as determined under regulations
prescribed by the Secretary).
For purposes of clause (iii), a partner's or shareholder's
allocable share of W-2 wages shall be determined in the same
manner as the partner's or shareholder's allocable share of
wage expenses. For purposes of this subparagraph, in the case
of an S corporation, an allocable share shall be the
shareholder's pro rata share of an item.
``(B) Application to trusts and estates.--This section
shall not apply to any trust or estate.
``(C) Treatment of trades or business in puerto rico.--
``(i) In general.--In the case of any taxpayer with
qualified business income from sources within the
commonwealth of Puerto Rico, if all such income is taxable
under section 1 for such taxable year, then for purposes of
determining the qualified business income of such taxpayer
for such taxable year, the term `United States' shall include
the Commonwealth of Puerto Rico.
``(ii) Special rule for applying wage limitation.--In the
case of any taxpayer described in clause (i), the
determination of W-2 wages of such taxpayer with respect to
any qualified trade or business conducted in Puerto Rico
shall be made without regard to any exclusion under section
3401(a)(8) for remuneration paid for services in Puerto Rico.
``(2) Coordination with minimum tax.--For purposes of
determining alternative minimum taxable income under section
55, qualified business income shall be determined without
regard to any adjustments under sections 56 through 59.
``(3) Deduction limited to income taxes.--The deduction
under subsection (a) shall only be allowed for purposes of
this chapter.
``(4) Regulations.--The Secretary shall prescribe such
regulations as are necessary to carry out the purposes of
this section, including regulations--
``(A) for requiring or restricting the allocation of items
and wages under this section and such reporting requirements
as the Secretary determines appropriate, and
``(B) for the application of this section in the case of
tiered entities.
``(g) Deduction Allowed to Specified Agricultural or
Horticultural Cooperatives.--
``(1) In general.--In the case of any taxable year of a
specified agricultural or horticultural cooperative beginning
after December 31, 2018, there shall be allowed a deduction
in an amount equal to the lesser of--
``(A) 23 percent of the cooperative's taxable income for
the taxable year, or
``(B) 50 percent of the W-2 wages of the cooperative with
respect to its trade or business.
``(2) Specified agricultural or horticultural
cooperative.--For purposes of this subsection, the term
`specified agricultural or horticultural cooperative' means
an organization to which part I of subchapter T applies which
is engaged in--
``(A) the manufacturing, production, growth, or extraction
in whole or significant part of any agricultural or
horticultural product,
``(B) the marketing of agricultural or horticultural
products which its patrons have so manufactured, produced,
grown, or extracted, or
``(C) the provision of supplies, equipment, or services to
farmers or to organizations described in subparagraph (A) or
(B).
``(h) Termination.--This section shall not apply to taxable
years beginning after December 31, 2025.''.
(b) Application to Publicly Traded Partnerships.--
(1) In general.--Section 199A(b)(1)(B), as added by
subsection (a), is amended by striking ``and qualified
cooperative dividends''
[[Page S7762]]
and inserting ``, qualified cooperative dividends, and
qualified publicly traded partnership income''.
(2) Qualified publicly traded partnership income.--Section
199A(e), as added by subsection (a), is amended by adding at
the end the following new paragraph:
``(5) Qualified publicly traded partnership income.--The
term `qualified publicly traded partnership income' means,
with respect to any qualified trade or business of a
taxpayer, the sum of--
``(A) the net amount of such taxpayer's allocable share of
each qualified item of income, gain, deduction, and loss (as
defined in subsection (c)(3) and determined after the
application of subsection (c)(4)) from a publicly traded
partnership (as defined in section 7704(a)) which is not
treated as a corporation under section 7704(c), plus
``(B) any gain recognized by such taxpayer upon disposition
of its interest in such partnership to the extent such gain
is treated as an amount realized from the sale or exchange of
property other than a capital asset under section 751(a).''.
(3) Conforming amendment.--Section 199A(c)(1), as added by
subsection (a), is amended by adding at the end the following
new sentence: ``Such term shall not include any qualified
publicly traded partnership income.''.
(c) Accuracy-related Penalty on Determination of Applicable
Percentage.--Section 6662(d)(1) is amended by inserting at
the end the following new subparagraph:
``(C) Special rule for taxpayers claiming section 199a
deduction.--In the case of any taxpayer who claims the
deduction allowed under section 199A for the taxable year,
subparagraph (A) shall be applied by substituting `5 percent'
for `10 percent'.''.
(d) Conforming Amendments.--
(1) Section 170(b)(2)(D) is amended by striking ``, and''
at the end of clause (iv), by redesignating clause (v) as
clause (vi), and by inserting after clause (iv) the following
new clause:
``(v) section 199A, and''.
(2) Section 172(d) is amended by adding at the end the
following new paragraph:
``(8) Qualified business income deduction.--The deduction
under section 199A shall not be allowed.''.
(3) Section 246(b)(1) is amended by inserting ``199A,''
before ``243(a)(1)''.
(4) Section 613(a) is amended by inserting ``and without
the deduction under section 199A'' after ``and without the
deduction under section 199''.
(5) Section 613A(d)(1) is amended by redesignating
subparagraphs (C), (D), and (E) as subparagraphs (D), (E),
and (F), respectively, and by inserting after subparagraph
(B), the following new subparagraph:
``(C) any deduction allowable under section 199A,''.
(6) The table of sections for part VI of subchapter B of
chapter 1 is amended by inserting at the end the following
new item:
``Sec. 199A. Qualified business income.''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 11012. LIMITATION ON LOSSES FOR TAXPAYERS OTHER THAN
CORPORATIONS.
(a) In General.--Section 461 is amended by adding at the
end the following new subsection:
``(l) Limitation on Excess Business Losses of Noncorporate
Taxpayers.--
``(1) Limitation.--In the case of taxable year of a
taxpayer other than a corporation beginning after December
31, 2017, and before January 1, 2026--
``(A) subsection (j) (relating to limitation on excess farm
losses of certain taxpayers) shall not apply, and
``(B) any excess business loss of the taxpayer for the
taxable year shall not be allowed.
``(2) Disallowed loss carryover.--Any loss which is
disallowed under paragraph (1) shall be treated as a net
operating loss carryover to the following taxable year under
section 172.
``(3) Excess business loss.--For purposes of this
subsection--
``(A) In general.--The term `excess business loss' means
the excess (if any) of--
``(i) the aggregate deductions of the taxpayer for the
taxable year which are attributable to trades or businesses
of such taxpayer (determined without regard to whether or not
such deductions are disallowed for such taxable year under
paragraph (1)), over
``(ii) the sum of--
``(I) the aggregate gross income or gain of such taxpayer
for the taxable year which is attributable to such trades or
businesses, plus
``(II) $250,000 (200 percent of such amount in the case of
a joint return).
``(B) Adjustment for inflation.--In the case of any taxable
year beginning after December 31, 2018, the $250,000 amount
in subparagraph (A)(ii)(II) shall be increased by an amount
equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `2017' for `2016' in
subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is
not a multiple of $1,000, such amount shall be rounded to the
nearest multiple of $1,000.
``(4) Application of subsection in case of partnerships and
s corporations.--In the case of a partnership or S
corporation--
``(A) this subsection shall be applied at the partner or
shareholder level, and
``(B) each partner's or shareholder's allocable share of
the items of income, gain, deduction, or loss of the
partnership or S corporation for any taxable year from trades
or businesses attributable to the partnership or S
corporation shall be taken into account by the partner or
shareholder in applying this subsection to the taxable year
of such partner or shareholder with or within which the
taxable year of the partnership or S corporation ends.
For purposes of this paragraph, in the case of an S
corporation, an allocable share shall be the shareholder's
pro rata share of an item.
``(5) Additional reporting.--The Secretary shall prescribe
such additional reporting requirements as the Secretary
determines appropriate to carry out the purposes of this
subsection.
``(6) Coordination with section 469.--This subsection shall
be applied after the application of section 469.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
PART III--TAX BENEFITS FOR FAMILIES AND INDIVIDUALS
SEC. 11021. INCREASE IN STANDARD DEDUCTION.
(a) In General.--Subsection (c) of section 63 is amended by
adding at the end the following new paragraph:
``(7) Special rules for taxable years 2018 through 2025.--
In the case of a taxable year beginning after December 31,
2017, and before January 1, 2026--
``(A) Increase in standard deduction.--Paragraph (2) shall
be applied--
``(i) by substituting `$18,000' for `$4,400' in
subparagraph (B), and
``(ii) by substituting `$12,000' for `$3,000' in
subparagraph (C).
``(B) Adjustment for inflation.--
``(i) In general.--Paragraph (4) shall not apply to the
dollar amounts contained in paragraphs (2)(B) and (2)(C).
``(ii) Adjustment of increased amounts.--In the case of a
taxable year beginning after 2018, the $18,000 and $12,000
amounts in subparagraph (A) shall each be increased by an
amount equal to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `2017' for `2016' in
subparagraph (A)(ii) thereof.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 11022. INCREASE IN AND MODIFICATION OF CHILD TAX CREDIT.
(a) In General.--Section 24 is amended by adding at the end
the following new subsection:
``(h) Special Rules for Taxable Years 2018 Through 2025.--
``(1) In general.--In the case of a taxable year beginning
after December 31, 2017, and before January 1, 2026, this
section shall be applied as provided in paragraphs (2), (3),
(5), (6), (7) and (8). In the case of taxable year beginning
after 12/31/17 and before 1/1/2025, this section shall be
applied as provided in paragraph (4).
``(2) Credit amount.--Subsection (a) shall be applied by
substituting `$2,000' for `$1,000'.
``(3) Limitation.--In lieu of the amount determined under
subsection (b)(2), the threshold amount shall be $500,000.
``(4) Definition of qualifying child.--Paragraph (1) of
subsection (c) shall be applied by substituting `18' for
`17'.
``(5) Partial credit allowed for certain other
dependents.--
``(A) In general.--The credit determined under subsection
(a) (after the application of paragraph (2)) shall be
increased by $500 for each dependent of the taxpayer (as
defined in section 152) other than a qualifying child
described in subsection (c) (after the application of
paragraph (4)).
``(B) Exception for certain noncitizens.--Subparagraph (A)
shall not apply with respect to any individual who would not
be a dependent if subparagraph (A) of section 152(b)(3) were
applied without regard to all that follows `resident of the
United States'.
``(6) Maximum amount of refundable credit.--
``(A) In general.--Subsection (d)(1)(A) shall be applied
without regard to paragraphs (2) and (5) of this subsection.
``(B) Adjustment for inflation.--In the case of a taxable
year beginning after 2017, subsection (d)(1)(A) shall be
applied as if the $1,000 amount in subsection (a) were
increased (but not to exceed the amount under paragraph (2)
of this subsection) by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins.
Any increase determined under the preceding sentence shall be
rounded to the next highest multiple of $100.
``(7) Earned income threshold for refundable credit.--
Subsection (d)(1)(B)(i) shall be applied by substituting
`$2,500' for `$3,000'.
``(8) Social security number required.--No credit shall be
allowed under subsection (d) to a taxpayer with respect to
any qualifying child unless the taxpayer includes the social
security number of such child on the
[[Page S7763]]
return of tax for the taxable year. For purposes of the
preceding sentence, the term `social security number' means a
social security number issued to an individual by the Social
Security Administration, but only if the social security
number is issued to a citizen of the United States or is
issued pursuant to subclause (I) (or that portion of
subclause (III) that relates to subclause (I)) of section
205(c)(2)(B)(i) of the Social Security Act.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 11023. INCREASED LIMITATION FOR CERTAIN CHARITABLE
CONTRIBUTIONS.
(a) In General.--Section 170(b)(1) is amended by
redesignating subparagraph (G) as subparagraph (H) and by
inserting after subparagraph (F) the following new
subparagraph:
``(G) Increased limitation for cash contributions.--
``(i) In general.--In the case of any contribution of cash
to an organization described in subparagraph (A), the total
amount of such contributions which may be taken into account
under subsection (a) for any taxable year beginning after
December 31, 2017, and before January 1, 2026, shall not
exceed 60 percent of the taxpayer's contribution base for
such year.
``(ii) Carryover.--If the aggregate amount of contributions
described in clause (i) exceeds the applicable limitation
under clause (i) for any taxable year described in such
clause, such excess shall be treated (in a manner consistent
with the rules of subsection (d)(1)) as a charitable
contribution to which clause (i) applies in each of the 5
succeeding years in order of time.
``(iii) Coordination with subparagraphs (a) and (b).--
``(I) In general.--Contributions taken into account under
this subparagraph shall not be taken into account under
subparagraph (A).
``(II) Limitation reduction.--For each taxable year
described in clause (i), and each taxable year to which any
contribution under this subparagraph is carried over under
clause (ii), subparagraph (A) shall be applied by reducing
(but not below zero) the contribution limitation allowed for
the taxable year under such subparagraph by the aggregate
contributions allowed under this subparagraph for such
taxable year, and subparagraph (B) shall be applied by
treating any reference to subparagraph (A) as a reference to
both subparagraph (A) and this subparagraph.''.
(b) Effective Date.--The amendment made by this section
shall apply to contributions in taxable years beginning after
December 31, 2017.
SEC. 11024. INCREASED CONTRIBUTIONS TO ABLE ACCOUNTS.
(a) Increase in Limitation for Contributions From
Compensation of Individuals With Disabilities.--
(1) In general.--Section 529A(b)(2)(B) is amended to read
as follows:
``(B) except in the case of contributions under subsection
(c)(1)(C), if such contribution to an ABLE account would
result in aggregate contributions from all contributors to
the ABLE account for the taxable year exceeding the sum of--
``(i) the amount in effect under section 2503(b) for the
calendar year in which the taxable year begins, plus
``(ii) in the case of any contribution by a designated
beneficiary described in paragraph (7) before January 1,
2026, the lesser of--
``(I) compensation (as defined by section 219(f)(1))
includible in the designated beneficiary's gross income for
the taxable year, or
``(II) an amount equal to the poverty line for a one-person
household, as determined for the calendar year preceding the
calendar year in which the taxable year begins.''.
(2) Responsibility for contribution limitation.--Paragraph
(2) of section 529A(b) is amended by adding at the end the
following: ``A designated beneficiary (or a person acting on
behalf of such beneficiary) shall maintain adequate records
for purposes of ensuring, and shall be responsible for
ensuring, that the requirements of subparagraph (B)(ii) are
met.''
(3) Eligible designated beneficiary.--Section 529A(b) is
amended by adding at the end the following:
``(7) Special rules related to contribution limit.--For
purposes of paragraph (2)(B)(ii)--
``(A) Designated beneficiary.--A designated beneficiary
described in this paragraph is an employee (including an
employee within the meaning of section 401(c)) with respect
to whom--
``(i) no contribution is made for the taxable year to a
defined contribution plan (within the meaning of section
414(i)) with respect to which the requirements of section
401(a) or 403(a) are met,
``(ii) no contribution is made for the taxable year to an
annuity contract described in section 403(b), and
``(iii) no contribution is made for the taxable year to an
eligible deferred compensation plan described in section
457(b).
``(B) Poverty line.--The term `poverty line' has the
meaning given such term by section 673 of the Community
Services Block Grant Act (42 U.S.C. 9902).''.
(b) Allowance of Saver's Credit for ABLE Contributions by
Account Holder.--Section 25B(d)(1) is amended by striking
``and'' at the end of subparagraph (B)(ii), by striking the
period at the end of subparagraph (C) and inserting ``,
and'', and by inserting at the end the following:
``(D) the amount of contributions made before January 1,
2026, by such individual to the ABLE account (within the
meaning of section 529A) of which such individual is the
designated beneficiary.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 11025. ROLLOVERS TO ABLE PROGRAMS FROM 529 PROGRAMS.
(a) In General.--Clause (i) of section 529(c)(3)(C) is
amended by striking ``or'' at the end of subclause (I), by
striking the period at the end of subclause (II) and
inserting ``, or'', and by adding at the end the following:
``(III) before January 1, 2026, to an ABLE account (as
defined in section 529A(e)(6)) of the designated beneficiary
or a member of the family of the designated beneficiary.
Subclause (III) shall not apply to so much of a distribution
which, when added to all other contributions made to the ABLE
account for the taxable year, exceeds the limitation under
section 529A(b)(2)(B)(i).''.
(b) Effective Date.--The amendments made by this section
shall apply to distributions after the date of the enactment
of this Act.
SEC. 11026. TREATMENT OF CERTAIN INDIVIDUALS PERFORMING
SERVICES IN THE SINAI PENINSULA OF EGYPT.
(a) In General.--For purposes of the following provisions
of the Internal Revenue Code of 1986, with respect to the
applicable period, a qualified hazardous duty area shall be
treated in the same manner as if it were a combat zone (as
determined under section 112 of such Code):
(1) Section 2(a)(3) (relating to special rule where
deceased spouse was in missing status).
(2) Section 112 (relating to the exclusion of certain
combat pay of members of the Armed Forces).
(3) Section 692 (relating to income taxes of members of
Armed Forces on death).
(4) Section 2201 (relating to members of the Armed Forces
dying in combat zone or by reason of combat-zone-incurred
wounds, etc.).
(5) Section 3401(a)(1) (defining wages relating to combat
pay for members of the Armed Forces).
(6) Section 4253(d) (relating to the taxation of phone
service originating from a combat zone from members of the
Armed Forces).
(7) Section 6013(f)(1) (relating to joint return where
individual is in missing status).
(8) Section 7508 (relating to time for performing certain
acts postponed by reason of service in combat zone).
(b) Qualified Hazardous Duty Area.--For purposes of this
section, the term ``qualified hazardous duty area'' means the
Sinai Peninsula of Egypt, if as of the date of the enactment
of this section any member of the Armed Forces of the United
States is entitled to special pay under section 310 of title
37, United States Code (relating to special pay; duty subject
to hostile fire or imminent danger), for services performed
in such location. Such term includes such location only
during the period such entitlement is in effect.
(c) Applicable Period.--
(1) In general.--Except as provided in paragraph (2), the
applicable period is--
(A) the portion of the first taxable year ending after June
9, 2015, which begins on such date, and
(B) any subsequent taxable year beginning before January 1,
2026.
(2) Withholding.--In the case of subsection (a)(5), the
applicable period is--
(A) the portion of the first taxable year ending after the
date of the enactment of this Act which begins on such date,
and
(B) any subsequent taxable year beginning before January 1,
2026.
(d) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
provisions of this section shall take effect on June 9, 2015.
(2) Withholding.--Subsection (a)(5) shall apply to
remuneration paid after the date of the enactment of this
Act.
SEC. 11027. EXTENSION OF WAIVER OF LIMITATIONS WITH RESPECT
TO EXCLUDING FROM GROSS INCOME AMOUNTS RECEIVED
BY WRONGFULLY INCARCERATED INDIVIDUALS.
(a) In General.--Section 304(d) of the Protecting Americans
from Tax Hikes Act of 2015 (26 U.S.C. 139F note) is amended
by striking ``1-year'' and inserting ``2-year''.
(b) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 11028. TEMPORARY REDUCTION IN MEDICAL EXPENSE DEDUCTION
FLOOR.
(a) In General.--Subsection (f) of section 213 is amended
to read as follows:
``(f) Special Rules for 2013 Through 2018.--In the case of
any taxable year--
``(1) beginning after December 31, 2012, and ending before
January 1, 2017, in the case of a taxpayer if such taxpayer
or such taxpayer's spouse has attained age 65 before the
close of such taxable year, and
``(2) beginning after December 31, 2016, and ending before
January 1, 2019, in the case of any taxpayer,
subsection (a) shall be applied with respect to a taxpayer by
substituting `7.5 percent' for `10 percent'.''.
(b) Minimum Tax Preference Not to Apply.--Section
56(b)(1)(B) is amended by adding at the end the following new
sentence:``This subparagraph shall not apply to
[[Page S7764]]
taxable years beginning after December 31, 2016, and ending
before January 1, 2019''.
(c) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2016.
SEC. 11029. RELIEF FOR 2016 DISASTER AREAS.
(a) In General.--For purposes of this section, the term
``2016 disaster area'' means any area with respect to which a
major disaster has been declared by the President under
section 401 of the Robert T. Stafford Disaster Relief and
Emergency Assistance Act during calendar year 2016.
(b) Special Rules for Use of Retirement Funds With Respect
to Areas Damaged by 2016 Disasters.--
(1) Tax-favored withdrawals from retirement plans.--
(A) In general.--Section 72(t) of the Internal Revenue Code
of 1986 shall not apply to any qualified 2016 disaster
distribution.
(B) Aggregate dollar limitation.--
(i) In general.--For purposes of this subsection, the
aggregate amount of distributions received by an individual
which may be treated as qualified 2016 disaster distributions
for any taxable year shall not exceed the excess (if any)
of--
(I) $100,000, over
(II) the aggregate amounts treated as qualified 2016
disaster distributions received by such individual for all
prior taxable years.
(ii) Treatment of plan distributions.--If a distribution to
an individual would (without regard to clause (i)) be a
qualified 2016 disaster distribution, a plan shall not be
treated as violating any requirement of this title merely
because the plan treats such distribution as a qualified 2016
disaster distribution, unless the aggregate amount of such
distributions from all plans maintained by the employer (and
any member of any controlled group which includes the
employer) to such individual exceeds $100,000.
(iii) Controlled group.--For purposes of clause (ii), the
term ``controlled group'' means any group treated as a single
employer under subsection (b), (c), (m), or (o) of section
414 of the Internal Revenue Code of 1986.
(C) Amount distributed may be repaid.--
(i) In general.--Any individual who receives a qualified
2016 disaster distribution may, at any time during the 3-year
period beginning on the day after the date on which such
distribution was received, make one or more contributions in
an aggregate amount not to exceed the amount of such
distribution to an eligible retirement plan of which such
individual is a beneficiary and to which a rollover
contribution of such distribution could be made under section
402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16) of the
Internal Revenue Code of 1986, as the case may be.
(ii) Treatment of repayments of distributions from eligible
retirement plans other than iras.--For purposes of the
Internal Revenue Code of 1986, if a contribution is made
pursuant to clause (i) with respect to a qualified 2016
disaster distribution from an eligible retirement plan other
than an individual retirement plan, then the taxpayer shall,
to the extent of the amount of the contribution, be treated
as having received the qualified 2016 disaster distribution
in an eligible rollover distribution (as defined in section
402(c)(4) of the Internal Revenue Code of 1986) and as having
transferred the amount to the eligible retirement plan in a
direct trustee to trustee transfer within 60 days of the
distribution.
(iii) Treatment of repayments for distributions from
iras.--For purposes of the Internal Revenue Code of 1986, if
a contribution is made pursuant to clause (i) with respect to
a qualified 2016 disaster distribution from an individual
retirement plan (as defined by section 7701(a)(37) of the
Internal Revenue Code of 1986), then, to the extent of the
amount of the contribution, the qualified 2016 disaster
distribution shall be treated as a distribution described in
section 408(d)(3) of such Code and as having been transferred
to the eligible retirement plan in a direct trustee to
trustee transfer within 60 days of the distribution.
(D) Definitions.--For purposes of this paragraph--
(i) Qualified 2016 disaster distribution.--Except as
provided in subparagraph (B), the term ``qualified 2016
disaster distribution'' means any distribution from an
eligible retirement plan made on or after January 1, 2016,
and before January 1, 2018, to an individual whose principal
place of abode at any time during calendar year 2016 was
located in a disaster area described in subsection (a) and
who has sustained an economic loss by reason of the events
giving rise to the Presidential declaration described in
subsection (a) which was applicable to such area.
(ii) Eligible retirement plan.--The term ``eligible
retirement plan'' shall have the meaning given such term by
section 402(c)(8)(B) of the Internal Revenue Code of 1986.
(E) Income inclusion spread over 3-year period.--
(i) In general.--In the case of any qualified 2016 disaster
distribution, unless the taxpayer elects not to have this
subparagraph apply for any taxable year, any amount required
to be included in gross income for such taxable year shall be
so included ratably over the 3-taxable-year period beginning
with such taxable year.
(ii) Special rule.--For purposes of clause (i), rules
similar to the rules of subparagraph (E) of section
408A(d)(3) of the Internal Revenue Code of 1986 shall apply.
(F) Special rules.--
(i) Exemption of distributions from trustee to trustee
transfer and withholding rules.--For purposes of sections
401(a)(31), 402(f), and 3405 of the Internal Revenue Code of
1986, qualified 2016 disaster distribution shall not be
treated as eligible rollover distributions.
(ii) Qualified 2016 disaster distributions treated as
meeting plan distribution requirements.--For purposes of the
Internal Revenue Code of 1986, a qualified 2016 disaster
distribution shall be treated as meeting the requirements of
sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), and
457(d)(1)(A) of the Internal Revenue Code of 1986.
(2) Provisions relating to plan amendments.--
(A) In general.--If this paragraph applies to any amendment
to any plan or annuity contract, such plan or contract shall
be treated as being operated in accordance with the terms of
the plan during the period described in subparagraph
(B)(ii)(I).
(B) Amendments to which subsection applies.--
(i) In general.--This paragraph shall apply to any
amendment to any plan or annuity contract which is made--
(I) pursuant to any provision of this section, or pursuant
to any regulation under any provision of this section; and
(II) on or before the last day of the first plan year
beginning on or after January 1, 2018, or such later date as
the Secretary prescribes.
In the case of a governmental plan (as defined in section
414(d) of the Internal Revenue Code of 1986), subclause (II)
shall be applied by substituting the date which is 2 years
after the date otherwise applied under subclause (II).
(ii) Conditions.--This paragraph shall not apply to any
amendment unless--
(I) during the period--
(aa) beginning on the date that this section or the
regulation described in clause (i)(I) takes effect (or in the
case of a plan or contract amendment not required by this
section or such regulation, the effective date specified by
the plan); and
(bb) ending on the date described in clause (i)(II) (or, if
earlier, the date the plan or contract amendment is adopted),
the plan or contract is operated as if such plan or contract
amendment were in effect; and
(II) such plan or contract amendment applies retroactively
for such period.
(c) Special Rules for Personal Casualty Losses Related to
2016 Major Disaster.--
(1) In general.--If an individual has a net disaster loss
for any taxable year beginning after December 31, 2017, and
before January 1, 2026--
(A) the amount determined under section 165(h)(2)(A)(ii) of
the Internal Revenue Code of 1986 shall be equal to the sum
of--
(i) such net disaster loss, and
(ii) so much of the excess referred to in the matter
preceding clause (i) of section 165(h)(2)(A) of such Code
(reduced by the amount in clause (i) of this subparagraph) as
exceeds 10 percent of the adjusted gross income of the
individual,
(B) section 165(h)(1) of such Code shall be applied by
substituting ``$500'' for ``$500 ($100 for taxable years
beginning after December 31, 2009)'',
(C) the standard deduction determined under section 63(c)
of such Code shall be increased by the net disaster loss, and
(D) section 56(b)(1)(E) of such Code shall not apply to so
much of the standard deduction as is attributable to the
increase under subparagraph (C) of this paragraph.
(2) Net disaster loss.--For purposes of this subsection,
the term ``net disaster loss'' means the excess of qualified
disaster-related personal casualty losses over personal
casualty gains (as defined in section 165(h)(3)(A) of the
Internal Revenue Code of 1986).
(3) Qualified disaster-related personal casualty losses.--
For purposes of this paragraph, the term ``qualified
disaster-related personal casualty losses'' means losses
described in section 165(c)(3) of the Internal Revenue Code
of 1986 which arise in a disaster area described in
subsection (a) on or after January 1, 2016, and which are
attributable to the events giving rise to the Presidential
declaration described in subsection (a) which was applicable
to such area.
PART IV--EDUCATION
SEC. 11031. TREATMENT OF STUDENT LOANS DISCHARGED ON ACCOUNT
OF DEATH OR DISABILITY.
(a) In General.--Section 108(f) is amended by adding at the
end the following new paragraph:
``(5) Discharges on account of death or disability.--
``(A) In general.--In the case of an individual, gross
income for any taxable year beginning after December 31,
2017, and before January 1, 2026, does not include any amount
which (but for this subsection) would be includible in gross
income for such taxable year by reasons of the discharge (in
whole or in part) of any loan described in subparagraph (B)
if such discharge was--
``(i) pursuant to subsection (a) or (d) of section 437 of
the Higher Education Act of 1965 or the parallel benefit
under part D of title IV of such Act (relating to the
repayment of loan liability),
``(ii) pursuant to section 464(c)(1)(F) of such Act, or
``(iii) otherwise discharged on account of the death or
total and permanent disability of the student.
[[Page S7765]]
``(B) Loans described.--A loan is described in this
subparagraph if such loan is--
``(i) a student loan (as defined in paragraph (2)), or
``(ii) a private education loan (as defined in section
140(7) of the Consumer Credit Protection Act (15 U.S.C.
1650(7))).''.
(b) Effective Date.--The amendment made by this section
shall apply to discharges of indebtedness after December 31,
2017.
SEC. 11032. INCREASE IN DEDUCTION FOR TEACHER EXPENSES.
(a) In General.--Subparagraph (D) of section 62(a)(2) is
amended by striking ``$250'' and inserting ``$250 ($500 in
the case of taxable years beginning after December 31, 2017,
and before January 1, 2026)''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
PART V--DEDUCTIONS AND EXCLUSIONS
SEC. 11041. SUSPENSION OF DEDUCTION FOR PERSONAL EXEMPTIONS.
(a) In General.--Subsection (d) of section 151 is amended--
(1) by striking ``In the case of'' in paragraph (4) and
inserting ``Except as provided in paragraph (5), in the case
of'', and
(2) by adding at the end the following new paragraph:
``(5) Special rules for taxable years 2018 through 2025.--
In the case of a taxable year beginning after December 31,
2017, and before January 1, 2026--
``(A) Exemption amount.--The term `exemption amount' means
zero.
``(B) References.--For purposes of any other provision of
this title, the reduction of the exemption amount to zero
under subparagraph (A) shall not be taken into account in
determining whether a deduction is allowed or allowable, or
whether a taxpayer is entitled to a deduction, under this
section.''.
(b) Application to Estates and Trusts.--Section
642(b)(2)(C) is amended by adding at the end the following
new clause:
``(iii) Years when personal exemption amount is zero.--
``(I) In general.--In the case of any taxable year in which
the exemption amount under section 151(d) is zero, clause (i)
shall be applied by substituting `$4,150' for `the exemption
amount under section 151(d)'.
``(II) Inflation adjustment.--In the case of any calendar
year beginning after 2018, the $4,150 amount in subparagraph
(A) shall be increased by an amount equal to--
``(aa) such dollar amount, multiplied by
``(bb) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `2017' for `2016' in
subparagraph (A)(ii) thereof.
If any increase determined under the preceding sentence is
not a multiple of $100, such increase shall be rounded to the
next lowest multiple of $100.''.
(c) Exception for Wage Withholding Rules.--Section 3402(a)
is amended by adding at the end the following new paragraph:
``(3) Years when personal exemption amount is zero.--
``(A) In general.--In the case of any taxable year in which
the exemption amount under section 151(d) is zero, paragraph
(2) shall be applied by substituting `$4,150' for `the amount
of one personal exemption provided in section 151(b)'.
``(B) Inflation adjustment.--In the case of any calendar
year beginning after 2018, the $4,150 amount in subparagraph
(A) shall be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `2017' for `2016' in
subparagraph (A)(ii) thereof.
If any increase determined under the preceding sentence is
not a multiple of $100, such increase shall be rounded to the
next lowest multiple of $100.''.
(d) Exception for Determining Property Exempt From Levy.--
Section 6334(d) is amended by adding at the end the following
new paragraph:
``(4) Years when personal exemption amount is zero.--
``(A) In general.--In the case of any taxable year in which
the exemption amount under section 151(d) is zero, paragraph
(2) shall not apply and for purposes of paragraph (1) the
term `exempt amount' means an amount equal to--
``(i) the sum of the amount determined under subparagraph
(B) and the standard deduction, divided by
``(ii) 52.
``(B) Amount determined.--For purposes of subparagraph (A),
the amount determined under this subparagraph is $4,150
multiplied by the number of the taxpayer's dependents for the
taxable year in which the levy occurs.
``(C) Inflation adjustment.--In the case of any taxable
year beginning after 2018, the $4,150 amount in subparagraph
(B) shall be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `2017' for `2016' in
subparagraph (A)(ii) thereof.
If any increase determined under the preceding sentence is
not a multiple of $100, such increase shall be rounded to the
next lowest multiple of $100.
``(D) Verified statement.--Unless the taxpayer submits to
the Secretary a written and properly verified statement
specifying the facts necessary to determine the proper amount
under subparagraph (A), subparagraph (A) shall be applied as
if the taxpayer were a married individual filing a separate
return with no dependents.''.
(e) Persons Required to Make Returns of Income.--Section
6012 is amended by adding at the end the following new
subsection:
``(f) Special Rule for Taxable Years 2018 Through 2025.--In
the case of a taxable year beginning after December 31, 2017,
and before January 1, 2026, subsection (a)(1) shall not
apply, and every individual who has gross income for the
taxable year shall be required to make returns with respect
to income taxes under subtitle A, except that a return shall
not be required of--
``(1) an individual who is not married (determined by
applying section 7703) and who has gross income for the
taxable year which does not exceed the standard deduction
applicable to such individual for such taxable year under
section 63, or
``(2) an individual entitled to make a joint return if--
``(A) the gross income of such individual, when combined
with the gross income of such individual's spouse, for the
taxable year does not exceed the standard deduction which
would be applicable to the taxpayer for such taxable year
under section 63 if such individual and such individual's
spouse made a joint return,
``(B) such individual and such individual's spouse have the
same household as their home at the close of the taxable
year,
``(C) such individual's spouse does not make a separate
return, and
``(D) neither such individual nor such individual's spouse
is an individual described in section 63(c)(5) who has income
(other than earned income) in excess of the amount in effect
under section 63(c)(5)(A).''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 11042. SUSPENSION OF DEDUCTION FOR STATE AND LOCAL, ETC.
TAXES.
(a) In General.--Subsection (b) of section 164 is amended
by adding at the end the following new paragraph:
``(6) Suspension of individual deductions for taxable years
2018 through 2025.--In the case of an individual and a
taxable year beginning after December 31, 2017, and before
January 1, 2026--
``(A) 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,
``(D) subsection (a)(3) shall not apply to State and local
taxes, and
``(E) paragraph (5) shall not apply.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 11043. SUSPENSION OF DEDUCTION FOR HOME EQUITY INTEREST.
(a) In General.--Section 163(h)(3)(A)(ii) is amended by
inserting ``in the case of taxable years beginning before
January 1, 2018, or after December 31, 2025,'' before ``home
equity indebtedness''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years ending after December 31, 2017.
SEC. 11044. MODIFICATION OF DEDUCTION FOR PERSONAL CASUALTY
LOSSES.
(a) In General.--Subsection (h) of section 165 is amended
by adding at the end the following new paragraph:
``(5) Limitation for taxable years 2018 through 2025.--In
the case of an individual, any loss described in subsection
(c)(3) which (but for this paragraph) would be deductible in
a taxable year beginning after December 31, 2017, and before
January 1, 2026, shall be allowed only to the extent it is
attributable to a Federally declared disaster (as defined in
subsection (i)(5)). The preceding sentence shall not apply to
any deduction under section 172 which is carried to such a
taxable year from a taxable year beginning before January 1,
2018.''.
(b) Effective Date.--The amendment made by this section
shall apply to losses incurred in taxable years beginning
after December 31, 2017.
SEC. 11045. SUSPENSION OF MISCELLANEOUS ITEMIZED DEDUCTIONS.
(a) In General.--Section 67 is amended by adding at the end
the following new subsection:
``(g) Suspension for Taxable Years 2018 Through 2025.--
Notwithstanding subsection (a), no miscellaneous itemized
deduction shall be allowed for any taxable year beginning
after December 31, 2017, and before January 1, 2026.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 11046. SUSPENSION OF OVERALL LIMITATION ON ITEMIZED
DEDUCTIONS.
(a) In General.--Section 68 is amended by adding at the end
the following new subsection:
[[Page S7766]]
``(f) Section Not to Apply.--This section shall not apply
to any taxable year beginning after December 31, 2017, and
before January 1, 2026.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 11047. MODIFICATION OF EXCLUSION OF GAIN FROM SALE OF
PRINCIPAL RESIDENCE.
(a) In General.--Section 121 is amended by adding at the
end the following new subsection:
``(h) Special Rules for Sales or Exchanges in Taxable Years
2018 Through 2025.--
``(1) In general.--In applying this section with respect to
sales or exchanges after December 31, 2017, and before
January 1, 2026--
``(A) `8-year' shall be substituted for `5-year' each place
it appears in subsections (a), (b)(5)(C)(ii)(I), and
(c)(1)(B)(i)(I) and paragraphs (7), (9), (10), and (12) of
subsection (d),
``(B) `5 years' shall be substituted for `2 years' each
place it appears in subsections (a), (b)(3), (b)(4),
(b)(5)(C)(ii)(III), and (c)(1)(B)(ii), and
``(C) `5-year' shall be substituted for `2-year' in
subsection (b)(3).
``(2) Exception for binding contracts.--Paragraph (1) shall
not apply to any sale or exchange with respect to which there
was a written binding contract in effect before January 1,
2018, and at all times thereafter before the sale or
exchange.''.
(b) Effective Date.--The amendment made by this section
shall apply to sales and exchanges after December 31, 2017.
SEC. 11048. SUSPENSION OF EXCLUSION FOR QUALIFIED BICYCLE
COMMUTING REIMBURSEMENT.
(a) In General.--Section 132(f) is amended by adding at the
end the following new paragraph:
``(8) Suspension of qualified bicycle commuting
reimbursement exclusion.--Paragraph (1)(D) shall not apply to
any taxable year beginning after December 31, 2017, and
before January 1, 2026.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 11049. SUSPENSION OF EXCLUSION FOR QUALIFIED MOVING
EXPENSE REIMBURSEMENT.
(a) In General.--Section 132(g) is amended--
(1) by striking ``For purposes of this section, the term''
and inserting ``For purposes of this section--
``(1) In general.--The term'', and
(2) by adding at the end the following new paragraph:
``(2) Suspension for taxable years 2018 through 2025.--
Except in the case of a member of the Armed Forces of the
United States on active duty who moves pursuant to a military
order and incident to a permanent change of station,
subsection (a)(6) shall not apply to any taxable year
beginning after December 31, 2017, and before January 1,
2026.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 11050. SUSPENSION OF DEDUCTION FOR MOVING EXPENSES.
(a) In General.--Section 217 is amended by adding at the
end the following new subsection:
``(k) Suspension of Deduction for Taxable Years 2018
Through 2025.--Except in the case of an individual to whom
subsection (g) applies, this section shall not apply to any
taxable year beginning after December 31, 2017, and before
January 1, 2026.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 11051. LIMITATION ON WAGERING LOSSES.
(a) In General.--Section 165(d) is amended by adding at the
end the following: ``For purposes of the preceding sentence,
in the case of taxable years beginning after December 31,
2017, and before January 1, 2026, the term `losses from
wagering transactions' includes any deduction otherwise
allowable under this chapter incurred in carrying on any
wagering transaction.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
PART VI--INCREASE IN ESTATE AND GIFT TAX EXEMPTION
SEC. 11061. INCREASE IN ESTATE AND GIFT TAX EXEMPTION.
(a) In General.--Section 2010(c)(3) is amended by adding at
the end the following new subparagraph:
``(C) Increase in basic exclusion amount.--In the case of
estates of decedents dying or gifts made after December 31,
2017, and before January 1, 2026, subparagraph (A) shall be
applied by substituting `$10,000,000' for `$5,000,000'.''.
(b) Conforming Amendment.--Subsection (g) of section 2001
is amended to read as follows:
``(g) Modifications to Tax Payable.--
``(1) Modifications to gift tax payable to reflect
different tax rates.--For purposes of applying subsection
(b)(2) with respect to 1 or more gifts, the rates of tax
under subsection (c) in effect at the decedent's death shall,
in lieu of the rates of tax in effect at the time of such
gifts, be used both to compute--
``(A) the tax imposed by chapter 12 with respect to such
gifts, and
``(B) the credit allowed against such tax under section
2505, including in computing--
``(i) the applicable credit amount under section
2505(a)(1), and
``(ii) the sum of the amounts allowed as a credit for all
preceding periods under section 2505(a)(2).
``(2) Modifications to estate tax payable to reflect
different basic exclusion amounts.--The Secretary shall
prescribe such regulations as may be necessary or appropriate
to carry out this section with respect to any difference
between--
``(A) the basic exclusion amount under section 2010(c)(3)
applicable at the time of the decedent's death, and
``(B) the basic exclusion amount under such section
applicable with respect to any gifts made by the decedent.''.
(c) Effective Date.--The amendments made by this section
shall apply to estates of decedents dying and gifts made
after December 31, 2017.
PART VII--TAXPAYER RIGHTS AND TAX ADMINISTRATION
SEC. 11071. EXTENSION OF TIME LIMIT FOR CONTESTING IRS LEVY.
(a) Extension of Time for Return of Property Subject to
Levy.--Subsection (b) of section 6343 is amended by striking
``9 months'' and inserting ``2 years''.
(b) Period of Limitation on Suits.--Subsection (c) of
section 6532 is amended--
(1) by striking ``9 months'' in paragraph (1) and inserting
``2 years'', and
(2) by striking ``9-month'' in paragraph (2) and inserting
``2-year''.
(c) Effective Date.--The amendments made by this section
shall apply to--
(1) levies made after the date of the enactment of this
Act, and
(2) levies made on or before such date if the 9-month
period has not expired under section 6343(b) of the Internal
Revenue Code of 1986 (without regard to this section) as of
such date.
SEC. 11072. MODIFICATION OF USER FEE REQUIREMENTS FOR
INSTALLMENT AGREEMENTS.
(a) In General.--Section 6159 is amended by redesignating
subsection (f) as subsection (g) and by inserting after
subsection (e) the following new subsection:
``(f) Installment Agreement Fees.--
``(1) Limitation on fee amount.--The amount of any fee
imposed on an installment agreement under this section may
not exceed the amount of such fee as in effect on the date of
the enactment of this subsection.
``(2) Waiver or reimbursement.--In the case of any taxpayer
with an adjusted gross income, as determined for the most
recent year for which such information is available, which
does not exceed 250 percent of the applicable poverty level
(as determined by the Secretary)--
``(A) if the taxpayer has agreed to make payments under the
installment agreement by electronic payment through a debit
instrument, no fee shall be imposed on an installment
agreement under this section, and
``(B) if the taxpayer is unable to make payments under the
installment agreement by electronic payment through a debit
instrument, the Secretary shall, upon completion of the
installment agreement, pay the taxpayer an amount equal to
any such fees imposed.''.
(b) Effective Date.--The amendments made by this section
shall apply to agreements entered into on or after the date
which is 60 days after the date of the enactment of this Act.
SEC. 11073. ATTORNEYS' FEES RELATING TO AWARDS TO
WHISTLEBLOWERS.
(a) In General.--Paragraph (21) of section 62(a) is amended
to read as follows:
``(21) Attorneys' fees relating to awards to
whistleblowers.--
``(A) In general.--Any deduction allowable under this
chapter for attorney fees and court costs paid by, or on
behalf of, the taxpayer in connection with any award under--
``(i) section 7623(b), or
``(ii) any action brought under--
``(I) section 21F of the Securities Exchange Act of 1934
(15 U.S.C. 78u-6),
``(II) a State false claims act, including a State false
claims act with qui tam provisions, or
``(III) section 23 of the Commodity Exchange Act (7 U.S.C.
26).
``(B) May not exceed award.--Subparagraph (A) shall not
apply to any deduction in excess of the amount includible in
the taxpayer's gross income for the taxable year on account
of such award.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 11074. CLARIFICATION OF WHISTLEBLOWER AWARDS.
(a) Definition of Proceeds.--
(1) In general.--Section 7623 is amended by adding at the
end the following new subsection:
``(c) Proceeds.--For purposes of this section, the term
`proceeds' includes--
``(1) penalties, interest, additions to tax, and additional
amounts provided under the internal revenue laws, and
``(2) any proceeds arising from laws for which the Internal
Revenue Service is authorized to administer, enforce, or
investigate, including--
``(A) criminal fines and civil forfeitures, and
``(B) violations of reporting requirements.''.
(2) Conforming amendments.--Paragraphs (1) and (2)(A) of
section 7623(b) are each amended by striking ``collected
proceeds (including penalties, interest, additions to tax,
and additional amounts) resulting from the
[[Page S7767]]
action'' and inserting ``proceeds collected as a result of
the action''.
(b) Amount of Proceeds Determined Without Regard to
Availability.--Paragraphs (1) and (2)(A) of section 7623(b)
are each amended by inserting ``(determined without regard to
whether such proceeds are available to the Secretary)'' after
``in response to such action''.
(c) Disputed Amount Threshold.--Section 7623(b)(5)(B) is
amended by striking ``tax, penalties, interest, additions to
tax, and additional amounts'' and inserting ``proceeds''.
