[House Report 116-379]
[From the U.S. Government Publishing Office]


116th Congress   }                                    {        Report
                        HOUSE OF REPRESENTATIVES
 2nd Session     }                                    {       116-379
_______________________________________________________________________

                                     

                                     

         TAXPAYER CERTAINTY AND DISASTER TAX RELIEF ACT OF 2019

                               ----------                              

                              R E P O R T

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                                   on

                               H.R. 3301

                             together with

                            DISSENTING VIEWS

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                     














116th Congress   }                                    {        Report
                        HOUSE OF REPRESENTATIVES
 2nd Session     }                                    {       116-379
_______________________________________________________________________

                                     

                                     

         TAXPAYER CERTAINTY AND DISASTER TAX RELIEF ACT OF 2019

                               __________

                              R E P O R T

                                 of the

                      COMMITTEE ON WAYS AND MEANS

                        HOUSE OF REPRESENTATIVES

                                   on

                               H.R. 3301

                             together with

                            DISSENTING VIEWS

 
 
 
 
 
          [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





                                     
January 21, 2020.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed
              
              
                               _______

                      U.S. GOVERNMENT PUBLISHING OFFICE
                      
39-389                     WASHINGTON : 2020 
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
                            C O N T E N T S

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     TAXPAYER CERTAINTY AND DISASTER TAX RELIEF ACT OF 2019 REPORT....1
 I. SUMMARY AND BACKGROUND...........................................16
        A. Purpose and Summary...................................    16
        B. Background and Need for Legislation...................    16
        C. Legislative History...................................    17
II. EXPLANATION OF THE BILL..........................................17
    TITLE I--EXTENSION OF CERTAIN EXPIRING PROVISIONS............    17
        A. Tax Relief and Support for Families and Individuals...    17
            1. Exclusion from gross income of discharge of 
                qualified principal residence indebtedness (sec. 
                101 of the bill and sec. 108(a)(1)(E) of the 
                Code)............................................    17
            2. Treatment of mortgage insurance premiums as 
                qualified residence interest (sec. 102 of the 
                bill and sec. 163(h) of the Code)................    19
            3. Reduction in medical expense deduction floor (sec. 
                103 of the bill and sec. 213 of the Code)........    20
            4. Deduction of qualified tuition and related 
                expenses (sec. 104 of the bill and sec. 222 of 
                the Code)........................................    21
            5. Black lung disability trust fund excise tax (sec. 
                105 of the bill and sec. 4121 of the Code).......    23
        B. Incentives for Employment, Economic Growth, and 
          Community Development..................................    23
            1. Indian employment tax credit (sec. 111 of the bill 
                and sec. 45A of the Code)........................    23
            2. Railroad track maintenance credit (sec. 112 of the 
                bill and sec. 45G of the Code)...................    25
            3. Mine rescue team training credit (sec. 113 of the 
                bill and sec. 45N of the Code)...................    28
            4. Seven-year recovery period for motorsports 
                entertainment complexes (sec. 114 of the bill and 
                sec. 168(i)(15) of the Code).....................    29
            5. Accelerated depreciation for business property on 
                Indian reservations (sec. 115 of the bill and 
                sec. 168(j) of the Code).........................    31
            6. Expensing rules for certain productions (sec. 116 
                of the bill and sec. 181 of the Code)............    32
            7. Empowerment zone tax incentives (sec. 117 of the 
                bill and secs. 1391, 1394, 1396, 1397A, and 1397B 
                of the Code).....................................    35
            8. American Samoa economic development credit (sec. 
                118 of the bill).................................    41
        C. Incentives for Energy Production, Efficiency, and 
          Green Economy Jobs.....................................    43
            1. Biodiesel and renewable diesel (sec. 121 of the 
                bill and sec. 40A of the Code)...................    43
            2. Second generation biofuel producer credit (sec. 
                122 of the bill and sec. 40 of the Code).........    46
            3. Nonbusiness energy property (sec. 123 of the bill 
                and sec. 25C of the Code)........................    47
            4. Qualified fuel cell motor vehicles (sec. 124 of 
                the bill and sec. 30B of the Code)...............    49
            5. Alternative fuel refueling property credit (sec. 
                125 of the bill and sec. 30C of the Code)........    49
            6. Extension of credit for electric motorcycles (sec. 
                126 of the bill and sec. 30D of the Code)........    50
            7. Credit for electricity produced from certain 
                renewable resources (sec. 127 of the bill and 
                sec. 45 of the Code).............................    51
            8. Energy-efficient homes credit (sec. 129 of the 
                bill and sec. 45L of the Code)...................    52
            9. Special allowance for second generation biofuel 
                plant property (sec. 130 of the bill and sec. 
                168(l) of the Code)..............................    53
            10. Energy-efficient commercial buildings deduction 
                (sec. 131 of the bill and sec. 179D of the Code).    56
            11. Special rule for sales or dispositions to 
                implement FERC or State electric restructuring 
                policy for qualified electric utilities (sec. 132 
                of the bill and sec. 451(k) of the Code).........    58
            12. Extension and clarification of excise tax credits 
                relating to alternative fuels (sec. 133 of the 
                bill and secs. 6426 and 6427 of the Code)........    60
            13. Oil spill liability trust fund rate (sec. 134 of 
                the bill and sec. 4611 of the Code)..............    63
        D. Certain Provisions Expiring at the End of 2019........    64
            1. New markets tax credit (sec. 141 of the bill and 
                sec. 45D of the Code)............................    64
            2. Employer credit for paid family and medical leave 
                (sec. 142 of the bill and sec. 45S of the Code)..    66
            3. Work opportunity credit (sec. 143 of the bill and 
                sec. 51 of the Code).............................    68
            4. Certain provisions related to beer, wine, and 
                distilled spirits (sec. 144 of the bill and secs. 
                263A, 5001, 5041, 5051, 5212, 5415, and 5555 of 
                the Code)........................................    74
            5. Look-through rule for related controlled foreign 
                corporations (sec. 145 of the bill and sec. 
                954(c)(6) of the Code)...........................    81
            6. Credit for health insurance costs of eligible 
                individuals (sec. 146 of the bill and sec. 35 of 
                the Code)........................................    82
    TITLE II--ESTATE AND GIFT TAX................................    85
            1. Reduction of unified credit against estate tax 
                (sec. 201 of the bill and sec. 2010 of the Code).    85
    TITLE III--DISASTER TAX RELIEF...............................    87
            1. Definitions (sec. 301 of the bill)................    87
            2. Special disaster-related rules for use of 
                retirement funds (sec. 302 of the bill and sec. 
                72 of the Code)..................................    87
            3. Disaster related employment relief (sec. 303 of 
                the bill and sec. 38 of the Code)................    91
            4. Temporary suspension of limitation on charitable 
                contributions (sec. 304(a) of the bill and sec. 
                170 of the Code).................................    92
            5. Special rules for qualified disaster-related 
                personal casualty losses (sec. 304(b) of the bill 
                and sec. 165 of the Code)........................    95
            6. Special rule for determining earned income (sec. 
                304(c) of the bill and secs. 24 and 32 of the 
                Code)............................................    96
            7. Automatic extension of filing deadlines in case of 
                certain taxpayers affected by Federally declared 
                disasters (sec. 305 of the bill and sec. 7508A of 
                the Code.........................................    97
            8. Modification of the tax rate for the excise tax on 
                investment income of private foundations (sec. 
                306 of the bill and sec. 4940 of the Code).......   100
            9. Additional low-income housing tax credit 
                allocations for qualified 2017 and 2018 
                California disaster areas (sec. 307 of the bill 
                and sec. 42 of the Code).........................   101
            10. Treatment of certain possessions (sec. 308 of the 
                bill)............................................   103
III.VOTES OF THE COMMITTEE..........................................104

        A. Committee Estimate of Budgetary Effects...............   114
        B. Statement Regarding New Budget Authority and Tax 
          Expenditures Budget Authority..........................   121
        C. Cost Estimate Prepared by the Congressional Budget 
          Office.................................................   121
 V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......127
        A. Committee Oversight Findings and Recommendations......   127
        B. Statement of General Performance Goals and Objectives.   127
        C. Information Relating to Unfunded Mandates.............   127
        D. Applicability of House Rule XXI, Clause 5(b)..........   127
        E. Tax Complexity Analysis...............................   128
        F. Congressional Earmarks, Limited Tax Benefits, and 
          Limited Tariff Benefits................................   128
        G. Duplication of Federal Programs.......................   128
        H. Hearings..............................................   128
VI.  CHANGES IN EXISTING LAW MADE BY THE BILL.......................128
        A. Changes in Existing Law Proposed by the Bill..........   128

















116th Congress   }                                    {        Report
                        HOUSE OF REPRESENTATIVES
 2nd Session     }                                    {       116-379
======================================================================



 
         TAXPAYER CERTAINTY AND DISASTER TAX RELIEF ACT OF 2019

                                _______
                                

January 21, 2020.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Neal, from the Committee on Ways and Means, submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 3301]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 3301) to amend the Internal Revenue Code of 1986 to 
extend certain expiring provisions, to provide disaster relief, 
and for other purposes, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; ETC.

  (a) Short Title.--This Act may be cited as the ``Taxpayer Certainty 
and Disaster Tax Relief Act of 2019''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; etc.

           TITLE I--EXTENSION OF CERTAIN EXPIRING PROVISIONS

    Subtitle A--Tax Relief and Support for Families and Individuals

Sec. 101. Exclusion from gross income of discharge of qualified 
principal residence indebtedness.
Sec. 102. Treatment of mortgage insurance premiums as qualified 
residence interest.
Sec. 103. Reduction in medical expense deduction floor.
Sec. 104. Deduction of qualified tuition and related expenses.
Sec. 105. Black lung disability trust fund excise tax.

 Subtitle B--Incentives for Employment, Economic Growth, and Community 
                              Development

Sec. 111. Indian employment credit.
Sec. 112. Railroad track maintenance credit.
Sec. 113. Mine rescue team training credit.
Sec. 114. 7-year recovery period for motorsports entertainment 
complexes.
Sec. 115. Accelerated depreciation for business property on Indian 
reservations.
Sec. 116. Expensing rules for certain productions.
Sec. 117. Empowerment zone tax incentives.
Sec. 118. American Samoa economic development credit.

  Subtitle C--Incentives for Energy Production, Efficiency, and Green 
                              Economy Jobs

Sec. 121. Biodiesel and renewable diesel.
Sec. 122. Second generation biofuel producer credit.
Sec. 123. Nonbusiness energy property.
Sec. 124. Qualified fuel cell motor vehicles.
Sec. 125. Alternative fuel refueling property credit.
Sec. 126. 2-wheeled plug-in electric vehicle credit.
Sec. 127. Credit for electricity produced from certain renewable 
resources.
Sec. 128. Production credit for Indian coal facilities.
Sec. 129. Energy efficient homes credit.
Sec. 130. Special allowance for second generation biofuel plant 
property.
Sec. 131. Energy efficient commercial buildings deduction.
Sec. 132. Special rule for sales or dispositions to implement FERC or 
State electric restructuring policy for qualified electric utilities.
Sec. 133. Extension and clarification of excise tax credits relating to 
alternative fuels.
Sec. 134. Oil spill liability trust fund rate.

       Subtitle D--Certain Provisions Expiring at the End of 2019

Sec. 141. New markets tax credit.
Sec. 142. Employer credit for paid family and medical leave.
Sec. 143. Work opportunity credit.
Sec. 144. Certain provisions related to beer, wine, and distilled 
spirits.
Sec. 145. Look-thru rule for related controlled foreign corporations.
Sec. 146. Credit for health insurance costs of eligible individuals.

                     TITLE II--ESTATE AND GIFT TAX

Sec. 201. Reduction of unified credit against estate tax.

                     TITLE III--DISASTER TAX RELIEF

Sec. 301. Definitions.
Sec. 302. Special disaster-related rules for use of retirement funds.
Sec. 303. Employee retention credit for employers affected by qualified 
disasters.
Sec. 304. Other disaster-related tax relief provisions.
Sec. 305. Automatic extension of filing deadlines in case of certain 
taxpayers affected by Federally declared disasters.
Sec. 306. Modification of the tax rate for the excise tax on investment 
income of private foundations.
Sec. 307. Additional low-income housing credit allocations for 
qualified 2017 and 2018 California disaster areas.
Sec. 308. Treatment of certain possessions.

  (c) Amendment of 1986 Code.--Except as otherwise expressly provided, 
whenever in this Act an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Internal Revenue Code of 1986.

           TITLE I--EXTENSION OF CERTAIN EXPIRING PROVISIONS

    Subtitle A--Tax Relief and Support for Families and Individuals

SEC. 101. EXCLUSION FROM GROSS INCOME OF DISCHARGE OF QUALIFIED 
                    PRINCIPAL RESIDENCE INDEBTEDNESS.

  (a) In General.--Section 108(a)(1)(E) is amended by striking 
``January 1, 2018'' each place it appears and inserting ``January 1, 
2021''.
  (b) Conforming Amendment.--Section 108(h)(2) is amended by inserting 
``and determined without regard to the substitution described in 
section 163(h)(3)(F)(i)(II)'' after ``clause (ii) thereof''.
  (c) Effective Date.--The amendments made by this section shall apply 
to discharges of indebtedness after December 31, 2017.

SEC. 102. TREATMENT OF MORTGAGE INSURANCE PREMIUMS AS QUALIFIED 
                    RESIDENCE INTEREST.

  (a) In General.--Section 163(h)(3)(E)(iv)(I) is amended by striking 
``December 31, 2017'' and inserting ``December 31, 2020''.
  (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred after December 31, 2017.

SEC. 103. REDUCTION IN MEDICAL EXPENSE DEDUCTION FLOOR.

  (a) In General.--Section 213(f) is amended to read as follows:
  ``(f) Temporary Special Rule.--In the case of taxable years beginning 
before January 1, 2021, subsection (a) shall be applied with respect to 
a taxpayer by substituting `7.5 percent' for `10 percent'.''.
  (b) Alternative Minimum Tax.--Section 56(b)(1) 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 ending after December 31, 2018.

SEC. 104. DEDUCTION OF QUALIFIED TUITION AND RELATED EXPENSES.

  (a) In General.--Section 222(e) is amended by striking ``December 31, 
2017'' and inserting ``December 31, 2020''.
  (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 105. BLACK LUNG DISABILITY TRUST FUND EXCISE TAX.

  (a) In General.--Section 4121(e)(2)(A) is amended by striking 
``December 31, 2018'' and inserting ``December 31, 2020''.
  (b) Effective Date.--The amendment made by this section shall apply 
on and after the first day of the first calendar month beginning after 
the date of the enactment of this Act.

 Subtitle B--Incentives for Employment, Economic Growth, and Community 
                              Development

SEC. 111. INDIAN EMPLOYMENT CREDIT.

  (a) In General.--Section 45A(f) is amended by striking ``December 31, 
2017'' and inserting ``December 31, 2020''.
  (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 112. RAILROAD TRACK MAINTENANCE CREDIT.

  (a) In General.--Section 45G(f) is amended by striking ``January 1, 
2018'' and inserting ``January 1, 2021''.
  (b) Safe Harbor Assignments.--Any assignment, including related 
expenditures paid or incurred, under section 45G(b)(2) of the Internal 
Revenue Code of 1986 for a taxable year beginning on or after January 
1, 2018, and before January 1, 2019, shall be treated as effective as 
of the close of such taxable year if made pursuant to a written 
agreement entered into no later than 90 days following the date of the 
enactment of this Act.
  (c) Effective Date.--The amendment made by this section shall apply 
to expenditures paid or incurred during taxable years beginning after 
December 31, 2017.

SEC. 113. MINE RESCUE TEAM TRAINING CREDIT.

  (a) In General.--Section 45N(e) is amended by striking ``December 31, 
2017'' and inserting ``December 31, 2020''.
  (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 114. 7-YEAR RECOVERY PERIOD FOR MOTORSPORTS ENTERTAINMENT 
                    COMPLEXES.

  (a) In General.--Section 168(i)(15)(D) is amended by striking 
``December 31, 2017'' and inserting ``December 31, 2020''.
  (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after December 31, 2017.

SEC. 115. ACCELERATED DEPRECIATION FOR BUSINESS PROPERTY ON INDIAN 
                    RESERVATIONS.

  (a) In General.--Section 168(j)(9) is amended by striking ``December 
31, 2017'' and inserting ``December 31, 2020''.
  (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after December 31, 2017.

SEC. 116. EXPENSING RULES FOR CERTAIN PRODUCTIONS.

  (a) In General.--Section 181(g) is amended by striking ``December 31, 
2017'' and inserting ``December 31, 2020''.
  (b) Effective Date.--The amendment made by this section shall apply 
to productions commencing after December 31, 2017.

SEC. 117. EMPOWERMENT ZONE TAX INCENTIVES.

  (a) In General.--Section 1391(d)(1)(A)(i) is amended by striking 
``December 31, 2017'' and inserting ``December 31, 2020''.
  (b) Treatment of Certain Termination Dates Specified in 
Nominations.--In the case of a designation of an empowerment zone the 
nomination for which included a termination date which is 
contemporaneous with the date specified in subparagraph (A)(i) of 
section 1391(d)(1) of the Internal Revenue Code of 1986 (as in effect 
before the enactment of this Act), subparagraph (B) of such section 
shall not apply with respect to such designation if, after the date of 
the enactment of this section, the entity which made such nomination 
amends the nomination to provide for a new termination date in such 
manner as the Secretary of the Treasury (or the Secretary's designee) 
may provide.
  (c) Effective Date.--The amendment made by subsection (a) shall apply 
to taxable years beginning after December 31, 2017.

SEC. 118. AMERICAN SAMOA ECONOMIC DEVELOPMENT CREDIT.

  (a) In General.--Section 119(d) of division A of the Tax Relief and 
Health Care Act of 2006 is amended--
          (1) by striking ``January 1, 2018'' each place it appears and 
        inserting ``January 1, 2021'',
          (2) by striking ``first 12 taxable years'' in paragraph (1) 
        and inserting ``first 15 taxable years'',
          (3) by striking ``first 6 taxable years'' in paragraph (2) 
        and inserting ``first 9 taxable years'', and
          (4) by adding at the end the following flush sentence:
``In the case of a corporation described in subsection (a)(2), the 
Internal Revenue Code of 1986 shall be applied and administered without 
regard to the amendments made by section 401(d)(1) of the Tax Technical 
Corrections Act of 2018.''.
  (b) Conforming Amendment.--Section 119(e) of division A of the Tax 
Relief and Health Care Act of 2006 is amended by inserting ``(as in 
effect before its repeal)'' after ``section 199 of the Internal Revenue 
Code of 1986''.
  (c) Effective Date.--The amendments made by this section shall apply 
to taxable years beginning after December 31, 2017.

  Subtitle C--Incentives for Energy Production, Efficiency, and Green 
                              Economy Jobs

SEC. 121. BIODIESEL AND RENEWABLE DIESEL.

  (a) Income Tax Credit.--
          (1) In general.--Section 40A(g) is amended by striking 
        ``December 31, 2017'' and inserting ``December 31, 2020''.
          (2) Effective date.--The amendment made by this subsection 
        shall apply to fuel sold or used after December 31, 2017.
  (b) Excise Tax Incentives.--
          (1) Termination.--
                  (A) In general.--Section 6426(c)(6) is amended by 
                striking ``December 31, 2017'' and inserting ``December 
                31, 2020''.
                  (B) Payments.--Section 6427(e)(6)(B) is amended by 
                striking ``December 31, 2017'' and inserting ``December 
                31, 2020''.
          (2) Effective date.--The amendments made by this subsection 
        shall apply to fuel sold or used after December 31, 2017.
          (3) Special rule.--Notwithstanding any other provision of 
        law, in the case of any biodiesel mixture credit properly 
        determined under section 6426(c) of the Internal Revenue Code 
        of 1986 for the period beginning on January 1, 2018, and ending 
        with the close of the last calendar quarter beginning before 
        the date of the enactment of this Act, such credit shall be 
        allowed, and any refund or payment attributable to such credit 
        (including any payment under section 6427(e) of such Code) 
        shall be made, only in such manner as the Secretary of the 
        Treasury (or the Secretary's delegate) shall provide. Such 
        Secretary shall issue guidance within 30 days after the date of 
        the enactment of this Act providing for a one-time submission 
        of claims covering periods described in the preceding sentence. 
        Such guidance shall provide for a 180-day period for the 
        submission of such claims (in such manner as prescribed by such 
        Secretary) to begin not later than 30 days after such guidance 
        is issued. Such claims shall be paid by such Secretary not 
        later than 60 days after receipt. If such Secretary has not 
        paid pursuant to a claim filed under this subsection within 60 
        days after the date of the filing of such claim, the claim 
        shall be paid with interest from such date determined by using 
        the overpayment rate and method under section 6621 of such 
        Code.

SEC. 122. SECOND GENERATION BIOFUEL PRODUCER CREDIT.

  (a) In General.--Section 40(b)(6)(J)(i) is amended by striking 
``January 1, 2018'' and inserting ``January 1, 2021''.
  (b) Effective Date.--The amendment made by this section shall apply 
to qualified second generation biofuel production after December 31, 
2017.

SEC. 123. NONBUSINESS ENERGY PROPERTY.

  (a) In General.--Section 25C(g)(2) is amended by striking ``December 
31, 2017'' and inserting ``December 31, 2020''.
  (b) Technical Amendment.--Section 25C(d)(3) is amended--
          (1) by striking ``an energy factor of at least 2.0'' in 
        subparagraph (A) and inserting ``a Uniform Energy Factor of at 
        least 2.2'', and
          (2) by striking ``an energy factor'' in subparagraph (D) and 
        inserting ``a Uniform Energy Factor''.
  (c) Effective Date.--The amendments made by this section shall apply 
to property placed in service after December 31, 2017.

SEC. 124. QUALIFIED FUEL CELL MOTOR VEHICLES.

  (a) In General.--Section 30B(k)(1) is amended by striking ``December 
31, 2017'' and inserting ``December 31, 2020''.
  (b) Effective Date.--The amendment made by this section shall apply 
to property purchased after December 31, 2017.

SEC. 125. ALTERNATIVE FUEL REFUELING PROPERTY CREDIT.

  (a) In General.--Section 30C(g) is amended by striking ``December 31, 
2017'' and inserting ``December 31, 2020''.
  (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after December 31, 2017.

SEC. 126. 2-WHEELED PLUG-IN ELECTRIC VEHICLE CREDIT.

  (a) In General.--Section 30D(g)(3)(E)(ii) is amended by striking 
``January 1, 2018'' and inserting ``January 1, 2021''.
  (b) Effective Date.--The amendment made by this section shall apply 
to vehicles acquired after December 31, 2017.

SEC. 127. CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN RENEWABLE 
                    RESOURCES.

  (a) In General.--The following provisions of section 45(d) are each 
amended by striking ``January 1, 2018'' each place it appears and 
inserting ``January 1, 2021'':
          (1) Paragraph (2)(A).
          (2) Paragraph (3)(A).
          (3) Paragraph (4)(B).
          (4) Paragraph (6).
          (5) Paragraph (7).
          (6) Paragraph (9).
          (7) Paragraph (11)(B).
  (b) Extension of Election to Treat Qualified Facilities as Energy 
Property.--Section 48(a)(5)(C)(ii) is amended by striking ``January 1, 
2018 (January 1, 2020, in the case of any facility which is described 
in paragraph (1) of section 45(d))'' and inserting ``January 1, 2021''.
  (c) Application of Extension to Wind Facilities.--
          (1) In general.--Section 45(d)(1) is amended by striking 
        ``January 1, 2020'' and inserting ``January 1, 2021''.
          (2) Application of phaseout percentage.--Sections 45(b)(5)(C) 
        and 48(a)(5)(E)(iii) are each amended by striking ``and before 
        January 1, 2020,''.
  (d) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2018.

SEC. 128. PRODUCTION CREDIT FOR INDIAN COAL FACILITIES.

  (a) In General.--Section 45(e)(10)(A) is amended by striking ``12-
year period'' each place it appears and inserting ``15-year period''.
  (b) Effective Date.--The amendment made by this section shall apply 
to coal produced after December 31, 2017.

SEC. 129. ENERGY EFFICIENT HOMES CREDIT.

  (a) In General.--Section 45L(g) is amended by striking ``December 31, 
2017'' and inserting ``December 31, 2020''.
  (b) Effective Date.--The amendment made by this section shall apply 
to homes acquired after December 31, 2017.

SEC. 130. SPECIAL ALLOWANCE FOR SECOND GENERATION BIOFUEL PLANT 
                    PROPERTY.

  (a) In General.--Section 168(l)(2)(D) is amended by striking 
``January 1, 2018'' and inserting ``January 1, 2021''.
  (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after December 31, 2017.

SEC. 131. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

  (a) In General.--Section 179D(h) is amended by striking ``December 
31, 2017'' and inserting ``December 31, 2020''.
  (b) Effective Dates.--The amendment made by subsection (a) shall 
apply to property placed in service after December 31, 2017.

SEC. 132. SPECIAL RULE FOR SALES OR DISPOSITIONS TO IMPLEMENT FERC OR 
                    STATE ELECTRIC RESTRUCTURING POLICY FOR QUALIFIED 
                    ELECTRIC UTILITIES.

  (a) In General.--Section 451(k)(3) is amended by striking ``January 
1, 2018'' and inserting ``January 1, 2021''.
  (b) Effective Date.--The amendment made by this section shall apply 
to dispositions after December 31, 2017.

SEC. 133. EXTENSION AND CLARIFICATION OF EXCISE TAX CREDITS RELATING TO 
                    ALTERNATIVE FUELS.

  (a) Extension.--
          (1) In general.--Sections 6426(d)(5) and 6426(e)(3) are each 
        amended by striking ``December 31, 2017'' and inserting 
        ``December 31, 2020''.
          (2) Outlay payments for alternative fuels.--Section 
        6427(e)(6)(C) is amended by striking ``December 31, 2017'' and 
        inserting ``December 31, 2020''.
          (3) Special rule.--Notwithstanding any other provision of 
        law, in the case of any alternative fuel credit properly 
        determined under section 6426(d) of the Internal Revenue Code 
        of 1986 for the period beginning on January 1, 2018, and ending 
        with the close of the last calendar quarter beginning before 
        the date of the enactment of this Act, such credit shall be 
        allowed, and any refund or payment attributable to such credit 
        (including any payment under section 6427(e) of such Code) 
        shall be made, only in such manner as the Secretary of the 
        Treasury (or the Secretary's delegate) shall provide. Such 
        Secretary shall issue guidance within 30 days after the date of 
        the enactment of this Act providing for a one-time submission 
        of claims covering periods described in the preceding sentence. 
        Such guidance shall provide for a 180-day period for the 
        submission of such claims (in such manner as prescribed by such 
        Secretary) to begin not later than 30 days after such guidance 
        is issued. Such claims shall be paid by such Secretary not 
        later than 60 days after receipt. If such Secretary has not 
        paid pursuant to a claim filed under this subsection within 60 
        days after the date of the filing of such claim, the claim 
        shall be paid with interest from such date determined by using 
        the overpayment rate and method under section 6621 of such 
        Code.
          (4) Effective date.--The amendments made by this subsection 
        shall apply to fuel sold or used after December 31, 2017.
  (b) Clarification of Rules Regarding Alternative Fuel Mixture 
Credit.--
          (1) In general.--Paragraph (2) of section 6426(e) is amended 
        by striking ``mixture of alternative fuel'' and inserting 
        ``mixture of alternative fuel (other than a fuel described in 
        subparagraph (A), (C), or (F) of subsection (d)(2))''.
          (2) Effective date.--The amendment made by this section shall 
        apply to--
                  (A) fuel sold or used on or after the date of the 
                enactment of this Act, and
                  (B) fuel sold or used before such date of enactment, 
                but only to the extent that credits and claims of 
                credit under section 6426(e) of the Internal Revenue 
                Code of 1986 with respect to such sale or use have not 
                been paid or allowed as of such date.

SEC. 134. OIL SPILL LIABILITY TRUST FUND RATE.

  (a) In General.--Section 4611(f)(2) is amended by striking ``December 
31, 2018'' and inserting ``December 31, 2020''.
  (b) Effective Date.--The amendment made by this section shall apply 
on and after the first day of the first calendar month beginning after 
the date of the enactment of this Act.

       Subtitle D--Certain Provisions Expiring at the End of 2019

SEC. 141. NEW MARKETS TAX CREDIT.

  (a) In General.--Section 45D(f)(1) is amended by striking ``and'' at 
the end of subparagraph (F), by striking the period at the end of 
subparagraph (G) and inserting ``, and'', and by adding at the end the 
following new subparagraph:
                  ``(H) $5,000,000,000 for 2020.''.
  (b) Carryover of Unused Limitation.--Section 45D(f)(3) is amended by 
striking ``2024'' and inserting ``2025''.
  (c) Effective Date.--The amendments made by this section shall apply 
to calendar years beginning after December 31, 2019.

SEC. 142. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE.

  (a) In General.--Section 45S(i) is amended by striking ``December 31, 
2019'' and inserting ``December 31, 2020''.
  (b) Effective Date.--The amendment made by this section shall apply 
to wages paid in taxable years beginning after December 31, 2019.

SEC. 143. WORK OPPORTUNITY CREDIT.

  (a) In General.--Section 51(c)(4) is amended by striking ``December 
31, 2019'' and inserting ``December 31, 2020''.
  (b) Effective Date.--The amendment made by this section shall apply 
to individuals who begin work for the employer after December 31, 2019.

SEC. 144. CERTAIN PROVISIONS RELATED TO BEER, WINE, AND DISTILLED 
                    SPIRITS.

  (a) Exemption for Aging Process of Beer, Wine, and Distilled 
Spirits.--
          (1) In general.--Section 263A(f)(4)(B) is amended by striking 
        ``December 31, 2019'' and inserting ``December 31, 2020''.
          (2) Effective date.--The amendment made by this subsection 
        shall apply to interest costs paid or accrued after December 
        31, 2019.
  (b) Reduced Rate of Excise Tax on Beer.--
          (1) In general.--Paragraphs (1)(C) and (2)(A) of section 
        5051(a) are each amended by striking ``January 1, 2020'' and 
        inserting ``January 1, 2021''.
          (2) Effective date.--The amendments made by this subsection 
        shall apply to beer removed after December 31, 2019.
  (c) Transfer of Beer Between Bonded Facilities.--
          (1) In general.--Section 5414(b)(3) is amended by striking 
        ``December 31, 2019'' and inserting ``December 31, 2020''.
          (2) Effective date.--The amendment made by this subsection 
        shall apply to calendar quarters beginning after December 31, 
        2019.
  (d) Reduced Rate of Excise Tax on Certain Wine.--
          (1) In general.--Section 5041(c)(8)(A) is amended by striking 
        ``January 1, 2020'' and inserting ``January 1, 2021''.
          (2) Conforming amendment.--The heading of section 5041(c)(8) 
        is amended by striking ``Special rule for 2018 and 2019'' and 
        inserting ``Temporary special rule''.
          (3) Effective date.--The amendments made by this subsection 
        shall apply to wine removed after December 31, 2019.
  (e) Adjustment of Alcohol Content Level for Application of Excise 
Taxes.--
          (1) In general.--Paragraphs (1) and (2) of section 5041(b) 
        are each amended by striking ``January 1, 2020'' and inserting 
        ``January 1, 2021''.
          (2) Effective date.--The amendments made by this subsection 
        shall apply to wine removed after December 31, 2019.
  (f) Definition of Mead and Low Alcohol by Volume Wine.--
          (1) In general.--Section 5041(h)(3) is amended by striking 
        ``December 31, 2019'' and inserting ``December 31, 2020''.
          (2) Effective date.--The amendment made by this subsection 
        shall apply to wine removed after December 31, 2019.
  (g) Reduced Rate of Excise Tax on Certain Distilled Spirits.--
          (1) In general.--Section 5001(c)(4) is amended by striking 
        ``December 31, 2019'' and inserting ``December 31, 2020''.
          (2) Conforming amendment.--The heading of section 5001(c) is 
        amended by striking ``Reduced Rate for 2018 and 2019'' and 
        inserting ``Temporary Reduced Rate''.
          (3) Effective date.--The amendments made by this subsection 
        shall apply to distilled spirits removed after December 31, 
        2019.
  (h) Bulk Distilled Spirits.--
          (1) In general.--Section 5212 is amended by striking 
        ``January 1, 2020'' and inserting ``January 1, 2021''.
          (2) Effective date.--The amendment made by this subsection 
        shall apply to distilled spirits transferred in bond after 
        December 31, 2019.
  (i) Simplification of Rules Regarding Records, Statements, and 
Returns.--
          (1) In general.--Section 5555(a) is amended by striking 
        ``January 1, 2020'' and inserting ``January 1, 2021''.
          (2) Effective date.--The amendment made by this subsection 
        shall apply to calendar quarters beginning after December 31, 
        2019.

SEC. 145. LOOK-THRU RULE FOR RELATED CONTROLLED FOREIGN CORPORATIONS.

  (a) In General.--Section 954(c)(6)(C) is amended by striking 
``January 1, 2020'' and inserting ``January 1, 2021''.
  (b) Effective Date.--The amendment made by this section shall apply 
to taxable years of foreign corporations beginning after December 31, 
2019, and to taxable years of United States shareholders with or within 
which such taxable years of foreign corporations end.

SEC. 146. CREDIT FOR HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS.

  (a) In General.--Section 35(b)(1)(B) is amended by striking ``January 
1, 2020'' and inserting ``January 1, 2021''.
  (b) Effective Date.--The amendment made by this section shall apply 
to months beginning after December 31, 2019.

                     TITLE II--ESTATE AND GIFT TAX

SEC. 201. REDUCTION OF UNIFIED CREDIT AGAINST ESTATE TAX.

  (a) In General.--Section 2010(c)(3)(C) is amended by striking 
``January 1, 2026'' and inserting ``January 1, 2023''.
  (b) Effective Date.--The amendment made by this section shall apply 
to estates of decedents dying and gifts made after December 31, 2022.

                     TITLE III--DISASTER TAX RELIEF

SEC. 301. DEFINITIONS.

  For purposes of this title--
          (1) Qualified disaster area.--
                  (A) In general.--The term ``qualified disaster area'' 
                means any area with respect to which a major disaster 
                was declared, during the period beginning on January 1, 
                2018, and ending on the date which is 60 days after the 
                date of the enactment of this Act, by the President 
                under section 401 of the Robert T. Stafford Disaster 
                Relief and Emergency Assistance Act if the incident 
                period of the disaster with respect to which such 
                declaration is made begins on or before the date of the 
                enactment of this Act.
                  (B) Denial of double benefit.--Such term shall not 
                include the California wildfire disaster area (as 
                defined in section 20101 of subdivision 2 of division B 
                of the Bipartisan Budget Act of 2018).
          (2) Qualified disaster zone.--The term ``qualified disaster 
        zone'' means that portion of any qualified disaster area which 
        was determined by the President, during the period beginning on 
        January 1, 2018, and ending on the date which is 60 days after 
        the date of the enactment of this Act, to warrant individual or 
        individual and public assistance from the Federal Government 
        under the Robert T. Stafford Disaster Relief and Emergency 
        Assistance Act by reason of the qualified disaster with respect 
        to such disaster area.
          (3) Qualified disaster.--The term ``qualified disaster'' 
        means, with respect to any qualified disaster area, the 
        disaster by reason of which a major disaster was declared with 
        respect to such area.
          (4) Incident period.--The term ``incident period'' means, 
        with respect to any qualified disaster, the period specified by 
        the Federal Emergency Management Agency as the period during 
        which such disaster occurred (except that for purposes of this 
        title such period shall not be treated as beginning before 
        January 1, 2018, or ending after the date which is 30 days 
        after the date of the enactment of this Act).

SEC. 302. SPECIAL DISASTER-RELATED RULES FOR USE OF RETIREMENT FUNDS.

