[Congressional Record (Bound Edition), Volume 163 (2017), Part 14]
[House]
[Pages 20362-20415]
[From the U.S. Government Publishing Office, www.gpo.gov]




                         TAX CUTS AND JOBS ACT

  Mr. BRADY of Texas. Mr. Speaker, pursuant to House Resolution 668, I 
call up 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, with the Senate amendment thereto, and ask for its immediate 
consideration.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore (Mr. Yoder). The Clerk will designate the 
Senate amendment.
  Senate amendment:

       Strike out all after the enacting clause and insert:

                                TITLE I

     SEC. 11000. SHORT TITLE, ETC.

       (a) 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 (6).
       ``(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 $165,000...  $8,907, plus 22% of the excess
                                        over $77,400.
Over $165,000 but not over $315,000..  $28,179, plus 24% of the excess
                                        over $165,000.
Over $315,000 but not over $400,000..  $64,179, plus 32% of the excess
                                        over $315,000.
Over $400,000 but not over $600,000..  $91,379, plus 35% of the excess
                                        over $400,000.
Over $600,000........................  $161,379, plus 37% of the excess
                                        over $600,000.

       ``(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 $82,500....  $5,944, plus 22% of the excess
                                        over $51,800.
Over $82,500 but not over $157,500...  $12,698, plus 24% of the excess
                                        over $82,500.
Over $157,500 but not over $200,000..  $30,698, plus 32% of the excess
                                        over $157,500.
Over $200,000 but not over $500,000..  $44,298, plus 35% of the excess
                                        over $200,000.
Over $500,000........................  $149,298, plus 37% 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 $82,500....  $4,453.50, plus 22% of the excess
                                        over $38,700.
Over $82,500 but not over $157,500...  $14,089.50, plus 24% of the
                                        excess over $82,500.
Over $157,500 but not over $200,000..  $32,089.50, plus 32% of the
                                        excess over $157,500.
Over $200,000 but not over $500,000..  $45,689.50, plus 35% of the
                                        excess over $200,000.
Over $500,000........................  $150,689.50, plus 37% 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 $82,500....  $4,453.50, plus 22% of the excess
                                        over $38,700.
Over $82,500 but not over $157,500...  $14,089.50, plus 24% of the
                                        excess over $82,500.
Over $157,500 but not over $200,000..  $32,089.50, plus 32% of the
                                        excess over $157,500.
Over $200,000 but not over $300,000..  $45,689.50, plus 35% of the
                                        excess over $200,000.
Over $300,000........................  $80,689.50, plus 37% of the
                                        excess over $300,000.

       ``(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 37% 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) (applied without regard to clauses (i) and 
     (ii) of subsection (f)(2)(A)), 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.--

[[Page 20363]]

       ``(A) In general.--In the case of a child to whom 
     subsection (g) applies for the taxable year, the rules of 
     subparagraphs (B) and (C) shall apply in lieu of the rule 
     under subsection (g)(1).
       ``(B) Modifications to applicable rate brackets.--In 
     determining the amount of tax imposed by this section for the 
     taxable year on a child described in subparagraph (A), the 
     income tax table otherwise applicable under this subsection 
     to the child shall be applied with the following 
     modifications:
       ``(i) 24-percent bracket.--The maximum taxable income which 
     is taxed at a rate below 24 percent shall not be more than 
     the sum of--

       ``(I) the earned taxable income of such child, plus
       ``(II) the minimum taxable income for the 24-percent 
     bracket in the table under paragraph (2)(E) (as adjusted 
     under paragraph (3)) for the taxable year.

       ``(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) 37-percent bracket.--The maximum taxable income 
     which is taxed at a rate below 37 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 37-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)(A))--
       ``(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.
     If any increase under this subparagraph is not a multiple of 
     $50, such increase shall be rounded to the next lowest 
     multiple of $50.
       ``(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.--
       (1) In general.--Section 1(f)(2)(A) is amended to read as 
     follows:
       ``(A) except as provided in paragraph (8), by increasing 
     the minimum and maximum dollar amounts for each bracket for 
     which a tax is imposed under such table by the cost-of-living 
     adjustment for such calendar year, determined--
       ``(i) except as provided in clause (ii), by substituting 
     `1992' for `2016' in paragraph (3)(A)(ii), and
       ``(ii) in the case of adjustments to the dollar amounts at 
     which the 36 percent rate bracket begins or at which the 39.6 
     percent rate bracket begins, by substituting `1993' for 
     `2016' in paragraph (3)(A)(ii),''.
       (2) Conforming amendments.--Section 1(i) is amended--
       (A) by striking ``for `1992' in subparagraph (B)'' in 
     paragraph (1)(C) and inserting ``for `2016' in subparagraph 
     (A)(ii)'', and
       (B) by striking ``subsection (f)(3)(B) shall be applied by 
     substituting `2012' for `1992''' in paragraph (3)(C) and 
     inserting ``subsection (f)(3)(A)(ii) shall be applied by 
     substituting `2012' for `2016'''.
       (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).

[[Page 20364]]

       (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
       (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 sum of--
       ``(1) the lesser of--
       ``(A) the combined qualified business income amount of the 
     taxpayer, or
       ``(B) an amount equal to 20 percent of the excess (if any) 
     of--
       ``(i) the taxable income of the taxpayer for the taxable 
     year, over
       ``(ii) the sum of any net capital gain (as defined in 
     section 1(h)), plus the aggregate amount of the qualified 
     cooperative dividends, of the taxpayer for the taxable year, 
     plus
       ``(2) the lesser of--
       ``(A) 20 percent of the aggregate amount of the qualified 
     cooperative dividends of the taxpayer for the taxable year, 
     or
       ``(B) taxable income (reduced by the net capital gain (as 
     so defined)) of the taxpayer for the taxable year.
     The amount determined under the preceding sentence shall not 
     exceed the taxable income (reduced by the net capital gain 
     (as so defined)) 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) 20 percent of the aggregate amount of the qualified 
     REIT dividends and qualified publicly traded partnership 
     income 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) 20 percent of the taxpayer's qualified business 
     income with respect to the qualified trade or business, or
       ``(B) the greater of--
       ``(i) 50 percent of the W-2 wages with respect to the 
     qualified trade or business, or
       ``(ii) the sum of 25 percent of the W-2 wages with respect 
     to the qualified trade or business, plus 2.5 percent of the 
     unadjusted basis immediately after acquisition of all 
     qualified property.
       ``(3) Modifications to limit based on taxable income.--
       ``(A) Exception from 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).

[[Page 20365]]

       ``(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.
       ``(6) Qualified property.--For purposes of this section:
       ``(A) In general.--The term `qualified property' means, 
     with respect to any qualified trade or business for a taxable 
     year, tangible property of a character subject to the 
     allowance for depreciation under section 167--
       ``(i) which is held by, and available for use in, the 
     qualified trade or business at the close of the taxable year,
       ``(ii) which is used at any point during the taxable year 
     in the production of qualified business income, and
       ``(iii) the depreciable period for which has not ended 
     before the close of the taxable year.
       ``(B) Depreciable period.--The term `depreciable period' 
     means, with respect to qualified property of a taxpayer, the 
     period beginning on the date the property was first placed in 
     service by the taxpayer and ending on the later of--
       ``(i) the date that is 10 years after such date, or
       ``(ii) the last day of the last full year in the applicable 
     recovery period that would apply to the property under 
     section 168 (determined without regard to subsection (g) 
     thereof).
       ``(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. Such term 
     shall not include any qualified REIT dividends, qualified 
     cooperative dividends, or qualified publicly traded 
     partnership income.
       ``(2) Carryover of losses.--If the net amount of qualified 
     income, gain, deduction, and loss with respect to qualified 
     trades or businesses of the taxpayer for any taxable year is 
     less than zero, such amount shall be treated as a loss from a 
     qualified trade or business in the succeeding taxable year.
       ``(3) Qualified items of income, gain, deduction, and 
     loss.--For purposes of this subsection--
       ``(A) In general.--The term `qualified items of income, 
     gain, deduction, and loss' means items of income, gain, 
     deduction, and loss to the extent such items are--
       ``(i) effectively connected with the conduct of a trade or 
     business within the United States (within the meaning of 
     section 864(c), determined by substituting `qualified trade 
     or business (within the meaning of section 199A)' for 
     `nonresident alien individual or a foreign corporation' or 
     for `a foreign corporation' each place it appears), and
       ``(ii) included or allowed in determining taxable income 
     for the taxable year.
       ``(B) Exceptions.--The following investment items shall not 
     be taken into account as a qualified item of income, gain, 
     deduction, or loss:
       ``(i) Any item of short-term capital gain, short-term 
     capital loss, long-term capital gain, or long-term capital 
     loss.
       ``(ii) Any dividend, income equivalent to a dividend, or 
     payment in lieu of dividends described in section 
     954(c)(1)(G).
       ``(iii) Any interest income other than interest income 
     which is properly allocable to a trade or business.
       ``(iv) Any item of gain or loss described in subparagraph 
     (C) or (D) of section 954(c)(1) (applied by substituting 
     `qualified trade or business' for `controlled foreign 
     corporation').
       ``(v) Any item of income, gain, deduction, or loss taken 
     into account under section 954(c)(1)(F) (determined without 
     regard to clause (ii) thereof and other than items 
     attributable to notional principal contracts entered into in 
     transactions qualifying under section 1221(a)(7)).
       ``(vi) Any amount received from an annuity which is not 
     received in connection with the trade or business.
       ``(vii) Any item of deduction or loss properly allocable to 
     an amount described in any of the preceding clauses.
       ``(4) Treatment of reasonable compensation and guaranteed 
     payments.--Qualified business income shall not include--
       ``(A) reasonable compensation paid to the taxpayer by any 
     qualified trade or business of the taxpayer for services 
     rendered with respect to the trade or business,
       ``(B) any guaranteed payment described in section 707(c) 
     paid to a partner for services rendered with respect to the 
     trade or business, and
       ``(C) to the extent provided in regulations, any payment 
     described in section 707(a) to a partner for services 
     rendered with respect to the trade or business.
       ``(d) Qualified Trade or Business.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified trade or business' 
     means any trade or business other than--
       ``(A) a specified service trade or business, or
       ``(B) 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--
       ``(A) which is described in section 1202(e)(3)(A) (applied 
     without regard to the words `engineering, architecture,') or 
     which would be so described if the term `employees or owners' 
     were substituted for `employees' therein, or
       ``(B) which involves the performance of services that 
     consist of 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) any specified service trade or business of the 
     taxpayer shall not fail to be treated as a qualified trade or 
     business due to paragraph (1)(A), but
       ``(ii) only the applicable percentage of qualified items of 
     income, gain, deduction, or loss, and the W-2 wages and the 
     unadjusted basis immediately after acquisition of qualified 
     property, of the taxpayer allocable to such specified service 
     trade or business shall be taken into account in computing 
     the qualified business income, W-2 wages, and the unadjusted 
     basis immediately after acquisition of qualified property 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 
     $157,500 (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 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 `calendar year 2017' 
     for `calendar year 2016' in subparagraph (A)(ii) thereof.
     The amount of any increase under the preceding sentence shall 
     be rounded as provided in section 1(f)(7).
       ``(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.
       ``(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).
       ``(f) Special Rules.--
       ``(1) Application to partnerships and s corporations.--

[[Page 20366]]

       ``(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 and unadjusted 
     basis immediately after acquisition of qualified property for 
     the taxable year in an amount equal to such person's 
     allocable share of the W-2 wages and the unadjusted basis 
     immediately after acquisition of qualified property 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 such clause, partner's or 
     shareholder's allocable share of the unadjusted basis 
     immediately after acquisition of qualified property shall be 
     determined in the same manner as the partner's or 
     shareholder's allocable share of depreciation. 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.--Rules similar to 
     the rules under section 199(d)(1)(B)(i) (as in effect on 
     December 1, 2017) for the apportionment of W-2 wages shall 
     apply to the apportionment of W-2 wages and the apportionment 
     of unadjusted basis immediately after acquisition of 
     qualified property under this section.
       ``(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 limit.--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, 2017, there shall be allowed a deduction 
     in an amount equal to the lesser of--
       ``(A) 20 percent of the excess (if any) of--
       ``(i) the gross income of a specified agricultural or 
     horticultural cooperative, over
       ``(ii) the qualified cooperative dividends (as defined in 
     subsection (e)(4)) paid during the taxable year for the 
     taxable year, or
       ``(B) the greater of--
       ``(i) 50 percent of the W-2 wages of the cooperative with 
     respect to its trade or business, or
       ``(ii) the sum of 25 percent of the W-2 wages of the 
     cooperative with respect to its trade or business, plus 2.5 
     percent of the unadjusted basis immediately after acquisition 
     of all qualified property of the cooperative.
       ``(2) Limitation.--The amount determined under paragraph 
     (1) shall not exceed the taxable income of the specified 
     agricultural or horticultural for the taxable year.
       ``(3) 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) Anti-abuse Rules.--The Secretary shall--
       ``(1) apply rules similar to the rules under section 
     179(d)(2) in order to prevent the manipulation of the 
     depreciable period of qualified property using transactions 
     between related parties, and
       ``(2) prescribe rules for determining the unadjusted basis 
     immediately after acquisition of qualified property acquired 
     in like-kind exchanges or involuntary conversions.
       ``(i) Termination.--This section shall not apply to taxable 
     years beginning after December 31, 2025.''.
       (b) Treatment of Deduction in Computing Adjusted Gross and 
     Taxable Income.--
       (1) Deduction not allowed in computing adjusted gross 
     income.--Section 62(a) is amended by adding at the end the 
     following new sentence: ``The deduction allowed by section 
     199A shall not be treated as a deduction described in any of 
     the preceding paragraphs of this subsection.''.
       (2) Deduction allowed to nonitemizers.--Section 63(b) is 
     amended by striking ``and'' at the end of paragraph (1), by 
     striking the period at the end of paragraph (2) and inserting 
     ``, and'', and by adding at the end the following new 
     paragraph:
       ``(3) the deduction provided in section 199A.''.
       (3) Deduction allowed to itemizers without limits on 
     itemized deductions.--Section 63(d) is amended by striking 
     ``and'' at the end of paragraph (1), by striking the period 
     at the end of paragraph (2) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(3) the deduction provided in section 199A.''.
       (4) Conforming amendment.--Section 3402(m)(1) is amended by 
     inserting ``and the estimated deduction allowed under section 
     199A'' after ``chapter 1''.
       (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 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.''.
       (2) Section 246(b)(1) is amended by inserting ``199A,'' 
     before ``243(a)(1)''.
       (3) Section 613(a) is amended by inserting ``and without 
     the deduction under section 199A'' after ``and without the 
     deduction under section 199''.
       (4) 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,''.
       (5) Section 170(b)(2)(D) is amended by striking ``and'' in 
     clause (iv), by striking the period at the end of clause (v), 
     and by adding at the end the following new clause:
       ``(vi) section 199A(g).''.
       (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--

[[Page 20367]]

       ``(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 necessary 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.

     If any increase under this clause is not a multiple of $50, 
     such increase shall be rounded to the next lowest multiple of 
     $50.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2017.

     SEC. 11022. INCREASE IN AND MODIFICATION OF CHILD TAX CREDIT.

       (a) In General.--Section 24 is amended by adding at the end 
     the following new subsection:
       ``(h) Special Rules for Taxable Years 2018 Through 2025.--
       ``(1) In general.--In the case of a taxable year beginning 
     after December 31, 2017, and before January 1, 2026, this 
     section shall be applied as provided in paragraphs (2) 
     through (7).
       ``(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 $400,000 in 
     the case of a joint return ($200,000 in any other case).
       ``(4) 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).
       ``(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'.
       ``(C) Certain qualifying children.--In the case of any 
     qualifying child with respect to whom a credit is not allowed 
     under this section by reason of paragraph (7), such child 
     shall be treated as a dependent to whom subparagraph (A) 
     applies.
       ``(5) Maximum amount of refundable credit.--
       ``(A) In general.--The amount determined under subsection 
     (d)(1)(A) with respect to any qualifying child shall not 
     exceed $1,400, and such subsection shall be applied without 
     regard to paragraph (4) of this subsection.
       ``(B) Adjustment for inflation.--In the case of a taxable 
     year beginning after 2018, the $1,400 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 under this clause is not a multiple of $100, 
     such increase shall be rounded to the next lowest multiple of 
     $100.
       ``(6) Earned income threshold for refundable credit.--
     Subsection (d)(1)(B)(i) shall be applied by substituting 
     `$2,500' for `$3,000'.
       ``(7) Social security number required.--No credit shall be 
     allowed under this section to a taxpayer with respect to any 
     qualifying child unless the taxpayer includes the social 
     security number of such child on the return of tax for the 
     taxable year. For purposes of the preceding sentence, the 
     term `social security number' means a social security number 
     issued to an individual by the Social Security 
     Administration, but only if the social security number is 
     issued--
       ``(A) to a citizen of the United States or pursuant to 
     subclause (I) (or that portion of subclause (III) that 
     relates to subclause (I)) of section 205(c)(2)(B)(i) of the 
     Social Security Act, and
       ``(B) before the due date for such return.''.
       (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

[[Page 20368]]

     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. 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 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. 11028. 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.--

[[Page 20369]]

       (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 to a plan or contract unless such amendment applies 
     retroactively for such period, and shall not apply to any 
     such amendment unless the plan or contract is operated as if 
     such amendment were in effect during the period--

       (I) 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
       (II) ending on the date described in clause (i)(II) (or, if 
     earlier, the date the plan or contract amendment is adopted).

       (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, 2015, and 
     before January 1, 2018--
       (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 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) after 
     December 31, 2017, and before January 1, 2026, if such 
     discharge was--
       ``(i) pursuant to subsection (a) or (d) of section 437 of 
     the Higher Education Act of 1965 or the parallel benefit 
     under part D of title IV of such Act (relating to the 
     repayment of loan liability),
       ``(ii) pursuant to section 464(c)(1)(F) of such Act, or
       ``(iii) otherwise discharged on account of the death or 
     total and permanent disability of the student.
       ``(B) Loans described.--A loan is described in this 
     subparagraph if such loan is--
       ``(i) a student loan (as defined in paragraph (2)), or
       ``(ii) a private education loan (as defined in section 
     140(7) of the Consumer Credit Protection Act (15 U.S.C. 
     1650(7))).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to discharges of indebtedness after December 31, 
     2017.

     SEC. 11032. 529 ACCOUNT FUNDING FOR ELEMENTARY AND SECONDARY 
                   EDUCATION.

       (a) In General.--
       (1) In general.--Section 529(c) is amended by adding at the 
     end the following new paragraph:
       ``(7) Treatment of elementary and secondary tuition.--Any 
     reference in this subsection to the term `qualified higher 
     education expense' shall include a reference to expenses for 
     tuition in connection with enrollment or attendance at an 
     elementary or secondary public, private, or religious 
     school.''.
       (2) Limitation.--Section 529(e)(3)(A) is amended by adding 
     at the end the following: ``The amount of cash distributions 
     from all qualified tuition programs described in subsection 
     (b)(1)(A)(ii) with respect to a beneficiary during any 
     taxable year shall, in the aggregate, include not more than 
     $10,000 in expenses described in subsection (c)(7) incurred 
     during the taxable year.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to distributions made 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 taxable 
     year beginning in a calendar year after 2018, the $4,150 
     amount in subparagraph (A) shall be increased in the same 
     manner as provided in section 6334(d)(4)(C).''.

       (c) Modification of Wage Withholding Rules.--
       (1) In general.--Section 3402(a)(2) is amended by striking 
     ``means the amount'' and all that follows and inserting 
     ``means the amount by which the wages exceed the taxpayer's 
     withholding allowance, prorated to the payroll period.''.
       (2) Conforming amendments.--
       (A) Section 3401 is amended by striking subsection (e).
       (B) Paragraphs (1) and (2) of section 3402(f) are amended 
     to read as follows:
       ``(1) In general.--Under rules determined by the Secretary, 
     an employee receiving wages shall on any day be entitled to a 
     withholding allowance determined based on--
       ``(A) whether the employee is an individual for whom a 
     deduction is allowable with respect to another taxpayer under 
     section 151;
       ``(B) if the employee is married, whether the employee's 
     spouse is entitled to an allowance, or would be so entitled 
     if such spouse were an employee receiving wages, under 
     subparagraph (A) or (D), but only if such spouse does not 
     have in effect a withholding allowance certificate claiming 
     such allowance;
       ``(C) the number of individuals with respect to whom, on 
     the basis of facts existing at the beginning of such day, 
     there may reasonably be expected to be allowable a credit 
     under section 24(a) for the taxable year under subtitle A in 
     respect of which amounts deducted and withheld under this 
     chapter in the calendar year in which such day falls are 
     allowed as a credit;
       ``(D) any additional amounts to which the employee elects 
     to take into account under subsection (m), but only if the 
     employee's spouse does not have in effect a withholding 
     allowance certificate making such an election;
       ``(E) the standard deduction allowable to such employee 
     (one-half of such standard deduction in the case of an 
     employee who is married (as determined under section 7703) 
     and whose spouse is an employee receiving wages subject to 
     withholding); and
       ``(F) whether the employee has withholding allowance 
     certificates in effect with respect to more than 1 employer.
       ``(2) Allowance certificates.--
       ``(A) On commencement of employment.--On or before the date 
     of the commencement of employment with an employer, the 
     employee shall furnish the employer with a signed withholding 
     allowance certificate relating to the withholding allowance 
     claimed by the employee, which shall in no event exceed the 
     amount to which the employee is entitled.
       ``(B) Change of status.--If, on any day during the calendar 
     year, an employee's withholding allowance is in excess of the 
     withholding allowance to which the employee would be entitled 
     had the employee submitted a true and accurate withholding 
     allowance certificate to the employer on that day, the 
     employee shall within 10 days thereafter furnish the employer 
     with a new withholding allowance certificate. If, on any day 
     during the calendar year, an employee's withholding allowance 
     is greater than the withholding allowance claimed, the 
     employee may furnish the employer with a new withholding 
     allowance certificate relating to the

[[Page 20370]]

     withholding allowance to which the employee is so entitled, 
     which shall in no event exceed the amount to which the 
     employee is entitled on such day.
       ``(C) Change of status which affects next calendar year.--
     If on any day during the calendar year the withholding 
     allowance to which the employee will be, or may reasonably be 
     expected to be, entitled at the beginning of the employee's 
     next taxable year under subtitle A is different from the 
     allowance to which the employee is entitled on such day, the 
     employee shall, in such cases and at such times as the 
     Secretary shall by regulations prescribe, furnish the 
     employer with a withholding allowance certificate relating to 
     the withholding allowance which the employee claims with 
     respect to such next taxable year, which shall in no event 
     exceed the withholding allowance to which the employee will 
     be, or may reasonably be expected to be, so entitled.''.
       (C) Subsections (b)(1), (b)(2), (f)(3), (f)(4), (f)(5), 
     (f)(7) (including the heading thereof), (g)(4), (l)(1), 
     (l)(2), and (n) of section 3402 are each amended by striking 
     ``exemption'' each place it appears and inserting 
     ``allowance''.
       (D) The heading of section 3402(f) is amended by striking 
     ``Exemptions'' and inserting ``Allowance''.
       (E) Section 3402(m) is amended by striking ``additional 
     withholding allowances or additional reductions in 
     withholding under this subsection. In determining the number 
     of additional withholding allowances'' and inserting ``an 
     additional withholding allowance or additional reductions in 
     withholding under this subsection. In determining the 
     additional withholding allowance''.
       (F) Paragraphs (3) and (4) of section 3405(a) (and the 
     heading for such paragraph (4)) are each amended by striking 
     ``exemption'' each place it appears and inserting 
     ``allowance''.
       (G) Section 3405(a)(4) is amended by striking ``shall be 
     determined'' and all that follows through ``3 withholding 
     exemptions'' and inserting ``shall be determined under rules 
     prescribed by the Secretary''.
       (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 in a calendar year 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.--
       (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) Wage withholding.--The Secretary of the Treasury may 
     administer section 3402 for taxable years beginning before 
     January 1, 2019, without regard to the amendments made by 
     subsections (a) and (c).