(d) Effective Date.--The amendments made by this section
shall apply to information provided before, on, or after the
date of the enactment of this Act with respect to which a
final determination for an award has not been made before
such date of enactment.
PART VIII--INDIVIDUAL MANDATE
SEC. 11081. ELIMINATION OF SHARED RESPONSIBILITY PAYMENT FOR
INDIVIDUALS FAILING TO MAINTAIN MINIMUM
ESSENTIAL COVERAGE.
(a) In General.--Section 5000A(c) is amended--
(1) in paragraph (2)(B)(iii), by striking ``2.5 percent''
and inserting ``Zero percent'', and
(2) in paragraph (3)--
(A) by striking ``$695'' in subparagraph (A) and inserting
``$0'', and
(B) by striking subparagraph (D).
(b) Effective Date.--The amendments made by this section
shall apply to months beginning after December 31, 2018.
Subtitle B--Alternative Minimum Tax
SEC. 12001. INCREASED EXEMPTION FOR INDIVIDUALS.
(a) Increased Exemption.--Section 55(d) is amended by
adding at the end the following new paragraph:
``(5) Special rule for taxable years beginning after 2017
and before 2026.--
``(A) In general.--In the case of any taxable year
beginning after December 31, 2017, and before January 1,
2026--
``(i) paragraph (1) shall be applied--
``(I) by substituting `$109,400' for `$78,750' in
subparagraph (A), and
``(II) by substituting `$70,300' for `$50,600' in
subparagraph (B), and
``(ii) paragraph (3) shall be applied--
``(I) by substituting `$208,400' for `$150,000' in
subparagraph (A),
``(II) by substituting `$156,300' for `$112,500' in
subparagraph (B), and
``(III) in the case of a taxpayer described in paragraph
(1)(D), without regard to the substitution under subclause
(I).
``(B) Inflation adjustment.--
``(i) In general.--In the case of any taxable year
beginning in a calendar year after 2018, the amounts
described in clause (ii) shall each be increased by an amount
equal to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2017'
for `calendar year 2016' in subparagraph (A)(ii) thereof.
``(ii) Amounts described.--The amounts described in this
clause are the $109,400 amount in subparagraph (A)(i)(I), the
$70,300 amount in subparagraph (A)(i)(II), the $208,400
amount in subparagraph (A)(ii)(I), and the $156,300 amount in
subparagraph (A)(ii)(II).
``(iii) Rounding.--Any increased amount determined under
clause (i) shall be rounded to the nearest multiple of
$100.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
Subtitle C--Business-related Provisions
PART I--CORPORATE PROVISIONS
SEC. 13001. 20-PERCENT CORPORATE TAX RATE.
(a) In General.--Subsection (b) of section 11 is amended to
read as follows:
``(b) Amount of Tax.--The amount of the tax imposed by
subsection (a) shall be 20 percent of taxable income.''.
(b) Conforming Amendments.--
(1) The following sections are each amended by striking
``section 11(b)(1)'' and inserting ``section 11(b)'':
(A) Section 280C(c)(3)(B)(ii)(II).
(B) Paragraphs (2)(B) and (6)(A)(ii) of section 860E(e).
(C) Section 7874(e)(1)(B).
(2)(A) Part I of subchapter P of chapter 1 is amended by
striking section 1201 (and by striking the item relating to
such section in the table of sections for such part).
(B) Section 12 is amended by striking paragraphs (4) and
(6), and by redesignating paragraph (5) as paragraph (4).
(C) Section 453A(c)(3) is amended by striking ``or 1201
(whichever is appropriate)''.
(D) Section 527(b) is amended--
(i) by striking paragraph (2), and
(ii) by striking all that precedes ``is hereby imposed''
and inserting:
``(b) Tax Imposed.--A tax''.
(E) Sections 594(a) is amended by striking ``taxes imposed
by section 11 or 1201(a)'' and inserting ``tax imposed by
section 11''.
(F) Section 691(c)(4) is amended by striking ``1201,''.
(G) Section 801(a) is amended--
(i) by striking paragraph (2), and
(ii) by striking all that precedes ``is hereby imposed''
and inserting:
``(a) Tax Imposed.--A tax''.
(H) Section 831(e) is amended by striking paragraph (1) and
by redesignating paragraphs (2) and (3) as paragraphs (1) and
(2), respectively.
(I) Sections 832(c)(5) and 834(b)(1)(D) are each amended by
striking ``sec. 1201 and following,''.
(J) Section 852(b)(3)(A) is amended by striking ``section
1201(a)'' and inserting ``section 11(b)''.
(K) Section 857(b)(3) is amended--
(i) by striking subparagraph (A) and redesignating
subparagraphs (B) through (F) as subparagraphs (A) through
(E), respectively,
(ii) in subparagraph (C), as so redesignated--
(I) by striking ``subparagraph (A)(ii)'' in clause (i)
thereof and inserting ``paragraph (1)'',
(II) by striking ``the tax imposed by subparagraph
(A)(ii)'' in clauses (ii) and (iv) thereof and inserting
``the tax imposed by paragraph (1) on undistributed capital
gain'',
(iii) in subparagraph (E), as so redesignated, by striking
``subparagraph (B) or (D)'' and inserting ``subparagraph (A)
or (C)'', and
(iv) by adding at the end the following new subparagraph:
``(F) Undistributed capital gain.--For purposes of this
paragraph, the term `undistributed capital gain' means the
excess of the net capital gain over the deduction for
dividends paid (as defined in section 561) determined with
reference to capital gain dividends only.''.
(L) Section 882(a)(1) is amended by striking ``, 55, or
1201(a)'' and inserting ``or 55''.
(M) Section 904(b) is amended--
(i) by striking ``or 1201(a)'' in paragraph (2)(C),
(ii) by striking paragraph (3)(D) and inserting the
following:
``(D) Capital gain rate differential.--There is a capital
gain rate differential for any year if subsection (h) of
section 1 applies to such taxable year.'', and
(iii) by striking paragraph (3)(E) and inserting the
following:
``(E) Rate differential portion.--The rate differential
portion of foreign source net capital gain, net capital gain,
or the excess of net capital gain from sources within the
United States over net capital gain, as the case may be, is
the same proportion of such amount as--
``(i) the excess of--
``(I) the highest rate of tax set forth in subsection (a),
(b), (c), (d), or (e) of section 1 (whichever applies), over
``(II) the alternative rate of tax determined under section
1(h), bears to
``(ii) that rate referred to in subclause (I).''.
(N) Section 1374(b) is amended by striking paragraph (4).
(O) Section 1381(b) is amended by striking ``taxes imposed
by section 11 or 1201'' and inserting ``tax imposed by
section 11''.
(P) Sections 6425(c)(1)(A) and 6655(g)(1)(A)(i) are each
amended by striking ``or 1201(a),''.
(Q) Section 7518(g)(6)(A) is amended by striking ``or
1201(a)''.
(3)(A) Section 1445(e)(1) is amended--
(i) by striking ``35 percent'' and inserting ``the highest
rate of tax in effect for the taxable year under section
11(b)'', and
(ii) by striking ``of the gain'' and inserting ``multiplied
by the gain''.
(B) Section 1445(e)(2) is amended by striking ``35 percent
of the amount'' and inserting ``the highest rate of tax in
effect for the taxable year under section 11(b) multiplied by
the amount''.
(C) Section 1445(e)(6) is amended--
(i) by striking ``35 percent'' and inserting ``the highest
rate of tax in effect for the taxable year under section
11(b)'', and
(ii) by striking ``of the amount'' and inserting
``multiplied by the amount''.
(D) Section 1446(b)(2)(B) is amended by striking ``section
11(b)(1)'' and inserting ``section 11(b)''.
(4) Section 852(b)(1) is amended by striking the last
sentence.
(5)(A) Part I of subchapter B of chapter 5 is amended by
striking section 1551 (and by striking the item relating to
such section in the table of sections for such part).
(B) Section 535(c)(5) is amended to read as follows:
``(5) Cross reference.--For limitation on credit provided
in paragraph (2) or (3) in the case of certain controlled
corporations, see section 1561.''.
(6)(A) Section 1561(a) is amended--
(i) by striking paragraph (1) and redesignating paragraphs
(2) and (3) as paragraphs (1) and (2), respectively,
(ii) by striking ``amounts specified in paragraph (1) and
the amount specified in paragraph (3)'' and inserting ``the
amount specified in paragraph (2)'',
(iii) by striking ``The amounts specified in paragraph
(2)'' and inserting ``The amounts specified in paragraph
(1)'',
(iv) by striking the third sentence in the flush language,
and
(v) by striking ``under paragraph (3)'' and inserting
``under paragraph (2)''.
(B) The first sentence of section 1561(b) is amended to
read as follows: ``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)(1) divided by the number of corporations which
are component members of such group on the last day of such
taxable year.''
(7) Section 7518(g)(6)(A) is amended--
[[Page S7768]]
(A) by striking ``With respect to the portion'' and
inserting ``In the case of a taxpayer other than a
corporation, with respect to the portion'', and
(B) by striking ``(34 percent in the case of a
corporation)''.
(c) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to taxable years beginning after December 31, 2018.
(2) Withholding.--The amendments made by subsection (b)(3)
shall apply to distributions made after December 31, 2018.
(3) Certain transfers.--The amendments made by subsection
(b)(6) shall apply to transfers made after December 31, 2018.
(d) Normalization Requirements.--
(1) In general.--A normalization method of accounting shall
not be treated as being used with respect to any public
utility property for purposes of section 167 or 168 of the
Internal Revenue Code of 1986 if the taxpayer, in computing
its cost of service for ratemaking purposes and reflecting
operating results in its regulated books of account, reduces
the excess tax reserve more rapidly or to a greater extent
than such reserve would be reduced under the average rate
assumption method.
(2) Alternative method for certain taxpayers.--If, as of
the first day of the taxable year that includes the date of
enactment of this Act--
(A) the taxpayer was required by a regulatory agency to
compute depreciation for public utility property on the basis
of an average life or composite rate method, and
(B) the taxpayer's books and underlying records did not
contain the vintage account data necessary to apply the
average rate assumption method,
the taxpayer will be treated as using a normalization method
of accounting if, with respect to such jurisdiction, the
taxpayer uses the alternative method for public utility
property that is subject to the regulatory authority of that
jurisdiction.
(3) Definitions.--For purposes of this subsection--
(A) Excess tax reserve.--The term ``excess tax reserve''
means the excess of--
(i) the reserve for deferred taxes (as described in section
168(i)(9)(A)(ii) of the Internal Revenue Code of 1986) as
determined under the Internal Revenue Code of 1986 as in
effect on the day before the date of the enactment of this
Act, over
(ii) the amount which would be the balance in such reserve
if the amount of such reserve were determined by assuming
that the corporate rate reductions provided in this Act were
in effect for all prior periods.
(B) Average rate assumption method.--The average rate
assumption method is the method under which the excess in the
reserve for deferred taxes is reduced over the remaining
lives of the property as used in its regulated books of
account which gave rise to the reserve for deferred taxes.
Under such method, if timing differences for the property
reverse, the amount of the adjustment to the reserve for the
deferred taxes is calculated by multiplying--
(i) the ratio of the aggregate deferred taxes for the
property to the aggregate timing differences for the property
as of the beginning of the period in question, by
(ii) the amount of the timing differences which reverse
during such period.
(C) Alternative method.--The ``alternative method'' is the
method in which the taxpayer--
(i) computes the excess tax reserve on all public utility
property included in the plant account on the basis of the
weighted average life or composite rate used to compute
depreciation for regulatory purposes, and
(ii) reduces the excess tax reserve ratably over the
remaining regulatory life of the property.
(4) Tax increased for normalization violation.--If, for any
taxable year ending after the date of the enactment of this
Act, the taxpayer does not use a normalization method of
accounting, the taxpayer's tax for the taxable year shall be
increased by the amount by which it reduces its excess tax
reserve more rapidly than permitted under a normalization
method of accounting.
SEC. 13002. REDUCTION IN DIVIDEND RECEIVED DEDUCTIONS TO
REFLECT LOWER CORPORATE INCOME TAX RATES.
(a) Dividends Received by Corporations.--
(1) In general.--Section 243(a)(1) is amended by striking
``70 percent'' and inserting ``50 percent''.
(2) Dividends from 20-percent owned corporations.--Section
243(c)(1) is amended--
(A) by striking ``80 percent'' and inserting ``65
percent'', and
(B) by striking ``70 percent'' and inserting ``50
percent''.
(3) Conforming amendment.--The heading for section 243(c)
is amended by striking ``Retention of 80-percent Dividend
Received Deduction'' and inserting ``Increased Percentage''.
(b) Dividends Received From FSC.--Section 245(c)(1)(B) is
amended--
(1) by striking ``70 percent'' and inserting ``50
percent'', and
(2) by striking ``80 percent'' and inserting ``65
percent''.
(c) Limitation on Aggregate Amount of Deductions.--Section
246(b)(3) is amended--
(1) by striking ``80 percent'' in subparagraph (A) and
inserting ``65 percent'', and
(2) by striking ``70 percent'' in subparagraph (B) and
inserting ``50 percent''.
(d) Reduction in Deduction Where Portfolio Stock Is Debt-
financed.--Section 246A(a)(1) is amended--
(1) by striking ``70 percent'' and inserting ``50
percent'', and
(2) by striking ``80 percent'' and inserting ``65
percent''.
(e) Income From Sources Within the United States.--Section
861(a)(2) is amended--
(1) by striking ``100/70th'' and inserting ``100/50th'' in
subparagraph (B), and
(2) in the flush sentence at the end--
(A) by striking ``100/80th'' and inserting ``100/65th'',
and
(B) by striking ``100/70th'' and inserting ``100/50th''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2018.
PART II--SMALL BUSINESS REFORMS
SEC. 13101. MODIFICATIONS OF RULES FOR EXPENSING DEPRECIABLE
BUSINESS ASSETS.
(a) Increase in Limitation.--
(1) Dollar limitation.--Section 179(b)(1) is amended by
striking ``$500,000'' and inserting ``$1,000,000''.
(2) Reduction in limitation.--Section 179(b)(2) is amended
by striking ``$2,000,000'' and inserting ``$2,500,000''.
(3) Inflation adjustments.--
(A) In general.--Subparagraph (A) of section 179(b)(6), as
amended by section 11002(d), is amended--
(i) by striking ``2015'' and inserting ``2018'', and
(ii) in clause (ii), by striking ``calendar year 2014'' and
inserting ``calendar year 2017''.
(B) Sport utility vehicles.--Section 179(b)(6) is amended--
(i) in subparagraph (A), by striking ``paragraphs (1) and
(2)'' and inserting ``paragraphs (1), (2), and (5)(A)'', and
(ii) in subparagraph (B), by inserting ``($100 in the case
of any increase in the amount under paragraph (5)(A))'' after
``$10,000''.
(b) Section 179 Property to Include Qualified Real
Property.--
(1) In general.--Subparagraph (B) of section 179(d)(1) is
amended to read as follows:
``(B) which is--
``(i) section 1245 property (as defined in section
1245(a)(3)), or
``(ii) at the election of the taxpayer, qualified real
property (as defined in subsection (f)), and''.
(2) Qualified real property defined.--Subsection (f) of
section 179 is amended to read as follows:
``(f) Qualified Real Property.--For purposes of this
section, the term `qualified real property' means--
``(1) any qualified improvement property described in
section 168(e)(6), and
``(2) any of the following improvements to nonresidential
real property placed in service after the date such property
was first placed in service:
``(A) Roofs.
``(B) Heating, ventilation, and air-conditioning property.
``(C) Fire protection and alarm systems.
``(D) Security systems.''.
(c) Repeal of Exclusion for Certain Property.--The last
sentence of section 179(d)(1) is amended by inserting
``(other than paragraph (2) thereof)'' after ``section
50(b)''.
(d) Effective Date.--The amendments made by this section
shall apply to property placed in service in taxable years
beginning after December 31, 2017.
SEC. 13102. MODIFICATIONS OF GROSS RECEIPTS TEST FOR USE OF
CASH METHOD OF ACCOUNTING BY CORPORATIONS AND
PARTNERSHIPS.
(a) Modifications of Gross Receipts Test.--
(1) In general.--So much of section 448(c) as precedes
paragraph (2) is amended to read as follows:
``(c) Gross Receipts Test.--
``(1) In general.--A corporation or partnership meets the
gross receipts test of this subsection for any taxable year
if the average annual gross receipts of such entity for the
3-taxable-year period ending with the taxable year which
precedes such taxable year does not exceed the applicable
dollar limit.''.
(2) Applicable dollar limit.--Subsection (c) of section 448
is amended by adding at the end the following new paragraph:
``(4) Applicable dollar limit.--
``(A) In general.--The applicable dollar limit is
$15,000,000.
``(B) Adjustment for inflation.--In the case of any taxable
year beginning after December 31, 2018, the $15,000,000
amount under subparagraph (A) shall be increased by an amount
equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting `calendar year 2017' for
`calendar year 2016' in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is
not a multiple of $1,000, such amount shall be rounded to the
next lowest multiple of $1,000.''.
(3) Change in method of accounting.--Paragraph (7) of
section 448(d) is amended--
(A) by striking ``In the case of'' and all that follows up
to subparagraph (A) and inserting: ``If a taxpayer changes
its method of accounting because the taxpayer is prohibited
from using the cash receipts and disbursement method of
accounting by reason of subsection (a) or is no longer
prohibited
[[Page S7769]]
from using such method by reason of such subsection--'', and
(B) by inserting ``and'' at the end of subparagraph (A), by
striking ``, and'' at the end of subparagraph (B) and
inserting a period, and by striking subparagraph (C).
(4) Conforming amendment.--Paragraph (3) of section 448(b)
is amended to read as follows:
``(3) Entities satisfying gross receipts test.--Paragraphs
(1) and (2) of subsection (a) shall not apply to any
corporation or partnership for any taxable year if such
entity meets the gross receipts test of subsection (c) for
the taxable year.''.
(b) Application of Modifications to Farming Corporations.--
(1) In general.--Paragraph (1) of section 447(d) is amended
to read as follows:
``(1) In general.--A corporation meets the requirements of
this subsection for any taxable year with respect to its
gross receipts if the corporation meets the gross receipts
test of section 448(c) for the taxable year.''.
(2) Family corporations.--Paragraph (2) of section 447(d)
is amended--
(A) by striking subparagraph (A) and inserting the
following:
``(A) In general.--In the case of a family corporation, in
applying section 448(c) for purposes of paragraph (1)--
``(i) paragraph (1) of section 448(c) shall be applied by
substituting the applicable family corporation limit for the
applicable dollar limit, and
``(ii) the rules of subparagraph (B) shall apply in
computing gross receipts.'',
(B) in subparagraph (B)(i), by striking ``the last sentence
of paragraph (1)'' and inserting ``paragraph (2) of section
448(c)'', and
(C) by adding at the end the following new subparagraph:
``(D) Applicable family corporation limit.--
``(i) In general.--The applicable family corporation limit
is $25,000,000.
``(ii) Adjustment for inflation.--In the case of any
taxable year beginning after December 31, 2018, the
$25,000,000 amount under clause (i) shall be increased by an
amount equal to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting `calendar year 2017' for
`calendar year 2016' in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is
not a multiple of $1,000, such amount shall be rounded to the
next lowest multiple of $1,000.''.
(3) Exception for certain corporations.--Subsection (c) of
section 447 is amended by inserting ``for any taxable year''
after ``not being a corporation''.
(4) Change in method of accounting.--Section 447(f) is
amended--
(A) by striking ``In the case of'' and all that follows up
to paragraph (1) and inserting the following: ``If a taxpayer
changes its method of accounting because the taxpayer is
required to use an accrual method of accounting by reason of
subsection (a) or is no longer required to use such method by
reason of such subsection--'', and
(B) by striking paragraph (2) and inserting the following:
``(2) such change shall be treated as initiated by the
taxpayer, and''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13103. CLARIFICATION OF INVENTORY ACCOUNTING RULES FOR
SMALL BUSINESSES.
(a) Clarification of Inventory Rules.--
(1) In general.--Section 471 is amended by redesignating
subsection (c) as subsection (d) and by inserting after
subsection (b) the following new subsection:
``(c) Small Business Taxpayers Not Required to Use
Inventories.--
``(1) In general.--A qualified taxpayer shall not be
required to use inventories under this section for a taxable
year.
``(2) Treatment of taxpayers not using inventories.--A
qualified taxpayer who is not required under this subsection
to use inventories with respect to any property for a taxable
year beginning after December 31, 2017, may treat such
property--
``(A) as a non-incidental material or supply, or
``(B) in a manner which conforms to the taxpayer's method
for accounting for such property in--
``(i) an applicable financial statement (as defined in
section 451(b)(3)), or
``(ii) in the case of a taxpayer that does not have an
applicable financial statement, their books and records used
for purposes of determining tax imposed by this title.
``(3) Qualified taxpayer.--For purposes of this subsection,
the term `qualified taxpayer' means, with respect to any
taxable year, a taxpayer who meets the gross receipts test of
section 448(c) for the taxable year (or, in the case of a
sole proprietorship, who would meet such test if such
proprietorship were a corporation). Such term shall not
include a tax shelter prohibited from using the cash receipts
and disbursements method of accounting under section
448(a)(3).
``(4) Coordination with section 481.--If a taxpayer changes
its method of accounting because the taxpayer is not required
to use inventories by reason of paragraph (1) or is required
to use inventories because such paragraph no longer applies
to the taxpayer--
``(A) such change shall be treated as initiated by the
taxpayer, and
``(B) such change shall be treated as made with the consent
of the Secretary.''.
(2) Conforming amendment.--Subsection (c) of section 263A
is amended by adding at the end the following new paragraph:
``(8) Exclusion from inventory rules.--Nothing in this
section shall require the use of inventories for any taxable
year by a qualified taxpayer (within the meaning of section
471(c)(3)) who is not required to use inventories under
section 471 for such taxable year.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13104. MODIFICATION OF RULES FOR UNIFORM CAPITALIZATION
OF CERTAIN EXPENSES.
(a) In General.--Section 263A(b) is amended by striking all
that follows paragraph (1) and inserting the following new
paragraphs:
``(2) Property acquired for resale.--Real or personal
property described in section 1221(a)(1) which is acquired by
the taxpayer for resale.
``(3) Exception for small businesses.--This section shall
not apply to any taxpayer who meets the gross receipts test
under section 448(c) for the taxable year (or, in the case of
a sole proprietorship, who would meet such test if such
proprietorship were a corporation), other than a tax shelter
prohibited from using the cash receipts and disbursements
method of accounting under section 448(a)(3).
``(4) Films, sound recordings, books, etc.--For purposes of
this subsection, the term `tangible personal property' shall
include a film, sound recording, video tape, book, or similar
property.
``(5) Coordination with section 481.--If a taxpayer changes
its method of accounting because this section does not apply
to the taxpayer by reason of the exception under paragraph
(3) or this section applies to the taxpayer because such
exception no longer applies to the taxpayer--
``(A) such change shall be treated as initiated by the
taxpayer, and
``(B) such change shall be treated as made with the consent
of the Secretary.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13105. INCREASE IN GROSS RECEIPTS TEST FOR CONSTRUCTION
CONTRACT EXCEPTION TO PERCENTAGE OF COMPLETION
METHOD.
(a) Increase.--
(1) In general.--Section 460(e)(1)(B) is amended--
(A) in the matter preceding clause (i), by inserting
``(other than a tax shelter prohibited from using the cash
receipts and disbursements method of accounting under section
448(a)(3))'' after ``taxpayer'', and
(B) by striking clause (ii) and inserting the following:
``(ii) who meets the gross receipts test of section 448(c)
for the taxable year in which such contract is entered into
(or, in the case of a sole proprietorship, who would meet
such test if such proprietorship were a corporation).''.
(2) Conforming amendments.--
(A) Section 460(e) is amended by striking paragraphs (2)
and (3) and by redesignating paragraphs (4) through (6) as
paragraphs (2) through (4), respectively.
(B) The last sentence of section 56(a)(3) is amended by
striking ``section 460(e)(6)'' and inserting ``section
460(e)(4)''.
(b) Coordination With Section 481.--Section 460(e), as
amended by subsection (a), is amended by adding at the end
the following:
``(5) Coordination with section 481.--If a taxpayer changes
its method of accounting because subsections (a), (b),
(c)(1), and (c)(2) do not apply by reason of the exception
under paragraph (1)(B) or such subsections apply to the
taxpayer because such exception no longer applies to the
taxpayer--
``(A) such change shall be treated as initiated by the
taxpayer,
``(B) such change shall be treated as made with the consent
of the Secretary, and
``(C) such change shall be permitted only on a cut-off
basis for all similarly classified contracts entered into on
or after the year of change and no adjustments under section
481(a) shall be made.''.
(c) Effective Date.--The amendment made by this section
shall apply to contracts entered into after December 31,
2017, in taxable years ending after such date.
PART III--COST RECOVERY AND ACCOUNTING METHODS
Subpart A--Cost Recovery
SEC. 13201. TEMPORARY 100-PERCENT EXPENSING FOR CERTAIN
BUSINESS ASSETS.
(a) Increased Expensing.--
(1) In general.--Section 168(k) is amended--
(A) in paragraph (1)(A), by striking ``50 percent'' and
inserting ``the applicable percentage'', and
(B) in paragraph (5)(A)(i), by striking ``50 percent'' and
inserting ``the applicable percentage''.
(2) Applicable percentage.--Paragraph (6) of section 168(k)
is amended to read as follows:
``(6) Applicable percentage.--For purposes of this
subsection--
``(A) In general.--Except as otherwise provided in this
paragraph, the term `applicable percentage' means--
[[Page S7770]]
``(i) in the case of property placed in service after
September 27, 2017, and before January 1, 2023, 100 percent,
``(ii) in the case of property placed in service after
December 31, 2022, and before January 1, 2024, 80 percent,
``(iii) in the case of property placed in service after
December 31, 2023, and before January 1, 2025, 60 percent,
``(iv) in the case of property placed in service after
December 31, 2024, and before January 1, 2026, 40 percent,
and
``(v) in the case of property placed in service after
December 31, 2025, and before January 1, 2027, 20 percent.
``(B) Rule for property with longer production periods.--In
the case of property described in paragraph (2)(B) or (C),
the term `applicable percentage' means--
``(i) in the case of property placed in service after
September 27, 2017, and before January 1, 2024, 100 percent,
``(ii) in the case of property placed in service after
December 31, 2023, and before January 1, 2025, 80 percent,
``(iii) in the case of property placed in service after
December 31, 2024, and before January 1, 2026, 60 percent,
``(iv) in the case of property placed in service after
December 31, 2025, and before January 1, 2027, 40 percent,
and
``(v) in the case of property placed in service after
December 31, 2026, and before January 1, 2028, 20 percent.
``(C) Rule for plants bearing fruits and nuts.--In the case
of a specified plant described in paragraph (5), the term
`applicable percentage' means--
``(i) in the case of a plant which is planted or grafted
after September 27, 2017, and before January 1, 2023, 100
percent,
``(ii) in the case of a plant which is planted or grafted
after December 31, 2022, and before January 1, 2024, 80
percent,
``(iii) in the case of a plant which is planted or grafted
after December 31, 2023, and before January 1, 2025, 60
percent,
``(iv) in the case of a plant which is planted or grafted
after December 31, 2024, and before January 1, 2026, 40
percent, and
``(v) in the case of a plant which is planted or grafted
after December 31, 2025, and before January 1, 2027, 20
percent.''.
(3) Conforming amendment.--Paragraph (5) of section 168(k)
is amended by striking subparagraph (F).
(b) Extension.--
(1) In general.--Section 168(k) is amended--
(A) in paragraph (2)--
(i) in subparagraph (A)(iii), clauses (i)(III) and (ii) of
subparagraph (B), and subparagraph (E)(i), by striking
``January 1, 2020'' each place it appears and inserting
``January 1, 2027'', and
(ii) in subparagraph (B)--
(I) in clause (i)(II), by striking ``January 1, 2021'' and
inserting ``January 1, 2028'', and
(II) in the heading of clause (ii), by striking ``pre-
january 1, 2020'' and inserting ``pre-january 1, 2027'', and
(B) in paragraph (5)(A), by striking ``January 1, 2020''
and inserting ``January 1, 2027''.
(2) Conforming amendments.--
(A) Clause (ii) of section 460(c)(6)(B) is amended by
striking ``January 1, 2020 (January 1, 2021'' and inserting
``January 1, 2027 (January 1, 2028''.
(B) The heading of section 168(k) is amended by striking
``Acquired After December 31, 2007, and Before January 1,
2020''.
(c) Exception for Public Utilities.--Section 168(k) is
amended by adding at the end the following new paragraph:
``(8) Exception for certain property.--The term `qualified
property' shall not include any property which is primarily
used in a trade or business described in clause (iv) of
section 163(j)(7)(A).''.
(d) Special Rule.--Section 168(k), as amended by subsection
(c), is amended by adding at the end the following new
paragraph:
``(9) Special rule for property placed in service during
certain periods.--
``(A) In general.--In the case of qualified property placed
in service by the taxpayer during the first taxable year
ending after September 27, 2017, if the taxpayer elects to
have this paragraph apply for such taxable year, paragraphs
(1)(A) and (5)(A)(i) shall be applied by substituting `50
percent' for `the applicable percentage'.
``(B) Form of election.--Any election under this paragraph
shall be made at such time and in such form and manner as the
Secretary may prescribe.''.
(e) Coordination With Section 280F.--Section 168(k)(2)(F)
is amended by striking clause (iii).
(f) Qualified Film and Television and Live Theatrical
Productions.--
(1) In general.--Clause (i) of section 168(k)(2)(A), as
amended by section 13204, is amended--
(A) in subclause (II), by striking ``or'',
(B) in subclause (III), by adding ``or'' after the comma,
and
(C) by adding at the end the following:
``(IV) which is a qualified film or television production
(as defined in subsection (d) of section 181) for which a
deduction would have been allowable under section 181 without
regard to subsections (a)(2) and (g) of such section or this
subsection, or
``(V) which is a qualified live theatrical production (as
defined in subsection (e) of section 181) for which a
deduction would have been allowable under section 181 without
regard to subsections (a)(2) and (g) of such section or this
subsection,''.
(2) Production placed in service.--Paragraph (2) of section
168(k) is amended by adding at the end the following:
``(H) Production placed in service.--For purposes of
subparagraph (A)--
``(i) a qualified film or television production shall be
considered to be placed in service at the time of initial
release or broadcast, and
``(ii) a qualified live theatrical production shall be
considered to be placed in service at the time of the initial
live staged performance.''.
(g) Effective Dates.--The amendments made by this section
shall apply to property placed in service, and specified
plants planted or grafted after, after September 27, 2017, in
taxable years ending after such date.
SEC. 13202. MODIFICATIONS TO DEPRECIATION LIMITATIONS ON
LUXURY AUTOMOBILES AND PERSONAL USE PROPERTY.
(a) Luxury Automobiles.--
(1) In general.--280F(a)(1)(A) is amended--
(A) in clause (i), by striking ``$2,560'' and inserting
``$10,000'',
(B) in clause (ii), by striking ``$4,100'' and inserting
``$16,000'',
(C) in clause (iii), by striking ``$2,450'' and inserting
``$9,600'', and
(D) in clause (iv), by striking ``$1,475'' and inserting
``$5,760''.
(2) Conforming amendments.--
(A) Clause (ii) of section 280F(a)(1)(B) is amended by
striking ``$1,475'' in the text and heading and inserting
``$5,760''.
(B) Paragraph (7) of section 280F(d) is amended--
(i) in subparagraph (A), by striking ``1988'' and inserting
``2018'', and
(ii) in subparagraph (B)(i)(II), by striking ``1987'' and
inserting ``2017''.
(b) Removal of Computer Equipment From Listed Property.--
(1) In general.--Section 280F(d)(4)(A) is amended--
(A) by inserting ``and'' at the end of clause (iii),
(B) by striking clause (iv), and
(C) by redesignating clause (v) as clause (iv).
(2) Conforming amendment.--Section 280F(d)(4) is amended by
striking subparagraph (B) and by redesignating subparagraph
(C) as subparagraph (B).
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after December 31,
2017, in taxable years ending after such date.
SEC. 13203. MODIFICATIONS OF TREATMENT OF CERTAIN FARM
PROPERTY.
(a) Treatment of Certain Farm Property as 5-Year
Property.--Clause (vii) of section 168(e)(3)(B) is amended by
striking ``after December 31, 2008, and which is placed in
service before January 1, 2010'' and inserting ``after
December 31, 2017''.
(b) Repeal of Required Use of 150-Percent Declining Balance
Method.--Section 168(b)(2) is amended by striking
subparagraph (B) and by redesignating subparagraphs (C) and
(D) as subparagraphs (B) and (C), respectively.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after December 31,
2017, in taxable years ending after such date.
SEC. 13204. APPLICABLE RECOVERY PERIOD FOR REAL PROPERTY.
(a) Residential Rental Property and Nonresidential Real
Property.--
(1) Reduction of recovery period.--The table contained in
section 168(c) is amended--
(A) by striking ``27.5 years'' and inserting ``25 years'',
and
(B) by striking ``39 years'' and inserting ``25 years''.
(2) Statutory recovery period.--The table contained in
section 467(e)(3)(A) is amended--
(A) by inserting ``(other than residential rental property
and nonresidential real property)'' after ``15-year and 20-
year property'', and
(B) by striking ``19 years'' and inserting ``25 years''.
(3) Conforming amendment.--Clause (ii) of section
168(e)(2)(B) is amended by striking ``27.5 years'' and
inserting ``25 years''.
(b) Improvements to Real Property.--
(1) Classification of qualified improvement property as 10-
year property.--Subparagraph (D) of section 168(e)(3) is
amended--
(A) in clause (iii), by striking ``and'',
(B) in clause (iv), by striking the period and inserting
``, and'', and
(C) by adding at the end the following new clause:
``(v) any qualified improvement property described in
subsection (e)(6).''.
(2) Elimination of qualified leasehold improvement,
qualified restaurant, and qualified retail improvement
property.--Subsection (e) of section 168 is amended--
(A) in subparagraph (E) of paragraph (3)--
(i) by striking clauses (iv), (v), and (ix),
(ii) in clause (vii), by inserting ``and'' at the end,
(iii) in clause (viii), by striking ``, and'' and inserting
a period, and
(iv) by redesignating clauses (vi), (vii), and (viii), as
so amended, as clauses (iv), (v), and (vi), respectively, and
(B) by striking paragraphs (6), (7), and (8).
(3) Application of straight line method to qualified
improvement property.--Paragraph (3) of section 168(b) is
amended--
(A) by striking subparagraphs (G), (H), and (I), and
[[Page S7771]]
(B) by inserting after subparagraph (F) the following new
subparagraph:
``(G) Qualified improvement property described in
subsection (e)(6).''.
(4) Alternative depreciation system.--
(A) Electing real property trade or business.--Subsection
(g) of section 168 is amended--
(i) in paragraph (1)--
(I) in subparagraph (D), by striking ``and'' at the end,
(II) in subparagraph (E), by inserting ``and'' at the end,
and
(III) by inserting after subparagraph (E) the following new
subparagraph:
``(F) any property described in paragraph (8),'', and
(ii) by adding at the end the following new paragraph:
``(8) Electing real property trade or business.--The
property described in this paragraph shall consist of any
nonresidential real property, residential rental property,
and qualified improvement property held by an electing real
property trade or business (as defined in 163(j)(7)(B)).''.
(B) Qualified improvement property.--The table contained in
subparagraph (B) of section 168(g)(3) is amended--
(i) by inserting after the item relating to subparagraph
(D)(ii) the following new item:
``(D)(v)........................................................20''.
, and
(ii) by striking the item relating to subparagraph (E)(iv)
and all that follows through the item relating to
subparagraph (E)(ix) and inserting the following:
``(E)(iv).........................................................20
(E)(v)............................................................30
(E)(vi).........................................................35''.
(C) Applicable recovery period for residential rental
property.--The table contained in subparagraph (C) of section
168(g)(2) is amended by striking clauses (iii) and (iv) and
inserting the following:
``(iii) Residential rental property.........................30 years
(iv) Nonresidential real property...........................40 years
(v) Any railroad grading or tunnel bore or water utility p50 years''.
(5) Conforming amendments.--
(A) Clause (i) of section 168(k)(2)(A) is amended--
(i) in subclause (II), by inserting ``or'' after the comma,
(ii) in subclause (III), by striking ``or'' at the end, and
(iii) by striking subclause (IV).
(B) Section 168 is amended--
(i) in subsection (e), as amended by paragraph (2)(B), by
adding at the end the following:
``(6) Qualified improvement property.--
``(A) In general.--The term `qualified improvement
property' means any improvement to an interior portion of a
building which is nonresidential real property if such
improvement is placed in service after the date such building
was first placed in service.
``(B) Certain improvements not included.--Such term shall
not include any improvement for which the expenditure is
attributable to--
``(i) the enlargement of the building,
``(ii) any elevator or escalator, or
``(iii) the internal structural framework of the
building.''.
(ii) in subsection (k), by striking paragraph (3).
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to property
placed in service after December 31, 2017.
(2) Amendments related to electing real property trade or
business.--The amendments made by subsection (b)(4)(A) shall
apply to taxable years beginning after December 31, 2017.
SEC. 13205. USE OF ALTERNATIVE DEPRECIATION SYSTEM FOR
ELECTING FARMING BUSINESSES.
(a) In General.--Section 168(g)(1), as amended by section
13204, is amended by striking ``and'' at the end of
subparagraph (E), by inserting ``and'' at the end of
subparagraph (F), and by inserting after subparagraph (F) the
following new subparagraph:
``(G) any property with a recovery period of 10 years or
more which is held by an electing farming business (as
defined in section 163(j)(7)(C)),''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13206. AMORTIZATION OF RESEARCH AND EXPERIMENTAL
EXPENDITURES.
(a) In General.--Section 174 is amended to read as follows:
``SEC. 174. AMORTIZATION OF RESEARCH AND EXPERIMENTAL
EXPENDITURES.
``(a) In General.--In the case of a taxpayer's specified
research or experimental expenditures for any taxable year--
``(1) except as provided in paragraph (2), no deduction
shall be allowed for such expenditures, and
``(2) the taxpayer shall--
``(A) charge such expenditures to capital account, and
``(B) be allowed an amortization deduction of such
expenditures ratably over the 5-year period (15-year period
in the case of any specified research or experimental
expenditures which are attributable to foreign research
(within the meaning of section 41(d)(4)(F))) beginning with
the midpoint of the taxable year in which such expenditures
are paid or incurred.
``(b) Specified Research or Experimental Expenditures.--For
purposes of this section, the term `specified research or
experimental expenditures' means, with respect to any taxable
year, research or experimental expenditures which are paid or
incurred by the taxpayer during such taxable year in
connection with the taxpayer's trade or business.
``(c) Special Rules.--
``(1) Land and other property.--This section shall not
apply to any expenditure for the acquisition or improvement
of land, or for the acquisition or improvement of property to
be used in connection with the research or experimentation
and of a character which is subject to the allowance under
section 167 (relating to allowance for depreciation, etc.) or
section 611 (relating to allowance for depletion); but for
purposes of this section allowances under section 167, and
allowances under section 611, shall be considered as
expenditures.
``(2) Exploration expenditures.--This section shall not
apply to any expenditure paid or incurred for the purpose of
ascertaining the existence, location, extent, or quality of
any deposit of ore or other mineral (including oil and gas).
``(3) Software development.--For purposes of this section,
any amount paid or incurred in connection with the
development of any software shall be treated as a research or
experimental expenditure.
``(d) Treatment Upon Disposition, Retirement, or
Abandonment.--If any property with respect to which specified
research or experimental expenditures are paid or incurred is
disposed, retired, or abandoned during the period during
which such expenditures are allowed as an amortization
deduction under this section, no deduction shall be allowed
with respect to such expenditures on account of such
disposition, retirement, or abandonment and such amortization
deduction shall continue with respect to such
expenditures.''.
(b) Change in Method of Accounting.--The amendments made by
subsection (a) shall be treated as a change in method of
accounting for purposes of section 481 of the Internal
Revenue Code of 1986 and--
(1) such change shall be treated as initiated by the
taxpayer,
(2) such change shall be treated as made with the consent
of the Secretary, and
(3) such change shall be applied only on a cut-off basis
for any research or experimental expenditures paid or
incurred in taxable years beginning after December 31, 2025,
and no adjustments under section 481(a) shall be made.
(c) Clerical Amendment.--The table of sections for part VI
of subchapter B of chapter 1 is amended by striking the item
relating to section 174 and inserting the following new item:
``Sec. 174. Amortization of research and experimental expenditures.''.
(d) Conforming Amendments.--
(1) Section 41(d)(1)(A) is amended by striking ``expenses
under section 174'' and inserting ``specified research or
experimental expenditures under section 174''.
(2) Subsection (c) of section 280C is amended--
(A) by striking paragraph (1) and inserting the following:
``(1) In general.--If--
``(A) the amount of the credit determined for the taxable
year under section 41(a)(1), exceeds
``(B) the amount allowable as a deduction for such taxable
year for qualified research expenses or basic research
expenses,
the amount chargeable to capital account for the taxable year
for such expenses shall be reduced by the amount of such
excess.'',
(B) by striking paragraph (2),
(C) by redesignating paragraphs (3) (as amended by this
Act) and (4) as paragraphs (2) and (3), respectively, and
(D) in paragraph (2), as redesignated by subparagraph (C),
by striking ``paragraphs (1) and (2)'' and inserting
``paragraph (1)''.
(e) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred in taxable years
beginning after December 31, 2025.
SEC. 13207. EXPENSING OF CERTAIN COSTS OF REPLANTING CITRUS
PLANTS LOST BY REASON OF CASUALTY.
(a) In General.--Section 263A(d)(2) is amended by adding at
the end the following new subparagraph:
``(C) Special temporary rule for citrus plants lost by
reason of casualty.--
``(i) In general.--In the case of the replanting of citrus
plants, subparagraph (A) shall apply to amounts paid or
incurred by a person (other than the taxpayer described in
subparagraph (A)) if--
``(I) the taxpayer described in subparagraph (A) has an
equity interest of not less than 50 percent in the replanted
citrus plants at all times during the taxable year in which
such amounts were paid or incurred and such other person
holds any part of the remaining equity interest, or
``(II) such other person acquired the entirety of such
taxpayer's equity interest in the land on which the lost or
damaged citrus plants were located at the time of such loss
or damage, and the replanting is on such land.
``(ii) Termination.--Clause (i) shall not apply to any cost
paid or incurred after the date which is 10 years after the
date of the enactment of the Tax Cuts and Jobs Act.''.
(b) Effective Date.--The amendment made by this section
shall apply to costs
[[Page S7772]]
paid or incurred after the date of the enactment of this Act.
Subpart B--Accounting Methods
SEC. 13221. CERTAIN SPECIAL RULES FOR TAXABLE YEAR OF
INCLUSION.
(a) Inclusion Not Later Than for Financial Accounting
Purposes.--Section 451 is amended by redesignating
subsections (b) through (i) as subsections (c) through (j),
respectively, and by inserting after subsection (a) the
following new subsection:
``(b) Inclusion Not Later Than for Financial Accounting
Purposes.--
``(1) Income taken into account in financial statement.--
``(A) In general.--In the case of a taxpayer the taxable
income of which is computed under an accrual method of
accounting, the all events test with respect to any item of
gross income (or portion thereof) shall not be treated as met
any later than when such item (or portion thereof) is taken
into account as revenue in--
``(i) an applicable financial statement of the taxpayer, or
``(ii) such other financial statement as the Secretary may
specify for purposes of this subsection.
``(B) Exception.--This paragraph shall not apply to--
``(i) a taxpayer which does not have a financial statement
described in clause (i) or (ii) of subparagraph (A) for a
taxable year, or
``(ii) any item of gross income in connection with a
mortgage servicing contract.
``(C) All events test.--For purposes of this section, the
all events test is met with respect to any item of gross
income if all the events have occurred which fix the right to
receive such income and the amount of such income can be
determined with reasonable accuracy.
``(2) Coordination with special methods of accounting.--
Paragraph (1) shall not apply with respect to any item of
gross income for which the taxpayer uses a special method of
accounting provided under any other provision of this
chapter, other than any provision of part V of subchapter P
(except as provided in clause (ii) of paragraph (1)(B)).
``(3) Applicable financial statement.--For purposes of this
subsection, the term `applicable financial statement' means--
``(A) a financial statement which is certified as being
prepared in accordance with generally accepted accounting
principles and which is--
``(i) a 10-K (or successor form), or annual statement to
shareholders, required to be filed by the taxpayer with the
United States Securities and Exchange Commission,
``(ii) an audited financial statement of the taxpayer which
is used for--
``(I) credit purposes,
``(II) reporting to shareholders, partners, or other
proprietors, or to beneficiaries, or
``(III) any other substantial nontax purpose,
but only if there is no statement of the taxpayer described
in clause (i), or
``(iii) filed by the taxpayer with any other Federal agency
for purposes other than Federal tax purposes, but only if
there is no statement of the taxpayer described in clause (i)
or (ii),
``(B) a financial statement which is made on the basis of
international financial reporting standards and is filed by
the taxpayer with an agency of a foreign government which is
equivalent to the United States Securities and Exchange
Commission and which has reporting standards not less
stringent than the standards required by such Commission, but
only if there is no statement of the taxpayer described in
subparagraph (A), or
``(C) a financial statement filed by the taxpayer with any
other regulatory or governmental body specified by the
Secretary, but only if there is no statement of the taxpayer
described in subparagraph (A) or (B).