  (a) Tax-favored Withdrawals From Retirement Plans.--
          (1) In general.--Section 72(t) of the Internal Revenue Code 
        of 1986 shall not apply to any qualified disaster distribution.
          (2) Aggregate dollar limitation.--
                  (A) In general.--For purposes of this subsection, the 
                aggregate amount of distributions received by an 
                individual which may be treated as qualified 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 disaster distributions received by 
                        such individual for all prior taxable years.
                  (B) Treatment of plan distributions.--If a 
                distribution to an individual would (without regard to 
                subparagraph (A)) be a qualified disaster distribution, 
                a plan shall not be treated as violating any 
                requirement of the Internal Revenue Code of 1986 merely 
                because the plan treats such distribution as a 
                qualified 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.
                  (C) Controlled group.--For purposes of subparagraph 
                (B), 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.
                  (D) Special rule for individuals affected by more 
                than one disaster.--The limitation of subparagraph (A) 
                shall be applied separately with respect to 
                distributions made with respect to each qualified 
                disaster.
          (3) Amount distributed may be repaid.--
                  (A) In general.--Any individual who receives a 
                qualified 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 1 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.
                  (B) 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 subparagraph (A) with 
                respect to a qualified 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 disaster distribution in an 
                eligible rollover distribution (as defined in section 
                402(c)(4) of such Code) and as having transferred the 
                amount to the eligible retirement plan in a direct 
                trustee to trustee transfer within 60 days of the 
                distribution.
                  (C) Treatment of repayments of distributions from 
                iras.--For purposes of the Internal Revenue Code of 
                1986, if a contribution is made pursuant to 
                subparagraph (A) with respect to a qualified disaster 
                distribution from an individual retirement plan (as 
                defined by section 7701(a)(37) of such Code), then, to 
                the extent of the amount of the contribution, the 
                qualified 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.
          (4) Definitions.--For purposes of this subsection--
                  (A) Qualified disaster distribution.--Except as 
                provided in paragraph (2), the term ``qualified 
                disaster distribution'' means any distribution from an 
                eligible retirement plan made--
                          (i) on or after the first day of the incident 
                        period of a qualified disaster and before the 
                        date which is 180 days after the date of the 
                        enactment of this Act, and
                          (ii) to an individual whose principal place 
                        of abode at any time during the incident period 
                        of such qualified disaster is located in the 
                        qualified disaster area with respect to such 
                        qualified disaster and who has sustained an 
                        economic loss by reason of such qualified 
                        disaster.
                  (B) 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.
          (5) Income inclusion spread over 3-year period.--
                  (A) In general.--In the case of any qualified 
                disaster distribution, unless the taxpayer elects not 
                to have this paragraph 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.
                  (B) Special rule.--For purposes of subparagraph (A), 
                rules similar to the rules of subparagraph (E) of 
                section 408A(d)(3) of the Internal Revenue Code of 1986 
                shall apply.
          (6) Special rules.--
                  (A) 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 disaster 
                distributions shall not be treated as eligible rollover 
                distributions.
                  (B) Qualified disaster distributions treated as 
                meeting plan distribution requirements.--For purposes 
                the Internal Revenue Code of 1986, a qualified 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 such 
                Code.
  (b) Recontributions of Withdrawals for Home Purchases.--
          (1) Recontributions.--
                  (A) In general.--Any individual who received a 
                qualified distribution may, during the applicable 
                period, make 1 or more contributions in an aggregate 
                amount not to exceed the amount of such qualified 
                distribution to an eligible retirement plan (as defined 
                in section 402(c)(8)(B) of the Internal Revenue Code of 
                1986) 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), or 408(d)(3), of such Code, as the case may 
                be.
                  (B) Treatment of repayments.--Rules similar to the 
                rules of subparagraphs (B) and (C) of subsection (a)(3) 
                shall apply for purposes of this subsection.
          (2) Qualified distribution.--For purposes of this subsection, 
        the term ``qualified distribution'' means any distribution--
                  (A) described in section 401(k)(2)(B)(i)(IV), 
                403(b)(7)(A)(ii) (but only to the extent such 
                distribution relates to financial hardship), 
                403(b)(11)(B), or 72(t)(2)(F), of the Internal Revenue 
                Code of 1986,
                  (B) which was to be used to purchase or construct a 
                principal residence in a qualified disaster area, but 
                which was not so used on account of the qualified 
                disaster with respect to such area, and
                  (C) which was received during the period beginning on 
                the date which is 180 days before the first day of the 
                incident period of such qualified disaster and ending 
                on the date which is 30 days after the last day of such 
                incident period.
          (3) Applicable period.--For purposes of this subsection, the 
        term ``applicable period'' means, in the case of a principal 
        residence in a qualified disaster area with respect to any 
        qualified disaster, the period beginning on the first day of 
        the incident period of such qualified disaster and ending on 
        the date which is 180 days after the date of the enactment of 
        this Act.
  (c) Loans From Qualified Plans.--
          (1) Increase in limit on loans not treated as 
        distributions.--In the case of any loan from a qualified 
        employer plan (as defined under section 72(p)(4) of the 
        Internal Revenue Code of 1986) to a qualified individual made 
        during the 180-day period beginning on the date of the 
        enactment of this Act--
                  (A) clause (i) of section 72(p)(2)(A) of such Code 
                shall be applied by substituting ``$100,000'' for 
                ``$50,000'', and
                  (B) clause (ii) of such section shall be applied by 
                substituting ``the present value of the nonforfeitable 
                accrued benefit of the employee under the plan'' for 
                ``one-half of the present value of the nonforfeitable 
                accrued benefit of the employee under the plan''.
          (2) Delay of repayment.--In the case of a qualified 
        individual (with respect to any qualified disaster) with an 
        outstanding loan (on or after the first day of the incident 
        period of such qualified disaster) from a qualified employer 
        plan (as defined in section 72(p)(4) of the Internal Revenue 
        Code of 1986)--
                  (A) if the due date pursuant to subparagraph (B) or 
                (C) of section 72(p)(2) of such Code for any repayment 
                with respect to such loan occurs during the period 
                beginning on the first day of the incident period of 
                such qualified disaster and ending on the date which is 
                180 days after the last day of such incident period, 
                such due date shall be delayed for 1 year (or, if 
                later, until the date which is 180 days after the date 
                of the enactment of this Act),
                  (B) any subsequent repayments with respect to any 
                such loan shall be appropriately adjusted to reflect 
                the delay in the due date under subparagraph (A) and 
                any interest accruing during such delay, and
                  (C) in determining the 5-year period and the term of 
                a loan under subparagraph (B) or (C) of section 
                72(p)(2) of such Code, the period described in 
                subparagraph (A) of this paragraph shall be 
                disregarded.
          (3) Qualified individual.--For purposes of this subsection, 
        the term ``qualified individual'' means any individual--
                  (A) whose principal place of abode at any time during 
                the incident period of any qualified disaster is 
                located in the qualified disaster area with respect to 
                such qualified disaster, and
                  (B) who has sustained an economic loss by reason of 
                such qualified disaster.
  (d) Provisions Relating to Plan Amendments.--
          (1) In general.--If this subsection 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 paragraph (2)(B)(i).
          (2) Amendments to which subsection applies.--
                  (A) In general.--This subsection 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 issued 
                        by the Secretary or the Secretary of Labor 
                        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, 
                        2020, or such later date as the Secretary may 
                        prescribe.
                In the case of a governmental plan (as defined in 
                section 414(d) of the Internal Revenue Code of 1986), 
                clause (ii) shall be applied by substituting the date 
                which is 2 years after the date otherwise applied under 
                clause (ii).
                  (B) Conditions.--This subsection shall not apply to 
                any amendment unless--
                          (i) during the period--
                                  (I) beginning on the date that this 
                                section or the regulation described in 
                                subparagraph (A)(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 
                                subparagraph (A)(ii) (or, if earlier, 
                                the date the plan or contract amendment 
                                is adopted),
                the plan or contract is operated as if such plan or 
                contract amendment were in effect, and
                          (ii) such plan or contract amendment applies 
                        retroactively for such period.

SEC. 303. EMPLOYEE RETENTION CREDIT FOR EMPLOYERS AFFECTED BY QUALIFIED 
                    DISASTERS.

  (a) In General.--For purposes of section 38 of the Internal Revenue 
Code of 1986, in the case of an eligible employer, the 2018 qualified 
disaster employee retention credit shall be treated as a credit listed 
at the end of subsection (b) of such section. For purposes of this 
subsection, the 2018 qualified disaster employee retention credit for 
any taxable year is an amount equal to 40 percent of the qualified 
wages with respect to each eligible employee of such employer for such 
taxable year. The amount of qualified wages with respect to any 
employee which may be taken into account under this subsection by the 
employer for any taxable year shall not exceed $6,000 (reduced by the 
amount of qualified wages with respect to such employee which may be so 
taken into account for any prior taxable year).
  (b) Definitions.--For purposes of this section--
          (1) Eligible employer.--The term ``eligible employer'' means 
        any employer--
                  (A) which conducted an active trade or business in a 
                qualified disaster zone at any time during the incident 
                period of the qualified disaster with respect to such 
                qualified disaster zone, and
                  (B) with respect to whom the trade or business 
                described in subparagraph (A) is inoperable at any time 
                during the period beginning on the first day of the 
                incident period of such qualified disaster and ending 
                on the date of the enactment of this Act, as a result 
                of damage sustained by reason of such qualified 
                disaster.
          (2) Eligible employee.--The term ``eligible employee'' means 
        with respect to an eligible employer an employee whose 
        principal place of employment with such eligible employer 
        (determined immediately before the qualified disaster referred 
        to in paragraph (1)) was in the qualified disaster zone 
        referred to in such paragraph.
          (3) Qualified wages.--The term ``qualified wages'' means 
        wages (as defined in section 51(c)(1) of the Internal Revenue 
        Code of 1986, but without regard to section 3306(b)(2)(B) of 
        such Code) paid or incurred by an eligible employer with 
        respect to an eligible employee at any time on or after the 
        date on which the trade or business described in paragraph (1) 
        first became inoperable at the principal place of employment of 
        the employee (determined immediately before the qualified 
        disaster referred to in such paragraph) and before the earlier 
        of--
                  (A) the date on which such trade or business has 
                resumed significant operations at such principal place 
                of employment, or
                  (B) the date which 150 days after the last day of the 
                incident period of the qualified disaster referred to 
                in paragraph (1).
        Such term shall include wages paid without regard to whether 
        the employee performs no services, performs services at a 
        different place of employment than such principal place of 
        employment, or performs services at such principal place of 
        employment before significant operations have resumed.
  (c) Certain Rules to Apply.--For purposes of this subsection, rules 
similar to the rules of sections 51(i)(1), 52, and 280C(a), of the 
Internal Revenue Code of 1986, shall apply.
  (d) Employee Not Taken Into Account More Than Once.--An employee 
shall not be treated as an eligible employee for purposes of this 
subsection for any period with respect to any employer if such employer 
is allowed a credit under section 51 of the Internal Revenue Code of 
1986 with respect to such employee for such period.

SEC. 304. OTHER DISASTER-RELATED TAX RELIEF PROVISIONS.

  (a) Temporary Increase in Limitation on Qualified Contributions.--
          (1) Suspension of current limitation.--Except as otherwise 
        provided in paragraph (2), qualified contributions shall be 
        disregarded in applying subsections (b) and (d) of section 170 
        of the Internal Revenue Code of 1986.
          (2) Application of increased limitation.--For purposes of 
        section 170 of the Internal Revenue Code of 1986--
                  (A) Individuals.--In the case of an individual--
                          (i) Limitation.--Any qualified contribution 
                        shall be allowed as a deduction only to the 
                        extent that the aggregate of such contributions 
                        does not exceed the excess of the taxpayer's 
                        contribution base (as defined in subparagraph 
                        (H) of section 170(b)(1) of such Code) over the 
                        amount of all other charitable contributions 
                        allowed under section 170(b)(1) of such Code.
                          (ii) Carryover.--If the aggregate amount of 
                        qualified contributions made in the 
                        contribution year (within the meaning of 
                        section 170(d)(1) of such Code) exceeds the 
                        limitation of clause (i), such excess shall be 
                        added to the excess described in section 
                        170(b)(1)(G)(ii).
                  (B) Corporations.--In the case of a corporation--
                          (i) Limitation.--Any qualified contribution 
                        shall be allowed as a deduction only to the 
                        extent that the aggregate of such contributions 
                        does not exceed the excess of the taxpayer's 
                        taxable income (as determined under paragraph 
                        (2) of section 170(b) of such Code) over the 
                        amount of all other charitable contributions 
                        allowed under such paragraph.
                          (ii) Carryover.--If the aggregate amount of 
                        qualified contributions made in the 
                        contribution year (within the meaning of 
                        section 170(d)(2) of such Code) exceeds the 
                        limitation of clause (i), such excess shall be 
                        appropriately taken into account under section 
                        170(d)(2) subject to the limitations thereof.
          (3) Qualified contributions.--
                  (A) In general.--For purposes of this subsection, the 
                term ``qualified contribution'' means any charitable 
                contribution (as defined in section 170(c) of the 
                Internal Revenue Code of 1986) if--
                          (i) such contribution--
                                  (I) is paid, during the period 
                                beginning on January 1, 2018, and 
                                ending on the date which is 60 days 
                                after the date of the enactment of this 
                                Act, in cash to an organization 
                                described in section 170(b)(1)(A) of 
                                such Code, and
                                  (II) is made for relief efforts in 
                                one or more qualified disaster areas,
                          (ii) the taxpayer obtains from such 
                        organization contemporaneous written 
                        acknowledgment (within the meaning of section 
                        170(f)(8) of such Code) that such contribution 
                        was used (or is to be used) for relief efforts 
                        described in clause (i)(II), and
                          (iii) the taxpayer has elected the 
                        application of this subsection with respect to 
                        such contribution.
                  (B) Exception.--Such term shall not include a 
                contribution by a donor if the contribution is--
                          (i) to an organization described in section 
                        509(a)(3) of the Internal Revenue Code of 1986, 
                        or
                          (ii) for the establishment of a new, or 
                        maintenance of an existing, donor advised fund 
                        (as defined in section 4966(d)(2) of such 
                        Code).
                  (C) Application of election to partnerships and s 
                corporations.--In the case of a partnership or S 
                corporation, the election under subparagraph (A)(iii) 
                shall be made separately by each partner or 
                shareholder.
  (b) Special Rules for Qualified Disaster-related Personal Casualty 
Losses.--
          (1) In general.--If an individual has a net disaster loss for 
        any taxable year--
                  (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 subsection, 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 qualified disaster area on or after the first day of 
        the incident period of the qualified disaster to which such 
        area relates, and which are attributable to such qualified 
        disaster.
  (c) Special Rule for Determining Earned Income.--
          (1) In general.--In the case of a qualified individual, if 
        the earned income of the taxpayer for the applicable taxable 
        year is less than the earned income of the taxpayer for the 
        preceding taxable year, the credits allowed under sections 
        24(d) and 32 of the Internal Revenue Code of 1986 may, at the 
        election of the taxpayer, be determined by substituting--
                  (A) such earned income for the preceding taxable 
                year, for
                  (B) such earned income for the applicable taxable 
                year.
          (2) Qualified individual.--For purposes of this subsection--
                  (A) In general.--The term ``qualified individual'' 
                means any individual whose principal place of abode at 
                any time during the incident period of any qualified 
                disaster was located--
                          (i) in the qualified disaster zone with 
                        respect to such qualified disaster, or
                          (ii) in the qualified disaster area with 
                        respect to such qualified disaster (but outside 
                        the qualified disaster zone with respect to 
                        such qualified disaster) and such individual 
                        was displaced from such principal place of 
                        abode by reason of such qualified disaster.
                  (B) Hurricane sandy.--The term ``qualified 
                individual'' includes any individual whose principal 
                place of abode at any time during the period beginning 
                on October 29, 2012, and ending on November 3, 2012, 
                was located--
                          (i) in that portion of the area described in 
                        clause (ii) which was determined by the 
                        President to warrant individual or individual 
                        and public assistance from the Federal 
                        Government under the Robert T. Stafford 
                        Disaster Relief and Emergency Assistance Act by 
                        reason of Hurricane Sandy, or
                          (ii) in the area with respect to which a 
                        major disaster was declared by the President 
                        under section 401 of the Robert T. Stafford 
                        Disaster Relief and Emergency Assistance Act by 
                        reason of Hurricane Sandy and such individual 
                        was displaced from such principal place of 
                        abode by reason of Hurricane Sandy.
          (3) Applicable taxable year.--The term ``applicable taxable 
        year'' means--
                  (A) in the case of a qualified individual other than 
                an individual described in subparagraph (B), any 
                taxable year which includes any portion of the incident 
                period of the qualified disaster to which the qualified 
                disaster area referred to in paragraph (2)(A) relates, 
                or
                  (B) in the case of a qualified individual described 
                in subparagraph (B) of paragraph (2), any taxable year 
                which includes any portion of the period described in 
                such subparagraph.
          (4) Earned income.--For purposes of this subsection, the term 
        ``earned income'' has the meaning given such term under section 
        32(c) of the Internal Revenue Code of 1986.
          (5) Special rules.--
                  (A) Application to joint returns.--For purposes of 
                paragraph (1), in the case of a joint return for an 
                applicable taxable year--
                          (i) such paragraph shall apply if either 
                        spouse is a qualified individual, and
                          (ii) the earned income of the taxpayer for 
                        the preceding taxable year shall be the sum of 
                        the earned income of each spouse for such 
                        preceding taxable year.
                  (B) Uniform application of election.--Any election 
                made under paragraph (1) shall apply with respect to 
                both sections 24(d) and 32 of the Internal Revenue Code 
                of 1986.
                  (C) Errors treated as mathematical error.--For 
                purposes of section 6213 of the Internal Revenue Code 
                of 1986, an incorrect use on a return of earned income 
                pursuant to paragraph (1) shall be treated as a 
                mathematical or clerical error.
                  (D) No effect on determination of gross income, 
                etc.--Except as otherwise provided in this subsection, 
                the Internal Revenue Code of 1986 shall be applied 
                without regard to any substitution under paragraph (1).
                  (E) Extension of period of limitation for certain 
                individuals affected by hurricane sandy.--
                          (i) In general.--In the case of an individual 
                        described in paragraph (2)(B), the period of 
                        limitation prescribed by section 6511(a) of the 
                        Internal Revenue Code of 1986 for any 
                        applicable taxable year shall be extended until 
                        the date prescribed by law (including 
                        extensions) for filing the return of tax for 
                        the taxable year that includes the date of the 
                        enactment of this Act, and section 6511(b)(2) 
                        of such Code shall not apply to any claim of 
                        credit or refund with respect to the return for 
                        such applicable tax year.
                          (ii) Amendments, etc. restricted to changes 
                        to earned income.--Clause (i) shall apply only 
                        with respect to amendments to the return of 
                        tax, and claims for credit or refund, relating 
                        to a change in the earned income of the 
                        individual.

SEC. 305. AUTOMATIC EXTENSION OF FILING DEADLINES IN CASE OF CERTAIN 
                    TAXPAYERS AFFECTED BY FEDERALLY DECLARED DISASTERS.

  (a) In General.--Section 7508A is amended by adding at the end the 
following new subsection:
  ``(d) Mandatory 60-day Extension.--
          ``(1) In general.--In the case of any qualified taxpayer, the 
        period--
                  ``(A) beginning on the earliest incident date 
                specified in the declaration to which the disaster area 
                referred to in paragraph (2) relates, and
                  ``(B) ending on the date which is 60 days after the 
                latest incident date so specified,
        shall be disregarded in the same manner as a period specified 
        under subsection (a).
          ``(2) Qualified taxpayer.--For purposes of this subsection, 
        the term `qualified taxpayer' means--
                  ``(A) any individual whose principal residence (for 
                purposes of section 1033(h)(4)) is located in a 
                disaster area,
                  ``(B) any taxpayer if the taxpayer's principal place 
                of business (other than the business of performing 
                services as an employee) is located in a disaster area,
                  ``(C) any individual who is a relief worker 
                affiliated with a recognized government or 
                philanthropic organization and who is assisting in a 
                disaster area,
                  ``(D) any taxpayer whose records necessary to meet a 
                deadline for an act described in section 7508(a)(1) are 
                maintained in a disaster area,
                  ``(E) any individual visiting a disaster area who was 
                killed or injured as a result of the disaster, and
                  ``(F) solely with respect to a joint return, any 
                spouse of an individual described in any preceding 
                subparagraph of this paragraph.
          ``(3) Disaster area.--For purposes of this subsection, the 
        term `disaster area' has the meaning given such term under 
        subparagraph (B) of section 165(i)(5) with respect to a 
        Federally declared disaster (as defined in subparagraph (A) of 
        such section).
          ``(4) Application to rules regarding pensions.--In the case 
        of any person described in subsection (b), a rule similar to 
        the rule of paragraph (1) shall apply for purposes of 
        subsection (b) with respect to--
                  ``(A) making contributions to a qualified retirement 
                plan (within the meaning of section 4974(c)) under 
                section 219(f)(3), 404(a)(6), 404(h)(1)(B), or 
                404(m)(2),
                  ``(B) making distributions under section 408(d)(4),
                  ``(C) recharacterizing contributions under section 
                408A(d)(6), and
                  ``(D) making a rollover under section 402(c), 
                403(a)(4), 403(b)(8), or 408(d)(3).
          ``(5) Coordination with periods specified by the secretary.--
        Any period described in paragraph (1) with respect to any 
        person (including by reason of the application of paragraph 
        (4)) shall be in addition to (or concurrent with, as the case 
        may be) any period specified under subsection (a) or (b) with 
        respect to such person.''.
  (b) Effective Date.--The amendment made by this section shall apply 
to federally declared disasters declared after the date of the 
enactment of this Act.

SEC. 306. MODIFICATION OF THE TAX RATE FOR THE EXCISE TAX ON INVESTMENT 
                    INCOME OF PRIVATE FOUNDATIONS.

  (a) In General.--Section 4940(a) is amended by striking ``2 percent'' 
and inserting ``1.39 percent''.
  (b) Elimination of Reduced Tax Where Foundation Meets Certain 
Distribution Requirements.--Section 4940 of such Code is amended by 
striking subsection (e).
  (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. 307. ADDITIONAL LOW-INCOME HOUSING CREDIT ALLOCATIONS FOR 
                    QUALIFIED 2017 AND 2018 CALIFORNIA DISASTER AREAS.

  (a) In General.--For purposes of section 42 of the Internal Revenue 
Code of 1986, the State housing credit ceiling for California for 
calendar year 2019 shall be increased by the lesser of--
          (1) the aggregate housing credit dollar amount allocated by 
        the State housing credit agencies of California for such 
        calendar year to buildings located in qualified 2017 and 2018 
        California disaster areas, or
          (2) 50 percent of the sum of the State housing credit 
        ceilings for California for calendar years 2017 and 2018.
  (b) Allocations Treated as Made First From Additional Allocation for 
Purposes of Determining Carryover.--For purposes of determining the 
unused State housing credit ceiling for any calendar year under section 
42(h)(3)(C) of the Internal Revenue Code of 1986, any increase in the 
State housing credit ceiling under subsection (a) shall be treated as 
an amount described in clause (ii) of such section.
  (c) Definitions.--For purposes of this section--
          (1) Qualified 2017 and 2018 california disaster areas.--The 
        term ``qualified 2017 and 2018 California disaster areas'' 
        means any area in California which was determined by the 
        President (before January 1, 2019) to warrant individual or 
        individual and public assistance from the Federal Government 
        under the Robert T. Stafford Disaster Relief and Emergency 
        Assistance Act by reason of a major disaster the incident 
        period of which begins or ends in calendar year 2017 or 2018. 
        Notwithstanding section 301, for purposes of the preceding 
        sentence, the term ``incident period'' means the period 
        specified by the Federal Emergency Management Agency as the 
        period during which the disaster occurred.
          (2) Other definitions.--Terms used in this section which are 
        also used in section 42 of the Internal Revenue Code of 1986 
        shall have the same meaning in this section as in such section 
        42.

SEC. 308. TREATMENT OF CERTAIN POSSESSIONS.

  (a) Payments to Possessions With Mirror Code Tax Systems.--The 
Secretary of the Treasury shall pay to each possession of the United 
States which has a mirror code tax system amounts equal to the loss (if 
any) to that possession by reason of the application of the provisions 
of this title. Such amounts shall be determined by the Secretary of the 
Treasury based on information provided by the government of the 
respective possession.
  (b) Payments to Other Possessions.--The Secretary of the Treasury 
shall pay to each possession of the United States which does not have a 
mirror code tax system amounts estimated by the Secretary of the 
Treasury as being equal to the aggregate benefits (if any) that would 
have been provided to residents of such possession by reason of the 
provisions of this title if a mirror code tax system had been in effect 
in such possession. The preceding sentence shall not apply unless the 
respective possession has a plan, which has been approved by the 
Secretary of the Treasury, under which such possession will promptly 
distribute such payments to its residents.
  (c) Mirror Code Tax System.--For purposes of this section, the term 
``mirror code tax system'' means, with respect to any possession of the 
United States, the income tax system of such possession if the income 
tax liability of the residents of such possession under such system is 
determined by reference to the income tax laws of the United States as 
if such possession were the United States.
  (d) Treatment of Payments.--For purposes of section 1324 of title 31, 
United States Code, the payments under this section shall be treated in 
the same manner as a refund due from a credit provision referred to in 
subsection (b)(2) of such section.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 3301, the ``Taxpayer Certainty and Disaster 
Relief Act of 2019'' as amended and ordered reported by the 
Committee on Ways and Means on June 20 2019, (1) extends 
certain expired and expiring tax provisions, (2) reduces the 
unified credit against the estate tax effective January 1, 
2023, (3) provides tax relief for areas affected by certain 
natural disasters occurring on or after January 1, 2018, and 
(4) makes certain other changes.

                 B. Background and Need for Legislation

    The responsible stewardship of temporary tax policy is 
essential to sound tax administration. Temporary tax policy can 
be used to address a one-time need, to provide transition rules 
for new policy, and for other valid purposes. However, 
certainty in tax policy is important. Uncertainty can reduce 
consumer confidence, increase volatility in the stock market, 
and threaten investment and job growth in crucial sectors 
across our economy, including defense, healthcare, finance, and 
infrastructure.
    H.R. 3301 extends 26 provisions that expired in 2017 and 
2018. It also prospectively extends six provisions set to 
expire at the end of 2019. Some of the temporary provisions 
extended in this bill enhance support for families and 
individuals. Others provide incentives for employment, economic 
growth, and community development. Finally, certain provisions 
in this bill extend incentives for energy production, 
efficiency, and green economy jobs. The costs of extending 
these provisions are offset by a reduction to the unified 
credit against the estate tax, effective January 1, 2023.
    In addition to the extensions of certain provisions as 
described above, H.R. 3301 provides critical tax relief for 
communities that have been hurt by natural disasters. This 
relief not only addresses disasters that occurred in 2018, but 
also extends to disasters that occur up to 30 days after the 
date of enactment of the legislation.

                         C. Legislative History


Background

    H.R. 3301, the ``Taxpayer Certainty and Disaster Tax Relief 
Act of 2019,'' was introduced on June 18, 2019 by Mr. Thompson 
of California, and was referred to the Committee on Ways and 
Means.

Committee hearings

    The Subcommittee on Select Revenue Measures held a hearing 
on Temporary Policy in the Internal Revenue Code on Tuesday, 
March 12, 2019. The Committee heard testimony from Mark Mazur 
of the Urban-Brookings Tax Policy Center, Pam Olson of 
PricewaterhouseCoopers, Chye-Ching Huang of the Center on 
Budget and Policy Priorities, Judy K. Sakaki of Sonoma State 
University and Kyle Pomerleau of the Tax Foundation.
    In addition, the Committee on Ways and Means held a hearing 
on the 2017 Tax Law and Who It Left Behind on March 27, 2019. 
Witnesses included Nancy Abromowitz of the American University 
Washington College of Law, Elise Gould of the Economic Policy 
Institute, Douglas Holtz-Eakin of the American Action Forum, 
Jason Oh of the University of California Los Angeles, and 
Christopher Shelton of the Communications Workers of America.
    A number of Members of Congress also testified on many of 
the provisions contained in H. R. 3301 at the Committee's 
Member Day Hearing held on June 4, 2019.

Committee action

    The Committee on Ways and Means marked up H.R. 3301 on June 
20, 2019, and ordered the bill, as amended, favorably reported 
(with a quorum being present) by a vote of 25 yeas and 17 nays.

                      II. EXPLANATION OF THE BILL


           TITLE I--EXTENSION OF CERTAIN EXPIRING PROVISIONS


         A. Tax Relief and Support for Families and Individuals


  1. exclusion from gross income of discharge of qualified principal 
 residence indebtedness (sec. 101 of the bill and sec. 108(a)(1)(e) of 
                               the code)


                             PRESENT LAW\1\
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    \1\All discussions of Present Law in this report refer to present 
law as of the date of the markup (i.e., June 20, 2019) and do not 
reflect subsequent law changes.
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In general

    Gross income includes income that is realized by a debtor 
from the discharge of indebtedness,\2\ subject to certain 
exceptions for debtors in Title 11 bankruptcy cases, insolvent 
debtors, certain student loans, certain farm indebtedness, and 
certain real property business indebtedness.\3\ In cases 
involving discharges of indebtedness that are excluded from 
gross income under the exceptions to the general rule, 
taxpayers generally reduce certain tax attributes, including 
basis in property, by the amount of the discharge of 
indebtedness.
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    \2\A debt cancellation that constitutes a gift or bequest is not 
treated as income to the donee debtor. Sec. 102.
    \3\Secs. 61(a)(11) and 108.
---------------------------------------------------------------------------
    The amount of discharge of indebtedness excluded from 
income by an insolvent debtor not in a Title 11 bankruptcy case 
cannot exceed the amount by which the debtor is insolvent. In 
the case of a discharge due to bankruptcy or where the debtor 
is insolvent, any reduction in basis may not exceed the excess 
of the aggregate bases of properties held by the taxpayer 
immediately after the discharge over the aggregate of the 
liabilities of the taxpayer immediately after the discharge.\4\
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    \4\Sec. 1017.
---------------------------------------------------------------------------
    For all taxpayers, the amount of discharge of indebtedness 
generally is equal to the difference between the adjusted issue 
price of the debt being cancelled and the amount used to 
satisfy the debt. These rules generally apply to the exchange 
of an old obligation for a new obligation, including a 
modification of indebtedness that is treated as an exchange (a 
debt-for-debt exchange).

Qualified principal residence indebtedness

    An exclusion from gross income is provided for any 
discharge of indebtedness income by reason of a discharge (in 
whole or in part) of qualified principal residence 
indebtedness. Qualified principal residence indebtedness means 
acquisition indebtedness (within the meaning of section 
163(h)(3)(B), except that the dollar limitation is $2 million) 
with respect to the taxpayer's principal residence.\5\ 
Acquisition indebtedness with respect to a principal residence 
generally means indebtedness which is incurred in the 
acquisition, construction, or substantial improvement of the 
principal residence of the individual and is secured by the 
residence. It also includes refinancing of such indebtedness to 
the extent the amount of the indebtedness resulting from such 
refinancing does not exceed the amount of the refinanced 
indebtedness. For these purposes, the term ``principal 
residence'' has the same meaning as under section 121.
---------------------------------------------------------------------------
    \5\Sec. 108(h)(2).
---------------------------------------------------------------------------
    If immediately before the discharge, only a portion of a 
discharged indebtedness is qualified principal residence 
indebtedness, the exclusion applies only to so much of the 
amount discharged as exceeds the portion of the debt which is 
not qualified principal residence indebtedness. For example, 
assume that a principal residence is secured by an indebtedness 
of $1 million, of which $700,000 is qualified principal 
residence indebtedness. If the residence is sold for $600,000 
and $400,000 debt is discharged, then only $100,000 of the 
amount discharged may be excluded from gross income under the 
qualified principal residence indebtedness exclusion.
    The basis of the individual's principal residence is 
reduced by the amount excluded from income under the provision.
    The qualified principal residence indebtedness exclusion 
does not apply to a taxpayer in a Title 11 case; instead, the 
general exclusion rules apply. In the case of an insolvent 
taxpayer not in a Title 11 case, the qualified principal 
residence indebtedness exclusion applies unless the taxpayer 
elects to have the general exclusion rules apply instead.
    The exclusion does not apply to the discharge of a loan if 
the discharge is on account of services performed for the 
lender or any other factor not directly related to a decline in 
the value of the residence or to the financial condition of the 
taxpayer.
    The exclusion for qualified principal residence 
indebtedness is effective for discharges of indebtedness before 
January 1, 2018.

                           REASONS FOR CHANGE

    The Committee believes that taxpayers restructuring their 
acquisition indebtedness on a principal residence or losing 
their principal residence in a foreclosure are likely, due to 
their economic circumstances, to lack the necessary liquidity 
to pay taxes on the resulting discharge of indebtedness. 
Therefore, the Committee believes the exclusion from gross 
income for discharges of qualified principal residence 
indebtedness should be extended.

                        EXPLANATION OF PROVISION

    The provision extends for three additional years (through 
December 31, 2020) the exclusion from gross income for 
discharges of qualified principal residence indebtedness. The 
provision also provides for an exclusion from gross income in 
the case of those taxpayers whose qualified principal residence 
indebtedness was discharged on or after January 1, 2021, if the 
discharge was subject to a written arrangement entered into 
prior to January 1, 2021.

                             EFFECTIVE DATE

    The provision generally applies to discharges of 
indebtedness after December 31, 2017.

  2. treatment of mortgage insurance premiums as qualified residence 
      interest (sec. 102 of the bill and sec. 163(h) of the code)


                              PRESENT LAW

In general

    Qualified residence interest is deductible notwithstanding 
the general rule that personal interest is nondeductible.\6\
---------------------------------------------------------------------------
    \6\Sec. 163(h).
---------------------------------------------------------------------------

Acquisition indebtedness

    Qualified residence interest is interest on acquisition 
indebtedness with respect to a principal and a second residence 
of the taxpayer. The maximum amount of acquisition indebtedness 
is $750,000 ($375,000 in the case of married taxpayers filing 
separately). Acquisition indebtedness means debt that is 
incurred in acquiring, constructing, or substantially improving 
a qualified residence of the taxpayer, and that is secured by 
the residence.

Qualified mortgage insurance

    Certain premiums paid or accrued for qualified mortgage 
insurance by a taxpayer during the taxable year in connection 
with acquisition indebtedness on a qualified residence of the 
taxpayer are treated as interest that is qualified residence 
interest and thus deductible. The amount allowable as a 
deduction is phased out ratably by 10 percent for each $1,000 
(or fraction thereof) by which the taxpayer's adjusted gross 
income exceeds $100,000 ($500 and $50,000, respectively, in the 
case of a married individual filing a separate return). Thus, 
the deduction is not allowed if the taxpayer's adjusted gross 
income exceeds $109,000 ($54,000 in the case of married 
individual filing a separate return).
    For this purpose, qualified mortgage insurance means 
mortgage insurance provided by the Department of Veterans 
Affairs, the Federal Housing Administration, or the Rural 
Housing Service, and private mortgage insurance (defined in 
section two of the Homeowners Protection Act of 1998 as in 
effect on the date of enactment of the provision).
    Amounts paid for qualified mortgage insurance that are 
properly allocable to periods after the close of the taxable 
year are treated as paid in the period to which they are 
allocated. No deduction is allowed for the unamortized balance 
if the mortgage is paid before the end of its term (except in 
the case of qualified mortgage insurance provided by the 
Department of Veterans Affairs or Rural Housing Service).
    The deduction does not apply with respect to any mortgage 
insurance contract issued before January 1, 2007. The deduction 
is disallowed for any amount paid or accrued after December 31, 
2017, or properly allocable to any period after that date.
    Information reporting rules apply to mortgage insurance 
premiums for premiums paid or accrued during periods to which 
the deductibility provision applies.\7\
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    \7\Sec. 6050H(h) and Treas. Reg. sec. 1.6050H-3.
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                           REASONS FOR CHANGE

    The Committee believes that permitting the deduction of 
mortgage insurance premiums is consistent with the policy 
underlying the home mortgage interest deduction, i.e., 
encouraging home ownership. Therefore, the Committee believes 
the deduction for qualified mortgage insurance premiums should 
be extended.

                        EXPLANATION OF PROVISION

    The provision extends the deduction for qualified mortgage 
insurance premiums for three years (with respect to contracts 
entered into after December 31, 2006). Thus, the provision 
applies to amounts paid or accrued in 2018, 2019, and 2020 (and 
not properly allocable to any period after December 31, 2020).