     SEC. 11042. LIMITATION ON 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) Limitation on 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 shall not be taken into 
     account under subsection (a)(1), and
       ``(B) the aggregate amount of taxes taken into account 
     under paragraphs (1), (2), and (3) of subsection (a) and 
     paragraph (5) of this subsection for any taxable year shall 
     not exceed $10,000 ($5,000 in the case of a married 
     individual filing a separate return).
     The preceding sentence shall not apply to any foreign taxes 
     described in subsection (a)(3) or to any taxes described in 
     paragraph (1) and (2) of subsection (a) which are paid or 
     accrued in carrying on a trade or business or an activity 
     described in section 212. For purposes of subparagraph (B), 
     an amount paid in a taxable year beginning before January 1, 
     2018, with respect to a State or local income tax imposed for 
     a taxable year beginning after December 31, 2017, shall be 
     treated as paid on the last day of the taxable year for which 
     such tax is so imposed.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2016.

     SEC. 11043. LIMITATION ON DEDUCTION FOR QUALIFIED RESIDENCE 
                   INTEREST.

       (a) In General.--Section 163(h)(3) is amended by adding at 
     the end the following new subparagraph:
       ``(F) Special rules for taxable years 2018 through 2025.--
       ``(i) In general.--In the case of taxable years beginning 
     after December 31, 2017, and before January 1, 2026--

       ``(I) Disallowance of home equity indebtedness interest.--
     Subparagraph (A)(ii) shall not apply.
       ``(II) Limitation on acquisition indebtedness.--
     Subparagraph (B)(ii) shall be applied by substituting 
     `$750,000 ($375,000' for `$1,000,000 ($500,000'.
       ``(III) Treatment of indebtedness incurred on or before 
     december 15, 2017.--Subclause (II) shall not apply to any 
     indebtedness incurred on or before December 15, 2017, and, in 
     applying such subclause to any indebtedness incurred after 
     such date, the limitation under such subclause shall be 
     reduced (but not below zero) by the amount of any 
     indebtedness incurred on or before December 15, 2017, which 
     is treated as acquisition indebtedness for purposes of this 
     subsection for the taxable year.
       ``(IV) Binding contract exception.--In the case of a 
     taxpayer who enters into a written binding contract before 
     December 15, 2017, to close on the purchase of a principal 
     residence before January 1, 2018, and who purchases such 
     residence before April 1, 2018, subclause (III) shall be 
     applied by substituting `April 1, 2018' for `December 15, 
     2017'.

       ``(ii) Treatment of limitation in taxable years after 
     december 31, 2025.--In the case of taxable years beginning 
     after December 31, 2025, the limitation under subparagraph 
     (B)(ii) shall be applied to the aggregate amount of 
     indebtedness of the taxpayer described in subparagraph (B)(i) 
     without regard to the taxable year in which the indebtedness 
     was incurred.
       ``(iii) Treatment of refinancings of indebtedness.--

       ``(I) In general.--In the case of any indebtedness which is 
     incurred to refinance indebtedness, such refinanced 
     indebtedness shall be treated for purposes of clause (i)(III) 
     as incurred on the date that the original indebtedness was 
     incurred to the extent the amount of the indebtedness 
     resulting from such refinancing does not exceed the amount of 
     the refinanced indebtedness.
       ``(II) Limitation on period of refinancing.--Subclause (I) 
     shall not apply to any indebtedness after the expiration of 
     the term of the original indebtedness or, if the principal of 
     such original indebtedness is not amortized over its term, 
     the expiration of the term of the 1st refinancing of such 
     indebtedness (or if earlier, the date which is 30 years after 
     the date of such 1st refinancing).

       ``(iv) Coordination with exclusion of income from discharge 
     of indebtedness.--Section 108(h)(2) shall be applied without 
     regard to this subparagraph.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning 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.--
       ``(A) In general.--In the case of an individual, except as 
     provided in subparagraph (B), any personal casualty loss 
     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 as a deduction under 
     subsection (a) only to the extent

[[Page 20371]]

     it is attributable to a Federally declared disaster (as 
     defined in subsection (i)(5)).
       ``(B) Exception related to personal casualty gains.--If a 
     taxpayer has personal casualty gains for any taxable year to 
     which subparagraph (A) applies--
       ``(i) subparagraph (A) shall not apply to the portion of 
     the personal casualty loss not attributable to a Federally 
     declared disaster (as so defined) to the extent such loss 
     does not exceed such gains, and
       ``(ii) in applying paragraph (2) for purposes of 
     subparagraph (A) to the portion of personal casualty loss 
     which is so attributable to such a disaster, the amount of 
     personal casualty gains taken into account under paragraph 
     (2)(A) shall be reduced by the portion of such gains taken 
     into account under clause (i).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to losses incurred in taxable years beginning 
     after December 31, 2017.

     SEC. 11045. SUSPENSION OF MISCELLANEOUS ITEMIZED DEDUCTIONS.

       (a) In General.--Section 67 is amended by adding at the end 
     the following new subsection:
       ``(g) Suspension for Taxable Years 2018 Through 2025.--
     Notwithstanding subsection (a), no miscellaneous itemized 
     deduction shall be allowed for any taxable year beginning 
     after December 31, 2017, and before January 1, 2026.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2017.

     SEC. 11046. SUSPENSION OF OVERALL LIMITATION ON ITEMIZED 
                   DEDUCTIONS.

       (a) In General.--Section 68 is amended by adding at the end 
     the following new subsection:
       ``(f) Section Not to Apply.--This section shall not apply 
     to any taxable year beginning after December 31, 2017, and 
     before January 1, 2026.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2017.

     SEC. 11047. 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. 11048. 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. 11049. 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. 11050. 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.

     SEC. 11051. REPEAL OF DEDUCTION FOR ALIMONY PAYMENTS.

       (a) In General.--Part VII of subchapter B is amended by 
     striking by striking section 215 (and by striking the item 
     relating to such section in the table of sections for such 
     subpart).
       (b) Conforming Amendments.--
       (1) Corresponding repeal of provisions providing for 
     inclusion of alimony in gross income.--
       (A) Subsection (a) of section 61 is amended by striking 
     paragraph (8) and by redesignating paragraphs (9) through 
     (15) as paragraphs (8) through (14), respectively.
       (B) Part II of subchapter B of chapter 1 is amended by 
     striking section 71 (and by striking the item relating to 
     such section in the table of sections for such part).
       (C) Subpart F of part I of subchapter J of chapter 1 is 
     amended by striking section 682 (and by striking the item 
     relating to such section in the table of sections for such 
     subpart).
       (2) Related to repeal of section 215.--
       (A) Section 62(a) is amended by striking paragraph (10).
       (B) Section 3402(m)(1) is amended by striking ``(other than 
     paragraph (10) thereof)''.
       (C) Section 6724(d)(3) is amended by striking subparagraph 
     (C) and by redesignating subparagraph (D) as subparagraph 
     (C).
       (3) Related to repeal of section 71.--
       (A) Section 121(d)(3) is amended--
       (i) by striking ``(as defined in section 71(b)(2))'' in 
     subparagraph (B), and
       (ii) by adding at the end the following new subparagraph:
       ``(C) Divorce or separation instrument.--For purposes of 
     this paragraph, the term `divorce or separation instrument' 
     means--
       ``(i) a decree of divorce or separate maintenance or a 
     written instrument incident to such a decree,
       ``(ii) a written separation agreement, or
       ``(iii) a decree (not described in clause (i)) requiring a 
     spouse to make payments for the support or maintenance of the 
     other spouse.''.
       (B) Section 152(d)(5) is amended to read as follows:
       ``(5) Special rules for support.--
       ``(A) In general.--For purposes of this subsection--
       ``(i) payments to a spouse of alimony or separate 
     maintenance payments shall not be treated as a payment by the 
     payor spouse for the support of any dependent, and
       ``(ii) in the case of the remarriage of a parent, support 
     of a child received from the parent's spouse shall be treated 
     as received from the parent.
       ``(B) Alimony or separate maintenance payment.--For 
     purposes of subparagraph (A), the term `alimony or separate 
     maintenance payment' means any payment in cash if--
       ``(i) such payment is received by (or on behalf of) a 
     spouse under a divorce or separation instrument (as defined 
     in section 121(d)(3)(C)),
       ``(ii) in the case of an individual legally separated from 
     the individual's spouse under a decree of divorce or of 
     separate maintenance, the payee spouse and the payor spouse 
     are not members of the same household at the time such 
     payment is made, and
       ``(iii) there is no liability to make any such payment for 
     any period after the death of the payee spouse and there is 
     no liability to make any payment (in cash or property) as a 
     substitute for such payments after the death of the payee 
     spouse.''.
       (C) Section 219(f)(1) is amended by striking the third 
     sentence.
       (D) Section 220(f)(7) is amended by striking ``subparagraph 
     (A) of section 71(b)(2)'' and inserting ``clause (i) of 
     section 121(d)(3)(C)''.
       (E) Section 223(f)(7) is amended by striking ``subparagraph 
     (A) of section 71(b)(2)'' and inserting ``clause (i) of 
     section 121(d)(3)(C)''.
       (F) Section 382(l)(3)(B)(iii) is amended by striking 
     ``section 71(b)(2)'' and inserting ``section 121(d)(3)(C)''.
       (G) Section 408(d)(6) is amended by striking ``subparagraph 
     (A) of section 71(b)(2)'' and inserting ``clause (i) of 
     section 121(d)(3)(C)''.
       (4) Additional conforming amendments.--Section 7701(a)(17) 
     is amended--
       (A) by striking ``sections 682 and 2516'' and inserting 
     ``section 2516'', and
       (B) by striking ``such sections'' each place it appears and 
     inserting ``such section''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to--
       (1) any divorce or separation instrument (as defined in 
     section 71(b)(2) of the Internal Revenue Code of 1986 as in 
     effect before the date of the enactment of this Act) executed 
     after December 31, 2018, and
       (2) any divorce or separation instrument (as so defined) 
     executed on or before such date and modified after such date 
     if the modification expressly provides that the amendments 
     made by this section apply to such modification.

           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

[[Page 20372]]

       ``(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--EXTENSION OF TIME LIMIT FOR CONTESTING IRS LEVY

     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.

                     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. REPEAL OF TAX FOR CORPORATIONS.

       (a) In General.--Section 55(a) is amended by striking 
     ``There'' and inserting ``In the case of a taxpayer other 
     than a corporation, there''.
       (b) Conforming Amendments.--
       (1) Section 38(c)(6) is amended by adding at the end the 
     following new subparagraph:
       ``(E) Corporations.--In the case of a corporation, this 
     subsection shall be applied by treating the corporation as 
     having a tentative minimum tax of zero.''.
       (2) Section 53(d)(2) is amended by inserting ``, except 
     that in the case of a corporation, the tentative minimum tax 
     shall be treated as zero'' before the period at the end.
       (3)(A) Section 55(b)(1) is amended to read as follows:
       ``(1) Amount of tentative tax.--
       ``(A) In general.--The tentative minimum tax for the 
     taxable year is the sum of--
       ``(i) 26 percent of so much of the taxable excess as does 
     not exceed $175,000, plus
       ``(ii) 28 percent of so much of the taxable excess as 
     exceeds $175,000.
     The amount determined under the preceding sentence shall be 
     reduced by the alternative minimum tax foreign tax credit for 
     the taxable year.
       ``(B) Taxable excess.--For purposes of this subsection, the 
     term `taxable excess' means so much of the alternative 
     minimum taxable income for the taxable year as exceeds the 
     exemption amount.
       ``(C) Married individual filing separate return.--In the 
     case of a married individual filing a separate return, 
     subparagraph (A) shall be applied by substituting 50 percent 
     of the dollar amount otherwise applicable under clause (i) 
     and clause (ii) thereof. For purposes of the preceding 
     sentence, marital status shall be determined under section 
     7703.''.
       (B) Section 55(b)(3) is amended by striking ``paragraph 
     (1)(A)(i)'' and inserting ``paragraph (1)(A)''.
       (C) Section 59(a) is amended--
       (i) by striking ``subparagraph (A)(i) or (B)(i) of section 
     55(b)(1) (whichever applies) in lieu of the highest rate of 
     tax specified in section 1 or 11 (whichever applies)'' in 
     paragraph (1)(C) and inserting ``section 55(b)(1) in lieu of 
     the highest rate of tax specified in section 1'', and
       (ii) in paragraph (2), by striking ``means'' and all that 
     follows and inserting ``means the amount determined under the 
     first sentence of section 55(b)(1)(A).''.
       (D) Section 897(a)(2)(A) is amended by striking ``section 
     55(b)(1)(A)'' and inserting ``section 55(b)(1)''.
       (E) Section 911(f) is amended--
       (i) in paragraph (1)(B)--
       (I) by striking ``section 55(b)(1)(A)(ii)'' and inserting 
     ``section 55(b)(1)(B)'', and
       (II) by striking ``section 55(b)(1)(A)(i)'' and inserting 
     ``section 55(b)(1)(A)'', and
       (ii) in paragraph (2)(B), by striking ``section 
     55(b)(1)(A)(ii)'' each place it appears and inserting 
     ``section 55(b)(1)(B)''.
       (4) Section 55(c)(1) is amended by striking ``, the section 
     936 credit allowable under section 27(b), and the Puerto Rico 
     economic activity credit under section 30A''.
       (5) Section 55(d), as amended by section 11002, is 
     amended--
       (A) by striking paragraph (2) and redesignating paragraphs 
     (3) and (4) as paragraphs (2) and (3), respectively,
       (B) in paragraph (2) (as so redesignated), by inserting 
     ``and'' at the end of subparagraph (B), by striking ``, and'' 
     at the end of subparagraph (C) and inserting a period, and by 
     striking subparagraph (D), and
       (C) in paragraph (3) (as so redesignated)--
       (i) by striking ``(b)(1)(A)(i)'' in subparagraph (B)(i) and 
     inserting ``(b)(1)(A)'', and
       (ii) by striking ``paragraph (3)'' in subparagraph (B)(iii) 
     and inserting ``paragraph (2)''.
       (6) Section 55 is amended by striking subsection (e).
       (7) Section 56(b)(2) is amended by striking subparagraph 
     (C) and by redesignating subparagraph (D) as subparagraph 
     (C).
       (8)(A) Section 56 is amended by striking subsections (c) 
     and (g).
       (B) Section 847 is amended by striking the last sentence of 
     paragraph (9).
       (C) Section 848 is amended by striking subsection (i).
       (9) Section 58(a) is amended by striking paragraph (3) and 
     redesignating paragraph (4) as paragraph (3).
       (10) Section 59 is amended by striking subsections (b) and 
     (f).
       (11) Section 11(d) is amended by striking ``the taxes 
     imposed by subsection (a) and section 55'' and inserting 
     ``the tax imposed by subsection (a)''.
       (12) Section 12 is amended by striking paragraph (7).
       (13) Section 168(k) is amended by striking paragraph (4).
       (14) Section 882(a)(1) is amended by striking ``, 55,''.
       (15) Section 962(a)(1) is amended by striking ``sections 11 
     and 55'' and inserting ``section 11''.
       (16) Section 1561(a) is amended--
       (A) by inserting ``and'' at the end of paragraph (1), by 
     striking ``, and'' at the end of paragraph (2) and inserting 
     a period, and by striking paragraph (3), and
       (B) by striking the last sentence.
       (17) Section 6425(c)(1)(A) is amended to read as follows:
       ``(A) the tax imposed by section 11 or 1201(a), or 
     subchapter L of chapter 1, whichever is applicable, over''.
       (18) Section 6655(e)(2) is amended by striking ``and 
     alternative minimum taxable income'' each place it appears in 
     subparagraphs (A) and (B)(i).
       (19) Section 6655(g)(1)(A) is amended by inserting ``plus'' 
     at the end of clause (i), by striking clause (ii), and by 
     redesignating clause (iii) as clause (ii).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2017.

     SEC. 12002. CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY OF 
                   CORPORATIONS.

       (a) Credits Treated as Refundable.--Section 53 is amended 
     by adding at the end the following new subsection:
       ``(e) Portion of Credit Treated as Refundable.--
       ``(1) In general.--In the case of any taxable year of a 
     corporation beginning in 2018, 2019, 2020, or 2021, the 
     limitation under subsection (c) shall be increased by the AMT 
     refundable credit amount for such year.
       ``(2) AMT refundable credit amount.--For purposes of 
     paragraph (1), the AMT refundable credit amount is an amount 
     equal to 50 percent (100 percent in the case of a taxable 
     year beginning in 2021) of the excess (if any) of--
       ``(A) the minimum tax credit determined under subsection 
     (b) for the taxable year, over
       ``(B) the minimum tax credit allowed under subsection (a) 
     for such year (before the application of this subsection for 
     such year).
       ``(3) Credit refundable.--For purposes of this title (other 
     than this section), the credit allowed by reason of this 
     subsection shall be treated as a credit allowed under subpart 
     C (and not this subpart).
       ``(4) Short taxable years.--In the case of any taxable year 
     of less than 365 days, the AMT refundable credit amount 
     determined under paragraph (2) with respect to such taxable 
     year shall be the amount which bears the same ratio to such 
     amount determined without regard to this paragraph as the 
     number of days in such taxable year bears to 365.''.
       (b) Treatment of References.--Section 53(d) is amended by 
     adding at the end the following new paragraph:
       ``(3) AMT term references.--In the case of a corporation, 
     any references in this subsection to section 55, 56, or 57 
     shall be treated as a reference to such section as in effect 
     before the amendments made by Tax Cuts and Jobs Act.''.
       (c) Conforming Amendment.--Section 1374(b)(3)(B) is amended 
     by striking the last sentence thereof.
       (d) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 2017.
       (2) Conforming amendment.--The amendment made by subsection 
     (c) shall apply to taxable years beginning after December 31, 
     2021.

     SEC. 12003. INCREASED EXEMPTION FOR INDIVIDUALS.

       (a) In General.--Section 55(d), as amended by the preceding 
     provisions of this Act, is amended by adding at the end the 
     following new paragraph:
       ``(4) 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 (2) shall be applied--

[[Page 20373]]

       ``(I) by substituting `$1,000,000' for `$150,000' in 
     subparagraph (A),
       ``(II) by substituting `50 percent of the dollar amount 
     applicable under subparagraph (A)' 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), and the $1,000,000 
     amount in subparagraph (A)(ii)(I).
       ``(iii) Rounding.--Any increased amount determined under 
     clause (i) shall be rounded to the nearest multiple of $100.
       ``(iv) Coordination with current adjustments.--In the case 
     of any taxable year to which subparagraph (A) applies, no 
     adjustment shall be made under paragraph (3) to any of the 
     numbers which are substituted under subparagraph (A) and 
     adjusted under this subparagraph.''.
       (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. 21-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 21 percent of taxable income.''.
       (b) Conforming Amendments.--
       (1) The following sections are each amended by striking 
     ``section 11(b)(1)'' and inserting ``section 11(b)'':
       (A) Section 280C(c)(3)(B)(ii)(II).
       (B) Paragraphs (2)(B) and (6)(A)(ii) of section 860E(e).
       (C) Section 7874(e)(1)(B).
       (2)(A) Part I of subchapter P of chapter 1 is amended by 
     striking section 1201 (and by striking the item relating to 
     such section in the table of sections for such part).
       (B) Section 12 is amended by striking paragraphs (4) and 
     (6), and by redesignating paragraph (5) as paragraph (4).
       (C) Section 453A(c)(3) is amended by striking ``or 1201 
     (whichever is appropriate)''.
       (D) Section 527(b) is amended--
       (i) by striking paragraph (2), and
       (ii) by striking all that precedes ``is hereby imposed'' 
     and inserting:
       ``(b) Tax Imposed.--A tax''.
       (E) Sections 594(a) is amended by striking ``taxes imposed 
     by section 11 or 1201(a)'' and inserting ``tax imposed by 
     section 11''.
       (F) Section 691(c)(4) is amended by striking ``1201,''.
       (G) Section 801(a) is amended--
       (i) by striking paragraph (2), and
       (ii) by striking all that precedes ``is hereby imposed'' 
     and inserting:
       ``(a) Tax Imposed.--A tax''.
       (H) Section 831(e) is amended by striking paragraph (1) and 
     by redesignating paragraphs (2) and (3) as paragraphs (1) and 
     (2), respectively.
       (I) Sections 832(c)(5) and 834(b)(1)(D) are each amended by 
     striking ``sec. 1201 and following,''.
       (J) Section 852(b)(3)(A) is amended by striking ``section 
     1201(a)'' and inserting ``section 11(b)''.
       (K) Section 857(b)(3) is amended--
       (i) by striking subparagraph (A) and redesignating 
     subparagraphs (B) through (F) as subparagraphs (A) through 
     (E), respectively,
       (ii) in subparagraph (C), as so redesignated--
       (I) by striking ``subparagraph (A)(ii)'' in clause (i) 
     thereof and inserting ``paragraph (1)'',
       (II) by striking ``the tax imposed by subparagraph 
     (A)(ii)'' in clauses (ii) and (iv) thereof and inserting 
     ``the tax imposed by paragraph (1) on undistributed capital 
     gain'',
       (iii) in subparagraph (E), as so redesignated, by striking 
     ``subparagraph (B) or (D)'' and inserting ``subparagraph (A) 
     or (C)'', and
       (iv) by adding at the end the following new subparagraph:
       ``(F) Undistributed capital gain.--For purposes of this 
     paragraph, the term `undistributed capital gain' means the 
     excess of the net capital gain over the deduction for 
     dividends paid (as defined in section 561) determined with 
     reference to capital gain dividends only.''.
       (L) Section 882(a)(1), as amended by section 12001, is 
     further amended by striking ``or 1201(a)''.
       (M) Section 904(b) is amended--
       (i) by striking ``or 1201(a)'' in paragraph (2)(C),
       (ii) by striking paragraph (3)(D) and inserting the 
     following:
       ``(D) Capital gain rate differential.--There is a capital 
     gain rate differential for any year if subsection (h) of 
     section 1 applies to such taxable year.'', and
       (iii) by striking paragraph (3)(E) and inserting the 
     following:
       ``(E) Rate differential portion.--The rate differential 
     portion of foreign source net capital gain, net capital gain, 
     or the excess of net capital gain from sources within the 
     United States over net capital gain, as the case may be, is 
     the same proportion of such amount as--
       ``(i) the excess of--

       ``(I) the highest rate of tax set forth in subsection (a), 
     (b), (c), (d), or (e) of section 1 (whichever applies), over
       ``(II) the alternative rate of tax determined under section 
     1(h), bears to

       ``(ii) that rate referred to in subclause (I).''.
       (N) Section 1374(b) is amended by striking paragraph (4).
       (O) Section 1381(b) is amended by striking ``taxes imposed 
     by section 11 or 1201'' and inserting ``tax imposed by 
     section 11''.
       (P) Sections 6425(c)(1)(A), as amended by section 12001, 
     and 6655(g)(1)(A)(i) are each amended by striking ``or 
     1201(a),''.
       (Q) Section 7518(g)(6)(A) is amended by striking ``or 
     1201(a)''.
       (3)(A) Section 1445(e)(1) is amended--
       (i) by striking ``35 percent'' and inserting ``the highest 
     rate of tax in effect for the taxable year under section 
     11(b)'', and
       (ii) by striking ``of the gain'' and inserting ``multiplied 
     by the gain''.
       (B) Section 1445(e)(2) is amended by striking ``35 percent 
     of the amount'' and inserting ``the highest rate of tax in 
     effect for the taxable year under section 11(b) multiplied by 
     the amount''.
       (C) Section 1445(e)(6) is amended--
       (i) by striking ``35 percent'' and inserting ``the highest 
     rate of tax in effect for the taxable year under section 
     11(b)'', and
       (ii) by striking ``of the amount'' and inserting 
     ``multiplied by the amount''.
       (D) Section 1446(b)(2)(B) is amended by striking ``section 
     11(b)(1)'' and inserting ``section 11(b)''.
       (4) Section 852(b)(1) is amended by striking the last 
     sentence.
       (5)(A) Part I of subchapter B of chapter 5 is amended by 
     striking section 1551 (and by striking the item relating to 
     such section in the table of sections for such part).
       (B) Section 535(c)(5) is amended to read as follows:
       ``(5) Cross reference.--For limitation on credit provided 
     in paragraph (2) or (3) in the case of certain controlled 
     corporations, see section 1561.''.
       (6)(A) Section 1561, as amended by section 12001, is 
     amended to read as follows:

     ``SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS CREDIT IN THE 
                   CASE OF CERTAIN CONTROLLED CORPORATIONS.