``(4) Allocation of transaction price.--For purposes of
this subsection, in the case of a contract which contains
multiple performance obligations, the allocation of the
transaction price to each performance obligation shall be
equal to the amount allocated to each performance obligation
for purposes of including such item in revenue in the
applicable financial statement of the taxpayer.
``(5) Group of entities.--For purposes of paragraph (1), if
the financial results of a taxpayer are reported on the
applicable financial statement (as defined in paragraph (3))
for a group of entities, such statement may be treated as the
applicable financial statement of the taxpayer.''.
(b) Treatment of Advance Payments.--Section 451, as amended
by subsection (a), is amended by redesignating subsections
(c) through (j) as subsections (d) through (k), respectively,
and by inserting after subsection (b) the following new
subsection:
``(c) Treatment of Advance Payments.--
``(1) In general.--A taxpayer which computes taxable income
under the accrual method of accounting, and receives any
advance payment during the taxable year, shall--
``(A) except as provided in subparagraph (B), include such
advance payment in gross income for such taxable year, or
``(B) if the taxpayer elects the application of this
subparagraph with respect to the category of advance payments
to which such advance payment belongs, the taxpayer shall--
``(i) to the extent that any portion of such advance
payment is required under subsection (b) to be included in
gross income in the taxable year in which such payment is
received, so include such portion, and
``(ii) include the remaining portion of such advance
payment in gross income in the taxable year following the
taxable year in which such payment is received.
``(2) Election.--
``(A) In general.--Except as otherwise provided in this
paragraph, the election under paragraph (1)(B) shall be made
at such time, in such form and manner, and with respect to
such categories of advance payments, as the Secretary may
provide.
``(B) Period to which election applies.--An election under
paragraph (1)(B) shall be effective for the taxable year with
respect to which it is first made and for all subsequent
taxable years, unless the taxpayer secures the consent of the
Secretary to revoke such election. For purposes of this
title, the computation of taxable income under an election
made under paragraph (1)(B) shall be treated as a method of
accounting.
``(3) Taxpayers ceasing to exist.--Except as otherwise
provided by the Secretary, the election under paragraph
(1)(B) shall not apply with respect to advance payments
received by the taxpayer during a taxable year if such
taxpayer ceases to exist during (or with the close of) such
taxable year.
``(4) Advance payment.--For purposes of this subsection--
``(A) In general.--The term `advance payment' means any
payment--
``(i) the full inclusion of which in the gross income of
the taxpayer for the taxable year of receipt is a permissible
method of accounting under this section (determined without
regard to this subsection),
``(ii) any portion of which is included in revenue by the
taxpayer in a financial statement described in clause (i) or
(ii) of subsection (b)(1)(A) for a subsequent taxable year,
and
``(iii) which is for goods, services, or such other items
as may be identified by the Secretary for purposes of this
clause.
``(B) Exclusions.--Except as otherwise provided by the
Secretary, such term shall not include--
``(i) rent,
``(ii) insurance premiums governed by subchapter L,
``(iii) payments with respect to financial instruments,
``(iv) payments with respect to warranty or guarantee
contracts under which a third party is the primary obligor,
``(v) payments subject to section 871(a), 881, 1441, or
1442,
``(vi) payments in property to which section 83 applies,
and
``(vii) any other payment identified by the Secretary for
purposes of this subparagraph.
``(C) Receipt.--For purposes of this subsection, an item of
gross income is received by the taxpayer if it is actually or
constructively received, or if it is due and payable to the
taxpayer.
``(D) Allocation of transaction price.--For purposes of
this subsection, rules similar to subsection (b)(4) shall
apply.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
(d) Coordination With Section 481.--
(1) In general.--In the case of any qualified change in
method of accounting for the taxpayer's first taxable year
beginning after December 31, 2017--
(A) such change shall be treated as initiated by the
taxpayer, and
(B) such change shall be treated as made with the consent
of the Secretary of the Treasury.
(2) Qualified change in method of accounting.--For purposes
of this subsection, the term ``qualified change in method of
accounting'' means any change in method of accounting which--
(A) is required by the amendments made by this section, or
(B) was prohibited under the Internal Revenue Code of 1986
prior to such amendments and is permitted under such Code
after such amendments.
(e) Special Rules for Original Issue Discount.--
Notwithstanding subsection (c), in the case of income from a
debt instrument having original issue discount--
(1) the amendments made by this section shall apply to
taxable years beginning after December 31, 2018, and
(2) the period for taking into account any adjustments
under section 481 by reason of a qualified change in method
of accounting (as defined in subsection (d)) shall be 6
years.
PART IV--BUSINESS-RELATED EXCLUSIONS AND DEDUCTIONS
SEC. 13301. LIMITATION ON DEDUCTION FOR INTEREST.
(a) In General.--Section 163(j) is amended to read as
follows:
``(j) Limitation on Business Interest.--
``(1) In general.--The amount allowed as a deduction under
this chapter for any taxable year for business interest shall
not exceed the sum of--
``(A) the business interest income of such taxpayer for
such taxable year, plus
``(B) 30 percent of the adjusted taxable income of such
taxpayer for such taxable year.
The amount determined under subparagraph (B) shall not be
less than zero.
``(2) Carryforward of disallowed business interest.--The
amount of any business interest not allowed as a deduction
for any taxable year by reason of paragraph (1) shall be
treated as business interest paid or accrued in the
succeeding taxable year.
``(3) Exemption for certain small businesses.--In the case
of any taxpayer (other
[[Page S7773]]
than a tax shelter prohibited from using the cash receipts
and disbursements method of accounting under section
448(a)(3)) which meets the gross receipts test of section
448(c) for any taxable year, paragraph (1) shall not apply to
such taxpayer for such taxable year. In the case of any
taxpayer which is not a corporation or a partnership, the
gross receipts test of section 448(c) shall be applied in the
same manner as if such taxpayer were a corporation or
partnership.
``(4) Application to partnerships, etc.--
``(A) In general.--In the case of any partnership--
``(i) this subsection shall be applied at the partnership
level and any deduction for business interest shall be taken
into account in determining the non-separately stated taxable
income or loss of the partnership, and
``(ii) the adjusted taxable income of each partner of such
partnership--
``(I) shall be determined without regard to such partner's
distributive share of any items of income, gain, deduction,
or loss of such partnership, and
``(II) shall be increased by such partner's distributive
share of such partnership's excess taxable income.
For purposes of clause (ii)(II), a partner's distributive
share of partnership excess taxable income shall be
determined in the same manner as the partner's distributive
share of nonseparately stated taxable income or loss of the
partnership.
``(B) Special rules for carryforwards.--
``(i) In general.--The amount of any business interest not
allowed as a deduction to a partnership for any taxable year
by reason of paragraph (1) for any taxable year--
``(I) shall not be treated under paragraph (2) as business
interest paid or accrued by the partnership in the succeeding
taxable year, and
``(II) shall, subject to clause (ii), be treated as excess
business interest which is allocated to each partner in the
same manner as the non-separately stated taxable income or
loss of the partnership.
``(ii) Treatment of excess business interest allocated to
partners.--If a partner is allocated any excess business
interest from a partnership under clause (i) for any taxable
year--
``(I) such excess business interest shall be treated as
business interest paid or accrued by the partner in the next
succeeding taxable year in which the partner is allocated
excess taxable income from such partnership, but only to the
extent of such excess taxable income, and
``(II) any portion of such excess business interest
remaining after the application of subclause (I) shall,
subject to the limitations of subclause (I), be treated as
business interest paid or accrued in succeeding taxable
years.
For purposes of applying this paragraph, excess taxable
income allocated to a partner from a partnership for any
taxable year shall not be taken into account under paragraph
(1)(A) with respect to any business interest other than
excess business interest from the partnership until all such
excess business interest for such taxable year and all
preceding taxable years has been treated as paid or accrued
under clause (ii).
``(iii) Basis adjustments.--
``(I) In general.--The adjusted basis of a partner in a
partnership interest shall be reduced (but not below zero) by
the amount of excess business interest allocated to the
partner under clause (i)(II).
``(II) Special rule for dispositions.--If a partner
disposes of a partnership interest, the adjusted basis of the
partner in the partnership interest shall be increased
immediately before the disposition by the amount of the
excess (if any) of the amount of the basis reduction under
subclause (I) over the portion of any excess business
interest allocated to the partner under clause (i)(II) which
has previously been treated under clause (ii) as business
interest paid or accrued by the partner. The preceding
sentence shall also apply to transfers of the partnership
interest (including by reason of death) in a transaction in
which gain is not recognized in whole or in part. No
deduction shall be allowed to the transferor or transferee
under this chapter for any excess business interest resulting
in a basis increase under this subclause.
``(C) Excess taxable income.--The term `excess taxable
income' means, with respect to any partnership, the amount
which bears the same ratio to the partnership's adjusted
taxable income as--
``(i) the excess (if any) of--
``(I) the amount determined for the partnership under
paragraph (1)(B), over
``(II) the amount (if any) by which the business interest
of the partnership exceeds the business interest income of
the partnership, bears to
``(ii) the amount determined for the partnership under
paragraph (1)(B).
``(D) Application to s corporations.--Rules similar to the
rules of subparagraphs (A) and (C) shall apply with respect
to any S corporation and its shareholders.
``(5) Business interest.--For purposes of this subsection,
the term `business interest' means any interest paid or
accrued on indebtedness properly allocable to a trade or
business. Such term shall not include investment interest
(within the meaning of subsection (d)).
``(6) Business interest income.--For purposes of this
subsection, the term `business interest income' means the
amount of interest includible in the gross income of the
taxpayer for the taxable year which is properly allocable to
a trade or business. Such term shall not include investment
income (within the meaning of subsection (d)).
``(7) Trade or business.--For purposes of this subsection--
``(A) In general.--The term `trade or business' shall not
include--
``(i) the trade or business of performing services as an
employee,
``(ii) any electing real property trade or business,
``(iii) any electing farming business, or
``(iv) the trade or business of the furnishing or sale of--
``(I) electrical energy, water, or sewage disposal
services,
``(II) gas or steam through a local distribution system, or
``(III) transportation of gas or steam by pipeline,
if the rates for such furnishing or sale, as the case may be,
have been established or approved by a State or political
subdivision thereof, by any agency or instrumentality of the
United States, by a public service or public utility
commission or other similar body of any State or political
subdivision thereof, or by the governing or ratemaking body
of an electric cooperative.
``(B) Electing real property trade or business.--For
purposes of this paragraph, the term `electing real property
trade or business' means any trade or business which is
described in section 469(c)(7)(C) and which makes an election
under this subparagraph. Any such election shall be made at
such time and in such manner as the Secretary shall
prescribe, and, once made, shall be irrevocable.
``(C) Electing farming business.--For purposes of this
paragraph, the term `electing farming business' means--
``(i) a farming business (as defined in section 263A(e)(4))
which makes an election under this subparagraph, or
``(ii) any trade or business of a specified agricultural or
horticultural cooperative (as defined in section 199A(g)(2))
with respect to which the cooperative makes an election under
this subparagraph.
Any such election shall be made at such time and in such
manner as the Secretary shall prescribe, and, once made,
shall be irrevocable.
``(8) Adjusted taxable income.--For purposes of this
subsection, the term `adjusted taxable income' means the
taxable income of the taxpayer--
``(A) computed without regard to--
``(i) any item of income, gain, deduction, or loss which is
not properly allocable to a trade or business,
``(ii) any business interest or business interest income,
``(iii) the amount of any net operating loss deduction
under section 172, and
``(iv) the amount of any deduction allowed under section
199 or 199A, and
``(B) computed with such other adjustments as provided by
the Secretary.
``(9) Cross references.--
``(A) For requirement that an electing real property trade
or business use the alternative depreciation system, see
section 168(g)(1)(F).
``(B) For requirement that an electing farming business use
the alternative depreciation system, see section
168(g)(1)(G).''.
(b) Treatment of Carryforward of Disallowed Business
Interest in Certain Corporate Acquisitions.--
(1) In general.--Section 381(c) is amended by inserting
after paragraph (19) the following new paragraph:
``(20) Carryforward of disallowed business interest.--The
carryover of disallowed business interest described in
section 163(j)(2) to taxable years ending after the date of
distribution or transfer.''.
(2) Application of limitation.--Section 382(d) is amended
by adding at the end the following new paragraph:
``(3) Application to carryforward of disallowed interest.--
The term `pre-change loss' shall include any carryover of
disallowed interest described in section 163(n) under rules
similar to the rules of paragraph (1).''.
(3) Conforming amendment.--Section 382(k)(1) is amended by
inserting after the first sentence the following: ``Such term
shall include any corporation entitled to use a carryforward
of disallowed interest described in section 381(c)(20).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13302. MODIFICATION OF NET OPERATING LOSS DEDUCTION.
(a) Limitation on Deduction.--
(1) In general.--Section 172(a) is amended to read as
follows:
``(a) Deduction Allowed.--There shall be allowed as a
deduction for the taxable year an amount equal to the lesser
of--
``(1) the aggregate of the net operating loss carryovers to
such year, plus the net operating loss carrybacks to such
year, or
``(2) 90 percent (80 percent in the case of taxable years
beginning after December 31, 2022) of taxable income computed
without regard to the deduction allowable under this section.
For purposes of this subtitle, the term `net operating loss
deduction' means the deduction allowed by this subsection.''.
(2) Coordination of limitation with carrybacks and
carryovers.--Section 172(b)(2) is amended by striking ``shall
be
[[Page S7774]]
computed--'' and all that follows and inserting ``shall--
``(A) be computed with the modifications specified in
subsection (d) other than paragraphs (1), (4), and (5)
thereof, and by determining the amount of the net operating
loss deduction without regard to the net operating loss for
the loss year or for any taxable year thereafter,
``(B) not be considered to be less than zero, and
``(C) not exceed the amount determined under subsection
(a)(2) for such prior taxable year.''.
(3) Conforming amendment.--Section 172(d)(6) is amended by
striking ``and'' at the end of subparagraph (A), by striking
the period at the end of subparagraph (B) and inserting ``;
and'', and by adding at the end the following new
subparagraph:
``(C) subsection (a)(2) shall be applied by substituting
`real estate investment trust taxable income (as defined in
section 857(b)(2) but without regard to the deduction for
dividends paid (as defined in section 561))' for `taxable
income'.''.
(b) Repeal of Net Operating Loss Carryback; Indefinite
Carryforward.--
(1) In general.--Section 172(b)(1)(A) is amended--
(A) by striking ``shall be a net operating loss carryback
to each of the 2 taxable years'' in clause (i) and inserting
``except as otherwise provided in this paragraph, shall not
be a net operating loss carryback to any taxable year'', and
(B) by striking ``to each of the 20 taxable years'' in
clause (ii) and inserting ``to each taxable year''.
(2) Conforming amendment.--Section 172(b)(1) is amended by
striking subparagraphs (B) through (F).
(c) Treatment of Farming Losses.--
(1) Allowance of carrybacks.--Section 172(b)(1), as amended
by subsection (b)(2), is amended by adding at the end the
following new subparagraph:
``(B) Farming losses.--
``(i) In general.--In the case of any portion of a net
operating loss for the taxable year which is a farming loss
with respect to the taxpayer, such loss shall be a net
operating loss carryback to each of the 2 taxable years
preceding the taxable year of such loss.
``(ii) Farming loss.--For purposes of this section, the
term `farming loss' means the lesser of--
``(I) the amount which would be the net operating loss for
the taxable year if only income and deductions attributable
to farming businesses (as defined in section 263A(e)(4)) are
taken into account, or
``(II) the amount of the net operating loss for such
taxable year.
``(iii) Coordination with paragraph (2).--For purposes of
applying paragraph (2), a farming loss for any taxable year
shall be treated as a separate net operating loss for such
taxable year to be taken into account after the remaining
portion of the net operating loss for such taxable year.
``(iv) Election.--Any taxpayer entitled to a 2-year
carryback under clause (i) from any loss year may elect not
to have such clause apply to such loss year. Such election
shall be made in such manner as prescribed by the Secretary
and shall be made by the due date (including extensions of
time) for filing the taxpayer's return for the taxable year
of the net operating loss. Such election, once made for any
taxable year, shall be irrevocable for such taxable year.''.
(2) Conforming amendments.--
(A) Section 172 is amended by striking subsections (f),
(g), and (h), and by redesignating subsection (i) as
subsection (f).
(B) Section 537(b)(4) is amended by inserting ``(as in
effect before the date of enactment of the Tax Cuts and Jobs
Act)'' after ``as defined in section 172(f)''.
(d) Treatment of Certain Insurance Losses.--
(1) Treatment of carryforwards and carrybacks.--Section
172(b)(1), as amended by subsections (b)(2) and (c)(1), is
amended by adding at the end the following new subparagraph:
``(C) Insurance companies.--In the case of an insurance
company (as defined in section 816(a)) other than a life
insurance company, the net operating loss for any taxable
year--
``(i) shall be a net operating loss carryback to each of
the 2 taxable years preceding the taxable year of such loss,
and
``(ii) shall be a net operating loss carryover to each of
the 20 taxable years following the taxable year of the
loss.''.
(2) Exemption from limitation.--Section 172, as amended by
subsection (c)(2)(A), is amended by redesignating subsection
(f) as subsection (g) and inserting after subsection (e) the
following new subsection:
``(f) Special Rule for Insurance Companies.--In the case of
an insurance company (as defined in section 816(a)) other
than a life insurance company--
``(1) the amount of the deduction allowed under subsection
(a) shall be the aggregate of the net operating loss
carryovers to such year, plus the net operating loss
carrybacks to such year, and
``(2) subparagraph (C) of subsection (b)(2) shall not
apply.''.
(e) Effective Date.--
(1) Net operating loss limitation.--The amendments made by
subsections (a) and (d)(2) shall apply to losses arising in
taxable years beginning after December 31, 2017.
(2) Carryforwards and carrybacks.--The amendments made by
subsections (b), (c), and (d)(1) shall apply to net operating
losses arising in taxable years ending after December 31,
2017.
SEC. 13303. LIKE-KIND EXCHANGES OF REAL PROPERTY.
(a) In General.--Section 1031(a)(1) is amended by striking
``property'' each place it appears and inserting ``real
property''.
(b) Conforming Amendments.--
(1)(A) 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.''.
(B) Section 1031 is amended by striking subsection (i).
(2) Section 1031 is amended by striking subsection (e).
(3) Section 1031, as amended by paragraph (2), is amended
by inserting after subsection (d) the following new
subsection:
``(e) Application to Certain Partnerships.--For purposes of
this section, an interest in a partnership which has in
effect a valid election under section 761(a) to be excluded
from the application of all of subchapter K shall be treated
as an interest in each of the assets of such partnership and
not as an interest in a partnership.''.
(4) Section 1031(h) is amended to read as follows:
``(h) Special Rules for Foreign Real Property.--Real
property located in the United States and real property
located outside the United States are not property of a like
kind.''.
(5) 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. 13304. LIMITATION ON DEDUCTION BY EMPLOYERS OF EXPENSES
FOR FRINGE BENEFITS.
(a) No Deduction Allowed for Entertainment Expenses.--
(1) In general.--Section 274(a) is amended--
(A) in paragraph (1)(A), by striking ``unless'' and all
that follows through ``trade or business,'',
(B) by striking the flush sentence at the end of paragraph
(1), and
(C) by striking paragraph (2)(C).
(2) Conforming amendments.--
(A) Section 274(d) is amended--
(i) by striking paragraph (2) and redesignating paragraphs
(3) and (4) as paragraphs (2) and (3), respectively, and
(ii) in the flush text following paragraph (3) (as so
redesignated)--
(I) by striking ``, entertainment, amusement, recreation,
or use of the facility or property,'' in item (B), and
(II) by striking ``(D) the business relationship to the
taxpayer of persons entertained, using the facility or
property, or receiving the gift'' and inserting ``(D) the
business relationship to the taxpayer of the person receiving
the benefit'',
(B) Section 274 is amended by striking subsection (l).
(C) Section 274(n) is amended by striking ``and
Entertainment'' in the heading.
(D) Section 274(n)(1) is amended to read as follows:
``(1) In general.--The amount allowable as a deduction
under this chapter for any expense for food or beverages
shall not exceed 50 percent of the amount of such expense
which would (but for this paragraph) be allowable as a
deduction under this chapter.''.
(E) Section 274(n)(2) is amended--
(i) in subparagraph (B), by striking ``in the case of an
expense for food or beverages,'',
(ii) by striking subparagraph (C) and redesignating
subparagraphs (D) and (E) as subparagraphs (C) and (D),
respectively,
(iii) by striking ``of subparagraph (E)'' the last sentence
and inserting ``of subparagraph (D)'', and
(iv) by striking ``in subparagraph (D)'' in the last
sentence and inserting ``in subparagraph (C)''.
(F) Clause (iv) of section 7701(b)(5)(A) is amended to read
as follows:
``(iv) a professional athlete who is temporarily in the
United States to compete in a sports event--
``(I) which is organized for the primary purpose of
benefiting an organization which is described in section
501(c)(3) and exempt from tax under section 501(a),
``(II) all of the net proceeds of which are contributed to
such organization, and,
``(III) which utilizes volunteers for substantially all of
the work performed in carrying out such event.''.
(b) Only 50 Percent of Expenses for Meals Provided on or
Near Business
[[Page S7775]]
Premises Allowed as Deduction.--Paragraph (2) of section
274(n), as amended by subsection (a), is amended--
(1) by striking subparagraph (B),
(2) by redesignating subparagraphs (C) and (D) as
subparagraphs (B) and (C), respectively,
(3) by striking ``of subparagraph (D)'' in the last
sentence and inserting ``of subparagraph (C)'', and
(4) by striking ``in subparagraph (C)'' in the last
sentence and inserting ``in subparagraph (B)''.
(c) Treatment of Transportation Benefits.--Section 274, as
amended by subsection (a), is amended--
(1) in subsection (a)--
(A) in the heading, by striking ``or Recreation'' and
inserting ``Recreation, or Qualified Transportation
Fringes'', and
(B) by adding at the end the following new paragraph:
``(4) Qualified transportation fringes.--No deduction shall
be allowed under this chapter for the expense of any
qualified transportation fringe (as defined in section
132(f)) provided to an employee of the taxpayer.'', and
(2) by inserting after subsection (k) the following new
subsection:
``(l) Transportation and Commuting Benefits.--No deduction
shall be allowed under this chapter for any expense incurred
for providing any transportation, or any payment or
reimbursement, to an employee of the taxpayer in connection
with travel between the employee's residence and place of
employment, except as necessary for ensuring the safety of
the employee.''.
(d) Elimination of Deduction for Meals Provided at
Convenience of Employer.--Section 274, as amended by
subsection (c), is amended--
(1) by redesignating subsection (o) as subsection (p), and
(2) by inserting after subsection (n) the following new
subsection:
``(o) Meals Provided at Convenience of Employer.--No
deduction shall be allowed under this chapter for--
``(1) any expense for the operation of a facility described
in section 132(e)(2), and any expense for food or beverages,
including under section 132(e)(1), associated with such
facility, or
``(2) any expense for meals described in section 119(a).''.
(e) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to amounts
incurred or paid after December 31, 2017.
(2) Effective date for elimination of deduction for meals
provided at convenience of employer.--The amendments made by
subsection (d) shall apply to amounts incurred or paid after
December 31, 2025.
SEC. 13305. REPEAL OF DEDUCTION FOR INCOME ATTRIBUTABLE TO
DOMESTIC PRODUCTION ACTIVITIES.
(a) Repeal.--
(1) Taxpayers other than corporations.--Section 199 is
amended by adding at the end the following new subsection:
``(e) Partial Termination for Taxpayers Other Than
Corporations.--In the case of a taxpayer other than a C
corporation, this section shall not apply to any taxable year
beginning after December 31, 2017.''.
(2) Certain special rules for cooperatives.--Section
199(d)(3) is amended by adding at the end the following new
subparagraph:
``(G) Partial termination.--Subparagraphs (A) and (B) shall
not apply to any taxable year beginning after December 31,
2017.''.
(3) Total repeal.--Part VI of subchapter B of chapter 1, as
amended by paragraphs (1) and (2), is amended by striking
section 199 (and by striking the item relating to such
section in the table of sections for such part).
(b) Conforming Amendments.--
(1) Sections 74(d)(2)(B), 86(b)(2)(A), 135(c)(4)(A),
137(b)(3)(A), 219(g)(3)(A)(ii), 221(b)(2)(C), 222(b)(2)(C),
246(b)(1), and 469(i)(3)(F)(iii) are each amended by striking
``199,''.
(2) Section 170(b)(2)(D), as amended by section 11011, is
amended by striking clause (iv) and by redesignating clauses
(v) and (vi) as redesignating clauses (iv) as clause (v),
respectively.
(3) Section 172(d) is amended by striking paragraph (7).
(4) Section 613(a) is amended by striking ``and without the
deduction under section 199''.
(5) Section 613A(d)(1) is amended by striking subparagraph
(B) and by redesignating subparagraphs (C), (D), and (E) as
subparagraphs (B), (C), and (D).
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2018.
(2) Earlier termination for certain taxpayers.--The
amendment made by paragraphs (1) and (2) of subsection (a)
shall apply to taxable years beginning after December 31,
2017.
SEC. 13306. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES,
AND OTHER AMOUNTS.
(a) Denial of Deduction.--
(1) In general.--Subsection (f) of section 162 is amended
to read as follows:
``(f) Fines, Penalties, and Other Amounts.--
``(1) In general.--Except as provided in the following
paragraphs of this subsection, no deduction otherwise
allowable shall be allowed under this chapter for any amount
paid or incurred (whether by suit, agreement, or otherwise)
to, or at the direction of, a government or governmental
entity in relation to the violation of any law or the
investigation or inquiry by such government or entity into
the potential violation of any law.
``(2) Exception for amounts constituting restitution or
paid to come into compliance with law.--
``(A) In general.--Paragraph (1) shall not apply to any
amount that--
``(i) the taxpayer establishes--
``(I) constitutes restitution (including remediation of
property) for damage or harm which was or may be caused by
the violation of any law or the potential violation of any
law, or
``(II) is paid to come into compliance with any law which
was violated or otherwise involved in the investigation or
inquiry described in paragraph (1),
``(ii) is identified as restitution or as an amount paid to
come into compliance with such law, as the case may be, in
the court order or settlement agreement, and
``(iii) in the case of any amount of restitution for
failure to pay any tax imposed under this title in the same
manner as if such amount were such tax, would have been
allowed as a deduction under this chapter if it had been
timely paid.
The identification under clause (ii) alone shall not be
sufficient to make the establishment required under clause
(i).
``(B) Limitation.--Subparagraph (A) shall not apply to any
amount paid or incurred as reimbursement to the government or
entity for the costs of any investigation or litigation.
``(3) Exception for amounts paid or incurred as the result
of certain court orders.--Paragraph (1) shall not apply to
any amount paid or incurred by reason of any order of a court
in a suit in which no government or governmental entity is a
party.
``(4) Exception for taxes due.--Paragraph (1) shall not
apply to any amount paid or incurred as taxes due.
``(5) Treatment of certain nongovernmental regulatory
entities.--For purposes of this subsection, the following
nongovernmental entities shall be treated as governmental
entities:
``(A) Any nongovernmental entity which exercises self-
regulatory powers (including imposing sanctions) in
connection with a qualified board or exchange (as defined in
section 1256(g)(7)).
``(B) To the extent provided in regulations, any
nongovernmental entity which exercises self-regulatory powers
(including imposing sanctions) as part of performing an
essential governmental function.''.
(2) Effective date.--The amendment made by this subsection
shall apply to amounts paid or incurred on or after the date
of the enactment of this Act, except that such amendments
shall not apply to amounts paid or incurred under any binding
order or agreement entered into before such date. Such
exception shall not apply to an order or agreement requiring
court approval unless the approval was obtained before such
date.
(b) Reporting of Deductible Amounts.--
(1) In general.--Subpart B of part III of subchapter A of
chapter 61 is amended by inserting after section 6050W the
following new section:
``SEC. 6050X. INFORMATION WITH RESPECT TO CERTAIN FINES,
PENALTIES, AND OTHER AMOUNTS.
``(a) Requirement of Reporting.--
``(1) In general.--The appropriate official of any
government or any entity described in section 162(f)(5) which
is involved in a suit or agreement described in paragraph (2)
shall make a return in such form as determined by the
Secretary setting forth--
``(A) the amount required to be paid as a result of the
suit or agreement to which paragraph (1) of section 162(f)
applies,
``(B) any amount required to be paid as a result of the
suit or agreement which constitutes restitution or
remediation of property, and
``(C) any amount required to be paid as a result of the
suit or agreement for the purpose of coming into compliance
with any law which was violated or involved in the
investigation or inquiry.
``(2) Suit or agreement described.--
``(A) In general.--A suit or agreement is described in this
paragraph if--
``(i) it is--
``(I) a suit with respect to a violation of any law over
which the government or entity has authority and with respect
to which there has been a court order, or
``(II) an agreement which is entered into with respect to a
violation of any law over which the government or entity has
authority, or with respect to an investigation or inquiry by
the government or entity into the potential violation of any
law over which such government or entity has authority, and
``(ii) the aggregate amount involved in all court orders
and agreements with respect to the violation, investigation,
or inquiry is $600 or more.
``(B) Adjustment of reporting threshold.--The Secretary
shall adjust the $600 amount in subparagraph (A)(ii) as
necessary in order to ensure the efficient administration of
the internal revenue laws.
``(3) Time of filing.--The return required under this
subsection shall be filed at the
[[Page S7776]]
time the agreement is entered into, as determined by the
Secretary.
``(b) Statements To Be Furnished to Individuals Involved in
the Settlement.--Every person required to make a return under
subsection (a) shall furnish to each person who is a party to
the suit or agreement a written statement showing--
``(1) the name of the government or entity, and
``(2) the information supplied to the Secretary under
subsection (a)(1).
The written statement required under the preceding sentence
shall be furnished to the person at the same time the
government or entity provides the Secretary with the
information required under subsection (a).
``(c) Appropriate Official Defined.--For purposes of this
section, the term `appropriate official' means the officer or
employee having control of the suit, investigation, or
inquiry or the person appropriately designated for purposes
of this section.''.
(2) Conforming amendment.--The table of sections for
subpart B of part III of subchapter A of chapter 61 is
amended by inserting after the item relating to section 6050W
the following new item:
``Sec. 6050X. Information with respect to certain fines, penalties, and
other amounts.''.
(3) Effective date.--The amendments made by this subsection
shall apply to amounts paid or incurred on or after the date
of the enactment of this Act, except that such amendments
shall not apply to amounts paid or incurred under any binding
order or agreement entered into before such date. Such
exception shall not apply to an order or agreement requiring
court approval unless the approval was obtained before such
date.
SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS SUBJECT TO
NONDISCLOSURE AGREEMENTS PAID IN CONNECTION
WITH SEXUAL HARASSMENT OR SEXUAL ABUSE.
(a) Denial of Deduction.--Section 162 is amended by
redesignating subsection (q) as subsection (r) and by
inserting after subsection (p) the following new subsection:
``(q) Payments Related to Sexual Harassment and Sexual
Abuse.--No deduction shall be allowed under this chapter
for--
``(1) any settlement or payment related to sexual
harassment or sexual abuse if such settlement or payment is
subject to a nondisclosure agreement, or
``(2) attorney's fees related to such a settlement or
payment.''.
(b) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred after the date of the
enactment of this Act.
SEC. 13309. REPEAL OF DEDUCTION FOR LOCAL LOBBYING EXPENSES.
(a) In General.--Section 162(e) is amended by striking
paragraphs (2) and (7) and by redesignating paragraphs (3),
(4), (5), (6), and (8) as paragraphs (2), (3), (4), (5), and
(6), respectively.
(b) Conforming Amendment.--Section 6033(e)(1)(B)(ii) is
amended by striking ``section 162(e)(5)(B)(ii)'' and
inserting ``section 162(e)(4)(B)(ii)''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred on or after the date
of the enactment of this Act.
SEC. 13310. RECHARACTERIZATION OF CERTAIN GAINS IN THE CASE
OF PARTNERSHIP PROFITS INTERESTS HELD IN
CONNECTION WITH PERFORMANCE OF INVESTMENT
SERVICES.
(a) In General.--Part IV of subchapter O of chapter 1 is
amended--
(1) by redesignating section 1061 as section 1062, and
(2) by inserting after section 1060 the following new
section:
``SEC. 1061. PARTNERSHIP INTERESTS HELD IN CONNECTION WITH
PERFORMANCE OF SERVICES.
``(a) In General.--If one or more applicable partnership
interests are held by a taxpayer at any time during the
taxable year, the excess (if any) of--
``(1) the taxpayer's net long-term capital gain with
respect to such interests for such taxable year, over
``(2) the taxpayer's net long-term capital gain with
respect to such interests for such taxable year computed by
applying paragraphs (3) and (4) of sections 1222 by
substituting `3 years' for `1 year',
shall be treated as short-term capital gain, notwithstanding
section 83 or any election in effect under section 83(b).
``(b) Special Rule.--To the extent provided by the
Secretary, subsection (a) shall not apply to income or gain
attributable to any asset not held for portfolio investment
on behalf of third party investors.
``(c) Applicable Partnership Interest.--For purposes of
this section--
``(1) In general.--Except as provided in this paragraph or
paragraph (4), the term `applicable partnership interest'
means any interest in a partnership which, directly or
indirectly, is transferred to (or is held by) the taxpayer in
connection with the performance of substantial services by
the taxpayer, or any other related person, in any applicable
trade or business. The previous sentence shall not apply to
an interest held by a person who is employed by another
entity that is conducting a trade or business (other than an
applicable trade or business) and only provides services to
such other entity.
``(2) Applicable trade or business.--The term `applicable
trade or business' means any activity conducted on a regular,
continuous, and substantial basis which, regardless of
whether the activity is conducted in one or more entities,
consists, in whole or in part, of--
``(A) raising or returning capital, and
``(B) either--
``(i) investing in (or disposing of) specified assets (or
identifying specified assets for such investing or
disposition), or
``(ii) developing specified assets.
``(3) Specified asset.--The term `specified asset' means
securities (as defined in section 475(c)(2) without regard to
the last sentence thereof), commodities (as defined in
section 475(e)(2)), real estate held for rental or
investment, cash or cash equivalents, options or derivative
contracts with respect to any of the foregoing, and an
interest in a partnership to the extent of the partnership's
proportionate interest in any of the foregoing.
``(4) Exceptions.--The term `applicable partnership
interest' shall not include--
``(A) any interest in a partnership directly or indirectly
held by a corporation, or
``(B) any capital interest in the partnership which
provides the taxpayer with a right to share in partnership
capital commensurate with--
``(i) the amount of capital contributed (determined at the
time of receipt of such partnership interest), or
``(ii) the value of such interest subject to tax under
section 83 upon the receipt or vesting of such interest.
``(5) Third party investor.--The term `third party
investor' means a person who--
``(A) holds an interest in the partnership which does not
constitute property held in connection with an applicable
trade or business; and
``(B) is not (and has not been) actively engaged, and is
(and was) not related to a person so engaged, in (directly or
indirectly) providing substantial services described in
paragraph (1) for such partnership or any applicable trade or
business.
``(d) Transfer of Applicable Partnership Interest to
Related Person.--
``(1) In general.--If a taxpayer transfers any applicable
partnership interest, directly or indirectly, to a person
related to the taxpayer, the taxpayer shall include in gross
income (as short term capital gain) the excess (if any) of--
``(A) so much of the taxpayer's long-term capital gains
with respect to such interest for such taxable year
attributable to the sale or exchange of any asset held for
not more than 3 years as is allocable to such interest, over
``(B) any amount treated as short term capital gain under
subsection (a) with respect to the transfer of such interest.
``(2) Related person.--For purposes of this paragraph, a
person is related to the taxpayer if--
``(A) the person is a member of the taxpayer's family
within the meaning of section 318(a)(1), or
``(B) the person performed a service within the current
calendar year or the preceding three calendar years in any
applicable trade or business in which or for which the
taxpayer performed a service.
``(e) Reporting.--The Secretary shall require such
reporting (at the time and in the manner prescribed by the
Secretary) as is necessary to carry out the purposes of this
section.
``(f) Regulations.--The Secretary shall issue such
regulations or other guidance as is necessary or appropriate
to carry out the purposes of this section''.
(b) Clerical Amendment.--The table of sections for part IV
of subchapter O of chapter 1 is amended by striking the item
relating to 1061 and inserting the following new items:
``Sec. 1061. Partnership interests held in connection with performance
of services.
``Sec. 1062. Cross references.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13311. PROHIBITION ON CASH, GIFT CARDS, AND OTHER NON-
TANGIBLE PERSONAL PROPERTY AS EMPLOYEE
ACHIEVEMENT AWARDS.
(a) In General.--Subparagraph (A) of section 274(j)(3) is
amended--
(1) by striking ``The term'' and inserting the following:
``(i) In general.--The term''.
(2) by redesignating clauses (i), (ii), and (iii) as
subclauses (I), (II), and (III), respectively, and conforming
the margins accordingly, and
(3) by adding at the end the following new clause:
``(ii) Tangible personal property.--For purposes of clause
(i), the term `tangible personal property' shall not
include--
``(I) cash, cash equivalents, gift cards, gift coupons, or
gift certificates (other than arrangements conferring only
the right to select and receive tangible personal property
from a limited array of such items pre-selected or pre-
approved by the employer), or
``(II) vacations, meals, lodging, tickets to theater or
sporting events, stocks, bonds, other securities, and other
similar items.''.
(b) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred after December 31,
2017.
SEC. 13312. FLOOR PLAN FINANCING.
(a) Application of Interest Limitation.--
(1) In general.--Section 163(j), as amended by section
13301, is amended--
[[Page S7777]]
(A) in paragraph (1), by striking ``plus'' at the end of
subparagraph (A), by striking the period at the end of
subparagraph (B) and inserting ``, plus'', and by inserting
after subparagraph (B) the following new subparagraph:
``(C) the floor plan financing interest of such taxpayer
for such taxable year.'', and
(B) in paragraph (4)(C)(i)(II), by inserting ``, reduced by
the floor plan financing interest,'' after ``business
interest of the partnership'', and
(C) by redesignating paragraph (9) as paragraph (10) and
inserting after paragraph (8) the following new paragraph:
``(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 or lease, 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) Any self-propelled vehicle designed for transporting
persons or property on a public street, highway, or road.
``(vi) A boat.
``(vii) Farm machinery or equipment.''.
(2) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31,
2017.
(b) Exception From 100 Percent Expensing.--
(1) In general.--Paragraph (6) of section 168(k), as added
by section 13201(a)(4), is amended--
(A) by striking ``shall not include any property'' and
inserting ``shall not include--
``(A) any property'', and
(B) by adding at the end the following new subparagraph:
``(B) any property used in 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.''.
(2) Effective date.--The amendments made by this subsection
shall apply to property placed in service after September 27,
2017, in taxable years ending after such date.
SEC. 13313. ELIMINATION OF DEDUCTION FOR LIVING EXPENSES
INCURRED BY MEMBERS OF CONGRESS.
(a) In General.--Subsection (a) of section 162 is amended
in the matter following paragraph (3) by striking ``in excess
of $3,000''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
PART V--BUSINESS CREDITS
Subpart A--General Provisions
SEC. 13401. MODIFICATION OF ORPHAN DRUG CREDIT.
(a) Credit Rate.--Subsection (a) of section 45C is amended
by striking ``50 percent'' and inserting ``27.5 percent''.
(b) Election of Reduced Credit.--Subsection (b) of section
280C is amended by redesignating paragraph (3) as paragraph
(4) and by inserting after paragraph (2) the following new
paragraph:
``(3) Election of reduced credit.--
``(A) In general.--In the case of any taxable year for
which an election is made under this paragraph--
``(i) paragraphs (1) and (2) shall not apply, and
``(ii) the amount of the credit under section 45C(a) shall
be the amount determined under subparagraph (B).
``(B) Amount of reduced credit.--The amount of credit
determined under this subparagraph for any taxable year shall
be the amount equal to the excess of--
``(i) the amount of credit determined under section 45C(a)
without regard to this paragraph, over
``(ii) the product of--
``(I) the amount described in clause (i), and
``(II) the maximum rate of tax under section 11(b).
``(C) Election.--An election under this paragraph for any
taxable year shall be made not later than the time for filing
the return of tax for such year (including extensions), shall
be made on such return, and shall be made in such manner as
the Secretary shall prescribe. Such an election, once made,
shall be irrevocable.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13402. REHABILITATION CREDIT LIMITED TO CERTIFIED
HISTORIC STRUCTURES.
(a) In General.--Subsection (a) of section 47 is amended to
read as follows:
``(a) General Rule.--
``(1) In general.--For purposes of section 46, for any
taxable year during the 5-year period beginning in the
taxable year in which a qualified rehabilitated building is
placed in service, the rehabilitation credit for such year is
an amount equal to the ratable share for such year.
``(2) Ratable share.--For purposes of paragraph (1), the
ratable share for any taxable year during the period
described in such paragraph is the amount equal to 20 percent
of the qualified rehabilitation expenditures with respect to
the qualified rehabilitated building, as allocated ratably to
each year during such period.''.
(b) Conforming Amendments.--
(1) Section 47(c) is amended--
(A) in paragraph (1)--
(i) in subparagraph (A), by amending clause (iii) to read
as follows:
``(iii) such building is a certified historic structure,
and'',
(ii) by striking subparagraph (B), and
(iii) by redesignating subparagraphs (C) and (D) as
subparagraphs (B) and (C), respectively, and
(B) in paragraph (2)(B), by amending clause (iv) to read as
follows:
``(iv) Certified historic structure.--Any expenditure
attributable to the rehabilitation of a qualified
rehabilitated building unless the rehabilitation is a
certified rehabilitation (within the meaning of subparagraph
(C)).''.
(2) Paragraph (4) of section 145(d) is amended--
(A) by striking ``of section 47(c)(1)(C)'' each place it
appears and inserting ``of section 47(c)(1)(B)'', and
(B) by striking ``section 47(c)(1)(C)(i)'' and inserting
``section 47(c)(1)(B)(i)''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to amounts paid
or incurred after December 31, 2017.
(2) Transition rule.--In the case of qualified
rehabilitation expenditures with respect to any building--
(A) owned or leased by the taxpayer during the entirety of
the period after December 31, 2017, and
(B) with respect to which the 24-month period selected by
the taxpayer under section 47(c)(1)(B) of the Internal
Revenue Code of 1986 (as amended by subsection (b)) begins
not later than 180 days after the date of the enactment of
this Act,
the amendments made by this section shall apply to such
expenditures paid or incurred after the end of the taxable
year in which the 24-month period referred to in subparagraph
(B) ends.
SEC. 13403. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL
LEAVE.
(a) In General.--
(1) Allowance of credit.--Subpart D of part IV of
subchapter A of chapter 1 is amended by adding at the end the
following new section:
``SEC. 45S. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL
LEAVE.
``(a) Establishment of Credit.--
``(1) In general.--For purposes of section 38, in the case
of an eligible employer, the paid family and medical leave
credit is an amount equal to the applicable percentage of the
amount of wages paid to qualifying employees during any
period in which such employees are on family and medical
leave.
``(2) Applicable percentage.--For purposes of paragraph
(1), the term `applicable percentage' means 12.5 percent
increased (but not above 25 percent) by 0.25 percentage
points for each percentage point by which the rate of payment
(as described under subsection (c)(1)(B)) exceeds 50 percent.
``(b) Limitation.--
``(1) In general.--The credit allowed under subsection (a)
with respect to any employee for any taxable year shall not
exceed an amount equal to the product of the normal hourly
wage rate of such employee for each hour (or fraction
thereof) of actual services performed for the employer and
the number of hours (or fraction thereof) for which family
and medical leave is taken.
``(2) Non-hourly wage rate.--For purposes of paragraph (1),
in the case of any employee who is not paid on an hourly wage
rate, the wages of such employee shall be prorated to an
hourly wage rate under regulations established by the
Secretary.
``(3) Maximum amount of leave subject to credit.--The
amount of family and medical leave that may be taken into
account with respect to any employee under subsection (a) for
any taxable year shall not exceed 12 weeks.