                             EFFECTIVE DATE

    The provision applies to amounts paid or accrued after 
December 31, 2017.

 3. REDUCTION IN MEDICAL EXPENSE DEDUCTION FLOOR (SEC. 103 OF THE BILL 
                       AND SEC. 213 OF THE CODE)

                              PRESENT LAW

    For taxable years ending before January 1, 2019, 
individuals may claim an itemized deduction for unreimbursed 
medical expenses paid during the taxable year, but only to the 
extent that the expenses exceed 7.5 percent of adjusted gross 
income (``AGI'') for purposes of regular tax and the 
alternative minimum tax (``AMT'').\8\ For taxable years ending 
after December 31, 2018, the 7.5-percent threshold is increased 
to 10 percent.
---------------------------------------------------------------------------
    \8\Sec. 213. The threshold was amended by the Patient Protection 
and Affordable Care Act (Pub. L. No. 111-148). For taxable years 
beginning after December 31, 2012, the threshold was 10 percent for 
regular tax purposes and AMT purposes. A temporary special rule applied 
in the case of a taxpayer who attained age 65 (or, in the case of a 
married taxpayer, if either the taxpayer or the taxpayer's spouse 
attained age 65) before the close of the taxable year, in which case 
the threshold was 7.5 percent for regular tax purposes. The 2017 Tax 
Act (Pub. L. No. 115-97) reduced the floor to 7.5 percent for all 
taxpayers for taxable years beginning after December 31, 2016, and 
ending before January 1, 2019.
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                           REASONS FOR CHANGE

    The Committee believes that the itemized deduction for 
unreimbursed medical expenses serves the purpose of allowing 
taxpayers to offset the cost of unexpected medical expenses 
that may impose an economic hardship. The Committee believes 
that extending the availability of the deduction to more 
taxpayer expenses is consistent with that purpose. Therefore, 
the Committee believes that the reduced threshold of 7.5 
percent of AGI should be extended.

                        EXPLANATION OF PROVISION

    The provision extends for two years the threshold for 
deducting medical expenses of 7.5 percent of AGI. The 7.5-
percent threshold applies for purposes of the AMT as well as 
the regular tax. The provision applies for taxable years 
beginning before January 1, 2021.

                             EFFECTIVE DATE

    The provision applies to taxable years ending after 
December 31, 2018.

4. DEDUCTION OF QUALIFIED TUITION AND RELATED EXPENSES (SEC. 104 OF THE 
                     BILL AND SEC. 222 OF THE CODE)

                              PRESENT LAW

    An individual is allowed a deduction for qualified tuition 
and related expenses for higher education paid by the 
individual during the taxable year.\9\ The deduction is allowed 
in computing adjusted gross income. The term qualified tuition 
and related expenses is defined in the same manner as for the 
American Opportunity and Lifetime Learning credits, and 
includes tuition and fees required for the enrollment or 
attendance of the taxpayer, the taxpayer's spouse, or any 
dependent of the taxpayer with respect to whom the taxpayer is 
allowed a deduction for a personal exemption,\10\ at an 
eligible institution of higher education for courses of 
instruction of such individual at such institution.\11\ The 
expenses must be in connection with enrollment at an 
institution of higher education during the taxable year, or 
with an academic period beginning during the taxable year or 
during the first three months of the next taxable year. The 
deduction is not available for tuition and related expenses 
paid for elementary or secondary education.
---------------------------------------------------------------------------
    \9\Sec. 222.
    \10\Notwithstanding that the exemption amount is zero for taxable 
years beginning after December 31, 2017, and before January 1, 2026, 
the reduction of the exemption amount to zero is not taken into account 
in determining whether a deduction for a personal exemption is still 
allowed or allowable. Sec. 151(d)(5)(B).
    \11\The deduction generally is not available for expenses with 
respect to a course or education involving sports, games, or hobbies, 
and is not available for student activity fees, athletic fees, 
insurance expenses, or other expenses unrelated to an individual's 
academic course of instruction. Secs. 222(d)(1) and 25A(f).
---------------------------------------------------------------------------
    The maximum deduction is $4,000 for an individual whose 
adjusted gross income for the taxable year does not exceed 
$65,000 ($130,000 in the case of a joint return), or $2,000 for 
an individual whose adjusted gross income does not exceed 
$80,000 ($160,000 in the case of a joint return). No deduction 
is allowed for an individual whose adjusted gross income 
exceeds the relevant adjusted gross income limitations, for a 
married individual who does not file a joint return, or for an 
individual with respect to whom a personal exemption deduction 
is allowable to another taxpayer for the taxable year.
    The amount of qualified tuition and related expenses must 
be reduced by certain scholarships, educational assistance 
allowances, and other amounts paid for the benefit of such 
individual,\12\ as well as by the amount of such expenses taken 
into account for purposes of determining any exclusion from 
gross income of (1) income from certain U.S. savings bonds used 
to pay higher education tuition and fees and (2) income from a 
Coverdell education savings account.\13\ Additionally, such 
expenses must be reduced by the earnings portion (but not the 
return of principal) of distributions from a qualified tuition 
program if an exclusion under section 529 is claimed with 
respect to expenses eligible for the qualified tuition 
deduction. No deduction is allowed for any expense for which a 
deduction is otherwise allowed or with respect to an individual 
for whom an American Opportunity or Lifetime Learning credit is 
elected for such taxable year.
---------------------------------------------------------------------------
    \12\Secs. 222(d)(1) and 25A(g)(2).
    \13\Sec. 222(c). These reductions are the same as those that apply 
to the American Opportunity and Lifetime Learning credits.
---------------------------------------------------------------------------
    The deduction is not available for taxable years beginning 
after December 31, 2017.

                           REASONS FOR CHANGE

    The Committee believes that the deduction for qualified 
tuition mitigates the effect of rising tuition costs on 
students and their families. The Committee further believes 
that the deduction provides an important financial incentive 
for individuals to pursue higher education. Therefore, the 
Committee believes the qualified tuition deduction should be 
extended.

                        EXPLANATION OF PROVISION

    The provision extends the qualified tuition deduction for 
three years, through 2020.

                             EFFECTIVE DATE

    The provision applies to taxable years beginning after 
December 31, 2017.

 5. BLACK LUNG DISABILITY TRUST FUND EXCISE TAX (SEC. 105 OF THE BILL 
                       AND SEC. 4121 OF THE CODE)

                              PRESENT LAW

    Before January 1, 2019, coal extracted from mines was taxed 
at either $1.10 per ton if from an underground mine, or $0.55 
per ton if from a surface mine.\14\ The total amount of tax was 
not to exceed 4.4 percent of the price at which such ton of 
coal was sold by the producer.
---------------------------------------------------------------------------
    \14\Sec. 4121.
---------------------------------------------------------------------------
    After December 31, 2018, the ``temporary increase 
termination date,'' the tax rates declined to rates of $0.50 
for underground mines, and $0.25 for surface mines. After the 
temporary increase termination date, the total amount of tax is 
not to exceed two percent of the price at which such ton of 
coal is sold by the producer.

                           REASONS FOR CHANGE

    The Government Accountability Office has reported that the 
expenditures of the Black Lung Disability Trust Fund have 
consistently exceed revenues.\15\ The Committee believes that 
the Black Lung Disability Trust Fund should be provided with a 
level of funding sufficient to cover its expenditures.
---------------------------------------------------------------------------
    \15\Government Accountability Office, Black Lung Benefits Program: 
Options for Improving Trust Fund Finances, (GAO 18-351, May 2018).
---------------------------------------------------------------------------

                        EXPLANATION OF PROVISION

    The provision reinstates the increased rates on coal 
through December 31, 2020. Coal extracted will be taxed at 
$1.10 per ton if from an underground mine, or $0.55 per ton if 
from a surface mine. The total amount of tax cannot exceed 4.4 
percent of the price at which such ton of coal is sold by the 
producer.

                             EFFECTIVE DATE

    The provision applies on and after the first day of the 
first calendar month beginning after the date of enactment.

     B. Incentives for Employment, Economic Growth, and Community 
                              Development


 1. INDIAN EMPLOYMENT TAX CREDIT (SEC. 111 OF THE BILL AND SEC. 45A OF 
                               THE CODE)

                              PRESENT LAW

    In general, a credit against income tax liability is 
allowed to employers for the first $20,000 of qualified wages 
and qualified employee health insurance costs paid or incurred 
by the employer with respect to certain employees.\16\ The 
credit is equal to 20 percent of the excess of eligible 
employee qualified wages and health insurance costs during the 
current year over the amount of such wages and costs incurred 
by the employer during 1993. The credit is an incremental 
credit, such that an employer's current-year qualified wages 
and qualified employee health insurance costs (up to $20,000 
per employee) are eligible for the credit only to the extent 
that the sum of such costs exceeds the sum of comparable costs 
paid during 1993. No deduction is allowed for the portion of 
the wages equal to the amount of the credit.\17\
---------------------------------------------------------------------------
    \16\Sec. 45A.
    \17\Sec. 280C(a).
---------------------------------------------------------------------------
    Qualified wages means wages paid or incurred by an employer 
for services performed by a qualified employee. A qualified 
employee means any employee who is an enrolled member of an 
Indian tribe or the spouse of an enrolled member of an Indian 
tribe, who performs substantially all of the services within an 
Indian reservation, and whose principal place of abode while 
performing such services is on or near the reservation in which 
the services are performed. An ``Indian reservation'' is a 
reservation as defined in section 3(d) of the Indian Financing 
Act of 1974\18\ or section 4(10) of the Indian Child Welfare 
Act of 1978.\19\ For purposes of the preceding sentence, 
section 3(d) is applied by treating ``former Indian 
reservations in Oklahoma'' as including only lands that are (1) 
within the jurisdictional area of an Oklahoma Indian tribe as 
determined by the Secretary of the Interior, and (2) recognized 
by such Secretary as an area eligible for trust land status 
under 25 C.F.R. Part 151 (as in effect on August 5, 1997).
---------------------------------------------------------------------------
    \18\Pub. L. No. 93-262.
    \19\Pub. L. No. 95-608.
---------------------------------------------------------------------------
    An employee is not treated as a qualified employee for any 
taxable year of the employer if the total amount of wages paid 
or incurred by the employer with respect to such employee 
during the taxable year exceeds an amount determined at an 
annual rate of $30,000 (which after adjustment for inflation is 
$45,000 for 2017).\20\ In addition, an employee will not be 
treated as a qualified employee under certain specific 
circumstances, such as where the employee is related to the 
employer (in the case of an individual employer) or to one of 
the employer's specified shareholders, owners, partners, 
grantors, beneficiaries, or fiduciaries, or is a dependent 
thereof.\21\ Similarly, an employee will not be treated as a 
qualified employee where the employee has more than a five 
percent ownership interest in the employer. Finally, an 
employee will not be considered a qualified employee to the 
extent the employee's services relate to gaming activities or 
are performed in a building housing such activities.
---------------------------------------------------------------------------
    \20\See Instructions for Form 8845, Indian Employment Credit 
(2017).
    \21\Sec. 51(i)(1).
---------------------------------------------------------------------------
    The wage credit is available for wages paid or incurred in 
taxable years beginning on or before December 31, 2017.

                           REASONS FOR CHANGE

    To further encourage employment on Indian reservations, the 
Committee believes the Indian employment credit should be 
extended.

                        EXPLANATION OF PROVISION

    The provision extends the Indian employment credit for 
three years (through taxable years beginning before January 1, 
2021).

                             EFFECTIVE DATE

    The provision applies to taxable years beginning after 
December 31, 2017.

2. RAILROAD TRACK MAINTENANCE CREDIT (SEC. 112 OF THE BILL AND SEC. 45G 
                              OF THE CODE)

                              PRESENT LAW

In general

    A business tax credit is allowed for 50 percent of 
qualified railroad track maintenance expenditures paid or 
incurred by an eligible taxpayer during taxable years beginning 
before January 1, 2018 (the ``railroad track maintenance 
credit'' or ``credit'').\22\ For purposes of calculating the 
credit, all members of a controlled group of corporations or a 
group of businesses under common control are treated as a 
single taxpayer, and each member's credit is determined on a 
proportionate basis to each member's share of the aggregate 
qualified railroad track maintenance expenditures taken into 
account by the group for the credit.\23\ The credit may reduce 
a taxpayer's tax liability below its tentative minimum tax.\24\
---------------------------------------------------------------------------
    \22\Sec. 45G(a) and (f). An eligible taxpayer generally claims the 
railroad track maintenance credit by filing Form 8900, Qualified 
Railroad Track Maintenance Credit. If a taxpayer's only source of the 
credit is a partnership or S corporation, the taxpayer may report the 
credit directly on Form 3800, General Business Credit (see Part III, 
line 4g).
    \23\Sec. 45G(e)(2) and Treas. Reg. sec. 1.45G-1(f). See also Notice 
2013-20, 2013-15 I.R.B. 902, April 8, 2013; and Field Attorney Advice 
20151601F, December 19, 2014.
    \24\Sec. 38(c)(4).
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Limitation

    The railroad track maintenance credit is limited to the 
product of $3,500 times the number of miles of railroad 
track\25\ (1) owned or leased by an eligible taxpayer as of the 
close of its taxable year,\26\ and (2) assigned to the eligible 
taxpayer by a Class II or Class III railroad that owns or 
leases such track at the close of the taxable year.\27\ Amounts 
that exceed the limitation are not carried over to another 
taxable year.\28\
---------------------------------------------------------------------------
    \25\Double track is treated as multiple lines of railroad track, 
rather than as a single line of railroad track (i.e., one mile of 
single track is one mile, but one mile of double track is two miles). 
Treas. Reg. sec. 1.45G-1(b)(9).
    \26\A Class II or Class III owns railroad track if the railroad 
track is subject to the allowance for depreciation under section 167 by 
such Class II or Class III railroad. Treas. Reg. sec. 1.45G-1(b)(2). 
Railroad track generally has a seven-year MACRS recovery period. Sec. 
168(e)(3)(C)(i) and asset class 40.4 of Rev. Proc. 87-56, 1987-2 C.B. 
674. Alternatively, railroad structures and similar improvements (e.g., 
bridges, elevated structures, fences, etc.) generally have a 20-year 
MACRS recovery period (see asset class 40.2 of Rev. Proc. 87-56), while 
railroad grading and tunnel bores have a 50-year recovery period (see 
sec. 168(c)). The term ``railroad grading or tunnel bore'' means all 
improvements resulting from excavations (including tunneling), 
construction of embankments, clearings, diversions of roads and 
streams, sodding of slopes, and from similar work necessary to provide, 
construct, reconstruct, alter, protect, improve, replace, or restore a 
roadbed or right-of-way for railroad track. Sec. 168(e)(4).
    \27\Sec. 45G(b)(1).
    \28\Treas. Reg. sec. 1.45G-1(c)(2)(iii).
---------------------------------------------------------------------------

Assignments

    Each mile of railroad track may be taken into account only 
once, either by the owner of such mile or by the owner's 
assignee, in computing the per-mile limitation.\29\ Any 
assignment of a mile of railroad track may be made only once 
per taxable year of the Class II or Class III railroad, and is 
treated as made at the close of such taxable year.\30\ Such 
assignment is taken into account for the taxable year of the 
assignee that includes the date that such assignment is treated 
as effective. However, assignments, including related 
expenditures paid or incurred, for taxable years ending after 
January 1, 2017, and before January 1, 2018, are treated as 
effective as of the close of such taxable year if made pursuant 
to a written agreement entered into no later than May 10, 
2018.\31\
---------------------------------------------------------------------------
    \29\Sec. 45G(b)(2). See also Treas. Reg. sec. 1.45G-1(d).
    \30\An assignor must file Form 8900 with its timely filed 
(including extensions) Federal income tax return for the taxable year 
for which it assigns any mile of eligible railroad track, even if it is 
not itself claiming the railroad track maintenance credit for that 
taxable year. Treas. Reg. sec. 1.45G-1(d)(4). Both the assignor and the 
assignee must attach a statement to Form 8900 detailing the information 
required by Treas. Reg. sec. 1.45G-1(d)(4).
    \31\Bipartisan Budget Act of 2018, Pub. L. No. 115-123, Division D, 
Title I, Subtitle B, sec. 40302(b)(2), February 9, 2018.
---------------------------------------------------------------------------

Eligible taxpayer

    An eligible taxpayer means any Class II or Class III 
railroad, and any person (including a Class I railroad)\32\ who 
transports property using the rail facilities\33\ of a Class II 
or Class III railroad or who furnishes railroad-related 
property\34\ or services\35\ to a Class II or Class III 
railroad, but only with respect to miles of railroad track 
assigned to such person by such railroad under the 
provision.\36\
---------------------------------------------------------------------------
    \32\The Surface Transportation Board currently classifies a Class I 
railroad as a carrier with annual operating revenue of $447,621,226 or 
more. The seven Class I railroads are BNSF Railway Company, Kansas City 
Southern Railway Company, Union Pacific Railway Company, Soo Line 
Railroad Company (Canadian Pacific's U.S. operations), CSX 
Transportation Inc., Norfolk Southern Railway Company, and Grand Trunk 
Corporation (Canadian National's U.S. operations). See the Surface 
Transportation Board FAQs--Economic and Industry Information, available 
at https://www.stb.gov/stb/faqs.html.
    \33\Rail facilities of a Class II or Class III railroad are 
railroad yards, tracks, bridges, tunnels, wharves, docks, stations, and 
other related assets that are used in the transport of freight by a 
railroad and owned or leased by that railroad. Treas. Reg. sec. 1.45G-
1(b)(6).
    \34\Railroad-related property is property that is unique to 
railroads and provided directly to a Class II or Class III railroad. 
See Treas. Reg. sec. 1.45G-1(b)(7) for a detailed description.
    \35\Railroad-related services are services that are provided 
directly to, and are unique to, a railroad and that relate to railroad 
shipping, loading and unloading of railroad freight, or repairs of rail 
facilities or railroad-related property. See Treas. Reg. sec. 1.45G-
1(b)(8) for a detailed description.
    \36\Sec. 45G(c).
---------------------------------------------------------------------------
    The terms Class II or Class III railroad have the meanings 
given by the Surface Transportation Board without regard to the 
controlled group rules under section 45G(e)(2).\37\
---------------------------------------------------------------------------
    \37\Sec. 45G(e)(1) and Treas. Reg. sec. 1.45G-1(b)(1). The Surface 
Transportation Board currently classifies a Class II railroad as a 
carrier with annual operating revenue of less than $447,621,226 but in 
excess of $35,809,698, and a Class III railroad as a carrier with 
annual operating revenue of $35,809,698 or less. See the Surface 
Transportation Board FAQs--Economic and Industry Information, available 
at https://www.stb.gov/stb/faqs.html.
---------------------------------------------------------------------------

Qualified railroad track maintenance expenditures

    Qualified railroad track maintenance expenditures are 
defined as gross expenditures (whether or not otherwise 
chargeable to capital account\38\) for maintaining railroad 
track (including roadbed, bridges, and related track 
structures) owned or leased as of January 1, 2015, by a Class 
II or Class III railroad, determined without regard to any 
consideration for such expenditure given by the Class II or 
Class III railroad which made the assignment of such track.\39\ 
However, consideration received directly or indirectly from 
persons other than the Class II or Class III railroad does 
reduce the amount of qualified railroad track maintenance 
expenditures.\40\ Any amount that an assignee pays an assignor 
in exchange for an assignment of one or more miles of eligible 
railroad is treated as qualified railroad track maintenance 
expenditures paid or incurred by the assignee at the time and 
to the extent the assignor pays or incurs qualified railroad 
track maintenance expenditures.\41\
---------------------------------------------------------------------------
    \38\All or some of the qualified railroad track maintenance 
expenditures may be required to be capitalized under section 263(a) as 
a tangible or intangible asset. See, e.g., Treas. Reg. sec. 1.263(a)-
4(d)(8), which requires the capitalization of amounts paid or incurred 
by a taxpayer to produce or improve real property owned by another 
(except to the extent the taxpayer is selling services at fair market 
value to produce or improve the real property) if the real property can 
reasonably be expected to produce significant economic benefits for the 
taxpayer. The basis of the tangible or intangible asset includes the 
capitalized amount of the qualified railroad track maintenance 
expenditures. Treas. Reg. sec. 1.45G-1(e)(1). Note that for purposes of 
Treas. Reg. sec. 1.263(a)-4(d)(8), real property includes property that 
is affixed to real property and that will ordinarily remain affixed for 
an indefinite period of time. Treas. Reg. sec. 1.263(a)-4(d)(8)(iii). 
Intangible assets described in Treas. Reg. sec. 1.263(a)-4(d)(8) are 
generally depreciable ratably over 25 years. See Treas. Reg. sec. 
1.167(a)-3.
    \39\Sec. 45G(d); Treas. Reg. sec. 1.45G-1(b)(5).
    \40\Treas. Reg. sec. 1.45G-1(c)(3)(ii).
    \41\Treas. Reg. sec. 1.45G-1(c)(3).
---------------------------------------------------------------------------

                            BASIS ADJUSTMENT

    Basis of the railroad track must be reduced (but not below 
zero) by an amount equal to 100 percent of the taxpayer's 
qualified railroad track maintenance tax credit determined for 
the taxable year.\42\ The basis reduction is taken into account 
before the depreciation deduction with respect to such railroad 
track is determined for the taxable year for which the railroad 
track maintenance credit is allowable.\43\ If all or some of 
the qualified railroad track maintenance expenditures paid or 
incurred by an eligible taxpayer during the taxable year is 
capitalized under section 263(a) to more than one asset, 
whether tangible or intangible, the reduction to the basis of 
these assets is allocated among each of the assets subject to 
the reduction in proportion to the unadjusted basis of each 
asset at the time the qualified railroad track maintenance 
expenditures are paid or incurred during that taxable year.\44\
---------------------------------------------------------------------------
    \42\Sec. 45G(e)(3). See also sec. 1016(a)(29) and Treas. Reg. Sec. 
1.45G-1(e).
    \43\Treas. Reg. sec. 1.45G-1(e)(2).
    \44\Ibid.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that Class II and Class III 
railroads are an important part of the nation's railway system. 
Therefore, the Committee believes that this incentive for 
railroad track maintenance expenditures should be extended.

                        EXPLANATION OF PROVISION

    The provision extends the present law credit for three 
years, for qualified railroad track maintenance expenditures 
paid or incurred during taxable years beginning before January 
1, 2021.

                             EFFECTIVE DATE

    The provision generally applies to expenditures paid or 
incurred during taxable years beginning after December 31, 
2017.
    The provision also provides a safe harbor that treats 
assignments, including related expenditures paid or incurred, 
for taxable years beginning on or after January 1, 2018, and 
before January 1, 2019, as effective as of the close of such 
taxable year if made pursuant to a written agreement entered 
into no later than 90 days following the date of enactment.

3. MINE RESCUE TEAM TRAINING CREDIT (SEC. 113 OF THE BILL AND SEC. 45N 
                              OF THE CODE)

                              PRESENT LAW

    An eligible employer may claim a general business credit 
against income tax with respect to each qualified mine rescue 
team employee equal to the lesser of (1) 20 percent of the 
amount paid or incurred by the taxpayer during the taxable year 
with respect to the training program costs of the qualified 
mine rescue team employee (including the wages of the employee 
while attending the program) or (2) $10,000.\45\
---------------------------------------------------------------------------
    \45\Sec. 45N(a).
---------------------------------------------------------------------------
    A qualified mine rescue team employee is any full-time 
employee of the taxpayer who is a miner eligible for more than 
six months of a taxable year to serve as a mine rescue team 
member by virtue of either having completed the initial 20-hour 
course of instruction prescribed by the Mine Safety and Health 
Administration's Office of Educational Policy and Development, 
or receiving at least 40 hours of refresher training in such 
instruction.\46\
---------------------------------------------------------------------------
    \46\Sec. 45N(b).
---------------------------------------------------------------------------
    An eligible employer is any taxpayer which employs 
individuals as miners in underground mines in the United 
States.\47\ The term ``wages'' has the meaning given to such 
term by section 3306(b)\48\ (determined without regard to any 
dollar limitation contained in that section).\49\
---------------------------------------------------------------------------
    \47\Sec. 45N(c).
    \48\Section 3306(b) defines wages for purposes of Federal 
Unemployment Tax.
    \49\Sec. 45N(d).
---------------------------------------------------------------------------
    No deduction is allowed for the portion of the expenses 
otherwise deductible that is equal to the amount of the 
credit.\50\ The credit does not apply to taxable years 
beginning after December 31, 2017.\51\ Additionally, the credit 
is not allowable for purposes of computing the alternative 
minimum tax.\52\
---------------------------------------------------------------------------
    \50\Sec. 280C(e).
    \51\Sec. 45N(e).
    \52\Sec. 38(c). Note that the corporate alternative minimum tax was 
repealed for taxable years beginning after December 31, 2017. See An 
Act to Provide for Reconciliation Pursuant to Titles II and V of the 
Concurrent Resolution on the Budget for Fiscal Year 2018, Pub. L. No. 
115-97, sec. 12001, December 22, 2017.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that mine rescue teams help ensure 
the safety of those operating in and around a mine in the event 
of an accident. Therefore, the Committee believes that this 
incentive for costs incurred to train mine rescue teams should 
be extended.

                        EXPLANATION OF PROVISION

    The provision extends the credit for three years through 
taxable years beginning before January 1, 2021.

                             EFFECTIVE DATE

    The provision applies to taxable years beginning after 
December 31, 2017.

 4. seven-year recovery period for motorsports entertainment complexes 
         (sec. 114 of the bill and sec. 168(i)(15) of the code)


                              PRESENT LAW

            In general
    A taxpayer generally must capitalize the cost of property 
used in a trade or business or held for the production of 
income and recover such cost over time through annual 
deductions for depreciation or amortization.\53\ The period for 
depreciation or amortization generally begins when the asset is 
placed in service by the taxpayer.\54\ Tangible property 
generally is depreciated under the modified accelerated cost 
recovery system (``MACRS''), which determines depreciation for 
different types of property based on an assigned applicable 
depreciation method, recovery period, and convention.\55\
---------------------------------------------------------------------------
    \53\See secs. 263(a) and 167. In general, only the tax owner of 
property (i.e., the taxpayer with the benefits and burdens of 
ownership) is entitled to claim tax benefits such as cost recovery 
deductions with respect to the property. In addition, where property is 
not used exclusively in a taxpayer's business, the amount eligible for 
a deduction must be reduced by the amount related to personal use. See, 
e.g., sec. 280A.
    \54\See Treas. Reg. secs. 1.167(a)-10(b), -3, -14, and 1.197-2(f). 
See also Treas. Reg. sec. 1.167(a)-11(e)(1)(i).
    \55\Sec. 168.
---------------------------------------------------------------------------
    The applicable recovery period for an asset is determined 
in part by statute and in part by historic Treasury 
guidance.\56\ The ``type of property'' of an asset is used to 
determine the ``class life'' of the asset, which in turn 
dictates the applicable recovery period for the asset.
---------------------------------------------------------------------------
    \56\Exercising authority granted by Congress, the Secretary issued 
Rev. Proc. 87-56, 1987-2 C.B. 674, laying out the framework of recovery 
periods for enumerated classes of assets. The Secretary clarified and 
modified the list of asset classes in Rev. Proc. 88-22, 1988-1 C.B. 
785. In November 1988, Congress revoked the Secretary's authority to 
modify the class lives of depreciable property. Rev. Proc. 87-56, as 
modified, remains in effect except to the extent that the Congress has, 
since 1988, statutorily modified the recovery period for certain 
depreciable assets, effectively superseding any administrative guidance 
with regard to such property.
---------------------------------------------------------------------------
    The MACRS recovery periods applicable to most tangible 
personal property range from three to 20 years. The 
depreciation methods generally applicable to tangible personal 
property are the 200-percent and 150-percent declining balance 
methods,\57\ switching to the straight line method for the 
first taxable year where using the straight line method with 
respect to the adjusted basis as of the beginning of that year 
yields a larger depreciation allowance.
---------------------------------------------------------------------------
    \57\Under the declining balance method, the depreciation rate is 
determined by dividing the appropriate percentage (here 150 or 200) by 
the appropriate recovery period. This leads to accelerated depreciation 
when the declining balance percentage is greater than 100. The table 
below illustrates depreciation for an asset with a cost of $1,000 and a 
seven-year recovery period under the 200-percent declining balance 
method, the 150-percent declining balance method, and the straight line 
method.

    Recovery method              Year1 Year2Year3Year4Year5Year6Year 7  
Total
    200-percent declining balance   285.71 204.08 145.77 104.12 86.77  
86.77 86.77   1,000.00
    150-percent declining balance   214.29 168.37 132.29 121.26 121.26 
121.26  121.26 1,000.00
    Straight-line                142.86 142.86 142.86 142.86 142.86 
142.86 142.86 1,000.00
    *Details may not add to totals due to rounding.
---------------------------------------------------------------------------
            Real property
    The recovery periods for most real property are 39 years 
for nonresidential real property and 27.5 years for residential 
rental property.\58\ The straight line depreciation method is 
required for the aforementioned real property.\59\ In addition, 
nonresidential real and residential rental property are both 
subject to the mid-month convention, which treats all property 
placed in service during any month (or disposed of during any 
month) as placed in service (or disposed of) on the mid-point 
of such month.\60\ All other property generally is subject to 
the half-year convention, which treats all property placed in 
service during any taxable year (or disposed of during any 
taxable year) as placed in service (or disposed of) on the mid-
point of such taxable year.\61\
---------------------------------------------------------------------------
    \58\Sec. 168(c).
    \59\Sec. 168(b)(3).
    \60\Sec. 168(d)(2) and (d)(4)(B).
    \61\Sec. 168(d)(1) and (d)(4)(A). However, if substantial property 
is placed in service during the last three months of a taxable year, a 
special rule requires use of the mid-quarter convention, which treats 
all property placed in service (or disposed of) during any quarter as 
placed in service (or disposed of) on the mid-point of such quarter. 
Sec. 168(d)(3) and (d)(4)(C). Nonresidential real property, residential 
rental property, and railroad grading or tunnel bore are not taken into 
account for purposes of the mid-quarter convention.
---------------------------------------------------------------------------
    Land improvements (such as roads and fences) are generally 
recovered using the 150-percent declining balance method, a 
recovery period of 15 years, and the half-year convention.\62\ 
An exception exists for the theme and amusement park industry, 
whose assets are generally assigned a recovery period of seven 
years by asset class 80.0 of Rev. Proc. 87-56.\63\ Racetrack 
facilities are excluded from the definition of theme and 
amusement park facilities classified under asset class 
80.0.\64\
---------------------------------------------------------------------------
    \62\Sec. 168(b)(2)(A) and asset class 00.3 of Rev. Proc. 87-56. 
Under the 150-percent declining balance method, the depreciation rate 
is determined by dividing 150 percent by the appropriate recovery 
period, switching to the straight-line method for the first taxable 
year where using the straight-line method with respect to the adjusted 
basis as of the beginning of that year will yield a larger depreciation 
allowance. Sec. 168(b)(2) and (b)(1)(B).
    \63\This asset class includes assets used in the provision of 
rides, attractions, and amusements in activities defined as theme and 
amusement parks, and includes appurtenances associated with a ride, 
attraction, amusement or theme setting within the park such as ticket 
booths, facades, shop interiors, and props, special purpose structures, 
and buildings other than warehouses, administration buildings, hotels, 
and motels. It also includes all land improvements for or in support of 
park activities (e.g., parking lots, sidewalks, waterways, bridges, 
fences, landscaping, etc.) and support functions (e.g., food and 
beverage retailing, souvenir vending and other nonlodging 
accommodations) if owned by the park and provided exclusively for the 
benefit of park patrons. Theme and amusement parks are defined as 
combinations of amusements, rides, and attractions which are 
permanently situated on park land and open to the public for the price 
of admission. This asset class is a composite of all assets used in 
this industry except transportation equipment (general purpose trucks, 
cars, airplanes, etc., which are included in asset classes with the 
prefix 00.2), assets used in the provision of administrative services 
(asset classes with the prefix 00.1), and warehouses, administration 
buildings, hotels and motels.
    \64\See Joint Committee on Taxation, General Explanation of Tax 
Legislation Enacted in the 108th Congress (JCS-5-05), May 2005, p. 328.
---------------------------------------------------------------------------
    Although racetrack facilities are excluded from asset class 
80.0, the statute assigns a recovery period of seven years to 
motorsports entertainment complexes placed in service before 
January 1, 2018.\65\ For this purpose, a motorsports 
entertainment complex means a racing track facility which (1) 
is permanently situated on land, and (2) during the 36-month 
period following its placed-in-service date, hosts one or more 
racing events for automobiles, (of any type) trucks, or 
motorcycles which are open to the public for the price of 
admission.\66\
---------------------------------------------------------------------------
    \65\Sec. 168(e)(3)(C)(ii) and (i)(15)(D).
    \66\Sec. 168(i)(15)(A).
---------------------------------------------------------------------------
    A motorsports entertainment complex also includes ancillary 
facilities, land improvements (e.g., parking lots, sidewalks, 
waterways, bridges, fences, and landscaping), support 
facilities (e.g., food and beverage retailing, souvenir 
vending, and other nonlodging accommodations), and 
appurtenances associated with such facilities and related 
attractions and amusements (e.g., ticket booths, race track 
surfaces, suites and hospitality facilities, grandstands and 
viewing structures, props, walls, facilities that support the 
delivery of entertainment services, other special purpose 
structures, facades, shop interiors, and buildings).\67\ Such 
ancillary and support facilities must be (1) owned by the 
taxpayer who owns the motorsports entertainment complex, and 
(2) provided for the benefit of patrons of the motorsports 
entertainment complex.
---------------------------------------------------------------------------
    \67\Sec. 168(i)(15)(B).
---------------------------------------------------------------------------
    A motorsports entertainment complex does not include any 
transportation equipment, administrative services assets, 
warehouses, administrative buildings, hotels, or motels.\68\
---------------------------------------------------------------------------
    \68\Sec. 168(i)(15)(C).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that certain depreciation incentives 
encourage State and local economic development. Therefore, the 
Committee believes that the seven-year recovery period for 
motorsports entertainment complex property should be extended.

                        EXPLANATION OF PROVISION

    The provision extends the seven-year recovery period for 
motorsports entertainment complexes for three years to apply to 
property placed in service before January 1, 2021.

                             EFFECTIVE DATE

    The provision applies to property placed in service after 
December 31, 2017.

      5. accelerated depreciation for business property on indian 
    reservations (sec. 115 of the bill and sec. 168(j) of the code)


                              PRESENT LAW

    With respect to certain property used in connection with 
the conduct of a trade or business within an Indian 
reservation, depreciation deductions under section 168(j) are 
determined using the following recovery periods:

 
 
 
3-year property............................................      2 years
5-year property............................................      3 years
7-year property............................................      4 years
10-year property...........................................      6 years
15-year property...........................................      9 years
20-year property...........................................     12 years
Nonresidential real property...............................           22
                                                               years\69\
 

    ``Qualified Indian reservation property'' eligible for 
accelerated depreciation includes property described in the 
table above which is (1) used by the taxpayer predominantly in 
the active conduct of a trade or business within an Indian 
reservation; (2) not used or located outside the reservation on 
a regular basis; (3) not acquired (directly or indirectly) by 
the taxpayer from a person who is related to the taxpayer;\70\ 
and (4) is not property placed in service for purposes of 
conducting or housing certain gaming activities.\71\
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    \69\Section 168(j)(2) does not provide shorter recovery periods for 
water utility property, residential rental property, or railroad 
grading and tunnel bores.
    \70\For these purposes, the term ``related persons'' is defined in 
section 465(b)(3)(C).
    \71\Sec. 168(j)(4)(A).
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    Certain ``qualified infrastructure property'' may be 
eligible for the accelerated depreciation, even if located 
outside an Indian reservation, provided that the purpose of 
such property is to connect with qualified infrastructure 
property located within the reservation (e.g., roads, power 
lines, water systems, railroad spurs, and communications 
facilities).\72\
---------------------------------------------------------------------------
    \72\Sec. 168(j)(4)(C).
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    An ``Indian reservation'' means a reservation as defined in 
section 3(d) of the Indian Financing Act of 1974 (25 U.S.C. 
1452(d))\73\ or section 4(10) of the Indian Child Welfare Act 
of 1978 (25 U.S.C. 1903(10)).\74\ For purposes of the preceding 
sentence, section 3(d) is applied by treating ``former Indian 
reservations in Oklahoma'' as including only lands that are (1) 
within the jurisdictional area of an Oklahoma Indian tribe as 
determined by the Secretary of the Interior, and (2) recognized 
by such Secretary as an area eligible for trust land status 
under 25 C.F.R. Part 151 (as in effect on August 5, 1997).\75\
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    \73\Pub. L. No. 93-262.
    \74\Pub. L. No. 95-608.
    \75\Sec. 168(j)(6).
---------------------------------------------------------------------------
    The depreciation deduction allowed for regular tax purposes 
is also allowed for purposes of the alternative minimum 
tax.\76\
---------------------------------------------------------------------------
    \76\Sec. 168(j)(3). Note that the corporate alternative minimum tax 
was repealed for taxable years beginning after December 31, 2017. See 
An Act to Provide for Reconciliation Pursuant to Titles II and V of the 
Concurrent Resolution on the Budget for Fiscal Year 2018, Pub. L. No. 
115-97, sec. 12001, December 22, 2017.
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    The accelerated depreciation for qualified Indian 
reservation property is available with respect to property 
placed in service before January 1, 2018.\77\ A taxpayer may 
annually make an irrevocable election out of section 168(j) on 
a class-by-class basis.\78\
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    \77\Sec. 168(j)(9).
    \78\Sec. 168(j)(8).
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                           REASONS FOR CHANGE

    To further encourage economic development within and expand 
employment opportunities on Indian reservations, the Committee 
believes accelerated depreciation for qualified Indian 
reservation property should be extended.