       ``(a) In General.--The component members of a controlled 
     group of corporations on a December 31 shall, for their 
     taxable years which include such December 31, be limited for 
     purposes of this subtitle to one $250,000 ($150,000 if any 
     component member is a corporation described in section 
     535(c)(2)(B)) amount for purposes of computing the 
     accumulated earnings credit under section 535(c)(2) and (3). 
     Such amount shall be divided equally among the component 
     members of such group on such December 31 unless the 
     Secretary prescribes regulations permitting an unequal 
     allocation of such amount.
       ``(b) Certain Short Taxable Years.--If a corporation has a 
     short taxable year which does not include a December 31 and 
     is a component member of a controlled group of corporations 
     with respect to such taxable year, then for purposes of this 
     subtitle, the amount to be used in computing the accumulated 
     earnings credit under section 535(c)(2) and (3) of such 
     corporation for such taxable year shall be the amount 
     specified in subsection (a) with respect to such group, 
     divided by the number of corporations which are component 
     members of such group on the last day of such taxable year. 
     For purposes of the preceding sentence, section 1563(b) shall 
     be applied as if such last day were substituted for December 
     31.''.
       (B) The table of sections for part II of subchapter B of 
     chapter 5 is amended by striking the item relating to section 
     1561 and inserting the following new item:

``Sec. 1561. Limitation on accumulated earnings credit in the case of 
              certain controlled corporations.''.

       (7) Section 7518(g)(6)(A) is amended--
       (A) by striking ``With respect to the portion'' and 
     inserting ``In the case of a taxpayer other than a 
     corporation, with respect to the portion'', and
       (B) by striking ``(34 percent in the case of a 
     corporation)''.
       (c) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by subsections (a) and (b) 
     shall apply to taxable years beginning after December 31, 
     2017.
       (2) Withholding.--The amendments made by subsection (b)(3) 
     shall apply to distributions made after December 31, 2017.
       (3) Certain transfers.--The amendments made by subsection 
     (b)(6) shall apply to transfers made after December 31, 2017.
       (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

[[Page 20374]]

       (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 of 
     the day before the corporate rate reductions provided in the 
     amendments made by this section take effect, 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, during the time period in which the 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 for the corporate rate reductions provided in the 
     amendments made by this section--
       (A) 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, and
       (B) such taxpayer shall not be treated as using a 
     normalization method of accounting for purposes of 
     subsections (f)(2) and (i)(9)(C) of section 168 of the 
     Internal Revenue Code of 1986.

     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, 
     2017.

                    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. SMALL BUSINESS ACCOUNTING METHOD REFORM AND 
                   SIMPLIFICATION.

       (a) Modification of Limitation on Cash Method of 
     Accounting.--
       (1) Increased limitation.--So much of section 448(c) as 
     precedes paragraph (2) is amended to read as follows:
       ``(c) Gross Receipts Test.--For purposes of this section--
       ``(1) In general.--A corporation or partnership meets the 
     gross receipts test of this subsection for any taxable year 
     if the average annual gross receipts of such entity for the 
     3-taxable-year period ending with the taxable year which 
     precedes such taxable year does not exceed $25,000,000.''.
       (2) Application of exception on annual basis.--Section 
     448(b)(3) is amended to read as follows:
       ``(3) Entities which meet gross receipts test.--Paragraphs 
     (1) and (2) of subsection (a) shall not apply to any 
     corporation or partnership for any taxable year if such 
     entity (or any predecessor) meets the gross receipts test of 
     subsection (c) for such taxable year.''.
       (3) Inflation adjustment.--Section 448(c) is amended by 
     adding at the end the following new paragraph:
       ``(4) Adjustment for inflation.--In the case of any taxable 
     year beginning after December 31, 2018, the dollar amount in 
     paragraph (1) shall be increased by an amount equal to--
       ``(A) such dollar amount, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 1(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 $1,000,000, such amount shall be rounded to 
     the nearest multiple of $1,000,000.''.
       (4) Coordination with section 481.--Section 448(d)(7) is 
     amended to read as follows:
       ``(7) Coordination with section 481.--Any change in method 
     of accounting made pursuant to this section shall be treated 
     for purposes of section 481 as initiated by the taxpayer and 
     made with the consent of the Secretary.''.
       (5) Application of exception to corporations engaged in 
     farming.--
       (A) In general.--Section 447(c) is amended--
       (i) by inserting ``for any taxable year'' after ``not being 
     a corporation'' in the matter preceding paragraph (1), and
       (ii) by amending paragraph (2) to read as follows:
       ``(2) a corporation which meets the gross receipts test of 
     section 448(c) for such taxable year.''.
       (B) Coordination with section 481.--Section 447(f) is 
     amended to read as follows:
       ``(f) Coordination With Section 481.--Any change in method 
     of accounting made pursuant to this section shall be treated 
     for purposes of section 481 as initiated by the taxpayer and 
     made with the consent of the Secretary.''.
       (C) Conforming amendments.--Section 447 is amended--
       (i) by striking subsections (d), (e), (h), and (i), and
       (ii) by redesignating subsections (f) and (g) (as amended 
     by subparagraph (B)) as subsections (d) and (e), 
     respectively.
       (b) Exemption From UNICAP Requirements.--
       (1) In general.--Section 263A is amended by redesignating 
     subsection (i) as subsection (j) and

[[Page 20375]]

     by inserting after subsection (h) the following new 
     subsection:
       ``(i) Exemption for Certain Small Businesses.--
       ``(1) In general.--In the case of any taxpayer (other than 
     a tax shelter prohibited from using the cash receipts and 
     disbursements method of accounting under section 448(a)(3)) 
     which meets the gross receipts test of section 448(c) for any 
     taxable year, this section shall not apply with respect to 
     such taxpayer for such taxable year.
       ``(2) Application of gross receipts test to individuals, 
     etc.--In the case of any taxpayer which is not a corporation 
     or a partnership, the gross receipts test of section 448(c) 
     shall be applied in the same manner as if each trade or 
     business of such taxpayer were a corporation or partnership.
       ``(3) Coordination with section 481.--Any change in method 
     of accounting made pursuant to this subsection shall be 
     treated for purposes of section 481 as initiated by the 
     taxpayer and made with the consent of the Secretary.''.
       (2) Conforming amendment.--Section 263A(b)(2) is amended to 
     read as follows:
       ``(2) Property acquired for resale.--Real or personal 
     property described in section 1221(a)(1) which is acquired by 
     the taxpayer for resale.''.
       (c) Exemption From Inventories.--Section 471 is amended by 
     redesignating subsection (c) as subsection (d) and by 
     inserting after subsection (b) the following new subsection:
       ``(c) Exemption for Certain Small Businesses.--
       ``(1) In general.--In the case of any taxpayer (other than 
     a tax shelter prohibited from using the cash receipts and 
     disbursements method of accounting under section 448(a)(3)) 
     which meets the gross receipts test of section 448(c) for any 
     taxable year--
       ``(A) subsection (a) shall not apply with respect to such 
     taxpayer for such taxable year, and
       ``(B) the taxpayer's method of accounting for inventory for 
     such taxable year shall not be treated as failing to clearly 
     reflect income if such method either--
       ``(i) treats inventory as non-incidental materials and 
     supplies, or
       ``(ii) conforms to such taxpayer's method of accounting 
     reflected in an applicable financial statement of the 
     taxpayer with respect to such taxable year or, if the 
     taxpayer does not have any applicable financial statement 
     with respect to such taxable year, the books and records of 
     the taxpayer prepared in accordance with the taxpayer's 
     accounting procedures.
       ``(2) Applicable financial statement.--For purposes of this 
     subsection, the term `applicable financial statement' has the 
     meaning given the term in section 451(b)(3).
       ``(3) Application of gross receipts test to individuals, 
     etc.--In the case of any taxpayer which is not a corporation 
     or a partnership, the gross receipts test of section 448(c) 
     shall be applied in the same manner as if each trade or 
     business of such taxpayer were a corporation or partnership.
       ``(4) Coordination with section 481.--Any change in method 
     of accounting made pursuant to this subsection shall be 
     treated for purposes of section 481 as initiated by the 
     taxpayer and made with the consent of the Secretary.''.
       (d) Exemption From Percentage Completion for Long-term 
     Contracts.--
       (1) In general.--Section 460(e)(1)(B) is amended--
       (A) by inserting ``(other than a tax shelter prohibited 
     from using the cash receipts and disbursements method of 
     accounting under section 448(a)(3))'' after ``taxpayer'' in 
     the matter preceding clause (i), and
       (B) by amending clause (ii) to read as follows:
       ``(ii) who meets the gross receipts test of section 448(c) 
     for the taxable year in which such contract is entered 
     into.''.
       (2) Conforming amendments.--Section 460(e) is amended by 
     striking paragraphs (2) and (3), by redesignating paragraphs 
     (4), (5), and (6) as paragraphs (3), (4), and (5), 
     respectively, and by inserting after paragraph (1) the 
     following new paragraph:
       ``(2) Rules related to gross receipts test.--
       ``(A) Application of gross receipts test to individuals, 
     etc.--For purposes of paragraph (1)(B)(ii), in the case of 
     any taxpayer which is not a corporation or a partnership, the 
     gross receipts test of section 448(c) shall be applied in the 
     same manner as if each trade or business of such taxpayer 
     were a corporation or partnership.
       ``(B) Coordination with section 481.--Any change in method 
     of accounting made pursuant to paragraph (1)(B)(ii) shall be 
     treated as initiated by the taxpayer and made with the 
     consent of the Secretary. Such change shall be effected on a 
     cut-off basis for all similarly classified contracts entered 
     into on or after the year of change.''.
       (e) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to taxable years beginning after December 31, 2017.
       (2) Preservation of suspense account rules with respect to 
     any existing suspense accounts.--So much of the amendments 
     made by subsection (a)(5)(C) as relate to section 447(i) of 
     the Internal Revenue Code of 1986 shall not apply with 
     respect to any suspense account established under such 
     section before the date of the enactment of this Act.
       (3) Exemption from percentage completion for long-term 
     contracts.--The amendments made by subsection (d) shall apply 
     to contracts entered into after December 31, 2017, in taxable 
     years ending after such date.

             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--
       ``(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 subparagraph (B) or (C) of 
     paragraph (2), 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.--
       (A) Paragraph (5) of section 168(k) is amended by striking 
     subparagraph (F).
       (B) Section 168(k) is amended by adding at the end the 
     following new paragraph:
       ``(8) Phase down.--In the case of qualified property 
     acquired by the taxpayer before September 28, 2017, and 
     placed in service by the taxpayer after September 27, 2017, 
     paragraph (6) shall be applied by substituting for each 
     percentage therein--
       ``(A) `50 percent' in the case of--
       ``(i) property placed in service before January 1, 2018, 
     and
       ``(ii) property described in subparagraph (B) or (C) of 
     paragraph (2) which is placed in service in 2018,
       ``(B) `40 percent' in the case of--
       ``(i) property placed in service in 2018 (other than 
     property described in subparagraph (B) or (C) of paragraph 
     (2)), and
       ``(ii) property described in subparagraph (B) or (C) of 
     paragraph (2) which is placed in service in 2019,
       ``(C) `30 percent' in the case of--
       ``(i) property placed in service in 2019 (other than 
     property described in subparagraph (B) or (C) of paragraph 
     (2)), and
       ``(ii) property described in subparagraph (B) or (C) of 
     paragraph (2) which is placed in service in 2020, and
       ``(D) `0 percent' in the case of--
       ``(i) property placed in service after 2019 (other than 
     property described in subparagraph (B) or (C) of paragraph 
     (2)), and
       ``(ii) property described in subparagraph (B) or (C) of 
     paragraph (2) which is placed in service after 2020.''.
       (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

[[Page 20376]]

       (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) Application to Used Property.--
       (1) In general.--Section 168(k)(2)(A)(ii) is amended to 
     read as follows:
       ``(ii) the original use of which begins with the taxpayer 
     or the acquisition of which by the taxpayer meets the 
     requirements of clause (ii) of subparagraph (E), and''.
       (2) Acquisition requirements.--Section 168(k)(2)(E)(ii) is 
     amended to read as follows:
       ``(ii) Acquisition requirements.--An acquisition of 
     property meets the requirements of this clause if--

       ``(I) such property was not used by the taxpayer at any 
     time prior to such acquisition, and
       ``(II) the acquisition of such property meets the 
     requirements of paragraphs (2)(A), (2)(B), (2)(C), and (3) of 
     section 179(d).'',

       (3) Anti-abuse rules.--Section 168(k)(2)(E) is further 
     amended by amending clause (iii)(I) to read as follows:

       ``(I) property is used by a lessor of such property and 
     such use is the lessor's first use of such property,''.

       (d) Exception for Certain Property.--Section 168(k), as 
     amended by this section, is amended by adding at the end the 
     following new paragraph:
       ``(9) Exception for certain property.--The term `qualified 
     property' shall not include--
       ``(A) any property which is primarily used in a trade or 
     business described in clause (iv) of section 163(j)(7)(A), or
       ``(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.''.
       (e) Special Rule.--Section 168(k), as amended by this 
     section, is amended by adding at the end the following new 
     paragraph:
       ``(10) 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.''.
       (f) Coordination With Section 280F.--Clause (iii) of 
     section 168(k)(2)(F) is amended by striking ``placed in 
     service by the taxpayer after December 31, 2017'' and 
     inserting ``acquired by the taxpayer before September 28, 
     2017, and placed in service by the taxpayer after September 
     27, 2017''.
       (g) 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.''.
       (h) Effective Date.--
       (1) In general.--Except as provided by paragraph (2), the 
     amendments made by this section shall apply to property 
     which--
       (A) is acquired after September 27, 2017, and
       (B) is placed in service after such date.
     For purposes of the preceding sentence, property shall not be 
     treated as acquired after the date on which a written binding 
     contract is entered into for such acquisition.
       (2) Specified plants.--The amendments made by this section 
     shall apply to specified plants planted or grafted after 
     September 27, 2017.

     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) Improvements to Real Property.--
       (1) 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).
       (2) Application of straight line method to qualified 
     improvement property.--Paragraph (3) of section 168(b) is 
     amended--
       (A) by striking subparagraphs (G), (H), and (I), and
       (B) by inserting after subparagraph (F) the following new 
     subparagraph:
       ``(G) Qualified improvement property described in 
     subsection (e)(6).''.
       (3) 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''.

       (4) Conforming amendments.--
       (A) Clause (i) of section 168(k)(2)(A) is amended--
       (i) in subclause (II), by inserting ``or'' after the comma,

[[Page 20377]]

       (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 (1)(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.'', and
       (ii) in subsection (k), by striking paragraph (3).
       (b) 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 (a)(3)(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, 2021, 
     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, 2021.

     SEC. 13207. EXPENSING OF CERTAIN COSTS OF REPLANTING CITRUS 
                   PLANTS LOST BY REASON OF CASUALTY.

       (a) In General.--Section 263A(d)(2) is amended by adding at 
     the end the following new subparagraph:
       ``(C) Special temporary rule for citrus plants lost by 
     reason of casualty.--
       ``(i) In general.--In the case of the replanting of citrus 
     plants, subparagraph (A) shall apply to amounts paid or 
     incurred by a person (other than the taxpayer described in 
     subparagraph (A)) if--

       ``(I) the taxpayer described in subparagraph (A) has an 
     equity interest of not less than 50 percent in the replanted 
     citrus plants at all times during the taxable year in which 
     such amounts were paid or incurred and such other person 
     holds any part of the remaining equity interest, or
       ``(II) such other person acquired the entirety of such 
     taxpayer's equity interest in the land on which the lost or 
     damaged citrus plants were located at the time of such loss 
     or damage, and the replanting is on such land.

       ``(ii) Termination.--Clause (i) shall not apply to any cost 
     paid or incurred after the date which is 10 years after the 
     date of the enactment of the Tax Cuts and Jobs Act.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to costs paid or incurred after the date of the 
     enactment of this Act.

                     Subpart B--Accounting Methods

     SEC. 13221. CERTAIN SPECIAL RULES FOR TAXABLE YEAR OF 
                   INCLUSION.

       (a) Inclusion Not Later Than for Financial Accounting 
     Purposes.--Section 451 is amended by redesignating 
     subsections (b) through (i) as subsections (c) through (j), 
     respectively, and by inserting after subsection (a) the 
     following new subsection:
       ``(b) Inclusion Not Later Than for Financial Accounting 
     Purposes.--
       ``(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--

[[Page 20378]]

       ``(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 shall 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,
       ``(B) 30 percent of the adjusted taxable income of such 
     taxpayer for such taxable year, plus
       ``(C) the floor plan financing interest of such taxpayer 
     for such taxable year.
     The amount determined under subparagraph (B) shall not be 
     less than zero.
       ``(2) Carryforward of disallowed business interest.--The 
     amount of any business interest not allowed as a deduction 
     for any taxable year by reason of paragraph (1) shall be 
     treated as business interest paid or accrued in the 
     succeeding taxable year.
       ``(3) Exemption for certain small businesses.--In the case 
     of any taxpayer (other than a tax shelter prohibited from 
     using the cash receipts and disbursements method of 
     accounting under section 448(a)(3)) which meets the gross 
     receipts test of section 448(c) for any taxable year, 
     paragraph (1) shall not apply to such taxpayer for such 
     taxable year. In the case of any taxpayer which is not a 
     corporation or a partnership, the gross receipts test of 
     section 448(c) shall be applied in the same manner as if such 
     taxpayer were a corporation or partnership.
       ``(4) Application to partnerships, etc.--
       ``(A) In general.--In the case of any partnership--
       ``(i) this subsection shall be applied at the partnership 
     level and any deduction for business interest shall be taken 
     into account in determining the non-separately stated taxable 
     income or loss of the partnership, and
       ``(ii) the adjusted taxable income of each partner of such 
     partnership--

       ``(I) shall be determined without regard to such partner's 
     distributive share of 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

[[Page 20379]]

       ``(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, reduced by the floor plan financing 
     interest, 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,
       ``(iv) the amount of any deduction allowed under section 
     199A, and
       ``(v) in the case of taxable years beginning before January 
     1, 2022, any deduction allowable for depreciation, 
     amortization, or depletion, and
       ``(B) computed with such other adjustments as provided by 
     the Secretary.
       ``(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) Any self-propelled vehicle designed for transporting 
     persons or property on a public street, highway, or road.
       ``(ii) A boat.
       ``(iii) Farm machinery or equipment.
       ``(10) 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(j)(2) 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) 80 percent of taxable income computed without regard 
     to the deduction allowable under this section.
     For purposes of this subtitle, the term `net operating loss 
     deduction' means the deduction allowed by this subsection.''.
       (2) Coordination of limitation with carrybacks and 
     carryovers.--Section 172(b)(2) is amended by striking ``shall 
     be computed--'' and all that follows and inserting ``shall--
       ``(A) be computed with the modifications specified in 
     subsection (d) other than paragraphs (1), (4), and (5) 
     thereof, and by determining the amount of the net operating 
     loss deduction without regard to the net operating loss for 
     the loss year or for any taxable year thereafter,
       ``(B) not be considered to be less than zero, and
       ``(C) not exceed the amount determined under subsection 
     (a)(2) for such prior taxable year.''.
       (3) Conforming amendment.--Section 172(d)(6) is amended by 
     striking ``and'' at the end of subparagraph (A), by striking 
     the period at the end of subparagraph (B) and inserting ``; 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(C) subsection (a)(2) shall be applied by substituting 
     `real estate investment trust taxable income (as defined in 
     section 857(b)(2) but without regard to the deduction for 
     dividends paid (as defined in section 561))' for `taxable 
     income'.''.
       (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

[[Page 20380]]

     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 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.--
       ``(1) In general.--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.
       ``(2) Exception.--In the case of any qualified bicycle 
     commuting reimbursement (as described in section 
     132(f)(5)(F)), this subsection shall not apply for any 
     amounts paid or incurred after December 31, 2017, and before 
     January 1, 2026.''.
       (d) Elimination of Deduction for Meals Provided at 
     Convenience of Employer.--Section 274, as amended by 
     subsection (c), is amended--

[[Page 20381]]

       (1) by redesignating subsection (o) as subsection (p), and
       (2) by inserting after subsection (n) the following new 
     subsection:
       ``(o) Meals Provided at Convenience of Employer.--No 
     deduction shall be allowed under this chapter for--
       ``(1) any expense for the operation of a facility described 
     in section 132(e)(2), and any expense for food or beverages, 
     including under section 132(e)(1), associated with such 
     facility, or
       ``(2) any expense for meals described in section 119(a).''.
       (e) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to amounts 
     incurred or paid after December 31, 2017.
       (2) Effective date for elimination of deduction for meals 
     provided at convenience of employer.--The amendments made by 
     subsection (d) shall apply to amounts incurred or paid after 
     December 31, 2025.

     SEC. 13305. REPEAL OF DEDUCTION FOR INCOME ATTRIBUTABLE TO 
                   DOMESTIC PRODUCTION ACTIVITIES.