``(c) Eligible Employer.--For purposes of this section--
``(1) In general.--The term `eligible employer' means any
employer who has in place a policy that meets the following
requirements:
``(A) The policy provides--
``(i) in the case of a qualifying employee who is not a
part-time employee (as defined in section 4980E(d)(4)(B)),
not less than 2 weeks of annual paid family and medical
leave, and
``(ii) in the case of a qualifying employee who is a part-
time employee, an amount of annual paid family and medical
leave that is not less than an amount which bears the same
ratio to the amount of annual paid family and medical leave
that is provided to a qualifying employee described in clause
(i) as--
``(I) the number of hours the employee is expected to work
during any week, bears to
``(II) the number of hours an equivalent qualifying
employee described in clause (i) is expected to work during
the week.
``(B) The policy requires that the rate of payment under
the program is not less than 50 percent of the wages normally
paid to such employee for services performed for the
employer.
``(2) Special rule for certain employers.--
``(A) In general.--An added employer shall not be treated
as an eligible employer unless
[[Page S7778]]
such employer provides paid family and medical leave in
compliance with a policy which ensures that the employer--
``(i) will not interfere with, restrain, or deny the
exercise of or the attempt to exercise, any right provided
under the policy, and
``(ii) will not discharge or in any other manner
discriminate against any individual for opposing any practice
prohibited by the policy.
``(B) Added employer; added employee.--For purposes of this
paragraph--
``(i) Added employee.--The term `added employee' means a
qualifying employee who is not covered by title I of the
Family and Medical Leave Act of 1993, as amended.
``(ii) Added employer.--The term `added employer' means an
eligible employer (determined without regard to this
paragraph), whether or not covered by that title I, who
offers paid family and medical leave to added employees.
``(3) Aggregation rule.--All persons which are treated as a
single employer under subsections (a) and (b) of section 52
shall be treated as a single taxpayer.
``(4) Treatment of benefits mandated or paid for by state
or local governments.--For purposes of this section, any
leave which is paid by a State or local government or
required by State or local law shall not be taken into
account in determining the amount of paid family and medical
leave provided by the employer.
``(5) No inference.--Nothing in this subsection shall be
construed as subjecting an employer to any penalty,
liability, or other consequence (other than ineligibility for
the credit allowed by reason of subsection (a) or recapturing
the benefit of such credit) for failure to comply with the
requirements of this subsection.
``(d) Qualifying Employees.--For purposes of this section,
the term `qualifying employee' means any employee (as defined
in section 3(e) of the Fair Labor Standards Act of 1938, as
amended) who--
``(1) has been employed by the employer for 1 year or more,
and
``(2) for the preceding year, had compensation not in
excess of an amount equal to 60 percent of the amount
applicable for such year under clause (i) of section
414(q)(1)(B).
``(e) Family and Medical Leave.--
``(1) In general.--Except as provided in paragraph (2), for
purposes of this section, the term `family and medical leave'
means leave for any 1 or more of the purposes described under
subparagraph (A), (B), (C), (D), or (E) of paragraph (1), or
paragraph (3), of section 102(a) of the Family and Medical
Leave Act of 1993, as amended, whether the leave is provided
under that Act or by a policy of the employer.
``(2) Exclusion.--If an employer provides paid leave as
vacation leave, personal leave, or medical or sick leave
(other than leave specifically for 1 or more of the purposes
referred to in paragraph (1)), that paid leave shall not be
considered to be family and medical leave under paragraph
(1).
``(3) Definitions.--In this subsection, the terms `vacation
leave', `personal leave', and `medical or sick leave' mean
those 3 types of leave, within the meaning of section
102(d)(2) of that Act.
``(f) Determinations Made by Secretary of Treasury.--For
purposes of this section, any determination as to whether an
employer or an employee satisfies the applicable requirements
for an eligible employer (as described in subsection (c)) or
qualifying employee (as described in subsection (d)),
respectively, shall be made by the Secretary based on such
information, to be provided by the employer, as the Secretary
determines to be necessary or appropriate.
``(g) Wages.--For purposes of this section, the term
`wages' has the meaning given such term by subsection (b) of
section 3306 (determined without regard to any dollar
limitation contained in such section). Such term shall not
include any amount taken into account for purposes of
determining any other credit allowed under this subpart.
``(h) Election to Have Credit Not Apply.--
``(1) In general.--A taxpayer may elect to have this
section not apply for any taxable year.
``(2) Other rules.--Rules similar to the rules of
paragraphs (2) and (3) of section 51(j) shall apply for
purposes of this subsection.
``(i) Termination.--This section shall not apply to wages
paid in taxable years beginning after December 31, 2019.''.
(b) Credit Part of General Business Credit.--Section 38(b)
is amended by striking ``plus'' at the end of paragraph (35),
by striking the period at the end of paragraph (36) and
inserting ``, plus'', and by adding at the end the following
new paragraph:
``(37) in the case of an eligible employer (as defined in
section 45S(c)), the paid family and medical leave credit
determined under section 45S(a).''.
(c) Credit Allowed Against AMT.--Subparagraph (B) of
section 38(c)(4) is amended by redesignating clauses (ix)
through (xi) as clauses (x) through (xii), respectively, and
by inserting after clause (viii) the following new clause:
``(ix) the credit determined under section 45S,''.
(d) Conforming Amendments.--
(1) Denial of double benefit.--Section 280C(a) is amended
by inserting ``45S(a),'' after ``45P(a),''.
(2) Election to have credit not apply.--Section 6501(m) is
amended by inserting ``45S(h),'' after ``45H(g),''.
(3) Clerical amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 is amended by
adding at the end the following new item:
``Sec. 45S. Employer credit for paid family and medical leave.''.
(e) Effective Date.--The amendments made by this section
shall apply to wages paid in taxable years beginning after
December 31, 2017.
Subpart B--Provisions Relating to Low-income Housing Credit
SEC. 13411. TREATMENT OF VETERANS' PREFERENCE AS NOT
VIOLATING GENERAL PUBLIC USE REQUIREMENTS.
(a) In General.--Subparagraph (C) of section 42(g)(9) is
amended to read as follows:
``(C) who are veterans of the Armed Forces.''.
(b) Effective Date.--The amendment made by this section
shall apply to buildings placed in service before, on, or
after the date of the enactment of this Act.
SEC. 13412. INCREASE IN CREDIT FOR CERTAIN RURAL HOUSING.
(a) In General.--Section 42(d)(5)(B) is amended by adding
at the end the following new clause:
``(vi) Certain new buildings in rural areas.--For purposes
of clause (i), a building described in subsection
(b)(1)(B)(i) which is located in a rural area (as defined in
section 520 of the Housing Act of 1949) shall be treated in
the same manner as a new building located in a difficult
development area which is designated for purposes of this
subparagraph.''.
(b) Offset.--Section 42(d)(5)(B)(i) is amended by striking
``130 percent'' both places it appears in subclauses (I) and
(II) and inserting ``125 percent''.
(c) Effective Date.--The amendments made by this section
shall apply to buildings placed in service after the date of
the enactment of this Act.
PART VI--PROVISIONS RELATED TO SPECIFIC ENTITIES AND INDUSTRIES
Subpart A--Partnership Provisions
SEC. 13501. TREATMENT OF GAIN OR LOSS OF FOREIGN PERSONS FROM
SALE OR EXCHANGE OF INTERESTS IN PARTNERSHIPS
ENGAGED IN TRADE OR BUSINESS WITHIN THE UNITED
STATES.
(a) In General.--Section 864(c) is amended by adding at the
end the following:
``(8) Gain or loss of foreign persons from sale or exchange
of certain partnership interests.--
``(A) In general.--Notwithstanding any other provision of
this subtitle, if a nonresident alien individual or foreign
corporation owns, directly or indirectly, an interest in a
partnership which is engaged in any trade or business within
the United States, gain or loss on the sale or exchange of
all (or any portion of) such interest shall be treated as
effectively connected with the conduct of such trade or
business to the extent such gain or loss does not exceed the
amount determined under subparagraph (B).
``(B) Amount treated as effectively connected.--The amount
determined under this subparagraph with respect to any
partnership interest sold or exchanged--
``(i) in the case of any gain on the sale or exchange of
the partnership interest, is--
``(I) the portion of the partner's distributive share of
the amount of gain which would have been effectively
connected with the conduct of a trade or business within the
United States if the partnership had sold all of its assets
at their fair market value as of the date of the sale or
exchange of such interest, or
``(II) zero if no gain on such deemed sale would have been
so effectively connected, and
``(ii) in the case of any loss on the sale or exchange of
the partnership interest, is--
``(I) the portion of the partner's distributive share of
the amount of loss on the deemed sale described in clause
(i)(I) which would have been so effectively connected, or
``(II) zero if no loss on such deemed sale would be have
been so effectively connected.
For purposes of this subparagraph, a partner's distributive
share of gain or loss on the deemed sale shall be determined
in the same manner as such partner's distributive share of
the non-separately stated taxable income or loss of such
partnership.
``(C) Coordination with united states real property
interests.--If a partnership described in subparagraph (A)
holds any United States real property interest (as defined in
section 897(c)) at the time of the sale or exchange of the
partnership interest, then the gain or loss treated as
effectively connected income under subparagraph (A) shall be
reduced by the amount so treated with respect to such United
States real property interest under section 897.
``(D) Sale or exchange.--For purposes of this paragraph, an
individual or corporation shall be treated as having sold or
exchanged any interest in a partnership if, under any
provision of this subtitle, gain or loss is realized from the
sale or exchange of such interest.
``(E) Secretarial authority.--The Secretary shall prescribe
such regulations as the Secretary determines appropriate for
the application of this paragraph, including regulations
which provide that, notwithstanding subparagraph (D), this
paragraph applies in a case even if gain or loss from a sale
or exchange would not be realized under any other provision
of this subtitle.''.
(b) Withholding Requirements.--Section 1446 is amended by
redesignating subsection
[[Page S7779]]
(f) as subsection (g) and by inserting after subsection (e)
the following:
``(f) Special Rules for Withholding on Sales of Partnership
Interests.--
``(1) In general.--Except as provided in this subsection,
if any portion of the gain (if any) on any disposition of an
interest in a partnership would be treated under section
864(c)(8) as effectively connected with the conduct of a
trade or business within the United States, the transferee
shall be required to deduct and withhold a tax equal to 10
percent of the amount realized on the disposition.
``(2) Exception if nonforeign affidavit furnished.--
``(A) In general.--No person shall be required to deduct
and withhold any amount under paragraph (1) with respect to
any disposition if the transferor furnishes to the transferee
an affidavit by the transferor stating, under penalty of
perjury, the transferor's United States taxpayer
identification number and that the transferor is not a
foreign person.
``(B) False affidavit.--Subparagraph (A) shall not apply to
any disposition if--
``(i) the transferee has actual knowledge that the
affidavit is false, or the transferee receives a notice (as
described in section 1445(d)) from a transferor's agent or
transferee's agent that such affidavit or statement is false,
or
``(ii) the Secretary by regulations requires the transferee
to furnish a copy of such affidavit or statement to the
Secretary and the transferee fails to furnish a copy of such
affidavit or statement to the Secretary at such time and in
such manner as required by such regulations.
``(C) Rules for agents.--The rules of section 1445(d) shall
apply to a transferor's agent or transferee's agent with
respect to any affidavit described in subparagraph (A) in the
same manner as such rules apply with respect to the
disposition of a United States real property interest under
such section.
``(3) Authority of secretary to prescribe reduced amount.--
At the request of the transferor or transferee, the Secretary
may prescribe a reduced amount to be withheld under this
section if the Secretary determines that to substitute such
reduced amount will not jeopardize the collection of the tax
imposed under this title with respect to gain treated under
section 864(c)(8) as effectively connected with the conduct
of a trade or business with in the United States.
``(4) Partnership to withhold amounts not withheld by the
transferee.--If a transferee fails to withhold any amount
required to be withheld under paragraph (1), the partnership
shall be required to deduct and withhold from distributions
to the transferee a tax in an amount equal to the amount the
transferee failed to withhold (plus interest under this title
on such amount).
``(5) Definitions.--Any term used in this subsection which
is also used under section 1445 shall have the same meaning
as when used in such section.
``(6) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of
this subsection, including regulations providing for
exceptions from the provisions of this subsection.''.
(c) Effective Date.--The amendments made by this section
shall apply to sales and exchanges on or after November 27,
2017.
SEC. 13502. MODIFY DEFINITION OF SUBSTANTIAL BUILT-IN LOSS IN
THE CASE OF TRANSFER OF PARTNERSHIP INTEREST.
(a) In General.--Paragraph (1) of section 743(d) is to read
as follows:
``(1) In general.--For purposes of this section, a
partnership has a substantial built-in loss with respect to a
transfer of an interest in the partnership if--
``(A) the partnership's adjusted basis in the partnership
property exceeds by more than $250,000 the fair market value
of such property, or
``(B) the transferee partner would be allocated a loss of
more than $250,000 if the partnership assets were sold for
cash equal to their fair market value immediately after such
transfer.''.
(b) Effective Date.--The amendments made by this section
shall apply to transfers of partnership interests after
December 31, 2017.
SEC. 13503. CHARITABLE CONTRIBUTIONS AND FOREIGN TAXES TAKEN
INTO ACCOUNT IN DETERMINING LIMITATION ON
ALLOWANCE OF PARTNER'S SHARE OF LOSS.
(a) In General.--Subsection (d) of section 704 is amended--
(1) by striking ``A partner's distributive share'' and
inserting the following:
``(1) In general.--A partner's distributive share'',
(2) by striking ``Any excess of such loss'' and inserting
the following:
``(2) Carryover.--Any excess of such loss'', and
(3) by adding at the end the following new paragraph:
``(3) Special rules.--
``(A) In general.--In determining the amount of any loss
under paragraph (1), there shall be taken into account the
partner's distributive share of amounts described in
paragraphs (4) and (6) of section 702(a).
``(B) Exception.--In the case of a charitable contribution
of property whose fair market value exceeds its adjusted
basis, subparagraph (A) shall not apply to the extent of the
partner's distributive share of such excess.''.
(b) Effective Date.--The amendments made by this section
shall apply to partnership taxable years beginning after
December 31, 2017.
Subpart B--Insurance Reforms
SEC. 13511. NET OPERATING LOSSES OF LIFE INSURANCE COMPANIES.
(a) In General.--Section 805(b) is amended by striking
paragraph (4) and by redesignating paragraph (5) as paragraph
(4).
(b) Conforming Amendments.--
(1) Part I of subchapter L of chapter 1 is amended by
striking section 810 (and by striking the item relating to
such section in the table of sections for such part).
(2)(A) Part III of subchapter L of chapter 1 is amended by
striking section 844 (and by striking the item relating to
such section in the table of sections for such part).
(B) Section 831(b)(3) is amended by striking ``except as
provided in section 844,''
(3) Section 381 is amended by striking subsection (d).
(4) Section 805(a)(4)(B)(ii) is amended to read as follows:
``(ii) the deduction allowed under section 172,''.
(5) Section 805(a) is amended by striking paragraph (5).
(6) Section 805(b)(2)(A)(iv) is amended to read as follows:
``(iv) any net operating loss carryback to the taxable year
under section 172, and''.
(7) Section 953(b)(1)(B) is amended to read as follows:
``(B) So much of section 805(a)(8) as relates to the
deduction allowed under section 172.''.
(8) Section 1351(i)(3) is amended by striking ``or the
operations loss deduction under section 810,''.
(c) Effective Date.--The amendments made by this section
shall apply to losses arising in taxable years beginning
after December 31, 2017.
SEC. 13512. REPEAL OF SMALL LIFE INSURANCE COMPANY DEDUCTION.
(a) In General.--Part I of subchapter L of chapter 1 is
amended by striking section 806 (and by striking the item
relating to such section in the table of sections for such
part).
(b) Conforming Amendments.--
(1) Section 453B(e) is amended--
(A) by striking ``(as defined in section 806(b)(3))'' in
paragraph (2)(B), and
(B) by adding at the end the following new paragraph:
``(3) Noninsurance business.--
``(A) In general.--For purposes of this subsection, the
term `noninsurance business' means any activity which is not
an insurance business.
``(B) Certain activities treated as insurance businesses.--
For purposes of subparagraph (A), any activity which is not
an insurance business shall be treated as an insurance
business if--
``(i) it is of a type traditionally carried on by life
insurance companies for investment purposes, but only if the
carrying on of such activity (other than in the case of real
estate) does not constitute the active conduct of a trade or
business, or
``(ii) it involves the performance of administrative
services in connection with plans providing life insurance,
pension, or accident and health benefits.''.
(2) Section 465(c)(7)(D)(v)(II) is amended by striking
``section 806(b)(3)'' and inserting ``section 453B(e)(3)''.
(3) Section 801(a)(2) is amended by striking subparagraph
(C).
(4) Section 804 is amended by striking ``means--'' and all
that follows and inserting ``means the general deductions
provided in section 805.''.
(5) Section 805(a)(4)(B), as amended by this Act, is
amended by striking clause (i) and by redesignating clauses
(ii), (iii), and (iv) as clauses (i), (ii), and (iii),
respectively.
(6) Section 805(b)(2)(A), as amended by this Act, is
amended by striking clause (iii) and by redesignating clauses
(iv) and (v) as clauses (iii) and (iv), respectively.
(7) Section 842(c) is amended by striking paragraph (1) and
by redesignating paragraphs (2) and (3) as paragraphs (1) and
(2), respectively.
(8) Section 953(b)(1), as amended by section 13511, is
amended by striking subparagraph (A) and by redesignating
subparagraphs (B) and (C) as subparagraphs (A) and (B),
respectively.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13513. ADJUSTMENT FOR CHANGE IN COMPUTING RESERVES.
(a) In General.--Paragraph (1) of section 807(f) is amended
to read as follows:
``(1) Treatment as change in method of accounting.--If the
basis for determining any item referred to in subsection (c)
as of the close of any taxable year differs from the basis
for such determination as of the close of the preceding
taxable year, then so much of the difference between--
``(A) the amount of the item at the close of the taxable
year, computed on the new basis, and
``(B) the amount of the item at the close of the taxable
year, computed on the old basis,
as is attributable to contracts issued before the taxable
year shall be taken into account under section 481 as
adjustments attributable to a change in method of accounting
initiated by the taxpayer and made with the consent of the
Secretary.''.
[[Page S7780]]
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13514. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS TO
SHAREHOLDERS FROM PRE-1984 POLICYHOLDERS
SURPLUS ACCOUNT.
(a) In General.--Subpart D of part I of subchapter L is
amended by striking section 815 (and by striking the item
relating to such section in the table of sections for such
subpart).
(b) Conforming Amendment.--Section 801 is amended by
striking subsection (c).
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
(d) Phased Inclusion of Remaining Balance of Policyholders
Surplus Accounts.--In the case of any stock life insurance
company which has a balance (determined as of the close of
such company's last taxable year beginning before January 1,
2018) in an existing policyholders surplus account (as
defined in section 815 of the Internal Revenue Code of 1986,
as in effect before its repeal), the tax imposed by section
801 of such Code for the first 8 taxable years beginning
after December 31, 2017, shall be the amount which would be
imposed by such section for such year on the sum of--
(1) life insurance company taxable income for such year
(within the meaning of such section 801 but not less than
zero), plus
(2) \1/8\ of such balance.
SEC. 13515. MODIFICATION OF PRORATION RULES FOR PROPERTY AND
CASUALTY INSURANCE COMPANIES.
(a) In General.--Section 832(b)(5)(B) is amended--
(1) by striking ``15 percent'' and inserting ``the
applicable percentage'', and
(2) by inserting at the end the following new sentence:
``For purposes of this subparagraph, the applicable
percentage is 5.25 percent divided by the highest rate in
effect under section 11(b).''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13516. REPEAL OF SPECIAL ESTIMATED TAX PAYMENTS.
(a) In General.--Part III of subchapter L of chapter 1 is
amended by striking section 847 (and by striking the item
relating to such section in the table of sections for such
part).
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13517. COMPUTATION OF LIFE INSURANCE TAX RESERVES.
(a) In General.--
(1) Computation of reserves.--Section 807(c) is amended to
read as follows:
``(c) Items Taken Into Account.--The items referred to in
subsections (a) and (b) are as follows--
``(1) The life insurance reserves (as defined in section
816(b)).
``(2) The unearned premiums and unpaid losses included in
total reserves under section 816(c)(2).
``(3) The amounts (discounted at the appropriate rate of
interest) necessary to satisfy the obligations under
insurance and annuity contracts, but only if such obligations
do not involve (at the time with respect to which the
computation is made under this paragraph) life, accident, or
health contingencies.
``(4) Dividend accumulations, and other amounts, held at
interest in connection with insurance and annuity contracts.
``(5) Premiums received in advance, and liabilities for
premium deposit funds.
``(6) Reasonable special contingency reserves under
contracts of group term life insurance or group accident and
health insurance which are established and maintained for the
provision of insurance on retired lives, for premium
stabilization, or a combination thereof.
For purposes of paragraph (3), the appropriate rate of
interest is the highest rate or rates permitted to be used to
discount the obligations by the National Association of
Insurance Commissioners as of the date the reserve is
determined. In no case shall the amount determined under
paragraph (3) for any contract be less than the net surrender
value of such contract. For purposes of paragraph (2) and
section 805(a)(1), the amount of the unpaid losses (other
than losses on life insurance contracts) shall be the amount
of the discounted unpaid losses as defined in section 846.''.
(2) Section 807(d) is amended--
(A) by striking paragraphs (1), (2), (4), and (5),
(B) by redesignating paragraph (6) as paragraph (4),
(C) by inserting before paragraph (3) the following new
paragraphs:
``(1) Determination of reserve.--
``(A) In general.--For purposes of this part (other than
section 816), the amount of the life insurance reserves for
any contract (other than a contract to which subparagraph (B)
applies) shall be the greater of--
``(i) the net surrender value of such contract, or
``(ii) 92.87 percent of the reserve determined under
paragraph (2).
``(B) Variable contracts.--For purposes of this part (other
than section 816), the amount of the life insurance reserves
for a variable contract shall be equal to the sum of--
``(i) the greater of--
``(I) the net surrender value of such contract, or
``(II) the portion of the reserve that is separately
accounted for under section 817, plus
``(ii) 92.87 percent of the excess (if any) of the reserve
determined under paragraph (2) over the amount in clause (i).
``(C) Statutory cap.--In no event shall the reserves
determined under subparagraphs (A) or (B) for any contract as
of any time exceed the amount which would be taken into
account with respect to such contract as of such time in
determining statutory reserves (as defined in paragraph (4)).
``(2) Amount of reserve.--The amount of the reserve
determined under this paragraph with respect to any contract
shall be determined by using the tax reserve method
applicable to such contract.'',
(D) by striking ``(as of the date of issuance)'' in
paragraph (3)(A)(iv)(I) and inserting ``(as of the date the
reserve is determined)'',
(E) by striking ``as of the date of the issuance of'' in
paragraph (3)(A)(iv)(II) and inserting ``as of the date the
reserve is determined for'',
(F) by striking ``in effect on the date of the issuance of
the contract'' in paragraph (3)(B)(i) and inserting
``applicable to the contract and in effect as of the date the
reserve is determined'', and
(G) by striking ``in effect on the date of the issuance of
the contract'' in paragraph (3)(B)(ii) and inserting
``applicable to the contract and in effect as of the date the
reserve is determined''.
(3) Section 807(e) is amended--
(A) by striking paragraphs (2) and (5),
(B) by redesignating paragraphs (3), (4), (6), and (7) as
paragraphs (2), (3), (4), and (5), respectively,
(C) by amending paragraph (2) (as so redesignated) to read
as follows:
``(2) Qualified supplemental benefits.--
``(A) Qualified supplemental benefits treated separately.--
For purposes of this part, the amount of the life insurance
reserve for any qualified supplemental benefit shall be
computed separately as though such benefit were under a
separate contract.
``(B) Qualified supplemental benefit.--For purposes of this
paragraph, the term `qualified supplemental benefit' means
any supplemental benefit described in subparagraph (C) if--
``(i) there is a separately identified premium or charge
for such benefit, and
``(ii) any net surrender value under the contract
attributable to any other benefit is not available to fund
such benefit.
``(C) Supplemental benefits.--For purposes of this
paragraph, the supplemental benefits described in this
subparagraph are any--
``(i) guaranteed insurability,
``(ii) accidental death or disability benefit,
``(iii) convertibility,
``(iv) disability waiver benefit, or
``(v) other benefit prescribed by regulations,
which is supplemental to a contract for which there is a
reserve described in subsection (c).'', and
(D) by adding at the end the following new paragraph:
``(6) Reporting rules.--The Secretary shall require
reporting (at such time and in such manner as the Secretary
shall prescribe) with respect to the opening balance and
closing balance of reserves and with respect to the method of
computing reserves for purposes of determining income.''.
(4) Section 7702 is amended--
(A) by striking clause (i) of subsection (c)(3)(B) and
inserting the following:
``(i) reasonable mortality charges which meet the
requirements prescribed in regulations to be promulgated by
the Secretary or that do not exceed the mortality charges
specified in the prevailing commissioners' standard tables as
defined in subsection (f)(10),'' and
(B) by adding at the end of subsection (f) the following
new paragraph:
``(10) Prevailing commissioners' standard tables.--For
purposes of subsection (c)(3)(B)(i), the term `prevailing
commissioners' standard tables' means the most recent
commissioners' standard tables prescribed by the National
Association of Insurance Commissioners which are permitted to
be used in computing reserves for that type of contract under
the insurance laws of at least 26 States when the contract
was issued. If the prevailing commissioners' standard tables
as of the beginning of any calendar year (hereinafter in this
paragraph referred to as the `year of change') are different
from the prevailing commissioners' standard tables as of the
beginning of the preceding calendar year, the issuer may use
the prevailing commissioners' standard tables as of the
beginning of the preceding calendar year with respect to any
contract issued after the change and before the close of the
3-year period beginning on the first day of the year of
change.''.
(b) Conforming Amendments.--
(1) Section 808 is amended by adding at the end the
following new subsection:
``(g) Prevailing State Assumed Interest Rate.--For purposes
of this subchapter--
``(1) In general.--The term `prevailing State assumed
interest rate' means, with respect to any contract, the
highest assumed interest rate permitted to be used in
computing life insurance reserves for insurance contracts or
annuity contracts (as the case may be) under the insurance
laws of at least 26 States. For purposes of the preceding
sentence, the effect of nonforfeiture laws of a
[[Page S7781]]
State on interest rates for reserves shall not be taken into
account.
``(2) When rate determined.--The prevailing State assumed
interest rate with respect to any contract shall be
determined as of the beginning of the calendar year in which
the contract was issued.''.
(2) Paragraph (1) of section 811(d) is amended by striking
``the greater of the prevailing State assumed interest rate
or applicable Federal interest rate in effect under section
807'' and inserting ``the interest rate in effect under
section 808(g)''.
(3) Subparagraph (A) of section 846(f)(6) is amended by
striking ``except that'' and all that follows and inserting
``except that the limitation of subsection (a)(3) shall
apply, and''.
(4) Subparagraph (B) of section 954(i)(5) is amended by
striking ``shall apply, and''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
(2) Transition rule.--For the first taxable year beginning
after December 31, 2017, the reserve with respect to any
contract (as determined under section 807(d)(2) of the
Internal Revenue Code of 1986) at the end of the preceding
taxable year shall be determined as if the amendments made by
this section had applied to such reserve in such preceding
taxable year.
(3) Transition relief.--
(A) In general.--If--
(i) the reserve determined under section 807(d)(2) of the
Internal Revenue Code of 1986 (determined without regard to
the amendments made by this section) with respect to any
contract as of the close of the year preceding the first
taxable year beginning after December 31, 2017, differs from
(ii) the reserve which would have been determined with
respect to such contract as of the close of such taxable year
under such section determined without regard to paragraph
(2),
then the difference between the amount of the reserve
described in clause (i) and the amount of the reserve
described in clause (ii) shall be taken into account under
the method provided in subparagraph (B).
(B) Method.--The method provided in this subparagraph is as
follows:
(i) If the amount determined under subparagraph (A)(i)
exceeds the amount determined under subparagraph (A)(ii), 1/8
of such excess shall be taken into account, for each of the 8
succeeding taxable years, as a deduction under section
805(a)(2) or 832(c)(4) of such Code, as applicable.
(ii) If the amount determined under subparagraph (A)(ii)
exceeds the amount determined under subparagraph (A)(i), 1/8
of such excess shall be included in gross income, for each of
the 8 succeeding taxable years, under section 803(a)(2) or
832(b)(1)(C) of such Code, as applicable.
SEC. 13518. MODIFICATION OF RULES FOR LIFE INSURANCE
PRORATION FOR PURPOSES OF DETERMINING THE
DIVIDENDS RECEIVED DEDUCTION.
(a) In General.--Section 812 is amended to read as follows:
``SEC. 812. DEFINITION OF COMPANY'S SHARE AND POLICYHOLDER'S
SHARE.
``(a) Company's Share.--For purposes of section 805(a)(4),
the term `company's share' means, with respect to any taxable
year beginning after December 31, 2017, 70 percent.
``(b) Policyholder's Share.--For purposes of section 807,
the term `policyholder's share' means, with respect to any
taxable year beginning after December 31, 2017, 30
percent.''.
(b) Conforming Amendment.--Section 817A(e)(2) is amended by
striking ``, 807(d)(2)(B), and 812'' and inserting ``and
807(d)(2)(B)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13519. CAPITALIZATION OF CERTAIN POLICY ACQUISITION
EXPENSES.
(a) In General.--
(1) Section 848(a)(2) is amended by striking ``120-month''
and inserting ``180-month''.
(2) Section 848(c)(1) is amended by striking ``1.75
percent'' and inserting ``2.1 percent''.
(3) Section 848(c)(2) is amended by striking ``2.05
percent'' and inserting ``2.46 percent''.
(4) Section 848(c)(3) is amended by striking ``7.7
percent'' and inserting ``9.24 percent''.
(b) Conforming Amendments.--Section 848(b)(1) is amended by
striking ``120-month'' and inserting ``180-month''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to net premiums for taxable years beginning after
December 31, 2017.
(2) Transition rule.--Specified policy acquisition expenses
first required to be capitalized in a taxable year beginning
before January 1, 2018, will continue to be allowed as a
deduction ratably over the 120-month period beginning with
the first month in the second half of such taxable year.
SEC. 13520. TAX REPORTING FOR LIFE SETTLEMENT TRANSACTIONS.
(a) In General.--Subpart B of part III of subchapter A of
chapter 61, as amended by section 13306, is amended by adding
at the end the following new section:
``SEC. 6050Y. RETURNS RELATING TO CERTAIN LIFE INSURANCE
CONTRACT TRANSACTIONS.
``(a) Requirement of Reporting of Certain Payments.--
``(1) In general.--Every person who acquires a life
insurance contract or any interest in a life insurance
contract in a reportable policy sale during any taxable year
shall make a return for such taxable year (at such time and
in such manner as the Secretary shall prescribe) setting
forth--
``(A) the name, address, and TIN of such person,
``(B) the name, address, and TIN of each recipient of
payment in the reportable policy sale,
``(C) the date of such sale,
``(D) the name of the issuer of the life insurance contract
sold and the policy number of such contract, and
``(E) the amount of each payment.
``(2) Statement to be furnished to persons with respect to
whom information is required.--Every person required to make
a return under this subsection shall furnish to each person
whose name is required to be set forth in such return a
written statement showing--
``(A) the name, address, and phone number of the
information contact of the person required to make such
return, and
``(B) the information required to be shown on such return
with respect to such person, except that in the case of an
issuer of a life insurance contract, such statement is not
required to include the information specified in paragraph
(1)(E).
``(b) Requirement of Reporting of Seller's Basis in Life
Insurance Contracts.--
``(1) In general.--Upon receipt of the statement required
under subsection (a)(2) or upon notice of a transfer of a
life insurance contract to a foreign person, each issuer of a
life insurance contract shall make a return (at such time and
in such manner as the Secretary shall prescribe) setting
forth--
``(A) the name, address, and TIN of the seller who
transfers any interest in such contract in such sale,
``(B) the investment in the contract (as defined in section
72(e)(6)) with respect to such seller, and
``(C) the policy number of such contract.
``(2) Statement to be furnished to persons with respect to
whom information is required.--Every person required to make
a return under this subsection shall furnish to each person
whose name is required to be set forth in such return a
written statement showing--
``(A) the name, address, and phone number of the
information contact of the person required to make such
return, and
``(B) the information required to be shown on such return
with respect to each seller whose name is required to be set
forth in such return.
``(c) Requirement of Reporting With Respect to Reportable
Death Benefits.--
``(1) In general.--Every person who makes a payment of
reportable death benefits during any taxable year shall make
a return for such taxable year (at such time and in such
manner as the Secretary shall prescribe) setting forth--
``(A) the name, address, and TIN of the person making such
payment,
``(B) the name, address, and TIN of each recipient of such
payment,
``(C) the date of each such payment,
``(D) the gross amount of each such payment, and
``(E) such person's estimate of the investment in the
contract (as defined in section 72(e)(6)) with respect to the
buyer.
``(2) Statement to be furnished to persons with respect to
whom information is required.--Every person required to make
a return under this subsection shall furnish to each person
whose name is required to be set forth in such return a
written statement showing--
``(A) the name, address, and phone number of the
information contact of the person required to make such
return, and
``(B) the information required to be shown on such return
with respect to each recipient of payment whose name is
required to be set forth in such return.
``(d) Definitions.--For purposes of this section:
``(1) Payment.--The term `payment' means, with respect to
any reportable policy sale, the amount of cash and the fair
market value of any consideration transferred in the sale.
``(2) Reportable policy sale.--The term `reportable policy
sale' has the meaning given such term in section
101(a)(3)(B).
``(3) Issuer.--The term `issuer' means any life insurance
company that bears the risk with respect to a life insurance
contract on the date any return or statement is required to
be made under this section.
``(4) Reportable death benefits.--The term `reportable
death benefits' means amounts paid by reason of the death of
the insured under a life insurance contract that has been
transferred in a reportable policy sale.''.
(b) Clerical Amendment.--The table of sections for subpart
B of part III of subchapter A of chapter 61, as amended by
section 13306, is amended by inserting after the item
relating to section 6050X the following new item:
``Sec. 6050Y. Returns relating to certain life insurance contract
transactions.''.
(c) Conforming Amendments.--
(1) Subsection (d) of section 6724 is amended--
(A) by striking ``or'' at the end of clause (xxiv) of
paragraph (1)(B), by striking ``and'' at the end of clause
(xxv) of such paragraph and inserting ``or'', and by
inserting after such clause (xxv) the following new clause:
``(xxvi) section 6050Y (relating to returns relating to
certain life insurance contract transactions), and'', and
[[Page S7782]]
(B) by striking ``or'' at the end of subparagraph (HH) of
paragraph (2), by striking the period at the end of
subparagraph (II) of such paragraph and inserting ``, or'',
and by inserting after such subparagraph (II) the following
new subparagraph:
``(JJ) subsection (a)(2), (b)(2), or (c)(2) of section
6050Y (relating to returns relating to certain life insurance
contract transactions).''.
(2) Section 6047 is amended--
(A) by redesignating subsection (g) as subsection (h),
(B) by inserting after subsection (f) the following new
subsection:
``(g) Information Relating to Life Insurance Contract
Transactions.--This section shall not apply to any
information which is required to be reported under section
6050Y.'', and
(C) by adding at the end of subsection (h), as so
redesignated, the following new paragraph:
``(4) For provisions requiring reporting of information
relating to certain life insurance contract transactions, see
section 6050Y.''.
(d) Effective Date.--The amendments made by this section
shall apply to--
(1) reportable policy sales (as defined in section
6050Y(d)(2) of the Internal Revenue Code of 1986 (as added by
subsection (a)) after December 31, 2017, and
(2) reportable death benefits (as defined in section
6050Y(d)(4) of such Code (as added by subsection (a)) paid
after December 31, 2017.
SEC. 13521. CLARIFICATION OF TAX BASIS OF LIFE INSURANCE
CONTRACTS.
(a) Clarification With Respect to Adjustments.--Paragraph
(1) of section 1016(a) is amended by striking subparagraph
(A) and all that follows and inserting the following:
``(A) for--
``(i) taxes or other carrying charges described in section
266; or
``(ii) expenditures described in section 173 (relating to
circulation expenditures),
for which deductions have been taken by the taxpayer in
determining taxable income for the taxable year or prior
taxable years; or
``(B) for mortality, expense, or other reasonable charges
incurred under an annuity or life insurance contract;''.
(b) Effective Date.--The amendment made by this section
shall apply to transactions entered into after August 25,
2009.
SEC. 13522. EXCEPTION TO TRANSFER FOR VALUABLE CONSIDERATION
RULES.
(a) In General.--Subsection (a) of section 101 is amended
by inserting after paragraph (2) the following new paragraph:
``(3) Exception to valuable consideration rules for
commercial transfers.--
``(A) In general.--The second sentence of paragraph (2)
shall not apply in the case of a transfer of a life insurance
contract, or any interest therein, which is a reportable
policy sale.
``(B) Reportable policy sale.--For purposes of this
paragraph, the term `reportable policy sale' means the
acquisition of an interest in a life insurance contract,
directly or indirectly, if the acquirer has no substantial
family, business, or financial relationship with the insured
apart from the acquirer's interest in such life insurance
contract. For purposes of the preceding sentence, the term
`indirectly' applies to the acquisition of an interest in a
partnership, trust, or other entity that holds an interest in
the life insurance contract.''.
(b) Conforming Amendment.--Paragraph (1) of section 101(a)
is amended by striking ``paragraph (2)'' and inserting
``paragraphs (2) and (3)''.
(c) Effective Date.--The amendments made by this section
shall apply to transfers after December 31, 2017.
Subpart C--Banks and Financial Instruments
SEC. 13531. LIMITATION ON DEDUCTION FOR FDIC PREMIUMS.
(a) In General.--Section 162, as amended by sections 13307
and 13308, is amended by redesignating subsection (s) as
subsection (t) and by inserting after subsection (r) the
following new subsection:
``(s) Disallowance of FDIC Premiums Paid by Certain Large
Financial Institutions.--
``(1) In general.--No deduction shall be allowed for the
applicable percentage of any FDIC premium paid or incurred by
the taxpayer.
``(2) Exception for small institutions.--Paragraph (1)
shall not apply to any taxpayer for any taxable year if the
total consolidated assets of such taxpayer (determined as of
the close of such taxable year) do not exceed
$10,000,000,000.
``(3) Applicable percentage.--For purposes of this
subsection, the term `applicable percentage' means, with
respect to any taxpayer for any taxable year, the ratio
(expressed as a percentage but not greater than 100 percent)
which--
``(A) the excess of--
``(i) the total consolidated assets of such taxpayer
(determined as of the close of such taxable year), over
``(ii) $10,000,000,000, bears to
``(B) $40,000,000,000.
``(4) FDIC premiums.--For purposes of this subsection, the
term `FDIC premium' means any assessment imposed under
section 7(b) of the Federal Deposit Insurance Act (12 U.S.C.
1817(b)).
``(5) Total consolidated assets.--For purposes of this
subsection, the term `total consolidated assets' has the
meaning given such term under section 165 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (12 U.S.C.
5365).
``(6) Aggregation rule.--
``(A) In general.--Members of an expanded affiliated group
shall be treated as a single taxpayer for purposes of
applying this subsection.
``(B) Expanded affiliated group.--
``(i) In general.--For purposes of this paragraph, the term
`expanded affiliated group' means an affiliated group as
defined in section 1504(a), determined--
``(I) by substituting `more than 50 percent' for `at least
80 percent' each place it appears, and
``(II) without regard to paragraphs (2) and (3) of section
1504(b).
``(ii) Control of non-corporate entities.--A partnership or
any other entity (other than a corporation) shall be treated
as a member of an expanded affiliated group if such entity is
controlled (within the meaning of section 954(d)(3)) by
members of such group (including any entity treated as a
member of such group by reason of this clause).''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13532. REPEAL OF ADVANCE REFUNDING BONDS.
(a) In General.--Paragraph (1) of section 149(d) is amended
by striking ``as part of an issue described in paragraph (2),
(3), or (4).'' and inserting ``to advance refund another
bond.''.
(b) Conforming Amendments.--
(1) Section 149(d) is amended by striking paragraphs (2),
(3), (4), and (6) and by redesignating paragraphs (5) and (7)
as paragraphs (2) and (3).
(2) Section 148(f)(4)(C) is amended by striking clause
(xiv) and by redesignating clauses (xv) to (xvii) as clauses
(xiv) to (xvi).
(c) Effective Date.--The amendments made by this section
shall apply to advance refunding bonds issued after December
31, 2017.
SEC. 13533. COST BASIS OF SPECIFIED SECURITIES DETERMINED
WITHOUT REGARD TO IDENTIFICATION.
(a) In General.--Section 1012 is amended by adding at the
end the following new subsection:
``(e) Cost Basis of Specified Securities Determined Without
Regard to Identification.--
``(1) In general.--Unless the Secretary permits the use of
an average basis method for determining cost, in the case of
the sale, exchange, or other disposition of a specified
security (within the meaning of section 6045(g)(3)(B)), the
basis (and holding period) of such security shall be
determined on a first-in first-out basis.
``(2) Exception.--In the case of a sale, exchange, or other
disposition of a specified security by a regulated investment
company (as defined in section 851(a)), paragraph (1) shall
not apply.''.
(b) Conforming Amendments.--
(1) Section 1012(c)(1) is amended by striking ``the
conventions prescribed by regulations under this section''
and inserting ``the method applicable for determining the
cost of such security''.
(2) Section 1012(c)(2)(A) is amended by inserting ``(as in
effect prior to the enactment of the Tax Cuts and Jobs Act)''
after ``this section''.
(3) Section 6045(g)(2)(B)(i)(I) is amended by striking
``unless the customer notifies the broker by means of making
an adequate identification of the stock sold or
transferred''.
(c) Effective Date.--The amendments made by this section
shall apply to sales, exchanges, and other dispositions after
December 31, 2017.
Subpart D--S Corporations
SEC. 13541. EXPANSION OF QUALIFYING BENEFICIARIES OF AN
ELECTING SMALL BUSINESS TRUST.
(a) No Look-Through for Eligibility Purposes.--Section
1361(c)(2)(B)(v) is amended by adding at the end the
following new sentence: ``This clause shall not apply for
purposes of subsection (b)(1)(C).''.
(b) Effective Date.--The amendment made by this section
shall take effect on January 1, 2018.
SEC. 13542. CHARITABLE CONTRIBUTION DEDUCTION FOR ELECTING
SMALL BUSINESS TRUSTS.
(a) In General.--Section 641(c)(2) is amended by inserting
after subparagraph (D) the following new subparagraph:
``(E)(i) Section 642(c) shall not apply.
``(ii) For purposes of section 170(b)(1)(G), adjusted gross
income shall be computed in the same manner as in the case of
an individual, except that the deductions for costs which are
paid or incurred in connection with the administration of the
trust and which would not have been incurred if the property
were not held in such trust shall be treated as allowable in
arriving at adjusted gross income.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13543. 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 sub-section:
``(d) Adjustments attributable to conversion from S
corporation to C corporation.--(1) In General.--In the case
of an eligible terminated S corporation, any increase in tax
under this chapter by reason of an adjustment required
[[Page S7783]]
by subsection (a)(2), and 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.''
(b) In General.--Section 1371 is amended by adding at the
end the following new subsection:
``(f) Cash Distributions Following Post-termination
Transition Period.--
``(1) In general.--In the case of a distribution of money
by an eligible terminated S corporation 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.
``(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.''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions after the date of the enactment
of this Act.
PART VII--EMPLOYMENT
Subpart A--Compensation
SEC. 13601. MODIFICATION OF LIMITATION ON EXCESSIVE EMPLOYEE
REMUNERATION.
(a) Repeal of Performance-based Compensation and Commission
Exceptions for Limitation on Excessive Employee
Remuneration.--
(1) In general.--Paragraph (4) of section 162(m) is amended
by striking subparagraphs (B) and (C) and by redesignating
subparagraphs (D), (E), (F), and (G) as subparagraphs (B),
(C), (D), and (E), respectively.
(2) Conforming amendments.--
(A) Paragraphs (5)(E) and (6)(D) of section 162(m) are each
amended by striking ``subparagraphs (B), (C), and (D)'' and
inserting ``subparagraph (B)''.
(B) Paragraphs (5)(G) and (6)(G) of section 162(m) are each
amended by striking ``(F) and (G)'' and inserting ``(D) and
(E)''.
(b) Modification of Definition of Covered Employees.--
Paragraph (3) of section 162(m) is amended--
(1) in subparagraph (A), by striking ``as of the close of
the taxable year, such employee is the chief executive
officer of the taxpayer or is'' and inserting ``such employee
is the principal executive officer or principal financial
officer of the taxpayer at any time during the taxable year,
or was'',
(2) in subparagraph (B)--
(A) by striking ``4'' and inserting ``3'', and
(B) by striking ``(other than the chief executive
officer)'' and inserting ``(other than any individual
described in subparagraph (A))'', and
(3) by striking ``or'' at the end of subparagraph (A), by
striking the period at the end of subparagraph (B) and
inserting ``, or'', and by adding at the end the following:
``(C) was a covered employee of the taxpayer (or any
predecessor) for any preceding taxable year beginning after
December 31, 2016.''.