                        EXPLANATION OF PROVISION

    The provision extends for three years the accelerated 
depreciation for qualified Indian reservation property to apply 
to property placed in service before January 1, 2021.

                             EFFECTIVE DATE

    The provision applies to property placed in service after 
December 31, 2017.

 6. EXPENSING RULES FOR CERTAIN PRODUCTIONS (SEC. 116 OF THE BILL AND 
                         SEC. 181 OF THE CODE)

                              PRESENT LAW

    Under section 181, a taxpayer may elect\79\ to deduct up to 
$15 million of the aggregate production costs of any qualified 
film, television or live theatrical production, commencing 
prior to January 1, 2018,\80\ in the year the costs are paid or 
incurred by the taxpayer, in lieu of capitalizing the costs and 
recovering them through depreciation allowances once the 
production is placed in service.\81\ The dollar limitation is 
increased to $20 million if a significant amount of the 
production costs are incurred in areas eligible for designation 
as a low-income community or eligible for designation by the 
Delta Regional Authority as a distressed county or isolated 
area of distress.\82\
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    \79\See Treas. Reg. sec. 1.181-2 for rules on making (and revoking) 
an election under section 181.
    \80\For purposes of determining whether a production is eligible 
for section 181 expensing, a qualified film or television production is 
treated as commencing on the first date of principal photography. The 
date on which a qualified live theatrical production commences is the 
date of the first public performance of such production for a paying 
audience.
    \81\Sec. 181(a)(2)(A). See Treas. Reg. sec. 1.181-1 for rules on 
determining eligible production costs. Eligible production costs under 
section 181 include participations and residuals paid or incurred. 
Treas. Reg. sec. 1.181-1(a)(3)(i). The special rule in section 
167(g)(7) that allows taxpayers using the income forecast method of 
depreciation to include participations and residuals that have not met 
the economic performance requirements in the adjusted basis of the 
property for the taxable year the property is placed in service does 
not apply for purposes of section 181. Treas. Reg. sec. 1.181-1(a)(8). 
Thus, under section 181, a taxpayer may only include participations and 
residuals actually paid or incurred in eligible production costs. 
Further, production costs do not include the cost of obtaining a 
production after its initial release or broadcast. See Treas. Reg. sec. 
1.181-1(a)(3). For this purpose, ``initial release or broadcast'' means 
the first commercial exhibition or broadcast of a production to an 
audience. Treas. Reg. sec. 1.181-1(a)(7). Thus, e.g., a taxpayer may 
not expense the purchase of an existing film library under section 181. 
See T.D. 9551, 76 Fed. Reg. 64816, October 19, 2011.
    \82\Sec. 181(a)(2)(B).
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    A section 181 election may only be made by an owner of the 
production.\83\ An owner of a production is any person that is 
required under section 263A to capitalize the costs of 
producing the production into the cost basis of the production, 
or that would be required to do so if section 263A applied to 
that person.\84\ In addition, the aggregate production costs of 
a qualified production that is co-produced include all 
production costs, regardless of funding source, in determining 
if the applicable dollar limit is exceeded. Thus, the term 
``aggregate production costs'' means all production costs paid 
or incurred by any person, whether paid or incurred directly by 
an owner or indirectly on behalf of an owner.\85\ The costs of 
the production in excess of the applicable dollar limitation 
are capitalized and recovered under the taxpayer's method of 
accounting for the recovery of such property once placed in 
service.\86\
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    \83\Treas. Reg. sec. 1.181-1(a).
    \84\Treas. Reg. sec. 1.181-1(a)(2)(i).
    \85\Treas. Reg. sec. 1.181-1(a)(4). See Treas. Reg. sec. 1.181-
2(c)(3) for the information required to be provided to the Internal 
Revenue Service when more than one person will claim deductions under 
section 181 for a production (to ensure that the applicable deduction 
limitation is not exceeded).
    \86\See Joint Committee on Taxation, General Explanation of Tax 
Legislation Enacted in the 110th Congress (JCS-1-09), March 2009, p. 
448; and Treas. Reg. sec. 1.181-1(c)(2). A production is generally 
considered to be placed in service at the time of initial release, 
broadcast, or live staged performance (i.e., at the time of the first 
commercial exhibition, broadcast, or live staged performance of a 
production to an audience). See, e.g., Rev. Rul. 79-285, 1979-2 C.B. 
91; and Priv. Ltr. Rul. 9010011, March 9, 1990. See also, Treas. Reg. 
sec. 1.181-1(a)(7). However, a production generally may not be 
considered to be placed in service if it is only exhibited, broadcasted 
or performed for a limited test audience in advance of the commercial 
exhibition, broadcast, or performance to general audiences. See Priv. 
Ltr. Rul. 9010011 and Treas. Reg. sec. 1.181-1(a)(7).
---------------------------------------------------------------------------
    A qualified film, television, or live theatrical production 
means any production of a motion picture (whether released 
theatrically or directly to video cassette or any other 
format), television program, or live staged play if at least 75 
percent of the total compensation expended on the production is 
for services performed in the United States by actors, 
directors, producers, and other relevant production 
personnel.\87\ Solely for purposes of this rule, the term 
``compensation'' does not include participations and residuals 
(as defined in section 167(g)(7)(B)).\88\
---------------------------------------------------------------------------
    \87\Sec. 181(d)(3)(A).
    \88\Sec. 181(d)(3)(B). Participations and residuals are defined as, 
with respect to any property, costs the amount of which by contract 
varies with the amount of income earned in connection with such 
property. See also Treas. Reg. sec. 1.181-3(c).
---------------------------------------------------------------------------
    Each episode of a television series is treated as a 
separate production, and only the first 44 episodes of a 
particular series qualify under the provision.\89\ Qualified 
productions do not include sexually explicit productions as 
referenced by section 2257 of title 18 of the U.S. Code.\90\
---------------------------------------------------------------------------
    \89\Sec. 181(d)(2)(B).
    \90\Sec. 181(d)(2)(C).
---------------------------------------------------------------------------
    A qualified live theatrical production is defined as a live 
staged production of a play (with or without music) which is 
derived from a written book or script and is produced or 
presented by a commercial entity in any venue which has an 
audience capacity of not more than 3,000, or a series of venues 
the majority of which have an audience capacity of not more 
than 3,000.\91\ In addition, qualified live theatrical 
productions include any live staged production which is 
produced or presented by a taxable entity no more than 10 weeks 
annually in any venue which has an audience capacity of not 
more than 6,500.\92\ In general, in the case of multiple live-
staged productions, each such live-staged production is treated 
as a separate production. Similar to the exclusion for sexually 
explicit productions from the definition of qualified film or 
television productions, qualified live theatrical productions 
do not include stage performances that would be excluded by 
section 2257(h)(1) of title 18 of the U.S. Code, if such 
provision were extended to live stage performances.\93\
---------------------------------------------------------------------------
    \91\Sec. 181(e)(2)(A).
    \92\Sec. 181(e)(2)(D).
    \93\Sec. 181(e)(2)(E).
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    For purposes of recapture under section 1245, any deduction 
allowed under section 181 is treated as if it were a deduction 
allowable for amortization.\94\ Thus, the deduction under 
section 181 may be subject to recapture as ordinary income in 
the taxable year in which (1) the taxpayer revokes a section 
181 election, (2) the production fails to meet the requirements 
of section 181, or (3) the taxpayer sells or otherwise disposes 
of the production.\95\
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    \94\Sec. 1245(a)(2)(C). For a discussion of the recapture rules 
applicable to depreciation and amortization deductions, see Joint 
Committee on Taxation, Background and Present Law Relating to Cost 
Recovery and Domestic Production Activities, (JCX-19-12) February 27, 
2012, pp. 45-46.
    \95\See Treas. Reg. sec. 1.181-4.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    To further encourage investment in and financing of 
domestic film, television, and certain live theatrical 
productions, the Committee believes that section 181 should be 
extended.

                        EXPLANATION OF PROVISION

    The provision extends the special treatment for qualified 
film, television, and live theatrical productions under section 
181 for three years to qualified productions commencing prior 
to January 1, 2021.

                             EFFECTIVE DATE

    The provision applies to productions commencing after 
December 31, 2017.

  7. EMPOWERMENT ZONE TAX INCENTIVES (SEC. 117 OF THE BILL AND SECS. 
            1391, 1394, 1396, 1397A, AND 1397B OF THE CODE)

                              PRESENT LAW

    The Omnibus Budget Reconciliation Act of 1993 (``OBRA 
93'')\96\ authorized the designation of nine empowerment zones 
(``Round I empowerment zones'') to provide tax incentives for 
businesses to locate within certain targeted areas\97\ 
designated by the Secretaries of the Department of Housing and 
Urban Development (``HUD'') and the U.S. Department of 
Agriculture (``USDA''). The first empowerment zones were 
established in large rural areas and large cities. OBRA 93 also 
authorized the designation of 95 enterprise communities,\98\ 
which were located in smaller rural areas and cities.\99\
---------------------------------------------------------------------------
    \96\Pub. L. No. 103-66.
    \97\The targeted areas are those that have pervasive poverty, high 
unemployment, and general economic distress, and that satisfy certain 
eligibility criteria, including specified poverty rates and population 
and geographic size limitations.
    \98\Sec. 1391(b)(1).
    \99\Enterprise communities were eligible for only one tax benefit: 
tax-exempt bond financing. For tax purposes, the areas designated as 
enterprise communities continued as such for the ten-year period 
starting 1995 and ending at the end of 2004. However, after 2004 the 
enterprise communities may still be eligible for other Federal benefits 
(e.g., grants and preferences).
---------------------------------------------------------------------------
    The Taxpayer Relief Act of 1997\100\ authorized the 
designation of two additional urban Round I empowerment zones, 
and 20 additional empowerment zones (``Round II empowerment 
zones''). The Community Renewal Tax Relief Act of 2000 (``2000 
Community Renewal Act'')\101\ authorized a total of 10 new 
empowerment zones (``Round III empowerment zones''), bringing 
the total number of authorized, and not relinquished, 
empowerment zones to 41.\102\ In addition, the 2000 Community 
Renewal Act conformed the tax incentives that are available to 
businesses in the Round I, Round II, and Round III empowerment 
zones, and extended the empowerment zone incentives through 
December 31, 2009. Subsequent legislation, most recently the 
Bipartisan Budget Act of 2018, extended the empowerment zone 
incentives through December 31, 2017.\103\
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    \100\Pub. L. No. 105-34.
    \101\Pub. L. No. 106-554. The 2000 Community Renewal Act also 
authorized the designation of 40 ``renewal communities'' within which 
special tax incentives were available. The tax incentives were 
generally available through December 31, 2009 when the renewal 
community designation expired. One of the tax incentives involving the 
exclusion of capital gain from the sale or exchange of a qualified 
community asset continued through 2014.
    \102\The urban part of the program is administered by HUD and the 
rural part of the program is administered by the USDA. The eight urban 
Round I empowerment zones are Atlanta, GA; Baltimore, MD; Chicago, IL; 
Cleveland, OH; Detroit, MI; Los Angeles, CA; New York, NY; and 
Philadelphia, PA/Camden, NJ. Atlanta relinquished its empowerment zone 
designation in Round III. The three rural Round I empowerment zones are 
Kentucky Highlands, KY; Mid-Delta, MI; and Rio Grande Valley, TX. The 
15 urban Round II empowerment zones are Boston, MA; Cincinnati, OH; 
Columbia, SC; Columbus, OH; Cumberland County, NJ; El Paso, TX; Gary/
Hammond/East Chicago, IN; Ironton, OH/Huntington, WV; Knoxville, TN; 
Miami/Dade County, FL; Minneapolis, MN; New Haven, CT; Norfolk/
Portsmouth, VA; Santa Ana, CA; and St. Louis, Missouri/East St. Louis, 
IL. The five rural Round II empowerment zones are Desert Communities, 
CA; Griggs-Steele, ND; Oglala Sioux Tribe, SD; Southernmost Illinois 
Delta, IL; and Southwest Georgia United, GA. The eight urban Round III 
empowerment zones are Fresno, CA; Jacksonville, FL; Oklahoma City, OK; 
Pulaski County, AR; San Antonio, TX; Syracuse, NY; Tucson, AZ; and 
Yonkers, NY. The two rural Round III empowerment zones are Aroostook 
County, ME; and Futuro, TX.
    \103\Pub. L. No. 111-312, sec. 753 (2010); Pub. L. No. 112-240, 
sec. 327(a) (2013); Pub. L. No. 113-295, sec. 139 (2014); Pub. L. No. 
114-113, Div. Q, sec. 171(a) (2015); and Pub. L. No. 115-123, sec. 
40311 (2018). The empowerment zone tax incentives may expire earlier 
than December 31, 2017 if a State or local government provided for an 
expiration date in the nomination of an empowerment zone, or the 
appropriate Secretary revokes an empowerment zone's designation. The 
State or local government may, however, amend the nomination to provide 
for a new termination date.
---------------------------------------------------------------------------
    The tax incentives available within the designated 
empowerment zones include a Federal income tax credit for 
employers who hire qualifying employees (the ``wage credit''), 
increased expensing of qualifying depreciable property, tax-
exempt bond financing, and deferral of capital gains tax on the 
sale of qualified assets sold and replaced.
    The following is a description of the empowerment zone tax 
incentives as in effect through 2017.

Wage credit

    A 20-percent wage credit is available to employers for the 
first $15,000 of qualified wages paid to each employee (i.e., a 
maximum credit of $3,000 with respect to each qualified 
employee) who (1) is a resident of the empowerment zone, and 
(2) performs substantially all employment services within the 
empowerment zone in a trade or business of the employer.\104\
---------------------------------------------------------------------------
    \104\Sec. 1396. The $15,000 limit is annual, not cumulative, such 
that the limit is the first $15,000 of wages paid in a calendar year 
which ends with or within the taxable year.
---------------------------------------------------------------------------
    The wage credit rate applies to qualifying wages paid 
before January 1, 2018. Wages paid to a qualified employee who 
earns more than $15,000 are eligible for the wage credit 
(although only the first $15,000 of wages is eligible for the 
credit). The wage credit is available with respect to a 
qualified full-time or part-time employee (employed for at 
least 90 days), regardless of the number of other employees who 
work for the employer. In general, any taxable business 
carrying out activities in the empowerment zone may claim the 
wage credit.\105\
---------------------------------------------------------------------------
    \105\However, the wage credit is not available for wages paid in 
connection with certain business activities described in section 
144(c)(6)(B), including a golf course, country club, massage parlor, 
hot tub facility, suntan facility, racetrack, liquor store, or certain 
farming activities. In addition, wages are not eligible for the wage 
credit if paid to: (1) a person who owns more than five percent of the 
stock (or capital or profits interests) of the employer, (2) certain 
relatives of the employer, or (3) if the employer is a corporation or 
partnership, certain relatives of a person who owns more than 50 
percent of the business.
---------------------------------------------------------------------------
    An employer's deduction otherwise allowed for wages paid is 
reduced by the amount of wage credit claimed for that taxable 
year.\106\ Wages are not to be taken into account for purposes 
of the wage credit if taken into account in determining the 
employer's work opportunity tax credit under section 51.\107\ 
In addition, the $15,000 cap is reduced by any wages taken into 
account in computing the work opportunity tax credit.\108\ The 
wage credit may be used to offset up to 25 percent of the 
employer's alternative minimum tax liability.\109\
---------------------------------------------------------------------------
    \106\Sec. 280C(a).
    \107\Sec. 1396(c)(3)(A).
    \108\Sec. 1396(c)(3)(B).
    \109\Sec. 38(c)(2). The corporate alternative minimum tax is 
repealed for taxable years beginning after December 31, 2017. However, 
the full amount of the minimum tax credit will be allowed in taxable 
years beginning before 2022.
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            Increased section 179 expensing limitation
    An enterprise zone business\110\ is allowed up to an 
additional $35,000 of section 179 expensing for qualified zone 
property placed in service before January 1, 2018.\111\ For 
taxable years beginning in 2017, the total amount that may be 
expensed is $545,000.\112\ The section 179 expensing allowed to 
a taxpayer is reduced (but not below zero) by the amount by 
which the cost of qualifying property placed in service during 
the taxable year exceeds a specified dollar amount.\113\ 
However, an enterprise zone business is only required to take 
into account 50 percent of the cost of qualified zone property 
placed in service during the year in determining whether the 
cost of qualifying property exceeds the specified dollar 
amount.\114\
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    \110\Sec. 1397C. The term ``enterprise zone business'' is separate 
and distinct from the term ``enterprise community.'' Enterprise 
community, for purposes of the Code, means the areas designated as such 
under section 1391. Sec. 1393(b). Note, however, that for purposes of 
section 1394 relating to tax-exempt enterprise zone facility bonds, 
references to empowerment zones shall be treated as including 
references to enterprise communities. Sec. 1394(b)(3).
    \111\Sec. 1397A. Note that an Act to Provide for Reconciliation 
Pursuant to Titles II and V of the Concurrent Resolution on the Budget 
for Fiscal Year 2018 provides 100-percent bonus depreciation for 
qualified property acquired and placed in service after September 27, 
2017, and before January 1, 2023. The 100-percent allowance is phased 
down by 20 percent per calendar year for qualified property placed in 
service after December 31, 2022. Qualified property includes MACRS 
property with an applicable recovery period of 20 years or less, and 
therefore generally includes qualified zone property other than 
buildings.
    \112\$510,000 section 179(b)(1) limitation + $35,000 increase for 
qualified zone property = $545,000 maximum dollar limitation. See sec. 
179(b)(1) and Section 3.25 of Rev. Proc. 2016-55, 2016-45 I.R.B. 707. 
For taxable years beginning after 2017, the relevant dollar amount 
under section 179(b)(1) is $1,000,000 (indexed for inflation for 
taxable years beginning after 2018). See also Section 3.25 of Rev. 
Proc. 2018-18, 2018-10 I.R.B. 392.
    \113\For taxable years beginning in 2017, the relevant dollar 
amount is $2,030,000. Sec. 179(b)(2) and Section 3.25 of Rev. Proc. 
2016-55, 2016-45 I.R.B. 707. For taxable years beginning after 2017, 
the relevant dollar amount under section 179(b)(2) is $2,500,000 
(indexed for inflation for taxable years beginning after 2018). See 
also Section 3.25 of Rev. Proc. 2018-18, 2018-10 I.R.B. 392.
    \114\Sec. 1397A(a)(2). For example, assume that during 2017 a 
calendar year taxpayer in an enterprise zone business purchased and 
placed in service $4,500,000 of section 179 property that is qualified 
zone property. The $510,000 section 179(b)(1) dollar amount for 2017 is 
increased to $545,000 (by the lesser of $35,000 or $4,500,000). That 
amount is reduced by the excess section 179 property cost amount of 
$220,000 ((50 percent  $4,500,000) - $2,030,000)). The 
taxpayer's expensing limitation is $325,000 ($545,000 - $220,000). If 
the taxpayer had not been an enterprise zone business, its expensing 
limitation would be zero because the taxpayer would have been fully 
phased out.
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    The term ``qualified zone property'' is defined as 
depreciable tangible property (including buildings) provided 
that (i) the property is acquired by the taxpayer by purchase 
(from an unrelated party) after the date on which the 
designation of the empowerment zone took effect, (ii) the 
original use of the property in an empowerment zone commences 
with the taxpayer, and (iii) substantially all of the use of 
the property is in an empowerment zone in the active conduct of 
a qualified trade or business by the taxpayer in such 
zone.\115\ Special rules are provided in the case of property 
that is substantially renovated by the taxpayer.\116\
---------------------------------------------------------------------------
    \115\Sec. 1397D(a)(1). Note, however, that to be eligible for the 
increased section 179 expensing, the qualified zone property has to 
also meet the definition of section 179 property (e.g., building 
property would only qualify if it constitutes qualified real property 
under section 179(f) (prior to amendments by Pub. L. Nos. 115-97 and 
115-141)).
    \116\Sec. 1397D(a)(2).
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    An enterprise zone business means any qualified business 
entity and any qualified proprietorship. A qualified business 
entity means any corporation or partnership if for such year: 
(1) every trade or business of such entity is the active 
conduct of a qualified business within an empowerment zone; (2) 
at least 50 percent of the total gross income of such entity is 
derived from the active conduct of such business; (3) a 
substantial portion of the use of the tangible property of such 
entity (whether owned or leased) is within an empowerment zone; 
(4) a substantial portion of the intangible property of such 
entity is used in the active conduct of any such business; (5) 
a substantial portion of the services performed for such entity 
by its employees are performed in an empowerment zone; (6) at 
least 35 percent of its employees are residents of an 
empowerment zone; (7) less than five percent of the average of 
the aggregate unadjusted bases of the property of such entity 
is attributable to collectibles other than collectibles that 
are held primarily for sale to customers in the ordinary course 
of such business; and (8) less than five percent of the average 
of the aggregate unadjusted bases of the property of such 
entity is attributable to nonqualified financial property.\117\
---------------------------------------------------------------------------
    \117\Sec. 1397C(b).
---------------------------------------------------------------------------
    A qualified proprietorship is any qualified business 
carried on by an individual as a proprietorship if for such 
year: (1) at least 50 percent of the total gross income of such 
individual from such business is derived from the active 
conduct of such business in an empowerment zone; (2) a 
substantial portion of the use of the tangible property of such 
individual in such business (whether owned or leased) is within 
an empowerment zone; (3) a substantial portion of the 
intangible property of such business is used in the active 
conduct of such business; (4) a substantial portion of the 
services performed for such individual in such business by 
employees of such business are performed in an empowerment 
zone; (5) at least 35 percent of such employees are residents 
of an empowerment zone; (6) less than five percent of the 
average of the aggregate unadjusted bases of the property of 
such individual which is used in such business is attributable 
to collectibles other than collectibles that are held primarily 
for sale to customers in the ordinary course of such business; 
and (7) less than five percent of the average of the aggregate 
unadjusted bases of the property of such individual which is 
used in such business is attributable to nonqualified financial 
property.\118\
---------------------------------------------------------------------------
    \118\Sec. 1397C(c). For these purposes, the term ``employee'' 
includes the proprietor.
---------------------------------------------------------------------------
    A qualified business is defined as any trade or business 
other than a trade or business that consists predominantly of 
the development or holding of intangibles for sale or license 
or any business prohibited in connection with the empowerment 
zone employment credit.\119\ In addition, the leasing of real 
property that is located within the empowerment zone is treated 
as a qualified business only if (1) the leased property is not 
residential rental property, and (2) at least 50 percent of the 
gross rental income from the real property is from enterprise 
zone businesses. The rental of tangible personal property is 
not a qualified business unless at least 50 percent of the 
rental of such property is by enterprise zone businesses or by 
residents of an empowerment zone.
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    \119\Sec. 1397C(d). Excluded businesses include any private or 
commercial golf course, country club, massage parlor, hot tub facility, 
sun tan facility, racetrack or other facility used for gambling, or any 
store the principal business of which is the sale of alcoholic 
beverages for off-premises consumption. Sec. 144(c)(6). Also, a 
qualified business does not include certain large farms. Sec. 
1397C(d)(5)(B).
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            Expanded tax-exempt financing for certain zone facilities
    States or local governments can issue enterprise zone 
facility bonds to raise funds to provide an enterprise zone 
business with qualified zone property.\120\ These bonds can be 
used in areas designated enterprise communities as well as 
areas designated empowerment zones. To qualify, 95 percent (or 
more) of the net proceeds from the bond issue must be used to 
finance: (1) qualified zone property whose principal user is an 
enterprise zone business, and (2) certain land functionally 
related and subordinate to such property.
---------------------------------------------------------------------------
    \120\Sec. 1394.
---------------------------------------------------------------------------
    The term enterprise zone business is the same as that used 
for purposes of the increased section 179 deduction limitation 
(discussed above) with certain modifications for start-up 
businesses. First, an employee is considered a resident of an 
empowerment zone for purposes of the 35-percent in-zone 
employment requirement if they are a resident of an empowerment 
zone, an enterprise community, or a qualified low-income 
community within an applicable nominating jurisdiction.\121\ 
The applicable nominating jurisdiction means, with respect to 
any empowerment zone or enterprise community, any local 
government that nominated such community for designation under 
section 1391. The definition of a qualified low-income 
community is similar to the definition of a low income 
community provided in section 45D(e) (concerning eligibility 
for the new markets tax credit). A ``qualified low-income 
community'' is a population census tract with either (1) a 
poverty rate of at least 20 percent, or (2) median family 
income which does not exceed 80 percent of the greater of 
metropolitan area median family income or statewide median 
family income (for a nonmetropolitan census tract, does not 
exceed 80 percent of statewide median family income). In the 
case of a population census tract located within a high 
migration rural county, low-income is defined by reference to 
85 percent (as opposed to 80 percent) of statewide median 
family income. For this purpose, a high migration rural county 
is any county that, during the 20-year period ending with the 
year in which the most recent census was conducted, has a net 
out-migration of inhabitants from the county of at least 10 
percent of the population of the county at the beginning of 
such period.
---------------------------------------------------------------------------
    \121\Pub. L. No. 114-113, Div. Q, sec. 171 (2015) (effective for 
bonds issued after 2015).
---------------------------------------------------------------------------
    The Secretary is authorized to designate ``targeted 
populations'' as qualified low-income communities. For this 
purpose, a ``targeted population'' is defined by reference to 
section 103(20) of the Riegle Community Development and 
Regulatory Improvement Act of 1994\122\ (the ``Act'') to mean 
individuals, or an identifiable group of individuals, including 
an Indian tribe, who are low-income persons or otherwise lack 
adequate access to loans or equity investments. Section 103(17) 
of the Act provides that ``low-income'' means (1) for a 
targeted population within a metropolitan area, less than 80 
percent of the area median family income; and (2) for a 
targeted population within a nonmetropolitan area, less than 
the greater of (a) 80 percent of the area median family income, 
or (b) 80 percent of the statewide nonmetropolitan area median 
family income.
---------------------------------------------------------------------------
    \122\Pub. L. No. 103-325.
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    Second, a business will be treated as an enterprise zone 
business during a start-up period if (1) at the beginning of 
the period, it is reasonable to expect the business to be an 
enterprise zone business by the end of the start-up period, and 
(2) the business makes bona fide efforts to be an enterprise 
zone business. The start-up period is the period that ends with 
the start of the first tax year beginning more than two years 
after the later of (1) the issue date of the bond issue 
financing the qualified zone property, and (2) the date this 
property is first placed in service (or, if earlier, the date 
that is three years after the issue date).\123\
---------------------------------------------------------------------------
    \123\Sec. 1394(b)(3).
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    Third, a business that qualifies as an enterprise zone 
business at the end of the start-up period must continue to 
qualify during a testing period that ends three tax years after 
the start-up period ends. After the three-year testing period, 
a business will continue to be treated as an enterprise zone 
business as long as 35 percent of its employees are residents 
of an empowerment zone, enterprise community, or a qualified 
low-income community within an applicable nominating 
jurisdiction.
    The face amount of the bonds may not exceed $60 million for 
an empowerment zone in a rural area, $130 million for an 
empowerment zone in an urban area with zone population of less 
than 100,000, and $230 million for an empowerment zone in an 
urban area with zone population of at least 100,000.
            Elective rollover of capital gain from the sale or exchange 
                    of any qualified empowerment zone asset
    Taxpayers can elect to defer recognition of gain on the 
sale of a qualified empowerment zone asset held for more than 
one year and replaced within 60 days by another qualified 
empowerment zone asset in the same zone.\124\ A qualified 
empowerment zone asset generally means stock or a partnership 
interest acquired at original issue for cash in an enterprise 
zone business, or tangible property originally used in an 
enterprise zone business by the taxpayer. The deferral is 
accomplished by reducing the basis of the replacement asset by 
the amount of the gain recognized on the sale of the asset.
---------------------------------------------------------------------------
    \124\Sec. 1397B.
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                           REASONS FOR CHANGE

    To further encourage economic development within and expand 
employment opportunities in empowerment zones, the Committee 
believes that the empowerment zone tax incentives should be 
extended.

                        EXPLANATION OF PROVISION

    The provision extends for three years, through December 31, 
2020, the period for which the designation of an empowerment 
zone is in effect, thus extending for three years the 
empowerment zone tax incentives, including the wage credit, 
increased section 179 expensing for qualifying property, tax-
exempt bond financing, and deferral of capital gains tax on the 
sale of qualified assets replaced with other qualified assets. 
In the case of a designation of an empowerment zone the 
nomination for which included a termination date which is 
December 31, 2017, termination shall not apply with respect to 
such designation if the entity which made such nomination 
amends the nomination to provide for a new termination date in 
such manner as the Secretary may provide.

                             EFFECTIVE DATE

    The provision applies to taxable years beginning after 
December 31, 2017.

  8. AMERICAN SAMOA ECONOMIC DEVELOPMENT CREDIT (SEC. 118 OF THE BILL)

                              PRESENT LAW

    Since 2006, certain domestic corporations have been 
entitled to an economic development credit with respect to 
operations in American Samoa. The credit is not part of the 
Code but is computed based on the rules of former sections 30A, 
199, and 936.
    For taxable years beginning before January 1, 2011, as 
originally enacted, the credit was limited to domestic 
corporations that were existing credit claimants with respect 
to American Samoa who had elected the application of section 
936 for its last taxable year beginning before January 1, 2006. 
The credit is based on the corporation's economic activity-
based limitation with respect to American Samoa. An existing 
claimant is a domestic corporation that (1) was engaged in the 
active conduct of a trade or business within American Samoa on 
October 13, 1995, and (2) elected the benefits of the 
possession tax credit\125\ in an election in effect for its 
taxable year that included October 13, 1995.\126\ A corporation 
that added a substantial new line of business (other than in a 
qualifying acquisition of all the assets of a trade or business 
of an existing credit claimant) ceased to be an existing credit 
claimant as of the close of the taxable year ending before the 
date on which that new line of business was added.
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    \125\For taxable years beginning before January 1, 2006, certain 
domestic corporations with business operations in the U.S. possessions 
were eligible for the possession tax credit. Secs. 27(b) and 936. This 
credit offset the U.S. tax imposed on certain income related to 
operations in the U.S. possessions. Subject to certain limitations, the 
amount of the possession tax credit allowed to any domestic corporation 
equaled the portion of that corporation's U.S. tax that was 
attributable to the corporation's non-U.S. source taxable income from 
(1) the active conduct of a trade or business within a U.S. possession, 
(2) the sale or exchange of substantially all of the assets that were 
used in such a trade or business, or (3) certain possessions 
investment. No deduction or foreign tax credit was allowed for any 
possessions or foreign tax paid or accrued with respect to taxable 
income that was taken into account in computing the credit under 
section 936. Under the economic activity-based limit, the amount of the 
credit could not exceed an amount equal to the sum of (1) 60 percent of 
the taxpayer's qualified possession wages and allocable employee fringe 
benefit expenses, (2) 15 percent of depreciation allowances with 
respect to short-life qualified tangible property, plus 40 percent of 
depreciation allowances with respect to medium-life qualified tangible 
property, plus 65 percent of depreciation allowances with respect to 
long-life qualified tangible property, and (3) in certain cases, a 
portion of the taxpayer's possession income taxes. A taxpayer could 
elect, instead of the economic activity-based limit, a limit equal to 
the applicable percentage of the credit that otherwise would have been 
allowable with respect to possession business income, beginning in 
1998, the applicable percentage was 40 percent.
    To qualify for the possession tax credit for a taxable year, a 
domestic corporation was required to satisfy two conditions. First, the 
corporation was required to derive at least 80 percent of its gross 
income for the three-year period immediately preceding the close of the 
taxable year from sources within a possession. Second, the corporation 
was required to derive at least 75 percent of its gross income for that 
same period from the active conduct of a possession business. Sec. 
936(a)(2). The section 936 credit generally expired for taxable years 
beginning after December 31, 2005.
    \126\A corporation will qualify as an existing credit claimant if 
it acquired all the assets of a trade or business of a corporation that 
(1) actively conducted that trade or business in a possession on 
October 13, 1995, and (2) had elected the benefits of the possession 
tax credit in an election in effect for the taxable year that included 
October 13, 1995.
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    The amount of the credit allowed to a qualifying domestic 
corporation under the provision is equal to the sum of the 
amounts used in computing the corporation's economic activity-
based limitation with respect to American Samoa, except that no 
credit is allowed for the amount of any American Samoa income 
taxes. Thus, for any qualifying corporation the amount of the 
credit equals the sum of (1) 60 percent of the corporation's 
qualified American Samoa wages and allocable employee fringe 
benefit expenses and (2) 15 percent of the corporation's 
depreciation allowances with respect to short-life qualified 
American Samoa tangible property, plus 40 percent of the 
corporation's depreciation allowances with respect to medium-
life qualified American Samoa tangible property, plus 65 
percent of the corporation's depreciation allowances with 
respect to long-life qualified American Samoa tangible 
property.
    The section 936(c) rule denying a credit or deduction for 
any possessions or foreign tax paid with respect to taxable 
income taken into account in computing the credit under section 
936 does not apply with respect to the credit allowed by the 
provision.
    For taxable years beginning after December 31, 2011, the 
credit rules are modified in two ways. First, domestic 
corporations with operations in American Samoa are allowed the 
credit even if those corporations are not existing credit 
claimants. Second, the credit is available to a domestic 
corporation (either an existing credit claimant or a new credit 
claimant) only if the corporation has qualified production 
activities income (as defined in section 199(c) by substituting 
``American Samoa'' for ``the United States'' in each place that 
the latter term appears).
    In the case of a corporation that is an existing credit 
claimant with respect to American Samoa and that elected the 
application of section 936 for its last taxable year beginning 
before January 1, 2006, the credit applies to the first 12 
taxable years of the corporation which begin after December 31, 
2005, and before January 1, 2018. For any other corporation, 
the credit applies to the first six taxable years of that 
corporation which begin after December 31, 2011, and before 
January 1, 2018.

                           REASONS FOR CHANGE

    To further encourage economic development in American 
Samoa, the Committee believes the American Samoa economic 
development credit should be extended.

                        EXPLANATION OF PROVISION

    The provision extends the credit for three years to apply 
(a) in the case of a corporation that is an existing credit 
claimant with respect to American Samoa and that elected the 
application of section 936 for its last taxable year beginning 
before January 1, 2006, to the first 15 taxable years of the 
corporation which begin after December 31, 2005, and before 
January 1, 2021, and (b) in the case of any other corporation, 
to the first nine taxable years of the corporation which begin 
after December 31, 2011 and before January 1, 2021.
    For purposes of this credit, the Code is applied without 
regard to the repeal of sections 30A and 936 in 2018,\127\ or 
the repeal of section 199 in 2017.\128\
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    \127\See The Consolidated Appropriations Act 2018, Pub. L. No. 115-
141, Division U, Title IV, at sec. 401(d)(1)(C) (the repeal of section 
936) and sec. 401(d)(1)(D)(viii)(I) (definition of intangible property 
added to section 367(d)) (March 23, 2018).
    \128\Pub. L. 115-97, section 13305(a).
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                             EFFECTIVE DATE

    The provision is effective for taxable years beginning 
after December 31, 2017.