       (a) In General.--Part VI of subchapter B of chapter 1 is 
     amended by striking section 199 (and by striking the item 
     relating to such section in the table of sections for such 
     part).
       (b) Conforming Amendments.--
       (1) Sections 74(d)(2)(B), 86(b)(2)(A), 135(c)(4)(A), 
     137(b)(3)(A), 219(g)(3)(A)(ii), 221(b)(2)(C), 222(b)(2)(C), 
     246(b)(1), and 469(i)(3)(F)(iii) are each amended by striking 
     ``199,''.
       (2) Section 170(b)(2)(D), as amended by subtitle A, is 
     amended by striking clause (iv), and by redesignating clauses 
     (v) and (vi) as clauses (iv) and (v).
       (3) Section 172(d) is amended by striking paragraph (7).
       (4) Section 613(a), as amended by section 11011, is amended 
     by striking ``and without the deduction under section 199''.
       (5) Section 613A(d)(1), as amended by section 11011, is 
     amended by striking subparagraph (B) and by redesignating 
     subparagraphs (C), (D), (E), and (F) as subparagraphs (B), 
     (C), (D), and (E), respectively.
       (c) Effective Date.--The amendments made by this section 
     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 time the agreement is 
     entered into, as determined by the Secretary.
       ``(b) Statements to Be Furnished to Individuals Involved in 
     the Settlement.--Every person required to make a return under 
     subsection (a) shall furnish to each person who is a party to 
     the suit or agreement a written statement showing--
       ``(1) the name of the government or entity, and
       ``(2) the information supplied to the Secretary under 
     subsection (a)(1).
     The written statement required under the preceding sentence 
     shall be furnished to the person at the same time the 
     government or entity provides the Secretary with the 
     information required under subsection (a).
       ``(c) Appropriate Official Defined.--For purposes of this 
     section, the term `appropriate official' means the officer or 
     employee having control of the suit, investigation, or 
     inquiry or the person appropriately designated for purposes 
     of this section.''.
       (2) Conforming amendment.--The table of sections for 
     subpart B of part III of subchapter A of chapter 61 is 
     amended by inserting after the item relating to section 6050W 
     the following new item:

``Sec. 6050X. Information with respect to certain fines, penalties, and 
              other amounts.''.

       (3) Effective date.--The amendments made by this subsection 
     shall apply to amounts paid or incurred on or after the date 
     of the enactment of this Act, except that such amendments 
     shall not apply to amounts paid or incurred under any binding 
     order or agreement entered into before such date. Such 
     exception shall not apply to an order or agreement requiring 
     court approval unless the approval was obtained before such 
     date.

     SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS SUBJECT TO 
                   NONDISCLOSURE AGREEMENTS PAID IN CONNECTION 
                   WITH SEXUAL HARASSMENT OR SEXUAL ABUSE.

       (a) Denial of Deduction.--Section 162 is amended by 
     redesignating subsection (q) as subsection (r) and by 
     inserting after subsection (p) the following new subsection:
       ``(q) Payments Related to Sexual Harassment and Sexual 
     Abuse.--No deduction shall be allowed under this chapter 
     for--
       ``(1) any settlement or payment related to sexual 
     harassment or sexual abuse if such settlement or payment is 
     subject to a nondisclosure agreement, or
       ``(2) attorney's fees related to such a settlement or 
     payment.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred after the date of the 
     enactment of this Act.

     SEC. 13308. 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

[[Page 20382]]

     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. 13309. 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. 13310. 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. 13311. 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.

     SEC. 13312. CERTAIN CONTRIBUTIONS BY GOVERNMENTAL ENTITIES 
                   NOT TREATED AS CONTRIBUTIONS TO CAPITAL.

       (a) In General.--Section 118 is amended--
       (1) by striking subsections (b), (c), and (d),
       (2) by redesignating subsection (e) as subsection (d), and
       (3) by inserting after subsection (a) the following new 
     subsections:
       ``(b) Exceptions.--For purposes of subsection (a), the term 
     `contribution to the capital of the taxpayer' does not 
     include--
       ``(1) any contribution in aid of construction or any other 
     contribution as a customer or potential customer, and
       ``(2) any contribution by any governmental entity or civic 
     group (other than a contribution made by a shareholder as 
     such).
       ``(c) Regulations.--The Secretary shall issue such 
     regulations or other guidance as may be necessary or 
     appropriate to carry out this section, including regulations 
     or other guidance for determining whether any contribution 
     constitutes a contribution in aid of construction.''.
       (b) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to contributions 
     made after the date of enactment of this Act.
       (2) Exception.--The amendments made by this section shall 
     not apply to any contribution, made after the date of 
     enactment of this Act by a governmental entity, which is made 
     pursuant to a master development plan that has been approved 
     prior to such date by a governmental entity.

     SEC. 13313. REPEAL OF ROLLOVER OF PUBLICLY TRADED SECURITIES 
                   GAIN INTO SPECIALIZED SMALL BUSINESS INVESTMENT 
                   COMPANIES.

       (a) In General.--Part III of subchapter O of chapter 1 is 
     amended by striking section 1044 (and by striking the item 
     relating to such section in the table of sections of such 
     part).
       (b) Conforming Amendments.--Section 1016(a)(23) is 
     amended--
       (1) by striking ``1044,'', and
       (2) by striking ``1044(d),''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to sales after December 31, 2017.

     SEC. 13314. CERTAIN SELF-CREATED PROPERTY NOT TREATED AS A 
                   CAPITAL ASSET.

       (a) Patents, etc.--Section 1221(a)(3) is amended by 
     inserting ``a patent, invention, model or design (whether or 
     not patented), a secret formula or process,'' before ``a 
     copyright''.
       (b) Conforming Amendment.--Section 1231(b)(1)(C) is amended 
     by inserting ``a patent, invention, model or design (whether 
     or not patented), a secret formula or process,'' before ``a 
     copyright''.

[[Page 20383]]

       (c) Effective Date.--The amendments made by this section 
     shall apply to dispositions after December 31, 2017.

                        PART V--BUSINESS CREDITS

     SEC. 13401. MODIFICATION OF ORPHAN DRUG CREDIT.

       (a) Credit Rate.--Subsection (a) of section 45C is amended 
     by striking ``50 percent'' and inserting ``25 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 clause (i) of section 47(c)(1)(B) of the 
     Internal Revenue Code (as amended by subsection (b)), or the 
     60-month period applicable under clause (ii) of such section, 
     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, or the 60-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 written policy that meets the 
     following requirements:
       ``(A) The policy provides--
       ``(i) in the case of a qualifying employee who is not a 
     part-time employee (as defined in section 4980E(d)(4)(B)), 
     not less than 2 weeks of annual paid family and medical 
     leave, and
       ``(ii) in the case of a qualifying employee who is a part-
     time employee, an amount of annual paid family and medical 
     leave that is not less than an amount which bears the same 
     ratio to the amount of annual paid family and medical leave 
     that is provided to a qualifying employee described in clause 
     (i) as--

       ``(I) the number of hours the employee is expected to work 
     during any week, bears to
       ``(II) the number of hours an equivalent qualifying 
     employee described in clause (i) is expected to work during 
     the week.

       ``(B) The policy requires that the rate of payment under 
     the program is not less than 50 percent of the wages normally 
     paid to such employee for services performed for the 
     employer.
       ``(2) Special rule for certain employers.--
       ``(A) In general.--An added employer shall not be treated 
     as an eligible employer unless such employer provides paid 
     family and medical leave in compliance with a written 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.

[[Page 20384]]

       ``(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.

     SEC. 13404. REPEAL OF TAX CREDIT BONDS.

       (a) In General.--Part IV of subchapter A of chapter 1 is 
     amended by striking subparts H, I, and J (and by striking the 
     items relating to such subparts in the table of subparts for 
     such part).
       (b) Payments to Issuers.--Subchapter B of chapter 65 is 
     amended by striking section 6431 (and by striking the item 
     relating to such section in the table of sections for such 
     subchapter).
       (c) Conforming Amendments.--
       (1) Part IV of subchapter U of chapter 1 is amended by 
     striking section 1397E (and by striking the item relating to 
     such section in the table of sections for such part).
       (2) Section 54(l)(3)(B) is amended by inserting ``(as in 
     effect before its repeal by the Tax Cuts and Jobs Act)'' 
     after ``section 1397E(I)''.
       (3) Section 6211(b)(4)(A) is amended by striking ``, and 
     6431'' and inserting ``and'' before ``36B''.
       (4) Section 6401(b)(1) is amended by striking ``G, H, I, 
     and J'' and inserting ``and G''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to bonds issued after December 31, 2017.

    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) Amount Treated as Effectively Connected.--
       (1) 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, 
     the term `sale or exchange' means any sale, exchange, or 
     other disposition.
       ``(E) Secretarial authority.--The Secretary shall prescribe 
     such regulations or other guidance as the Secretary 
     determines appropriate for the application of this paragraph, 
     including with respect to exchanges described in section 332, 
     351, 354, 355, 356, or 361.''.
       (2) Conforming amendments.--Section 864(c)(1) is amended--
       (A) by striking ``and (7)'' in subparagraph (A), and 
     inserting ``(7), and (8)'', and
       (B) by striking ``or (7)'' in subparagraph (B), and 
     inserting ``(7), or (8)''.
       (b) Withholding Requirements.--Section 1446 is amended by 
     redesignating subsection (f) as subsection (g) and by 
     inserting after subsection (e) the following:
       ``(f) Special Rules for Withholding on Dispositions 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 or other guidance 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 Dates.--
       (1) Subsection (a).--The amendments made by subsection (a) 
     shall apply to sales, exchanges, and dispositions on or after 
     November 27, 2017.
       (2) Subsection (b).--The amendment made by subsection (b) 
     shall apply to sales, exchanges, and dispositions after 
     December 31, 2017.

[[Page 20385]]



     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.

     SEC. 13504. REPEAL OF TECHNICAL TERMINATION OF PARTNERSHIPS.

       (a) In General.--Paragraph (1) of section 708(b) is 
     amended--
       (1) by striking ``, or'' at the end of subparagraph (A) and 
     all that follows and inserting a period, and
       (2) by striking ``only if--'' and all that follows through 
     ``no part of any business'' and inserting the following: 
     ``only if no part of any business''.
       (b) Conforming Amendment.--
       (1) Section 168(i)(7)(B) is amended by striking the second 
     sentence.
       (2) Section 743(e) is amended by striking paragraph (4) and 
     redesignating paragraphs (5), (6), and (7) as paragraphs (4), 
     (5), and (6).
       (c) Effective Date.--The amendments made by this section 
     shall apply to partnership taxable years beginning after 
     December 31, 2017.

                      Subpart B--Insurance Reforms

     SEC. 13511. NET OPERATING LOSSES OF LIFE INSURANCE COMPANIES.

       (a) In General.--Section 805(b) is amended by striking 
     paragraph (4) and by redesignating paragraph (5) as paragraph 
     (4).
       (b) Conforming Amendments.--
       (1) Part I of subchapter L of chapter 1 is amended by 
     striking section 810 (and by striking the item relating to 
     such section in the table of sections for such part).
       (2)(A) Part III of subchapter L of chapter 1 is amended by 
     striking section 844 (and by striking the item relating to 
     such section in the table of sections for such part).
       (B) Section 831(b)(3) is amended by striking ``except as 
     provided in section 844,''
       (3) Section 381 is amended by striking subsection (d).
       (4) Section 805(a)(4)(B)(ii) is amended to read as follows:
       ``(ii) the deduction allowed under section 172,''.
       (5) Section 805(a) is amended by striking paragraph (5).
       (6) Section 805(b)(2)(A)(iv) is amended to read as follows:
       ``(iv) any net operating loss carryback to the taxable year 
     under section 172, and''.
       (7) Section 953(b)(1)(B) is amended to read as follows:
       ``(B) So much of section 805(a)(8) as relates to the 
     deduction allowed under section 172.''.
       (8) Section 1351(i)(3) is amended by striking ``or the 
     operations loss deduction under section 810,''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to losses arising in taxable years beginning 
     after December 31, 2017.

     SEC. 13512. REPEAL OF SMALL LIFE INSURANCE COMPANY DEDUCTION.

       (a) In General.--Part I of subchapter L of chapter 1 is 
     amended by striking section 806 (and by striking the item 
     relating to such section in the table of sections for such 
     part).
       (b) Conforming Amendments.--
       (1) Section 453B(e) is amended--
       (A) by striking ``(as defined in section 806(b)(3))'' in 
     paragraph (2)(B), and
       (B) by adding at the end the following new paragraph:
       ``(3) Noninsurance business.--
       ``(A) In general.--For purposes of this subsection, the 
     term `noninsurance business' means any activity which is not 
     an insurance business.
       ``(B) Certain activities treated as insurance businesses.--
     For purposes of subparagraph (A), any activity which is not 
     an insurance business shall be treated as an insurance 
     business if--
       ``(i) it is of a type traditionally carried on by life 
     insurance companies for investment purposes, but only if the 
     carrying on of such activity (other than in the case of real 
     estate) does not constitute the active conduct of a trade or 
     business, or
       ``(ii) it involves the performance of administrative 
     services in connection with plans providing life insurance, 
     pension, or accident and health benefits.''.
       (2) Section 465(c)(7)(D)(v)(II) is amended by striking 
     ``section 806(b)(3)'' and inserting ``section 453B(e)(3)''.
       (3) Section 801(a)(2) is amended by striking subparagraph 
     (C).
       (4) Section 804 is amended by striking ``means--'' and all 
     that follows and inserting ``means the general deductions 
     provided in section 805.''.
       (5) Section 805(a)(4)(B), as amended by this Act, is 
     amended by striking clause (i) and by redesignating clauses 
     (ii), (iii), and (iv) as clauses (i), (ii), and (iii), 
     respectively.
       (6) Section 805(b)(2)(A), as amended by this Act, is 
     amended by striking clause (iii) and by redesignating clauses 
     (iv) and (v) as clauses (iii) and (iv), respectively.
       (7) Section 842(c) is amended by striking paragraph (1) and 
     by redesignating paragraphs (2) and (3) as paragraphs (1) and 
     (2), respectively.
       (8) Section 953(b)(1), as amended by section 13511, is 
     amended by striking subparagraph (A) and by redesignating 
     subparagraphs (B) and (C) as subparagraphs (A) and (B), 
     respectively.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2017.

     SEC. 13513. ADJUSTMENT FOR CHANGE IN COMPUTING RESERVES.

       (a) In General.--Paragraph (1) of section 807(f) is amended 
     to read as follows:
       ``(1) Treatment as change in method of accounting.--If the 
     basis for determining any item referred to in subsection (c) 
     as of the close of any taxable year differs from the basis 
     for such determination as of the close of the preceding 
     taxable year, then so much of the difference between--
       ``(A) the amount of the item at the close of the taxable 
     year, computed on the new basis, and
       ``(B) the amount of the item at the close of the taxable 
     year, computed on the old basis,
     as is attributable to contracts issued before the taxable 
     year shall be taken into account under section 481 as 
     adjustments attributable to a change in method of accounting 
     initiated by the taxpayer and made with the consent of the 
     Secretary.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2017.

     SEC. 13514. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS TO 
                   SHAREHOLDERS FROM PRE-1984 POLICYHOLDERS 
                   SURPLUS ACCOUNT.

       (a) In General.--Subpart D of part I of subchapter L is 
     amended by striking section 815 (and by striking the item 
     relating to such section in the table of sections for such 
     subpart).
       (b) Conforming Amendment.--Section 801 is amended by 
     striking subsection (c).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2017.
       (d) Phased Inclusion of Remaining Balance of Policyholders 
     Surplus Accounts.--In the case of any stock life insurance 
     company which has a balance (determined as of the close of 
     such company's last taxable year beginning before January 1, 
     2018) in an existing policyholders surplus account (as 
     defined in section 815 of the Internal Revenue Code of 1986, 
     as in effect before its repeal), the tax imposed by section 
     801 of such Code for the first 8 taxable years beginning 
     after December 31, 2017, shall be the amount which would be 
     imposed by such section for such year on the sum of--
       (1) life insurance company taxable income for such year 
     (within the meaning of such section 801 but not less than 
     zero), plus
       (2) \1/8\ of such balance.

     SEC. 13515. MODIFICATION OF PRORATION RULES FOR PROPERTY AND 
                   CASUALTY INSURANCE COMPANIES.

       (a) In General.--Section 832(b)(5)(B) is amended--
       (1) by striking ``15 percent'' and inserting ``the 
     applicable percentage'', and
       (2) by inserting at the end the following new sentence: 
     ``For purposes of this subparagraph, the applicable 
     percentage is 5.25 percent divided by the highest rate in 
     effect under section 11(b).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2017.

     SEC. 13516. REPEAL OF SPECIAL ESTIMATED TAX PAYMENTS.

       (a) In General.--Part III of subchapter L of chapter 1 is 
     amended by striking section 847 (and by striking the item 
     relating to such section in the table of sections for such 
     part).
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2017.

     SEC. 13517. COMPUTATION OF LIFE INSURANCE TAX RESERVES.

       (a) In General.--
       (1) Appropriate rate of interest.--The second sentence of 
     section 807(c) is amended to read as follows: ``For purposes 
     of paragraph (3),

[[Page 20386]]

     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.''.
       (2) Method of computing reserves.--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) 92.81 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) 92.81 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)).
       ``(D) No double counting.--In no event shall any amount or 
     item be taken into account more than once in determining any 
     reserve under this subchapter.
       ``(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 ``(other than a qualified long-term care 
     insurance contract, as defined in section 7702B(b)), a 2-year 
     full preliminary term method'' in paragraph (3)(A)(iii) and 
     inserting ``, the reserve method prescribed by the National 
     Association of Insurance Commissioners which covers such 
     contract as of the date the reserve is determined'',
       (E) by striking ``(as of the date of issuance)'' in 
     paragraph (3)(A)(iv)(I) and inserting ``(as of the date the 
     reserve is determined)'',
       (F) 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'',
       (G) 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
       (H) 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) Special rules.--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) Definition of life insurance contract.--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 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) Section 848(e)(1)(B)(iii) is amended by striking 
     ``807(e)(4)'' and inserting ``807(e)(3)''.
       (5) Subparagraph (B) of section 954(i)(5) is amended by 
     striking ``shall be substituted for the prevailing State 
     assumed interest rate,'' and inserting ``shall apply,''.
       (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) 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) of the 
     Internal Revenue Code of 1986 (determined after application 
     of paragraph (2)) 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.

[[Page 20387]]



     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 ``2.09 percent''.
       (3) Section 848(c)(2) is amended by striking ``2.05 
     percent'' and inserting ``2.45 percent''.
       (4) Section 848(c)(3) is amended by striking ``7.7 
     percent'' and inserting ``9.2 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
       (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.

     SEC. 13523. MODIFICATION OF DISCOUNTING RULES FOR PROPERTY 
                   AND CASUALTY INSURANCE COMPANIES.

       (a) Modification of Rate of Interest Used to Discount 
     Unpaid Losses.--Paragraph (2) of section 846(c) is amended to 
     read as follows:
       ``(2) Determination of annual rate.--The annual rate 
     determined by the Secretary under this paragraph for any 
     calendar year shall be a rate determined on the basis of the 
     corporate bond yield curve (as defined in section

[[Page 20388]]

     430(h)(2)(D)(i), determined by substituting `60-month period' 
     for `24-month period' therein).''.
       (b) Modification of Computational Rules for Loss Payment 
     Patterns.--Section 846(d)(3) is amended by striking 
     subparagraphs (B) through (G) and inserting the following new 
     subparagraph:
       ``(B) Treatment of certain losses.--
       ``(i) 3-year loss payment pattern.--In the case of any line 
     of business not described in subparagraph (A)(ii), losses 
     paid after the 1st year following the accident year shall be 
     treated as paid equally in the 2nd and 3rd year following the 
     accident year.
       ``(ii) 10-year loss payment pattern.--

       ``(I) In general.--The period taken into account under 
     subparagraph (A)(ii) shall be extended to the extent required 
     under subclause (II).
       ``(II) Computation of extension.--The amount of losses 
     which would have been treated as paid in the 10th year after 
     the accident year shall be treated as paid in such 10th year 
     and each subsequent year in an amount equal to the amount of 
     the average of the losses treated as paid in the 7th, 8th, 
     and 9th years after the accident year (or, if lesser, the 
     portion of the unpaid losses not theretofore taken into 
     account). To the extent such unpaid losses have not been 
     treated as paid before the 24th year after the accident year, 
     they shall be treated as paid in such 24th year.''.

       (c) Repeal of Historical Payment Pattern Election.--Section 
     846, as amended by this Act, is amended by striking 
     subsection (e) and by redesignating subsections (f) and (g) 
     as subsections (e) and (f), respectively.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2017.
       (e) Transitional Rule.--For the first taxable year 
     beginning after December 31, 2017--
       (1) the unpaid losses and the expenses unpaid (as defined 
     in paragraphs (5)(B) and (6) of section 832(b) of the 
     Internal Revenue Code of 1986) at the end of the preceding 
     taxable year, and
       (2) the unpaid losses as defined in sections 807(c)(2) and 
     805(a)(1) of such Code at the end of the preceding taxable 
     year,
     shall be determined as if the amendments made by this section 
     had applied to such unpaid losses and expenses unpaid in the 
     preceding taxable year and by using the interest rate and 
     loss payment patterns applicable to accident years ending 
     with calendar year 2018, and any adjustment shall be taken 
     into account ratably in such first taxable year and the 7 
     succeeding taxable years. For subsequent taxable years, such 
     amendments shall be applied with respect to such unpaid 
     losses and expenses unpaid by using the interest rate and 
     loss payment patterns applicable to accident years ending 
     with calendar year 2018.

               Subpart C--Banks and Financial Instruments

     SEC. 13531. LIMITATION ON DEDUCTION FOR FDIC PREMIUMS.

       (a) In General.--Section 162, as amended by sections 13307, 
     is amended by redesignating subsection (r) as subsection (s) 
     and by inserting after subsection (q) the following new 
     subsection:
       ``(r) 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.

                       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 subsection:
       ``(d) Adjustments Attributable to Conversion From S 
     Corporation to C Corporation.--
       ``(1) In general.--In the case of an eligible terminated S 
     corporation, any adjustment required by subsection (a)(2) 
     which is attributable to such corporation's revocation 
     described in paragraph (2)(A)(ii) shall be taken into account 
     ratably during the 6-taxable year period beginning with the 
     year of change.
       ``(2) Eligible terminated s corporation.--For purposes of 
     this subsection, the term `eligible terminated S corporation' 
     means any C corporation--
       ``(A) which--
       ``(i) was an S corporation on the day before the date of 
     the enactment of the Tax Cuts and Jobs Act, and
       ``(ii) during the 2-year period beginning on the date of 
     such enactment makes a revocation of its election under 
     section 1362(a), and
       ``(B) the owners of the stock of which, determined on the 
     date such revocation is made, are the same owners (and in 
     identical proportions) as on the date of such enactment.''.
       (b) Cash Distributions Following Post-termination 
     Transition Period From S Corporation Status.--Section 1371 is 
     amended by adding at the end the following new subsection:
       ``(f) Cash Distributions Following Post-termination 
     Transition Period.--In the case of a distribution of money by 
     an eligible terminated S corporation (as defined in section 
     481(d)) after the post-termination transition period, the 
     accumulated adjustments account shall be allocated to such 
     distribution, and the distribution shall be chargeable to 
     accumulated earnings and profits, in the same ratio as the 
     amount of such accumulated adjustments account bears to the 
     amount of such accumulated earnings and profits.''.