(c) Expansion of Applicable Employer.--
(1) In general.--Section 162(m)(2) is amended to read as
follows:
``(2) Publicly held corporation.--For purposes of this
subsection, the term `publicly held corporation' means any
corporation which is an issuer (as defined in section 3 of
the Securities Exchange Act of 1934 (15 U.S.C. 78c))--
``(A) the securities of which are required to be registered
under section 12 of such Act (15 U.S.C. 78l), or
``(B) that is required to file reports under section 15(d)
of such Act (15 U.S.C. 78o(d)).''.
(2) Conforming amendment.--Section 162(m)(3), as amended by
subsection (b), is amended by adding at the end the following
flush sentence:
``Such term shall include any employee who would be described
in subparagraph (B) if the reporting described in such
subparagraph were required as so described.''.
(d) Special Rule for Remuneration Paid to Beneficiaries,
etc.--Paragraph (4) of section 162(m), as amended by
subsection (a), is amended by adding at the end the following
new subparagraph:
``(F) Special rule for remuneration paid to beneficiaries,
etc.--Remuneration shall not fail to be applicable employee
remuneration merely because it is includible in the income
of, or paid to, a person other than the covered employee,
including after the death of the covered employee.''.
(e) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2017.
(2) Exception for binding contracts.--The amendments made
by this section shall not apply to remuneration which is
pursuant to a written binding contract which was in effect on
November 2, 2017, and which was not modified in any material
respect on or after such date.
SEC. 13602. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZATION
EXECUTIVE COMPENSATION.
(a) In General.--Subchapter D of chapter 42 is amended by
adding at the end the following new section:
``SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE
COMPENSATION.
``(a) Tax Imposed.--There is hereby imposed a tax equal to
20 percent of the sum of--
``(1) so much of the remuneration paid (other than any
excess parachute payment) by an applicable tax-exempt
organization for the taxable year with respect to employment
of any covered employee in excess of $1,000,000, plus
``(2) any excess parachute payment paid by such an
organization to any covered employee.
For purposes of the preceding sentence, remuneration shall be
treated as paid when there is no substantial risk of
forfeiture of the rights to such remuneration.
``(b) Liability for Tax.--The employer shall be liable for
the tax imposed under subsection (a).
``(c) Definitions and Special Rules.--For purposes of this
section--
``(1) Applicable tax-exempt organization.--The term
`applicable tax-exempt organization' means any organization
which for the taxable year--
``(A) is exempt from taxation under section 501(a),
``(B) is a farmers' cooperative organization described in
section 521(b)(1),
``(C) has income excluded from taxation under section
115(1), or
``(D) is a political organization described in section
527(e)(1).
``(2) Covered employee.--For purposes of this section, the
term `covered employee' means any employee (including any
former employee) of an applicable tax-exempt organization if
the employee--
``(A) is one of the 5 highest compensated employees of the
organization for the taxable year, or
``(B) was a covered employee of the organization (or any
predecessor) for any preceding taxable year beginning after
December 31, 2016.
``(3) Remuneration.--For purposes of this section, the term
`remuneration' means wages (as defined in section 3401(a)),
except that such term shall not include any designated Roth
contribution (as defined in section 402A(c)) and shall
include amounts required to be included in gross income under
section 457(f).
``(4) Remuneration from related organizations.--
``(A) In general.--Remuneration of a covered employee by an
applicable tax-exempt organization shall include any
remuneration paid with respect to employment of such employee
by any related person or governmental entity.
``(B) Related organizations.--A person or governmental
entity shall be treated as related to an applicable tax-
exempt organization if such person or governmental entity--
``(i) controls, or is controlled by, the organization,
``(ii) is controlled by one or more persons which control
the organization,
``(iii) is a supported organization (as defined in section
509(f)(3)) during the taxable year with respect to the
organization,
``(iv) is a supporting organization described in section
509(a)(3) during the taxable year with respect to the
organization, or
``(v) in the case of an organization which is a voluntary
employees' beneficiary association described in section
501(c)(9), establishes, maintains, or makes contributions to
such voluntary employees' beneficiary association.
``(C) Liability for tax.--In any case in which remuneration
from more than one employer is taken into account under this
paragraph in determining the tax imposed by subsection (a),
each such employer shall be liable for such tax in an amount
which bears the same ratio to the total tax determined under
subsection (a) with respect to such remuneration as--
``(i) the amount of remuneration paid by such employer with
respect to such employee, bears to
``(ii) the amount of remuneration paid by all such
employers to such employee.
``(5) Excess parachute payment.--For purposes of
determining the tax imposed by subsection (a)(2)--
``(A) In general.--The term `excess parachute payment'
means an amount equal to the excess of any parachute payment
over the portion of the base amount allocated to such
payment.
``(B) Parachute payment.--The term `parachute payment'
means any payment in the nature of compensation to (or for
the benefit of) a covered employee if--
``(i) such payment is contingent on such employee's
separation from employment with the employer, and
``(ii) the aggregate present value of the payments in the
nature of compensation to (or for the benefit of) such
individual which are contingent on such separation equals or
exceeds an amount equal to 3 times the base amount.
Such term does not include any payment described in section
280G(b)(6) (relating to exemption for payments under
qualified plans) or any payment made under or to an annuity
[[Page S7784]]
contract described in section 403(b) or a plan described in
section 457(b).
``(C) Base amount.--Rules similar to the rules of
280G(b)(3) shall apply for purposes of determining the base
amount.
``(D) Property transfers; present value.--Rules similar to
the rules of paragraphs (3) and (4) of section 280G(d) shall
apply.
``(6) Coordination with deduction limitation.--Remuneration
the deduction for which is not allowed by reason of section
162(m) shall not be taken into account for purposes of this
section.
``(d) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to prevent avoidance of the
tax under this section, including regulations preventing
employees from being misclassified as contractors or from
being compensated through a pass-through or other entity to
avoid such tax.''.
(b) Clerical Amendment.--The table of sections for
subchapter D of chapter 42 is amended by adding at the end
the following new item:
``Sec. 4960. Tax on excess tax-exempt organization executive
compensation.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13603. TREATMENT OF QUALIFIED EQUITY GRANTS.
(a) In General.--Section 83 is amended by adding at the end
the following new subsection:
``(i) Qualified Equity Grants.--
``(1) In general.--For purposes of this subtitle--
``(A) Timing of inclusion.--If qualified stock is
transferred to a qualified employee who makes an election
with respect to such stock under this subsection, subsection
(a) shall be applied by including the amount determined under
such subsection with respect to such stock in income of the
employee in the taxable year determined under subparagraph
(B) in lieu of the taxable year described in subsection (a).
``(B) Taxable year determined.--The taxable year determined
under this subparagraph is the taxable year of the employee
which includes the earliest of--
``(i) the first date such qualified stock becomes
transferable (including, solely for purposes of this clause,
becoming transferable to the employer),
``(ii) the date the employee first becomes an excluded
employee,
``(iii) the first date on which any stock of the
corporation which issued the qualified stock becomes readily
tradable on an established securities market (as determined
by the Secretary, but not including any market unless such
market is recognized as an established securities market by
the Secretary for purposes of a provision of this title other
than this subsection),
``(iv) the date that is 5 years after the first date the
rights of the employee in such stock are transferable or are
not subject to a substantial risk of forfeiture, whichever
occurs earlier, or
``(v) the date on which the employee revokes (at such time
and in such manner as the Secretary provides) the election
under this subsection with respect to such stock.
``(2) Qualified stock.--
``(A) In general.--For purposes of this subsection, the
term `qualified stock' means, with respect to any qualified
employee, any stock in a corporation which is the employer of
such employee, if--
``(i) such stock is received--
``(I) in connection with the exercise of an option, or
``(II) in settlement of a restricted stock unit, and
``(ii) such option or restricted stock unit was granted by
the corporation--
``(I) in connection with the performance of services as an
employee, and
``(II) during a calendar year in which such corporation was
an eligible corporation.
``(B) Limitation.--The term `qualified stock' shall not
include any stock if the employee may sell such stock to, or
otherwise receive cash in lieu of stock from, the corporation
at the time that the rights of the employee in such stock
first become transferable or not subject to a substantial
risk of forfeiture.
``(C) Eligible corporation.--For purposes of subparagraph
(A)(ii)(II)--
``(i) In general.--The term `eligible corporation' means,
with respect to any calendar year, any corporation if--
``(I) no stock of such corporation (or any predecessor of
such corporation) is readily tradable on an established
securities market (as determined under paragraph (1)(B)(iii))
during any preceding calendar year, and
``(II) such corporation has a written plan under which, in
such calendar year, not less than 80 percent of all employees
who provide services to such corporation in the United States
(or any possession of the United States) are granted stock
options, or restricted stock units, with the same rights and
privileges to receive qualified stock.
``(ii) Same rights and privileges.--For purposes of clause
(i)(II)--
``(I) except as provided in subclauses (II) and (III), the
determination of rights and privileges with respect to stock
shall be made in a similar manner as under section 423(b)(5),
``(II) employees shall not fail to be treated as having the
same rights and privileges to receive qualified stock solely
because the number of shares available to all employees is
not equal in amount, so long as the number of shares
available to each employee is more than a de minimis amount,
and
``(III) rights and privileges with respect to the exercise
of an option shall not be treated as the same as rights and
privileges with respect to the settlement of a restricted
stock unit.
``(iii) Employee.--For purposes of clause (i)(II), the term
`employee' shall not include any employee described in
section 4980E(d)(4) or any excluded employee.
``(iv) Special rule for calendar years before 2018.--In the
case of any calendar year beginning before January 1, 2018,
clause (i)(II) shall be applied without regard to whether the
rights and privileges with respect to the qualified stock are
the same.
``(3) Qualified employee; excluded employee.--For purposes
of this subsection--
``(A) In general.--The term `qualified employee' means any
individual who--
``(i) is not an excluded employee, and
``(ii) agrees in the election made under this subsection to
meet such requirements as are determined by the Secretary to
be necessary to ensure that the withholding requirements of
the corporation under chapter 24 with respect to the
qualified stock are met.
``(B) Excluded employee.--The term `excluded employee'
means, with respect to any corporation, any individual--
``(i) who was a 1-percent owner (within the meaning of
section 416(i)(1)(B)(ii)) at any time during the 10 preceding
calendar years,
``(ii) who is or has been at any prior time--
``(I) the chief executive officer of such corporation or an
individual acting in such a capacity, or
``(II) the chief financial officer of such corporation or
an individual acting in such a capacity,
``(iii) who bears a relationship described in section
318(a)(1) to any individual described in subclause (I) or
(II) of clause (ii), or
``(iv) who was for any of the 10 preceding taxable years
one of the 4 highest compensated officers of such
corporation, determined with respect to each such taxable
year on the basis of the shareholder disclosure rules for
compensation under the Securities Exchange Act of 1934 (as if
such rules applied to such corporation).
``(4) Election.--
``(A) Time for making election.--An election with respect
to qualified stock shall be made under this subsection no
later than 30 days after the first date the rights of the
employee in such stock are transferable or are not subject to
a substantial risk of forfeiture, whichever occurs earlier,
and shall be made in a manner similar to the manner in which
an election is made under subsection (b).
``(B) Limitations.--No election may be made under this
section with respect to any qualified stock if--
``(i) the qualified employee has made an election under
subsection (b) with respect to such qualified stock,
``(ii) any stock of the corporation which issued the
qualified stock is readily tradable on an established
securities market (as determined under paragraph (1)(B)(iii))
at any time before the election is made, or
``(iii) such corporation purchased any of its outstanding
stock in the calendar year preceding the calendar year which
includes the first date the rights of the employee in such
stock are transferable or are not subject to a substantial
risk of forfeiture, unless--
``(I) not less than 25 percent of the total dollar amount
of the stock so purchased is deferral stock, and
``(II) the determination of which individuals from whom
deferral stock is purchased is made on a reasonable basis.
``(C) Definitions and special rules related to limitation
on stock redemptions.--
``(i) Deferral stock.--For purposes of this paragraph, the
term `deferral stock' means stock with respect to which an
election is in effect under this subsection.
``(ii) Deferral stock with respect to any individual not
taken into account if individual holds deferral stock with
longer deferral period.--Stock purchased by a corporation
from any individual shall not be treated as deferral stock
for purposes of subparagraph (B)(iii) if such individual
(immediately after such purchase) holds any deferral stock
with respect to which an election has been in effect under
this subsection for a longer period than the election with
respect to the stock so purchased.
``(iii) Purchase of all outstanding deferral stock.--The
requirements of subclauses (I) and (II) of subparagraph
(B)(iii) shall be treated as met if the stock so purchased
includes all of the corporation's outstanding deferral stock.
``(iv) Reporting.--Any corporation which has outstanding
deferral stock as of the beginning of any calendar year and
which purchases any of its outstanding stock during such
calendar year shall include on its return of tax for the
taxable year in which, or with which, such calendar year ends
the total dollar amount of its outstanding stock so purchased
during such calendar year and such other information as the
Secretary requires for purposes of administering this
paragraph.
``(5) Controlled groups.--For purposes of this subsection,
all persons treated as a single employer under section 414(b)
shall be treated as 1 corporation.
``(6) Notice requirement.--Any corporation which transfers
qualified stock to a
[[Page S7785]]
qualified employee shall, at the time that (or a reasonable
period before) an amount attributable to such stock would
(but for this subsection) first be includible in the gross
income of such employee--
``(A) certify to such employee that such stock is qualified
stock, and
``(B) notify such employee--
``(i) that the employee may be eligible to elect to defer
income on such stock under this subsection, and
``(ii) that, if the employee makes such an election--
``(I) the amount of income recognized at the end of the
deferral period will be based on the value of the stock at
the time at which the rights of the employee in such stock
first become transferable or not subject to substantial risk
of forfeiture, notwithstanding whether the value of the stock
has declined during the deferral period,
``(II) the amount of such income recognized at the end of
the deferral period will be subject to withholding under
section 3401(i) at the rate determined under section 3402(t),
and
``(III) the responsibilities of the employee (as determined
by the Secretary under paragraph (3)(A)(ii)) with respect to
such withholding.
``(7) Restricted stock units.--This section (other than
this subsection), including any election under subsection
(b), shall not apply to restricted stock units.''.
(b) Withholding.--
(1) Time of withholding.--Section 3401 is amended by adding
at the end the following new subsection:
``(i) Qualified Stock for Which an Election Is in Effect
Under Section 83(i).--For purposes of subsection (a),
qualified stock (as defined in section 83(i)) with respect to
which an election is made under section 83(i) shall be
treated as wages--
``(1) received on the earliest date described in section
83(i)(1)(B), and
``(2) in an amount equal to the amount included in income
under section 83 for the taxable year which includes such
date.''.
(2) Amount of withholding.--Section 3402 is amended by
adding at the end the following new subsection:
``(t) Rate of Withholding for Certain Stock.--In the case
of any qualified stock (as defined in section 83(i)(2)) with
respect to which an election is made under section 83(i)--
``(1) the rate of tax under subsection (a) shall not be
less than the maximum rate of tax in effect under section 1,
and
``(2) such stock shall be treated for purposes of section
3501(b) in the same manner as a non-cash fringe benefit.''.
(c) Coordination With Other Deferred Compensation Rules.--
(1) Election to apply deferral to statutory options.--
(A) Incentive stock options.--Section 422(b) is amended by
adding at the end the following: ``Such term shall not
include any option if an election is made under section 83(i)
with respect to the stock received in connection with the
exercise of such option.''.
(B) Employee stock purchase plans.--Section 423 is
amended--
(i) by adding at the end of subsection (a) the following
flush sentence:
``The preceding sentence shall not apply to any share of
stock with respect to which an election is made under section
83(i).'', and
(ii) in subsection (b)(5), by striking ``and'' before ``the
plan'' and by inserting ``, and the rules of section 83(i)
shall apply in determining which employees have a right to
make an election under such section'' before the semicolon at
the end.
(2) Exclusion from definition of nonqualified deferred
compensation plan.--Subsection (d) of section 409A is amended
by adding at the end the following new paragraph:
``(7) Treatment of qualified stock.--An arrangement under
which an employee may receive qualified stock (as defined in
section 83(i)(2)) shall not be treated as a nonqualified
deferred compensation plan solely because of an employee's
election, or ability to make an election, to defer
recognition of income under section 83(i).''.
(d) Information Reporting.--Section 6051(a) is amended by
striking ``and'' at the end of paragraph (14)(B), by striking
the period at the end of paragraph (15) and inserting a
comma, and by inserting after paragraph (15) the following
new paragraphs:
``(16) the amount includible in gross income under
subparagraph (A) of section 83(i)(1) with respect to an event
described in subparagraph (B) of such section which occurs in
such calendar year, and
``(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:
``(p) Failure to Provide Notice Under Section 83(i).--In
the case of each failure to provide a notice as required by
section 83(i)(6), at the time prescribed therefor, unless it
is shown that such failure is due to reasonable cause and not
to willful neglect, there shall be paid, on notice and demand
of the Secretary and in the same manner as tax, by the person
failing to provide such notice, an amount equal to $100 for
each such failure, but the total amount imposed on such
person for all such failures during any calendar year shall
not exceed $50,000.''.
(f) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to stock
attributable to options exercised, or restricted stock units
settled, after December 31, 2017.
(2) Requirement to provide notice.--The amendments made by
subsection (e) shall apply to failures after December 31,
2017.
(g) Transition Rule.--Until such time as the Secretary (or
the Secretary's delegate) issues regulations or other
guidance for purposes of implementing the requirements of
paragraph (2)(C)(i)(II) of section 83(i) of the Internal
Revenue Code of 1986 (as added by this section), or the
requirements of paragraph (6) of such section, a corporation
shall be treated as being in compliance with such
requirements (respectively) if such corporation complies with
a reasonable good faith interpretation of such requirements.
SEC. 13604. INCREASE IN EXCISE TAX RATE FOR STOCK
COMPENSATION OF INSIDERS IN EXPATRIATED
CORPORATIONS.
(a) In General.--Section 4985(a)(1) is amended by striking
``section 1(h)(1)(C)'' and inserting ``section 1(h)(1)(D)''.
(b) Effective Date.--The amendment made by this section
shall apply to corporations first becoming expatriated
corporations (as defined in section 4985 of the Internal
Revenue Code of 1986) after the date of enactment of this
Act.
Subpart B--Retirement Plans
SEC. 13611. 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. 13612. MODIFICATION OF RULES APPLICABLE TO LENGTH OF
SERVICE AWARD PLANS.
(a) Maximum Deferral Amount.--Clause (ii) of section
457(e)(11)(B) is amended by striking ``$3,000'' and inserting
``$6,000''.
(b) Cost of Living Adjustment.--Subparagraph (B) of section
457(e)(11) is amended by adding at the end the following:
``(iii) Cost of living adjustment.--In the case of taxable
years beginning after December 31, 2017, the Secretary shall
adjust the $6,000 amount under clause (ii) at the same time
and in the same manner as under section 415(d), except that
the base period shall be the calendar quarter beginning July
1, 2016, and any increase under this paragraph that is not a
multiple of $500 shall be rounded to the next lowest multiple
of $500.''.
(c) Application of Limitation on Accruals.--Subparagraph
(B) of section 457(e)(11), as amended by subsection (b), is
amended by adding at the end the following:
``(iv) Special rule for application of limitation on
accruals for certain plans.--In the case of a plan described
in subparagraph (A)(ii) which is a defined benefit plan (as
defined in section 414(j)), the limitation under clause (ii)
shall apply to the actuarial present value of the aggregate
amount of length of service awards accruing with respect to
any year of service. Such actuarial present value with
respect to any year shall be calculated using reasonable
actuarial assumptions and methods, assuming payment will be
made under the most valuable form of payment under the plan
with payment commencing at the later of the earliest age at
which unreduced benefits are payable under the plan or the
participant's age at the time of the calculation.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13613. EXTENDED ROLLOVER PERIOD FOR PLAN LOAN OFFSET
AMOUNTS.
(a) In General.--Paragraph (3) of section 402(c) is amended
by redesignating subparagraph (B) as subparagraph (C) and by
inserting after subparagraph (A) the following new
subparagraph:
``(B) Rollover of certain plan loan offset amounts.--
``(i) In general.--In the case of an eligible rollover
distribution of a qualified plan loan offset amount, the
requirements of subparagraph (A) shall be treated as met if
such transfer occurs on or before the due date (including
extensions) for filing the return of tax for the taxable year
in which such amount is treated as distributed from a
qualified employer plan.
``(ii) Qualified plan loan offset amount.--For purposes of
this subparagraph, the term `qualified plan loan offset
amount' means a plan loan offset amount which is treated as
distributed from a qualified employer plan to a participant
or beneficiary solely by reason of--
``(I) the termination of the qualified employer plan, or
``(II) the failure to meet the repayment terms of the loan
from such plan because of the severance from employment of
the participant.
``(iii) Plan loan offset amount.--For purposes of clause
(ii), the term `plan loan offset amount' means the amount by
which the participant's accrued benefit under the plan is
reduced in order to repay a loan from the plan.
``(iv) Limitation.--This subparagraph shall not apply to
any plan loan offset amount unless such plan loan offset
amount relates to a loan to which section 72(p)(1) does not
apply by reason of section 72(p)(2).
[[Page S7786]]
``(v) Qualified employer plan.--For purposes of this
subsection, the term `qualified employer plan' has the
meaning given such term by section 72(p)(4).''.
(b) Conforming Amendment.--Subparagraph (A) of section
402(c)(3) is amended by striking ``subparagraph (B)'' and
inserting ``subparagraphs (B) and (C)''.
(c) Effective Date.--The amendments made by this section
shall apply to plan loan offset amounts which are treated as
distributed in taxable years beginning after December 31,
2017.
PART VIII--EXEMPT ORGANIZATIONS
SEC. 13701. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE
COLLEGES AND UNIVERSITIES.
(a) In General.--Chapter 42 is amended by adding at the end
the following new subchapter:
``Subchapter H--Excise Tax Based on Investment Income of Private
Colleges and Universities
``Sec. 4968. Excise tax based on investment income of private colleges
and universities.
``SEC. 4968. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE
COLLEGES AND UNIVERSITIES.
``(a) Tax Imposed.--There is hereby imposed on each
applicable educational institution for the taxable year a tax
equal to 1.4 percent of the net investment income of such
institution for the taxable year.
``(b) Applicable Educational Institution.--For purposes of
this subchapter--
``(1) In general.--The term `applicable educational
institution' means an eligible educational institution (as
defined in section 25A(f)(2))--
``(A) which had at least 500 tuition-paying students during
the preceding taxable year,
``(B) which participated in and received funds through a
program described in section 25A(f)(2)(B) during the
preceding taxable year,
``(C) which is not described in the first sentence of
section 511(a)(2)(B) (relating to State colleges and
universities), and
``(D) 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 $500,000 per
student of the institution.
``(2) Students.--For purposes of paragraph (1), the number
of students of an institution shall be based on the daily
average number of full-time students attending such
institution (with part-time students taken into account on a
full-time student equivalent basis).
``(c) Net Investment Income.--For purposes of this section,
net investment income shall be determined under rules similar
to the rules of section 4940(c).
``(d) Assets and Net Investment Income of Related
Organizations.--
``(1) In general.--For purposes of subsections (b)(1)(C)
and (c), assets and net investment income of any related
organization with respect to an educational institution shall
be treated as assets and net investment income, respectively,
of the educational institution, except that--
``(A) no such amount shall be taken into account with
respect to more than 1 educational institution, and
``(B) unless such organization is controlled by such
institution or is described in section 509(a)(3) with respect
to such institution for the taxable year, assets and net
investment income which are not intended or available for the
use or benefit of the educational institution shall not be
taken into account.
``(2) Related organization.--For purposes of this
subsection, the term `related organization' means, with
respect to an educational institution, any organization
which--
``(A) controls, or is controlled by, such institution,
``(B) is controlled by 1 or more persons which also control
such institution, or
``(C) is a supported organization (as defined in section
509(f)(3)), or an organization described in section
509(a)(3), during the taxable year with respect to such
institution.''.
(b) Clerical Amendment.--The table of subchapters for
chapter 42 is amended by adding at the end the following new
item:
``subchapter h--excise tax based on investment income of private
colleges and universities''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 13702. UNRELATED BUSINESS TAXABLE INCOME SEPARATELY
COMPUTED FOR EACH TRADE OR BUSINESS ACTIVITY.
(a) In General.--Subsection (a) of section 512 is amended
by adding at the end the following new paragraph:
``(6) Special rule for organization with more than 1
unrelated trade or business.--In the case of any organization
with more than 1 unrelated trade or business--
``(A) unrelated business taxable income, including for
purposes of determining any net operating loss deduction,
shall be computed separately with respect to each such trade
or business and without regard to subsection (b)(12),
``(B) the unrelated business taxable income of such
organization shall be the sum of the unrelated business
taxable income so computed with respect to each such trade or
business, less a specific deduction under subsection (b)(12),
and
``(C) for purposes of subparagraph (B), unrelated business
taxable income with respect to any such trade or business
shall not be less than zero.''.
(b) Effective Date.--
(1) In general.--Except to the extent provided in paragraph
(2), the amendment made by this section shall apply to
taxable years beginning after December 31, 2017.
(2) Carryovers of net operating losses.--If any net
operating loss arising in a taxable year beginning before
January 1, 2018, is carried over to a taxable year beginning
on or after such date--
(A) subparagraph (A) of section 512(a)(6) of the Internal
Revenue Code of 1986, as added by this Act, shall not apply
to such net operating loss, and
(B) the unrelated business taxable income of the
organization, after the application of subparagraph (B) of
such section, shall be reduced by the amount of such net
operating loss.
SEC. 13703. REPEAL OF DEDUCTION FOR AMOUNTS PAID IN EXCHANGE
FOR COLLEGE ATHLETIC EVENT SEATING RIGHTS.
(a) In General.--Section 170(l) is amended--
(1) by striking paragraph (1) and inserting the following:
``(1) In general.--No deduction shall be allowed under this
section for any amount described in paragraph (2).'', and
(2) in paragraph (2)(B), by striking ``such amount would be
allowable as a deduction under this section but for the fact
that''.
(b) Effective Date.--The amendments made by this section
shall apply to contributions made in taxable years beginning
after December 31, 2017.
SEC. 13704. REPEAL OF SUBSTANTIATION EXCEPTION IN CASE OF
CONTRIBUTIONS REPORTED BY DONEE.
(a) In General.--Section 170(f)(8) is amended by striking
subparagraph (D) and by redesignating subparagraph (E) as
subparagraph (D).
(b) Effective Date.--The amendments made by this section
shall apply to contributions made in taxable years beginning
after December 31, 2016.
PART IX--OTHER PROVISIONS
Subpart A--Craft Beverage Modernization and Tax Reform
SEC. 13801. PRODUCTION PERIOD FOR BEER, WINE, AND DISTILLED
SPIRITS.
(a) In General.--Section 263A(f) is amended--
(1) by redesignating paragraph (4) as paragraph (5), and
(2) by inserting after paragraph (3) the following new
paragraph:
``(4) Exemption for aging process of beer, wine, and
distilled spirits.--
``(A) In general.--For purposes of this subsection, the
production period shall not include the aging period for--
``(i) beer (as defined in section 5052(a)),
``(ii) wine (as described in section 5041(a)), or
``(iii) distilled spirits (as defined in section
5002(a)(8)), except such spirits that are unfit for use for
beverage purposes.
``(B) Termination.--This paragraph shall not apply to
interest costs paid or accrued after December 31, 2019.''.
(b) Conforming Amendment.--Paragraph (5)(B)(ii) of section
263A(f), as redesignated by this section, is amended by
inserting ``except as provided in paragraph (4),'' before
``ending on the date''.
(c) Effective Date.--The amendments made by this section
shall apply to interest costs paid or accrued in calendar
years beginning after December 31, 2017.
SEC. 13802. REDUCED RATE OF EXCISE TAX ON BEER.
(a) In General.--Paragraph (1) of section 5051(a) is
amended to read as follows:
``(1) In general.--
``(A) Imposition of tax.--A tax is hereby imposed on all
beer brewed or produced, and removed for consumption or sale,
within the United States, or imported into the United States.
Except as provided in paragraph (2), the rate of such tax
shall be the amount determined under this paragraph.
``(B) Rate.--Except as provided in subparagraph (C), the
rate of tax shall be $18 for per barrel.
``(C) Special rule.--In the case of beer removed after
December 31, 2017, and before January 1, 2020, the rate of
tax shall be--
``(i) $16 on the first 6,000,000 barrels of beer--
``(I) brewed by the brewer and removed during the calendar
year for consumption or sale, or
``(II) imported by the importer into the United States
during the calendar year, and
``(ii) $18 on any barrels of beer to which clause (i) does
not apply.
``(D) Barrel.--For purposes of this section, a barrel shall
contain not more than 31 gallons of beer, and any tax imposed
under this section shall be applied at a like rate for any
other quantity or for fractional parts of a barrel.''.
(b) Reduced Rate for Certain Domestic Production.--
Subparagraph (A) of section 5051(a)(2) is amended--
(1) in the heading, by striking ``$7 a barrel'', and
(2) by inserting ``($3.50 in the case of beer removed after
December 31, 2017, and before January 1, 2020)'' after
``$7''.
(c) Application of Reduced Tax Rate for Foreign
Manufacturers and Importers.--Subsection (a) of section 5051
is amended--
(1) in subparagraph (C)(i)(II) of paragraph (1), as amended
by subsection (a), by inserting ``but only if the importer is
an electing
[[Page S7787]]
importer under paragraph (4) and the barrels have been
assigned to the importer pursuant to such paragraph'' after
``during the calendar year'', and
(2) by adding at the end the following new paragraph:
``(4) Reduced tax rate for foreign manufacturers and
importers.--
``(A) In general.--In the case of any barrels of beer which
have been brewed or produced outside of the United States and
imported into the United States, the rate of tax applicable
under clause (i) of paragraph (1)(C) (referred to in this
paragraph as the `reduced tax rate') may be assigned by the
brewer (provided that the brewer makes an election described
in subparagraph (B)(ii)) to any electing importer of such
barrels pursuant to the requirements established by the
Secretary under subparagraph (B).
``(B) Assignment.--The Secretary shall, through such rules,
regulations, and procedures as are determined appropriate,
establish procedures for assignment of the reduced tax rate
provided under this paragraph, which shall include--
``(i) a limitation to ensure that the number of barrels of
beer for which the reduced tax rate has been assigned by a
brewer--
``(I) to any importer does not exceed the number of barrels
of beer brewed or produced by such brewer during the calendar
year which were imported into the United States by such
importer, and
``(II) to all importers does not exceed the 6,000,000
barrels to which the reduced tax rate applies,
``(ii) procedures that allow the election of a brewer to
assign and an importer to receive the reduced tax rate
provided under this paragraph,
``(iii) requirements that the brewer provide any
information as the Secretary determines necessary and
appropriate for purposes of carrying out this paragraph, and
``(iv) procedures that allow for revocation of eligibility
of the brewer and the importer for the reduced tax rate
provided under this paragraph in the case of any erroneous or
fraudulent information provided under clause (iii) which the
Secretary deems to be material to qualifying for such reduced
rate.
``(C) Controlled group.--For purposes of this section, any
importer making an election described in subparagraph (B)(ii)
shall be deemed to be a member of the controlled group of the
brewer, as described under paragraph (5).''.
(d) Controlled Group and Single Taxpayer Rules.--Subsection
(a) of section 5051, as amended by this section, is amended--
(1) in paragraph (2)--
(A) by striking subparagraph (B), and
(B) by redesignating subparagraph (C) as subparagraph (B),
and
(2) by adding at the end the following new paragraph:
``(5) Controlled group and single taxpayer rules.--
``(A) In general.--Except as provided in subparagraph (B),
in the case of a controlled group, the 6,000,000 barrel
quantity specified in paragraph (1)(C)(i) and the 2,000,000
barrel quantity specified in paragraph (2)(A) shall be
applied to the controlled group, and the 6,000,000 barrel
quantity specified in paragraph (1)(C)(i) and the 60,000
barrel quantity specified in paragraph (2)(A) shall be
apportioned among the brewers who are members of such group
in such manner as the Secretary or their delegate shall by
regulations prescribe. For purposes of the preceding
sentence, the term `controlled group' has the meaning
assigned to it by subsection (a) of section 1563, except that
for such purposes the phrase `more than 50 percent' shall be
substituted for the phrase `at least 80 percent' in each
place it appears in such subsection. Under regulations
prescribed by the Secretary, principles similar to the
principles of the preceding two sentences shall be applied to
a group of brewers under common control where one or more of
the brewers is not a corporation.
``(B) Foreign manufacturers and importers.--For purposes of
paragraph (4), in the case of a controlled group, the
6,000,000 barrel quantity specified in paragraph (1)(C)(i)
shall be applied to the controlled group and apportioned
among the members of such group in such manner as the
Secretary shall by regulations prescribe. For purposes of the
preceding sentence, the term `controlled group' has the
meaning given such term under subparagraph (A). Under
regulations prescribed by the Secretary, principles similar
to the principles of the preceding two sentences shall be
applied to a group of brewers under common control where one
or more of the brewers is not a corporation.
``(C) Single taxpayer.--Pursuant to rules issued by the
Secretary, two or more entities (whether or not under common
control) that produce beer marketed under a similar brand,
license, franchise, or other arrangement shall be treated as
a single taxpayer for purposes of the application of this
subsection.''.
(e) Effective Date.--The amendments made by this section
shall apply to beer removed after December 31, 2017.
SEC. 13803. TRANSFER OF BEER BETWEEN BONDED FACILITIES.
(a) In General.--Section 5414 is amended--
(1) by striking ``Beer may be removed'' and inserting ``(a)
In General.--Beer may be removed'', and
(2) by adding at the end the following:
``(b) Transfer of Beer Between Bonded Facilities.--
``(1) In general.--Beer may be removed from one bonded
brewery to another bonded brewery, without payment of tax,
and may be mingled with beer at the receiving brewery,
subject to such conditions, including payment of the tax, and
in such containers, as the Secretary by regulations shall
prescribe, which shall include--
``(A) any removal from one brewery to another brewery
belonging to the same brewer,
``(B) any removal from a brewery owned by one corporation
to a brewery owned by another corporation when--
``(i) one such corporation owns the controlling interest in
the other such corporation, or
``(ii) the controlling interest in each such corporation is
owned by the same person or persons, and
``(C) any removal from one brewery to another brewery
when--
``(i) the proprietors of transferring and receiving
premises are independent of each other and neither has a
proprietary interest, directly or indirectly, in the business
of the other, and
``(ii) the transferor has divested itself of all interest
in the beer so transferred and the transferee has accepted
responsibility for payment of the tax.
``(2) Transfer of liability for tax.--For purposes of
paragraph (1)(C), such relief from liability shall be
effective from the time of removal from the transferor's
bonded premises, or from the time of divestment of interest,
whichever is later.
``(3) Termination.--This subsection shall not apply to any
calendar quarter beginning after December 31, 2019.''.
(b) Removal From Brewery by Pipeline.--Section 5412 is
amended by inserting ``pursuant to section 5414 or'' before
``by pipeline''.
(c) Effective Date.--The amendments made by this section
shall apply to any calendar quarters beginning after December
31, 2017.
SEC. 13804. REDUCED RATE OF EXCISE TAX ON CERTAIN WINE.
(a) In General.--Section 5041(c) is amended by adding at
the end the following new paragraph:
``(8) Special rule for 2018 and 2019.--
``(A) In general.--In the case of wine removed after
December 31, 2017, and before January 1, 2020, paragraphs (1)
and (2) shall not apply and there shall be allowed as a
credit against any tax imposed by this title (other than
chapters 2, 21, and 22) an amount equal to the sum of--
``(i) $1 per wine gallon on the first 30,000 wine gallons
of wine, plus
``(ii) 90 cents per wine gallon on the first 100,000 wine
gallons of wine to which clause (i) does not apply, plus
``(iii) 53.5 cents per wine gallon on the first 620,000
wine gallons of wine to which clauses (i) and (ii) do not
apply,
which are produced by the producer and removed during the
calendar year for consumption or sale, or which are imported
by the importer into the United States during the calendar
year.
``(B) Adjustment of credit for hard cider.--In the case of
wine described in subsection (b)(6), subparagraph (A) of this
paragraph shall be applied--
``(i) in clause (i) of such subparagraph, by substituting
`6.2 cents' for `$1',
``(ii) in clause (ii) of such subparagraph, by substituting
`5.6 cents' for `90 cents', and
``(iii) in clause (iii) of such subparagraph, by
substituting `3.3 cents' for `53.5 cents'.'',
(b) Controlled Group and Single Taxpayer Rules.--Paragraph
(4) of section 5041(c) is amended by striking ``section
5051(a)(2)(B)'' and inserting ``section 5051(a)(5)''.
(c) Allowance of Credit for Foreign Manufacturers and
Importers.--Subsection (c) of section 5041, as amended by
subsection (a), is amended--
(1) in subparagraph (A) of paragraph (8), by inserting
``but only if the importer is an electing importer under
paragraph (9) and the wine gallons of wine have been assigned
to the importer pursuant to such paragraph'' after ``into the
United States during the calendar year'', and
(2) by adding at the end the following new paragraph:
``(9) Allowance of credit for foreign manufacturers and
importers.--
``(A) In general.--In the case of any wine gallons of wine
which have been produced outside of the United States and
imported into the United States, the credit allowable under
paragraph (8) (referred to in this paragraph as the `tax
credit') may be assigned by the person who produced such wine
(referred to in this paragraph as the `foreign producer'),
provided that such person makes an election described in
subparagraph (B)(ii), to any electing importer of such wine
gallons pursuant to the requirements established by the
Secretary under subparagraph (B).
``(B) Assignment.--The Secretary shall, through such rules,
regulations, and procedures as are determined appropriate,
establish procedures for assignment of the tax credit
provided under this paragraph, which shall include--
``(i) a limitation to ensure that the number of wine
gallons of wine for which the tax credit has been assigned by
a foreign producer--
``(I) to any importer does not exceed the number of wine
gallons of wine produced by such foreign producer during the
calendar year which were imported into the United States by
such importer, and
``(II) to all importers does not exceed the 750,000 wine
gallons of wine to which the tax credit applies,
[[Page S7788]]
``(ii) procedures that allow the election of a foreign
producer to assign and an importer to receive the tax credit
provided under this paragraph,
``(iii) requirements that the foreign producer provide any
information as the Secretary determines necessary and
appropriate for purposes of carrying out this paragraph, and
``(iv) procedures that allow for revocation of eligibility
of the foreign producer and the importer for the tax credit
provided under this paragraph in the case of any erroneous or
fraudulent information provided under clause (iii) which the
Secretary deems to be material to qualifying for such credit.
``(C) Controlled group.--For purposes of this section, any
importer making an election described in subparagraph (B)(ii)
shall be deemed to be a member of the controlled group of the
foreign producer, as described under paragraph (4).''.
(d) Effective Date.--The amendments made by this section
shall apply to wine removed after December 31, 2017.
SEC. 13805. ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR
APPLICATION OF EXCISE TAX RATES.
(a) In General.--Paragraphs (1) and (2) of section 5041(b)
are each amended by inserting ``(16 percent in the case of
wine removed after December 31, 2017, and before January 1,
2020'' after ``14 percent''.
(b) Effective Date.--The amendments made by this section
shall apply to wine removed after December 31, 2017.
SEC. 13806. DEFINITION OF MEAD AND LOW ALCOHOL BY VOLUME
WINE.
(a) In General.--Section 5041 is amended--
(1) in subsection (a), by striking ``Still wines'' and
inserting ``Subject to subsection (h), still wines'', and
(2) by adding at the end the following new subsection:
``(h) Mead and Low Alcohol by Volume Wine.--
``(1) In general.--For purposes of subsections (a) and
(b)(1), mead and low alcohol by volume wine shall be deemed
to be still wines containing not more than 16 percent of
alcohol by volume.
``(2) Definitions.--
``(A) Mead.--For purposes of this section, the term `mead'
means a wine--
``(i) containing not more than 0.64 gram of carbon dioxide
per hundred milliliters of wine, except that the Secretary
shall by regulations prescribe such tolerances to this
limitation as may be reasonably necessary in good commercial
practice,
``(ii) which is derived solely from honey and water,
``(iii) which contains no fruit product or fruit flavoring,
and
``(iv) which contains less than 8.5 percent alcohol by
volume.
``(B) Low alcohol by volume wine.--For purposes of this
section, the term `low alcohol by volume wine' means a wine--
``(i) containing not more than 0.64 gram of carbon dioxide
per hundred milliliters of wine, except that the Secretary
shall by regulations prescribe such tolerances to this
limitation as may be reasonably necessary in good commercial
practice,
``(ii) which is derived--
``(I) primarily from grapes, or
``(II) from grape juice concentrate and water,
``(iii) which contains no fruit product or fruit flavoring
other than grape, and
``(iv) which contains less than 8.5 percent alcohol by
volume.
``(3) Termination.--This subsection shall not apply to wine
removed after December 31, 2019.''.
(b) Effective Date.--The amendments made by this section
shall apply to wine removed after December 31, 2017.
SEC. 13807. REDUCED RATE OF EXCISE TAX ON CERTAIN DISTILLED
SPIRITS.
(a) In General.--Section 5001 is amended by redesignating
subsection (c) as subsection (d) and by inserting after
subsection (b) the following new subsection:
``(c) Reduced Rate for 2018 and 2019.--
``(1) In general.--In the case of a distilled spirits
operation, the otherwise applicable tax rate under subsection
(a)(1) shall be--
``(A) $2.70 per proof gallon on the first 100,000 proof
gallons of distilled spirits, and
``(B) $13.34 per proof gallon on the first 22,130,000 of
proof gallons of distilled spirits to which subparagraph (A)
does not apply,
which have been distilled or processed by such operation and
removed during the calendar year for consumption or sale, or
which have been imported by the importer into the United
States during the calendar year.
``(2) Controlled groups.--
``(A) In general.--In the case of a controlled group, the
proof gallon quantities specified under subparagraphs (A) and
(B) of paragraph (1) shall be applied to such group and
apportioned among the members of such group in such manner as
the Secretary or their delegate shall by regulations
prescribe.
``(B) Definition.--For purposes of subparagraph (A), the
term `controlled group' shall have the meaning given such
term by subsection (a) of section 1563, except that `more
than 50 percent' shall be substituted for `at least 80
percent' each place it appears in such subsection.
``(C) Rules for non-corporations.--Under regulations
prescribed by the Secretary, principles similar to the
principles of subparagraphs (A) and (B) shall be applied to a
group under common control where one or more of the persons
is not a corporation.
``(D) Single taxpayer.--Pursuant to rules issued by the
Secretary, two or more entities (whether or not under common
control) that produce distilled spirits marketed under a
similar brand, license, franchise, or other arrangement shall
be treated as a single taxpayer for purposes of the
application of this subsection.
``(3) Termination.--This subsection shall not apply to
distilled spirits removed after December 31, 2019.''.
(b) Conforming Amendment.--Section 7652(f)(2) is amended by
striking ``section 5001(a)(1)'' and inserting ``subsection
(a)(1) of section 5001, determined as if subsection (c)(1) of
such section did not apply''.
(c) Application of Reduced Tax Rate for Foreign
Manufacturers and Importers.--Subsection (c) of section 5001,
as added by subsection (a), is amended--
(1) in paragraph (1), by inserting ``but only if the
importer is an electing importer under paragraph (3) and the
proof gallons of distilled spirits have been assigned to the
importer pursuant to such paragraph'' after ``into the United
States during the calendar year'', and
(2) by redesignating paragraph (3) as paragraph (4) and by
inserting after paragraph (2) the following new paragraph:
``(3) Reduced tax rate for foreign manufacturers and
importers.--
``(A) In general.--In the case of any proof gallons of
distilled spirits which have been produced outside of the
United States and imported into the United States, the rate
of tax applicable under paragraph (1) (referred to in this
paragraph as the `reduced tax rate') may be assigned by the
distilled sprits operation (provided that such operation
makes an election described in subparagraph (B)(ii)) to any
electing importer of such proof gallons pursuant to the
requirements established by the Secretary under subparagraph
(B).
``(B) Assignment.--The Secretary shall, through such rules,
regulations, and procedures as are determined appropriate,
establish procedures for assignment of the reduced tax rate
provided under this paragraph, which shall include--
``(i) a limitation to ensure that the number of proof
gallons of distilled spirits for which the reduced tax rate
has been assigned by a distilled spirits operation--
``(I) to any importer does not exceed the number of proof
gallons produced by such operation during the calendar year
which were imported into the United States by such importer,
and
``(II) to all importers does not exceed the 22,230,000
proof gallons of distilled spirits to which the reduced tax
rate applies,
``(ii) procedures that allow the election of a distilled
spirits operation to assign and an importer to receive the
reduced tax rate provided under this paragraph,
``(iii) requirements that the distilled spirits operation
provide any information as the Secretary determines necessary
and appropriate for purposes of carrying out this paragraph,
and
``(iv) procedures that allow for revocation of eligibility
of the distilled spirits operation and the importer for the
reduced tax rate provided under this paragraph in the case of
any erroneous or fraudulent information provided under clause
(iii) which the Secretary deems to be material to qualifying
for such reduced rate.