C. Incentives for Energy Production, Efficiency, and Green Economy Jobs


1. BIODIESEL AND RENEWABLE DIESEL (SEC. 121 OF THE BILL AND SEC. 40A OF 
                               THE CODE)

                              PRESENT LAW

            Biodiesel
    Present law provides an income tax credit for biodiesel 
fuels (the ``biodiesel fuels credit''). The biodiesel fuels 
credit is the sum of three credits: (1) the biodiesel mixture 
credit, (2) the biodiesel credit, and (3) the small agri-
biodiesel producer credit. The biodiesel fuels credit is 
treated as a general business credit. The amount of the 
biodiesel fuels credit is includible in gross income. The 
biodiesel fuels credit is coordinated to take into account 
benefits from the biodiesel excise tax credit and payment 
provisions discussed below. The credit does not apply to fuel 
sold or used after December 31, 2017.
    Biodiesel is monoalkyl esters of long chain fatty acids 
derived from plant or animal matter that meet (1) the 
registration requirements established by the EPA under section 
211 of the Clean Air Act (42 U.S.C. sec. 7545) and (2) the 
requirements of the American Society of Testing and Materials 
(``ASTM'') D6751. Agri-biodiesel is biodiesel derived solely 
from virgin oils including oils from corn, soybeans, sunflower 
seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, 
flaxseeds, rice bran, mustard seeds, camelina, or animal fats.
    Biodiesel may be taken into account for purposes of the 
credit only if the taxpayer obtains a certification (in such 
form and manner as prescribed by the Secretary) from the 
producer or importer of the biodiesel that identifies the 
product produced and the percentage of biodiesel and agri-
biodiesel in the product.
            Biodiesel mixture credit
    The biodiesel mixture credit is $1.00 for each gallon of 
biodiesel (including agri-biodiesel) used by the taxpayer in 
the production of a qualified biodiesel mixture. A qualified 
biodiesel mixture is a mixture of biodiesel and diesel fuel 
that is (1) sold by the taxpayer producing such mixture to any 
person for use as a fuel, or (2) used as a fuel by the taxpayer 
producing such mixture. The sale or use must be in the trade or 
business of the taxpayer and is to be taken into account for 
the taxable year in which such sale or use occurs. No credit is 
allowed with respect to any casual off-farm production of a 
qualified biodiesel mixture.
    Per IRS guidance a mixture need only contain 1/10th of one 
percent of diesel fuel to be a qualified mixture. Thus, a 
qualified biodiesel mixture can contain 99.9 percent biodiesel 
and 0.1 percent diesel fuel.
            Biodiesel credit (B-100)
    The biodiesel credit is $1.00 for each gallon of biodiesel 
that is not in a mixture with diesel fuel (100 percent 
biodiesel or B-100) and which during the taxable year is (1) 
used by the taxpayer as a fuel in a trade or business or (2) 
sold by the taxpayer at retail to a person and placed in the 
fuel tank of such person's vehicle.
            Small agri-biodiesel producer credit
    The Code provides a small agri-biodiesel producer income 
tax credit, in addition to the biodiesel and biodiesel mixture 
credits. The credit is 10 cents per gallon for up to 15 million 
gallons of agri-biodiesel produced by small producers, defined 
generally as persons whose agri-biodiesel production capacity 
does not exceed 60 million gallons per year. The agri-biodiesel 
must (1) be sold by such producer to another person (a) for use 
by such other person in the production of a qualified biodiesel 
mixture in such person's trade or business (other than casual 
off-farm production), (b) for use by such other person as a 
fuel in a trade or business, or, (c) who sells such agri-
biodiesel at retail to another person and places such agri-
biodiesel in the fuel tank of such other person; or (2) used by 
the producer for any purpose described in (a), (b), or (c).
            Biodiesel mixture excise tax credit
    The Code also provides an excise tax credit for biodiesel 
mixtures. The credit is $1.00 for each gallon of biodiesel used 
by the taxpayer in producing a biodiesel mixture for sale or 
use in a trade or business of the taxpayer. A biodiesel mixture 
is a mixture of biodiesel and diesel fuel that (1) is sold by 
the taxpayer producing such mixture to any person for use as a 
fuel or (2) is used as a fuel by the taxpayer producing such 
mixture. No credit is allowed unless the taxpayer obtains a 
certification (in such form and manner as prescribed by the 
Secretary) from the producer of the biodiesel that identifies 
the product produced and the percentage of biodiesel and agri-
biodiesel in the product.
    The credit is not available for any sale or use for any 
period after December 31, 2017. This excise tax credit is 
coordinated with the income tax credit for biodiesel such that 
credit for the same biodiesel cannot be claimed for both income 
and excise tax purposes.
            Payments with respect to biodiesel fuel mixtures
    If any person produces a biodiesel fuel mixture in such 
person's trade or business, the Secretary is to pay such person 
an amount equal to the biodiesel mixture credit. The biodiesel 
fuel mixture credit must first be taken against tax liability 
for taxable fuels. To the extent the biodiesel fuel mixture 
credit exceeds such tax liability, the excess may be received 
as a payment. Thus, if the person has no section 4081 
liability, the credit is refundable. The Secretary is not 
required to make payments with respect to biodiesel fuel 
mixtures sold or used after December 31, 2017.
            Renewable diesel
    Renewable diesel is liquid fuel that (1) is derived from 
biomass (as defined in section 45K(c)(3)), (2) meets the 
registration requirements for fuels and fuel additives 
established by the EPA under section 211 of the Clean Air Act, 
and (3) meets the requirements of the ASTM D975 or D396, or 
equivalent standard established by the Secretary. ASTM D975 
provides standards for diesel fuel suitable for use in diesel 
engines. ASTM D396 provides standards for fuel oil intended for 
use in fuel-oil burning equipment, such as furnaces. Renewable 
diesel also includes fuel derived from biomass that meets the 
requirements of a Department of Defense specification for 
military jet fuel or an ASTM specification for aviation turbine 
fuel.
    For purposes of the Code, renewable diesel is generally 
treated the same as biodiesel. In the case of renewable diesel 
that is aviation fuel, kerosene is treated as though it were 
diesel fuel for purposes of a qualified renewable diesel 
mixture. Like biodiesel, the incentive may be taken as an 
income tax credit, an excise tax credit, or as a payment from 
the Secretary. The incentive for renewable diesel is $1.00 per 
gallon. There is no small producer credit for renewable diesel. 
The incentives for renewable diesel expired after December 31, 
2017.

                           REASONS FOR CHANGE

    To encourage the domestic production of biodiesel fuel, the 
Committee believes that the income tax credit, excise tax 
credit, and payment provisions for biodiesel and renewable 
diesel should be extended.

                        EXPLANATION OF PROVISION

    The provision extends the present-law income tax credit, 
excise tax credit and payment provisions for biodiesel and 
renewable diesel through December 31, 2020. The provision 
creates a special rule to address claims regarding excise tax 
credits and claims for payment for fuel sold or used during the 
period beginning on January 1, 2018, through the close of the 
last calendar quarter beginning before the date of enactment. 
In particular, the provision directs the Secretary to issue 
guidance within 30 days of the date of enactment. Such guidance 
is to provide for a one-time submission of claims covering 
those periods. The guidance is to provide for a 180-day period 
for the submission of such claims (in such manner as prescribed 
by the Secretary) to begin no later than 30 days after such 
guidance is issued. Such claims shall be paid by the Secretary 
of the Treasury not later than 60 days after receipt. If the 
claim is not paid within 60 days of the date of the filing, the 
claim shall be paid with interest from such date determined by 
using the overpayment rate and method under section 6621.

                             EFFECTIVE DATE

    The provision applies to fuel sold or used after December 
31, 2017.

2. SECOND GENERATION BIOFUEL PRODUCER CREDIT (SEC. 122 OF THE BILL AND 
                          SEC. 40 OF THE CODE)

                              PRESENT LAW

    The second generation biofuel producer credit is a 
nonrefundable income tax credit that a producer may claim for 
each gallon of qualified second generation biofuel production 
for the taxable year. The amount of the credit per gallon is 
$1.01. The provision does not apply to qualified second 
generation biofuel production after December 31, 2017.
    ``Qualified second generation biofuel production'' is any 
second generation biofuel which is produced by the taxpayer and 
which, during the taxable year, is: (1) sold by the taxpayer to 
another person (a) for use by such other person in the 
production of a qualified second generation biofuel mixture in 
such person's trade or business (other than casual off-farm 
production), (b) for use by such other person as a fuel in a 
trade or business, or (c) who sells such second generation 
biofuel at retail to another person and places such cellulosic 
biofuel in the fuel tank of such other person; or (2) used by 
the producer for any purpose described in (1)(a), (b), or 
(c).\129\ Special rules apply for fuel derived from algae.
---------------------------------------------------------------------------
    \129\In addition, for fuels derived from algae, cyanobacterial or 
lemna, a special rule provides that qualified second generation biofuel 
includes fuel that is sold by the taxpayer to another person for 
refining by such other person into a fuel that meets the registration 
requirements for fuels and fuel additives under section 211 of the 
Clean Air Act.
---------------------------------------------------------------------------
    ``Second generation biofuel'' means any liquid fuel that 
(1) is produced in the United States and used as fuel in the 
United States, (2) is derived by or from qualified feedstocks 
and (3) meets the registration requirements for fuels and fuel 
additives established by the Environmental Protection Agency 
(``EPA'') under section 211 of the Clean Air Act. ``Qualified 
feedstock'' means any lignocellulosic or hemicellulosic matter 
that is available on a renewable or recurring basis, and any 
cultivated algae, cyanobacteria or lemna. Second generation 
biofuel does not include fuels that (1) are more than four 
percent (determined by weight) water and sediment in any 
combination, (2) have an ash content of more than one percent 
(determined by weight), or (3) have an acid number greater than 
25 (``unprocessed or excluded fuels''). It also does not 
include any alcohol with a proof of less than 150.
    The second generation biofuel producer credit cannot be 
claimed unless the taxpayer is registered by the Internal 
Revenue Service (``IRS'') as a producer of second generation 
biofuel. Second generation biofuel eligible for the section 40 
credit is precluded from qualifying as biodiesel, renewable 
diesel, or alternative fuel for purposes of the applicable 
income tax credit, excise tax credit, or payment provisions 
relating to those fuels.
    Because it is a credit under section 40(a), the second 
generation biofuel producer credit is part of the general 
business credits in section 38. However, the credit can only be 
carried forward three taxable years after the termination of 
the credit. The credit is also allowable against the 
alternative minimum tax. Under section 87, the credit is 
included in gross income.

                           REASONS FOR CHANGE

    To further encourage the domestic production of second 
generation biofuels, the Committee believes that the second 
generation biofuel producer credit should be extended.

                        EXPLANATION OF PROVISION

    The provision extends the credit for three years, through 
December 31, 2020.

                             EFFECTIVE DATE

    The provision applies to qualified second generation 
biofuel production after December 31, 2017.

 3. NONBUSINESS ENERGY PROPERTY (SEC. 123 OF THE BILL AND SEC. 25C OF 
                               THE CODE)

                              PRESENT LAW

    A 10-percent credit is available for the purchase of 
qualified energy efficiency improvements to existing 
homes.\130\ A qualified energy efficiency improvement is any 
energy efficient building envelope component (1) that is 
installed in or on a dwelling located in the United States and 
owned and used by the taxpayer as the taxpayer's principal 
residence, (2) the original use of which commences with the 
taxpayer, and (3) that reasonably can be expected to remain in 
use for at least five years. The credit is nonrefundable.
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    \130\Sec. 25C.
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    Energy efficient building envelope components are building 
envelope components that meet (1) the applicable Energy Star 
program requirements, in the case of a roof or roof products, 
(2) version 6.0 Energy Star program requirements, in the case 
of an exterior window, a skylights, or an exterior door, and 
(3) the prescriptive criteria for such components established 
by the 2009 International Energy Conservation Code, as in 
effect on the date of enactment of the American Recovery and 
Reinvestment Tax Act of 2009, in the case of any other 
component.
    Building envelope components are (1) insulation materials 
or systems which are specifically and primarily designed to 
reduce the heat loss or gain for a dwelling when installed in 
or on such dwelling unit, (2) exterior windows (including 
skylights), (3) exterior doors, and (4) metal or asphalt roofs 
installed on a dwelling unity, but only if such roof has 
appropriate pigmented coatings or cooling granules that are 
specifically and primarily designed to reduce the heat gain for 
a dwelling.
    Additionally, credits are also available for the purchase 
of specific energy efficient property originally placed in 
service by the taxpayer during the taxable year. The allowable 
credit for the purchase of certain property is (1) $50 for each 
advanced main air circulating fan, (2) $150 for each qualified 
natural gas, propane, or oil furnace or hot water boiler, and 
(3) $300 for each item of energy efficient building property.
    An advanced main air circulating fan is a fan used in a 
natural gas, propane, or oil furnace and which has an annual 
electricity use of no more than two percent of the total annual 
energy use of the furnace (as determined in the standard 
Department of Energy test procedures).
    A qualified natural gas, propane, or oil furnace or hot 
water boiler is a natural gas, propane, or oil furnace or hot 
water boiler with an annual fuel utilization efficiency rate of 
at least 95.
    Energy-efficient building property is: (1) an electric heat 
pump water heater which yields an energy factor of at least 2.0 
in the standard Department of Energy test procedure, (2) an 
electric heat pump which achieves the highest efficiency tier 
established by the Consortium for Energy Efficiency, as in 
effect on January 1, 2009,\131\ (3) a central air conditioner 
which achieves the highest efficiency tier established by the 
Consortium for Energy Efficiency as in effect on January 1, 
2009,\132\ (4) a natural gas, propane, or oil water heater 
which has an energy factor of at least 0.82 or thermal 
efficiency of at least 90 percent, and (5) a stove which burns 
biomass fuel to heat a dwelling unit located in the United 
States and used as a residence by the taxpayer, or to heat 
water for use in such dwelling unity, and which has a thermal 
efficiency rating of at least 75 percent. Biomass fuel is any 
plant-derived fuel available on a renewable or recurring basis, 
including agricultural crops and trees, wood and wood waste and 
residues (including wood pellets), plants (including aquatic 
plants), grasses, residues, and fibers.
---------------------------------------------------------------------------
    \131\These standards are a seasonal energy efficiency ratio 
(``SEER'') greater than or equal to 15, an energy efficiency ratio 
(``EER'') greater than or equal to 12.5, and heating seasonal 
performance factor (``HSPF'') greater than or equal to 8.5 for split 
heat pumps, and SEER greater than or equal to 14, EER greater than or 
equal to 12, and HSPF greater than or equal to 8.0 for packaged heat 
pumps.
    \132\These standards are a SEER greater than or equal to 16 and EER 
greater than or equal to 13 for split systems, and SEER greater than or 
equal to 14 and EER greater than or equal to 12 for packaged systems.
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    Generally, the credit is available for property placed in 
service prior to January 1, 2018. The maximum credit for a 
taxpayer for all taxable years is $500, and no more than $200 
of such credit may be attributable to expenditures on windows.
    The taxpayer's basis in the property is reduced by the 
amount of the credit. Special proration rules apply in the case 
of jointly owned property, condominiums, and tenant-
stockholders in cooperative housing corporations. If less than 
80 percent of the property is used for nonbusiness purposes, 
only that portion of expenditures that is used for nonbusiness 
purposes is taken into account.
    For purposes of determining the amount of expenditures made 
by any individual with respect to any dwelling unit, 
expenditures which are made from subsidized energy financing 
are not taken into account. The term ``subsidized energy 
financing'' means financing provided under a Federal, State, or 
local program a principal purpose of which is to provide 
subsidized financing for projects designed to conserve or 
produce energy.

                           REASONS FOR CHANGE

    The Committee believes that it is in the national interest 
to conserve energy and that many existing homes continue to be 
inadequately insulated and have inefficient heating, 
ventilation, and cooling equipment. Therefore, the Committee 
believes that the nonbusiness energy efficient property credit 
should be extended.

                        EXPLANATION OF PROVISION

    The provision extends the nonbusiness energy property 
credit for three years, through December 31, 2020. The 
provision also updates the credit's requirements to reflect the 
fact that the Department of Energy has replaced the energy 
factor previously used to measure efficiency with a new 
standard called the uniform energy factor.

                             EFFECTIVE DATE

    The provision is effective for property placed in service 
after December 31, 2017.

 4. QUALIFIED FUEL CELL MOTOR VEHICLES (SEC. 124 OF THE BILL AND SEC. 
                            30B OF THE CODE)

                              PRESENT LAW

    A credit is available through 2017 for vehicles propelled 
by chemically combining oxygen with hydrogen and creating 
electricity (``fuel cell vehicles'').\133\ The base credit is 
$4,000 for vehicles weighing 8,500 pounds or less. Heavier 
vehicles can get up to a $40,000 credit, depending on their 
weight. An additional $1,000 to $4,000 credit is available to 
cars and light trucks to the extent their fuel economy exceeds 
the 2002 base fuel economy set forth in the Code.
---------------------------------------------------------------------------
    \133\Sec. 30B.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that further investments in advanced 
technology vehicles are necessary to transform automotive 
transportation in the United States to be cleaner, more fuel 
efficient, and less reliant on petroleum fuels. Therefore, the 
Committee believes the credit for fuel cell motor vehicles 
should be extended.

                        EXPLANATION OF PROVISION

    The provision extends the credit for fuel cell vehicles for 
three years, through December 31, 2020.

                             EFFECTIVE DATE

    The provision applies to property purchased after December 
31, 2017.

5. ALTERNATIVE FUEL REFUELING PROPERTY CREDIT (SEC. 125 OF THE BILL AND 
                         SEC. 30C OF THE CODE)

                              PRESENT LAW

    Taxpayers may claim a 30-percent credit for the cost of 
installing qualified clean-fuel vehicle refueling property to 
be used in a trade or business of the taxpayer or installed at 
the principal residence of the taxpayer.\134\ The credit may 
not exceed $30,000 per taxable year per location, in the case 
of qualified refueling property used in a trade or business and 
$1,000 per taxable year per location, in the case of qualified 
refueling property installed on property which is used as a 
principal residence.
---------------------------------------------------------------------------
    \134\Sec. 30C.
---------------------------------------------------------------------------
    Qualified refueling property is property (not including a 
building or its structural components) for the storage or 
dispensing of a clean-burning fuel or electricity into the fuel 
tank or battery of a motor vehicle propelled by such fuel or 
electricity, but only if the storage or dispensing of the fuel 
or electricity is at the point of delivery into the fuel tank 
or battery of the motor vehicle. The original use of such 
property must begin with the taxpayer.
    Clean-burning fuels are any fuel at least 85 percent of the 
volume of which consists of ethanol, natural gas, compressed 
natural gas, liquefied natural gas, liquefied petroleum gas, or 
hydrogen. In addition, any mixture of biodiesel and diesel 
fuel, determined without regard to any use of kerosene and 
containing at least 20 percent biodiesel, qualifies as a clean 
fuel.
    Credits for qualified refueling property used in a trade or 
business are part of the general business credit and may be 
carried back for one year and forward for 20 years. Credits for 
residential qualified refueling property cannot exceed for any 
taxable year the difference between the taxpayer's regular tax 
(reduced by certain other credits) and the taxpayer's tentative 
minimum tax. Generally, in the case of qualified refueling 
property sold to a tax-exempt entity, the taxpayer selling the 
property may claim the credit.
    A taxpayer's basis in qualified refueling property is 
reduced by the amount of the credit. In addition, no credit is 
available for property used outside the United States or for 
which an election to expense has been made under section 179.
    The credit is available for property placed in service 
before January 1, 2018.

                           REASONS FOR CHANGE

    The Committee believes that further investments in advanced 
technology vehicles and related infrastructure are necessary to 
transform automotive transportation in the United States to be 
cleaner, more fuel efficient, and less reliant on petroleum 
fuels. Therefore, the Committee believes the credit for 
alternative fuel refueling property should be extended.

                        EXPLANATION OF PROVISION

    The provision extends for three years the 30-percent credit 
for alternative fuel refueling property, through December 31, 
2020.

                             EFFECTIVE DATE

    The provision applies to property placed in service after 
December 31, 2017.

 6. EXTENSION OF CREDIT FOR ELECTRIC MOTORCYCLES (SEC. 126 OF THE BILL 
                       AND SEC. 30D OF THE CODE)

                              PRESENT LAW

    In general, for vehicles acquired before 2018, a 10-percent 
credit is available for qualifying plug-in electric 
motorcycles.\135\ Qualifying electric motorcycles must have a 
battery capacity of at least 2.5 kilowatt-hours, be 
manufactured primarily for use on public streets, roads, and 
highways, and be capable of achieving speeds of at least 45 
miles per hour. The maximum credit for any qualifying vehicle 
is $2,500.
---------------------------------------------------------------------------
    \135\Sec. 30D(g). The credit lapsed and was not available for 
vehicles placed in service in calendar year 2014. Before 2014, the 
credit was also available for qualified vehicles having 3-wheels.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that further investments in advanced 
technology vehicles are necessary to transform automotive 
transportation in the United States to be cleaner, more fuel 
efficient, and less reliant on petroleum fuels. Therefore, the 
Committee believes the credit for electric motorcycles should 
be extended.

                        EXPLANATION OF PROVISION

    The provision extends the electric motorcycles credit for 
three years, through December 31, 2020.

                             EFFECTIVE DATE

    The provision applies to vehicles acquired after December 
31, 2017.

  7. CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN RENEWABLE RESOURCES 
             (SEC. 127 OF THE BILL AND SEC. 45 OF THE CODE)

                              PRESENT LAW

            Renewable electricity production credit
    An income tax credit is allowed for the production of 
electricity from qualified energy resources at qualified 
facilities (the ``renewable electricity production 
credit'').\136\ Qualified energy resources comprise wind, 
closed-loop biomass, open-loop biomass, geothermal energy, 
municipal solid waste, qualified hydropower production, and 
marine and hydrokinetic renewable energy. Qualified facilities 
are, generally, facilities that generate electricity using 
qualified energy resources. To be eligible for the credit, 
electricity produced from qualified energy resources at 
qualified facilities must be sold by the taxpayer to an 
unrelated person.
---------------------------------------------------------------------------
    \136\Sec. 45. In addition to the renewable electricity production 
credit, section 45 also provides income tax credits for the production 
of Indian coal and refined coal at qualified facilities.

                   SUMMARY OF CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN RENEWABLE RESOURCES
----------------------------------------------------------------------------------------------------------------
 Eligible electricity production activity (sec.    Credit amount for 2019\1\
                      45)                          (cents per kilowatt-hour)             Expiration\2\
----------------------------------------------------------------------------------------------------------------
Wind...........................................                           2.5  December 31, 2019
Closed-loop biomass............................                           2.5  December 31, 2017
Open-loop biomass (including agricultural                                 1.2  December 31, 2017
 livestock waste nutrient facilities).
Geothermal.....................................                           2.5  December 31, 2017
Municipal solid waste (including landfill gas                             1.2  December 31, 2017
 facilities and trash combustion facilities).
Qualified hydropower...........................                           1.2  December 31, 2017
Marine and hydrokinetic........................                           1.2  December 31, 2017
----------------------------------------------------------------------------------------------------------------
\1\In general, the credit is available for electricity produced during the first 10 years after a facility has
  been placed in service. For wind facilities, the credit is reduced by 20 percent for facilities the
  construction of which begins in calendar year 2017, by 40 percent for facilities the construction of which
  begins in calendar year 2018, and by 60 percent for facilities the construction of which begins in calendar
  year 2019.
\2\Expires for property the construction of which begins after this date.

            Election to claim energy credit in lieu of renewable 
                    electricity production credit
    A taxpayer may make an irrevocable election to have certain 
property which is part of a qualified renewable electricity 
production facility be treated as energy property eligible for 
a 30 percent investment credit under section 48. For wind 
facilities, the credit is reduced by 20 percent for facilities 
the construction of which begins in calendar year 2017, by 40 
percent for facilities the construction of which begins in 
calendar year 2018, and by 60 percent for facilities the 
construction of which begins in calendar year 2019. For 
purposes of the investment credit, qualified facilities are 
facilities otherwise eligible for the renewable electricity 
production credit with respect to which no credit under section 
45 has been allowed. A taxpayer electing to treat a facility as 
energy property may not claim the renewable electricity 
production credit. The eligible basis for the investment credit 
for taxpayers making this election is the basis of the 
depreciable (or amortizable) property that is part of a 
facility capable of generating electricity eligible for the 
renewable electricity production credit.

                           REASONS FOR CHANGE

    The Committee believes that extending the existing 
incentives for the production of electricity from renewable 
resources will help limit the environmental consequences of 
continued reliance on power generated using fossil fuels.

                        EXPLANATION OF PROVISION

    For renewable power facilities, the provision extends for 
three years (one year in the case of wind facilities), through 
December 31, 2020, the beginning of construction deadline for 
the renewable electricity production credit and the election to 
claim the energy credit in lieu of the electricity production 
credit. For wind facilities the construction of which begins in 
calendar year 2020, the credit is reduced by 60 percent.

                             EFFECTIVE DATE

    The provision takes effect January 1, 2018.

8. ENERGY-EFFICIENT HOMES CREDIT (SEC. 129 OF THE BILL AND SEC. 45L OF 
                               THE CODE)

                              PRESENT LAW

    A credit is available to an eligible contractor for each 
qualified new energy-efficient home that is constructed by the 
eligible contractor and acquired by a person from such eligible 
contractor for use as a residence during the taxable year. To 
qualify as a new energy-efficient home, the home must be: (1) a 
dwelling located in the United States, (2) substantially 
completed after August 8, 2005, and (3) certified in accordance 
with guidance prescribed by the Secretary to have a projected 
level of annual heating and cooling energy consumption that 
meets the standards for either a 30-percent or 50-percent 
reduction in energy usage, compared to a comparable dwelling 
constructed in accordance with the standards of chapter 4 of 
the 2006 International Energy Conservation Code as in effect 
(including supplements) on January 1, 2006, and any applicable 
Federal minimum efficiency standards for equipment. With 
respect to homes that meet the 30-percent standard, one-third 
of such 30-percent savings must come from the building 
envelope, and with respect to homes that meet the 50-percent 
standard, one-fifth of such 50-percent savings must come from 
the building envelope.
    Manufactured homes that conform to Federal manufactured 
home construction and safety standards are eligible for the 
credit provided all the criteria for the credit are met. The 
eligible contractor is the person who constructed the home, or 
in the case of a manufactured home, the producer of such home.
    The credit equals $1,000 in the case of a new home that 
meets the 30-percent standard and $2,000 in the case of a new 
home that meets the 50-percent standard. Only manufactured 
homes are eligible for the $1,000 credit.
    In lieu of meeting the standards of chapter 4 of the 2006 
International Energy Conservation Code, manufactured homes 
certified by a method prescribed by the Administrator of the 
Environmental Protection Agency under the Energy Star Labeled 
Homes program are eligible for the $1,000 credit provided 
criteria (1) and (2), above, are met.
    The credit applies to homes that are purchased prior to 
January 1, 2018.

                           REASONS FOR CHANGE

    The Committee believes that it is in the national interest 
to conserve energy. The Committee further recognizes that 
residential energy use for heating and cooling represents a 
significant share of national energy consumption and 
accordingly believes that measures to reduce heating and 
cooling energy requirements have the potential to reduce 
national energy consumption. The Committee also recognizes that 
the most cost-effective time to achieve home energy efficiency 
is when the home is under construction. Therefore, the 
Committee believes the credit for energy-efficient homes should 
be extended.

                        EXPLANATION OF PROVISION

    The provision extends the credit for three years, to homes 
that are acquired prior to January 1, 2021.

                             EFFECTIVE DATE

    The provision applies to homes acquired after December 31, 
2017.

9. special allowance for second generation biofuel plant property (sec. 
              130 of the bill and sec. 168(l) of the code)


                              PRESENT LAW

            In general
    A taxpayer generally must capitalize the cost of property 
used in a trade or business or held for the production of 
income and recover such cost over time through annual 
deductions for depreciation or amortization.\137\ The period 
for depreciation or amortization generally begins when the 
asset is placed in service by the taxpayer.\138\ Tangible 
property generally is depreciated under the modified 
accelerated cost recovery system (``MACRS''), which determines 
depreciation for different types of property based on an 
assigned applicable depreciation method, recovery period,\139\ 
and convention.\140\
---------------------------------------------------------------------------
    \137\See secs. 263(a) and 167. In general, only the tax owner of 
property (i.e., the taxpayer with the benefits and burdens of 
ownership) is entitled to claim tax benefits such as cost recovery 
deductions with respect to the property. In addition, where property is 
not used exclusively in a taxpayer's business, the amount eligible for 
a deduction must be reduced by the amount related to personal use. See, 
e.g., sec. 280A.
    \138\See Treas. Reg. secs. 1.167(a)-10(b), 1.167(a)-3, 1.167(a)-14, 
and 1.197-2(f). See also Treas. Reg. sec. 1.167(a)-11(e)(1)(i).
    \139\The applicable recovery period for an asset is determined in 
part by statute and in part by historic Treasury guidance. Exercising 
authority granted by Congress, the Secretary issued Rev. Proc. 87-56, 
1987-2 C.B. 674, laying out the framework of recovery periods for 
enumerated classes of assets. The Secretary clarified and modified the 
list of asset classes in Rev. Proc. 88-22, 1988-1 C.B. 785. In November 
1988, Congress revoked the Secretary's authority to modify the class 
lives of depreciable property. Rev. Proc. 87-56, as modified, remains 
in effect except to the extent that the Congress has, since 1988, 
statutorily modified the recovery period for certain depreciable 
assets, effectively superseding any administrative guidance with regard 
to such property.
    \140\Sec. 168.
---------------------------------------------------------------------------
            Special depreciation allowance for second generation 
                    biofuel plant property
    An additional first-year depreciation deduction is allowed 
equal to 50 percent of the adjusted basis of qualified second 
generation biofuel plant property for the taxable year in which 
the property is placed in service.\141\ In order to qualify, 
the property generally must be placed in service before January 
1, 2018.\142\
---------------------------------------------------------------------------
    \141\Sec. 168(l).
    \142\Sec. 168(l)(2)(D).
---------------------------------------------------------------------------
    The additional first-year depreciation deduction is allowed 
for both regular tax and alternative minimum tax purposes,\143\ 
but is not allowed in computed earnings and profits.\144\ The 
additional first-year depreciation deduction is subject to the 
general rules regarding whether a cost is subject to 
capitalization under section 263A. The basis of the property 
and the depreciation allowances in the year of purchase and 
later years are appropriately adjusted to reflect the 
additional first-year depreciation deduction.\145\
---------------------------------------------------------------------------
    \143\Sec. 168(l)(5). Note that the corporate minimum tax was 
repealed for taxable years beginning after December 31, 2017. See an 
Act to Provide for Reconciliation Pursuant to Titles II and V of the 
Concurrent Resolution on the Budget for Fiscal Year 2018, Pub. L. No. 
115-97, sec. 2001, December 22, 2017.
    \144\Sec. 312(k)(3).
    \145\Sec. 168(l)(1)(B).
---------------------------------------------------------------------------
            Qualified property
    Qualified second generation biofuel plant property means 
depreciable property used in the U.S. solely to produce any 
liquid fuel that (1) is derived by, or from, qualified 
feedstocks, and (2) meets the registration requirements for 
fuels and fuel additives established by the Environmental 
Protection Agency (``EPA'') under section 211 of the Clean Air 
Act.\146\ Qualified feedstock means any lignocellulosic or 
hemicellulosic matter that is available on a renewable or 
recurring basis,\147\ and any cultivated algae, cyanobacteria, 
or lemna.\148\ Second generation biofuel does not include any 
alcohol with a proof of less than 150 or certain unprocessed 
fuel.\149\ Unprocessed fuels are fuels that (1) are more than 
four percent (determined by weight) water and sediment in any 
combination, (2) have an ash content of more than one percent 
(determined by weight), or (3) have an acid number greater than 
25.\150\
---------------------------------------------------------------------------
    \146\Secs. 168(l)(2)(A) and 40(b)(6)(E).
    \147\For example, lignocellulosic or hemicellulosic matter that is 
available on a renewable or recurring basis includes bagasse (from 
sugar cane), corn stalks, and switchgrass. See Joint Committee on 
Taxation, General Explanation of Tax Legislation Enacted in the 109th 
Congress (JCS-1-07), January 2007, p. 722.
    \148\Sec. 40(b)(6)(F).
    \149\Sec. 40(b)(6)(E)(ii) and (iii).
    \150\Sec. 40(b)(6)(E)(iii).
---------------------------------------------------------------------------
    In order for such property to qualify for the additional 
first-year depreciation deduction, it must also meet the 
following requirements: (1) the original use of the property 
must commence with the taxpayer; and (2) the property must be 
(i) acquired by purchase (as defined under section 179(d)) by 
the taxpayer, and (ii) placed in service before January 1, 
2018.\151\ Property that is manufactured, constructed, or 
produced by the taxpayer for use by the taxpayer qualifies if 
the taxpayer begins the manufacture, construction, or 
production of the property before January 1, 2018 (and all 
other requirements are met).\152\ Property that is 
manufactured, constructed, or produced for the taxpayer by 
another person under a contract that is entered into prior to 
the manufacture, construction, or production of the property is 
considered to be manufactured, constructed, or produced by the 
taxpayer.
---------------------------------------------------------------------------
    \151\Sec. 168(l)(2). Requirements relating to actions taken before 
2007 are not described herein since they have little (if any) remaining 
effect.
    \152\Sec. 168(l)(4) and (k)(2)(E).
---------------------------------------------------------------------------
            Exceptions
    Property not eligible for the additional first-year 
depreciation deduction under section 168(l) includes (1) any 
property to which the additional first-year depreciation 
allowance under section 168(k) applies,\153\ (2) any property 
required to be depreciated under the alternative depreciation 
system of section 168(g),\154\ (3) any property any portion of 
which is financed with the proceeds of a tax-exempt obligation 
under section 103,\155\ and (4) any property with respect to 
which the taxpayer has elected 50-percent expensing under 
section 179C (relating to election to expense certain 
refineries).\156\
---------------------------------------------------------------------------
    \153\Sec. 168(l)(3)(A).
    \154\Sec. 168(l)(3)(B).
    \155\Sec. 168(l)(3)(C).
    \156\Sec. 168(l)(7).
---------------------------------------------------------------------------
    A taxpayer may elect out of the additional first-year 
depreciation for any class of property for any taxable 
year.\157\
---------------------------------------------------------------------------
    \157\Sec. 168(l)(3)(D).
---------------------------------------------------------------------------
    In addition, recapture rules apply if the property ceases 
to be qualified second generation biofuel plant property.\158\
---------------------------------------------------------------------------
    \158\Sec. 168(l)(6).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee acknowledges that encouraging the 
manufacturing of biofuels (including algae-based fuels) in the 
United States is important for fostering innovative new 
technology, encouraging energy independence, supporting the 
commercial production of these fuels, and creating 
manufacturing jobs in the United States. Therefore, the 
Committee believes the special depreciation allowance for 
second generation biofuel plant property should be extended.

                        EXPLANATION OF PROVISION

    The provision extends the special depreciation allowance 
for three years, to qualified second generation biofuel plant 
property placed in service prior to January 1, 2021.

                             EFFECTIVE DATE

    The provision applies to property placed in service after 
December 31, 2017.