                          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

[[Page 20389]]

     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 
     provided 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 
     the product of the rate of tax under section 11 and 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 (within the meaning of section 457(f)(3)(B)) 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:
       ``(A) In general.--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).
       ``(B) Exception for remuneration for medical services.--The 
     term `remuneration' shall not include the portion of any 
     remuneration paid to a licensed medical professional 
     (including a veterinarian) which is for the performance of 
     medical or veterinary services by such professional.
       ``(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.
       ``(C) Exception.--Such term does not include any payment--
       ``(i) described in section 280G(b)(6) (relating to 
     exemption for payments under qualified plans),
       ``(ii) made under or to an annuity contract described in 
     section 403(b) or a plan described in section 457(b),
       ``(iii) to a licensed medical professional (including a 
     veterinarian) to the extent that such payment is for the 
     performance of medical or veterinary services by such 
     professional, or
       ``(iv) to an individual who is not a highly compensated 
     employee as defined in section 414(q).
       ``(D) Base amount.--Rules similar to the rules of 
     280G(b)(3) shall apply for purposes of determining the base 
     amount.
       ``(E) 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 to prevent 
     avoidance of such tax through the performance of services 
     other than as an employee or by providing compensation 
     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,

[[Page 20390]]

       ``(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 are granted 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 is a 1-percent owner (within the meaning of 
     section 416(i)(1)(B)(ii)) at any time during the calendar 
     year or who was such a 1 percent owner 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 is one of the 4 highest compensated officers of 
     such corporation for the taxable year, or was one of the 4 
     highest compensated officers of such corporation for any of 
     the 10 preceding taxable years, determined with respect to 
     each such taxable year on the basis of the shareholder 
     disclosure rules for compensation under the Securities 
     Exchange Act of 1934 (as if such rules applied to such 
     corporation).
       ``(4) Election.--
       ``(A) Time for making election.--An election with respect 
     to qualified stock shall be made under this subsection no 
     later than 30 days after the first date the rights of the 
     employee in such stock are transferable or are not subject to 
     a substantial risk of forfeiture, whichever occurs earlier, 
     and shall be made in a manner similar to the manner in which 
     an election is made under subsection (b).
       ``(B) Limitations.--No election may be made under this 
     section with respect to any qualified stock if--
       ``(i) the qualified employee has made an election under 
     subsection (b) with respect to such qualified stock,
       ``(ii) any stock of the corporation which issued the 
     qualified stock is readily tradable on an established 
     securities market (as determined under paragraph (1)(B)(iii)) 
     at any time before the election is made, or
       ``(iii) such corporation purchased any of its outstanding 
     stock in the calendar year preceding the calendar year which 
     includes the first date the rights of the employee in such 
     stock are transferable or are not subject to a substantial 
     risk of forfeiture, unless--

       ``(I) not less than 25 percent of the total dollar amount 
     of the stock so purchased is deferral stock, and
       ``(II) the determination of which individuals from whom 
     deferral stock is purchased is made on a reasonable basis.

       ``(C) Definitions and special rules related to limitation 
     on stock redemptions.--
       ``(i) Deferral stock.--For purposes of this paragraph, the 
     term `deferral stock' means stock with respect to which an 
     election is in effect under this subsection.
       ``(ii) Deferral stock with respect to any individual not 
     taken into account if individual holds deferral stock with 
     longer deferral period.--Stock purchased by a corporation 
     from any individual shall not be treated as deferral stock 
     for purposes of subparagraph (B)(iii) if such individual 
     (immediately after such purchase) holds any deferral stock 
     with respect to which an election has been in effect under 
     this subsection for a longer period than the election with 
     respect to the stock so purchased.
       ``(iii) Purchase of all outstanding deferral stock.--The 
     requirements of subclauses (I) and (II) of subparagraph 
     (B)(iii) shall be treated as met if the stock so purchased 
     includes all of the corporation's outstanding deferral stock.
       ``(iv) Reporting.--Any corporation which has outstanding 
     deferral stock as of the beginning of any calendar year and 
     which purchases any of its outstanding stock during such 
     calendar year shall include on its return of tax for the 
     taxable year in which, or with which, such calendar year ends 
     the total dollar amount of its outstanding stock so purchased 
     during such calendar year and such other information as the 
     Secretary requires for purposes of administering this 
     paragraph.
       ``(5) Controlled groups.--For purposes of this subsection, 
     all persons treated as a single employer under section 414(b) 
     shall be treated as 1 corporation.
       ``(6) Notice requirement.--Any corporation which transfers 
     qualified stock to a qualified employee shall, at the time 
     that (or a reasonable period before) an amount attributable 
     to such stock would (but for this subsection) first be 
     includible in the gross income of such employee--
       ``(A) certify to such employee that such stock is qualified 
     stock, and
       ``(B) notify such employee--
       ``(i) that the employee may be eligible to elect to defer 
     income on such stock under this subsection, and
       ``(ii) that, if the employee makes such an election--

       ``(I) the amount of income recognized at the end of the 
     deferral period will be based on the value of the stock at 
     the time at which the rights of the employee in such stock 
     first become transferable or not subject to substantial risk 
     of forfeiture, notwithstanding whether the value of the stock 
     has declined during the deferral period,
       ``(II) the amount of such income recognized at the end of 
     the deferral period will be subject to withholding under 
     section 3401(i) at the rate determined under section 3402(t), 
     and
       ``(III) the responsibilities of the employee (as determined 
     by the Secretary under paragraph (3)(A)(ii)) with respect to 
     such withholding.

       ``(7) Restricted stock units.--This section (other than 
     this subsection), including any election under subsection 
     (b), shall not apply to restricted stock units.''.
       (b) Withholding.--
       (1) Time of withholding.--Section 3401 is amended by adding 
     at the end the following new subsection:
       ``(i) Qualified Stock for Which an Election Is in Effect 
     Under Section 83(i).--For purposes of subsection (a), 
     qualified stock (as defined in section 83(i)) with respect to 
     which an election is made under section 83(i) shall be 
     treated as wages--
       ``(1) received on the earliest date described in section 
     83(i)(1)(B), and
       ``(2) in an amount equal to the amount included in income 
     under section 83 for the taxable year which includes such 
     date.''.
       (2) Amount of withholding.--Section 3402 is amended by 
     adding at the end the following new subsection:
       ``(t) Rate of Withholding for Certain Stock.--In the case 
     of any qualified stock (as defined in section 83(i)(2)) with 
     respect to which an election is made under section 83(i)--
       ``(1) the rate of tax under subsection (a) shall not be 
     less than the maximum rate of tax in effect under section 1, 
     and
       ``(2) such stock shall be treated for purposes of section 
     3501(b) in the same manner as a non-cash fringe benefit.''.

[[Page 20391]]

       (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) 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, and
       (ii) by adding at the end the following new subsection:
       ``(d) Coordination With Qualified Equity Grants.--An option 
     for which an election is made under section 83(i) with 
     respect to the stock received in connection with its exercise 
     shall not be considered as granted pursuant an employee stock 
     purchase plan.''.
       (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 with respect to such employee 
     solely because of such 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 CONVERSIONS.

       (a) In General.--Section 408A(d)(6)(B) is amended by adding 
     at the end the following new clause:
       ``(iii) Conversions.--Subparagraph (A) shall not apply in 
     the case of a qualified rollover contribution to which 
     subsection (d)(3) applies (including by reason of 
     subparagraph (C) thereof).''.
       (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 adding at the end the following new subparagraph:
       ``(C) Rollover of certain plan loan offset amounts.--
       ``(i) In general.--In the case of a qualified plan loan 
     offset amount, paragraph (1) shall not apply to any transfer 
     of such amount made after the due date (including extensions) 
     for filing the return of tax for the taxable year in which 
     such amount is treated as distributed from a qualified 
     employer plan.
       ``(ii) Qualified plan loan offset amount.--For purposes of 
     this subparagraph, the term `qualified plan loan offset 
     amount' means a plan loan offset amount which is treated as 
     distributed from a qualified employer plan to a participant 
     or beneficiary solely by reason of--

       ``(I) the termination of the qualified employer plan, or
       ``(II) the failure to meet the repayment terms of the loan 
     from such plan because of the severance from employment of 
     the participant.

       ``(iii) Plan loan offset amount.--For purposes of clause 
     (ii), the term `plan loan offset amount' means the amount by 
     which the participant's accrued benefit under the plan is 
     reduced in order to repay a loan from the plan.
       ``(iv) Limitation.--This subparagraph shall not apply to 
     any plan loan offset amount unless such plan loan offset 
     amount relates to a loan to which section 72(p)(1) does not 
     apply by reason of section 72(p)(2).
       ``(v) Qualified employer plan.--For purposes of this 
     subsection, the term `qualified employer plan' has the 
     meaning given such term by section 72(p)(4).''.
       (b) Conforming Amendments.--Section 402(c)(3) is amended--
       (1) by striking ``Transfer must be made within 60 days of 
     receipt'' in the heading and inserting ``Time limit on 
     transfers'', and
       (2) by striking ``subparagraph (B)'' in subparagraph (A) 
     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 students during the preceding 
     taxable year,
       ``(B) more than 50 percent of the students of which are 
     located in the United States,
       ``(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 (including for purposes of 
     determining the number

[[Page 20392]]

     of students at a particular location) 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. UNRELATED BUSINESS TAXABLE INCOME INCREASED BY 
                   AMOUNT OF CERTAIN FRINGE BENEFIT EXPENSES FOR 
                   WHICH DEDUCTION IS DISALLOWED.

       (a) In General.--Section 512(a), as amended by this Act, is 
     further amended by adding at the end the following new 
     paragraph:
       ``(7) Increase in unrelated business taxable income by 
     disallowed fringe.--Unrelated business taxable income of an 
     organization shall be increased by any amount for which a 
     deduction is not allowable under this chapter by reason of 
     section 274 and which is paid or incurred by such 
     organization for any qualified transportation fringe (as 
     defined in section 132(f)), any parking facility used in 
     connection with qualified parking (as defined in section 
     132(f)(5)(C)), or any on-premises athletic facility (as 
     defined in section 132(j)(4)(B)). The preceding sentence 
     shall not apply to the extent the amount paid or incurred is 
     directly connected with an unrelated trade or business which 
     is regularly carried on by the organization. The Secretary 
     shall issue such regulations or other guidance as may be 
     necessary or appropriate to carry out the purposes of this 
     paragraph, including regulations or other guidance providing 
     for the appropriate allocation of depreciation and other 
     costs with respect to facilities used for parking or for on-
     premises athletic facilities.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to amounts paid or incurred after December 31, 
     2017.

     SEC. 13704. 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. 13705. 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 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--

[[Page 20393]]

       ``(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,

       ``(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

[[Page 20394]]

     ``(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 spirits 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).
       ``(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

[[Page 20395]]

     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,
       ``(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

[[Page 20396]]

     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 chief executive officer 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 chief executive officer of a 
     State 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.--
       ``(1) Treatment of gains.--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--
       ``(A) 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,
       ``(B) the amount of gain excluded by subparagraph (A) shall 
     be included in gross income as provided by subsection (b), 
     and
       ``(C) subsection (c) shall apply.
       ``(2) Election.--No election may be made under paragraph 
     (1)--
       ``(A) with respect to a sale or exchange if an election 
     previously made with respect to such sale or exchange is in 
     effect, or
       ``(B) with respect to any sale or exchange after December 
     31, 2026.
       ``(b) Deferral of Gain Invested in Opportunity Zone 
     Property.--
       ``(1) Year of inclusion.--Gain to which subsection 
     (a)(1)(B) 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)(A) shall be the excess of--
       ``(i) the lesser of the amount of gain excluded under 
     paragraph (1) or the fair market value of the investment 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)(1)(B).--The basis in the investment shall be increased by 
     the amount of gain recognized by reason of subsection 
     (a)(1)(B) 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)(A).
       ``(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)(A).
       ``(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) In general.--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 
     by the average of the percentage of qualified opportunity 
     zone property held in the fund as measured--
       ``(A) on the last day of the first 6-month period of the 
     taxable year of the fund, and
       ``(B) on the last day of the taxable year of the fund.
       ``(2) Qualified opportunity zone property.--
       ``(A) In general.--The term `qualified opportunity zone 
     property' means property which is--
       ``(i) qualified opportunity zone stock,
       ``(ii) qualified opportunity zone partnership interest, or
       ``(iii) qualified opportunity zone business property.
       ``(B) Qualified opportunity zone stock.--
       ``(i) In general.--Except as provided in clause (ii), the 
     term `qualified opportunity zone stock' means any stock in a 
     domestic corporation if--

       ``(I) such stock is acquired by the qualified opportunity 
     fund 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 qualified 
     opportunity fund'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

[[Page 20397]]

     zone partnership interest' means any capital or profits 
     interest in a domestic partnership if--
       ``(i) such interest is acquired by the qualified 
     opportunity fund 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 qualified 
     opportunity fund'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 qualified opportunity fund if--

       ``(I) such property was acquired by the qualified 
     opportunity fund 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 qualified opportunity 
     fund or the qualified opportunity fund substantially improves 
     the property, and
       ``(III) during substantially all of the qualified 
     opportunity fund'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 qualified opportunity fund 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 qualified opportunity 
     fund exceed an amount equal to the adjusted basis of such 
     property at the beginning of such 30-month period in the 
     hands of the qualified opportunity fund.
       ``(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 (determined by substituting `qualified 
     opportunity zone business' for `qualified opportunity fund' 
     each place it appears in paragraph (2)(D)),
       ``(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) 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) 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,
       ``(B) rules to ensure a qualified opportunity fund has a 
     reasonable period of time to reinvest the return of capital 
     from investments in qualified opportunity zone stock and 
     qualified opportunity zone partnership interests, and to 
     reinvest proceeds received from the sale or disposition of 
     qualified opportunity zone property, and
       ``(C) 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
       ``(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 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

[[Page 20398]]

     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) with respect to any 
     income, war profits, or excess profits taxes imposed by any 
     foreign country or possession of the United States.
       ``(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) 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 shareholder's taxable income from 
     sources without the United States (and entire taxable income) 
     shall be determined without regard to--
       ``(A) the foreign-source portion of any dividend received 
     from such foreign corporation, and
       ``(B) any deductions properly allocable or apportioned to--
       ``(i) income (other than amounts includible under section 
     951(a)(1) or 951A(a)) with respect to stock of such specified 
     10-percent owned foreign corporation, or
       ``(ii) such stock to the extent income with respect to such 
     stock is other than amounts includible under section 
     951(a)(1) or 951A(a).
     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. Deduction for foreign source-portion of dividends received 
              by domestic corporations from certain 10-percent owned 
              foreign corporations.''.

       (f) Effective Date.--The amendments made by this section 
     shall apply to distributions made after (and, in the case of 
     the amendments made by subsection (d), deductions with 
     respect to taxable years ending after) December 31, 2017.

     SEC. 14102. SPECIAL RULES RELATING TO SALES OR TRANSFERS 
                   INVOLVING SPECIFIED 10-PERCENT OWNED FOREIGN 
                   CORPORATIONS.

       (a) Sales by United States Persons of Stock.--
       (1) In general.--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.''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to sales or exchanges after December 31, 2017.
       (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 
     received a dividend from a specified 10-percent owned foreign 
     corporation (as defined in section 245A) in any taxable year, 
     solely for purposes of determining loss on any disposition of 
     stock of such foreign corporation in such taxable year or any 
     subsequent taxable year, the basis of such domestic 
     corporation in such stock shall be reduced (but not below 
     zero) by the amount of any deduction allowable to such 
     domestic corporation under section 245A with respect to such 
     stock except to the extent such basis was reduced under 
     section 1059 by reason of a dividend for which such a 
     deduction was allowable.''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to distributions made after December 31, 2017.
       (c) Sale by a CFC of a Lower Tier CFC.--
       (1) In general.--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) Application of basis or similar adjustment.--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, rules 
     similar to the rules of section 961(d) shall apply.
       ``(C) Foreign-source portion.--For purposes of this 
     paragraph, the foreign-source portion of any amount treated 
     as a dividend under paragraph (1) shall be determined in the 
     same manner as under section 245A(c).''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to sales or exchanges after December 31, 2017.
       (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:

[[Page 20399]]



     ``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) Transferred Loss Amount.--For purposes of this 
     section, the term `transferred loss amount' means, with 
     respect to any transfer of substantially all of the assets of 
     a foreign branch, the excess (if any) of--
       ``(1) the sum of losses--
       ``(A) which were incurred by the foreign branch after 
     December 31, 2017, and before the transfer, and
       ``(B) with respect to which a deduction was allowed to the 
     taxpayer, over
       ``(2) the sum of--
       ``(A) any taxable income of such branch for a taxable year 
     after the taxable year in which the loss was incurred and 
     through the close of the taxable year of the transfer, and
       ``(B) any amount which is recognized under section 
     904(f)(3) on account of the transfer.
       ``(c) Reduction for Recognized Gains.--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 
     (b)(2)(B)).
       ``(d) Source of Income.--Amounts included in gross income 
     under this section shall be treated as derived from sources 
     within the United States.
       ``(e) Basis Adjustments.--Consistent with such regulations 
     or other guidance as the Secretary 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.
       (4) Transition rule.--The amount of gain taken into account 
     under section 91(c) of the Internal Revenue Code of 1986, as 
     added by this subsection, shall be reduced by the amount of 
     gain which would be recognized under section 367(a)(3)(C) 
     (determined without regard to the amendments made by 
     subsection (e)) with respect to losses incurred before 
     January 1, 2018.
       (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 
     foreign income corporation which begins before January 1, 
     2018, the subpart F income of such foreign corporation (as 
     otherwise determined for such taxable year under section 952) 
     shall be increased by the greater of--
       ``(1) the accumulated post-1986 deferred foreign income of 
     such corporation determined as of November 2, 2017, or
       ``(2) the accumulated post-1986 deferred foreign income of 
     such corporation determined as of December 31, 2017.
       ``(b) Reduction in Amounts Included in Gross Income of 
     United States Shareholders of Specified Foreign Corporations 
     With Deficits in Earnings and Profits.--
       ``(1) In general.--In the case of a taxpayer which is a 
     United States shareholder with respect to at least one 
     deferred foreign income corporation and at least one E&P 
     deficit foreign corporation, the amount which would (but for 
     this subsection) be taken into account under section 
     951(a)(1) by reason of subsection (a) as such United States 
     shareholder's pro rata share of the subpart F income of each 
     deferred foreign income corporation shall be reduced 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, as of 
     November 2, 2017--
       ``(i) such specified foreign corporation has a deficit in 
     post-1986 earnings and profits,
       ``(ii) such corporation was a specified foreign 
     corporation, and
       ``(iii) 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 with the taxable 
     year described in subsection (a), 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, with 
     respect to any taxable year beginning with the taxable year 
     described in subsection (a), a United States shareholder's 
     pro rata share of the earnings and profits of any 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.
       ``(5) Netting among united states shareholders in same 
     affiliated group.--
       ``(A) In general.--In the case of any affiliated group 
     which includes at least one E&P net surplus shareholder and 
     one E&P net deficit shareholder, the amount which would (but 
     for this paragraph) be taken into account under section 
     951(a)(1) by reason of subsection (a) by each such E&P net 
     surplus shareholder shall be reduced (but not below zero) by 
     such shareholder's applicable share of the affiliated group's 
     aggregate unused E&P deficit.
       ``(B) E&P net surplus shareholder.--For purposes of this 
     paragraph, the term `E&P net surplus shareholder' means any 
     United States shareholder which would (determined without 
     regard to this paragraph) take into account an amount greater 
     than zero under section 951(a)(1) by reason of subsection 
     (a).
       ``(C) E&P net deficit shareholder.--For purposes of this 
     paragraph, the term `E&P net deficit shareholder' means any 
     United States shareholder if--
       ``(i) the aggregate foreign E&P deficit with respect to 
     such shareholder (as defined in paragraph (3)(A) without 
     regard to clause (i)(II) thereof), exceeds
       ``(ii) the amount which would (but for this subsection) be 
     taken into account by such shareholder under section 
     951(a)(1) by reason of subsection (a).
       ``(D) Aggregate unused e&p deficit.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `aggregate unused E&P deficit' 
     means, with respect to any affiliated group, the lesser of--

       ``(I) the sum of the excesses described in subparagraph 
     (C), determined with respect to each E&P net deficit 
     shareholder in such group, or

[[Page 20400]]

       ``(II) the amount determined under subparagraph (E)(ii).

       ``(ii) Reduction with respect to e&p net deficit 
     shareholders which are not wholly owned by the affiliated 
     group.--If the group ownership percentage of any E&P net 
     deficit shareholder is less than 100 percent, the amount of 
     the excess described in subparagraph (C) which is taken into 
     account under clause (i)(I) with respect to such E&P net 
     deficit shareholder shall be such group ownership percentage 
     of such amount.
       ``(E) Applicable share.--For purposes of this paragraph, 
     the term `applicable share' means, with respect to any E&P 
     net surplus shareholder in any affiliated group, the amount 
     which bears the same proportion to such group's aggregate 
     unused E&P deficit as--
       ``(i) the product of--

       ``(I) such shareholder's group ownership percentage, 
     multiplied by
       ``(II) the amount which would (but for this paragraph) be 
     taken into account under section 951(a)(1) by reason of 
     subsection (a) by such shareholder, bears to

       ``(ii) the aggregate amount determined under clause (i) 
     with respect to all E&P net surplus shareholders in such 
     group.
       ``(F) Group ownership percentage.--For purposes of this 
     paragraph, the term `group ownership percentage' means, with 
     respect to any United States shareholder in any affiliated 
     group, the percentage of the value of the stock of such 
     United States shareholder which is held by other includible 
     corporations in such affiliated group. Notwithstanding the 
     preceding sentence, the group ownership percentage of the 
     common parent of the affiliated group is 100 percent. Any 
     term used in this subparagraph which is also used in section 
     1504 shall have the same meaning as when used in such 
     section.
       ``(c) Application of Participation Exemption to Included 
     Income.--
       ``(1) In general.--In the case of a United States 
     shareholder of a deferred foreign income corporation, there 
     shall be allowed as a deduction for the taxable year in which 
     an amount is included in the gross income of such United 
     States shareholder under section 951(a)(1) by reason of this 
     section an amount equal to the sum of--
       ``(A) the United States shareholder's 8 percent rate 
     equivalent percentage of the excess (if any) of--
       ``(i) the amount so included as gross income, over
       ``(ii) the amount of such United States shareholder's 
     aggregate foreign cash position, plus
       ``(B) the United States shareholder's 15.5 percent rate 
     equivalent percentage of so much of the amount described in 
     subparagraph (A)(ii) as does not exceed the amount described 
     in subparagraph (A)(i).
       ``(2) 8 and 15.5 percent rate equivalent percentages.--For 
     purposes of this subsection--
       ``(A) 8 percent rate equivalent percentage.--The term `8 
     percent rate equivalent percentage' means, with respect to 
     any United States shareholder for any taxable year, the 
     percentage which would result in the amount to which such 
     percentage applies being subject to a 8 percent rate of tax 
     determined by only taking into account a deduction equal to 
     such percentage of such amount and the highest rate of tax 
     specified in section 11 for such taxable year. In the case of 
     any taxable year of a United States shareholder to which 
     section 15 applies, the highest rate of tax under section 11 
     before the effective date of the change in rates and the 
     highest rate of tax under section 11 after the effective date 
     of such change shall each be taken into account under the 
     preceding sentence in the same proportions as the portion of 
     such taxable year which is before and after such effective 
     date, respectively.
       ``(B) 15.5 percent rate equivalent percentage.--The term 
     `15.5 percent rate equivalent percentage' means, with respect 
     to any United States shareholder for any taxable year, the 
     percentage determined under subparagraph (A) applied by 
     substituting `15.5 percent rate of tax' for `8 percent rate 
     of tax'.
       ``(3) Aggregate foreign cash position.--For purposes of 
     this subsection--
       ``(A) In general.--The term `aggregate foreign cash 
     position' means, with respect to any United States 
     shareholder, 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 2, 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 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.
       ``(II) Commercial paper, certificates of deposit, the 
     securities of the Federal government and of any State or 
     foreign government.
       ``(III) Any foreign currency.
       ``(IV) Any obligation with a term of less than one year.
       ``(V) Any asset which the Secretary identifies as being 
     economically equivalent to any asset described in this 
     subparagraph.