``(C) Controlled group.--
``(i) In general.--For purposes of this section, any
importer making an election described in subparagraph (B)(ii)
shall be deemed to be a member of the controlled group of the
distilled spirits operation, as described under paragraph
(2).
``(ii) Apportionment.--For purposes of this paragraph, in
the case of a controlled group, rules similar to section
5051(a)(5)(B) shall apply.''.
(d) Effective Date.--The amendments made by this section
shall apply to distilled spirits removed after December 31,
2017.
SEC. 13808. BULK DISTILLED SPIRITS.
(a) In General.--Section 5212 is amended by adding at the
end the following sentence: ``In the case of distilled
spirits transferred in bond after December 31, 2017, and
before January 1, 2020, this section shall be applied without
regard to whether distilled spirits are bulk distilled
spirits.''.
(b) Effective Date.--The amendments made by this section
shall apply distilled spirits transferred in bond after
December 31, 2017.
Subpart B--Miscellaneous Provisions
SEC. 13821. MODIFICATION OF TAX TREATMENT OF ALASKA NATIVE
CORPORATIONS AND SETTLEMENT TRUSTS.
(a) Exclusion for ANCSA Payments Assigned to Alaska Native
Settlement Trusts.--
(1) In general.--Part III of subchapter B of chapter 1 is
amended by inserting before section 140 the following new
section:
``SEC. 139G. ASSIGNMENTS TO ALASKA NATIVE SETTLEMENT TRUSTS.
``(a) In General.--In the case of a Native Corporation,
gross income shall not include the value of any payments that
would otherwise be made, or treated as being made, to such
Native Corporation pursuant to, or as required by, any
provision of the Alaska Native Claims Settlement Act (43
U.S.C. 1601 et seq.), including any payment that would
otherwise be made to a Village Corporation pursuant to
section 7(j) of the Alaska Native Claims Settlement Act (43
U.S.C. 1606(j)), provided that any such payments--
``(1) are assigned in writing to a Settlement Trust, and
``(2) were not received by such Native Corporation prior to
the assignment described in paragraph (1).
[[Page S7789]]
``(b) Inclusion in Gross Income.--In the case of a
Settlement Trust which has been assigned payments described
in subsection (a), gross income shall include such payments
when received by such Settlement Trust pursuant to the
assignment and shall have the same character as if such
payments were received by the Native Corporation.
``(c) Amount and Scope of Assignment.--The amount and scope
of any assignment under subsection (a) shall be described
with reasonable particularity and may either be in a
percentage of one or more such payments or in a fixed dollar
amount.
``(d) Duration of Assignment; Revocability.--Any assignment
under subsection (a) shall specify--
``(1) a duration either in perpetuity or for a period of
time, and
``(2) whether such assignment is revocable.
``(e) Prohibition on Deduction.--Notwithstanding section
247, no deduction shall be allowed to a Native Corporation
for purposes of any amounts described in subsection (a).
``(f) Definitions.--For purposes of this section, the terms
`Native Corporation' and `Settlement Trust' have the same
meaning given such terms under section 646(h).''.
(2) Conforming amendment.--The table of sections for part
III of subchapter B of chapter 1 is amended by inserting
before the item relating to section 140 the following new
item:
``Sec. 139G. Assignments to Alaska Native Settlement Trusts.''.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31,
2016.
(b) Deduction of Contributions to Alaska Native Settlement
Trusts.--
(1) In general.--Part VIII of subchapter B of chapter 1 is
amended by inserting before section 248 the following new
section:
``SEC. 247. CONTRIBUTIONS TO ALASKA NATIVE SETTLEMENT TRUSTS.
``(a) In General.--In the case of a Native Corporation,
there shall be allowed a deduction for any contributions made
by such Native Corporation to a Settlement Trust (regardless
of whether an election under section 646 is in effect for
such Settlement Trust) for which the Native Corporation has
made an annual election under subsection (e).
``(b) Amount of Deduction.--The amount of the deduction
under subsection (a) shall be equal to--
``(1) in the case of a cash contribution (regardless of the
method of payment, including currency, coins, money order, or
check), the amount of such contribution, or
``(2) in the case of a contribution not described in
paragraph (1), the lesser of--
``(A) the Native Corporation's adjusted basis in the
property contributed, or
``(B) the fair market value of the property contributed.
``(c) Limitation and Carryover.--
``(1) In general.--Subject to paragraph (2), the deduction
allowed under subsection (a) for any taxable year shall not
exceed the taxable income (as determined without regard to
such deduction) of the Native Corporation for the taxable
year in which the contribution was made.
``(2) Carryover.--If the aggregate amount of contributions
described in subsection (a) for any taxable year exceeds the
limitation under paragraph (1), such excess shall be treated
as a contribution described in subsection (a) in each of the
15 succeeding years in order of time.
``(d) Definitions.--For purposes of this section, the terms
`Native Corporation' and `Settlement Trust' have the same
meaning given such terms under section 646(h).
``(e) Manner of Making Election.--
``(1) In general.--For each taxable year, a Native
Corporation may elect to have this section apply for such
taxable year on the income tax return or an amendment or
supplement to the return of the Native Corporation, with such
election to have effect solely for such taxable year.
``(2) Revocation.--Any election made by a Native
Corporation pursuant to this subsection may be revoked
pursuant to a timely filed amendment or supplement to the
income tax return of such Native Corporation.
``(f) Additional Rules.--
``(1) Earnings and profits.--Notwithstanding section
646(d)(2), in the case of a Native Corporation which claims a
deduction under this section for any taxable year, the
earnings and profits of such Native Corporation for such
taxable year shall be reduced by the amount of such
deduction.
``(2) Gain or loss.--No gain or loss shall be recognized by
the Native Corporation with respect to a contribution of
property for which a deduction is allowed under this section.
``(3) Income.--Subject to subsection (g), a Settlement
Trust shall include in income the amount of any deduction
allowed under this section in the taxable year in which the
Settlement Trust actually receives such contribution.
``(4) Period.--The holding period under section 1223 of the
Settlement Trust shall include the period the property was
held by the Native Corporation.
``(5) Basis.--The basis that a Settlement Trust has for
which a deduction is allowed under this section shall be
equal to the lesser of--
``(A) the adjusted basis of the Native Corporation in such
property immediately before such contribution, or
``(B) the fair market value of the property immediately
before such contribution.
``(6) Prohibition.--No deduction shall be allowed under
this section with respect to any contributions made to a
Settlement Trust which are in violation of subsection (a)(2)
or (c)(2) of section 39 of the Alaska Native Claims
Settlement Act (43 U.S.C. 1629e).
``(g) Election by Settlement Trust To Defer Income
Recognition.--
``(1) In general.--In the case of a contribution which
consists of property other than cash, a Settlement Trust may
elect to defer recognition of any income related to such
property until the sale or exchange of such property, in
whole or in part, by the Settlement Trust.
``(2) Treatment.--In the case of property described in
paragraph (1), any income or gain realized on the sale or
exchange of such property shall be treated as--
``(A) for such amount of the income or gain as is equal to
or less than the amount of income which would be included in
income at the time of contribution under subsection (f)(3)
but for the taxpayer's election under this subsection,
ordinary income, and
``(B) for any amounts of the income or gain which are in
excess of the amount of income which would be included in
income at the time of contribution under subsection (f)(3)
but for the taxpayer's election under this subsection, having
the same character as if this subsection did not apply.
``(3) Election.--
``(A) In general.--For each taxable year, a Settlement
Trust may elect to apply this subsection for any property
described in paragraph (1) which was contributed during such
year. Any property to which the election applies shall be
identified and described with reasonable particularity on the
income tax return or an amendment or supplement to the return
of the Settlement Trust, with such election to have effect
solely for such taxable year.
``(B) Revocation.--Any election made by a Settlement Trust
pursuant to this subsection may be revoked pursuant to a
timely filed amendment or supplement to the income tax return
of such Settlement Trust.
``(C) Certain dispositions.--
``(i) In general.--In the case of any property for which an
election is in effect under this subsection and which is
disposed of within the first taxable year subsequent to the
taxable year in which such property was contributed to the
Settlement Trust--
``(I) this section shall be applied as if the election
under this subsection had not been made,
``(II) any income or gain which would have been included in
the year of contribution under subsection (f)(3) but for the
taxpayer's election under this subsection shall be included
in income for the taxable year of such contribution, and
``(III) the Settlement Trust shall pay any increase in tax
resulting from such inclusion, including any applicable
interest, and increased by 10 percent of the amount of such
increase with interest.
``(ii) Assessment.--Notwithstanding section 6501(a), any
amount described in subclause (III) of clause (i) may be
assessed, or a proceeding in court with respect to such
amount may be initiated without assessment, within 4 years
after the date on which the return making the election under
this subsection for such property was filed.''.
(2) Conforming amendment.--The table of sections for part
VIII of subchapter B of chapter 1 is amended by inserting
before the item relating to section 248 the following new
item:
``Sec. 247. Contributions to Alaska Native Settlement Trusts.''.
(3) Effective date.--
(A) In general.--The amendments made by this subsection
shall apply to taxable years for which the period of
limitation on refund or credit under section 6511 of the
Internal Revenue Code of 1986 has not expired.
(B) One-year waiver of statute of limitations.--If the
period of limitation on a credit or refund resulting from the
amendments made by paragraph (1) expires before the end of
the 1-year period beginning on the date of the enactment of
this Act, refund or credit of such overpayment (to the extent
attributable to such amendments) may, nevertheless, be made
or allowed if claim therefor is filed before the close of
such 1-year period.
(c) Information Reporting for Deductible Contributions to
Alaska Native Settlement Trusts.--
(1) In general.--Section 6039H is amended--
(A) in the heading, by striking ``sponsoring'', and
(B) by adding at the end the following new subsection:
``(e) Deductible Contributions by Native Corporations to
Alaska Native Settlement Trusts.--
``(1) In general.--Any Native Corporation (as defined in
subsection (m) of section 3 of the Alaska Native Claims
Settlement Act (43 U.S.C. 1602(m))) which has made a
contribution to a Settlement Trust (as defined in subsection
(t) of such section) to which an election under subsection
(e) of section 247 applies shall provide such Settlement
Trust with a statement regarding such election not later than
January 31 of the calendar year subsequent to the calendar
year in which the contribution was made.
``(2) Content of statement.--The statement described in
paragraph (1) shall include--
``(A) the total amount of contributions to which the
election under subsection (e) of section 247 applies,
``(B) for each contribution, whether such contribution was
in cash,
[[Page S7790]]
``(C) for each contribution which consists of property
other than cash, the date that such property was acquired by
the Native Corporation and the adjusted basis and fair market
value of such property on the date such property was
contributed to the Settlement Trust,
``(D) the date on which each contribution was made to the
Settlement Trust, and
``(E) such information as the Secretary determines to be
necessary or appropriate for the identification of each
contribution and the accurate inclusion of income relating to
such contributions by the Settlement Trust.''.
(2) Conforming amendment.--The item relating to section
6039H in the table of sections for subpart A of part III of
subchapter A of chapter 61 is amended to read as follows:
``Sec. 6039H. Information With Respect to Alaska Native Settlement
Trusts and Native Corporations.''.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31,
2016.
SEC. 13822. AMOUNTS PAID FOR AIRCRAFT MANAGEMENT SERVICES.
(a) In General.--Subsection (e) of section 4261 is amended
by adding at the end the following new paragraph:
``(5) Amounts paid for aircraft management services.--
``(A) In general.--No tax shall be imposed by this section
or section 4271 on any amounts paid by an aircraft owner for
aircraft management services related to--
``(i) maintenance and support of the aircraft owner's
aircraft, or
``(ii) flights on the aircraft owner's aircraft.
``(B) Aircraft management services.--For purposes of
subparagraph (A), the term `aircraft management services'
includes--
``(i) assisting an aircraft owner with administrative and
support services, such as scheduling, flight planning, and
weather forecasting,
``(ii) obtaining insurance,
``(iii) maintenance, storage and fueling of aircraft,
``(iv) hiring, training, and provision of pilots and crew,
``(v) establishing and complying with safety standards, and
``(vi) such other services as are necessary to support
flights operated by an aircraft owner.
``(C) Lessee treated as aircraft owner.--
``(i) In general.--For purposes of this paragraph, the term
`aircraft owner' includes a person who leases the aircraft
other than under a disqualified lease.
``(ii) Disqualified lease.--For purposes of clause (i), the
term `disqualified lease' means a lease from a person
providing aircraft management services with respect to such
aircraft (or a related person (within the meaning of section
465(b)(3)(C)) to the person providing such services), if such
lease is for a term of 31 days or less.
``(D) Pro rata allocation.--In the case of amounts paid to
any person which (but for this subsection) are subject to the
tax imposed by subsection (a), a portion of which consists of
amounts described in subparagraph (A), this paragraph shall
apply on a pro rata basis only to the portion which consists
of amounts described in such subparagraph.''.
(b) Effective Date.--The amendment made by this section
shall apply to amounts paid after the date of the enactment
of this Act.
SEC. 13823. OPPORTUNITY ZONES.
(a) In General.--Chapter 1 is amended by adding at the end
the following:
``Subchapter Z--Opportunity Zones
``Sec. 1400Z-1. Designation.
``Sec. 1400Z-2. Special rules for capital gains invested in opportunity
zones.
``SEC. 1400Z-1. DESIGNATION.
``(a) Qualified Opportunity Zone Defined.--For the purposes
of this subchapter, the term `qualified opportunity zone'
means a population census tract that is a low-income
community that is designated as a qualified opportunity zone.
``(b) Designation.--
``(1) In general.--For purposes of subsection (a), a
population census tract that is a low-income community is
designated as a qualified opportunity zone if--
``(A) not later than the end of the determination period,
the governor of the State in which the tract is located--
``(i) nominates the tract for designation as a qualified
opportunity zone, and
``(ii) notifies the Secretary in writing of such
nomination, and
``(B) the Secretary certifies such nomination and
designates such tract as a qualified opportunity zone before
the end of the consideration period.
``(2) Extension of periods.--A governor may request that
the Secretary extend either the determination or
consideration period, or both (determined without regard to
this subparagraph), for an additional 30 days.
``(c) Other Definitions.--For purposes of this subsection--
``(1) Low-income communities.--The term `low-income
community' has the same meaning as when used in section
45D(e).
``(2) Definition of periods.--
``(A) Consideration period.--The term `consideration
period' means the 30-day period beginning on the date on
which the Secretary receives notice under subsection
(b)(1)(A)(ii), as extended under subsection (b)(2).
``(B) Determination period.--The term `determination
period' means the 90-day period beginning on the date of the
enactment of the Tax Cuts and Jobs Act, as extended under
subsection (b)(2).
``(3) State.--For purposes of this section, the term
`State' includes any possession of the United States.
``(d) Number of Designations.--
``(1) In general.--Except as provided by paragraph (2), the
number of population census tracts in a State that may be
designated as qualified opportunity zones under this section
may not exceed 25 percent of the number of low-income
communities in the State.
``(2) Exception.--If the number of low-income communities
in a State is less than 100, then a total of 25 of such
tracts may be designated as qualified opportunity zones.
``(e) Designation of Tracts Contiguous With Low-Income
Communities.--
``(1) In general.--A population census tract that is not a
low-income community may be designated as a qualified
opportunity zone under this section if--
``(A) the tract is contiguous with the low-income community
that is designated as a qualified opportunity zone, and
``(B) the median family income of the tract does not exceed
125 percent of the median family income of the low-income
community with which the tract is contiguous.
``(2) Limitation.--Not more than 5 percent of the
population census tracts designated in a State as a qualified
opportunity zone may be designated under paragraph (1).
``(f) Period for Which Designation Is in Effect.--A
designation as a qualified opportunity zone shall remain in
effect for the period beginning on the date of the
designation and ending at the close of the 10th calendar year
beginning on or after such date of designation.
``SEC. 1400Z-2. SPECIAL RULES FOR CAPITAL GAINS INVESTED IN
OPPORTUNITY ZONES.
``(a) In General.--In the case of gain from the sale to, or
exchange with, an unrelated person of any property held by
the taxpayer, at the election of the taxpayer--
``(1) gross income for the taxable year shall not include
so much of such gain as does not exceed the aggregate amount
invested by the taxpayer in a qualified opportunity fund
during the 180-day period beginning on the date of such sale
or exchange,
``(2) the amount of gain excluded by paragraph (1) shall be
included in gross income as provided by subsection (b), and
``(3) subsection (c) shall apply.
No election may be made under the preceding sentence with
respect to a sale or exchange if an election previously made
with respect to such sale or exchange is in effect.
``(b) Deferral of Gain Invested in Opportunity Zone
Property.--
``(1) Year of inclusion.--Gain to which subsection (a)(2)
applies shall be included in income in the taxable year which
includes the earlier of--
``(A) the date on which such investment is sold or
exchanged, or
``(B) December 31, 2026.
``(2) Amount includible.--
``(A) In general.--The amount of gain included in gross
income under subsection (a)(1) shall be the excess of--
``(i) the lesser of the amount of gain excluded under
paragraph (1) or the fair market value of the property as
determined as of the date described in paragraph (1), over
``(ii) the taxpayer's basis in the investment.
``(B) Determination of basis.--
``(i) In general.--Except as otherwise provided in this
clause or subsection (c), the taxpayer's basis in the
investment shall be zero.
``(ii) Increase for gain recognized under subsection
(a)(2).--The basis in the investment shall be increased by
the amount of gain recognized by reason of subsection (a)(2)
with respect to such property.
``(iii) Investments held for 5 years.--In the case of any
investment held for at least 5 years, the basis of such
investment shall be increased by an amount equal to 10
percent of the amount of gain deferred by reason of
subsection (a)(1).
``(iv) Investments held for 7 years.--In the case of any
investment held by the taxpayer for at least 7 years, in
addition to any adjustment made under clause (iii), the basis
of such property shall be increased by an amount equal to 5
percent of the amount of gain deferred by reason of
subsection (a)(1).
``(c) Special Rule for Investments Held for at Least 10
Years.--In the case of any investment held by the taxpayer
for at least 10 years and with respect to which the taxpayer
makes an election under this clause, the basis of such
property shall be equal to the fair market value of such
investment on the date that the investment is sold or
exchanged.
``(d) Qualified Opportunity Fund.--For purposes of this
section--
``(1) Qualified opportunity fund.--The term `qualified
opportunity fund' means any investment vehicle which is
organized as a corporation or a partnership for the purpose
of investing in qualified opportunity zone property (other
than another qualified opportunity fund) that holds at least
90 percent of its assets in qualified opportunity zone
property, determined--
``(A) on the last day of the first 6-month period of the
taxable year of the fund, and
``(B) on the last day of the taxable year of the fund.
[[Page S7791]]
``(2) Qualified opportunity zone property.--
``(A) In general.--The term `qualified opportunity zone
property' means property which is--
``(i) qualified opportunity zone stock,
``(ii) qualified opportunity zone partnership interest, or
``(iii) qualified opportunity zone business property.
``(B) Qualified opportunity zone stock.--
``(i) In general.--Except as provided in clause (ii), the
term `qualified opportunity zone stock' means any stock in a
domestic corporation if--
``(I) such stock is acquired by the taxpayer after December
31, 2017, at its original issue (directly or through an
underwriter) from the corporation solely in exchange for
cash,
``(II) as of the time such stock was issued, such
corporation was a qualified opportunity zone business (or, in
the case of a new corporation, such corporation was being
organized for purposes of being a qualified opportunity zone
business), and
``(III) during substantially all of the taxpayer's holding
period for such stock, such corporation qualified as a
qualified opportunity zone business.
``(ii) Redemptions.--A rule similar to the rule of section
1202(c)(3) shall apply for purposes of this paragraph.
``(C) Qualified opportunity zone partnership interest.--The
term `qualified opportunity zone partnership interest' means
any capital or profits interest in a domestic partnership
if--
``(i) such interest is acquired by the taxpayer after
December 31, 2017, from the partnership solely in exchange
for cash,
``(ii) as of the time such interest was acquired, such
partnership was a qualified opportunity zone business (or, in
the case of a new partnership, such partnership was being
organized for purposes of being a qualified opportunity zone
business), and
``(iii) during substantially all of the taxpayer's holding
period for such interest, such partnership qualified as a
qualified opportunity zone business.
``(D) Qualified opportunity zone business property.--
``(i) In general.--The term `qualified opportunity zone
business property' means tangible property used in a trade or
business of the taxpayer if--
``(I) such property was acquired by the taxpayer by
purchase (as defined in section 179(d)(2)) after December 31,
2017,
``(II) the original use of such property in the qualified
opportunity zone commences with the taxpayer or the taxpayer
substantially improves the property, and
``(III) during substantially all of the taxpayer's holding
period for such property, substantially all of the use of
such property was in a qualified opportunity zone.
``(ii) Substantial improvement.--For purposes of
subparagraph (A)(ii), property shall be treated as
substantially improved by the taxpayer only if, during any
30-month period beginning after the date of acquisition of
such property, additions to basis with respect to such
property in the hands of the taxpayer exceed an amount equal
to the adjusted basis of such property at the beginning of
such 30-month period in the hands of the taxpayer.
``(iii) Related party.--For purposes of subparagraph
(A)(i), the related person rule of section 179(d)(2) shall be
applied pursuant to paragraph (8) of this subsection in lieu
of the application of such rule in section 179(d)(2)(A).
``(3) Qualified opportunity zone business.--
``(A) In general.--The term `qualified opportunity zone
business' means a trade or business--
``(i) in which substantially all of the tangible property
owned or leased by the taxpayer is qualified opportunity zone
business property,
``(ii) which satisfies the requirements of paragraphs (2),
(4), and (8) of section 1397C(b), and
``(iii) which is not described in section 144(c)(6)(B).
``(B) Special rule.--For purposes of subparagraph (A),
tangible property that ceases to be a qualified opportunity
zone business property shall continue to be treated as a
qualified opportunity zone business property for the lesser
of--
``(i) 5 years after the date on which such tangible
property ceases to be so qualified, or
``(ii) the date on which such tangible property is no
longer held by the qualified opportunity zone business.
``(e) Applicable Rules.--
``(1) Treatment of investments with mixed funds.--In the
case of any investment in a qualified opportunity fund only a
portion of which consists of investments of gain to which an
election under subsection (a)(1) is in effect--
``(A) such investment shall be treated as 2 separate
investments, consisting of--
``(i) one investment that only includes amounts to which
the election under subsection (a)(1) applies, and
``(ii) a separate investment consisting of other amounts,
and
``(B) subsections (a), (b), and (c) shall only apply to the
investment described in subparagraph (A)(i).
``(2) Related persons.--For purposes of this section,
persons are related to each other if such persons are
described in section 267(b) or 707(b)(1), determined by
substituting `20 percent' for `50 percent' each place it
occurs in such sections.
``(3) Decedents.--In the case of a decedent, amounts
recognized under this section shall, if not properly
includible in the gross income of the decedent, be includible
in gross income as provided by section 691.
``(4) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section, including--
``(A) rules for the certification of qualified opportunity
funds for the purposes of this section, and
``(B) rules to prevent abuse.
``(f) Failure of Qualified Opportunity Fund to Maintain
Investment Standard.--
``(1) In general.--If a qualified opportunity fund fails to
meet the 90-percent requirement of subsection (c)(1), the
qualified opportunity fund shall pay a penalty for each month
it fails to meet the requirement in an amount equal to the
product of--
``(A) the excess of--
``(i) the amount equal to 90 percent of its aggregate
assets, over
``(ii) the aggregate amount of qualified opportunity zone
property held by the fund, multiplied by
``(B) the underpayment rate established under section
6621(a)(2) for such month.
``(2) Special rule for partnerships.--In the case that the
qualified opportunity fund is a partnership, the penalty
imposed by paragraph (1) shall be taken into account
proportionately as part of the distributive share of each
partner of the partnership.
``(3) Reasonable cause exception.--No penalty shall be
imposed under this subsection with respect to any failure if
it is shown that such failure is due to reasonable cause.''.
(b) Basis Adjustments.--Section 1016(a) is amended by
striking ``and'' at the end of paragraph (36), by striking
the period at the end of paragraph (37) and inserting ``,
and'', and by inserting after paragraph (37) the following:
``(38) to the extent provided in subsections (b)(2) and (c)
of section 1400Z-2.''.
(c) Clerical Amendment.--The table of subchapters for
chapter 1 is amended by adding at the end the following new
item:
``subchapter z. opportunity zones''.
(d) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
Subtitle D--International Tax Provisions
PART I--OUTBOUND TRANSACTIONS
Subpart A--Establishment of Participation Exemption System for Taxation
of Foreign Income
SEC. 14101. DEDUCTION FOR FOREIGN-SOURCE PORTION OF DIVIDENDS
RECEIVED BY DOMESTIC CORPORATIONS FROM
SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.
(a) In General.--Part VIII of subchapter B of chapter 1 is
amended by inserting after section 245 the following new
section:
``SEC. 245A. DEDUCTION FOR FOREIGN SOURCE-PORTION OF
DIVIDENDS RECEIVED BY DOMESTIC CORPORATIONS
FROM SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.
``(a) In General.--In the case of any dividend received
from a specified 10-percent owned foreign corporation by a
domestic corporation which is a United States shareholder
with respect to such foreign corporation, there shall be
allowed as a deduction an amount equal to the foreign-source
portion of such dividend.
``(b) Specified 10-percent Owned Foreign Corporation.--For
purposes of this section--
``(1) In general.--The term `specified 10-percent owned
foreign corporation' means any foreign corporation with
respect to which any domestic corporation is a United States
shareholder with respect to such corporation.
``(2) Exclusion of passive foreign investment companies.--
Such term shall not include any corporation which is a
passive foreign investment company (as defined in section
1297) with respect to the shareholder and which is not a
controlled foreign corporation.
``(c) Foreign-source Portion.--For purposes of this
section--
``(1) In general.--The foreign-source portion of any
dividend from a specified 10-percent owned foreign
corporation is an amount which bears the same ratio to such
dividend as--
``(A) the undistributed foreign earnings of the specified
10-percent owned foreign corporation, bears to
``(B) the total undistributed earnings of such foreign
corporation.
``(2) Undistributed earnings.--The term `undistributed
earnings' means the amount of the earnings and profits of the
specified 10-percent owned foreign corporation (computed in
accordance with sections 964(a) and 986)--
``(A) as of the close of the taxable year of the specified
10-percent owned foreign corporation in which the dividend is
distributed, and
``(B) without diminution by reason of dividends distributed
during such taxable year.
``(3) Undistributed foreign earnings.--The term
`undistributed foreign earnings' means the portion of the
undistributed earnings which is attributable to neither--
``(A) income described in subparagraph (A) of section
245(a)(5), nor
[[Page S7792]]
``(B) dividends described in subparagraph (B) of such
section (determined without regard to section 245(a)(12)).
``(d) Disallowance of Foreign Tax Credit, etc.--
``(1) In general.--No credit shall be allowed under section
901 for any taxes paid or accrued (or treated as paid or
accrued) with respect to any distribution any portion of
which constitutes a dividend for which a deduction is allowed
under this section.
``(2) Denial of deduction.--No deduction shall be allowed
under this chapter for any tax for which credit is not
allowable under section 901 by reason of paragraph (1)
(determined by treating the taxpayer as having elected the
benefits of subpart A of part III of subchapter N).
``(e) Special Rules for Hybrid Dividends.--
``(1) In general.--Subsection (a) shall not apply to any
dividend received by a United States shareholder from a
controlled foreign corporation if the dividend is a hybrid
dividend.
``(2) Hybrid dividends of tiered corporations.--If a
controlled foreign corporation with respect to which a
domestic corporation is a United States shareholder receives
a hybrid dividend from any other controlled foreign
corporation with respect to which such domestic corporation
is also a United States shareholder, then, notwithstanding
any other provision of this title--
``(A) the hybrid dividend shall be treated for purposes of
section 951(a)(1)(A) as subpart F income of the receiving
controlled foreign corporation for the taxable year of the
controlled foreign corporation in which the dividend was
received, and
``(B) the United States shareholder shall include in gross
income an amount equal to the shareholder's pro rata share
(determined in the same manner as under section 951(a)(2)) of
the subpart F income described in subparagraph (A).
``(3) Denial of foreign tax credit, etc.--The rules of
subsection (d) shall apply to any hybrid dividend received
by, or any amount included under paragraph (2) in the gross
income of, a United States shareholder.
``(4) Hybrid dividend.--The term `hybrid dividend' means an
amount received from a controlled foreign corporation--
``(A) for which a deduction would be allowed under
subsection (a) but for this subsection, and
``(B) for which the controlled foreign corporation received
a deduction (or other tax benefit) from taxes imposed by any
foreign country.
``(f) Special Rule for Purging Distributions of Passive
Foreign Investment Companies.--Any amount which is treated as
a dividend under section 1291(d)(2)(B) shall not be treated
as a dividend for purposes of this section.
``(g) Regulations.--The Secretary shall prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out the provisions of this section,
including regulations for the treatment of United States
shareholders owning stock of a specified 10 percent owned
foreign corporation through a partnership.''.
(b) Application of Holding Period Requirement.--Subsection
(c) of section 246 is amended--
(1) by striking ``or 245'' in paragraph (1) and inserting
``245, or 245A'', and
(2) by adding at the end the following new paragraph:
``(5) Special rules for foreign source portion of dividends
received from specified 10-percent owned foreign
corporations.--
``(A) 1-year holding period requirement.--For purposes of
section 245A--
``(i) paragraph (1)(A) shall be applied--
``(I) by substituting `365 days' for `45 days' each place
it appears, and
``(II) by substituting `731-day period' for `91-day
period', and
``(ii) paragraph (2) shall not apply.
``(B) Status must be maintained during holding period.--For
purposes of applying paragraph (1) with respect to section
245A, the taxpayer shall be treated as holding the stock
referred to in paragraph (1) for any period only if--
``(i) the specified 10-percent owned foreign corporation
referred to in section 245A(a) is a specified 10-percent
owned foreign corporation at all times during such period,
and
``(ii) the taxpayer is a United States shareholder with
respect to such specified 10-percent owned foreign
corporation at all times during such period.''.
(c) Application of Rules Generally Applicable to Deductions
for Dividends Received.--
(1) Treatment of dividends from certain corporations.--
Paragraph (1) of section 246(a) is amended by striking ``and
245'' and inserting ``245, and 245A''.
(2) Assets generating tax-exempt portion of dividend not
taken into account in allocating and apportioning deductible
expenses.--Paragraph (3) of section 864(e) is amended by
striking ``or 245(a)'' and inserting ``, 245(a), or 245A''.
(3) Coordination with section 1059.--Subparagraph (B) of
section 1059(b)(2) is amended by striking ``or 245'' and
inserting ``245, or 245A''.
(d) Coordination With Foreign Tax Credit Limitation.--
Subsection (b) of section 904 is amended by adding at the end
the following new paragraph:
``(5) Treatment of dividends for which deduction is allowed
under section 245a.--For purposes of subsection (a), in the
case of a domestic corporation which is a United States
shareholder with respect to a specified 10-percent owned
foreign corporation, such domestic corporation's taxable
income from sources without the United States shall be
determined without regard to--
``(A) the foreign-source portion of any dividend received
from such foreign corporation, and
``(B) any deductions properly allocable to such portion.
Any term which is used in section 245A and in this paragraph
shall have the same meaning for purposes of this paragraph as
when used in such section.''.
(e) Conforming Amendments.--
(1) Subsection (b) of section 951 is amended by striking
``subpart'' and inserting ``title''.
(2) Subsection (a) of section 957 is amended by striking
``subpart'' in the matter preceding paragraph (1) and
inserting ``title''.
(3) The table of sections for part VIII of subchapter B of
chapter 1 is amended by inserting after the item relating to
section 245 the following new item:
``Sec. 245A. Dividends received by domestic corporations from certain
foreign corporations.''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders in which or with which such
taxable years of foreign corporations end.
SEC. 14102. SPECIAL RULES RELATING TO SALES OR TRANSFERS
INVOLVING SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.
(a) Sales by United States Persons of Stock.--Section 1248
is amended by redesignating subsection (j) as subsection (k)
and by inserting after subsection (i) the following new
subsection:
``(j) Coordination With Dividends Received Deduction.--In
the case of the sale or exchange by a domestic corporation of
stock in a foreign corporation held for 1 year or more, any
amount received by the domestic corporation which is treated
as a dividend by reason of this section shall be treated as a
dividend for purposes of applying section 245A.''.
(b) Basis in Specified 10-percent Owned Foreign Corporation
Reduced by Nontaxed Portion of Dividend for Purposes of
Determining Loss.--
(1) In general.--Section 961 is amended by adding at the
end the following new subsection:
``(d) Basis in Specified 10-percent Owned Foreign
Corporation Reduced by Nontaxed Portion of Dividend for
Purposes of Determining Loss.--If a domestic corporation
receives a dividend from a specified 10-percent owned foreign
corporation (as defined in section 245A) in any taxable year,
solely for purposes of determining loss on any disposition of
stock of such foreign corporation in such taxable year or any
subsequent taxable year, the basis of such domestic
corporation in such stock shall be reduced (but not below
zero) by the amount of any deduction allowable to such
domestic corporation under section 245A with respect to such
stock.''.
(2) Effective date.--The amendments made by this subsection
shall apply to dividends received in taxable years beginning
after December 31, 2017.
(c) Sale by a CFC of a Lower Tier CFC.--Section 964(e) is
amended by adding at the end the following new paragraph:
``(4) Coordination with dividends received deduction.--
``(A) In general.--If, for any taxable year of a controlled
foreign corporation beginning after December 31, 2017, any
amount is treated as a dividend under paragraph (1) by reason
of a sale or exchange by the controlled foreign corporation
of stock in another foreign corporation held for 1 year or
more, then, notwithstanding any other provision of this
title--
``(i) the foreign-source portion of such dividend shall be
treated for purposes of section 951(a)(1)(A) as subpart F
income of the selling controlled foreign corporation for such
taxable year,
``(ii) a United States shareholder with respect to the
selling controlled foreign corporation shall include in gross
income for the taxable year of the shareholder with or within
which such taxable year of the controlled foreign corporation
ends an amount equal to the shareholder's pro rata share
(determined in the same manner as under section 951(a)(2)) of
the amount treated as subpart F income under clause (i), and
``(iii) the deduction under section 245A(a) shall be
allowable to the United States shareholder with respect to
the subpart F income included in gross income under clause
(ii) in the same manner as if such subpart F income were a
dividend received by the shareholder from the selling
controlled foreign corporation.
``(B) Effect of loss on earnings and profits.--For purposes
of this title, in the case of a sale or exchange by a
controlled foreign corporation of stock in another foreign
corporation in a taxable year of the selling controlled
foreign corporation beginning after December 31, 2017, to
which this paragraph would apply if gain were recognized, the
earnings and profits of the selling controlled foreign
corporation shall not be reduced by reason of any loss from
such sale or exchange.
``(C) Foreign-source portion.--For purposes of this
paragraph, the foreign-source portion of any amount treated
as a dividend
[[Page S7793]]
under paragraph (1) shall be determined in the same manner as
under section 245A(c).''.
(d) Treatment of Foreign Branch Losses Transferred to
Specified 10-percent Owned Foreign Corporations.--
(1) In general.--Part II of subchapter B of chapter 1 is
amended by adding at the end the following new section:
``SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANSFERRED TO
SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.
``(a) In General.--If a domestic corporation transfers
substantially all of the assets of a foreign branch (within
the meaning of section 367(a)(3)(C), as in effect before the
date of the enactment of the Tax Cuts and Jobs Act) to a
specified 10-percent owned foreign corporation (as defined in
section 245A) with respect to which it is a United States
shareholder after such transfer, such domestic corporation
shall include in gross income for the taxable year which
includes such transfer an amount equal to the transferred
loss amount with respect to such transfer.
``(b) Limitation and Carryforward Based on Foreign-source
Dividends Received.--
``(1) In general.--The amount included in the gross income
of the taxpayer under subsection (a) for any taxable year
shall not exceed the amount allowed as a deduction under
section 245A for such taxable year (taking into account
dividends received from all specified 10-percent owned
foreign corporations with respect to which the taxpayer is a
United States shareholder).
``(2) Amounts not included carried forward.--Any amount not
included in gross income for any taxable year by reason of
paragraph (1) shall, subject to the application of paragraph
(1) to the succeeding taxable year, be included in gross
income for the succeeding taxable year.
``(c) Transferred Loss Amount.--For purposes of this
section, the term `transferred loss amount' means, with
respect to any transfer of substantially all of the assets of
a foreign branch, the excess (if any) of--
``(1) the sum of losses--
``(A) which were incurred by the foreign branch after
December 31, 2017, and before the transfer, and
``(B) with respect to which a deduction was allowed to the
taxpayer, over
``(2) the sum of--
``(A) any taxable income of such branch for a taxable year
after the taxable year in which the loss was incurred and
through the close of the taxable year of the transfer, and
``(B) any amount which is recognized under section
904(f)(3) on account of the transfer.
``(d) Reduction for Recognized Gains.--The transferred loss
amount shall be reduced (but not below zero) by the amount of
gain recognized by the taxpayer on account of the transfer
(other than amounts taken into account under subsection
(c)(2)(B)).
``(e) Source of Income.--Amounts included in gross income
under this section shall be treated as derived from sources
within the United States.
``(f) Basis Adjustments.--Consistent with such regulations
or other guidance as the Secretary shall prescribe, proper
adjustments shall be made in the adjusted basis of the
taxpayer's stock in the specified 10-percent owned foreign
corporation to which the transfer is made, and in the
transferee's adjusted basis in the property transferred, to
reflect amounts included in gross income under this
section.''.
(2) Clerical amendment.--The table of sections for part II
of subchapter B of chapter 1 is amended by adding at the end
the following new item:
``Sec. 91. Certain foreign branch losses transferred to specified 10-
percent owned foreign corporations.''.
(3) Effective date.--The amendments made by this subsection
shall apply to transfers after December 31, 2017.
(e) Repeal of Active Trade or Business Exception Under
Section 367.--
(1) In general.--Section 367(a) is amended by striking
paragraph (3) and redesignating paragraphs (4), (5), and (6)
as paragraphs (3), (4), and (5), respectively
(2) Conforming amendments.--Section 367(a)(4), as
redesignated by paragraph (1), is amended--
(A) by striking ``Paragraphs (2) and (3)'' and inserting
``Paragraph (2)'', and
(B) by striking ``Paragraphs (2) and (3)'' in the heading
and inserting ``Paragraph (2)''.
(3) Effective date.--The amendments made by this subsection
shall apply to transfers after December 31, 2017.
SEC. 14103. TREATMENT OF DEFERRED FOREIGN INCOME UPON
TRANSITION TO PARTICIPATION EXEMPTION SYSTEM OF
TAXATION.
(a) In General.--Section 965 is amended to read as follows:
``SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME UPON
TRANSITION TO PARTICIPATION EXEMPTION SYSTEM OF
TAXATION.
``(a) Treatment of Deferred Foreign Income as Subpart F
Income.--In the case of the last taxable year of a deferred
income corporation which begins before January 1, 2018, the
subpart F income of such foreign corporation (as otherwise
determined for such taxable year under section 952) shall be
increased by the greater of--
``(1) the accumulated post-1986 deferred foreign income of
such corporation determined as of November 9, 2017, or
``(2) the accumulated post-1986 deferred foreign income of
such corporation determined as of December 31, 2017.
``(b) Reduction in Amounts Included in Gross Income of
United States Shareholders of Specified Foreign Corporations
With Deficits in Earnings and Profits.--
``(1) In general.--In the case of a taxpayer which is a
United States shareholder with respect to at least one
deferred foreign income corporation and at least one E&P
deficit foreign corporation, the amount which would (but for
this subsection) be taken into account under section
951(a)(1) by reason of subsection (a) as such United States
shareholder's pro rata share of the subpart F income of each
deferred foreign income corporation shall be reduced by the
amount of such United States shareholder's aggregate foreign
E&P deficit which is allocated under paragraph (2) to such
deferred foreign income corporation.
``(2) Allocation of aggregate foreign e&p deficit.--The
aggregate foreign E&P deficit of any United States
shareholder shall be allocated among the deferred foreign
income corporations of such United States shareholder in an
amount which bears the same proportion to such aggregate as--
``(A) such United States shareholder's pro rata share of
the accumulated post-1986 deferred foreign income of each
such deferred foreign income corporation, bears to
``(B) the aggregate of such United States shareholder's pro
rata share of the accumulated post-1986 deferred foreign
income of all deferred foreign income corporations of such
United States shareholder.
``(3) Definitions related to e&p deficits.--For purposes of
this subsection--
``(A) Aggregate foreign e&p deficit.--
``(i) In general.--The term `aggregate foreign E&P deficit'
means, with respect to any United States shareholder, the
lesser of--
``(I) the aggregate of such shareholder's pro rata shares
of the specified E&P deficits of the E&P deficit foreign
corporations of such shareholder, or
``(II) the amount determined under paragraph (2)(B).
``(ii) Allocation of deficit.--If the amount described in
clause (i)(II) is less than the amount described in clause
(i)(I), then the shareholder shall designate, in such form
and manner as the Secretary determines--
``(I) the amount of the specified E&P deficit which is to
be taken into account for each E&P deficit corporation with
respect to the taxpayer, and
``(II) in the case of an E&P deficit corporation which has
a qualified deficit (as defined in section 952), the portion
(if any) of the deficit taken into account under subclause
(I) which is attributable to a qualified deficit, including
the qualified activities to which such portion is
attributable.
``(B) E&p deficit foreign corporation.--The term `E&P
deficit foreign corporation' means, with respect to any
taxpayer, any specified foreign corporation with respect to
which such taxpayer is a United States shareholder, if--
``(i) such specified foreign corporation has a deficit in
post-1986 earnings and profits, and
``(ii) as of November 9, 2017--
``(I) such corporation was a specified foreign corporation,
and
``(II) such taxpayer was a United States shareholder of
such corporation.
``(C) Specified e&p deficit.--The term `specified E&P
deficit' means, with respect to any E&P deficit foreign
corporation, the amount of the deficit referred to in
subparagraph (B).
``(4) Treatment of earnings and profits in future years.--
``(A) Reduced earnings and profits treated as previously
taxed income when distributed.--For purposes of applying
section 959 in any taxable year beginning after December 31,
2017, with respect to any United States shareholder of a
deferred foreign income corporation, an amount equal to such
shareholder's reduction under paragraph (1) which is
allocated to such deferred foreign income corporation under
this subsection shall be treated as an amount which was
included in the gross income of such United States
shareholder under section 951(a).
``(B) E&p deficits.--For purposes of this title, a United
States shareholder's pro rata share of the earnings and
profits of any specified E&P deficit foreign corporation
under this subsection shall be increased by the amount of the
specified E&P deficit of such corporation taken into account
by such shareholder under paragraph (1), and, for purposes of
section 952, such increase shall be attributable to the same
activity to which the deficit so taken into account was
attributable.
``(c) Application of Participation Exemption to Included
Income.--
``(1) In general.--In the case of a United States
shareholder of a deferred foreign income corporation, there
shall be allowed as a deduction for the taxable year in which
an amount is included in the gross income of such United
States shareholder under section 951(a)(1) by reason of this
section an amount equal to the sum of--
``(A) 78.6 percent of the excess (if any) of--
``(i) the amount so included as gross income, over
``(ii) the amount of such United States shareholder's
aggregate foreign cash position, plus
``(B) 58.6 percent of so much of the amount described in
subparagraph (A)(ii) as does not exceed the amount described
in subparagraph (A)(i).
``(2) Aggregate foreign cash position.--For purposes of
this subsection--
[[Page S7794]]
``(A) In general.--The term `aggregate foreign cash
position' means, with respect to any United States
shareholder, the greater of--
``(i) the aggregate of such United States shareholder's pro
rata share of the cash position of each specified foreign
corporation of such United States shareholder determined as
of the close of the last taxable year of such specified
foreign corporation which begins before January 1, 2018, or
``(ii) one half of the sum of--
``(I) the aggregate described in clause (i) determined as
of the close of the last taxable year of each such specified
foreign corporation which ends before November 9, 2017, plus
``(II) the aggregate described in clause (i) determined as
of the close of the taxable year of each such specified
foreign corporation which precedes the taxable year referred
to in subclause (I).
``(B) Cash position.--For purposes of this paragraph, the
cash position of any specified foreign corporation is the sum
of--
``(i) cash and foreign currency held by such foreign
corporation,
``(ii) the net accounts receivable of such foreign
corporation, plus
``(iii) the fair market value of the following assets held
by such corporation:
``(I) Personal property which is of a type that is actively
traded and for which there is an established financial market
(other than stock in the specified foreign corporation).