 10. ENERGY-EFFICIENT COMMERCIAL BUILDINGS DEDUCTION (SEC. 131 OF THE 
                    BILL AND SEC. 179D OF THE CODE)

                              PRESENT LAW

            In general
    Section 179D provides an election under which a taxpayer 
may take an immediate deduction equal to energy-efficient 
commercial building property expenditures made by the taxpayer. 
Energy-efficient commercial building property is defined as 
property (1) which is installed on or in any building located 
in the United States that is within the scope of Standard 90.1-
2007 of the American Society of Heating, Refrigerating, and Air 
Conditioning Engineers and the Illuminating Engineering Society 
of North America (``ASHRAE/IESNA''), (2) which is installed as 
part of (i) the interior lighting systems, (ii) the heating, 
cooling, ventilation, and hot water systems, or (iii) the 
building envelope, and (3) which is certified as being 
installed as part of a plan designed to reduce the total annual 
energy and power costs with respect to the interior lighting 
systems, heating, cooling, ventilation, and hot water systems 
of the building by 50 percent or more in comparison to a 
reference building which meets the minimum requirements of 
Standard 90.1-2007 (as in effect before the date of the 
adoption of ASHRAE/IESNA Standard 90.1-2010). The deduction is 
limited to an amount equal to $1.80 per square foot of the 
property for which such expenditures are made. The deduction is 
allowed in the year in which the property is placed in service.
    Certain certification requirements must be met in order to 
qualify for the deduction. The Secretary, in consultation with 
the Secretary of Energy, will promulgate regulations that 
describe methods of calculating and verifying energy and power 
costs using qualified computer software based on the provisions 
of the 2005 California Nonresidential Alternative Calculation 
Method Approval Manual.
    The Secretary is granted authority to prescribe procedures 
for the inspection and testing for compliance of buildings that 
are comparable, given the difference between commercial and 
residential buildings, to the requirements in the Mortgage 
Industry National Accreditation Procedures for Home Energy 
Rating Systems.\159\ Individuals qualified to determine 
compliance shall only be those recognized by one or more 
organizations certified by the Secretary for such purposes.
---------------------------------------------------------------------------
    \159\See IRS Notice 2006-52, 2006-1 C.B. 1175, June 2, 2006; IRS 
Notice 2008-40, 2008-14 I.R.B. 725 March 11, 2008.
---------------------------------------------------------------------------
    For energy-efficient commercial building property 
expenditures made by a public entity, such as public schools, 
the deduction may be allocated to the person primarily 
responsible for designing the property in lieu of the public 
entity.
    If a deduction is allowed under this section, the basis of 
the property is reduced by the amount of the deduction.
    The deduction applies to property placed in service prior 
to January 1, 2018.
            Partial allowance of deduction
            (1) System-specific deductions
    In the case of a building that does not meet the overall 
building requirement of 50-percent energy savings, a partial 
deduction is allowed with respect to each separate building 
system that comprises energy efficient property and which is 
certified by a qualified professional as meeting or exceeding 
the applicable system-specific savings targets established by 
the Secretary. The applicable system-specific savings targets 
to be established by the Secretary are those that would result 
in a total annual energy savings with respect to the whole 
building of 50 percent, if each of the separate systems met the 
system specific target. The separate building systems are (1) 
the interior lighting system, (2) the heating, cooling, 
ventilation and hot water systems, and (3) the building 
envelope. The maximum allowable deduction is $0.60 per square 
foot for each separate system.
            (2) Interim rules for lighting systems
    In general, in the case of system-specific partial 
deductions, no deduction is allowed until the Secretary 
establishes system-specific targets.\160\ However, in the case 
of lighting system retrofits, until such time as the Secretary 
issues final regulations, the system-specific energy savings 
target for the lighting system is deemed to be met by a 
reduction in lighting power density of 40 percent (50 percent 
in the case of a warehouse) of the minimum requirements in 
Table 9.3.1.1 or Table 9.3.1.2 of ASHRAE/IESNA Standard 90.1-
2007. Also, in the case of a lighting system that reduces 
lighting power density by 25 percent, a partial deduction of 30 
cents per square foot is allowed. A pro-rated partial deduction 
is allowed in the case of a lighting system that reduces 
lighting power density between 25 percent and 40 percent. 
Certain lighting level and lighting control requirements must 
also be met in order to qualify for the partial lighting 
deductions under the interim rule.
---------------------------------------------------------------------------
    \160\IRS Notice 2008-40, supra, set a target of a 10-percent 
reduction in total energy and power costs with respect to the building 
envelope, and 20 percent each with respect to the interior lighting 
system and the heating, cooling, ventilation and hot water systems. IRS 
Notice 2012-26 (2012-17 I.R.B. 847 April 23, 2012) established new 
targets of 10-percent reduction in total energy and power costs with 
respect to the building envelope, 25 percent with respect to the 
interior lighting system and 15 percent with respect to the heating, 
cooling, ventilation and hot water systems, effective beginning March 
12, 2012. The targets from Notice 2008-40 may be used until December 
31, 2013, but the targets of Notice 2012-26 apply thereafter.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that it is in the national interest 
to conserve energy. The Committee further recognizes that 
commercial buildings consume a significant amount of energy 
resources and that reductions in commercial energy use have the 
potential to reduce national energy consumption. Therefore, the 
Committee believes that the energy efficient commercial 
building deduction should be extended.

                        EXPLANATION OF PROVISION

    The provision extends the deduction for three years, 
through December 31, 2020.

                             EFFECTIVE DATE

    The provision applies to property placed in service after 
December 31, 2017.

 11. special rule for sales or dispositions to implement ferc or state 
 electric restructuring policy for qualified electric utilities (sec. 
              132 of the bill and sec. 451(k) of the code)


                              PRESENT LAW

    A taxpayer selling property generally realizes gain to the 
extent the sales price (and any other consideration received) 
exceeds the taxpayer's basis in the property.\161\ The realized 
gain is subject to current income tax\162\ unless the 
recognition of the gain is deferred or excluded from income 
under a special tax provision.\163\
---------------------------------------------------------------------------
    \161\See sec. 1001.
    \162\See secs. 61 and 451.
    \163\See, e.g., secs. 453, 1031, and 1033.
---------------------------------------------------------------------------
    One such special tax provision permits taxpayers to elect 
to recognize gain from qualifying electric transmission 
transactions ratably over an eight-year period beginning in the 
year of sale if the amount realized from such sale is used to 
purchase exempt utility property within the applicable 
period\164\ (the ``reinvestment property'').\165\ If the amount 
realized exceeds the amount used to purchase reinvestment 
property, any realized gain is recognized to the extent of such 
excess in the year of the qualifying electric transmission 
transaction.
---------------------------------------------------------------------------
    \164\The applicable period for a taxpayer to reinvest the proceeds 
is four years after the close of the taxable year in which the 
qualifying electric transmission transaction occurs.
    \165\Sec. 451(k).
---------------------------------------------------------------------------
    A qualifying electric transmission transaction is the sale 
or other disposition of property used by a qualified electric 
utility to an independent transmission company prior to January 
1, 2018.\166\ A qualified electric utility is defined as an 
electric utility, which as of the date of the qualifying 
electric transmission transaction, is vertically integrated in 
that it is both (1) a transmitting utility (as defined in the 
Federal Power Act\167\) with respect to the transmission 
facilities to which the election applies, and (2) an electric 
utility (as defined in the Federal Power Act\168\).\169\
---------------------------------------------------------------------------
    \166\Sec. 451(k)(3).
    \167\Sec. 3(23), 16 U.S.C. sec. 796, defines ``transmitting 
utility'' as any electric utility, qualifying cogeneration facility, 
qualifying small power production facility, or Federal power marketing 
agency that owns or operates electric power transmission facilities 
that are used for the sale of electric energy at wholesale.
    \168\Sec. 3(22), 16 U.S.C. sec. 796, defines ``electric utility'' 
as any person or State agency (including any municipality) that sells 
electric energy; such term includes the Tennessee Valley Authority, but 
does not include any Federal power marketing agency.
    \169\Sec. 451(k)(6).
---------------------------------------------------------------------------
    In general, an independent transmission company is defined 
as: (1) an independent transmission provider\170\ approved by 
the Federal Energy Regulatory Commission (``FERC''); (2) a 
person (i) who the FERC determines under section 203 of the 
Federal Power Act\171\ (or by declaratory order) is not a 
``market participant'' and (ii) whose transmission facilities 
are placed under the operational control of a FERC-approved 
independent transmission provider no later than four years 
after the close of the taxable year in which the transaction 
occurs; or (3) in the case of facilities subject to the 
jurisdiction of the Public Utility Commission of Texas, (i) a 
person which is approved by that Commission as consistent with 
Texas State law regarding an independent transmission 
organization, or (ii) a political subdivision, or affiliate 
thereof, whose transmission facilities are under the 
operational control of an organization described in (i).\172\
---------------------------------------------------------------------------
    \170\For example, a regional transmission organization, an 
independent system operator, or an independent transmission company.
    \171\16 U.S.C. sec. 824b.
    \172\Sec. 451(k)(4).
---------------------------------------------------------------------------
    Exempt utility property is defined as: (1) property used in 
the trade or business of (i) generating, transmitting, 
distributing, or selling electricity or (ii) producing, 
transmitting, distributing, or selling natural gas; or (2) 
stock in a controlled corporation whose principal trade or 
business consists of the activities described in (1).\173\ 
Exempt utility property does not include any property that is 
located outside of the United States.\174\
---------------------------------------------------------------------------
    \173\Sec. 451(k)(5).
    \174\Sec. 451(k)(5)(C).
---------------------------------------------------------------------------
    If a taxpayer is a member of an affiliated group of 
corporations filing a consolidated return, the reinvestment 
property may be purchased by any member of the affiliated group 
(in lieu of the taxpayer).\175\
---------------------------------------------------------------------------
    \175\Sec. 451(k)(7).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that the ``unbundling'' of electric 
transmission assets held by vertically integrated utilities, 
with the transmission assets ultimately placed under the 
ownership or control of independent transmission providers (or 
other similarly-approved operators), continues to be an 
important policy. To continue facilitating the implementation 
of this policy, the Committee believes it is appropriate to 
assist taxpayers in moving forward with industry restructuring 
by continuing to provide a tax deferral for gain associated 
with certain dispositions of electric transmission assets. The 
Committee believes this provision will encourage the sale of 
transmission property from electric utilities to independent 
transmission companies to improve transmission management and 
facilitate competitive transmission markets.

                        EXPLANATION OF PROVISION

    The provision extends for three years, through December 31, 
2020, the deferral provision for qualifying electric 
transmission transactions.

                             EFFECTIVE DATE

    The provision applies to dispositions after December 31, 
2017.

   12. EXTENSION AND CLARIFICATION OF EXCISE TAX CREDITS RELATING TO 
ALTERNATIVE FUELS (SEC. 133 OF THE BILL AND SECS. 6426 AND 6427 OF THE 
                                 CODE)

                              PRESENT LAW

    The Code provides two per-gallon excise tax credits with 
respect to alternative fuel: the alternative fuel credit, and 
the alternative fuel mixture credit. For this purpose, the term 
``alternative fuel'' means liquefied petroleum gas, P Series 
fuels (as defined by the Secretary of Energy under 42 U.S.C. 
sec. 13211(2)), compressed or liquefied natural gas, liquefied 
hydrogen, liquid fuel derived from coal through the Fischer-
Tropsch process (``coal-to-liquids''), compressed or liquefied 
gas derived from biomass, or liquid fuel derived from biomass. 
Such term does not include ethanol, methanol, or biodiesel. 
``Alternative fuel'' also does not include fuel (including 
lignin, wood residues, or spent pulping liquors) derived from 
the production of paper or pulp.
    For coal-to-liquids produced after December 30, 2009, the 
fuel must be certified as having been derived from coal 
produced at a gasification facility that separates and 
sequesters 75 percent of such facility's total carbon dioxide 
emissions.
    The alternative fuel credit is allowed against section 4041 
liability, and the alternative fuel mixture credit is allowed 
against section 4081 liability.\176\ Neither credit is allowed 
unless the taxpayer is registered with the Secretary. The 
alternative fuel credit is generally 50 cents per gallon (or 
applicable gasoline or diesel gallon equivalents\177\) of 
alternative fuel sold by the taxpayer for use as a motor fuel 
in a motor vehicle or motorboat, sold for use in aviation or so 
used by the taxpayer.
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    \176\Relating to the excise tax imposed upon removal of gasoline, 
aviation gasoline, diesel fuel and kerosene.
    \177\With respect to any nonliquid alternative fuel (e.g., 
compressed natural gas), ``gasoline gallon equivalent'' means the 
amount of such fuel having a Btu (British thermal unit) content of 
124,800 (higher heating value). For liquefied petroleum gas, the credit 
is determined by reference to the energy equivalent of a gallon 
gasoline, and for liquidized natural gas, it is the energy equivalent 
of a gallon of diesel.
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    The alternative fuel mixture credit is 50 cents per gallon 
of alternative fuel used in producing an alternative fuel 
mixture for sale or use in a trade or business of the taxpayer. 
An ``alternative fuel mixture'' is a mixture of alternative 
fuel and taxable fuel (gasoline, diesel fuel or kerosene) that 
contains at least 1/10 of one percent taxable fuel.\178\ The 
mixture must be sold by the taxpayer producing such mixture to 
any person for use as a fuel, or used by the taxpayer producing 
the mixture as a fuel. The credits expired after December 31, 
2017.
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    \178\It has been argued that, for purposes of the alternative fuel 
mixture credit, butane is liquefied petroleum gas. The term ``liquefied 
petroleum gas'' is not defined for purposes of section 6426. Butane is 
a gasoline blendstock under section 48.4081-1(c)(3)(i) of the Treasury 
regulations and, therefore, is gasoline for purposes of section 4083. 
In Revenue Ruling 2018-2, the Internal Revenue Service determined that 
butane is not an alternative fuel but is a gasoline blendstock as 
defined in the regulations. As a result, a mixture of butane and 
gasoline is a mixture of two taxable fuels. The IRS held that it is not 
an alternative fuel mixture and does not qualify for the alternative 
fuel mixture credit.
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    A person may file a claim for payment equal to the amount 
of the alternative fuel credit (but not the alternative fuel 
mixture credit). The alternative fuel credit must first be 
applied to the applicable excise tax liability under section 
4041, and any excess credit may be taken as a payment. The 
payment provision for alternative fuel expired after December 
31, 2017.

                           REASONS FOR CHANGE

    The alternative fuel mixture credit first appeared as part 
of the Senate Finance Committee's markup of the Energy Tax 
Incentives Act of 2005\179\ and was enacted as part of the 
Safe, Efficient Transportation Equity Act: A Legacy for Users 
in 2005.\180\ The alternative fuel mixture credit is part of a 
suite of incentives intended to reduce U.S. reliance on 
conventional gasoline, diesel, and kerosene by focusing on 
alternative fuels, thereby lessening U.S. dependence on foreign 
oil.\181\
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    \179\Joint Committee on Taxation, Description of Provisions of the 
``Energy Policy Tax Incentives Act of 2005,'' (JCX-44-05, June 14, 
2005) at p. 46.
    \180\Pub. L. No. 109-59, sec. 11113.
    \181\For example, see, H. Rpt. No. 110-658, at page 76: Alternative 
fuels are a significant component of establishing the nation's 
independence from foreign oil. The fuel incentives were not intended to 
subsidize fuels with no nexus to the United States. The Committee is 
aware of situations in which foreign-produced fuel is imported into the 
United States, mixed with a small amount of diesel fuel, in order to 
qualify for the credit for qualified biodiesel fuel mixtures, and then 
the fuel is exported. This practice does not contribute to establishing 
the country's fuel independence, therefore, the provision denies the 
fuel credits and payments to such fuel.
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    More than a decade after its enactment, in late 2016 or 
early 2017, promotional literature appeared urging taxpayers to 
assert on amended returns that butane (a standard component 
chemical present in all gasoline), when blended with gasoline, 
constituted an alternative fuel mixture. The theory behind this 
aggressive tax position is that the butane in the mixture was a 
form of liquefied petroleum gas, an alternative fuel.\182\ The 
Code does not provide a definition of liquefied petroleum gas 
for purposes of the alternative fuel mixture credit. The use of 
butane as an ingredient in gasoline predates the enactment of 
the alternative fuel mixture credit by many years and Congress 
never intended to incentivize such a widespread and established 
practice in the production of conventional gasoline necessary 
to meet environmental and performance standards.
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    \182\Taxpayers have filed several lawsuits recently challenging the 
IRS position that mixtures of butane and gasoline do not qualify for 
the alternative fuel mixture credit. See Rev. Rul. 2018-2, 2018-2 
I.R.B. 277. The Committee is also aware of disputes regarding the 
meaning of compressed natural gas (``CNG''). IRS Chief Counsel issued 
informal advice on the meaning of ``compressed natural gas'' for 
purposes of section 6426. FSA No. 20151001F (March 6, 2016) https://
www.irs.gov/pub/irs-lafa/151001f.pdf. The advice notes that CNG is 
generally defined as natural gas in its gaseous form that is contained 
under pressure of approximately 2,400 to 3600 psi (per square inch) and 
of the quality required for use as a fuel in vehicles. The Committee is 
aware that some taxpayers argue that lower levels of pressure 
sufficient to get any natural gas through a pipeline from the wellhead 
should qualify as CNG for purposes of the alternative fuel mixture 
credit. This interpretation is not consistent with Congressional intent 
to subsidize fuel capable of being used as a substitute for traditional 
motor vehicle fuel.
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    Others have claimed that butane mixed with propane is an 
alternative fuel mixture, asserting that butane is the taxable 
fuel component of the mixture. However, the presence of butane 
in propane does not further the goals of the mixture credit and 
the amount that can be added to propane for sale is 
significantly limited by industry standards.\183\ It is the 
understanding of the Committee that butane is being added in 
minor amounts to the propane sold simply to qualify for the 
alternative mixture credit. Such practice does not further the 
goals of energy independence.
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    \183\Propane for sale must adhere to commercial and international 
grades and standards for purity. U.S. Energy Information 
Administration, Hydrocarbon Gas Liquids (HGL): Recent Market Trends and 
Issues (November 2014) at 24 (https://www.eia.gov/analysis/hgl/pdf/
hgl.pdf). It is understood that in an effort to qualify for the mixture 
credit while still remaining within required standards, in practice 
only a minimum amount of butane (generally one-tenth of one percent) is 
added to the propane. ``Propane is consumed in the United States 
primarily in residential and commercial buildings for water heating, 
cooking, and seasonally as a fuel for space heating, located in regions 
where natural gas supply is limited or unavailable.'' Ibid. Unlike the 
alternative fuel credit, the mixture credit is not limited to 
transportation applications.
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    It is the Committee's understanding that if the taxpayers' 
claims (including lawsuits) are successful, the government 
stands to lose tens of billions of dollars in revenue resulting 
from amended returns seeking to retroactively take advantage of 
the unintended loophole for prior years, and also an additional 
estimated $5 billion per year from any prospective extensions 
of the alternative fuel mixture credit if this issue is not 
addressed.
    For the foregoing reasons, the Committee has determined 
that it must close this unintended loophole to protect the 
public fisc and to prevent a windfall resulting from erroneous 
interpretations of the law. The Committee believes that once 
the loophole is properly closed, it is appropriate to extend 
the incentives. Such an extension will encourage the use and 
development of alternative motor fuels as substitutes for 
traditional motor fuels, and will reduce reliance on 
traditional motor fuels by displacing a significant portion of 
that traditional volume with alternative fuels included as part 
of an alternative fuel mixture.

                        EXPLANATION OF PROVISION

    The provision extends the alternative fuel credit and 
related payment provisions, and the alternative fuel mixture 
credit through December 31, 2020.
    The provision creates a special rule to address claims 
regarding excise tax credits and claims for payment for 
alternative fuel sold or used during the period beginning on 
January 1, 2018, through the close of the last calendar quarter 
beginning before the date of enactment. In particular, the 
provision directs the Secretary to issue guidance within 30 
days of the date of enactment. Such guidance is to provide for 
a one-time submission of claims covering those periods. The 
guidance is to provide for a 180-day period for the submission 
of such claims (in such manner as prescribed by the Secretary) 
to begin no later than 30 days after such guidance is issued. 
Such claims shall be paid by the Secretary of the Treasury not 
later than 60 days after receipt. If the claim is not paid 
within 60 days of the date of the filing, the claim shall be 
paid with interest from such date determined by using the 
overpayment rate and method under section 6621.
    The provision also makes it clear that for purposes of the 
alternative fuel mixtures credit, an alternative fuel mixture 
is not a mixture that includes liquefied petroleum gas, 
compressed or liquefied natural gas, or compressed or liquefied 
gas derived from biomass.

                             EFFECTIVE DATE

    The provision generally applies to fuel sold or used after 
December 31, 2017. The clarification applies to fuel sold or 
used on or after the date of enactment and fuel sold or used 
before such date of enactment, but only to the extent that 
credits and claims of credit under section 6426(e) (relating to 
the alternative fuel mixture credit) with respect to such sale 
or use have not been paid or allowed as of such date.

13. OIL SPILL LIABILITY TRUST FUND RATE (SEC. 134 OF THE BILL AND SEC. 
                           4611 OF THE CODE)

                              PRESENT LAW

    Prior to its expiration, the Oil Spill Liability Trust Fund 
financing rate (``oil spill tax'') was nine cents per barrel. 
It generally applies to crude oil received at a U.S. refinery 
and to petroleum products entered into the United States for 
consumption, use, or warehousing.\184\ The oil spill tax also 
applies to certain uses and the exportation of domestic crude 
oil.\185\ If any domestic crude oil is used in or exported from 
the United States, and before such use or exportation no oil 
spill tax was imposed on such crude oil, then the oil spill tax 
is imposed on such crude oil. The tax does not apply to any use 
of crude oil for extracting oil or natural gas on the premises 
where such crude oil was produced.
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    \184\The term ``crude oil'' includes crude oil condensates and 
natural gasoline. The term ``petroleum product'' includes crude oil.
    \185\The term ``domestic crude oil'' means any crude oil produced 
from a well located in the United States.
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    For crude oil received at a refinery, the operator of the 
U.S. refinery is liable for the tax. For imported petroleum 
products, the person entering the product for consumption, use, 
or warehousing is liable for the tax. For certain uses and 
exports, the person using or exporting the crude oil is liable 
for the tax. No tax is imposed with respect to any petroleum 
product if the person who would be liable for such tax 
establishes that a prior oil spill tax has been imposed with 
respect to such product.
    The tax does not apply to any periods after December 31, 
2018.

                           REASONS FOR CHANGE

    The Committee believes it is appropriate to reinstate the 
oil spill tax to provide funding for expenditures from the Oil 
Spill Liability Trust Fund.

                        EXPLANATION OF PROVISION

    The provision extends the oil spill tax through December 
31, 2020.

                             EFFECTIVE DATE

    The provision applies beginning on the first day of the 
first calendar month beginning after the date of enactment of 
this Act.

           D. Certain Provisions Expiring at the End of 2019


  1. NEW MARKETS TAX CREDIT (SEC. 141 OF THE BILL AND SEC. 45D OF THE 
                                 CODE)

                              PRESENT LAW

    Section 45D provides a new markets tax credit for qualified 
equity investments made to acquire stock in a corporation, or a 
capital interest in a partnership, that is a qualified 
community development entity (``CDE'').\186\ The amount of the 
credit allowable to the investor (either the original purchaser 
or a subsequent holder) is (1) a five-percent credit for the 
year in which the equity interest is purchased from the CDE and 
for each of the following two years, and (2) a six-percent 
credit for each of the following four years.\187\ The credit is 
determined by applying the applicable percentage (five or six 
percent) to the amount paid to the CDE for the investment at 
its original issue, and is available to the taxpayer who holds 
the qualified equity investment on the date of the initial 
investment or on the respective anniversary date that occurs 
during the taxable year.\188\ The credit is recaptured if at 
any time during the seven-year period that begins on the date 
of the original issue of the investment the entity (1) ceases 
to be a qualified CDE, (2) the proceeds of the investment cease 
to be used as required, or (3) the equity investment is 
redeemed.\189\
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    \186\Section 45D was added by section 121(a) of the Community 
Renewal Tax Relief Act of 2000, Pub. L. No. 106-554.
    \187\Sec. 45D(a)(2).
    \188\Sec. 45D(a)(3).
    \189\Sec. 45D(g).
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    A qualified CDE is any domestic corporation or partnership: 
(1) whose primary mission is serving or providing investment 
capital for low-income communities or low-income persons; (2) 
that maintains accountability to residents of low-income 
communities by their representation on any governing board of 
or any advisory board to the CDE; and (3) that is certified by 
the Secretary as being a qualified CDE.\190\ A qualified equity 
investment means stock (other than nonqualified preferred 
stock) in a corporation or a capital interest in a partnership 
that is acquired at its original issue directly (or through an 
underwriter) from a CDE for cash, and includes an investment of 
a subsequent purchaser if such investment was a qualified 
equity investment in the hands of the prior holder.\191\ 
Substantially all of the investment proceeds must be used by 
the CDE to make qualified low-income community investments and 
the investment must be designated as a qualified equity 
investment by the CDE. For this purpose, qualified low-income 
community investments include: (1) capital or equity 
investments in, or loans to, qualified active low-income 
community businesses; (2) certain financial counseling and 
other services to businesses and residents in low-income 
communities; (3) the purchase from another CDE of any loan made 
by such entity that is a qualified low-income community 
investment; or (4) an equity investment in, or loan to, another 
CDE.\192\
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    \190\Sec. 45D(c).
    \191\Sec. 45D(b).
    \192\Sec. 45D(d).
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    A ``low-income community'' is a population census tract 
with either (1) a poverty rate of at least 20 percent, or (2) 
median family income which does not exceed 80 percent of the 
greater of metropolitan area median family income or statewide 
median family income (for a non-metropolitan census tract, does 
not exceed 80 percent of statewide median family income). In 
the case of a population census tract located within a high 
migration rural county, low-income is defined by reference to 
85 percent (as opposed to 80 percent) of statewide median 
family income.\193\ For this purpose, a high migration rural 
county is any county that, during the 20-year period ending 
with the year in which the most recent census was conducted, 
has a net out-migration of inhabitants from the county of at 
least 10 percent of the population of the county at the 
beginning of such period.
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    \193\Sec. 45D(e).
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    The Secretary is authorized to designate ``targeted 
populations''' as low-income communities for purposes of the 
new markets tax credit.\194\ For this purpose, a ``targeted 
population'' is defined by reference to section 103(20) of the 
Riegle Community Development and Regulatory Improvement Act of 
1994\195\ (the ``Act'') to mean individuals, or an identifiable 
group of individuals, including an Indian tribe, who are low-
income persons or otherwise lack adequate access to loans or 
equity investments. Section 103(17) of the Act provides that 
``low-income'' means (1) for a targeted population within a 
metropolitan area, less than 80 percent of the area median 
family income, and (2) for a targeted population within a non-
metropolitan area, less than the greater of 80 percent of the 
area median family income or 80 percent of the statewide non-
metropolitan area median family income. A targeted population 
is not required to be within any census tract. In addition, a 
population census tract with a population of less than 2,000 is 
treated as a low-income community for purposes of the credit if 
such tract is within an empowerment zone, the designation of 
which is in effect under section 1391, and is contiguous to one 
or more low-income communities.
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    \194\Sec. 45D(e)(2).
    \195\Pub. L. No. 103-325.
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    A qualified active low-income community business is defined 
as a business that satisfies, with respect to a taxable year, 
the following requirements: (1) at least 50 percent of the 
total gross income of the business is derived from the active 
conduct of trade or business activities in any low-income 
community; (2) a substantial portion of the tangible property 
of the business is used in a low-income community; (3) a 
substantial portion of the services performed for the business 
by its employees is performed in a low-income community; and 
(4) less than five percent of the average of the aggregate 
unadjusted bases of the property of the business is 
attributable to certain financial property or to certain 
collectibles.\196\
---------------------------------------------------------------------------
    \196\Sec. 45D(d)(2).
---------------------------------------------------------------------------
    The maximum annual amount of qualified equity investments 
is $3.5 billion for calendar years 2010 through 2019. No amount 
of unused allocation limitation may be carried to any calendar 
year after 2024.

                           REASONS FOR CHANGE

    The Committee believes that the new markets tax credit has 
proven to be an effective means of providing needed capital to 
businesses in low-income communities. Therefore, the Committee 
believes that the new markets tax credit should be extended, 
and that up to $5 billion in qualified equity investments 
should be permitted for the 2020 calendar year.

                        EXPLANATION OF PROVISION

    This provision extends the new markets tax credit for one 
year, through 2020, permitting up to $5 billion in qualified 
equity investments for the 2020 calendar year. The provision 
also extends for one year, through 2025, the carryover period 
for unused new markets tax credits.

                             EFFECTIVE DATE

    The provision applies to calendar years beginning after 
December 31, 2019.

 2. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE (SEC. 142 OF THE 
                     BILL AND SEC. 45S OF THE CODE)

                              PRESENT LAW

    For wages paid in taxable years beginning after December 
31, 2017, and before January 1, 2020, ``eligible employers''' 
may claim a general business credit equal to 12.5 percent of 
the amount of eligible wages (based on the normal hourly wage 
rate) paid to ``qualifying employees''' during any period in 
which such employees are on ``family and medical leave'' if the 
rate of payment under the program is 50 percent of the wages 
normally paid to an employee for actual services performed for 
the employer.\197\ The credit is increased by 0.25 percentage 
points (but not above 25 percent) for each percentage point by 
which the rate of payment exceeds 50 percent. The maximum 
amount of family and medical leave that may be taken into 
account with respect to any qualifying employee for any taxable 
year is 12 weeks.
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    \197\Wages for this purpose are Federal Unemployment Tax Act wages 
defined in section 3306(b), without regard to the dollar limitation, 
but do not include amounts taken into account for purposes of 
determining any other credit under subpart D of the Code.
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    An ``eligible employer'' is one which has in place a 
written policy that allows all qualifying full-time employees 
not less than two weeks of annual paid family and medical 
leave, and which allows all less-than-full-time qualifying 
employees a commensurate amount of leave (on a pro rata basis) 
compared to the leave provided to full-time employees. The 
policy must also provide that the rate of payment under the 
program is not less than 50 percent of the wages normally paid 
to any such employee for services performed for the employer.
    In addition, in order to be an eligible employer, the 
employer is prohibited from certain practices or acts which are 
also prohibited under the FMLA, regardless of whether the 
employer is subject to the FMLA. Specifically, the employer 
must provide paid family and medical leave in compliance with a 
written policy that ensures that the employer will not 
interfere with, restrain, or deny the exercise of or the 
attempt to exercise, any right provided under the policy and 
will not discharge or in any other manner discriminate against 
any individual for opposing any practice prohibited by the 
policy.
    A ``qualifying employee'' means any individual who is an 
employee under tax rules and principles and is defined in 
section 3(e) of the Fair Labor Standards Act of 1938,\198\ as 
amended, who has been employed by the employer for one year or 
more, and who for the preceding year, had compensation not in 
excess of 60 percent of the compensation threshold in such year 
for highly compensated employees.\199\ For 2019, this 60 
percent amount is $72,000.
    ``Family and medical leave'' for purposes of section 45S is 
generally defined as leave described under sections 
102(a)(1)(A)-(E) or 102(a)(3) of the FMLA.\200\ If an employer 
provides paid leave as vacation leave, personal leave, or other 
medical or sick leave\201\ (unless the medical or sick leave is 
specifically for one or more of the ``family and medical 
leave'' purposes defined above), such paid leave would not be 
considered to be family and medical leave. In addition, leave 
paid for by a State or local government or required by State or 
local law (including such leave required to be paid by the 
employer) is not taken into account in determining the amount 
of paid family and medical leave provided by the employer that 
is eligible for the credit.
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    \198\Pub. L. No. 75-718 (June 25, 1938); 29 U.S.C. sec. 201, et 
seq.
    \199\Sec. 414(q)(1)(B) ($120,000 for 2018).
    \200\FMLA section 102(a)(1) provides leave for FMLA purposes due to 
(A) the birth of a son or daughter of the employee and in order to care 
for such son or daughter; (B) the placement of a son or daughter with 
the employee for adoption or foster care; (C) caring for the spouse, or 
a son, daughter, or parent, of the employee, if such spouse, son, 
daughter, or parent has a serious health condition; (D) a serious 
health condition that makes the employee unable to perform the 
functions of the employee's position; (E) any qualifying exigency (as 
the Secretary of Labor shall, by regulation, determine) arising out of 
the fact that the spouse, or a son, daughter, or parent of the employee 
is on covered active duty (or has been notified of an impending call or 
order to covered active duty) in the Armed Forces. In addition, FMLA 
section 102(a)(3) provides leave for FMLA purposes due to the need of 
an employee who is a spouse, son, daughter, parent, or next-of-kin of 
an eligible service member to care for such service member.
    \201\These terms mean these types of leave within the meaning of 
FMLA section 102(d)(2).
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    The Secretary will make determinations as to whether an 
employer or an employee satisfies the applicable requirements 
for an eligible employer or qualifying employee, based on 
information provided by the employer that the Secretary 
determines to be necessary or appropriate.

                           REASONS FOR CHANGE

    The Committee believes that the paid family and medical 
leave tax credit is an important means to help incentivize 
employers to protect the wages of lower-paid employees 
experiencing certain family and medical events that necessitate 
time off from work. Therefore, the Committee believes that the 
credit should be extended for the 2020 taxable year.

                        EXPLANATION OF PROVISION

    The provision extends the paid family and medical leave 
credit for one year (for wages paid in taxable years beginning 
after December 31, 2019, and before January 1, 2021).

                             EFFECTIVE DATE

    The provision applies to wages paid in taxable years 
beginning after December 31, 2019.