       ``(C) Net accounts receivable.--For purposes of this 
     paragraph, the term `net accounts receivable' means, with 
     respect to any specified foreign corporation, the excess (if 
     any) of--
       ``(i) such corporation's accounts receivable, over
       ``(ii) such corporation's accounts payable (determined 
     consistent with the rules of section 461).
       ``(D) Prevention of double counting.--Cash positions of a 
     specified foreign corporation described in clause (ii), 
     (iii)(I), or (iii)(IV) 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 (other than a corporation) 
     shall be treated as a specified foreign corporation of a 
     United States shareholder for purposes of determining such 
     United States shareholder's aggregate foreign cash position 
     if any interest in such entity is held by a specified foreign 
     corporation of such United States shareholder (determined 
     after application of this subparagraph) and such entity would 
     be a specified foreign corporation of such United States 
     shareholder if such entity were a foreign corporation.
       ``(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 date 
     referred to in paragraph (1) or (2) of 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 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 described in subsection (a) other 
     than dividends distributed to another specified foreign 
     corporation.
       ``(e) Specified Foreign Corporation.--
       ``(1) In general.--For purposes of this section, the term 
     `specified foreign corporation' means--
       ``(A) any controlled foreign corporation, and
       ``(B) any foreign corporation with respect to which one or 
     more domestic corporations is a United States shareholder.
       ``(2) Application to certain foreign corporations.--For 
     purposes of sections 951 and 961, a foreign corporation 
     described in paragraph (1)(B) shall be treated as a 
     controlled foreign corporation solely for purposes of taking 
     into account the subpart F income of such corporation under 
     subsection (a) (and for purposes of applying subsection (f)).
       ``(3) 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.--
       ``(1) In general.--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

[[Page 20401]]

     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).
       ``(2) Special rules.--The portion which is included in the 
     income of a United States shareholder under section 951(a)(1) 
     by reason of subsection (a) which is equal to the deduction 
     allowed under subsection (c) by reason of such inclusion--
       ``(A) shall be treated as income exempt from tax for 
     purposes of sections 705(a)(1)(B) and 1367(a)(1)(A), and
       ``(B) shall not be treated as income exempt from tax for 
     purposes of determining whether an adjustment shall be made 
     to an accumulated adjustment account under section 
     1368(e)(1)(A).
       ``(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) 0.771 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) 0.557 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.--With respect to the 
     taxes treated as paid or accrued by a domestic corporation 
     with respect to amounts which are includible in gross income 
     of such domestic corporation by reason of this section, 
     section 78 shall apply only to so much of such taxes as bears 
     the same proportion to the amount of such taxes as--
       ``(A) the excess of--
       ``(i) the amounts which are includible in gross income of 
     such domestic corporation by reason of this section, over
       ``(ii) the deduction allowable under subsection (c) with 
     respect to such amounts, bears to
       ``(B) such amounts.
       ``(h) Election to Pay Liability in Installments.--
       ``(1) In general.--In the case of a United States 
     shareholder of a deferred foreign income corporation, such 
     United States shareholder may elect to pay the net tax 
     liability under this section in 8 installments of the 
     following amounts:
       ``(A) 8 percent of the net tax liability in the case of 
     each of the first 5 of such installments,
       ``(B) 15 percent of the net tax liability in the case of 
     the 6th such installment,
       ``(C) 20 percent of the net tax liability in the case of 
     the 7th such installment, and
       ``(D) 25 percent of the net tax liability in the case of 
     the 8th such installment.
       ``(2) Date for payment of installments.--If an election is 
     made under paragraph (1), the first installment shall be paid 
     on the due date (determined without regard to any extension 
     of time for filing the return) for the return of tax for the 
     taxable year described in subsection (a) and each succeeding 
     installment shall be paid on the due date (as so determined) 
     for the return of tax for the taxable year following the 
     taxable year with respect to which the preceding installment 
     was made.
       ``(3) Acceleration of payment.--If there is an addition to 
     tax for failure to timely pay any installment required under 
     this subsection, a liquidation or sale of substantially all 
     the assets of the taxpayer (including in a title 11 or 
     similar case), a cessation of business by the taxpayer, or 
     any similar circumstance, then the unpaid portion of all 
     remaining installments shall be due on the date of such event 
     (or in the case of a title 11 or similar case, the day before 
     the petition is filed). The preceding sentence shall not 
     apply to the sale of substantially all the assets of a 
     taxpayer to a buyer if such buyer enters into an agreement 
     with the Secretary under which such buyer is liable for the 
     remaining installments due under this subsection in the same 
     manner as if such buyer were the taxpayer.
       ``(4) Proration of deficiency to installments.--If an 
     election is made under paragraph (1) to pay the net tax 
     liability under this section in installments and a deficiency 
     has been assessed with respect to such net tax liability, the 
     deficiency shall be prorated to the installments payable 
     under paragraph (1). The part of the deficiency so prorated 
     to any installment the date for payment of which has not 
     arrived shall be collected at the same time as, and as a part 
     of, such installment. The part of the deficiency so prorated 
     to any installment the date for payment of which has arrived 
     shall be paid upon notice and demand from the Secretary. This 
     subsection shall not apply if the deficiency is due to 
     negligence, to intentional disregard of rules and 
     regulations, or to fraud with intent to evade tax.
       ``(5) Election.--Any election under paragraph (1) shall be 
     made not later than the due date for the return of tax for 
     the taxable year described in subsection (a) and shall be 
     made in such manner as the Secretary shall provide.
       ``(6) Net tax liability under this section.--For purposes 
     of this subsection--
       ``(A) In general.--The net tax liability under this section 
     with respect to any United States shareholder is the excess 
     (if any) of--
       ``(i) such taxpayer's net income tax for the taxable year 
     in which an amount is included in the gross income of such 
     United States shareholder under section 951(a)(1) by reason 
     of this section, over
       ``(ii) such taxpayer's net income tax for such taxable year 
     determined--

       ``(I) without regard to this section, and
       ``(II) without regard to any income or deduction properly 
     attributable to a dividend received by such United States 
     shareholder from any deferred foreign income corporation.

       ``(B) Net income tax.--The term `net income tax' means the 
     regular tax liability reduced by the credits allowed under 
     subparts A, B, and D of part IV of subchapter A.
       ``(i) Special Rules for S Corporation Shareholders.--
       ``(1) In general.--In the case of any S corporation which 
     is a United States shareholder of a deferred foreign income 
     corporation, each shareholder of such S corporation may elect 
     to defer payment of such shareholder's net tax liability 
     under this section with respect to such S corporation until 
     the shareholder's taxable year which includes the triggering 
     event with respect to such liability. Any net tax liability 
     payment of which is deferred under the preceding sentence 
     shall be assessed on the return of tax as an addition to tax 
     in the shareholder's taxable year which includes such 
     triggering event.
       ``(2) Triggering event.--
       ``(A) In general.--In the case of any shareholder's net tax 
     liability under this section with respect to any S 
     corporation, the triggering event with respect to such 
     liability is whichever of the following occurs first:
       ``(i) Such corporation ceases to be an S corporation 
     (determined as of the first day of the first taxable year 
     that such corporation is not an S corporation).
       ``(ii) A liquidation or sale of substantially all the 
     assets of such S corporation (including in a title 11 or 
     similar case), a cessation of business by such S corporation, 
     such S corporation ceases to exist, or any similar 
     circumstance.
       ``(iii) A transfer of any share of stock in such S 
     corporation by the taxpayer (including by reason of death, or 
     otherwise).
       ``(B) Partial transfers of stock.--In the case of a 
     transfer of less than all of the taxpayer's shares of stock 
     in the S corporation, such transfer shall only be a 
     triggering event with respect to so much of the taxpayer's 
     net tax liability under this section with respect to such S 
     corporation as is properly allocable to such stock.
       ``(C) Transfer of liability.--A transfer described in 
     clause (iii) of subparagraph (A) shall not be treated as a 
     triggering event if the transferee enters into an agreement 
     with the Secretary under which such transferee is liable for 
     net tax liability with respect to such stock in the same 
     manner as if such transferee were the taxpayer.
       ``(3) Net tax liability.--A shareholder's net tax liability 
     under this section with respect to any S corporation is the 
     net tax liability under this section which would be 
     determined under subsection (h)(6) if the only subpart F 
     income taken into account by such shareholder by reason of 
     this section were allocations from such S corporation.
       ``(4) Election to pay deferred liability in installments.--
     In the case of a taxpayer which elects to defer payment under 
     paragraph (1)--
       ``(A) subsection (h) shall be applied separately with 
     respect to the liability to which such election applies,
       ``(B) an election under subsection (h) with respect to such 
     liability shall be treated as timely made if made not later 
     than the due date for the return of tax for the taxable year 
     in which the triggering event with respect to such liability 
     occurs,
       ``(C) the first installment under subsection (h) with 
     respect to such liability shall be paid not later than such 
     due date (but determined without regard to any extension of 
     time for filing the return), and
       ``(D) if the triggering event with respect to any net tax 
     liability is described in paragraph (2)(A)(ii), an election 
     under subsection (h) with respect to such liability may be 
     made only with the consent of the Secretary.
       ``(5) Joint and several liability of s corporation.--If any 
     shareholder of an S corporation elects to defer payment under 
     paragraph (1), such S corporation shall be jointly and 
     severally liable for such payment and any penalty, addition 
     to tax, or additional amount attributable thereto.
       ``(6) Extension of limitation on collection.--Any 
     limitation on the time period for the collection of a 
     liability deferred under this subsection shall not be treated 
     as beginning before the date of the triggering event with 
     respect to such liability.
       ``(7) Annual reporting of net tax liability.--
       ``(A) In general.--Any shareholder of an S corporation 
     which makes an election under paragraph (1) shall report the 
     amount of such shareholder's deferred net tax liability on 
     such shareholder's return of tax for the taxable year for 
     which such election is made and on the return of tax for each 
     taxable year thereafter until such amount has been fully 
     assessed on such returns.
       ``(B) Deferred net tax liability.--For purposes of this 
     paragraph, the term `deferred net

[[Page 20402]]

     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 (c). Any copy provided to a 
     shareholder under section 6037(b) shall include a statement 
     of such shareholder's pro rata share of such amounts.
       ``(k) 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 (with respect to a 
     surrogate foreign corporation which first becomes a surrogate 
     foreign corporation during such period), 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 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).
       ``(3) Surrogate foreign corporation.--For purposes of this 
     subsection, the term `surrogate foreign corporation' has the 
     meaning given such term in section 7874(a)(2)(B).
       ``(m) Special Rules for United States Shareholders Which 
     Are Real Estate Investment Trusts.--
       ``(1) In general.--If a real estate investment trust is a 
     United States shareholder in 1 or more deferred foreign 
     income corporations--
       ``(A) any amount required to be taken into account under 
     section 951(a)(1) by reason of this section shall not be 
     taken into account as gross income of the real estate 
     investment trust for purposes of applying paragraphs (2) and 
     (3) of section 856(c) to any taxable year for which such 
     amount is taken into account under section 951(a)(1), and
       ``(B) if the real estate investment trust elects the 
     application of this subparagraph, notwithstanding subsection 
     (a), any amount required to be taken into account under 
     section 951(a)(1) by reason of this section shall, in lieu of 
     the taxable year in which it would otherwise be included in 
     gross income (for purposes of the computation of real estate 
     investment trust taxable income under section 857(b)), be 
     included in gross income as follows:
       ``(i) 8 percent of such amount in the case of each of the 
     taxable years in the 5-taxable year period beginning with the 
     taxable year in which such amount would otherwise be 
     included.
       ``(ii) 15 percent of such amount in the case of the 1st 
     taxable year following such period.
       ``(iii) 20 percent of such amount in the case of the 2nd 
     taxable year following such period.
       ``(iv) 25 percent of such amount in the case of the 3rd 
     taxable year following such period.
       ``(2) Rules for trusts electing deferred inclusion.--
       ``(A) Election.--Any election under paragraph (1)(B) shall 
     be made not later than the due date for the first taxable 
     year in the 5-taxable year period described in clause (i) of 
     paragraph (1)(B) and shall be made in such manner as the 
     Secretary shall provide.
       ``(B) Special rules.--If an election under paragraph (1)(B) 
     is in effect with respect to any real estate investment 
     trust, the following rules shall apply:
       ``(i) Application of participation exemption.--For purposes 
     of subsection (c)(1)--

       ``(I) the aggregate amount to which subparagraph (A) or (B) 
     of subsection (c)(1) applies shall be determined without 
     regard to the election,
       ``(II) each such aggregate amount shall be allocated to 
     each taxable year described in paragraph (1)(B) in the same 
     proportion as the amount included in the gross income of such 
     United States shareholder under section 951(a)(1) by reason 
     of this section is allocated to each such taxable year.
       ``(III) No installment payments.--The real estate 
     investment trust may not make an election under subsection 
     (g) for any taxable year described in paragraph (1)(B).

       ``(ii) Acceleration of inclusion.--If there is a 
     liquidation or sale of substantially all the assets of the 
     real estate investment trust (including in a title 11 or 
     similar case), a cessation of business by such trust, or any 
     similar circumstance, then any amount not yet included in 
     gross income under paragraph (1)(B) shall be included in 
     gross income as of the day before the date of the event and 
     the unpaid portion of any tax liability with respect to such 
     inclusion shall be due on the date of such event (or in the 
     case of a title 11 or similar case, the day before the 
     petition is filed).
       ``(n) Election Not to Apply Net Operating Loss Deduction.--
       ``(1) In general.--If a United States shareholder of a 
     deferred foreign income corporation elects the application of 
     this subsection for the taxable year described in subsection 
     (a), then the amount described in paragraph (2) shall not be 
     taken into account--
       ``(A) in determining the amount of the net operating loss 
     deduction under section 172 of such shareholder for such 
     taxable year, or
       ``(B) in determining the amount of taxable income for such 
     taxable year which may be reduced by net operating loss 
     carryovers or carrybacks to such taxable year under section 
     172.
       ``(2) Amount described.--The amount described in this 
     paragraph is the sum of--
       ``(A) the amount required to be taken into account under 
     section 951(a)(1) by reason of this section (determined after 
     the application of subsection (c)), plus
       ``(B) in the case of a domestic corporation which chooses 
     to have the benefits of subpart A of part III of subchapter N 
     for the taxable year, the taxes deemed to be paid by such 
     corporation under subsections (a) and (b) of section 960 for 
     such taxable year with respect to the amount described in 
     subparagraph (A) which are treated as a dividends under 
     section 78.
       ``(3) Election.--Any election under this subsection shall 
     be made not later than the due date (including extensions) 
     for filing the return of tax for the taxable year and shall 
     be made in such manner as the Secretary shall prescribe.
       ``(o) Regulations.--The Secretary shall prescribe such 
     regulations or other guidance as may be necessary or 
     appropriate to carry out the provisions of this section, 
     including--
       ``(1) regulations or other guidance to provide appropriate 
     basis adjustments, and
       ``(2) regulations or other guidance to prevent the 
     avoidance of the purposes of this section, including through 
     a reduction in earnings and profits, through changes in 
     entity classification or 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, the excess 
     of--
       ``(A) 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), over
       ``(B) the amount of interest expense taken into account 
     under subsection (c)(2)(A)(ii) in determining the 
     shareholder's net CFC tested income for the taxable year to 
     the extent the interest income attributable to such expense 
     is not taken into account in determining such shareholder's 
     net CFC tested income.
       ``(c) Net CFC Tested Income.--For purposes of this 
     section--

[[Page 20403]]

       ``(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) (or to which such deductions would be 
     allocable if there were such gross income).
       ``(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 controlled foreign 
     corporation for any taxable year, the average of such 
     corporation's aggregate 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--
       ``(A) by using the alternative depreciation system under 
     section 168(g), and
       ``(B) by allocating the depreciation deduction with respect 
     to such property ratably to each day during the period in the 
     taxable year to which such depreciation relates.
       ``(3) Partnership property.--For purposes of this 
     subsection, if a controlled foreign corporation holds an 
     interest in a partnership at the close of such taxable year 
     of the controlled foreign corporation, such controlled 
     foreign corporation shall take into account under paragraph 
     (1) the controlled foreign corporation's distributive share 
     of the aggregate of the partnership's adjusted bases 
     (determined as of such date in the hands of the partnership) 
     in tangible property held by such partnership to the extent 
     such property--
       ``(A) is used in the trade or business of the partnership,
       ``(B) is of a type with respect to which a deduction is 
     allowable under section 167, and
       ``(C) is used in the production of tested income 
     (determined with respect to such controlled foreign 
     corporation's distributive share of income with respect to 
     such property).
     For purposes of this paragraph, the controlled foreign 
     corporation's distributive share of the adjusted basis of any 
     property shall be the controlled foreign corporation's 
     distributive share of income with respect to such property.
       ``(4) Regulations.--The Secretary shall issue such 
     regulations or other guidance as the Secretary determines 
     appropriate to prevent the avoidance of the purposes of this 
     subsection, including regulations or other guidance which 
     provide for the treatment of property if--
       ``(A) such property is transferred, or held, temporarily, 
     or
       ``(B) the avoidance of the purposes of this paragraph is a 
     factor in the transfer or holding of such property.
       ``(e) Determination of Pro Rata Share, etc.--For purposes 
     of this section--
       ``(1) In general.--The pro rata shares referred to in 
     subsections (b), (c)(1)(A), and (c)(1)(B), respectively, 
     shall be determined under the rules of section 951(a)(2) in 
     the same manner as such section applies to subpart F income 
     and shall be taken into account in the taxable year of the 
     United States shareholder in which or with which the taxable 
     year of the controlled foreign corporation ends.
       ``(2) Treatment as united states shareholder.--A person 
     shall be treated as a United States shareholder of a 
     controlled foreign corporation for any taxable year of such 
     person only if such person owns (within the meaning of 
     section 958(a)) stock in such foreign corporation on the last 
     day in the taxable year of such foreign corporation 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, 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 subpart A of this part, 
     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)

[[Page 20404]]

     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--
       ``(i) 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, and
       ``(ii) the amount treated as a dividend received by such 
     corporation under section 78 which is attributable to the 
     amount described in clause (i).
       ``(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 
     and without regard to whether the corporation is a controlled 
     foreign corporation).
       ``(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) any amount included in the gross income of such 
     corporation under section 951(a)(1),
       ``(II) the global intangible low-taxed income included in 
     the gross income of such corporation under section 951A,
       ``(III) any financial services income (as defined in 
     section 904(d)(2)(D)) of such corporation,
       ``(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.
       ``(B) Domestic oil and gas extraction income.--For purposes 
     of subparagraph (A), the term `domestic oil and gas 
     extraction income' means income described in section 
     907(c)(1), determined by substituting `within the United 
     States' for `without the United States'.
       ``(4) Foreign-derived deduction eligible income.--The term 
     `foreign-derived deduction eligible income' means, with 
     respect to any taxpayer for any taxable year, any deduction 
     eligible income of such taxpayer which is derived in 
     connection with--
       ``(A) property--
       ``(i) which is sold by the taxpayer to any person who is 
     not a United States person, and
       ``(ii) which the taxpayer establishes to the satisfaction 
     of the Secretary is for a foreign use, or
       ``(B) services provided by the taxpayer which the taxpayer 
     establishes to the satisfaction of the Secretary are provided 
     to any person, or with respect to property, not located 
     within the United States.
       ``(5) Rules relating to foreign use property or services.--
     For purposes of this subsection--
       ``(A) Foreign use.--The term `foreign use' means any use, 
     consumption, or disposition which is not within the United 
     States.
       ``(B) Property or services provided to domestic 
     intermediaries.--
       ``(i) Property.--If a taxpayer sells property to another 
     person (other than a related party) for further manufacture 
     or other modification within the United States, such property 
     shall not be treated as sold for a foreign use even if such 
     other person subsequently uses such property for a foreign 
     use.
       ``(ii) Services.--If a taxpayer provides services to 
     another person (other than a related party) located within 
     the United States, such services shall not be treated as 
     described in paragraph (4)(B) even if such other person uses 
     such services in providing services which are so described.
       ``(C) Special rules with respect to related party 
     transactions.--
       ``(i) Sales to related parties.--If property is sold to a 
     related party who is not a United States person, such sale 
     shall not be treated as for a foreign use unless--

       ``(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 this Act, is amended by 
     adding at the end the following new paragraph:
       ``(9) 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:


[[Page 20405]]


``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.

         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. REPEAL OF INCLUSION BASED ON WITHDRAWAL OF 
                   PREVIOUSLY EXCLUDED SUBPART F INCOME FROM 
                   QUALIFIED INVESTMENT.

       (a) In General.--Subpart F of part III of subchapter N of 
     chapter 1 is amended by striking section 955.
       (b) Conforming Amendments.--
       (1)(A) Section 951(a)(1)(A) is amended to read as follows:
       ``(A) his pro rata share (determined under paragraph (2)) 
     of the corporation's subpart F income for such year, and''.
       (B) Section 851(b) is amended by striking ``section 
     951(a)(1)(A)(i)'' in the flush language at the end and 
     inserting ``section 951(a)(1)(A)''.
       (C) Section 952(c)(1)(B)(i) is amended by striking 
     ``section 951(a)(1)(A)(i)'' and inserting ``section 
     951(a)(1)(A)''.
       (D) Section 953(c)(1)(C) is amended by striking ``section 
     951(a)(1)(A)(i)'' and inserting ``section 951(a)(1)(A)''.
       (2) Section 951(a) is amended by striking paragraph (3).
       (3) Section 953(d)(4)(B)(iv)(II) is amended by striking 
     ``or amounts referred to in clause (ii) or (iii) of section 
     951(a)(1)(A)''.
       (4) Section 964(b) is amended by striking ``, 955,''.
       (5) Section 970 is amended by striking subsection (b).
       (6) The table of sections for subpart F of part III of 
     subchapter N of chapter 1 is amended by striking the item 
     relating to section 955.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years of foreign corporations 
     beginning after December 31, 2017, and to taxable years of 
     United States shareholders in which or with which such 
     taxable years of foreign corporations end.

     SEC. 14213. 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. 14214. 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. 14215. 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.

                 CHAPTER 3--PREVENTION OF BASE EROSION

     SEC. 14221. 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. 14222. 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 branches 
     or domestic entities,

[[Page 20406]]

       ``(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. 14223. 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 first becomes a surrogate 
     foreign corporation (as defined in section 7874(a)(2)(B)) 
     after the date of the enactment of this subclause, 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 received after the date of the 
     enactment of this Act.