``(II) Commercial paper, certificates of deposit, the
securities of the Federal government and of any State or
foreign government.
``(III) Any obligation with a term of less than one year.
``(IV) Any asset which the Secretary identifies as being
economically equivalent to any asset described in this
subparagraph.
``(C) Net accounts receivable.--For purposes of this
paragraph, the term `net accounts receivable' means, with
respect to any specified foreign corporation, the excess (if
any) of--
``(i) such corporation's accounts receivable, over
``(ii) such corporation's accounts payable (determined
consistent with the rules of section 461).
``(D) Prevention of double counting.--Cash positions of a
specified foreign corporation described in clause (ii) or
(iii)(III) of subparagraph (B) shall not be taken into
account by a United States shareholder under subparagraph (A)
to the extent that such United States shareholder
demonstrates to the satisfaction of the Secretary that such
amount is so taken into account by such United States
shareholder with respect to another specified foreign
corporation.
``(E) Cash positions of certain non-corporate entities
taken into account.--An entity shall be treated as a
specified foreign corporation of a United States shareholder
for purposes of determining such United States shareholder's
aggregate foreign cash position if--
``(i) such entity is a foreign entity which would be a
specified foreign corporation of such United States
shareholder if such entity were a corporation, or
``(ii) any interest in such entity is held by a specified
foreign corporation of such United States shareholder
(determined after application of clause (i)) and such entity
would be a specified foreign corporation of such United
States shareholder if such entity were a foreign corporation.
``(F) Anti-abuse.--If the Secretary determines that a
principal purpose of any transaction was to reduce the
aggregate foreign cash position taken into account under this
subsection, such transaction shall be disregarded for
purposes of this subsection.
``(d) Deferred Foreign Income Corporation; Accumulated
Post-1986 Deferred Foreign Income.--For purposes of this
section--
``(1) Deferred foreign income corporation.--The term
`deferred foreign income corporation' means, with respect to
any United States shareholder, any specified foreign
corporation of such United States shareholder which has
accumulated post-1986 deferred foreign income (as of the
close of the taxable year referred to in subsection (a))
greater than zero.
``(2) Accumulated post-1986 deferred foreign income.--The
term `accumulated post-1986 deferred foreign income' means
the post-1986 earnings and profits except to the extent such
earnings--
``(A) are attributable to income of the specified foreign
corporation which is effectively connected with the conduct
of a trade or business within the United States and subject
to tax under this chapter, or
``(B) in the case of a controlled foreign corporation, if
distributed, would be excluded from the gross income of a
United States shareholder under section 959.
To the extent provided in regulations or other guidance
prescribed by the Secretary, in the case of any controlled
foreign corporation which has shareholders which are not
United States shareholders, accumulated post-1986 deferred
foreign income shall be appropriately reduced by amounts
which would be described in subparagraph (B) if such
shareholders were United States shareholders.
``(3) Post-1986 earnings and profits.--The term `post-1986
earnings and profits' means the earnings and profits of the
foreign corporation (computed in accordance with sections
964(a) and 986, and by only taking into account periods when
the foreign corporation was a specified foreign corporation)
accumulated in taxable years beginning after December 31,
1986, and determined--
``(A) as of the date of the taxable year referred to in
paragraph (1) or (2) of subsection (a), whichever is
applicable with respect to such foreign corporation, and
``(B) without diminution by reason of dividends distributed
during the taxable year ending with or including such date.
``(e) Specified Foreign Corporation.--
``(1) In general.--For purposes of this section, the term
`specified foreign corporation' means--
``(A) any controlled foreign corporation, and
``(B) any section 902 corporation (as defined in section
909(d)(5) as in effect before the date of the enactment of
the Tax Cuts and Jobs Act).
``(2) Application to section 902 corporations.--For
purposes of sections 951 and 961, a section 902 corporation
(as so defined) shall be treated as a controlled foreign
corporation solely for purposes of taking into account the
subpart F income of such corporation under subsection (a)
(and for purposes of applying subsection (e)).
``(3) Exclusion of passive foreign investment companies.--
Such term shall not include any corporation which is a
passive foreign investment company (as defined in section
1297) with respect to the shareholder and which is not a
controlled foreign corporation.
``(f) Determinations of Pro Rata Share.--For purposes of
this section, the determination of any United States
shareholder's pro rata share of any amount with respect to
any specified foreign corporation shall be determined under
rules similar to the rules of section 951(a)(2) by treating
such amount in the same manner as subpart F income (and by
treating such specified foreign corporation as a controlled
foreign corporation).
``(g) Disallowance of Foreign Tax Credit, etc.--
``(1) In general.--No credit shall be allowed under section
901 for the applicable percentage of any taxes paid or
accrued (or treated as paid or accrued) with respect to any
amount for which a deduction is allowed under this section.
``(2) Applicable percentage.--For purposes of this
subsection, the term `applicable percentage' means the amount
(expressed as a percentage) equal to the sum of--
``(A) 0.786 multiplied by the ratio of--
``(i) the excess to which subsection (c)(1)(A) applies,
divided by
``(ii) the sum of such excess plus the amount to which
subsection (c)(1)(B) applies, plus
``(B) 0.586 multiplied by the ratio of--
``(i) the amount to which subsection (c)(1)(B) applies,
divided by
``(ii) the sum described in subparagraph (A)(ii).
``(3) Denial of deduction.--No deduction shall be allowed
under this chapter for any tax for which credit is not
allowable under section 901 by reason of paragraph (1)
(determined by treating the taxpayer as having elected the
benefits of subpart A of part III of subchapter N).
``(4) Coordination with section 78.--Section 78 shall not
apply to any tax for which credit is not allowable under
section 901 by reason of paragraph (1).
``(h) Election to Pay Liability in Installments.--
``(1) In general.--In the case of a United States
shareholder of a deferred foreign income corporation, such
United States shareholder may elect to pay the net tax
liability under this section in 8 installments of the
following amounts:
``(A) 8 percent of the net tax liability in the case of
each of the first 5 of such installments,
``(B) 15 percent of the net tax liability in the case of
the 6th such installment,
``(C) 20 percent of the net tax liability in the case of
the 7th such installment, and
``(D) 25 percent of the net tax liability in the case of
the 8th such installment.
``(2) Date for payment of installments.--If an election is
made under paragraph (1), the first installment shall be paid
on the due date (determined without regard to any extension
of time for filing the return) for the return of tax for the
taxable year described in subsection (a) and each succeeding
installment shall be paid on the due date (as so determined)
for the return of tax for the taxable year following the
taxable year with respect to which the preceding installment
was made.
``(3) Acceleration of payment.--If there is an addition to
tax for failure to timely pay any installment required under
this subsection, a liquidation or sale of substantially all
the assets of the taxpayer (including in a title 11 or
similar case), a cessation of business by the taxpayer, or
any similar circumstance, then the unpaid portion of all
remaining installments shall be due on the date of such event
(or in the case of a title 11 or similar case, the day before
the petition is filed). The preceding sentence shall not
apply to the sale of substantially all the assets of a
taxpayer to a buyer if such buyer enters into an agreement
with the Secretary under which such buyer is liable for the
remaining installments due under this subsection in the same
manner as if such buyer were the taxpayer.
``(4) Proration of deficiency to installments.--If an
election is made under paragraph (1) to pay the net tax
liability under this section in installments and a deficiency
[[Page S7795]]
has been assessed with respect to such net tax liability, the
deficiency shall be prorated to the installments payable
under paragraph (1). The part of the deficiency so prorated
to any installment the date for payment of which has not
arrived shall be collected at the same time as, and as a part
of, such installment. The part of the deficiency so prorated
to any installment the date for payment of which has arrived
shall be paid upon notice and demand from the Secretary. This
subsection shall not apply if the deficiency is due to
negligence, to intentional disregard of rules and
regulations, or to fraud with intent to evade tax.
``(5) Election.--Any election under paragraph (1) shall be
made not later than the due date for the return of tax for
the taxable year described in subsection (a) and shall be
made in such manner as the Secretary shall provide.
``(6) Net tax liability under this section.--For purposes
of this subsection--
``(A) In general.--The net tax liability under this section
with respect to any United States shareholder is the excess
(if any) of--
``(i) such taxpayer's net income tax for the taxable year
in which an amount is included in the gross income of such
United States shareholder under section 951(a)(1) by reason
of this section, over
``(ii) such taxpayer's net income tax for such taxable year
determined--
``(I) without regard to this section, and
``(II) without regard to any income or deduction properly
attributable to a dividend received by such United States
shareholder from any deferred foreign income corporation.
``(B) Net income tax.--The term `net income tax' means the
regular tax liability reduced by the credits allowed under
subparts A, B, and D of part IV of subchapter A.
``(i) Special Rules for S Corporation Shareholders.--
``(1) In general.--In the case of any S corporation which
is a United States shareholder of a deferred foreign income
corporation, each shareholder of such S corporation may elect
to defer payment of such shareholder's net tax liability
under this section with respect to such S corporation until
the shareholder's taxable year which includes the triggering
event with respect to such liability. Any net tax liability
payment of which is deferred under the preceding sentence
shall be assessed on the return of tax as an addition to tax
in the shareholder's taxable year which includes such
triggering event.
``(2) Triggering event.--
``(A) In general.--In the case of any shareholder's net tax
liability under this section with respect to any S
corporation, the triggering event with respect to such
liability is whichever of the following occurs first:
``(i) Such corporation ceases to be an S corporation
(determined as of the first day of the first taxable year
that such corporation is not an S corporation).
``(ii) A liquidation or sale of substantially all the
assets of such S corporation (including in a title 11 or
similar case), a cessation of business by such S corporation,
such S corporation ceases to exist, or any similar
circumstance.
``(iii) A transfer of any share of stock in such S
corporation by the taxpayer (including by reason of death, or
otherwise).
``(B) Partial transfers of stock.--In the case of a
transfer of less than all of the taxpayer's shares of stock
in the S corporation, such transfer shall only be a
triggering event with respect to so much of the taxpayer's
net tax liability under this section with respect to such S
corporation as is properly allocable to such stock.
``(C) Transfer of liability.--A transfer described in
clause (iii) of subparagraph (A) shall not be treated as a
triggering event if the transferee enters into an agreement
with the Secretary under which such transferee is liable for
net tax liability with respect to such stock in the same
manner as if such transferee were the taxpayer.
``(3) Net tax liability.--A shareholder's net tax liability
under this section with respect to any S corporation is the
net tax liability under this section which would be
determined under subsection (h)(6) if the only subpart F
income taken into account by such shareholder by reason of
this section were allocations from such S corporation.
``(4) Election to pay deferred liability in installments.--
In the case of a taxpayer which elects to defer payment under
paragraph (1)--
``(A) subsection (h) shall be applied separately with
respect to the liability to which such election applies,
``(B) an election under subsection (h) with respect to such
liability shall be treated as timely made if made not later
than the due date for the return of tax for the taxable year
in which the triggering event with respect to such liability
occurs,
``(C) the first installment under subsection (h) with
respect to such liability shall be paid not later than such
due date (but determined without regard to any extension of
time for filing the return), and
``(D) if the triggering event with respect to any net tax
liability is described in paragraph (2)(A)(ii), an election
under subsection (h) with respect to such liability may be
made only with the consent of the Secretary.
``(5) Joint and several liability of s corporation.--If any
shareholder of an S corporation elects to defer payment under
paragraph (1), such S corporation shall be jointly and
severally liable for such payment and any penalty, addition
to tax, or additional amount attributable thereto.
``(6) Extension of limitation on collection.--Any
limitation on the time period for the collection of a
liability deferred under this subsection shall not be treated
as beginning before the date of the triggering event with
respect to such liability.
``(7) Annual reporting of net tax liability.--
``(A) In general.--Any shareholder of an S corporation
which makes an election under paragraph (1) shall report the
amount of such shareholder's deferred net tax liability on
such shareholder's return of tax for the taxable year for
which such election is made and on the return of tax for each
taxable year thereafter until such amount has been fully
assessed on such returns.
``(B) Deferred net tax liability.--For purposes of this
paragraph, the term `deferred net tax liability' means, with
respect to any taxable year, the amount of net tax liability
payment of which has been deferred under paragraph (1) and
which has not been assessed on a return of tax for any prior
taxable year.
``(C) Failure to report.--In the case of any failure to
report any amount required to be reported under subparagraph
(A) with respect to any taxable year before the due date for
the return of tax for such taxable year, there shall be
assessed on such return as an addition to tax 5 percent of
such amount.
``(8) Election.--Any election under paragraph (1)--
``(A) shall be made by the shareholder of the S corporation
not later than the due date for such shareholder's return of
tax for the taxable year which includes the close of the
taxable year of such S corporation in which the amount
described in subsection (a) is taken into account, and
``(B) shall be made in such manner as the Secretary shall
provide.
``(j) Reporting by S Corporation.--Each S corporation which
is a United States shareholder of a specified foreign
corporation shall report in its return of tax under section
6037(a) the amount includible in its gross income for such
taxable year by reason of this section and the amount of the
deduction allowable by subsection (b). Any copy provided to a
shareholder under section 6037(b) shall include a statement
of such shareholder's pro rata share of such amounts.
``(k) Extension of Limitation on Assessment.--
Notwithstanding section 6501, the limitation on the time
period for the assessment of the net tax liability under this
section (as defined in subsection (h)(6)) shall not expire
before the date that is 6 years after the return for the
taxable year described in such subsection was filed.
``(l) Recapture for Expatriated Entities.--
``(1) In general.--If a deduction is allowed under
subsection (c) to a United States shareholder and such
shareholder first becomes an expatriated entity at any time
during the 10-year period beginning on the date of the
enactment of the Tax Cuts and Jobs Act, then--
``(A) the tax imposed by this chapter shall be increased
for the first taxable year in which such taxpayer becomes an
expatriated entity by an amount equal to 35 percent of the
amount of the deduction allowed to the specified foreign
corporation under subsection (c), and
``(B) no credits shall be allowed against the increase in
tax under subparagraph (A).
``(2) Expatriated entity.--For purposes of this subsection,
the term `expatriated entity' has the same meaning given such
term under section 7874(a)(2), except that such term shall
not include an entity if the surrogate foreign corporation
with respect to the entity is treated as a domestic
corporation under section 7874(b).
``(m) Special Rules for United States Shareholders Which
Are Real Estate Investment Trusts.--
``(1) In general.--If a real estate investment trust is a
United States shareholder in 1 or more deferred foreign
income corporations--
``(A) any amount required to be taken into account under
section 951(a)(1) by reason of this section shall not be
taken into account as gross income of the real estate
investment trust for purposes of applying paragraphs (2) and
(3) of section 856(c) to any taxable year for which such
amount is taken into account under section 951(a)(1), and
``(B) if the real estate investment trust elects the
application of this subparagraph, notwithstanding subsection
(a), any amount required to be taken into account under
section 951(a)(1) by reason of this section shall, in lieu of
the taxable year in which it would otherwise be included in
gross income ((for purposes of the computation of real estate
investment trust taxable income under section 857(b)), be
included in gross income as follows:
``(i) 8 percent of such amount in the case of each of the
taxable years in the 5-taxable year period beginning with the
taxable year in which such amount would otherwise be
included.
``(ii) 15 percent of such amount in the case of the 1st
taxable year following such period.
``(iii) 20 percent of such amount in the case of the 2nd
taxable year following such period.
``(iv) 25 percent of such amount in the case of the 3rd
taxable year following such period.
``(2) Rules for trusts electing deferred inclusion.--
[[Page S7796]]
``(A) Election.--Any election under paragraph (1)(B) shall
be made not later than the due date for the first taxable
year in the 5-taxable year period described in clause (i) of
paragraph (1)(B) and shall be made in such manner as the
Secretary shall provide.
``(B) Special rules.--If an election under paragraph (1)(B)
is in effect with respect to any real estate investment
trust, the following rules shall apply:
``(i) Application of participation exemption.--For purposes
of subsection (c)(1)--
``(I) the aggregate amount to which subparagraph (A) or (B)
of subsection (c)(1) applies shall be determined without
regard to the election,
``(II) each such aggregate amount shall be allocated to
each taxable year described in paragraph (1)(B) in the same
proportion as the amount included in the gross income of such
United States shareholder under section 951(a)(1) by reason
of this section is allocated to each such taxable year.
``(III) No installment payments.--The real estate
investment trust may not make an election under subsection
(g) for any taxable year described in paragraph (1)(B).
``(ii) Acceleration of inclusion.--If there is a
liquidation or sale of substantially all the assets of the
real estate investment trust (including in a title 11 or
similar case), a cessation of business by such trust, or any
similar circumstance, then any amount not yet included in
gross income under paragraph (1)(B) shall be included in
gross income as of the day before the date of the event and
the unpaid portion of any tax liability with respect to such
inclusion shall be due on the date of such event (or in the
case of a title 11 or similar case, the day before the
petition is filed).
``(n) Election Not to Apply Net Operating Loss Deduction.--
``(1) In general.--If a United States shareholder of a
deferred foreign income corporation elects the application of
this subsection for the taxable year described in subsection
(a), then the amount described in paragraph (2) shall not be
taken into account--
``(A) in determining the amount of the net operating loss
deduction under section 172 of such shareholder for such
taxable year, or
``(B) in determining the amount of taxable income for such
taxable year which may be reduced by net operating loss
carryovers or carrybacks to such taxable year under section
172.
``(2) Amount described.--The amount described in this
paragraph is the sum of--
``(A) the amount required to be taken into account under
section 951(a)(1) by reason of this section (determined after
the application of subsection (c)), plus
``(B) in the case of a domestic corporation which chooses
to have the benefits of subpart A of part III of subchapter N
for the taxable year, the taxes deemed to be paid by such
corporation under subsections (a) and (b) of section 960 for
such taxable year with respect to the amount described in
subparagraph (A) which are treated as a dividends under
section 78.
``(3) Election.--Any election under this subsection shall
be made not later than the due date (including extensions)
for filing the return of tax for the taxable year and shall
be made in such manner as the Secretary shall prescribe.
``(o) Regulations.--The Secretary shall prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out the provisions of this section or to
prevent the avoidance of the purposes of this section,
including through a reduction in earnings and profits through
changes in entity classification, changes in accounting
methods, or otherwise.''.
(b) Clerical Amendment.--The table of sections for subpart
F of part III of subchapter N of chapter 1 is amended by
striking the item relating to section 965 and inserting the
following:
``Sec. 965. Treatment of deferred foreign income upon transition to
participation exemption system of taxation.''.
Subpart B--Rules Related to Passive and Mobile Income
CHAPTER 1--TAXATION OF FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL
INTANGIBLE LOW-TAXED INCOME
SEC. 14201. CURRENT YEAR INCLUSION OF GLOBAL INTANGIBLE LOW-
TAXED INCOME BY UNITED STATES SHAREHOLDERS.
(a) In General.--Subpart F of part III of subchapter N of
chapter 1 is amended by inserting after section 951 the
following new section:
``SEC. 951A. GLOBAL INTANGIBLE LOW-TAXED INCOME INCLUDED IN
GROSS INCOME OF UNITED STATES SHAREHOLDERS.
``(a) In General.--Each person who is a United States
shareholder of any controlled foreign corporation for any
taxable year of such United States shareholder shall include
in gross income such shareholder's global intangible low-
taxed income for such taxable year.
``(b) Global Intangible Low-taxed Income.--For purposes of
this section--
``(1) In general.--The term `global intangible low-taxed
income' means, with respect to any United States shareholder
for any taxable year of such United States shareholder, the
excess (if any) of--
``(A) such shareholder's net CFC tested income for such
taxable year, over
``(B) such shareholder's net deemed tangible income return
for such taxable year.
``(2) Net deemed tangible income return.--The term `net
deemed tangible income return' means, with respect to any
United States shareholder for any taxable year, an amount
equal to 10 percent of the aggregate of such shareholder's
pro rata share of the qualified business asset investment of
each controlled foreign corporation with respect to which
such shareholder is a United States shareholder for such
taxable year (determined for each taxable year of each such
controlled foreign corporation which ends in or with such
taxable year of such United States shareholder).
``(c) Net CFC Tested Income.--For purposes of this
section--
``(1) In general.--The term `net CFC tested income' means,
with respect to any United States shareholder for any taxable
year of such United States shareholder, the excess (if any)
of--
``(A) the aggregate of such shareholder's pro rata share of
the tested income of each controlled foreign corporation with
respect to which such shareholder is a United States
shareholder for such taxable year of such United States
shareholder (determined for each taxable year of such
controlled foreign corporation which ends in or with such
taxable year of such United States shareholder), over
``(B) the aggregate of such shareholder's pro rata share of
the tested loss of each controlled foreign corporation with
respect to which such shareholder is a United States
shareholder for such taxable year of such United States
shareholder (determined for each taxable year of such
controlled foreign corporation which ends in or with such
taxable year of such United States shareholder).
``(2) Tested income; tested loss.--For purposes of this
section--
``(A) Tested income.--The term `tested income' means, with
respect to any controlled foreign corporation for any taxable
year of such controlled foreign corporation, the excess (if
any) of--
``(i) the gross income of such corporation determined
without regard to--
``(I) any item of income described in section 952(b),
``(II) any gross income taken into account in determining
the subpart F income of such corporation,
``(III) any gross income excluded from the foreign base
company income (as defined in section 954) and the insurance
income (as defined in section 953) of such corporation by
reason of section 954(b)(4),
``(IV) any dividend received from a related person (as
defined in section 954(d)(3)), and
``(V) any foreign oil and gas extraction income (as defined
in section 907(c)(1)) of such corporation, over
``(ii) the deductions (including taxes) properly allocable
to such gross income under rules similar to the rules of
section 954(b)(5).
``(B) Tested loss.--
``(i) In general.--The term `tested loss' means, with
respect to any controlled foreign corporation for any taxable
year of such controlled foreign corporation, the excess (if
any) of the amount described in subparagraph (A)(ii) over the
amount described in subparagraph (A)(i).
``(ii) Coordination with subpart f to deny double benefit
of losses.--Section 952(c)(1)(A) shall be applied by
increasing the earnings and profits of the controlled foreign
corporation by the tested loss of such corporation.
``(d) Qualified Business Asset Investment.--For purposes of
this section--
``(1) In general.--The term `qualified business asset
investment' means, with respect to any corporation for any
taxable year of such controlled foreign corporation, the
average of the aggregate of the corporation's adjusted bases
as of the close of each quarter of such taxable year in
specified tangible property --
``(A) used in a trade or business of the corporation, and
``(B) of a type with respect to which a deduction is
allowable under section 167.
``(2) Specified tangible property.--
``(A) In general.--The term `specified tangible property'
means, except as provided in subparagraph (B), any tangible
property used in the production of tested income.
``(B) Dual use property.--In the case of property used both
in the production of tested income and income which is not
tested income, such property shall be treated as specified
tangible property in the same proportion that the gross
income described in subsection (c)(1)(A) produced with
respect to such property bears to the total gross income
produced with respect to such property.
``(3) Determination of adjusted basis.--For purposes of
this subsection, notwithstanding any provision of this title
(or any other provision of law) which is enacted after the
date of the enactment of this section, the adjusted basis in
any property shall be determined using the alternative
depreciation system under section 168(g).
``(4) Regulations.--The Secretary shall issue such
regulations or other guidance as the Secretary determines
appropriate to prevent the avoidance of the purposes of this
subsection, including regulations or other guidance which
provide for the treatment of property if--
``(A) such property is transferred, or held, temporarily,
or
``(B) the avoidance of the purposes of this paragraph is a
factor in the transfer or holding of such property.
``(e) Determination of Pro Rata Share, etc.--For purposes
of this section--
[[Page S7797]]
``(1) In general.--The pro rata shares referred to in
subsections (b), (c)(1)(A), and (c)(1)(B), respectively,
shall be determined under the rules of section 951(a)(2) in
the same manner as such section applies to subpart F income
and shall be taken into account in the taxable year of the
United States shareholder in which or with which the taxable
year of the controlled foreign corporation ends.
``(2) Treatment as united states shareholder.--For purposes
of paragraph (1), a person shall be treated as a United
States shareholder of a controlled foreign corporation for
any taxable year only if such person owns (within the meaning
of section 958(a)) stock in such foreign corporation on the
last day, in such year, on which such foreign corporation is
a controlled foreign corporation.
``(3) Treatment as controlled foreign corporation.--A
foreign corporation shall be treated as a controlled foreign
corporation for any taxable year if such foreign corporation
is a controlled foreign corporation at any time during such
taxable year.
``(f) Treatment as Subpart F Income for Certain Purposes.--
``(1) In general.--
``(A) Application.--Except as provided in subparagraph (B),
any global intangible low-taxed income included in gross
income under subsection (a) shall be treated in the same
manner as an amount included under section 951(a)(1)(A) for
purposes of applying sections 168(h)(2)(B), 535(b)(10),
851(b), 904(h)(1), 959, 961, 962(c), 962(d), 993(a)(1)(E),
996(f)(1), 1248(b)(1), 1248(d)(1), 6501(e)(1)(C),
6654(d)(2)(D), and 6655(e)(4).
``(B) Exception.--The Secretary shall provide rules for the
application of subparagraph (A) to other provisions of this
title in any case in which the determination of subpart F
income is required to be made at the level of the controlled
foreign corporation.
``(2) Allocation of global intangible low-taxed income to
controlled foreign corporations.--For purposes of the
sections referred to in paragraph (1), with respect to any
controlled foreign corporation any pro rata amount from which
is taken into account in determining the global intangible
low-taxed income included in gross income of a United States
shareholder under subsection (a), the portion of such global
intangible low-taxed income which is treated as being with
respect to such controlled foreign corporation is--
``(A) in the case of a controlled foreign corporation with
no tested income, zero, and
``(B) in the case of a controlled foreign corporation with
tested income, the portion of such global intangible low-
taxed income which bears the same ratio to such global
intangible low-taxed income as--
``(i) such United States shareholder's pro rata amount of
the tested income of such controlled foreign corporation,
bears to
``(ii) the aggregate amount described in subsection
(c)(1)(A) with respect to such United States shareholder.''.
(b) Foreign Tax Credit.--
(1) Application of deemed paid foreign tax credit.--Section
960 is amended adding at the end the following new
subsection:
``(d) Deemed Paid Credit for Taxes Properly Attributable to
Tested Income.--
``(1) In general.--For purposes of this subpart, if any
amount is includible in the gross income of a domestic
corporation under section 951A, such domestic corporation
shall be deemed to have paid foreign income taxes equal to 80
percent of the product of--
``(A) such domestic corporation's inclusion percentage,
multiplied by
``(B) the aggregate tested foreign income taxes paid or
accrued by controlled foreign corporations.
``(2) Inclusion percentage.--For purposes of paragraph (1),
the term `inclusion percentage' means, with respect to any
domestic corporation, the ratio (expressed as a percentage)
of--
``(A) such corporation's global intangible low-taxed income
(as defined in section 951A(b)), divided by
``(B) the aggregate amount described in section
951A(c)(1)(A) with respect to such corporation.
``(3) Tested foreign income taxes.--For purposes of
paragraph (1), the term `tested foreign income taxes' means,
with respect to any domestic corporation which is a United
States shareholder of a controlled foreign corporation, the
foreign income taxes paid or accrued by such foreign
corporation which are properly attributable to the tested
income of such foreign corporation taken into account by such
domestic corporation under section 951A.''.
(2) Application of foreign tax credit limitation.--
(A) Separate basket for global intangible low-taxed
income.--Section 904(d)(1) is amended by redesignating
subparagraphs (A) and (B) as subparagraphs (B) and (C),
respectively, and by inserting before subparagraph (B) (as so
redesignated) the following new subparagraph:
``(A) any amount includible in gross income under section
951A (other than passive category income),''.
(B) Exclusion from general category income.--Section
904(d)(2)(A)(ii) is amended by inserting ``income described
in paragraph (1)(A) and'' before ``passive category income''.
(C) No carryover or carryback of excess taxes.--Section
904(c) is amended by adding at the end the following: ``This
subsection shall not apply to taxes paid or accrued with
respect to amounts described in subsection (d)(1)(A).''.
(c) Clerical Amendment .--The table of sections for subpart
F of part III of subchapter N of chapter 1 is amended by
inserting after the item relating to section 951 the
following new item:
``Sec. 951A. Global intangible low-taxed income included in gross
income of United States shareholders.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders in which or with which such
taxable years of foreign corporations end.
SEC. 14202. DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME
AND GLOBAL INTANGIBLE LOW-TAXED INCOME.
(a) In General.--Part VIII of subchapter B of chapter 1 is
amended by adding at the end the following new section:
``SEC. 250. FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL
INTANGIBLE LOW-TAXED INCOME.
``(a) Allowance of Deduction.--
``(1) In general.--In the case of a domestic corporation
for any taxable year, there shall be allowed as a deduction
an amount equal to the sum of--
``(A) 37.5 percent of the foreign-derived intangible income
of such domestic corporation for such taxable year, plus
``(B) 50 percent of the global intangible low-taxed income
amount (if any) which is included in the gross income of such
domestic corporation under section 951A for such taxable
year.
``(2) Limitation based on taxable income.--
``(A) In general.--If, for any taxable year--
``(i) the sum of the foreign-derived intangible income and
the global intangible low-taxed income amount otherwise taken
into account by the domestic corporation under paragraph (1),
exceeds
``(ii) the taxable income of the domestic corporation
(determined without regard to this section),
then the amount of the foreign-derived intangible income and
the global intangible low-taxed income amount so taken into
account shall be reduced as provided in subparagraph (B).
``(B) Reduction.--For purposes of subparagraph (A)--
``(i) foreign-derived intangible income shall be reduced by
an amount which bears the same ratio to the excess described
in subparagraph (A) as such foreign-derived intangible income
bears to the sum described in subparagraph (A)(i), and
``(ii) the global intangible low-taxed income amount shall
be reduced by the remainder of such excess.
``(3) Reduction in deduction for taxable years after
2025.--In the case of any taxable year beginning after
December 31, 2025, paragraph (1) shall be applied by
substituting--
``(A) `21.875 percent' for `37.5 percent' in subparagraph
(A), and
``(B) `37.5 percent' for `50 percent' in subparagraph (B).
``(b) Foreign-derived Intangible Income.--For purposes of
this section--
``(1) In general.--The foreign-derived intangible income of
any domestic corporation is the amount which bears the same
ratio to the deemed intangible income of such corporation
as--
``(A) the foreign-derived deduction eligible income of such
corporation, bears to
``(B) the deduction eligible income of such corporation.
``(2) Deemed intangible income.--For purposes of this
subsection--
``(A) In general.--The term `deemed intangible income'
means the excess (if any) of--
``(i) the deduction eligible income of the domestic
corporation, over
``(ii) the deemed tangible income return of the
corporation.
``(B) Deemed tangible income return.--The term `deemed
tangible income return' means, with respect to any
corporation, an amount equal to 10 percent of the
corporation's qualified business asset investment (as defined
in section 951A(d), determined by substituting `deduction
eligible income' for `tested income' in paragraph (2)
thereof).
``(3) Deduction eligible income.--
``(A) In general.--The term `deduction eligible income'
means, with respect to any domestic corporation, the excess
(if any) of--
``(i) gross income of such corporation determined without
regard to--
``(I) the subpart F income of such corporation determined
under section 951,
``(II) the global intangible low-taxed income determined
under section 951A,
``(III) any financial services income (as defined in
section 904(d)(2)(D)) of such corporation which is not
described in clause (ii),
``(IV) any dividend received from a corporation which is a
controlled foreign corporation of such domestic corporation,
``(V) any domestic oil and gas extraction income of such
corporation, and
``(VI) any foreign branch income (as defined in section
904(d)(2)(J)), over
``(ii) the deductions (including taxes) properly allocable
to such gross income under rules similar to the rules of
section 954(b)(5).
``(B) Domestic oil and gas extraction income.--For purposes
of subparagraph (A), the term `domestic oil and gas
extraction income' means income described in section
907(c)(1), determined by substituting `within
[[Page S7798]]
the United States' for `without the United States'.
``(4) Foreign-derived deduction eligible income.--The term
`foreign-derived deduction eligible income' means, with
respect to any taxpayer for any taxable year, any deduction
eligible income of such taxpayer which is derived in
connection with--
``(A) property--
``(i) which is sold by the taxpayer to any person who is
not a United States person, and
``(ii) which the taxpayer establishes to the satisfaction
of the Secretary is for a foreign use, or
``(B) services provided by the taxpayer which the taxpayer
establishes to the satisfaction of the Secretary are provided
to any person, or with respect to property, not located
within the United States.
``(5) Rules relating to foreign use property or services.--
For purposes of this subsection--
``(A) Foreign use.--The term `foreign use' means any use,
consumption, or disposition which is not within the United
States.
``(B) Property or services provided to domestic
intermediaries.--
``(i) Property.--If a taxpayer sells property to another
person (other than a related party) for further manufacture
or other modification within the United States, such property
shall not be treated as sold for a foreign use even if such
other person subsequently uses such property for a foreign
use.
``(ii) Services.--If a taxpayer provides services to
another person (other than a related party) located within
the United States, such services shall not be treated as
described in paragraph (4)(B) even if such other person uses
such services in providing services which are so described.
``(C) Special rules with respect to related party
transactions.--
``(i) Sales to related parties.--If property is sold to a
related party who is not a United States person, such sale
shall not be treated as for a foreign use unless--
``(I) such property is ultimately sold by a related party,
or used by a related party in connection with property which
is sold or the provision of services, to another person who
is an unrelated party who is not a United States person, and
``(II) the taxpayer establishes to the satisfaction of the
Secretary that such property is for a foreign use.
For purposes of this clause, a sale of property shall be
treated as a sale of each of the components thereof.
``(ii) Service provided to related parties.--If a service
is provided to a related party who is not located in the
United States, such service shall not be treated described in
subparagraph (A)(ii) unless the taxpayer established to the
satisfaction of the Secretary that such service is not
substantially similar to services provided by such related
party to persons located within the United States.
``(D) Related party.--For purposes of this paragraph, the
term `related party' means any member of an affiliated group
as defined in section 1504(a), determined--
``(i) by substituting `more than 50 percent' for `at least
80 percent' each place it appears, and
``(ii) without regard to paragraphs (2) and (3) of section
1504(b).
Any person (other than a corporation) shall be treated as a
member of such group if such person is controlled by members
of such group (including any entity treated as a member of
such group by reason of this sentence) or controls any such
member. For purposes of the preceding sentence, control shall
be determined under the rules of section 954(d)(3).
``(E) Sold.--For purposes of this subsection, the terms
`sold', `sells', and `sale' shall include any lease, license,
exchange, or other disposition.
``(c) Regulations.--The Secretary shall prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out the provisions of this section.''.
(b) Conforming Amendments.--
(1) Section 172(d), as amended by section 13011, is amended
by adding at the end the following new paragraph:
``(10) Deduction for foreign-derived intangible income.--
The deduction under section 250 shall not be allowed.''.
(2) Section 246(b)(1) is amended--
(A) by striking ``and subsection (a) and (b) of section
245'' the first place it appears and inserting ``, subsection
(a) and (b) of section 245, and section 250'',
(B) by striking ``and subsection (a) and (b) of section
245'' the second place it appears and inserting ``subsection
(a) and (b) of section 245, and 250''.
(3) Section 469(i)(3)(F)(iii) is amended by striking ``and
222'' and inserting ``222, and 250''.
(4) The table of sections for part VIII of subchapter B of
chapter 1 is amended by adding at the end the following new
item:
``Sec. 250. Foreign-derived intangible income and global intangible
low-taxed income.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 14203. SPECIAL RULES FOR TRANSFERS OF INTANGIBLE
PROPERTY FROM CONTROLLED FOREIGN CORPORATIONS
TO UNITED STATES SHAREHOLDERS.
(a) In General.--Subpart F of part III of subchapter N of
chapter 1 is amended by adding at the end the following new
section:
``SEC. 966. TRANSFERS OF INTANGIBLE PROPERTY TO UNITED STATES
SHAREHOLDERS.
``(a) In General.--In the case of any distribution of
intangible property which is held by a controlled foreign
corporation on the date of enactment of this section and
which is described in subsection (b)--
``(1) for purposes of part I of subchapter C and any other
provision of this title specified by the Secretary, the fair
market value of such property on the date of such
distribution shall be treated as not exceeding the adjusted
basis of such property immediately before such distribution,
and
``(2) if the distribution is to a United States shareholder
and is not a dividend--
``(A) the United States shareholder's adjusted basis in the
stock of the controlled foreign corporation with respect to
which such distribution is made shall be increased by the
amount (if any) of such distribution which would (but for
this subsection) be includible in gross income, and
``(B) the adjusted basis of such property in the hands of
such United States shareholder immediately after such
distribution shall be such adjusted basis immediately before
such distribution reduced by the amount of the increase
described in subparagraph (A).
``(b) Distribution.--A distribution is described in this
section if the distribution is--
``(1) received by a domestic corporation from a controlled
foreign corporation with respect to which such corporation is
a United States shareholder, and
``(2) made by the controlled foreign corporation before the
last day of the third taxable year of the controlled foreign
corporation beginning after December 31, 2017.
``(c) Intangible Property.--For purposes of this
subsection, the term `intangible property' has the meaning
given such term by section 936(h)(3)(B) or which is computer
software described in section 197(e)(3)(B).''.
(b) Conforming Amendments.--
(1) Section 197(f)(2)(B)(i) is amended by inserting
``966(a),'' after ``731,''.
(2) The table of sections for subpart F of part III of
subchapter N of chapter 1 is amended by adding at the end the
following new item:
``Sec. 966. Transfers of intangible property to United States
shareholders.''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions made in taxable years of foreign
corporations beginning after December 31, 2017, and to
taxable years of United States shareholders in which or with
which such taxable years of foreign corporations end.
CHAPTER 2--OTHER MODIFICATIONS OF SUBPART F PROVISIONS
SEC. 14211. ELIMINATION OF INCLUSION OF FOREIGN BASE COMPANY
OIL RELATED INCOME.
(a) Repeal.--Subsection (a) of section 954 is amended--
(1) by inserting ``and'' at the end of paragraph (2),
(2) by striking the comma at the end of paragraph (3) and
inserting a period, and
(3) by striking paragraph (5).
(b) Conforming Amendments.--
(1) Section 952(c)(1)(B)(iii) is amended by striking
subclause (I) and redesignating subclauses (II) through (V)
as subclauses (I) through (IV), respectively.
(2) Section 954(b) is amended--
(A) by striking the second sentence of paragraph (4),
(B) by striking ``the foreign base company services income,
and the foreign base company oil related income'' in
paragraph (5) and inserting ``and the foreign base company
services income'', and
(C) by striking paragraph (6).
(3) Section 954 is amended by striking subsection (g).
(c) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders with or within which such taxable
years of foreign corporations end.
SEC. 14212. INFLATION ADJUSTMENT OF DE MINIMIS EXCEPTION FOR
FOREIGN BASE COMPANY INCOME.
(a) In General.--Section 954(b)(3) is amended by adding at
the end the following new subparagraph:
``(D) Inflation adjustment.--In the case of any taxable
year beginning after 2017, the dollar amount in subparagraph
(A)(ii) shall be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins.
Any increase determined under the preceding sentence shall be
rounded to the nearest multiple of $50,000.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders in which or with which such
taxable years of foreign corporations end.
SEC. 14213. REPEAL OF INCLUSION BASED ON WITHDRAWAL OF
PREVIOUSLY EXCLUDED SUBPART F INCOME FROM
QUALIFIED INVESTMENT.
(a) In General.--Subpart F of part III of subchapter N of
chapter 1 is amended by striking section 955.
(b) Conforming Amendments.--
(1)(A) Section 951(a)(1)(A) is amended to read as follows:
``(A) his pro rata share (determined under paragraph (2))
of the corporation's subpart F income for such year, and''.
[[Page S7799]]
(B) Section 851(b) is amended by striking ``section
951(a)(1)(A)(i)'' in the flush language at the end and
inserting ``section 951(a)(1)(A)''.
(C) Section 952(c)(1)(B)(i) is amended by striking
``section 951(a)(1)(A)(i)'' and inserting ``section
951(a)(1)(A)''.
(D) Section 953(c)(1)(C) is amended by striking ``section
951(a)(1)(A)(i)'' and inserting ``section 951(a)(1)(A)''.
(2) Section 951(a) is amended by striking paragraph (3).
(3) Section 953(d)(4)(B)(iv)(II) is amended by striking
``or amounts referred to in clause (ii) or (iii) of section
951(a)(1)(A)''.
(4) Section 964(b) is amended by striking ``, 955,''.
(5) Section 970 is amended by striking subsection (b).
(6) The table of sections for subpart F of part III of
subchapter N of chapter 1 is amended by striking the item
relating to section 955.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders in which or with which such
taxable years of foreign corporations end.
SEC. 14214. MODIFICATION OF STOCK ATTRIBUTION RULES FOR
DETERMINING STATUS AS A CONTROLLED FOREIGN
CORPORATION.
(a) In General.--Section 958(b) is amended--
(1) by striking paragraph (4), and
(2) by striking ``Paragraphs (1) and (4)'' in the last
sentence and inserting ``Paragraph (1)''.
(b) Effective Date.--The amendments made by this section
shall apply to--
(1) the last taxable year of foreign corporations beginning
before January 1, 2018, and each subsequent taxable year of
such foreign corporations, and
(2) taxable years of United States shareholders in which or
with which such taxable years of foreign corporations end.
SEC. 14215. MODIFICATION OF DEFINITION OF UNITED STATES
SHAREHOLDER.
(a) In General.--Section 951(b) is amended by inserting ``,
or 10 percent or more of the total value of shares of all
classes of stock of such foreign corporation'' after ``such
foreign corporation''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders with or within which such taxable
years of foreign corporations end.
SEC. 14216. ELIMINATION OF REQUIREMENT THAT CORPORATION MUST
BE CONTROLLED FOR 30 DAYS BEFORE SUBPART F
INCLUSIONS APPLY.
(a) In General.--Section 951(a)(1) is amended by striking
``for an uninterrupted period of 30 days or more'' and
inserting ``at any time''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders with or within which such taxable
years of foreign corporations end.
SEC. 14217. LOOK-THRU RULE FOR RELATED CONTROLLED FOREIGN
CORPORATIONS MADE PERMANENT.
(a) In General.--Paragraph (6) of section 954(c) is amended
by striking subparagraph (C).
(b) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders in which or with which such
taxable years of foreign corporations end.
SEC. 14218. CORPORATIONS ELIGIBLE FOR DEDUCTION FOR DIVIDENDS
FROM CONTROLLED FOREIGN CORPORATIONS EXEMPT
FROM SUBPART F INCLUSION FOR INVESTMENT IN
UNITED STATES PROPERTY.
(a) In General.--Section 956(a) is amended by inserting
``(other than a corporation)'' after ``United States
shareholder'' in the matter preceding paragraph (1).
(b) Effective Date.--The amendment made by this section
shall apply to taxable years of controlled foreign
corporations ending after December 31, 2017, and to taxable
years of United States shareholders with or within which such
taxable years of controlled foreign corporations end.
CHAPTER 3--PREVENTION OF BASE EROSION
SEC. 14221. DENIAL OF DEDUCTION FOR INTEREST EXPENSE OF
UNITED STATES SHAREHOLDERS WHICH ARE MEMBERS OF
WORLDWIDE AFFILIATED GROUPS WITH EXCESS
DOMESTIC INDEBTEDNESS.
(a) In General.--Section 163 is amended by redesignating
subsection (n) as subsection (o) and by inserting after
subsection (m) the following new subsection:
``(n) Disallowance of Deduction for Interest Expense of
United States Shareholders Which Are Members of Worldwide
Affiliated Groups With Excess Domestic Indebtedness.--
``(1) In general.--In the case of any domestic corporation
which is a member of a worldwide affiliated group, the
deduction allowed under this chapter for interest paid or
accrued by such domestic corporation during the taxable year
shall be reduced by the product of--
``(A) the net interest expense of such domestic
corporation, multiplied by
``(B) the debt-to-equity differential percentage of such
worldwide affiliated group.
``(2) Carryforward.--Any amount disallowed under paragraph
(1) for any taxable year shall be treated as interest paid or
accrued in the succeeding taxable year.
``(3) Debt-to-equity differential percentage.--
``(A) In general.--For purposes of this subsection, the
term `debt-to-equity differential percentage' means, with
respect to any worldwide affiliated group, the percentage
which the excess domestic indebtedness of such group bears to
the total indebtedness of the domestic corporations which are
members of such group.
``(B) Excess domestic indebtedness.--For purposes of
subparagraph (A), the term `excess domestic indebtedness'
means, with respect to any worldwide affiliated group, the
excess (if any) of--
``(i) the total indebtedness of the domestic corporations
which are members of such group, over
``(ii) 110 percent of the amount which the total
indebtedness of such domestic corporations would be if the
ratio of such indebtedness to the total equity of such
domestic corporations equaled the ratio which--
``(I) the total indebtedness of such group, bears to
``(II) the total equity of such group.