  3. WORK OPPORTUNITY CREDIT (SEC. 143 OF THE BILL AND SEC. 51 OF THE 
                                 CODE)

                              PRESENT LAW

In general

    The work opportunity tax credit is available on an elective 
basis for employers hiring individuals from one or more of ten 
targeted groups. The amount of the credit available to an 
employer is determined by the amount of qualified wages paid by 
the employer. Generally, qualified wages consist of wages 
attributable to service rendered by a member of a targeted 
group during the one-year period beginning with the day the 
individual begins work for the employer (two years in the case 
of an individual in the long-term family assistance recipient 
category).
            Targeted groups eligible for the credit
    Generally, an employer is eligible for the credit only for 
qualified wages paid to members of a targeted group.
            (1) Families receiving TANF
    An eligible recipient is an individual certified by the 
designated local agency (e.g., a State employment security 
agency) as being a member of a family eligible to receive 
benefits under the Temporary Assistance for Needy Families 
Program (``TANF'') for a period of at least nine months, part 
of which is during the 18-month period ending on the hiring 
date. For these purposes, members of the family are defined to 
include only those individuals taken into account for purposes 
of determining eligibility for the TANF.
            (2) Qualified veteran
    A qualified veteran is a veteran in one of five categories, 
certified by the designated local agency as: (1) a member of a 
family eligible to receive assistance under a supplemental 
nutritional assistance program (for at least a three month 
period during the year prior to the hiring date); (2) entitled 
to compensation for a service connected disability and hired 
within one year of discharge; (3) entitled to compensation for 
a service connected disability and unemployed for an aggregate 
of at least six months during the one year period ending on the 
hiring date; (4) unemployed for at least four weeks but less 
than six months (whether or not consecutive) during the one-
year period ending on the date of hiring; or (5) unemployed for 
at least six months (whether or not consecutive) during the 
one-year period ending on the date of hiring.
    A veteran is an individual who has served on active duty 
(other than for training) in the Armed Forces for more than 180 
days or who has been discharged or released from active duty in 
the Armed Forces for a service-connected disability. However, 
any individual who has served for a period of more than 90 days 
during which the individual was on active duty (other than for 
training) is not a qualified veteran if any of this active duty 
occurred during the 60-day period ending on the date the 
individual was hired by the employer. This latter rule is 
intended to prevent employers who hire current members of the 
armed services (or those departed from service within the last 
60 days) from receiving the credit.
            (3) Qualified ex-felon
    A qualified ex-felon is an individual certified by the 
designated local agency as (1) having been convicted of a 
felony under any State or Federal law; and (2) having a hiring 
date within one year of release from prison or the date of 
conviction.
            (4) Designated community resident
    A designated community resident is an individual certified 
by the designated local agency as being at least age 18 but not 
yet age 40 on the hiring date and as having a principal place 
of abode within an empowerment zone, enterprise community, 
renewal community or a rural renewal community. For these 
purposes, a rural renewal county is a county outside a 
metropolitan statistical area (as defined by the Office of 
Management and Budget) which had a net population loss during 
the five-year periods 1990-1994 and 1995-1999. Qualified wages 
do not include wages paid or incurred for services performed 
while the individual's principal place of abode is outside an 
empowerment zone, enterprise community, renewal community or a 
rural renewal community.
            (5) Vocational rehabilitation referral
    A vocational rehabilitation referral is an individual who 
is certified by the designated local agency as an individual 
who has a physical or mental disability that constitutes a 
substantial handicap to employment and who has been referred to 
the employer while receiving, or after completing vocational 
rehabilitation services: (1) under an individualized, written 
plan for employment under a State plan approved under the 
Rehabilitation Act of 1973; (2) under a rehabilitation plan for 
veterans carried out under Chapter 31 of Title 38, U.S. Code; 
or (3) under an individual work plan developed and implemented 
by an employment network pursuant to subsection (g) of section 
1148 of the Social Security Act. Certification is provided by 
the designated local agency upon assurances from the vocational 
rehabilitation agency that the employee has met the above 
conditions.
            (6) Qualified summer youth employee
    A qualified summer youth employee is an individual: (1) who 
performs services during any 90-day period between May 1 and 
September 15; (2) who is certified by the designated local 
agency as being 16 or 17 years of age on the hiring date; (3) 
who has not been an employee of that employer before; and (4) 
who is certified by the designated local agency as having a 
principal place of abode within an empowerment zone, enterprise 
community, or renewal community. As with designated community 
residents, no credit is available on wages paid or incurred for 
service performed while the individual's principal place of 
abode is outside an empowerment zone, enterprise community, or 
renewal community. If, after the end of the 90-day period, the 
employer continues to employ a youth who was certified during 
the 90-day period as a member of another targeted group, the 
limit on qualified first-year wages will take into account 
wages paid to the youth while a qualified summer youth 
employee.
            (7) Qualified supplemental nutrition assistance program 
                    benefits recipient
    A qualified supplemental nutrition assistance program 
benefits recipient is an individual at least age 18 but not yet 
age 40 certified by the designated local agency as being a 
member of a family receiving assistance under a food and 
nutrition program under the Food and Nutrition Act of 2008 for 
a period of at least six months ending on the hiring date. In 
the case of families that cease to be eligible for food and 
nutrition assistance under section 6(o) of the Food and 
Nutrition Act of 2008, the six-month requirement is replaced 
with a requirement that the family has been receiving food and 
nutrition assistance for at least three of the five months 
ending on the date of hire. For these purposes, members of the 
family are defined to include only those individuals taken into 
account for purposes of determining eligibility for a food and 
nutrition assistance program under the Food and Nutrition Act 
of 2008.
            (8) Qualified SSI recipient
    A qualified SSI recipient is an individual designated by 
the designated local agency as receiving supplemental security 
income (``SSI'') benefits under Title XVI of the Social 
Security Act for any month ending within the 60-day period 
ending on the hiring date.
            (9) Long-term family assistance recipient
    A qualified long-term family assistance recipient is an 
individual certified by the designated local agency as being: 
(1) a member of a family that has received family assistance 
for at least 18 consecutive months ending on the hiring date; 
(2) a member of a family that has received such family 
assistance for a total of at least 18 months (whether or not 
consecutive) after August 5, 1997 (the date of enactment of the 
welfare-to-work tax credit) if the individual is hired within 
two years after the date that the 18-month total is reached; or 
(3) a member of a family who is no longer eligible for family 
assistance because of either Federal or State time limits, if 
the individual is hired within two years after the Federal or 
State time limits made the family ineligible for family 
assistance.
            (10) Long-term unemployment recipient
    A qualified long-term unemployment recipient is an 
individual certified by the designated local agency as being in 
a period of unemployment which: (1) is 27 consecutive weeks or 
more; and (2) includes a period in which the individual was 
receiving unemployment compensation under State or Federal law.

Qualified wages

    Generally, qualified wages are defined as cash wages paid 
by the employer to a member of a targeted group. The employer's 
deduction for wages is reduced by the amount of the 
credit.\202\
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    \202\ Sec. 280C(a).
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    For purposes of the credit, generally, wages are defined by 
reference to the Federal Unemployment Tax Act (FUTA) definition 
of wages as contained in section 3306(b) of the Code (without 
regard to the dollar limitation therein contained). Special 
rules apply in the case of certain agricultural labor and 
certain railroad labor.

Calculation of the credit

    The credit available to an employer for qualified wages 
paid to members of all targeted groups except for long-term 
family assistance recipients equals 40 percent (25 percent for 
employment of 400 hours or less) of qualified first-year wages. 
Generally, qualified first-year wages are qualified wages (not 
in excess of $6,000) attributable to service rendered by a 
member of a targeted group during the one-year period beginning 
with the day the individual began work for the employer. 
Therefore, the maximum credit per employee is $2,400 (40 
percent of the first $6,000 of qualified first-year wages).
    The general $6,000 limitation on qualified first-year wages 
is different for certain targeted groups: (1) qualified summer 
youth employees; (2) qualified veterans who are entitled to 
compensation for a service connected disability, and who are 
hired within one year of discharge; (3) qualified veterans who 
are entitled to compensation for a service connected 
disability, and who have been unemployed for an aggregate of at 
least six months during the one year period ending on the 
hiring date; (4) qualified veterans unemployed for at least six 
months (whether or not consecutive) during the one-year period 
ending on the date of hiring; and (5) long-term family 
assistance recipients. The maximum credit (and limitation on 
qualified wages) per employee for members of these the first 
four of these groups are, respectively: (1) $1,200 (40 percent 
of the first $3,000 of qualified first-year wages); (2) $4,800 
(40 percent of the first $12,000 of qualified first-year 
wages); (3) $9,600 (40 percent of the first $24,000 of 
qualified first-year wages); and (4) $5,600 (40 percent of the 
first $14,000 of qualified first-year wages);
    In the case of long-term family assistance recipients, the 
credit equals 40 percent (25 percent for employment of 400 
hours or less) of $10,000 for qualified first-year wages and 50 
percent of the first $10,000 of qualified second-year wages. 
Generally, qualified second-year wages are qualified wages (not 
in excess of $10,000) attributable to service rendered by a 
member of the long-term family assistance category during the 
one-year period beginning on the day after the one-year period 
beginning with the day the individual began work for the 
employer. Therefore, the maximum credit per employee is $9,000 
(40 percent of the first $10,000 of qualified first-year wages 
plus 50 percent of the first $10,000 of qualified second-year 
wages). Except for long-term family assistance recipients, no 
credit is allowed for second-year wages.

Certification rules

    Generally, an individual is not treated as a member of a 
targeted group unless: (1) on or before the day on which an 
individual begins work for an employer, the employer has 
received a certification from a designated local agency that 
such individual is a member of a targeted group; or (2) on or 
before the day an individual is offered employment with the 
employer, a pre-screening notice is completed by the employer 
with respect to such individual, and not later than the 28th 
day after the individual begins work for the employer, the 
employer submits such notice, signed by the employer and the 
individual under penalties of perjury, to the designated local 
agency as part of a written request for certification. For 
these purposes, a pre-screening notice is a document (in such 
form as the Secretary may prescribe) which contains information 
provided by the individual on the basis of which the employer 
believes that the individual is a member of a targeted group.
    An otherwise qualified unemployed veteran is treated as 
certified by the designated local agency as having aggregate 
periods of unemployment (whichever is applicable under the 
qualified veterans rules described above) if such veteran is 
certified by such agency as being in receipt of unemployment 
compensation under a State or Federal law for such applicable 
periods. The Secretary of the Treasury is authorized to provide 
alternative methods of certification for unemployed veterans.

Minimum employment period

    No credit is allowed for qualified wages paid to employees 
who work less than 120 hours in the first year of employment.

Qualified tax-exempt organizations employing qualified veterans

    The credit is not available to qualified tax-exempt 
organizations other than those employing qualified veterans. If 
a qualified tax-exempt organization employs a qualified veteran 
(as described above) a tax credit against the FICA taxes of the 
organization is allowed on the wages of the qualified veteran 
which are paid for the veteran's services in furtherance of the 
activities related to the function or purpose constituting the 
basis of the organization's exemption under section 501.\203\
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    \203\Sec. 3111(e).
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    The credit available to such tax-exempt employer for 
qualified wages paid to a qualified veteran equals 26 percent 
(16.25 percent for employment of 400 hours or less) of 
qualified first-year wages. The amount of qualified first-year 
wages eligible for the credit is the same as those for non-tax-
exempt employers (i.e., $6,000, $12,000, $14,000 or $24,000, 
depending on the category of qualified veteran).
    A qualified tax-exempt organization means an employer that 
is described in section 501(c) and exempt from tax under 
section 501(a).
    The Social Security Trust Funds are held harmless from the 
effects of this provision by a transfer from the Treasury 
General Fund.

Treatment of possessions

    The VOW to Hire Heroes Act of 2011 (the ``VOW Act'')\204\ 
provided a reimbursement mechanism for the U.S. possessions 
(American Samoa, Guam, the Commonwealth of the Northern Mariana 
Islands, the Commonwealth of Puerto Rico, and the United States 
Virgin Islands). The Secretary of the Treasury is to pay to 
each mirror code possession (Guam, the Commonwealth of the 
Northern Mariana Islands, and the United States Virgin Islands) 
an amount equal to the loss to that possession as a result of 
the VOW Act changes to the qualified veterans rules.\205\ 
Similarly, the Secretary of the Treasury is to pay to each non-
mirror Code possession (American Samoa and the Commonwealth of 
Puerto Rico) the amount that the Secretary estimates as being 
equal to the loss to that possession that would have occurred 
as a result of the VOW Act changes if a mirror code tax system 
had been in effect in that possession. The Secretary will make 
this payment to a non-mirror Code possession only if that 
possession establishes to the satisfaction of the Secretary 
that the possession has implemented (or, at the discretion of 
the Secretary, will implement) an income tax benefit that is 
substantially equivalent to the qualified veterans credit 
allowed under the VOW Act modifications.
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    \204\Pub. L. No. 112-56.
    \205\Prior to enactment of the VOW Act there were two categories of 
qualified veterans to whom wages paid by an employer were eligible for 
the credit. Employers who hired veterans who were eligible to receive 
assistance under a supplemental nutritional assistance program were 
entitled to a maximum credit of 40 percent of $6,000 of qualified 
first-year wages paid to such individual. Employers who hired veterans 
who were entitled to compensation for a service-connected disability 
were entitled to a maximum wage credit of 40 percent of $12,000 of 
qualified first-year wages paid to such individual. The VOW Act 
expanded the work opportunity credit with respect to qualified veterans 
resulting in the present-law treatment of qualified veterans described 
above.
---------------------------------------------------------------------------
    An employer that is allowed a credit against U.S. tax under 
the VOW Act with respect to a qualified veteran must reduce the 
amount of the credit claimed by the amount of any credit (or, 
in the case of a non-mirror Code possession, another tax 
benefit) that the employer claims against its possession income 
tax.

Other rules

    The work opportunity tax credit is not allowed for wages 
paid to a relative or dependent of the taxpayer. No credit is 
allowed for wages paid to an individual who is a more than 50-
percent owner of the entity. Similarly, wages paid to 
replacement workers during a strike or lockout are not eligible 
for the work opportunity tax credit. Wages paid to any employee 
during any period for which the employer received on-the-job 
training program payments with respect to that employee are not 
eligible for the work opportunity tax credit. The work 
opportunity tax credit generally is not allowed for wages paid 
to individuals who had previously been employed by the 
employer. In addition, many other technical rules apply.
    The work opportunity tax credit is not available for 
individuals who begin work for an employer after December 31, 
2019.

                           REASONS FOR CHANGE

    To further encourage employment of individuals in certain 
targeted groups, the Committee believes that the work 
opportunity tax credit should be extended.

                        EXPLANATION OF PROVISION

    The provision extends for one year the work opportunity tax 
credit making it available with respect to individuals who 
begin work for an employer on or before December 31, 2020.

                             EFFECTIVE DATE

    The provision generally applies to individuals who begin 
work for the employer after December 31, 2019.

  4. CERTAIN PROVISIONS RELATED TO BEER, WINE, AND DISTILLED SPIRITS 
(SEC. 144 OF THE BILL AND SECS. 263A, 5001, 5041, 5051, 5212, 5415, AND 
                           5555 OF THE CODE)

Exemption for aging process of beer, wine, and distilled spirits

                              PRESENT LAW

    The uniform capitalization (``UNICAP'') rules require 
certain direct and indirect costs allocable to real property or 
tangible personal property produced by the taxpayer to be 
included in either inventory or capitalized into the basis of 
such property, as applicable.\206\ For real or personal 
property acquired by the taxpayer for resale, section 263A 
generally requires certain direct and indirect costs allocable 
to such property to be included in inventory.
---------------------------------------------------------------------------
    \206\Sec. 263A.
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    In the case of interest expense, the uniform capitalization 
rules apply only to interest paid or incurred during the 
property's production period\207\ and that is allocable to 
property produced by the taxpayer or acquired for resale which 
(1) is either real property or property with a class life of at 
least 20 years, (2) has an estimated production period 
exceeding two years, or (3) has an estimated production period 
exceeding one year and a cost exceeding $1,000,000.\208\ The 
production period with respect to any property is the period 
beginning on the date on which production of the property 
begins,\209\ and, except as described below, ending on the date 
on which the property is ready to be placed in service or held 
for sale.\210\
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    \207\See Treas. Reg. sec. 1.263A-12.
    \208\Sec. 263A(f).
    \209\In the case of tangible personal property, the production 
period begins on the first date the taxpayer's accumulated production 
expenditures, including planning and design expenditures, are at least 
five percent of the taxpayer's total estimated accumulated production 
expenditures for the property unit. Treas. Reg. sec. 1.263A-12(c)(3). 
Thus, the production period may begin before physical production 
activity has commenced. See Treas. Reg. sec. 1.263A-12(c)(3). For 
example, in the case of the beer, wine, and distilled spirits industry, 
the production period may include time spent planning and designing 
ingredients, production space, or production personnel.
    \210\Sec. 263A(f)(5)(B). The production period for a unit of 
property produced for sale ends on the date that the unit is ready to 
be held for sale and all production activities reasonably expected to 
be undertaken by, or for, the taxpayer or a related person are 
complete. Treas. Reg. sec. 1.263A-12(d)(1).
---------------------------------------------------------------------------
    For interest costs paid or accrued after December 31, 2017, 
and before January 1, 2020, the aging period for beer,\211\ 
wine,\212\ or distilled spirits\213\ is excluded from the 
production period as determined for purposes of the UNICAP 
interest capitalization rules. Thus, producers of beer, wine, 
or distilled spirits (other than spirits unfit for beverage 
purposes) are able to deduct interest expenses (subject to any 
other applicable limitation) attributable to a shorter 
production period that does not include the aging period of the 
beer, wine, or distilled spirits. In the case of interest costs 
paid or accrued after December 31, 2019, the production period 
as determined for purposes of the UNICAP interest 
capitalization rules will include the aging period for beer, 
wine, or distilled spirits.
---------------------------------------------------------------------------
    \211\As defined in section 5052(a).
    \212\As defined in section 5041(a).
    \213\As defined in section 5002(a)(8), except such spirits that are 
unfit for use for beverage purposes.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that extending the exception to the 
interest capitalization rules for the alcoholic beverage 
industry will continue to simplify tax administration and 
taxpayer compliance.\214\
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    \214\Note that taxpayers in the alcoholic beverage industry that 
meet the $25 million gross receipts test of section 448(c) are exempt 
from all uniform capitalization rules under section 263A, including the 
interest capitalization rules. See sec. 263A(i).
---------------------------------------------------------------------------

                        EXPLANATION OF PROVISION

    The provision extends for one year, through December 31, 
2020, the exclusion of the aging period for beer, wine, or 
distilled spirits from the production period as determined for 
purposes of the UNICAP interest capitalization rules.

                             EFFECTIVE DATE

    The provision applies to interest costs paid or accrued 
after December 31, 2019.

REDUCED RATE OF EXCISE TAX ON BEER AND TRANSFER OF BEER BETWEEN BONDED 
                               FACILITIES

                              PRESENT LAW

In general

    Federal excise taxes are imposed at different rates on 
distilled spirits, wine, and beer and are imposed on these 
products when produced or imported. Generally, these excise 
taxes are administered and enforced by the Alcohol and Tobacco 
Tax and Trade Bureau (``TTB''), except the taxes on imported 
bottled distilled spirits, wine, and beer are collected by the 
Customs and Border Protection Bureau (the ``CBP'') of the 
Department of Homeland Security (under delegation by the 
Secretary of the Treasury).
    Liability for the excise tax on beer arises when the 
alcohol is produced or imported but is not payable until the 
beer is removed from the brewery or customs custody for 
consumption or sale. Generally, beer may be transferred between 
commonly owned breweries without payment of tax; however, tax 
liability follows these products. Imported bulk beer may be 
released from customs custody without payment of tax and 
transferred in bond to a brewery, which becomes liable for the 
tax on such beer. Beer may be exported without payment of tax 
and may be withdrawn from a brewery without payment of tax or 
free of tax for certain authorized uses, including industrial 
uses and non-beverage uses.\215\
---------------------------------------------------------------------------
    \215\ Sec. 5053.
---------------------------------------------------------------------------
    Notwithstanding the current, temporary rates described 
below, the rate of tax on beer is $18 per barrel (31 
gallons).\216\ Small brewers are eligible for a reduced tax 
rate of $7 per barrel on the first 60,000 barrels of beer 
domestically produced and removed each year.\217\ Small brewers 
are defined as brewers producing fewer than two million barrels 
of beer during a calendar year. The lower rates for small 
producers reduce the effective per-gallon tax rate from 
approximately 58 cents per gallon to approximately 22.6 cents 
per gallon for this beer.
---------------------------------------------------------------------------
    \216\Sec. 5051.
    \217\Sec. 5051(a)(2).
---------------------------------------------------------------------------
    In the case of a controlled group, the two million barrel 
limitation for small brewers is applied to the controlled 
group, and the 60,000 barrels eligible for the reduced rate of 
tax, are apportioned among the brewers who are component 
members of such group. The term ``controlled group'' has the 
meaning assigned to it by section 1563(a), except that the 
phrase ``more than 50 percent'' is substituted for the phrase 
``at least 80 percent'' in each place it appears in section 
1563(a).
    Individuals may produce limited quantities of beer for 
personal or family use without payment of tax during each 
calendar year. The limit is 200 gallons per calendar year for 
households of two or more adults and 100 gallons per calendar 
year for single-adult households.
    For calendar years 2018 and 2019, the rate of tax on beer 
is temporarily lowered to $16 per barrel on the first six 
million barrels brewed by the brewer or imported by the 
importer. In general, in the case of a controlled group of 
brewers, the six million barrel limitation is applied and 
apportioned at the level of the controlled group. Beer brewed 
or imported in excess of the six million barrel limit continues 
to be taxed at $18 per barrel. In the case of small brewers, 
such brewers are taxed at a rate of $3.50 per barrel on the 
first 60,000 barrels domestically produced, and $16 per barrel 
on any further barrels produced.

Transfer rules and removals without tax

    Certain removals or transfers of beer are exempt from tax. 
Beer may be transferred without payment of the tax between 
bonded premises under certain conditions specified in the 
regulations.\218\ The tax liability accompanies the beer that 
is transferred in bond. However, beer may only be transferred 
without payment of tax between breweries if both breweries are 
owned by the same brewer.
---------------------------------------------------------------------------
    \218\Sec. 5414.
---------------------------------------------------------------------------
    The shared ownership requirement of section 5414 is 
temporarily relaxed for calendar years 2018 and 2019. Thus, a 
brewer may transfer beer from one brewery to another without 
payment of tax, provided that: (1) the breweries are owned by 
the same person; (2) one brewery owns a controlling interest in 
the other; (3) the same person or persons have a controlling 
interest in both breweries; or (4) the proprietors of the 
transferring and receiving premises are independent of each 
other, and the transferor has divested itself of all interest 
in the beer so transferred, and the transferee has accepted 
responsibility for payment of the tax.
    For purposes of transferring the tax liability pursuant to 
(4) above, such relief from liability is effective from the 
time of removal from the transferor's bonded premises, or from 
the time of divestment, whichever is later.

                           REASONS FOR CHANGE

    The Committee believes that extending these provisions will 
continue to encourage growth and increased employment in the 
beer industry.

                        EXPLANATION OF PROVISION

    The provision extends for one year the temporary rate 
schedule on beer.
    The provision extends for one year the temporary rules 
regarding shared ownership.

                             EFFECTIVE DATE

    The provision to extend the temporary rate schedule applies 
to beer removed after December 31, 2019.
    The provision to extend the temporary rules regarding 
shared ownership applies to calendar quarters beginning after 
December 31, 2019.

   REDUCED RATE OF EXCISE TAX ON CERTAIN WINE, ADJUSTMENT OF ALCOHOL 
 CONTENT LEVEL FOR APPLICATION OF EXCISE TAXES, AND DEFINITION OF MEAD 
                     AND LOW ALCOHOL BY VOLUME WINE

                              PRESENT LAW

In general

    Excise taxes are imposed on wine according to the wine's 
alcohol content and carbonation levels. Notwithstanding 
temporary changes to alcohol content allowances described 
below, the following table outlines the rates of tax on wine.
---------------------------------------------------------------------------
    \219\A ``still wine'' is a non-effervescent or minimally 
effervescent wine containing no more than 0.392 grams of carbon dioxide 
per hundred milliliters of wine. Champagne wine typically contains more 
than twice that amount.
    \220\A wine gallon is a U.S. liquid gallon.

------------------------------------------------------------------------
          Tax (and Code Section)                      Tax Rates
------------------------------------------------------------------------
Wines (sec. 5041)
    ``Still wines''\219\ not more than 14   $1.07 per wine gallon\220\
     percent alcohol.
    ``Still wines'' more than 14 percent,   $1.57 per wine gallon
     but not more than 21 percent, alcohol.
    ``Still wines'' more than 21 percent,   $3.15 per wine gallon
     but not more than 24 percent, alcohol.
    ``Still wines'' more than 24 percent    $13.50 per proof gallon
     alcohol.                                (taxed as distilled
                                             spirits)
    Champagne and other sparkling wines...  $3.40 per wine gallon
    Artificially carbonated wines.........  $3.30 per wine gallon
------------------------------------------------------------------------

    Liability for the excise taxes on wine arises when the wine 
is produced or imported, but is not payable until the wine is 
removed from the bonded wine cellar or winery, or from customs 
control, for consumption or sale. Generally, bulk and bottled 
wine may be transferred between bonded premises; however, the 
tax liability on such wine becomes the responsibility of the 
transferee. Bulk natural wine may be released from customs 
custody without payment of tax and transferred in bond to a 
winery. Wine may be exported without payment of tax and may be 
withdrawn from a wine cellar or winery without payment of tax 
or free of tax for certain authorized uses, including 
industrial uses and non-beverage uses.\221\
---------------------------------------------------------------------------
    \221\Sec. 5042.
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Credits and exemptions for certain wine producers

    Notwithstanding the current temporary credits described 
below, domestic wine producers having aggregate annual 
production not exceeding 250,000 gallons (``small domestic 
producers'') receive a credit against the wine excise tax equal 
to 90 cents per gallon (the amount of a wine tax increase 
enacted in 1990) on the first 100,000 gallons of wine 
domestically produced and removed during a calendar year.\222\ 
The credit is reduced (but not below zero) by one percent for 
each 1,000 gallons produced in excess of 150,000 gallons; the 
credit may not be applied to the tax liability on sparkling 
wines. In the case of a controlled group, the 250,000 gallon 
limitation for wineries is applied to the controlled group, and 
the 100,000 gallons eligible for the credit, are apportioned 
among the wineries who are component members of such group. The 
term ``controlled group'' has the meaning assigned to it by 
sec. 1563(a), except that the phrase ``more than 50 percent'' 
is substituted for the phrase ``at least 80 percent'' in each 
place it appears in sec 1563(a).
---------------------------------------------------------------------------
    \222\Sec. 5041(c).
---------------------------------------------------------------------------
    The credit against the wine excise tax for small domestic 
producers is temporarily modified for calendar year 2018 and 
2019 in several ways. First, the 250,000 wine gallon domestic 
production limitation is removed (thus making the credit 
available for all wine producers and importers). Second, under 
the modifications, the credit may be applied to the tax 
liability on sparkling wine. Third, with respect to wine 
produced in, or imported into, the United States during a 
calendar year, the credit amount is modified to (1) $1.00 per 
wine gallon for the first 30,000 wine gallons of wine, plus, 
(2) 90 cents per wine gallon on the next 100,000 wine gallons 
of wine, plus (3) 53.5 cents per wine gallon on the next 
620,000 wine gallons of wine.\223\ Finally, there is no phase-
out of the credit with additional production.
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    \223\The credit rate for hard cider is tiered at the same level of 
production or importation, but is equal to 6.2 cents, 5.6 cents, and 
3.3 cents, respectively.
---------------------------------------------------------------------------

Other temporary changes

    Alcohol-by-volume levels of the first two tiers of the 
excise tax on wine are temporarily modified for calendar years 
2018 and 2019, by changing 14 percent to 16 percent. Thus, a 
wine producer or importer may temporarily produce or import 
``still wine'' that has an alcohol-by-volume level of up to 16 
percent and remain subject to the lowest rate of $1.07 per wine 
gallon.
    Mead and certain sparkling, low alcohol-by-volume wines are 
temporarily designated to be taxed at the lowest rate 
applicable to ``still wine,'' $1.07 per wine gallon of wine for 
calendar years 2018 and 2019. Mead is defined as a wine that 
contains not more than 0.64 grams of carbon dioxide per hundred 
milliliters of wine,\224\ which is derived solely from honey 
and water, contains no fruit product or fruit flavoring, and 
contains less than 8.5 percent alcohol-by-volume. The sparkling 
wines eligible to be taxed at the lowest rate are those wines 
that contain more than 0.64 grams of carbon dioxide per hundred 
milliliters of wine,\225\ which are derived primarily from 
grapes or grape juice concentrate and water, which contain no 
fruit flavoring other than grape, and which contain less than 
8.5 percent alcohol by volume.
---------------------------------------------------------------------------
    \224\The Secretary is authorized to prescribe tolerances to this 
limitation as may be reasonably necessary in good commercial practice.
    \225\The Secretary is authorized to prescribe tolerances to this 
limitation as may be reasonably necessary in good commercial practice.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that extending these provisions will 
continue to encourage growth and increased employment in the 
wine industry.

                        EXPLANATION OF PROVISION

    The provision extends for one year the temporary 
modifications to the credit against the wine excise tax.
    The provision extends for one year the temporary 
modification to the alcohol-by-volume levels for purposes of 
the excise tax.
    The provision extends for one year the temporary rates on 
mead and certain sparkling, low alcohol-by-volume wines.

                             EFFECTIVE DATE

    The provisions apply to wine removed after December 31, 
2019.

   REDUCED RATE OF EXCISE TAX ON CERTAIN DISTILLED SPIRITS AND BULK 
                           DISTILLED SPIRITS

                              PRESENT LAW

    Notwithstanding the current, temporary rates described 
below, distilled spirits are taxed at a rate of $13.50 per 
proof gallon.\226\ Liability for the excise tax on distilled 
spirits arises when the alcohol is produced or imported but is 
not determined and payable until bottled distilled spirits are 
removed from the bonded premises of the distilled spirits plant 
where they are produced, or customs custody. Generally, bulk 
distilled spirits may be transferred in bond between bonded 
premises; however, tax liability follows these products. 
Imported bulk distilled spirits may be released from customs 
custody without payment of tax and transferred in bond to a 
distillery. Distilled spirits be exported without payment of 
tax and may be withdrawn from a distillery without payment of 
tax or free of tax for certain authorized uses, including 
industrial uses and non-beverage uses.
---------------------------------------------------------------------------
    \226\Secs. 5001, 5006, 5043, and 5054.
---------------------------------------------------------------------------
    For calendar years 2018 and 2019, there is a temporary tax 
rate schedule for distilled spirits based on annual quantity 
produced or imported. The rate of tax is lowered to $2.70 per 
proof gallon on the first 100,000 proof gallons of distilled 
spirits produced, $13.34 for all proof gallons in excess of 
that amount but below 22,130,000 proof gallons, and $13.50 for 
amounts thereafter. Rules prevent members of the same 
controlled group from receiving the lower rate on more than 
100,000 proof gallons of distilled spirits. Additionally, 
importers of distilled spirits are eligible for the temporary 
lower rates subject to documentation of the annual total 
production of the producer.
    Additionally, for calendar years 2018 and 2019, distillers 
may transfer spirits in bond in containers other than bulk 
containers without payment of tax.

                           REASONS FOR CHANGE

    The Committee believes that extending these provisions will 
continue to encourage growth and increased employment in the 
distilled spirits industry.

                        EXPLANATION OF PROVISION

    The provision extends for one year the temporary rate 
schedule on distilled spirits and the eligibility of that rate 
schedule for importers.
    The provision extends for one year the allowance for 
distillers to transfer spirits in bond in containers other than 
bulk containers without payment of tax.

                             EFFECTIVE DATE

    The provision to extend the temporary rate schedule applies 
to distilled spirits removed after December 31, 2019.
    The provision to extend the allowance for distillers to 
transfer spirits in bond in containers other than bulk 
containers without payment of tax applies to distilled spirits 
transferred in bond after December 31, 2019.

SIMPLIFICATION OF RULES REGARDING RECORDS, STATEMENTS, AND RETURNS FOR 
              CRAFT BEVERAGE MODERNIZATION AND TAX REFORM

                              PRESENT LAW

    The Code requires those liable for taxation on alcoholic 
beverages to keep such records, render such statements, make 
such returns, and comply with such rules and regulations as 
prescribed by the Secretary.\227\ For calendar quarters 
beginning after February 9, 2018, and before January 1, 2020, 
the Secretary shall permit a unified system for any records, 
statements, and returns required to be kept, rendered, or made 
for any beer produced in a brewery for which tax is imposed, 
including any beer which has been removed for consumption on 
the premises of the brewery.
---------------------------------------------------------------------------
    \227\Sec. 5555(a).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that extending this provision will 
continue to simplify recordkeeping for brewers.

                        EXPLANATION OF PROVISION

    The provision extends for one year the Secretary's 
permission of a unified system for any records, statements, and 
returns required to be kept, rendered, or made for any beer 
produced in a brewery for which tax is imposed, including any 
beer which has been removed for consumption on the premises of 
the brewery.

                             EFFECTIVE DATE

    The provision applies to calendar quarters beginning 
December 31, 2019.

5. look-through rule for related controlled foreign corporations (sec. 
            145 of the bill and sec. 954(c)(6) of the code)


                              PRESENT LAW

In general

    The rules of subpart F\228\ require U.S. shareholders with 
a 10-percent or greater interest in a controlled foreign 
corporation (``CFC'') to include certain income of the CFC 
(referred to as ``subpart F income'') on a current basis for 
U.S. tax purposes.\229\
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    \228\Secs. 951-964.
    \229\Sec. 951(a).
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    Subpart F income includes foreign base company income.\230\ 
One category of foreign base company income is foreign personal 
holding company income, which includes passive income such as 
dividends, interest, rents, and royalties, among other types of 
income.\231\ There are several exceptions to these rules. For 
example, foreign personal holding company income does not 
include dividends and interest received by a CFC from a related 
corporation organized and operating in the same foreign country 
in which the CFC is organized, or rents and royalties received 
by a CFC from a related corporation for the use of property 
within the country in which the CFC is organized.\232\ 
Interest, rent, and royalty payments do not qualify for this 
exclusion to the extent that such payments reduce the subpart F 
income of the payor.
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    \230\Secs. 952(a)(2) and 954.
    \231\Sec. 954(c)(1).
    \232\Sec. 954(c)(3).
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    In addition, subpart F income of a CFC does not include any 
item of income from sources within the United States that is 
effectively connected with the conduct by such CFC of a trade 
or business within the United States (``ECI'') unless such item 
is exempt from taxation (or is subject to a reduced rate of 
tax) pursuant to a tax treaty.\233\
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    \233\Sec. 952(b).
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The ``CFC look-through'' rule

    Section 954(c)(6), colloquially referred to as the ``CFC 
look-through'' rule, provides that dividends, interest 
(including factoring income that is treated as equivalent to 
interest under section 954(c)(1)(E)), rents, and royalties 
received or accrued by one CFC from a related CFC are not 
treated as foreign personal holding company income to the 
extent attributable or properly allocable to income of the 
payor that is neither subpart F income nor treated as ECI. For 
this purpose, a related CFC is a CFC that controls or is 
controlled by the other CFC, or a CFC that is controlled by the 
same person or persons that control the other CFC. Ownership of 
more than 50 percent of the CFC's stock (by vote or value) 
constitutes control for these purposes.
    The Secretary is authorized to prescribe regulations that 
are necessary or appropriate to carry out the look-through 
rule, including such regulations as may be necessary or 
appropriate to prevent the abuse of the purposes of such rule.
    The look-through rule applies to taxable years of foreign 
corporations beginning after December 31, 2005, and before 
January 1, 2020, and to taxable years of U.S. shareholders with 
or within which such taxable years of foreign corporations 
end.\234\
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    \234\See section 144 of the Protecting Americans from Tax Hikes Act 
of 2015 (Division Q of Pub. L. No. 114-113), H.R. 2029 (the ``PATH Act 
of 2015''), which extended section 954(c)(6) for five years. Congress 
has previously extended the application of section 954(c)(6) several 
times, most recently in the Tax Increase Prevention Act of 2014, Pub. 
L. No. 113-295; Pub. L. No. 107-147, sec. 614, 2002; Pub. L. No. 106-
170, sec. 503, 1999; Pub. L. No. 105-277, 1998.
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                           REASONS FOR CHANGE

    The Committee believes that the CFC look-through rule 
streamlines the financing of the overseas operations of U.S. 
multinational companies by allowing the redeployment of active 
foreign earnings of one CFC in a related CFC without the 
imposition of an income inclusion under subpart F. Furthermore, 
the Committee believes that not extending the CFC look-through 
rule would be a policy change that would cause U.S. 
multinational companies to incur certain administrative and 
transaction costs in restructuring existing and future 
financings of their overseas operations conducted through CFCs. 
Finally, the CFC look-through rule prevents the affirmative use 
of related party transactions among related CFCs to convert 
income that is not subpart F income of one CFC into subpart F 
income of a related CFC. Absent the CFC look-through rule, such 
transactions in some cases may have the effect of reducing the 
total U.S. tax payable on foreign earnings. Accordingly, the 
Committee believes that the CFC look-through rule should be 
extended.

                        EXPLANATION OF PROVISION

    The provision extends for one year the application of the 
look-through rule, to taxable years of foreign corporations 
beginning before January 1, 2021, and to taxable years of U.S. 
shareholders with or within which such taxable years of foreign 
corporations end.

                             EFFECTIVE DATE

    The provision applies to taxable years of foreign 
corporations beginning after December 31, 2019, and to taxable 
years of U.S. shareholders with or within which such taxable 
years of foreign corporations end.

6. CREDIT FOR HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS (SEC. 146 
                  OF THE BILL AND SEC. 35 OF THE CODE)

                              PRESENT LAW

Eligible coverage months

    For months beginning before January 1, 2020, in the case of 
an eligible individual, a refundable tax credit is provided for 
72.5 percent of the individual's premiums for qualified health 
insurance of the individual and qualifying family members for 
each eligible coverage month beginning in the taxable 
year.\235\ The credit is commonly referred to as the health 
coverage tax credit. The credit is available only with respect 
to amounts paid by the individual for qualified health 
insurance. Advance monthly payments paid directly to the health 
plan administrator are available.\236\
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    \235\Qualifying family members are the individual's spouse and any 
dependent for whom the individual is entitled to claim a dependency 
exemption. Any individual who has certain specified coverage is not a 
qualifying family member.
    \236\Sec. 7527.
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    Eligibility for the credit is determined on a monthly 
basis. In general, an eligible coverage month is any month if 
(1) the month begins before January 1, 2020, and (2) as of the 
first day of the month, the individual is an eligible 
individual, is covered by qualified health insurance, the 
premium for which is paid by the individual, does not have 
other specified coverage, and is not imprisoned under Federal, 
State, or local authority. In the case of a joint return, the 
eligibility requirements are met if at least one spouse 
satisfies the requirements.