     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 subpart A of this part, 
     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 subpart A of this 
     part--
       ``(1) In general.--If any portion of a distribution from a 
     controlled foreign corporation to a domestic corporation 
     which is a United States shareholder with respect to such 
     controlled foreign corporation is excluded from gross income 
     under section 959(a), such domestic corporation shall be 
     deemed to have paid so much of such foreign corporation's 
     foreign income taxes as--
       ``(A) are properly attributable to such portion, and
       ``(B) have not been deemed to have to been paid by such 
     domestic corporation under this section for the taxable year 
     or any prior taxable year.
       ``(2) Tiered controlled foreign corporations.--If section 
     959(b) applies to any portion of a distribution from a 
     controlled foreign corporation to another controlled foreign 
     corporation, such controlled foreign corporation shall be 
     deemed to have paid so much of such other controlled foreign 
     corporation's foreign income taxes as--
       ``(A) are properly attributable to such portion, and
       ``(B) have not been deemed to have been paid by a domestic 
     corporation under this section for the taxable year or any 
     prior taxable year.'',
       (2) and by adding after subsection (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, an amount equal to the 
     taxes deemed to be paid by such corporation under subsections 
     (a), (b), and (d) of section 960 (determined without regard 
     to the phrase `80 percent of' in subsection (d)(1) thereof) 
     for such taxable year shall be treated for purposes of this 
     title (other than sections 245 and 245A) as a dividend 
     received by such domestic corporation from the foreign 
     corporation.''.
       (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)(B) is amended to read as follows:
       ``(B) in the case of a foreign income tax paid by a foreign 
     corporation, shall not be taken into account for purposes of 
     section 960.''.
       (15) Section 904(d)(2)(E) is amended--
       (A) by amending clause (i) to read as follows:
       ``(i) Noncontrolled 10-percent owned foreign corporation.--
     The term `noncontrolled 10-percent owned foreign corporation' 
     means any foreign corporation which is--

       ``(I) a specified 10-percent owned foreign corporation (as 
     defined in section 245A(b)), or
       ``(II) a passive foreign investment company (as defined in 
     section 1297(a)) with respect to which the taxpayer meets the 
     stock ownership requirements of section 902(a) (or, for 
     purposes of applying paragraphs (3) and (4), the requirements 
     of section 902(b)).

     A controlled foreign corporation shall not be treated as a 
     noncontrolled 10-percent owned foreign corporation with 
     respect to any distribution out of its earnings and profits 
     for periods during which it was a controlled foreign 
     corporation. Any reference to section 902 in this clause 
     shall be treated as a reference to such section as in effect 
     before its repeal.'', and
       (B) by striking ``non-controlled section 902 corporation'' 
     in clause (ii) and inserting ``noncontrolled 10-percent owned 
     foreign corporation''.
       (16) Section 904(d)(4) is amended--
       (A) by striking ``noncontrolled section 902 corporation'' 
     each place it appears and inserting ``noncontrolled 10-
     percent owned foreign corporation'',
       (B) by striking ``noncontrolled section 902 corporations'' 
     in the heading thereof and inserting ``noncontrolled 10-
     percent owned foreign corporations''.
       (17) Section 904(d)(6)(A) is amended by striking ``902, 
     907,'' and inserting ``907''.
       (18) Section 904(h)(10)(A) is amended by striking 
     ``sections 902, 907, and 960'' and inserting ``sections 907 
     and 960''.
       (19) 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).''.
       (20) Section 905(c)(1) is amended by striking the last 
     sentence.
       (21) 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''.

[[Page 20407]]

       (22) Section 906(a) is amended by striking ``(or deemed, 
     under section 902, paid or accrued during the taxable 
     year)''.
       (23) Section 906(b) is amended by striking paragraphs (4) 
     and (5).
       (24) Section 907(b)(2)(B) is amended by striking ``902 
     or''.
       (25) Section 907(c)(3)(A) is amended--
       (A) by striking subparagraph (A) and inserting the 
     following:
       ``(A) interest, to the extent the category of income of 
     such interest is determined under section 904(d)(3),'', and
       (B) by striking ``section 960(a)'' in subparagraph (B) and 
     inserting ``section 960''.
       (26) Section 907(c)(5) is amended by striking ``902 or''.
       (27) Section 907(f)(2)(B)(i) is amended by striking ``902 
     or''.
       (28) Section 908(a) is amended by striking ``902 or''.
       (29) 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) 
     without regard to paragraph (2) thereof)'',
       (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''.
       (30) Section 909(d) is amended by striking paragraph (5).
       (31) Section 958(a)(1) is amended by striking ``960(a)(1)'' 
     and inserting ``960''.
       (32) Section 959(d) is amended by striking ``Except as 
     provided in section 960(a)(3), any'' and inserting ``Any''.
       (33) Section 959(e) is amended by striking ``section 
     960(b)'' and inserting ``section 960(c)''.
       (34) 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''.
       (35) Section 1293(f) is amended by striking ``and'' at the 
     end of paragraph (1), by striking the period at the end of 
     paragraph (2) and inserting ``, and'', and by adding at the 
     end the following new paragraph:
       ``(3) a domestic corporation which owns (or is treated 
     under section 1298(a) as owning) stock of a qualified 
     electing fund shall be treated in the same manner as a United 
     States shareholder of a controlled foreign corporation (and 
     such qualified electing fund shall be treated in the same 
     manner as such controlled foreign corporation) if such 
     domestic corporation meets the stock ownership requirements 
     of subsection (a) or (b) of section 902 (as in effect before 
     its repeal) with respect to such qualified electing fund.''.
       (36) 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''.
       (37) Section 6038(c)(4) is amended by striking subparagraph 
     (C).
       (38) 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.
       (39) 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. 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.

     SEC. 14304. 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 (5 percent in the case 
     of taxable years beginning in calendar year 2018) 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 sum of--

       ``(I) the credit allowed under section 38 for the taxable 
     year which is properly allocable to the research credit 
     determined under section 41(a), plus
       ``(II) the portion of the applicable section 38 credits not 
     in excess of 80 percent of the lesser of the amount of such 
     credits or the base erosion minimum tax amount (determined 
     without regard to this subclause).

       ``(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 a taxpayer described in 
     subparagraph (B) who is an applicable taxpayer for any 
     taxable year, the percentage otherwise in effect under 
     paragraphs (1)(A) and (2)(A) shall each be increased by one 
     percentage point.
       ``(B) Taxpayer described.--A 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.
       ``(4) Applicable section 38 credits.--For purposes of 
     paragraph (1)(B)(ii)(II), the term `applicable section 38 
     credits' means the credit allowed under section 38 for the 
     taxable year which is properly allocable to--
       ``(A) the low-income housing credit determined under 
     section 42(a),

[[Page 20408]]

       ``(B) the renewable electricity production credit 
     determined under section 45(a), and
       ``(C) the investment credit determined under section 46, 
     but only to the extent properly allocable to the energy 
     credit determined under section 48.
       ``(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,
       ``(iii) in the case of a base erosion payment described in 
     subsection (d)(3)--

       ``(I) any reduction under section 803(a)(1)(B) in the gross 
     amount of premiums and other consideration on insurance and 
     annuity contracts for premiums and other consideration 
     arising out of indemnity insurance, and
       ``(II) any deduction under section 832(b)(4)(A) from the 
     amount of gross premiums written on insurance contracts 
     during the taxable year for premiums paid for reinsurance, 
     and

       ``(iv) in the case of a base erosion payment described in 
     subsection (d)(4), 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 section 163(j) 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 sum of--

       ``(I) the aggregate amount of the deductions (including 
     deductions described in clauses (i) and (ii) of paragraph 
     (2)(A)) allowable to the taxpayer under this chapter for the 
     taxable year, plus
       ``(II) the base erosion tax benefits described in clauses 
     (iii) and (iv) of paragraph (2)(A) allowable to the taxpayer 
     for the taxable year.

       ``(B) Certain items not taken into account.--The amount 
     under subparagraph (A)(ii) shall be determined by not taking 
     into account--
       ``(i) any deduction allowed under section 172, 245A, or 250 
     for the taxable year,
       ``(ii) any deduction for amounts paid or accrued for 
     services to which the exception under subsection (d)(5) 
     applies, and
       ``(iii) any deduction for qualified derivative payments 
     which are not treated as a base erosion payment by reason of 
     subsection (h).
       ``(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 
     for depreciation (or amortization in lieu of depreciation).
       ``(3) Reinsurance payments.--Such term shall also include 
     any premium or other consideration paid or accrued by the 
     taxpayer to a foreign person which is a related party of the 
     taxpayer for any reinsurance payments which are taken into 
     account under sections 803(a)(1)(B) or 832(b)(4)(A).
       ``(4) 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)(B) 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).
       ``(5) 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 component.
       ``(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 3 percent 
     (2 percent in the case of a taxpayer described in subsection 
     (b)(3)(B)) or higher.
       ``(2) Gross receipts.--
       ``(A) Special rule for foreign persons.--In the case of a 
     foreign person the gross receipts of which are taken into 
     account for purposes of paragraph (1)(B), only gross receipts 
     which are taken into account in determining income which is 
     effectively connected with the conduct of a trade or business 
     within the United States shall be taken into account. In the 
     case of a taxpayer which is a foreign person, the preceding 
     sentence shall not apply to the gross receipts of any United 
     States person which are aggregated with the taxpayer's gross 
     receipts by reason of paragraph (3).
       ``(B) Other rules made applicable.--Rules similar to the 
     rules of subparagraphs (B), (C), and (D) of section 448(c)(3) 
     shall apply in determining gross receipts for purposes of 
     this section.
       ``(3) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) of section 52 shall be treated 
     as 1 person for purposes of this subsection and subsection 
     (c)(4), except that in applying section 1563 for purposes of 
     section 52, the exception for foreign corporations under 
     section 1563(b)(2)(C) shall be disregarded.
       ``(f) Foreign Person.--For purposes of this section, the 
     term `foreign person' has the meaning given such term by 
     section 6038A(c)(3).
       ``(g) Related Party.--For purposes of this section--
       ``(1) In general.--The term `related party' means, with 
     respect to any applicable taxpayer--
       ``(A) any 25-percent owner of the taxpayer,
       ``(B) any person who is related (within the meaning of 
     section 267(b) or 707(b)(1)) to the taxpayer or any 25-
     percent owner of the taxpayer, and
       ``(C) any other person who is related (within the meaning 
     of section 482) to the taxpayer.
       ``(2) 25-percent owner.--The term `25-percent owner' means, 
     with respect to any corporation, any person who owns at least 
     25 percent of--
       ``(A) the total voting power of all classes of stock of a 
     corporation entitled to vote, or
       ``(B) the total value of all classes of stock of such 
     corporation.
       ``(3) Section 318 to apply.--Section 318 shall apply for 
     purposes of paragraphs (1) and (2), except that--
       ``(A) `10 percent' shall be substituted for `50 percent' in 
     section 318(a)(2)(C), and
       ``(B) subparagraphs (A), (B), and (C) of section 318(a)(3) 
     shall not be applied so as to consider a United States person 
     as owning stock which is owned by a person who is not a 
     United States person.
       ``(h) 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

[[Page 20409]]

     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.
     Such term shall not include any item described in clauses (i) 
     through (v).
       ``(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.
       ``(C) Exception for certain contracts.--Such term shall not 
     include any insurance, annuity, or endowment contract issued 
     by an insurance company to which subchapter L applies (or 
     issued by any foreign corporation to which such subchapter 
     would apply if such foreign corporation were a domestic 
     corporation).
       ``(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 sections 12001 and 13001, is amended by striking ``plus'' 
     at the end of clause (i), by redesignating clause (ii) as 
     clause (iii), and by inserting after clause (i) the following 
     new clause:
       ``(ii) the tax imposed by section 59A, plus''.
       (B) Subparagraphs (A)(i) and (B)(i) of section 6655(e)(2), 
     as amended by sections 12001 and 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:
       ``(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

[[Page 20410]]

       ``(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.

                                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.


                            Motion to Concur

  Mr. BRADY of Texas. Mr. Speaker, I have a motion at the desk.
  The SPEAKER pro tempore. The Clerk will designate the motion.
  The text of the motion is as follows:

       Mr. Brady of Texas moves that the House concur in the 
     Senate amendment to H.R. 1.

  The SPEAKER pro tempore. Pursuant to House Resolution 668, the 
gentleman from Texas (Mr. Brady) and the gentleman from Massachusetts 
(Mr. Neal) each will control 10 minutes.
  The Chair recognizes the gentleman from Texas.
  Mr. BRADY of Texas. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, both the House and now the Senate have taken action on 
legislation to reform America's Tax Code for the first time in 31 
years. Unfortunately, two targeted provisions did not meet Senate rules 
and had to be removed.
  Today, the process continues to move forward, and, with this vote, it 
will be the House, the people's House, that officially sends this 
historic legislation to President Trump's desk.
  I know the American people are excited. More than that, I know they 
are feeling a sense of relief. They are relieved that, for the first 
time in years, they are going to see more money in their paychecks that 
they can keep.
  Think about that middle-income family of four, earning $70,000 a 
year. These are working families, and the tax cut of more than $2,000 
they will see under this bill, that $2,000 is real money. It is real 
money these families worked hard to earn, but, until now, they have had 
to send it to Washington instead of being able to use it for their own 
needs, whether that is paying bills, saving for the future, or putting 
new tires on a car.
  Think about the relief our job creators and our workers will feel. 
For so long, Americans have barely seen any growth in their paychecks, 
yet they are going to their jobs every day, and they are working harder 
than ever.

                              {time}  1200

  With this bill, that hard work is finally going to be rewarded, and 
we are going to see the growth of jobs and paychecks like we haven't 
seen in years.
  For our businesses, large and small, no matter if they are a small 
startup with just three workers or a large company with 3,000, they are 
finally going to have a Tax Code that works with them as they grow, 
innovate, and invest in our communities. They are going to see relief 
from complexity and high rates and the feeling they are always having 
to compete with one hand tied behind their back.
  For all these Americans, all the hardworking men, women, and families 
who bring life to our communities and to our economy, I think the major 
source of relief is knowing that, starting in

[[Page 20411]]

the new year, none of us has to accept this broken Tax Code and this 
slow-growth status in America any longer.
  With the new tax system we will deliver today, things will change for 
the better, and they will change immediately. This new Tax Code will be 
simple, it will be fair, and it will be focused on the needs of the 
American people, not on Washington's special interests.
  This new Tax Code will be modern. It will be competitive. It will 
create more good-paying jobs right here in our communities, not drive 
them overseas. Above all, this new Tax Code, America's Tax Code, will 
not belong to the special interests anymore. It will belong to the 
American people. It will help more Americans realize their own American 
Dream, whatever that may be. For all the Americans who struggle and who 
have been left behind under today's broken Tax Code, that has to be the 
biggest relief of all.
  Mr. Speaker, I reserve the balance of my time.
  Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentlewoman from 
California (Ms. Pelosi), the distinguished leader of the Democratic 
Party.
  Ms. PELOSI. Mr. Speaker, I thank the gentleman for yielding me time, 
and, once again, I commend him for being a champion of middle class 
families.
  I want my colleagues all to hear the esteem in which we hold our 
Democratic members of the Ways and Means Committee. I thank you. Thank 
you very much, Mr. Neal, for being our ranking member and for your 
extraordinary leadership on behalf of America's middle class working 
families, and that includes millions of veterans. Thank you.
  Mr. Speaker, today is a very sad day in the history of America 
because we have, on the floor, probably the worst bill in recent time 
to come to the floor. That doesn't mean it doesn't have stiff 
competition from other legislation the Republicans have brought to the 
floor, but this is the worst because so many people are affected in 
such a negative way and because trillions of dollars of impact on our 
economy have been voted upon without any hearing, without any hearing 
from the people who will be most affected by it--no hearings, no 
experts, no listening to the American people.
  Yesterday, our Republican colleagues stood on this floor and voted 
for a GOP tax scam that the American people oppose 2 to 1. Our 
Republican colleagues stood on the floor and cheered. They cheered a 
bill that will raise taxes on 86 million middle class families and hand 
a staggering 83 percent of its tax cuts to the wealthiest 1 percent.
  Shamefully, the Republicans were cheering against the children as 
they robbed from their future and ransacked the middle class to reward 
the rich.
  Today, the Republicans take their victory lap for successfully 
pillaging the American middle class to benefit the powerful and the 
privileged.
  I come to the floor with stories of men and women and children that 
Republicans shamefully cheered against yesterday.
  Yesterday, I wish the Republicans had heard, as we did, the story of 
Ady Barkan, 30 years old, father of a beautiful baby son, and Ady is 
suddenly stricken with ALS, 30 years old.
  From his wheelchair, with a strong but wavering voice, he begged 
Congress not to pass this bill. He pleaded with anyone who would listen 
not to vote for this tax scam that will raise his health benefits and 
condemn Medicaid to devastating cuts as the logical next step. He has 
been lobbying on Capitol Hill against this bill for a while. Ady said 
yesterday it would do so much damage.

       It would deprive me of the Medicaid I need to stay alive a 
     little longer and see baby Carl learn to read and teach him 
     how to play chess and watch him go to first grade.

  But Republicans didn't listen, said ``no,'' and cheered.
  Yesterday, we heard the story, and I wish our Republican friends 
could have heard it, of Laura Hatcher, mother of sweet and kind 11-
year-old Simon, one of the Little Lobbyists.
  Simon has a rare disease and cerebral palsy. His mother spoke of how 
their family watches the Muppet version of ``A Christmas Carol'' and 
how Simon sees himself in Tiny Tim, another kind boy with braces on his 
legs. Unfortunately, this story, as of today, does not have the same 
kind of happy ending as ``A Christmas Carol.''
  But the story is not over, and like Tiny Tim, Simon and his family 
now find their future in danger because of the greed of those with 
power, the cruelty that is in the heart of the tax scam.
  As Simon's mother, Laura, said:

       Very soon I could, once again, be facing a future where I 
     don't know how I will be able to care for my child. This is a 
     thought I simply find too difficult to bear.

  Since you didn't hear yesterday, I will go on to say what she said.

       We parents of medically complex kids understand 
     consequences. We know what will happen if this tax bill 
     passes, if our country does not turn from this destructive 
     and immoral path.

  But the Republicans didn't listen. They said ``no,'' and they 
cheered. They cheered against Simon because Republicans value the 
wishes of the special interest lobbyists over the Little Lobbyists, the 
voices of Little Lobbyists, sick children standing up for themselves 
and for their siblings, children standing with their siblings.
  Yesterday, we heard from faith leaders, too. They implored Congress 
to reject this bill that punishes working families and rewards the 
wealthiest 1 percent.
  I repeat: 83 percent of the benefits go to the top 1 percent; 86 
million American working middle class families will have their taxes 
raised.
  Sister Simone said she wept for the fact that our Representatives are 
not weeping over the damage they are doing to families across America.
  They challenged us to honor our faith in this holy season, to 
remember that our first responsibility is to those who have the least, 
not to enrich those who are already privileged and powerful.
  They challenged us to heed not only the message of Christmas, but to 
remember the words of Jesus enshrined in the Gospel of Matthew.
  But Republicans didn't listen. They said ``no.'' They cheered. They 
cheered. They cheered against little Simon. They cheered against Ady 
Barkan. They cheered against people in need.
  The GOP tax scam is a monumental con job, but who got conned? 
President Trump will sign the bill whenever he signs it. I know it is 
supposed to be today, but I hear the special interests are weighing in 
for him to delay it for some reason or another.
  President Trump will sign a bill that betrays the promises he made in 
the campaign.
  President Trump promised to eliminate the carried interest loophole; 
yet the Republicans wrote a tax scam that not only continues this 
outrageous loophole, but it gives even more loopholes to the wealthy 
and well connected.
  President Trump promised to stop corporations from shipping jobs 
overseas, but Republicans wrote a tax scam that gives corporate America 
even bigger incentives to ship jobs overseas.
  President Trump promised tax reform focused on middle class families, 
tax breaks for middle class families. Republicans wrote a tax scam that 
raises taxes on 86 million middle class families in our country.
  President Trump promised he would protect Medicare, Medicaid, and 
Social Security, but Republicans wrote a tax plan to explode the 
deficit and use it as an excuse to cut Medicare and Medicaid. They have 
made no secret of their plans. They have even said this week, to raise 
the Social Security age.
  So who got conned? Did the people get conned by the promises? Did the 
President get conned by the Republicans? Is he signing a bill that 
betrays his promises to the American people?
  It is all about the Republicans in Congress. They have in their DNA 
trickle-down economics. Tax breaks for the rich, tax breaks for 
corporations, and the former Speaker even said: If trickle-down creates 
jobs, that would be good. If it doesn't, so be it. That is the free 
market.
  As Republicans head to the White House for their victory lap, 
hopefully they won't trip over the wheelchair of

[[Page 20412]]

Ady Barkan and other Americans with preexisting conditions.
  I caution them not to trip over the wheelchair of Simon Hatcher and 
other children with severe medical needs. They will be in the path of 
your victory lap.
  Don't trip over the sisters and brothers and mothers and fathers who 
tend to the health and well-being of their sick children and their 
siblings and who will not stop fighting to protect them.
  I told you yesterday in a public forum:

       I caution you not to get in the way of a mother and father 
     of a child with special needs and disabilities or extreme 
     medical conditions. They will do anything to protect that 
     child, and they notice what you are doing here.

  As you are on this victory lap, you will probably have to put on 
earphones so you can block out the pleas of faith leaders speaking up 
for hardworking American families.
  I know the Republicans want to talk so they can't hear the truth 
about their bill, but the American people won't forget the false 
representations you have made. They won't forget how loudly you cheered 
when you hurt their families, their children with special needs, their 
families struggling to attain some financial stability.
  And why? These people say to me: How could they be so cruel as to put 
the health provision in this bill that would possibly eliminate 13 
million people from the rolls of health insurance? How could they do 
that? Why did they do that?
  Why? The answer is always the same: to give them room to give tax 
breaks to the wealthiest people in our country and to corporate 
America, unpaid for, permanently.
  Our distinguished colleague from Massachusetts will show his credit 
card again today. They are putting this bill on a credit card that our 
children are going to have to pay for, robbing from their future.
  This holiday they are talking about giving people a Christmas 
present? Well, Joe Sixpack, whom the President said he was there to 
help, and I hope that that is true, Joe Sixpack will be delivering the 
champagne to their parties. That is how this is. This isn't about 
anything better for working class families. This is about champagne 
glasses clinking and wealthy families across the country.
  I don't begrudge them their success or their wealth or their 
achievement. I just don't want to see it at the exploitation of 
America's working families.
  Shame on you for voting for this outrageous theft from the American 
middle class.
  Mr. Speaker, once again, I urge my colleagues to do the right thing 
in this people's House and vote ``no'' on behalf of the American 
people.
  The SPEAKER pro tempore. Members are reminded to direct their remarks 
to the Chair.
  Mr. BRADY of Texas. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, we hear a lot of false claims these days by opponents of 
tax reform. We hear that this isn't relief for the middle class, that 
people will see their taxes increase. But the Tax Policy Center, the 
most liberal economic group there is, just grudgingly admitted 
yesterday that 90 percent of Americans will see real tax cuts in this 
Tax Cuts and Jobs Act. In fact, the only ones who won't are the one-
tenth of 1 percent who could.
  We hear today about betrayal. Well, let's talk about that.
  This tax reform bill doubles the child tax credit and expands it to 
nearly four times as many Americans, helping them with the expensive 
costs of childcare. Democrats oppose helping our parents raise their 
children. That is betrayal.