``(C) Total equity.--For purposes of subparagraph (B), the
term `total equity' means, with respect to one or more
corporations, an amount equal to--
``(i) the sum of the money and all other assets of such
corporations, reduced (but not below one) by
``(ii) the total indebtedness of such corporations.
``(D) Special rules for determining debt and equity.--
``(i) In general.--For purposes of this paragraph--
``(I) the amount taken into account with respect to any
asset shall be the adjusted basis thereof for purposes of
determining gain,
``(II) the amount taken into account with respect to any
indebtedness with original issue discount shall be its issue
price plus the portion of the original issue discount
previously accrued as determined under the rules of section
1272 (determined without regard to subsection (a)(7) or
(b)(4) thereof), and
``(III) there shall be such other adjustments as the
Secretary shall by regulations prescribe.
``(ii) Intragroup debt and equity interests disregarded.--
For purposes of this paragraph, the total indebtedness, and
the assets, of any group of corporations shall be determined
by treating all members of such group as one corporation.
``(iii) Determination of assets of domestic group.--For
purposes of this paragraph, the assets of the domestic
corporations which are members of any worldwide affiliated
group shall be determined by disregarding any interest held
by any such domestic corporation in any foreign corporation
which is a member of such group.
``(E) Phase in of percentage used in determining excess
indebtedness.--In the case of any taxable year beginning in a
calendar year before 2022, the following percentages shall be
substituted for `110 percent' in applying subparagraph
(B)(ii):
``In the case of a taxable year beginning
in: The percentage is:
2018...................................... 130
2019...................................... 125
2020...................................... 120
2021...................................... 115
``(4) Other definitions.--For purposes of this subsection--
``(A) Worldwide affiliated group.--The term `worldwide
affiliated group' means a group consisting of the includible
members of an affiliated group, as defined in section
1504(a), determined--
``(i) by substituting `more than 50 percent' for `at least
80 percent' each place it appears in such section, and
``(ii) without regard to paragraphs (2), (3), and (4) of
section 1504(b).
``(B) Net interest expense.--The term `net interest
expense' means the excess (if any) of
``(i) the interest paid or accrued by the taxpayer during
the taxable year, over
``(ii) the amount of interest includible in the gross
income of such taxpayer for such taxable year.
The Secretary shall by regulations provide for adjustments in
determining the amount of net interest expense if necessary.
``(5) Treatment of affiliated group.--For purposes of this
subsection, all members of the same affiliated group (within
the meaning of section 1504(a) applied by substituting `more
than 50 percent' for `at least 80 percent' each place it
appears) shall be treated as one taxpayer.
``(6) Regulations.--The Secretary shall prescribe such
regulations or other guidance as may be appropriate to carry
out the purposes of this subsection, including regulations or
other guidance--
``(A) to prevent the avoidance of the purposes of this
subsection,
``(B) providing such adjustments in the case of
corporations which are members of an affiliated group as may
be appropriate to carry out the purposes of this subsection,
``(C) providing for the coordination of this subsection
with section 884,
[[Page S7800]]
``(D) providing for the reallocation of shares of
partnership indebtedness, or distributive shares of the
partnership's interest income or interest expense, and
``(E) providing for the coordination with the limitation
under subsection (j).''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 14222. LIMITATIONS ON INCOME SHIFTING THROUGH INTANGIBLE
PROPERTY TRANSFERS.
(a) Definition of Intangible Asset.--Section 936(h)(3)(B)
is amended--
(1) by striking ``or'' at the end of clause (v),
(2) by striking clause (vi) and inserting the following:
``(vi) any goodwill, going concern value, or workforce in
place (including its composition and terms and conditions
(contractual or otherwise) of its employment); or
``(vii) any other item the value or potential value of
which is not attributable to tangible property or the
services of any individual.'', and
(3) by striking the flush language after clause (vii), as
added by paragraph (2).
(b) Clarification of Allowable Valuation Methods.--
(1) Foreign corporations.--Section 367(d)(2) is amended by
adding at the end the following new subparagraph:
``(D) Regulatory authority.--For purposes of the last
sentence of subparagraph (A), the Secretary shall require--
``(i) the valuation of transfers of intangible property,
including intangible property transferred with other property
or services, on an aggregate basis, or
``(ii) the valuation of such a transfer on the basis of the
realistic alternatives to such a transfer,
if the Secretary determines that such basis is the most
reliable means of valuation of such transfers.''.
(2) Allocation among taxpayers.--Section 482 is amended by
adding at the end the following: ``For purposes of this
section, the Secretary shall require the valuation of
transfers of intangible property (including intangible
property transferred with other property or services) on an
aggregate basis or the valuation of such a transfer on the
basis of the realistic alternatives to such a transfer, if
the Secretary determines that such basis is the most reliable
means of valuation of such transfers.''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to transfers in taxable years beginning after December
31, 2017.
(2) No inference.--Nothing in the amendment made by
subsection (a) shall be construed to create any inference
with respect to the application of section 936(h)(3) of the
Internal Revenue Code of 1986, or the authority of the
Secretary of the Treasury to provide regulations for such
application, with respect to taxable years beginning before
January 1, 2018.
SEC. 14223. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED IN
HYBRID TRANSACTIONS OR WITH HYBRID ENTITIES.
(a) In General.--Part IX of subchapter B of chapter 1 is
amended by inserting after section 267 the following:
``SEC. 267A. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED IN
HYBRID TRANSACTIONS OR WITH HYBRID ENTITIES.
``(a) In General.--No deduction shall be allowed under this
chapter for any disqualified related party amount paid or
accrued pursuant to a hybrid transaction or by, or to, a
hybrid entity.
``(b) Disqualified Related Party Amount.--For purposes of
this section--
``(1) Disqualified related party amount.--The term
`disqualified related party amount' means any interest or
royalty paid or accrued to a related party to the extent
that--
``(A) such amount is not included in the income of such
related party under the tax law of the country of which such
related party is a resident for tax purposes or is subject to
tax, or
``(B) such related party is allowed a deduction with
respect to such amount under the tax law of such country.
Such term shall not include any payment to the extent such
payment is included in the gross income of a United States
shareholder under section 951(a).
``(2) Related party.--The term `related party' means a
related person as defined in section 954(d)(3), except that
such section shall be applied with respect to the person
making the payment described in paragraph (1) in lieu of the
controlled foreign corporation otherwise referred to in such
section.
``(c) Hybrid Transaction.--For purposes of this section,
the term `hybrid transaction' means any transaction, series
of transactions, agreement, or instrument one or more
payments with respect to which are treated as interest or
royalties for purposes of this chapter and which are not so
treated for purposes the tax law of the foreign country of
which the recipient of such payment is resident for tax
purposes or is subject to tax.
``(d) Hybrid Entity.--For purposes of this section, the
term `hybrid entity' means any entity which is either--
``(1) treated as fiscally transparent for purposes of this
chapter but not so treated for purposes of the tax law of the
foreign country of which the entity is resident for tax
purposes or is subject to tax, or
``(2) treated as fiscally transparent for purposes of such
tax law but not so treated for purposes of this chapter.
``(e) Regulations.--The Secretary shall issue such
regulations or other guidance as may be necessary or
appropriate to carry out the purposes of this section,
including regulations or other guidance providing for--
``(1) rules for treating certain conduit arrangements which
involve a hybrid transaction or a hybrid entity as subject to
subsection (a),
``(2) rules for the application of this section to foreign
branches,
``(3) rules for treating certain structured transactions as
subject to subsection (a),
``(4) rules for treating a tax preference as an exclusion
from income for purposes of applying subsection (b)(1) if
such tax preference has the effect of reducing the generally
applicable statutory rate by 25 percent or more,
``(5) rules for treating the entire amount of interest or
royalty paid or accrued to a related party as a disqualified
related party amount if such amount is subject to a
participation exemption system or other system which provides
for the exclusion or deduction of a substantial portion of
such amount,
``(6) rules for determining the tax residence of a foreign
entity if the entity is otherwise considered a resident of
more than one country or of no country,
``(7) exceptions from subsection (a) with respect to--
``(A) cases in which the disqualified related party amount
is taxed under the laws of a foreign country other than the
country of which the related party is a resident for tax
purposes, and
``(B) other cases which the Secretary determines do not
present a risk of eroding the Federal tax base,
``(8) requirements for record keeping and information
reporting in addition to any requirements imposed by section
6038A.''.
(b) Conforming Amendment.--The table of sections for part
IX of subchapter B of chapter 1 is amended by inserting after
the item relating to section 267 the following new item:
``Sec. 267A. Certain related party amounts paid or accrued in hybrid
transactions or with hybrid entities.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 14224. SHAREHOLDERS OF SURROGATE FOREIGN CORPORATIONS
NOT ELIGIBLE FOR REDUCED RATE ON DIVIDENDS.
(a) In General.--Section 1(h)(11)(C)(iii) is amended--
(1) by striking ``shall not include any foreign
corporation'' and inserting ``shall not include--
``(I) any foreign corporation'',
(2) by striking the period at the end and inserting ``,
and'', and
(3) by adding at the end the following new subclause:
``(II) any corporation which is a surrogate foreign
corporation (as defined in section 7874(a)(2)(B)) other than
a foreign corporation which is treated as a domestic
corporation under section 7874(b).''.
(b) Effective Date.--The amendments made by this section
shall apply to dividends paid in taxable years beginning
after December 31, 2017.
Subpart C--Modifications Related to Foreign Tax Credit System
SEC. 14301. REPEAL OF SECTION 902 INDIRECT FOREIGN TAX
CREDITS; DETERMINATION OF SECTION 960 CREDIT ON
CURRENT YEAR BASIS.
(a) Repeal of Section 902 Indirect Foreign Tax Credits.--
Subpart A of part III of subchapter N of chapter 1 is amended
by striking section 902.
(b) Determination of Section 960 Credit on Current Year
Basis.--Section 960, as amended by section 14201, is
amended--
(1) by striking subsection (c), by redesignating subsection
(b) as subsection (c), by striking all that precedes
subsection (c) (as so redesignated) and inserting the
following:
``SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLUSIONS.
``(a) In General.--For purposes of this subpart, if there
is included in the gross income of a domestic corporation any
item of income under section 951(a)(1) with respect to any
controlled foreign corporation with respect to which such
domestic corporation is a United States shareholder, such
domestic corporation shall be deemed to have paid so much of
such foreign corporation's foreign income taxes as are
properly attributable to such item of income.
``(b) Special Rules for Distributions From Previously Taxed
Earnings and Profits.--For purposes of this subpart--
``(1) In general.--If any portion of a distribution from a
controlled foreign corporation to a domestic corporation
which is a United States shareholder with respect to such
controlled foreign corporation is excluded from gross income
under section 959(a), such domestic corporation shall be
deemed to have paid so much of such foreign corporation's
foreign income taxes as--
``(A) are properly attributable to such portion, and
``(B) have not been deemed to have to been paid by such
domestic corporation under this section for the taxable year
or any prior taxable year.
``(2) Tiered controlled foreign corporations.--If section
959(b) applies to any portion of a distribution from a
controlled foreign corporation to another controlled foreign
corporation, such controlled foreign
[[Page S7801]]
corporation shall be deemed to have paid so much of such
other controlled foreign corporation's foreign income taxes
as--
``(A) are properly attributable to such portion, and
``(B) have not been deemed to have been paid by a domestic
corporation under this section for any prior taxable year.'',
(2) and by adding after subsection (d) (as added by section
14201) the following new subsections:
``(e) Foreign Income Taxes.--The term `foreign income
taxes' means any income, war profits, or excess profits taxes
paid or accrued to any foreign country or possession of the
United States.
``(f) Regulations.--The Secretary shall prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out the provisions of this section.''.
(c) Conforming Amendments.--
(1) Section 78 is amended to read as follows:
``SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX CREDIT.
``If a domestic corporation chooses to have the benefits of
subpart A of part III of subchapter N (relating to foreign
tax credit) for any taxable year--
``(1) an amount equal to the taxes deemed to be paid by
such corporation under subsections (a) and (b) of section 960
for such taxable year shall be treated for purposes of this
title (other than section 960) as an item of income required
to be included in the gross income of such domestic
corporation under section 951(a), and
``(2) an amount equal to the aggregate tested foreign
income taxes deemed paid by such corporation under section
960(d) (determined without regard to the phrase `80 percent
of' in paragraph (1) thereof) shall be treated for purposes
of this title (other than section 960) as an addition to the
global intangible low-taxed income of such domestic
corporation under section 951A(a) for such taxable year.''.
(2) Paragraph (4) of section 245(a) is amended to read as
follows:
``(4) Post-1986 undistributed earnings.--The term `post-
1986 undistributed earnings' means the amount of the earnings
and profits of the foreign corporation (computed in
accordance with sections 964(a) and 986) accumulated in
taxable years beginning after December 31, 1986--
``(A) as of the close of the taxable year of the foreign
corporation in which the dividend is distributed, and
``(B) without diminution by reason of dividends distributed
during such taxable year.''.
(3) Section 245(a)(10)(C) is amended by striking ``902,
907, and 960'' and inserting ``907 and 960''.
(4) Sections 535(b)(1) and 545(b)(1) are each amended by
striking ``section 902(a) or 960(a)(1)'' and inserting
``section 960''.
(5) Section 814(f)(1) is amended--
(A) by striking subparagraph (B), and
(B) by striking all that precedes ``No income'' and
inserting the following:
``(1) Treatment of foreign taxes.--''.
(6) Section 865(h)(1)(B) is amended by striking ``902,
907,'' and inserting ``907''.
(7) Section 901(a) is amended by striking ``sections 902
and 960'' and inserting ``section 960''.
(8) Section 901(e)(2) is amended by striking ``but is not
limited to--'' and all that follows through ``that portion''
and inserting ``but is not limited to that portion''.
(9) Section 901(f) is amended by striking ``sections 902
and 960'' and inserting ``section 960''.
(10) Section 901(j)(1)(A) is amended by striking ``902
or''.
(11) Section 901(j)(1)(B) is amended by striking ``sections
902 and 960'' and inserting ``section 960''.
(12) Section 901(k)(2) is amended by striking ``, 902,''.
(13) Section 901(k)(6) is amended by striking ``902 or''.
(14) Section 901(m)(1) is amended by striking ``relevant
foreign assets--'' and all that follows and inserting
``relevant foreign assets shall not be taken into account in
determining the credit allowed under subsection (a).''.
(15) Section 904(d)(6)(A) is amended by striking ``902,
907,'' and inserting ``907''.
(16) Section 904(h)(10)(A) is amended by striking
``sections 902, 907, and 960'' and inserting ``sections 907
and 960''.
(17) Section 904(k) is amended to read as follows:
``(k) Cross References.--For increase of limitation under
subsection (a) for taxes paid with respect to amounts
received which were included in the gross income of the
taxpayer for a prior taxable year as a United States
shareholder with respect to a controlled foreign corporation,
see section 960(c).''.
(18) Section 905(c)(1) is amended by striking the last
sentence.
(19) Section 905(c)(2)(B)(i) is amended to read as follows:
``(i) shall be taken into account for the taxable year to
which such taxes relate, and''.
(20) Section 906(a) is amended by striking ``(or deemed,
under section 902, paid or accrued during the taxable
year)''.
(21) Section 906(b) is amended by striking paragraphs (4)
and (5).
(22) Section 907(b)(2)(B) is amended by striking ``902
or''.
(23) Section 907(c)(3) is amended--
(A) by striking subparagraph (A) and redesignating
subparagraphs (B) and (C) as subparagraphs (A) and (B),
respectively, and
(B) by striking ``section 960(a)'' in subparagraph (A) (as
so redesignated) and inserting ``section 960''.
(24) Section 907(c)(5) is amended by striking ``902 or''.
(25) Section 907(f)(2)(B)(i) is amended by striking ``902
or''.
(26) Section 908(a) is amended by striking ``902 or''.
(27) Section 909(b) is amended--
(A) by striking ``section 902 corporation'' in the matter
preceding paragraph (1) and inserting ``specified 10-percent
owned foreign corporation (as defined in section 245A(b))'',
(B) by striking ``902 or'' in paragraph (1),
(C) by striking ``by such section 902 corporation'' and all
that follows in the matter following paragraph (2) and
inserting ``by such specified 10-percent owned foreign
corporation or a domestic corporation which is a United
States shareholder with respect to such specified 10-percent
owned foreign corporation.'', and
(D) by striking ``Section 902 Corporations'' in the heading
thereof and inserting ``Specified 10-percent Owned Foreign
Corporations''.
(28) Section 909(d) is amended by striking paragraph (5).
(29) Section 958(a)(1) is amended by striking ``960(a)(1)''
and inserting ``960''.
(30) Section 959(d) is amended by striking ``Except as
provided in section 960(a)(3), any'' and inserting ``Any''.
(31) Section 959(e) is amended by striking ``section
960(b)'' and inserting ``section 960(c)''.
(32) Section 1291(g)(2)(A) is amended by striking ``any
distribution--'' and all that follows through ``but only if''
and inserting ``any distribution, any withholding tax imposed
with respect to such distribution, but only if''.
(33) Section 6038(c)(1)(B) is amended by striking
``sections 902 (relating to foreign tax credit for corporate
stockholder in foreign corporation) and 960 (relating to
special rules for foreign tax credit)'' and inserting
``section 960''.
(34) Section 6038(c)(4) is amended by striking subparagraph
(C).
(35) The table of sections for subpart A of part III of
subchapter N of chapter 1 is amended by striking the item
relating to section 902.
(36) The table of sections for subpart F of part III of
subchapter N of chapter 1 is amended by striking the item
relating to section 960 and inserting the following:
``Sec. 960. Deemed paid credit for subpart F inclusions.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of
United States shareholders in which or with which such
taxable years of foreign corporations end.
SEC. 14302. SEPARATE FOREIGN TAX CREDIT LIMITATION BASKET FOR
FOREIGN BRANCH INCOME.
(a) In General.--Section 904(d)(1), as amended by section
14201, is amended by redesignating subparagraphs (B) and (C)
as subparagraphs (C) and (D), respectively, and by inserting
after subparagraph (A) the following new subparagraph:
``(B) foreign branch income,''.
(b) Foreign Branch Income.--
(1) In general.--Section 904(d)(2) is amended by inserting
after subparagraph (I) the following new subparagraph:
``(J) Foreign branch income.--
``(i) In general.--The term `foreign branch income' means
the business profits of such United States person which are
attributable to 1 or more qualified business units (as
defined in section 989(a)) in 1 or more foreign countries.
For purposes of the preceding sentence, the amount of
business profits attributable to a qualified business unit
shall be determined under rules established by the Secretary.
``(ii) Exception.--Such term shall not include any income
which is passive category income.''.
(2) Conforming amendment.--Section 904(d)(2)(A)(ii), as
amended by section 14201, is amended by striking ``income
described in paragraph (1)(A) and'' and inserting ``income
described in paragraph (1)(A), foreign branch income, and''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 14303. ACCELERATION OF ELECTION TO ALLOCATE INTEREST,
ETC., ON A WORLDWIDE BASIS.
(a) In General.--Section 864(f)(6) is amended by striking
``December 31, 2020'' and inserting ``December 31, 2017''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 14304. SOURCE OF INCOME FROM SALES OF INVENTORY
DETERMINED SOLELY ON BASIS OF PRODUCTION
ACTIVITIES.
(a) In General.--Section 863(b) is amended by adding at the
end the following: ``Gains, profits, and income from the sale
or exchange of inventory property described in paragraph (2)
shall be allocated and apportioned between sources within and
without the United States solely on the basis of the
production activities with respect to the property.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
[[Page S7802]]
SEC. 14305. ELECTION TO INCREASE PERCENTAGE OF DOMESTIC
TAXABLE INCOME OFFSET BY OVERALL DOMESTIC LOSS
TREATED AS FOREIGN SOURCE.
(a) In General.--Section 904(g) is amended by adding at the
end the following new paragraph:
``(5) Election to increase percentage of taxable income
treated as foreign source.--
``(A) In general.--If any pre-2018 unused overall domestic
loss is taken into account under paragraph (1) for any
applicable taxable year, the taxpayer may elect to have such
paragraph applied to such loss by substituting a percentage
greater than 50 percent (but not greater than 100 percent)
for 50 percent in subparagraph (B) thereof.
``(B) Pre-2018 unused overall domestic loss.--For purposes
of this paragraph, the term `pre-2018 unused overall domestic
loss' means any overall domestic loss which--
``(i) arises in a qualified taxable year beginning before
January 1, 2018, and
``(ii) has not been used under paragraph (1) for any
taxable year beginning before such date.
``(C) Applicable taxable year.--For purposes of this
paragraph, the term `applicable taxable year' means any
taxable year of the taxpayer beginning after December 31,
2017, and before January 1, 2028.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
PART II--INBOUND TRANSACTIONS
SEC. 14401. BASE EROSION AND ANTI-ABUSE TAX.
(a) Imposition of Tax.--Subchapter A of chapter 1 is
amended by adding at the end the following new part:
``PART VII--BASE EROSION AND ANTI-ABUSE TAX
``Sec. 59A. Tax on base erosion payments of taxpayers with substantial
gross receipts.
``SEC. 59A. TAX ON BASE EROSION PAYMENTS OF TAXPAYERS WITH
SUBSTANTIAL GROSS RECEIPTS.
``(a) Imposition of Tax.--There is hereby imposed on each
applicable taxpayer for any taxable year a tax equal to the
base erosion minimum tax amount for the taxable year. Such
tax shall be in addition to any other tax imposed by this
subtitle.
``(b) Base Erosion Minimum Tax Amount.--For purposes of
this section--
``(1) In general.--Except as provided in paragraphs (2) and
(3), the term `base erosion minimum tax amount' means, with
respect to any applicable taxpayer for any taxable year, the
excess (if any) of--
``(A) an amount equal to 10 percent of the modified taxable
income of such taxpayer for the taxable year, over
``(B) an amount equal to the regular tax liability (as
defined in section 26(b)) of the taxpayer for the taxable
year, reduced (but not below zero) by the excess (if any)
of--
``(i) the credits allowed under this chapter against such
regular tax liability, over
``(ii) the credit allowed under section 38 for the taxable
year which is properly allocable to the research credit
determined under section 41(a).
``(2) Modifications for taxable years beginning after
2025.--In the case of any taxable year beginning after
December 31, 2025, paragraph (1) shall be applied--
``(A) by substituting `12.5 percent' for `10 percent' in
subparagraph (A) thereof, and
``(B) by reducing (but not below zero) the regular tax
liability (as defined in section 26(b)) for purposes of
subparagraph (B) thereof by the aggregate amount of the
credits allowed under this chapter against such regular tax
liability rather than the excess described in such
subparagraph.
``(3) Increased rate for certain banks and securities
dealers.--
``(A) In general.--In the case of an applicable taxpayer
described in subparagraph (B) for any taxable year--
``(i) paragraphs (1)(A) and (2)(A) shall each be applied by
substituting `11 percent' for `10 percent', and
``(ii) paragraph (2)(A) shall be applied by substituting
`13.5 percent' for `12.5 percent'.
``(B) Taxpayer described.--An applicable taxpayer is
described in this subparagraph if such taxpayer is a member
of an affiliated group (as defined in section 1504(a)(1))
which includes--
``(i) a bank (as defined in section 581), or
``(ii) a registered securities dealer under section 15(a)
of the Securities Exchange Act of 1934.
``(c) Modified Taxable Income.--For purposes of this
section--
``(1) In general.--The term `modified taxable income' means
the taxable income of the taxpayer computed under this
chapter for the taxable year, determined without regard to--
``(A) any base erosion tax benefit with respect to any base
erosion payment, or
``(B) the base erosion percentage of any net operating loss
deduction allowed under section 172 for the taxable year.
``(2) Base erosion tax benefit.--
``(A) In general.--The term `base erosion tax benefit'
means--
``(i) any deduction described in subsection (d)(1) which is
allowed under this chapter for the taxable year with respect
to any base erosion payment,
``(ii) in the case of a base erosion payment described in
subsection (d)(2), any deduction allowed under this chapter
for the taxable year for depreciation (or amortization in
lieu of depreciation) with respect to the property acquired
with such payment, and
``(iii) in the case of a base erosion payment described in
subsection (d)(3), any reduction in gross receipts with
respect to such payment in computing gross income of the
taxpayer for the taxable year for purposes of this chapter.
``(B) Tax benefits disregarded if tax withheld on base
erosion payment.--
``(i) In general.--Except as provided in clause (ii), any
base erosion tax benefit attributable to any base erosion
payment--
``(I) on which tax is imposed by section 871 or 881, and
``(II) with respect to which tax has been deducted and
withheld under section 1441 or 1442,
shall not be taken into account in computing modified taxable
income under paragraph (1)(A) or the base erosion percentage
under paragraph (4).
``(ii) Exception.--The amount not taken into account in
computing modified taxable income by reason of clause (i)
shall be reduced under rules similar to the rules under
section 163(j)(5)(B) (as in effect before the date of the
enactment of the Tax Cuts and Jobs Act).
``(3) Special rules for determining interest for which
deduction allowed.--For purposes of applying paragraph (1),
in the case of a taxpayer to which subsection (j) or (n) of
section 163 applies for the taxable year, the reduction in
the amount of interest for which a deduction is allowed by
reason of such subsection shall be treated as allocable first
to interest paid or accrued to persons who are not related
parties with respect to the taxpayer and then to such related
parties.
``(4) Base erosion percentage.--For purposes of paragraph
(1)(B)--
``(A) In general.--The term `base erosion percentage'
means, for any taxable year, the percentage determined by
dividing--
``(i) the aggregate amount of base erosion tax benefits of
the taxpayer for the taxable year, by
``(ii) the aggregate amount of the deductions allowable to
the taxpayer under this chapter for the taxable year.
``(B) Special rules.--The amount under subparagraph (A)(ii)
shall be determined--
``(i) by taking into account base erosion tax benefits
described in clauses (i) and (ii) of paragraph (2)(A), and
``(ii) by not taking into account any deduction allowed
under section 172, 245A, or 250 for the taxable year.
``(d) Base Erosion Payment.--For purposes of this section--
``(1) In general.--The term `base erosion payment' means
any amount paid or accrued by the taxpayer to a foreign
person which is a related party of the taxpayer and with
respect to which a deduction is allowable under this chapter.
``(2) Purchase of depreciable property.--Such term shall
also include any amount paid or accrued by the taxpayer to a
foreign person which is a related party of the taxpayer in
connection with the acquisition by the taxpayer from such
person of property of a character subject to the allowance of
depreciation (or amortization in lieu of depreciation).
``(3) Certain payments to expatriated entities.--
``(A) In general.--Such term shall also include any amount
paid or accrued by the taxpayer with respect to a person
described in subparagraph (B) which results in a reduction of
the gross receipts of the taxpayer.
``(B) Person described.--A person is described in this
subparagraph if such person is a--
``(i) surrogate foreign corporation which is a related
party of the taxpayer, but only if such person first became a
surrogate foreign corporation after November 9, 2017, or
``(ii) foreign person which is a member of the same
expanded affiliated group as the surrogate foreign
corporation.
``(C) Definitions.--For purposes of this paragraph--
``(i) Surrogate foreign corporation.--The term `surrogate
foreign corporation' has the meaning given such term by
section 7874(a)(2) but does not include a foreign corporation
treated as a domestic corporation under section 7874(b).
``(ii) Expanded affiliated group.--The term `expanded
affiliated group' has the meaning given such term by section
7874(c)(1).
``(4) Exception for certain amounts with respect to
services.--Paragraph (1) shall not apply to any amount paid
or accrued by a taxpayer for services if--
``(A) such services are services which meet the
requirements for eligibility for use of the services cost
method under section 482 (determined without regard to the
requirement that the services not contribute significantly to
fundamental risks of business success or failure), and
``(B) such amount constitutes the total services cost with
no markup.
``(e) Applicable Taxpayer.--For purposes of this section--
``(1) In general.--The term `applicable taxpayer' means,
with respect to any taxable year, a taxpayer--
``(A) which is a corporation other than a regulated
investment company, a real estate investment trust, or an S
corporation,
``(B) the average annual gross receipts of which for the 3-
taxable-year period ending with the preceding taxable year
are at least $500,000,000, and
``(C) the base erosion percentage (as determined under
subsection (c)(4)) of which for the taxable year is 4 percent
or higher.
[[Page S7803]]
``(2) Gross receipts.--
``(A) Special rule for foreign persons.--In the case of a
foreign person the gross receipts of which are taken into
account for purposes of paragraph (1)(B), only gross receipts
which are taken into account in determining income which is
effectively connected with the conduct of a trade or business
within the United States shall be taken into account. In the
case of a taxpayer which is a foreign person, the preceding
sentence shall not apply to the gross receipts of any United
States person which are aggregated with the taxpayer's gross
receipts by reason of paragraph (3).
``(B) Other rules made applicable.--Rules similar to the
rules of subparagraphs (B), (C), and (D) of section 448(c)(3)
shall apply in determining gross receipts for purposes of
this section.
``(3) Aggregation rules.--All persons treated as a single
employer under subsection (a) of section 52 shall be treated
as 1 person for purposes of this subsection and subsection
(c)(4), except that in applying section 1563 for purposes of
section 52, the exception for foreign corporations under
section 1563(b)(2)(C) shall be disregarded.
``(f) Foreign Person.--For purposes of this section, the
term `foreign person' has the meaning given such term by
section 6038A(c)(3).
``(g) Related Party.--For purposes of this section--
``(1) In general.--The term `related party' means, with
respect to any applicable taxpayer--
``(A) any 25-percent owner of the taxpayer,
``(B) any person who is related (within the meaning of
section 267(b) or 707(b)(1)) to the taxpayer or any 25-
percent owner of the taxpayer, and
``(C) any other person who is related (within the meaning
of section 482) to the taxpayer.
``(2) 25-percent owner.--The term `25-percent owner' means,
with respect to any corporation, any person who owns at least
25 percent of--
``(A) the total voting power of all classes of stock of a
corporation entitled to vote, or
``(B) the total value of all classes of stock of such
corporation.
``(3) Section 318 to apply.--Section 318 shall apply for
purposes of paragraphs (1) and (2), except that--
``(A) `10 percent' shall be substituted for `50 percent' in
section 318(a)(2)(C), and
``(B) subparagraphs (A), (B), and (C) of section 318(a)(3)
shall not be applied so as to consider a United States person
as owning stock which is owned by a person who is not a
United States person.
``(h) Exception for Certain Payments Made in the Ordinary
Course of Trade or Business.--For purposes of this section--
``(1) In general.--Except as provided in paragraph (3), any
qualified derivative payment shall not be treated as a base
erosion payment.
``(2) Qualified derivative payment.--
``(A) In general.--The term `qualified derivative payment'
means any payment made by a taxpayer pursuant to a derivative
with respect to which the taxpayer--
``(i) recognizes gain or loss as if such derivative were
sold for its fair market value on the last business day of
the taxable year (and such additional times as required by
this title or the taxpayer's method of accounting),
``(ii) treats any gain or loss so recognized as ordinary,
and
``(iii) treats the character of all items of income,
deduction, gain, or loss with respect to a payment pursuant
to the derivative as ordinary.
``(B) Reporting requirement.--No payments shall be treated
as qualified derivative payments under subparagraph (A) for
any taxable year unless the taxpayer includes in the
information required to be reported under section 6038B(b)(2)
with respect to such taxable year such information as is
necessary to identify the payments to be so treated and such
other information as the Secretary determines necessary to
carry out the provisions of this subsection.
``(3) Exceptions for payments otherwise treated as base
erosion payments.--This subsection shall not apply to any
qualified derivative payment if--
``(A) the payment would be treated as a base erosion
payment if it were not made pursuant to a derivative,
including any interest, royalty, or service payment, or
``(B) in the case of a contract which has derivative and
nonderivative components, the payment is properly allocable
to the nonderivative component.
``(4) Derivative defined.--For purposes of this
subsection--
``(A) In general.--The term `derivative' means any contract
(including any option, forward contract, futures contract,
short position, swap, or similar contract) the value of
which, or any payment or other transfer with respect to
which, is (directly or indirectly) determined by reference to
one or more of the following:
``(i) Any share of stock in a corporation.
``(ii) Any evidence of indebtedness.
``(iii) Any commodity which is actively traded.
``(iv) Any currency.
``(v) Any rate, price, amount, index, formula, or
algorithm.
``(B) Treatment of american depository receipts and similar
instruments.--Except as otherwise provided by the Secretary,
for purposes of this part, American depository receipts (and
similar instruments) with respect to shares of stock in
foreign corporations shall be treated as shares of stock in
such foreign corporations.
``(i) Regulations.--The Secretary shall prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out the provisions of this section,
including regulations--
``(1) providing for such adjustments to the application of
this section as are necessary to prevent the avoidance of the
purposes of this section, including through--
``(A) the use of unrelated persons, conduit transactions,
or other intermediaries, or
``(B) transactions or arrangements designed, in whole or in
part--
``(i) to characterize payments otherwise subject to this
section as payments not subject to this section, or
``(ii) to substitute payments not subject to this section
for payments otherwise subject to this section and
``(2) for the application of subsection (g), including
rules to prevent the avoidance of the exceptions under
subsection (g)(3).''.
(b) Reporting Requirements and Penalties.--
(1) In general.--Subsection (b) of section 6038A is amended
to read as follows:
``(b) Required Information.--
``(1) In general.--For purposes of subsection (a), the
information described in this subsection is such information
as the Secretary prescribes by regulations relating to--
``(A) the name, principal place of business, nature of
business, and country or countries in which organized or
resident, of each person which--
``(i) is a related party to the reporting corporation, and
``(ii) had any transaction with the reporting corporation
during its taxable year,
``(B) the manner in which the reporting corporation is
related to each person referred to in subparagraph (A), and
``(C) transactions between the reporting corporation and
each foreign person which is a related party to the reporting
corporation.
``(2) Additional information regarding base erosion
payments.--For purposes of subsection (a) and section 6038C,
if the reporting corporation or the foreign corporation to
whom section 6038C applies is an applicable taxpayer, the
information described in this subsection shall include--
``(A) such information as the Secretary determines
necessary to determine the base erosion minimum tax amount,
base erosion payments, and base erosion tax benefits of the
taxpayer for purposes of section 59A for the taxable year,
and
``(B) such other information as the Secretary determines
necessary to carry out such section.
For purposes of this paragraph, any term used in this
paragraph which is also used in section 59A shall have the
same meaning as when used in such section.''.
(2) Increase in penalty.--Paragraphs (1) and (2) of section
6038A(d) are each amended by striking ``$10,000'' and
inserting ``$25,000''.
(c) Disallowance of Credits Against Base Erosion Tax.--
Paragraph (2) of section 26(b) is amended by inserting after
subparagraph (A) the following new subparagraph:
``(B) section 59A (relating to base erosion and anti-abuse
tax),''.
(d) Conforming Amendments.--
(1) The table of parts for subchapter A of chapter 1 is
amended by adding after the item relating to part VI the
following new item:
``Part VII. Base erosion and anti-abuse tax''.
(2) Paragraph (1) of section 882(a), as amended by this
Act, is amended by inserting `` or 59A,'' after ``section
11,''.
(3) Subparagraph (A) of section 6425(c)(1), as amended by
section 13001, is amended to read as follows:
``(A) the sum of--
``(i) the tax imposed by section 11, or subchapter L of
chapter 1, whichever is applicable, plus
``(ii) the tax imposed by section 59A, over''.
(4)(A) Subparagraph (A) of section 6655(g)(1), as amended
by section 13001, is amended by striking ``plus'' at the end
of clause (i), by redesignating clause (ii) as clause (iii),
and by inserting after clause (i) the following new clause:
``(ii) the tax imposed by section 59A, plus''.
(B) Subparagraphs (A)(i) and (B)(i) of section 6655(e)(2),
as amended by section 13001, are each amended by inserting
``and modified taxable income'' after ``taxable income''.
(C) Subparagraph (B) of section 6655(e)(2) is amended by
adding at the end the following new clause:
``(iii) Modified taxable income.--The term `modified
taxable income' has the meaning given such term by section
59A(c)(1).''.
(e) Effective Date.--The amendments made by this section
shall apply to base erosion payments (as defined in section
59A(d) of the Internal Revenue Code of 1986, as added by this
section) paid or accrued in taxable years beginning after
December 31, 2017.
PART III--OTHER PROVISIONS
SEC. 14501. 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:
[[Page S7804]]
``(f) Qualifying Insurance Corporation.--For purposes of
subsection (b)(2)(B)--
``(1) In general.--The term `qualifying insurance
corporation' means, with respect to any taxable year, a
foreign corporation--
``(A) which would be subject to tax under subchapter L if
such corporation were a domestic corporation, and
``(B) the applicable insurance liabilities of which
constitute more than 25 percent of its total assets,
determined on the basis of such liabilities and assets as
reported on the corporation's applicable financial statement
for the last year ending with or within the taxable year.
``(2) Alternative facts and circumstances test for certain
corporations.--If a corporation fails to qualify as a
qualified insurance corporation under paragraph (1) solely
because the percentage determined under paragraph (1)(B) is
25 percent or less, a United States person that owns stock in
such corporation may elect to treat such stock as stock of a
qualifying insurance corporation if--
``(A) the percentage so determined for the corporation is
at least 10 percent, and
``(B) under regulations provided by the Secretary, based on
the applicable facts and circumstances--
``(i) the corporation is predominantly engaged in an
insurance business, and
``(ii) such failure is due solely to runoff-related or
rating-related circumstances involving such insurance
business.
``(3) Applicable insurance liabilities.--For purposes of
this subsection--
``(A) In general.--The term `applicable insurance
liabilities' means, with respect to any life or property and
casualty insurance business--
``(i) loss and loss adjustment expenses, and
``(ii) reserves (other than deficiency, contingency, or
unearned premium reserves) for life and health insurance
risks and life and health insurance claims with respect to
contracts providing coverage for mortality or morbidity
risks.
``(B) Limitations on amount of liabilities.--Any amount
determined under clause (i) or (ii) of subparagraph (A) shall
not exceed the lesser of such amount--
``(i) as reported to the applicable insurance regulatory
body in the applicable financial statement described in
paragraph (4)(A) (or, if less, the amount required by
applicable law or regulation), or
``(ii) as determined under regulations prescribed by the
Secretary.
``(4) Other definitions and rules.--For purposes of this
subsection--
``(A) Applicable financial statement.--The term `applicable
financial statement' means a statement for financial
reporting purposes which--
``(i) is made on the basis of generally accepted accounting
principles,
``(ii) is made on the basis of international financial
reporting standards, but only if there is no statement that
meets the requirement of clause (i), or
``(iii) except as otherwise provided by the Secretary in
regulations, is the annual statement which is required to be
filed with the applicable insurance regulatory body, but only
if there is no statement which meets the requirements of
clause (i) or (ii).
``(B) Applicable insurance regulatory body.--The term
`applicable insurance regulatory body' means, with respect to
any insurance business, the entity established by law to
license, authorize, or regulate such business and to which
the statement described in subparagraph (A) is provided.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 14502. REPEAL OF FAIR MARKET VALUE METHOD OF INTEREST
EXPENSE APPORTIONMENT.
(a) In General.--Paragraph (2) of section 864(e) is amended
to read as follows:
``(2) Gross income and fair market value methods may not be
used for interest.--All allocations and apportionments of
interest expense shall be determined using the adjusted bases
of assets rather than on the basis of the fair market value
of the assets or gross income.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2017.
SEC. 14503. MODIFICATION TO SOURCE RULES INVOLVING
POSSESSIONS.
(a) In General.--Subsection (b)(2) of Section 937 of the
Internal Revenue Code of 1986 is amended by inserting ``, but
only to the extent such income is attributable to an office
or fixed place of business within the United States
(determined under the rules of Section 864(c)(5))'' before
the period at the end.
(b) Source Rules for Personal Property Sales.--Subsection
(j)(3) of section 865 of the Internal Revenue Code of 1986 is
amended by inserting ``932,'' after ``931,''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2018.
TITLE II
SEC. 20001. OIL AND GAS PROGRAM.
(a) Definitions.--In this section:
(1) Coastal plain.--The term ``Coastal Plain'' means the
area identified as the 1002 Area on the plates prepared by
the United States Geological Survey entitled ``ANWR Map -
Plate 1'' and ``ANWR Map - Plate 2'', dated October 24, 2017,
and on file with the United States Geological Survey and the
Office of the Solicitor of the Department of the Interior.
(2) Secretary.--The term ``Secretary'' means the Secretary
of the Interior, acting through the Bureau of Land
Management.
(b) Oil and Gas Program.--
(1) In general.--Section 1003 of the Alaska National
Interest Lands Conservation Act (16 U.S.C. 3143) shall not
apply to the Coastal Plain.
(2) Establishment.--
(A) In general.--The Secretary shall establish and
administer a competitive oil and gas program for the leasing,
development, production, and transportation of oil and gas in
and from the Coastal Plain.
(B) Purposes.--Section 303(2)(B) of the Alaska National
Interest Lands Conservation Act (Public Law 96-487; 94 Stat.
2390) is amended--
(i) in clause (iii), by striking ``and'' at the end;
(ii) in clause (iv), by striking the period at the end and
inserting ``; and''; and
(iii) by adding at the end the following:
``(v) to provide for an oil and gas program on the Coastal
Plain.''.
(3) Management.--Except as otherwise provided in this
section, the Secretary shall manage the oil and gas program
on the Coastal Plain in a manner similar to the
administration of lease sales under the Naval Petroleum
Reserves Production Act of 1976 (42 U.S.C. 6501 et seq.)
(including regulations).
(4) Royalties.--Notwithstanding the Mineral Leasing Act (30
U.S.C. 181 et seq.), the royalty rate for leases issued
pursuant to this section shall be 16.67 percent.
(5) Receipts.--Notwithstanding the Mineral Leasing Act (30
U.S.C. 181 et seq.), of the amount of adjusted bonus, rental,
and royalty receipts derived from the oil and gas program and
operations on Federal land authorized under this section--
(A) 50 percent shall be paid to the State of Alaska; and
(B) the balance shall be deposited into the Treasury as
miscellaneous receipts.
(c) 2 Lease Sales Within 10 Years.--
(1) Requirement.--
(A) In general.--Subject to subparagraph (B), the Secretary
shall conduct not fewer than 2 lease sales area-wide under
the oil and gas program under this section by not later than
10 years after the date of enactment of this Act.
(B) Sale acreages; schedule.--
(i) Acreages.--The Secretary shall offer for lease under
the oil and gas program under this section--
(I) not fewer than 400,000 acres area-wide in each lease
sale; and
(II) those areas that have the highest potential for the
discovery of hydrocarbons.
(ii) Schedule.--The Secretary shall offer--
(I) the initial lease sale under the oil and gas program
under this section not later than 4 years after the date of
enactment of this Act; and
(II) a second lease sale under the oil and gas program
under this section not later than 7 years after the date of
enactment of this Act.
(2) Rights-of-way.--The Secretary shall issue any rights-
of-way or easements across the Coastal Plain for the
exploration, development, production, or transportation
necessary to carry out this section.
(3) Surface development.--In administering this section,
the Secretary shall authorize up to 2,000 surface acres of
Federal land on the Coastal Plain to be covered by production
and support facilities (including airstrips and any area
covered by gravel berms or piers for support of pipelines)
during the term of the leases under the oil and gas program
under this section.
SEC. 20002. LIMITATIONS ON AMOUNT OF DISTRIBUTED QUALIFIED
OUTER CONTINENTAL SHELF REVENUES.
Section 105(f)(1) of the Gulf of Mexico Energy Security Act
of 2006 (43 U.S.C. 1331 note; Public Law 109-432) is amended
by striking ``exceed $500,000,000 for each of fiscal years
2016 through 2055.'' and inserting the following: ``exceed--
``(A) $500,000,000 for each of fiscal years 2016 through
2019;
``(B) $650,000,000 for each of fiscal years 2020 and 2021;
and
``(C) $500,000,000 for each of fiscal years 2022 through
2055.''.
SEC. 20003. STRATEGIC PETROLEUM RESERVE DRAWDOWN AND SALE.
(a) Drawdown and Sale.--
(1) In general.--Notwithstanding section 161 of the Energy
Policy and Conservation Act (42 U.S.C. 6241), except as
provided in subsections (b) and (c), the Secretary of Energy
shall draw down and sell from the Strategic Petroleum Reserve
7,000,000 barrels of crude oil during the period of fiscal
years 2026 through 2027.
(2) Deposit of amounts received from sale.--Amounts
received from a sale under paragraph (1) shall be deposited
in the general fund of the Treasury during the fiscal year in
which the sale occurs.
(b) Emergency Protection.--The Secretary of Energy shall
not draw down and sell crude oil under subsection (a) in a
quantity that would limit the authority to sell petroleum
products under subsection (h) of section 161 of the Energy
Policy and Conservation Act (42 U.S.C. 6241) in the full
quantity authorized by that subsection.
(c) Limitation.--The Secretary of Energy shall not drawdown
or conduct sales of crude oil under subsection (a) after the
date on which a total of $600,000,000 has been deposited in
the general fund of the Treasury from sales authorized under
that subsection.
[[Page S7805]]
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