                              {time}  1215

  In this tax reform bill, we increase the amount of medical expenses 
Americans can write off--medical expenses driven up by ObamaCare. 
Democrats oppose helping families write off these costs. That is 
betrayal.
  Now we are expanding the number of Americans who can, and how much, 
give in charity to our churches and to their causes. Democrats oppose 
helping people give to the community and to the causes they believe in. 
That is betrayal.
  In this bill, we, for the first time, allow families who are saving 
for their kids' future to be able to use that and transfer it to the 
new ABLE accounts because their child has special needs and may need 
help throughout their life. Democrats oppose letting families save for 
their disabled children's future. That is betrayal.
  Then we hear over and over again how some stand for small business, 
our Main Street businesses. Republicans, for the first time ever, 
provide a 20 percent deduction for our Main Street and small businesses 
across America. Democrats oppose helping our Main Street businesses. 
That is betrayal.
  For too long, we have watched our jobs move overseas. This changes. 
This tax cut bill brings those jobs back and, more importantly, allows 
our companies, when they compete and win around the world, to bring 
those dollars back to be reinvested in our communities, in jobs, in 
manufacturing, and in research. Democrats oppose bringing jobs back to 
America and bringing those dollars back to reinvest in our community. 
Mr. Speaker, that is betrayal.
  At the end of the day, we have a choice. Do we give back to families, 
parents, small businesses, and to America the hope and opportunity of a 
new economy driven by what is important to them, not what is important 
to special interests in Washington, D.C.?
  That is what this bill is all about.
  Mr. Speaker, I reserve the balance of my time.
  Mr. NEAL. Mr. Speaker, I yield myself 1 minute.
  Mr. Speaker, the President just said in the last few minutes that the 
most important part of this legislation is the corporate tax cuts.
  Stop the nonsense that you are doing this for the middle class.
  In the 20 hours that have elapsed, Mr. Speaker, since we last had 
this debate, we were promised a number of things. The only thing they 
left out was that this tax bill was going to stem the tides, take us to 
Mars tomorrow, and the Cleveland Browns were going to win the Super 
Bowl.
  The certainty of what they are telling us--if the stockmarket goes 
up, then they did it. The stockmarket has been going up since March of 
2009. They talk about economic growth. Economic growth has now 
proceeded for 88 straight months. They keep telling us the rocket is 
about to launch because of this tax bill.
  Do you know what is great about this, Mr. Speaker?
  Reporters outside are starting to ask: Are you going to help them out 
if all of these things don't occur in the way they have said they are 
going to occur?
  I said: After the appropriate period of review.
  Mr. Speaker, I reserve the balance of my time.
  Mr. BRADY of Texas. Mr. Speaker, I reserve the balance of my time.
  Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from 
Maryland (Mr. Hoyer), who is the Democratic whip.
  Mr. HOYER. Mr. Speaker, the other thing that the chairman did not say 
is that, after your last round of tax cuts, we had the deepest 
recession anybody in this body has experienced, starting in December 
2007, when you had the Presidency, the House, and the Senate. You are 
at it again.
  Mr. Speaker, I rise in sadness and disappointment that the House 
passed such an irresponsible, dangerous, and debt-exploding legislation 
yesterday. We should be better than this. We should be more responsible 
than this.
  This bill gives 83 percent of its benefits to just 1 percent of the 
richest Americans.
  Why didn't we have it reversed and give 83 percent to the people you 
talk about, Mr. Chairman?
  It takes 13 million people off their health insurance coverage and it 
raises the deficit by $1.5 trillion.
  There can be little doubt that the majority party is fixated on 
cutting taxes for the richest in our country.
  Defeat this bill. Do right by the American people.

[[Page 20413]]


  Mr. BRADY of Texas. Mr. Speaker, I yield myself 1 minute.
  Mr. Speaker, let's talk deficits. Our Democrat opponents just hate 
the thought that we would give Americans back what they earned.
  In 2009, when President Obama lifted the national debt by $1.6 
trillion--more than this tax bill--they cheered. In the next year, when 
President Obama raised the national debt by almost $2 trillion in 1 
year, they cheered. Three more times, President Obama and Democrats 
raised our national debt more than $1 trillion every year. And now--
now--they oppose it.
  Why?
  Because that was about Washington spending your money. This is about 
giving it back to the American people, and now, suddenly, you object.
  Two trillion dollars of deficit in 1 year.
  Mr. Speaker, I reserve the balance of my time.
  Mr. NEAL. Mr. Speaker, I yield 30 seconds to the gentleman from 
Michigan (Mr. Levin), who is the longest-serving member of the Ways and 
Means Committee.
  Mr. LEVIN. Mr. Speaker, if you will listen, this bill is trickle-down 
at its worst. Except for the very wealthy trickle, it is, at best, a 
trickle; and for millions, not even that; and for the economy at large, 
a discredited theory.
  It is a deficit time bomb.
  The Speaker said to the middle class: Don't worry, the expiring tax 
cuts will surely be extended.
  That means the real deficit from this bill is $2.5 trillion, a 
humongous deficit wrapped in your hypocrisy--in your hypocrisy.
  The SPEAKER pro tempore. Members are again reminded that they should 
address their remarks to the Chair.
  Mr. BRADY of Texas. Mr. Speaker, I yield 1 minute to the gentleman 
from Kentucky (Mr. Barr).
  Mr. BARR. Mr. Speaker, I rise today to applaud the great work of the 
chairman of the Ways and Means Committee, my good friend from Texas 
(Mr. Brady) for his good work to overhaul America's Tax Code to deliver 
historic tax relief for workers, families, and job creators.
  I resent the rhetoric from some of my friends on the other side of 
the aisle who talk about this as hurting disabled families. I am the 
brother of a disabled sister, and I am voting for this bill because it 
helps families with loved ones with disabilities, like expanding the 
ABLE Act.
  I thank Chairman Brady for working with me and others to address a 
provision in the Tax Cuts and Jobs Act, which would negatively impact 
work-study colleges, such as Berea College in my district.
  The gentleman has fulfilled his commitment to me to fix this problem 
in the conference committee for work-study colleges and other small 
schools so that their endowments would be exempt from the excise tax on 
large college endowments.
  Regrettably, last night, Senate Democrats used procedural rules to 
insist that this exemption be stripped out of the final conference 
report. It is unfortunate that they put partisan politics ahead of 
ensuring that students--many of whom are low-income and first-
generation college students--at work-study colleges would continue to 
be able to receive a tuition-free education.
  The SPEAKER pro tempore. The time of the gentleman has expired.
  Mr. BRADY of Texas. Mr. Speaker, I yield an additional 30 seconds to 
the gentleman from Kentucky.
  Mr. BARR. Mr. Speaker, these are first-generation college students 
who receive a tuition-free education.
  I know that Chairman Brady shares my commitment and that of Chairman 
Rogers, Senator McConnell, and others to make sure that Berea College 
and other work-study colleges continue their important mission.
  Accordingly, I ask the gentleman's commitment to work with me to 
permanently exempt work-study colleges from the excise tax on endowment 
income in a timely manner, in the tax extenders, or another appropriate 
legislative vehicle as soon as possible.
  Mr. BRADY of Texas. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I thank Mr. Barr for his leadership. The gentleman is 
correct, Senate Democrats stripped this out. I am committed to working 
with the gentleman to find a permanent solution to this problem as soon 
as possible.
  Mr. Speaker, I reserve the balance of my time.
  Mr. NEAL. Mr. Speaker, I yield 30 seconds to the gentleman from 
Georgia (Mr. Lewis), who is an extraordinary man. Our friend is the 
ranking member of the Oversight Subcommittee.
  Mr. LEWIS of Georgia. Mr. Speaker, yesterday, taxpayers stood up and 
spoke out against Republicans lining the pockets of their donors by any 
means necessary.
  Did you hear their cries? Can you feel their pain?
  You did not, Mr. Speaker. You chose to turn a deaf ear and a blind 
eye to their hopes and their dreams.
  This bill is a shame and a disgrace.
  Mr. Speaker, I urge each of you to be on the side of the people, on 
the side of history, and to vote against this bill.
  Mr. BRADY of Texas. Mr. Speaker, I reserve the balance of my time.
  Mr. NEAL. Mr. Speaker, I yield 30 seconds to the gentleman from Texas 
(Mr. Doggett), who is a valued member of the Ways and Means Committee 
and the ranking member of the Tax Policy Subcommittee.
  Mr. DOGGETT. Mr. Speaker, we are here solely because of Republican 
blunders. Hardly the first blunder. Many more blunders will need 
correcting from this trumped-up partisan bill.
  If President Trump blunders into signing it today, it will trigger 
$25 billion in Medicare cuts.
  This sad bill is left without any name. Like other towers, this 
towering monstrosity should be called ``Trump''-the ``Trump Inequality 
Act,'' the ``Trump Family Enrichment Act,'' or perhaps just call it the 
``Whopper'' because it is a lie wrapped in lies.
  The truth will eventually catch up with these lies.
  Mr. BRADY of Texas. Mr. Speaker, I reserve the balance of my time.
  Mr. NEAL. Mr. Speaker, I yield 30 seconds to the gentleman from 
California (Mr. Thompson), who is a Vietnam veteran and a distinguished 
member of the Ways and Means Committee.
  Mr. THOMPSON of California. Mr. Speaker, this is one of the most 
important bills that any of us will ever vote on--no hearings, no 
expert witnesses--and now we get 30 seconds on the floor to debate it.
  So let me just use my 30 seconds to say that this is a bad bill for 
working families. It is going to cause middle class working families to 
pay more in taxes. It is going to strap our citizens with $2.3 trillion 
more of national debt. I ask for a ``no'' vote.
  Mr. BRADY of Texas. Mr. Speaker, I reserve the balance of my time.
  Mr. NEAL. Mr. Speaker, I yield 1 minute to the gentleman from New 
York (Mr. Crowley), who is the chairman of the Democratic Caucus and a 
valued member of the Ways and Means Committee.
  Mr. CROWLEY. Mr. Speaker, a revote--a revote--within less than 24 
hours of original passage. This proves that this bill is rotten to its 
core.
  But here is what the Republicans aren't going to fix:
  They didn't fix the fact that this bill won't provide economic 
security to hardworking families.
  They didn't fix the fact that this bill will subsidize mansions for 
the wealthy, not renters or first-time home buyers.
  They didn't fix the fact that it won't help families save for 
education or their retirement.
  They didn't fix the fact that it will saddle our grandchildren with 
$2 trillion of debt.
  Mr. Speaker, this bill is not an investment in hardworking men and 
women or Americans. In fact, it rips healthcare from 13 million 
Americans. It is an investment in the GOP's base--corporate special 
interests--the wealthiest among the wealthiest, and the entire Trump 
empire. This bill is a political calculation they think will get them a 
win on election day.
  But be warned: Americans are fed up and fired up. They know their 
cronies

[[Page 20414]]

are laughing all the way to the bank. But the American people are 
organizing all the way to November.
  Mr. BRADY of Texas. Mr. Speaker, I reserve the balance of my time.
  Mr. NEAL. Mr. Speaker, I yield 30 seconds to the gentleman from 
Illinois (Mr. Danny K. Davis), who is a champion of any and all things 
Chicago.
  Mr. DANNY K. DAVIS of Illinois. Mr. Speaker, think of Robin Hood in 
reverse: take from the poor and give to the rich.
  When you take away social safety net programs and when you take away 
Medicare and Medicaid, then it reminds me of Marie Antoinette. When the 
people had no bread, she said: Let them eat cake.
  I was opposed to this before it was released, I was opposed 
yesterday, I will be opposed tomorrow, and I will be opposed next week. 
It is no good for the American people.
  Mr. BRADY of Texas. Mr. Speaker, I reserve the balance of my time.
  Mr. NEAL. Mr. Speaker, might I inquire as to how much time is 
remaining?
  The SPEAKER pro tempore. The gentleman from Massachusetts has 3\1/2\ 
minutes remaining. The gentleman from Texas has 1 minute remaining.
  Mr. NEAL. Mr. Speaker, I am prepared to close on this side, and I 
yield myself the balance of my time.
  Mr. Speaker, so in 1 month we have taken the entire revenue system of 
the United States without hearing from one expert witness, without 
having had one public hearing, without using any precedent, and we 
changed the entire tax system of the country, tilting it clearly to the 
people at the very top.

                              {time}  1230

  When they say, as they certainly will, ``We have been doing hearings 
for 5 years,'' we never had one hearing on this legislation. Not one. 
We did not seek testimony from one witness in the conference committee. 
We got to offer opening statements and no amendments. There was no 
chance for any input on our side.
  More than anything else, this is a missed opportunity. This was a 
missed chance to take a system that we all know to have fallen into 
competitive failure across the globe. But instead, they decided to go 
it alone.
  So here is the way you want to think of this, for those of you who 
are following this debate:
  They are borrowing $2.3 trillion for the purpose of cutting the top 
tax bracket from 39.6 percent to 37 percent and calling that middle 
class tax relief;
  They are doubling the exemption on the estate tax to $22 million and 
calling that middle class tax relief;
  They are eliminating the alternative minimum tax for people at the 
very top and calling it middle class tax relief.
  By the 10th year of this tax proposal, 83 percent of the benefit 
accrues to the people at the very top of our economic system. That is 
not in dispute.
  They say things like: Well, in 5 years, we are going to correct this 
measure. Then they talked about the idea that somehow this was about 
simplicity. When you get into the phase-ins and the phaseouts, you are 
all going to pass out from trying to read this tax proposal.
  The complexity they add to the system is unparalleled, all to secure 
a tax cut for people at the top.
  So here we are in the holiday season, and they are telling us, by the 
way, that if we just borrow this money, everything is going to be fine.
  What did they say about borrowing when Bill Clinton was President? 
What did they say about borrowing when Barack Obama was President?
  They lectured us, day in and day out, in an unyielding manner, even 
though the economic performance of Clinton and Obama outweighed the two 
Republican Presidents in between.
  So here is the game plan for the holiday season. Do you know what the 
holiday hangover on your credit card is? People go out and use their 
credit cards, and they figure out all year how to try to pay for it.
  It is going to take you more than 10 years to try to pay for this, 
all upon the spurious notion that they guarantee economic growth, as 
the President said, by the way, that is going to exceed 6 percent. That 
is 6 percent.
  They are telling us that the stock market has gone up because of 
them, even though it has gone up since March of 2009. They are telling 
us now that this is going to spur unparalleled economic growth, even 
though the economy has been growing for 88 straight months, all on the 
credit card for the American people.
  Mr. Speaker, this is the worst piece of legislation that has come 
from the House in the 29 years that I have served here, and I yield 
back the balance of my time.
  Mr. BRADY of Texas. Mr. Speaker, I yield myself the balance of my 
time.
  Mr. Speaker, I say to my Democratic colleagues: The worst bill in 29 
years? With ObamaCare, don't sell yourselves short.
  Today, we have a choice to make. We can either stick with the status 
quo--we just heard it--or we can take bold action to overhaul this 
broken Tax Code and restore hope, opportunity, and prosperity to 
Americans.
  Our choice is clear, and I have made mine. I will vote to send this 
bill to President Trump's desk to get real tax reform done for the 
American people for the first time in 31 years. We will deliver for the 
American people.
  Mr. Speaker, I encourage my colleagues to join me in support of this 
bill, and I yield back the balance of my time.
  The SPEAKER pro tempore. All time for debate has expired.
  Pursuant to House Resolution 668, the previous question is ordered on 
the motion to concur.
  The question is on the motion to concur by the gentleman from Texas 
(Mr. Brady).
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.
  Mr. NEAL. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, this 15-
minute vote on the motion to concur will be followed by a 5-minute vote 
on suspending the rules and passing H.R. 1159.
  The vote was taken by electronic device, and there were--yeas 224, 
nays 201, not voting 7, as follows:

                             [Roll No. 699]

                               YEAS--224

     Abraham
     Aderholt
     Allen
     Amash
     Amodei
     Arrington
     Babin
     Bacon
     Banks (IN)
     Barletta
     Barr
     Barton
     Bergman
     Biggs
     Bilirakis
     Bishop (MI)
     Bishop (UT)
     Black
     Blackburn
     Blum
     Bost
     Brady (TX)
     Brat
     Bridenstine
     Brooks (IN)
     Buchanan
     Buck
     Bucshon
     Budd
     Burgess
     Byrne
     Calvert
     Carter (GA)
     Carter (TX)
     Chabot
     Cheney
     Coffman
     Cole
     Collins (GA)
     Collins (NY)
     Comer
     Comstock
     Conaway
     Cook
     Costello (PA)
     Cramer
     Crawford
     Culberson
     Curbelo (FL)
     Curtis
     Davidson
     Davis, Rodney
     Denham
     Dent
     DeSantis
     DesJarlais
     Diaz-Balart
     Duffy
     Duncan (SC)
     Duncan (TN)
     Dunn
     Emmer
     Estes (KS)
     Farenthold
     Ferguson
     Fitzpatrick
     Fleischmann
     Flores
     Fortenberry
     Foxx
     Gaetz
     Gallagher
     Garrett
     Gianforte
     Gibbs
     Gohmert
     Goodlatte
     Gosar
     Gowdy
     Granger
     Graves (GA)
     Graves (LA)
     Graves (MO)
     Griffith
     Grothman
     Guthrie
     Handel
     Harper
     Harris
     Hartzler
     Hensarling
     Herrera Beutler
     Hice, Jody B.
     Higgins (LA)
     Hill
     Holding
     Hollingsworth
     Hudson
     Huizenga
     Hultgren
     Hunter
     Hurd
     Jenkins (KS)
     Jenkins (WV)
     Johnson (LA)
     Johnson (OH)
     Johnson, Sam
     Jordan
     Joyce (OH)
     Katko
     Kelly (MS)
     Kelly (PA)
     King (IA)
     Kinzinger
     Knight
     Kustoff (TN)
     Labrador
     LaHood
     LaMalfa
     Lamborn
     Latta
     Lewis (MN)
     Long
     Loudermilk
     Love
     Lucas
     Luetkemeyer
     MacArthur
     Marchant
     Marino
     Marshall
     Massie
     Mast
     McCarthy
     McCaul
     McClintock
     McHenry
     McKinley
     McMorris Rodgers
     McSally
     Meadows
     Meehan
     Messer
     Mitchell
     Moolenaar
     Mooney (WV)
     Mullin
     Newhouse
     Noem
     Norman
     Nunes
     Olson
     Palazzo
     Palmer
     Paulsen
     Pearce
     Perry
     Pittenger
     Poe (TX)
     Poliquin
     Posey
     Ratcliffe
     Reed
     Reichert
     Rice (SC)
     Roby
     Roe (TN)
     Rogers (AL)
     Rogers (KY)
     Rokita
     Rooney, Francis
     Rooney, Thomas J.
     Ros-Lehtinen
     Roskam
     Ross
     Rothfus
     Rouzer
     Royce (CA)
     Russell
     Rutherford
     Ryan (WI)
     Sanford
     Scalise
     Schweikert
     Scott, Austin
     Sensenbrenner
     Sessions
     Shimkus
     Shuster
     Simpson
     Smith (MO)
     Smith (NE)
     Smucker

[[Page 20415]]


     Stewart
     Stivers
     Taylor
     Tenney
     Thompson (PA)
     Thornberry
     Tiberi
     Tipton
     Trott
     Turner
     Upton
     Valadao
     Wagner
     Walberg
     Walden
     Walker
     Walorski
     Walters, Mimi
     Weber (TX)
     Webster (FL)
     Wenstrup
     Westerman
     Williams
     Wilson (SC)
     Wittman
     Womack
     Woodall
     Yoder
     Yoho
     Young (AK)
     Young (IA)

                               NAYS--201

     Adams
     Aguilar
     Barragan
     Bass
     Beatty
     Bera
     Beyer
     Bishop (GA)
     Blumenauer
     Blunt Rochester
     Bonamici
     Boyle, Brendan F.
     Brady (PA)
     Brown (MD)
     Brownley (CA)
     Bustos
     Butterfield
     Capuano
     Carbajal
     Cardenas
     Carson (IN)
     Cartwright
     Castor (FL)
     Castro (TX)
     Chu, Judy
     Cicilline
     Clark (MA)
     Clarke (NY)
     Clay
     Cleaver
     Clyburn
     Cohen
     Connolly
     Cooper
     Correa
     Costa
     Courtney
     Crist
     Crowley
     Cuellar
     Cummings
     Davis (CA)
     Davis, Danny
     DeFazio
     DeGette
     Delaney
     DeLauro
     DelBene
     Demings
     DeSaulnier
     Deutch
     Dingell
     Doggett
     Donovan
     Doyle, Michael F.
     Ellison
     Engel
     Eshoo
     Espaillat
     Esty (CT)
     Evans
     Faso
     Foster
     Frankel (FL)
     Frelinghuysen
     Fudge
     Gabbard
     Gallego
     Garamendi
     Gomez
     Gonzalez (TX)
     Gottheimer
     Green, Al
     Green, Gene
     Grijalva
     Gutierrez
     Hanabusa
     Hastings
     Heck
     Higgins (NY)
     Himes
     Hoyer
     Huffman
     Issa
     Jackson Lee
     Jayapal
     Jeffries
     Johnson (GA)
     Johnson, E. B.
     Jones
     Kaptur
     Keating
     Kelly (IL)
     Khanna
     Kihuen
     Kildee
     Kilmer
     Kind
     King (NY)
     Krishnamoorthi
     Kuster (NH)
     Lance
     Langevin
     Larsen (WA)
     Larson (CT)
     Lawrence
     Lawson (FL)
     Lee
     Levin
     Lewis (GA)
     Lieu, Ted
     Lipinski
     LoBiondo
     Loebsack
     Lofgren
     Lowenthal
     Lowey
     Lujan Grisham, M.
     Lujan, Ben Ray
     Lynch
     Maloney, Carolyn B.
     Maloney, Sean
     Matsui
     McCollum
     McEachin
     McGovern
     McNerney
     Meeks
     Meng
     Moore
     Moulton
     Murphy (FL)
     Nadler
     Neal
     Nolan
     Norcross
     O'Halleran
     O'Rourke
     Pallone
     Panetta
     Pascrell
     Payne
     Pelosi
     Perlmutter
     Peters
     Peterson
     Pingree
     Polis
     Price (NC)
     Quigley
     Raskin
     Rice (NY)
     Richmond
     Rohrabacher
     Rosen
     Roybal-Allard
     Ruiz
     Ruppersberger
     Rush
     Ryan (OH)
     Sanchez
     Sarbanes
     Schakowsky
     Schiff
     Schneider
     Schrader
     Scott (VA)
     Scott, David
     Serrano
     Sewell (AL)
     Shea-Porter
     Sherman
     Sinema
     Sires
     Slaughter
     Smith (NJ)
     Smith (WA)
     Soto
     Speier
     Stefanik
     Suozzi
     Swalwell (CA)
     Takano
     Thompson (CA)
     Titus
     Tonko
     Torres
     Tsongas
     Vargas
     Veasey
     Vela
     Velazquez
     Visclosky
     Walz
     Wasserman Schultz
     Waters, Maxine
     Watson Coleman
     Welch
     Wilson (FL)
     Yarmuth
     Zeldin

                             NOT VOTING--7

     Brooks (AL)
     Kennedy
     Napolitano
     Pocan
     Renacci
     Smith (TX)
     Thompson (MS)

                              {time}  1255

  Mr. COSTELLO of Pennsylvania changed his vote from ``nay'' to 
``yea.''
  So the motion to concur was agreed to.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.
  Stated against:
  Mrs. NAPOLITANO. Mr. Speaker, I was absent during rollcall vote No. 
699 due to the death of my spouse. Had I been present, I would have 
voted ``Nay'' on the Motion to Concur in the Senate Amendment to H.R. 
1, the Tax Cuts and Jobs Act.

                          ____________________