Eligible individuals

    An eligible individual is an individual who is (1) an 
eligible Trade Adjustment Assistance (``TAA'') recipient, (2) 
an eligible alternative TAA recipient, or (3) an eligible 
Pension Benefit Guaranty Corporation (``PBGC'') pension 
recipient. In general, an individual is an eligible TAA 
recipient for a month if the individual (1) receives for any 
day of the month a trade readjustment allowance under the Trade 
Act of 1974 or would be eligible to receive such an allowance 
but for the requirement that the individual exhaust 
unemployment benefits before being eligible to receive an 
allowance and (2) with respect to such allowance, is covered 
under a required certification. An individual is an eligible 
alternative TAA recipient for a month if the individual 
participates in a certain program under the Trade Act of 1974 
and receives a related benefit for the month. Generally, an 
individual is an eligible PBGC pension recipient for any month 
if the individual (1) is age 55 or over as of the first day of 
the month and (2) receives a benefit for the month, any portion 
of which is paid by the PBGC. A person who may be claimed as a 
dependent on another person's tax return is not an eligible 
individual. In addition, an otherwise eligible individual is 
not eligible for the credit for a month if, as of the first day 
of the month, the individual has certain specified coverage, 
such as certain employer-provided coverage or coverage under 
certain governmental health programs.

Qualified health insurance

    Qualified health insurance eligible for the credit is: (1) 
coverage under a COBRA continuation provision;\237\ (2) State-
based continuation coverage provided by the State under a State 
law that requires such coverage; (3) coverage offered through a 
qualified State high risk pool; (4) coverage under a health 
insurance program offered to State employees or a comparable 
program; (5) coverage through an arrangement entered into by a 
State and a group health plan, an issuer of health insurance 
coverage, an administrator, or an employer; (6) coverage 
offered through a State arrangement with a private sector 
health care coverage purchasing pool; (7) coverage under a 
State-operated health plan that does not receive any Federal 
financial participation; (8) coverage under a group health plan 
that is available through the employment of the eligible 
individual's spouse; (9) coverage under individual health 
insurance\238\ (other than coverage purchased through an 
American Health Benefit Exchange);\239\ and (10) coverage under 
an employee benefit plan funded by a voluntary employee 
beneficiary association (``VEBA'')\240\ established pursuant to 
an order of a bankruptcy court (or by agreement with an 
authorized representative).\241\
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    \237\COBRA continuation provision is defined by section 9832(d)(1).
    \238\For this purpose, ``individual health insurance'' means any 
insurance that constitutes medical care offered to individuals other 
than in connection with a group health plan. Such term does not include 
Federal- or State-based health insurance coverage.
    \239\The premium assistance credit is provided for eligible 
individuals and families who purchase health insurance through an 
American Health Benefit Exchange. See sec. 36B.
    \240\See section 501(c)(9) for the definition of a VEBA.
    \241\See 11 U.S.C. sec. 1114.
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    Qualified health insurance does not include any State-based 
coverage (i.e., coverage described in (2)-(7) in the preceding 
paragraph) unless the State has elected to have such coverage 
treated as qualified health insurance and such coverage meets 
certain consumer-protection requirements.\242\ Such State 
coverage must provide that each qualifying individual is 
guaranteed enrollment if the individual pays the premium for 
enrollment or provides a qualified health insurance costs 
eligibility certificate and pays the remainder of the premium. 
In addition, the State-based coverage cannot impose any pre-
existing condition limitation with respect to qualifying 
individuals. State-based coverage cannot require a qualifying 
individual to pay a premium or contribution that is greater 
than the premium or contribution for a similarly situated 
individual who is not a qualified individual. Finally, benefits 
under the State-based coverage must be the same as (or 
substantially similar to) benefits provided to similarly 
situated individuals who are not qualifying individuals.
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    \242\For guidance on how a State elects a health program to be 
qualified health insurance for purposes of the credit, see Rev. Proc. 
2004-12, 2004-1 C.B. 528.
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    A qualifying individual for this purpose is an eligible 
individual who seeks to enroll in the State-based coverage and 
who has aggregate periods of creditable coverage\243\ of three 
months or longer, does not have other specified coverage, and 
is not imprisoned. However, State-based coverage that satisfies 
any or all of the consumer-protection requirements for State-
based coverage with respect to all eligible individuals is also 
qualified health insurance for purposes of the health coverage 
tax credit.\244\
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    \243\Creditable coverage is determined under section 9801(c).
    \244\See Q&A-10 of Notice 2005-50, 2005-2 C.B. 14.
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    Qualified health insurance does not include coverage under 
a flexible spending or similar arrangement or any insurance if 
substantially all of the coverage is for excepted benefits.

                           REASONS FOR CHANGE

    The Committee believes that the health coverage tax credit 
should be extended for 12 months, through 2020, so that health 
coverage continues to be affordable for eligible TAA 
recipients, alternative TAA recipients, and PBGC recipients.

                        EXPLANATION OF PROVISION

    The provision extends the availability of the health 
coverage tax credit for 12 months, by amending the definition 
of eligible coverage month to include months beginning before 
January 1, 2021, if the requirements for an eligible coverage 
month are otherwise met.

                             EFFECTIVE DATE

    The provision is effective for months beginning after 
December 31, 2019.

                     TITLE II--ESTATE AND GIFT TAX


1. REDUCTION OF UNIFIED CREDIT AGAINST ESTATE TAX (SEC. 201 OF THE BILL 
                       AND SEC. 2010 OF THE CODE)

                              PRESENT LAW

In general

    A gift tax is imposed on certain lifetime transfers, and an 
estate tax is imposed on certain transfers at death. A 
generation-skipping transfer tax generally is imposed on 
transfers, either directly or in trust or similar arrangement, 
to a ``skip person'' (i.e., a beneficiary in a generation more 
than one generation younger than that of the transferor). 
Transfers subject to the generation-skipping transfer tax 
include direct skips, taxable terminations, and taxable 
distributions.
    Income tax rules determine the recipient's tax basis in 
property acquired from a decedent or by gift. Gifts and 
bequests generally are excluded from the recipient's gross 
income.\245\
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    \245\Sec. 102.
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Unified credit (exemption) and tax rates

            Unified credit
    A unified credit is available with respect to taxable 
transfers by gift and at death.\246\ The unified credit offsets 
tax, computed using the applicable estate and gift tax rates, 
on a specified amount of transfers, referred to as the 
applicable exclusion amount, or exemption amount. Exemption 
used during life to offset taxable gifts reduces the amount of 
exemption that remains at death to offset the value of a 
decedent's estate. An election is available under which 
exemption that is not used by a decedent may be used by the 
decedent's surviving spouse (exemption portability).
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    \246\Sec. 2010.
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    For decedents dying and gifts made before January 1, 2018, 
the basic exclusion amount that is used to determine the 
unified credit is $5 million, indexed for inflation occurring 
after 2011. Public Law 115-97, however, temporarily increases 
the basic exclusion amount for estates of decedents dying and 
gifts made after December 31, 2017 and before January 1, 2026. 
This is accomplished by doubling the basic exclusion amount 
provided in section 2010(c)(3) of the Code from $5 million to 
$10 million. The $10 million amount is indexed for inflation 
occurring after 2011. For 2019, the basic exclusion amount is 
$11,400,000.\247\
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    \247\Rev. Proc. 2018-57, 2018-49 I.R.B. 827, p. 835 (December 3, 
2018). As a conforming amendment to the increase in the basic exclusion 
amount, Public Law 115-97 also amends section 2001(g) (regarding 
computation of estate tax). This conforming amendment, which was 
enacted as a permanent provision, provides that the Secretary shall 
prescribe regulations as may be necessary or appropriate to carry out 
the purposes of section 2001 with respect to differences between the 
basic exclusion amount in effect at the time of the decedent's death 
and at the time of any gifts made by the decedent. The purpose of the 
regulatory authority is to address the computation of the estate tax 
where (1) a decedent dies in a year in which the basic exclusion amount 
is lower than the basic exclusion amount that was in effect when the 
decedent made taxable gifts during his or her life, and (2) such 
taxable gifts exceeded the basic exclusion amount in effect at the time 
of the decedent's death. Because the temporary increase in the basic 
exclusion amount under Public Law 115-97 does not apply for estates of 
decedents dying after December 31, 2025, it was expected that such 
guidance would prevent the estate tax computation under section 2001(g) 
from recapturing, or ``clawing back,'' all or a portion of the benefit 
of the increased basic exclusion amount used to offset gift tax for 
certain decedents who make large taxable gifts between January 1, 2018, 
and December 31, 2025, and die after December 31, 2025. In November 
2018, the IRS issued proposed regulations pursuant to this regulatory 
authority. See REG-106706-18, 26 C.F.R. Part 20 (November 23, 2018).
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    The temporary increase in the basic exclusion amount 
expires for decedents dying and gifts made after December 31, 
2025. At that time, the basic exclusion amount returns to $5 
million, indexed for inflation occurring after 2011.
            Common tax rate table
    A common tax-rate table with a top marginal tax rate of 40 
percent is used to compute gift tax and estate tax. The 40-
percent rate applies to transfers in excess of $1 million (to 
the extent not exempt). Because the 2019 exemption amount 
shields the first $11.4 million in gifts and bequests from tax, 
transfers in excess of the exemption amount generally are 
subject to tax at the highest marginal rate (40 percent).
            Generation-skipping transfer tax exemption and rate
    The generation-skipping transfer tax is a separate tax that 
can apply in addition to either the gift tax or the estate tax. 
The tax rate and exemption amount for generation-skipping 
transfer tax purposes, however, are set by reference to the 
estate tax rules. Generation-skipping transfer tax is imposed 
using a flat rate equal to the highest estate tax rate (40 
percent). Tax is imposed on cumulative generation-skipping 
transfers in excess of the generation-skipping transfer tax 
exemption amount in effect for the year of the transfer. The 
generation-skipping transfer tax exemption for a given year is 
equal to the estate tax exemption amount in effect for that 
year ($11.4 million for 2019).

                           REASONS FOR CHANGE

    The Committee believes that it is appropriate to return to 
the pre-Public Law 115-97 basic exclusion amount in order to 
require the wealthiest estates to pay their fair share, without 
increasing the tax burden on lower- or middle-income Americans.

                        EXPLANATION OF PROVISION

    The provision accelerates by three years the expiration of 
the increase in the estate and gift tax exemption. As a result, 
the basic exclusion amount returns to $5 million (indexed for 
inflation occurring after 2011) for decedents dying and gifts 
made after December 31, 2022.

                             EFFECTIVE DATE

    The provision is effective for estates of decedents dying 
and gifts made after December 31, 2022.

                     TITLE III--DISASTER TAX RELIEF


                 1. DEFINITIONS (SEC. 301 OF THE BILL)

    The provisions below provide temporary tax relief to those 
areas affected by certain major disasters declared in 2018 and 
some portion of 2019. The provisions use the terms ``qualified 
disaster area,'' ``qualified disaster zone,'' ``qualified 
disaster,'' and ``incident period.'' As used in the bill, 
``qualified disaster area'' refers to an area with respect to 
which a major disaster has been declared by the President 
during the period beginning on January 1, 2018, and ending on 
the date which is 60 days after the date of enactment of the 
bill, under section 401 of the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act (the ``Stafford Act''), if 
the incident period of the disaster with respect to which such 
declaration is made begins on or before the date of the 
enactment of the bill. However, the ``California wildfire 
disaster area,'' as defined in the Bipartisan Budget Act of 
2018,\248\ is not a qualified disaster area. A ``qualified 
disaster zone'' refers to that portion of the applicable 
``qualified disaster area,'' as described above, which has been 
determined by the President to warrant individual or individual 
and public assistance from the Federal government under the 
Stafford Act by reason of the applicable qualified disaster. A 
``qualified disaster'' means, with respect to the applicable 
qualified disaster area, the disaster by reason of which a 
major disaster was declared with respect to such area. 
``Incident period'' means, with respect to the applicable 
qualified disaster, the period specified by the Federal 
Emergency Management Agency as the period during which such 
disaster occurred, except that such period shall not be treated 
as beginning before January 1, 2018, or ending after the date 
which is 30 days after the date of enactment of this bill.
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    \248\Pub. L. No. 115-123, sec. 20102.
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2. SPECIAL DISASTER-RELATED RULES FOR USE OF RETIREMENT FUNDS (SEC. 302 
                  OF THE BILL AND SEC. 72 OF THE CODE)

                              PRESENT LAW

Distributions from tax-favored retirement plans

    A distribution from a qualified retirement plan, a tax-
sheltered annuity plan (a ``section 403(b) plan''), an eligible 
deferred compensation plan of a State or local government 
employer (a ``governmental section 457(b) plan''), or an 
individual retirement arrangement (an ``IRA'') generally is 
included in income for the year distributed.\249\ These plans 
are referred to collectively as ``eligible retirement plans.'' 
In addition, unless an exception applies, a distribution from a 
qualified retirement plan, a section 403(b) plan, or an IRA 
received before age 59\1/2\ is subject to a 10-percent 
additional tax (referred to as the ``early withdrawal tax'') on 
the amount includible in income.\250\
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    \249\Secs. 401(a), 403(a), 403(b), 457(b) and 408. Under section 
3405, distributions from these plans are generally subject to income 
tax withholding unless the recipient elects otherwise. In addition, 
certain distributions from a qualified retirement plan, a section 
403(b) plan, or a governmental section 457(b) plan are subject to 
mandatory income tax withholding at a 20-percent rate unless the 
distribution is rolled over.
    \250\Sec. 72(t). Under present law, the 10-percent early withdrawal 
tax does not apply to distributions from a governmental section 457(b) 
plan.
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    In general, a distribution from an eligible retirement plan 
may be rolled over to another eligible retirement plan within 
60 days, in which case the amount rolled over generally is not 
includible in income. The IRS has the authority to waive the 
60-day requirement if failure to waive the requirement would be 
against equity or good conscience, including cases of casualty, 
disaster, or other events beyond the reasonable control of the 
individual.
    The terms of a qualified retirement plan, section 403(b) 
plan, or governmental section 457(b) plan generally determine 
when distributions are permitted. However, in some cases, 
restrictions may apply to distributions before an employee's 
termination of employment, referred to as ``in-service'' 
distributions. Despite such restrictions, an in-service 
distribution may be permitted in the case of financial hardship 
or an unforeseeable emergency.

Loans from tax-favored retirement plans

    Employer-sponsored retirement plans may provide loans to 
participants. Unless the loan satisfies certain requirements in 
both form and operation, the amount of a retirement plan loan 
is a deemed distribution from the retirement plan. Among the 
requirements that the loan must satisfy are that the loan 
amount must not exceed the lesser of 50 percent of the 
participant's account balance or $50,000 (generally taking into 
account outstanding balances of previous loans), and the loan's 
terms must provide for a repayment period of not more than five 
years (except for a loan specifically to purchase a home) and 
for level amortization of loan payments to be made not less 
frequently than quarterly.\251\ Thus, if an employee stops 
making payments on a loan before the loan is repaid, a deemed 
distribution of the outstanding loan balance generally occurs. 
A deemed distribution of an unpaid loan balance is generally 
taxed as though an actual distribution occurred, including 
being subject to a 10-percent early distribution tax, if 
applicable. A deemed distribution is not eligible for rollover 
to another eligible retirement plan. Subject to the limit on 
the amount of loans, which precludes any additional loan that 
would cause the limit to be exceeded, the rules relating to 
loans do not limit the number of loans an employee may obtain 
from a plan.
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    \251\Sec. 72(p).
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Tax-favored retirement plan compliance

    Tax-favored retirement plans are generally required to be 
operated in accordance with the terms of the plan document, and 
amendments to reflect changes to the plan generally must be 
adopted within a limited period.

                           REASONS FOR CHANGE

    When a disaster occurs, taxpayers living or working in the 
affected areas may experience damage to their homes and 
personal property, in some cases significant. As a result, they 
may need access to their financial resources to recover from 
the consequences of such events to repair such damage and to 
pay for immediate living expenses. The Committee believes that 
when a major Federal disaster is declared under the Stafford 
Act, affected taxpayers of qualified disasters should be able 
to take distributions or loans from their retirement accounts 
for such purposes.

                        EXPLANATION OF PROVISION

Distributions and recontributions

    Under the provision, an exception to the 10-percent early 
withdrawal tax applies in the case of ``qualified disaster 
distributions''' from a qualified retirement plan, a section 
403(b) plan, or an IRA. In addition, as discussed further, 
income attributable to a qualified disaster distribution may be 
included in income ratably over three years, and the amount of 
a qualified disaster distribution may be recontributed to an 
eligible retirement plan within three years.
    A ``qualified disaster distribution'' is any distribution 
from a qualified retirement plan, section 403(b) plan, or 
governmental section 457(b) plan, made on or after the first 
day of the incident period of a qualified disaster and before 
the date which is 180 days after the date of enactment, to an 
individual whose principal place of abode at any time during 
the incident period is located in the qualified disaster area 
and who has sustained an economic loss by reason of such 
disaster, regardless of whether a distribution otherwise would 
be permissible.\252\
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    \252\A qualified disaster distribution is subject to income tax 
withholding unless the recipient elects otherwise. Mandatory 20-percent 
withholding does not apply.
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    A plan is not treated as violating any Code requirement 
merely because it treats a distribution as a qualified disaster 
distribution, provided that the aggregate amount of such 
distributions from plans maintained by the employer and members 
of the employer's controlled group or affiliated service group 
does not exceed $100,000 for each qualified disaster. The total 
amount of distributions to an individual from all eligible 
retirement plans that may be treated as qualified disaster 
distributions with respect to each qualified disaster is 
$100,000. Thus, a plan is not treated as violating any Code 
requirement merely because an individual might receive total 
distributions in excess of $100,000, taking into account 
distributions from plans of other employers or IRAs, or because 
an individual may have been affected by more than one qualified 
disaster.
    Any amount required to be included in income as a result of 
a qualified disaster distribution is included in income ratably 
over the three-year period beginning with the year of 
distribution unless the individual elects not to have ratable 
inclusion apply.
    Any portion of a qualified disaster distribution may, at 
any time during the three-year period beginning the day after 
the date on which the distribution was received, be 
recontributed to an eligible retirement plan to which a 
rollover can be made. Any amount recontributed within the 
three-year period is treated as a rollover and thus is not 
includible in income. For example, if an individual receives a 
qualified disaster distribution in 2019, that amount is 
included in income, generally ratably over the year of the 
distribution and the following two years but is not subject to 
the 10-percent early withdrawal tax. If, in 2021, the amount of 
the qualified disaster distribution is recontributed to an 
eligible retirement plan, the individual may file an amended 
return to claim a refund of the tax attributable to the amount 
previously included in income. In addition, if, under the 
ratable inclusion provision, a portion of the distribution has 
not yet been included in income at the time of the 
contribution, the remaining amount is not includible in income.

Recontributions of withdrawals for purchase of a home

    Any individual who received a qualified disaster 
distribution\253\ during the period beginning on the date which 
is 180 days before the first day of the incident period of the 
qualified disaster and ending on the date which is 30 days 
after the last day of such incident period, which was to be 
used to purchase or construct a principal residence in a 
qualified disaster area, but which was not so purchased or 
constructed on account of the qualified disaster, may, during 
the ``applicable period,'' make one or more contributions in an 
aggregate amount not to exceed the amount of such qualified 
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.\254\ The 
``applicable period'' is, in the case of a principal residence 
in a qualified disaster area with respect to any qualified 
disaster, the period beginning on the first day of the incident 
period of such qualified disaster and ending on the date which 
is 180 days after the date of enactment. A plan is not treated 
as violating any Code requirement merely because it repays such 
distributions as provided above, provided that the aggregate 
amount of such repayments from plans maintained by the employer 
and members of the employer's controlled group or affiliated 
service group does not exceed $100,000.
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    \253\As described in sections 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) 
(but only to the extent such distribution relates to financial 
hardship), 403(b)(11)(B), or 72(t)(2)(F).
    \254\Under section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3), as 
the case may be.
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Loans

    In the case of a ``qualified individual'' who obtained a 
loan from a qualified employer plan\255\ made during the 180-
day period beginning on the date of enactment, in lieu of the 
permitted maximum loan amount as the lesser of 50 percent of 
the participant's account balance or $50,000, the permitted 
maximum loan amount is the lesser of ``the present value of the 
nonforfeitable accrued benefit of the employee under the plan'' 
(rather than ``one-half of the present value of the 
nonforfeitable accrued benefit of the employee under the 
plan'') or $100,000, and the loan is not treated as a 
distribution.\256\ For this purpose, a ``qualified individual'' 
is an individual whose principal place of abode, during any 
portion of the incident period of any qualified disaster, was 
located in the qualified disaster area and who sustained an 
economic loss by reason of the qualified disaster.
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    \255\As defined under section 72(p)(4).
    \256\See section 72(p)(2)(A).
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    In the case of such a qualified individual (with respect to 
a qualified disaster) with an outstanding loan (on or after the 
first day of the incident period of such qualified disaster), 
from a qualified employer plan, if the due date for any 
repayment with respect to such a loan\257\ occurs during the 
period beginning on the first day of the incident period of 
such qualified disaster and ending on the date which is 180 
days after the last day of such incident period, the due date 
is delayed for one year (or, if later, until the date which is 
180 days after the date of enactment) and any subsequent 
repayments will be appropriately adjusted to reflect the delay 
in any repayment date noted above and any interest accruing 
during such delay, but the repayment delay is disregarded in 
determining the 5-year period and the term of the loan.\258\
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    \257\See section 72(p)(2).
    \258\Under section 72(p)(2)(B) or (C).
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Plan amendments

    A plan amendment made pursuant to the provision (or a 
regulation issued thereunder) may be retroactively effective 
if, in addition to the requirements described below, the 
amendment is made on or before the last day of the first plan 
year beginning after January 1, 2020 (or in the case of a 
governmental plan, January 1, 2022), or a later date prescribed 
by the Secretary. In addition, the plan is treated as operated 
in accordance with plan terms during the period beginning with 
the date the provision or regulation takes effect (or the date 
specified by the plan if the amendment is not required by the 
provision or regulation) and ending on the last permissible 
date for the amendment (or, if earlier, the date the amendment 
is adopted). For an amendment to be retroactively effective, it 
must apply retroactively for that period, and the plan must be 
operated in accordance with the amendment during that period.

                             EFFECTIVE DATE

    The provision is effective on the date of enactment.

3. DISASTER RELATED EMPLOYMENT RELIEF (SEC. 303 OF THE BILL AND SEC. 38 
                              OF THE CODE)

                              PRESENT LAW

    The Code provides an employer credit for employers affected 
by Hurricane Katrina, Hurricane Rita, and Hurricane Wilma,\259\ 
for employers affected by Hurricane Harvey, Hurricane Irma, and 
Hurricane Maria,\260\ and for employers affected by certain 
California wildfires for which a major disaster had been 
declared by the President between January 1, 2017, through 
January 18, 2018. There is not a generally applicable employer 
tax credit for wages paid in connection with other disaster 
areas.
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    \259\Sec. 1400R. This provision was repealed by the Consolidated 
Appropriations Act, Pub L. No. 115-141, sec. 401(d)(6)(A).
    \260\Section 503 of the Disaster Tax Relief and Airport and Airway 
Extension Act of 2017, Pub. L. No. 115-63.
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                           REASONS FOR CHANGE

    The Committee desires to provide targeted relief to 
employers affected by qualified disasters in order to encourage 
them to retain their workforce, both to assist in the 
employer's recovery and so that the employees dealing with the 
hardship of a disaster may continue to receive salaries.

                        EXPLANATION OF PROVISION

    The provision provides a credit of 40 percent of the 
qualified wages (up to a maximum of $6,000 in qualified wages 
per employee) paid by an eligible employer to an eligible 
employee.
    An eligible employer is any employer that (1) conducted an 
active trade or business in a qualified disaster zone at any 
time during the applicable incident period of the applicable 
qualified disaster with respect to such qualified disaster zone 
and (2) with respect to which the trade or business described 
in (1) is inoperable on any day during the period beginning on 
the first day of the applicable incident period of the 
applicable qualified disaster and ending on the date of the 
enactment of this bill, as a result of damage sustained by 
reason of the applicable qualified disaster.
    An eligible employee is, with respect to an eligible 
employer, an employee whose principal place of employment, 
determined immediately before the applicable qualified 
disaster, with such eligible employer was in the applicable 
qualified disaster zone. An employee may not be treated as an 
eligible employee for any period with respect to an employer if 
such employer is allowed a credit under section 51, the work 
opportunity credit, with respect to the employee for the 
period.
    Qualified wages are wages (as defined in section 51(c)(1) 
of the Code, but without regard to section 3306(b)(2)(B) of the 
Code) paid or incurred by an eligible employer with respect to 
an eligible employee during the period (1) beginning on the 
date on which the trade or business first became inoperable at 
the principal place of employment of the employee immediately 
before the applicable qualified disaster and (2) ending on the 
earlier of (i) the date on which such trade or business has 
resumed significant operations at such principal place of 
employment or (ii) the date which is 150 days after the last 
day of the applicable incident period. Qualified wages include 
wages paid without regard to whether the employee performs no 
services, performs services at a different place of employment 
than such principal place of employment, or performs services 
at such principal place of employment before significant 
operations have resumed.
    The credit is treated as a current year business credit 
under section 38(b) and therefore is subject to the tax 
liability limitations of section 38(c). Rules similar to 
sections 51(i)(1), 52, and 280C(a) apply to the credit.

                             EFFECTIVE DATE

    The provision is effective on the date of enactment.

4. temporary suspension of limitation on charitable contributions (sec. 
              304(a) of the bill and sec. 170 of the code)


                              PRESENT LAW

In general

    In general, an income tax deduction is permitted for 
charitable contributions, subject to certain limitations that 
depend on the type of taxpayer, the property contributed, and 
the donee organization.\261\
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    \261\Sec. 170.
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    Charitable contributions of cash are deductible in the 
amount contributed. In general, contributions of capital gain 
property to a qualified charity are deductible at fair market 
value with certain exceptions. Capital gain property means any 
capital asset or property used in the taxpayer's trade or 
business the sale of which at its fair market value, at the 
time of contribution, would have resulted in gain that would 
have been long-term capital gain. Contributions of other 
appreciated property generally are deductible at the donor's 
basis in the property. Contributions of depreciated property 
generally are deductible at the fair market value of the 
property.

Percentage limitations

            Contributions by individuals
    For individuals, in any taxable year, the amount deductible 
as a charitable contribution is limited to a percentage of the 
taxpayer's contribution base. The applicable percentage of the 
contribution base varies depending on the type of donee 
organization and property contributed. The contribution base is 
defined as the taxpayer's adjusted gross income computed 
without regard to any net operating loss carryback.
    Contributions by an individual taxpayer of property (other 
than appreciated capital gain property) to a charitable 
organization described in section 170(b)(1)(A) (e.g., public 
charities, private foundations other than private non-operating 
foundations, and certain governmental units) may not exceed 50 
percent of the taxpayer's contribution base. Contributions of 
this type of property to nonoperating private foundations and 
certain other organizations generally may be deducted up to 30 
percent of the taxpayer's contribution base.
    For contributions taken into account for taxable years 
beginning after December 31, 2017 and before January 1, 2026, 
section 170(b)(1)(G) increases the percentage limit for 
contributions by an individual taxpayer of cash to an 
organization described in section 170(b)(1)(A) to 60 percent. 
The 60-percent limit does not apply to noncash contributions. 
The 60-percent limit is intended to be applied after, and 
reduced by, the amount of noncash contributions to 
organizations described in section 170(b)(1)(A).
    Contributions of appreciated capital gain property to 
charitable organizations described in section 170(b)(1)(A) 
generally are deductible up to 30 percent of the taxpayer's 
contribution base. An individual may elect, however, to bring 
all these contributions of appreciated capital gain property 
for a taxable year within the 50-percent limitation category by 
reducing the amount of the contribution deduction by the amount 
of the appreciation in the capital gain property. Contributions 
of appreciated capital gain property to charitable 
organizations described in section 170(b)(1)(B) (e.g., private 
nonoperating foundations) are deductible up to 20 percent of 
the taxpayer's contribution base.
            Contributions by corporations
    For corporations, in any taxable year, charitable 
contributions are not deductible to the extent the aggregate 
contributions exceed 10 percent of the corporation's taxable 
income computed without regard to net operating loss or capital 
loss carrybacks.
    For purposes of determining whether a corporation's 
aggregate charitable contributions in a taxable year exceed the 
applicable percentage limitation, contributions of capital gain 
property are taken into account after other charitable 
contributions.
            Carryforward of excess contributions
    Charitable contributions that exceed the applicable 
percentage limitation may be carried forward for up to five 
years.\262\ The amount that may be carried forward from a 
taxable year (``contribution year'') to a succeeding taxable 
year may not exceed the applicable percentage of the 
contribution base for the succeeding taxable year less the sum 
of contributions made in the succeeding taxable year plus 
contributions made in taxable years prior to the contribution 
year and treated as paid in the succeeding taxable year under 
this provision.
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    \262\Sec. 170(d).
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                           REASONS FOR CHANGE

    Charities play a critical role in providing relief to 
citizens and communities that are affected by natural 
disasters. The Committee believes it is important to ensure 
that charities have sufficient resources to provide such relief 
by encouraging taxpayers to donate to charities that are on the 
front lines of providing disaster relief. The provision 
furthers this goal by suspending the charitable percentage 
limits for certain charitable contributions to public charities 
of cash that will be used to provide disaster relief.

                        EXPLANATION OF PROVISION

    Under the provision, in the case of an individual, the 
deduction for qualified contributions is allowed up to the 
amount by which the taxpayer's contribution base exceeds the 
deduction for other charitable contributions. Contributions in 
excess of this amount are carried over to succeeding taxable 
years as contributions described in section 170(b)(1)(G)(ii) 
(generally relating to cash contributions to public charities).
    In the case of a corporation, the deduction for qualified 
contributions is allowed up to the amount by which the 
corporation's taxable income (as computed under section 
170(b)(2)) exceeds the deduction for other charitable 
contributions. Contributions in excess of this amount are 
carried over to succeeding taxable years, subject to the 
limitations of section 170(d)(2).
    In applying subsections (b) and (d) of section 170 to 
determine the deduction for other contributions, qualified 
contributions are not taken into account (except to the extent 
qualified contributions are carried over to succeeding taxable 
years under the rules described above).
    Qualified contributions are cash contributions paid during 
the period beginning on January 1, 2018, and ending on the date 
which is 60 days after the date of enactment, to a charitable 
organization described in section 170(b)(1)(A), other than 
contributions to (i) a supporting organization described in 
section 509(a)(3) or (ii) for the establishment of a new, or 
maintenance of an existing, donor advised fund (as defined in 
section 4966(d)(2)). Contributions of noncash property, such as 
securities, are not qualified contributions. Under the 
provision, qualified contributions must be to an organization 
described in section 170(b)(1)(A); thus, contributions to, for 
example, a charitable remainder trust generally are not 
qualified contributions, unless the charitable remainder 
interest is paid in cash to an eligible charity during the 
applicable time period. Qualified contributions must be made 
for relief efforts in one or more qualified disaster areas. 
Taxpayers must substantiate that the contribution is made for 
this purpose. A taxpayer must elect to have the contributions 
treated as qualified contributions.

                             EFFECTIVE DATE

    The provision is effective on the date of enactment.

   5. special rules for qualified disaster-related personal casualty 
       losses (sec. 304(b) of the bill and sec. 165 of the code)


                              PRESENT LAW

    An individual taxpayer may claim an itemized deduction for 
a personal casualty loss only if such loss was attributable to 
a disaster declared by the President under section 401 of the 
Stafford Act.\263\ All other personal casualty losses are 
deductible only to the extent that such losses do not exceed 
the individual's personal casualty gains. Personal casualty 
losses are deductible only if they exceed $100 per casualty. In 
addition, aggregate net losses are deductible only to the 
extent they exceed 10 percent of the individual taxpayer's 
adjusted gross income.
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    \263\165(h)(5).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that allowing taxpayers in qualified 
disaster areas a greater ability to take a personal casualty 
loss will assist in the taxpayers in recovering from the 
hardship caused by the applicable disaster.

                        EXPLANATION OF PROVISION

    Under the provision, in the case of a personal casualty 
loss which arose in a qualified disaster area on or after the 
first day of the incident period of the applicable qualified 
disaster and which were attributable to such qualified 
disaster, such losses are deductible without regard to whether 
aggregate net losses exceed 10 percent of a taxpayer's adjusted 
gross income. In order to be deductible, however, such losses 
must exceed $500 per casualty. Finally, such losses may be 
claimed in addition to the standard deduction and may be 
claimed by tax payers subject to the alternative minimum tax.

                             EFFECTIVE DATE

    The provision is effective on the date of enactment.

6. special rule for determining earned income (sec. 304(c) of the bill 
                    and secs. 24 and 32 of the code)


                              PRESENT LAW

    The Code provides eligible taxpayers with an earned income 
tax credit and a child credit. In general, the earned income 
tax credit is a refundable credit for low-income workers.\264\ 
The amount of the credit depends on the earned income of the 
taxpayer and whether the taxpayer has one, more than one, or no 
qualifying children. Earned income generally includes wages, 
salaries, tips, and other employee compensation, plus net 
earnings from self-employment.
---------------------------------------------------------------------------
    \264\Sec. 32.
---------------------------------------------------------------------------
    Taxpayers with incomes below certain threshold amounts are 
eligible for a $2,000 credit for each qualifying child.\265\ In 
some circumstances, all or a portion of the otherwise allowable 
credit is treated as a refundable credit (the ``additional 
child tax credit''). Generally, the amount of the additional 
child tax credit equals 15 percent of the taxpayer's earned 
income in excess of $2,500, capped at $1,400 (indexed for 
inflation).
---------------------------------------------------------------------------
    \265\Sec. 24.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    A qualified disaster may negatively affect taxpayers 
eligible to claim the earned income tax credit or child tax 
credit by temporarily preventing them from working, causing a 
loss in earned income. This could reduce the amount of such 
taxpayers' credits, through no fault of their own, during a 
time when they are suffering the hardship associated with 
recovering from disasters. The Committee believes that allowing 
such taxpayers to use prior year earned income for purposes of 
these credits is reasonable, just, and will aid in disaster 
recovery.

                        EXPLANATION OF PROVISION

In general

    The provision permits qualified individuals to elect to 
calculate their earned income tax credit and additional child 
tax credit for an applicable taxable year using their earned 
income from the prior taxable year. Qualified individuals are 
permitted to make the election with respect to an applicable 
taxable year only if their earned income for such taxable year 
is less than their earned income for the preceding taxable 
year.
    Qualified individuals are (1) individuals who, at any time 
during the incident period of a qualified disaster, had their 
principal place of abode in the applicable qualified disaster 
zone, or (2) individuals who during any portion of such 
incident period were not in the applicable qualified disaster 
zone but whose principal place of abode was in the applicable 
qualified disaster area and were displaced from such principal 
place of abode by reason of the qualified disaster. An 
applicable taxable year is any taxable year which includes any 
portion of the incident period of a qualified disaster.
    For purposes of the provision, in the case of a joint 
return for a taxable year which includes an applicable taxable 
year, the provision applies if either spouse is a qualified 
individual. In such cases, the earned income which is 
attributable to the taxpayer for the preceding taxable year is 
the sum of the earned income which is attributable to each 
spouse for such preceding taxable year.
    Any election to use the prior year's earned income under 
the provision applies with respect to both the earned income 
credit and additional child tax credit. For administrative 
purposes, the incorrect use on a return of earned income 
pursuant to an election under this provision is treated as a 
mathematical or clerical error. An election under the provision 
is disregarded for purposes of calculating gross income in the 
election year.

Hurricane Sandy

    The provision provides a similar rule for individuals 
affected by Hurricane Sandy. Such individuals can elect to 
calculate their earned income tax credit and additional child 
tax credit for the taxable year that includes the dates of 
Hurricane Sandy (October 29, 2012 through November 3, 2012, 
hereinafter ``Hurricane Sandy period'') using their earned 
income for the prior taxable year if it is greater than their 
earned income for the year that includes Hurricane Sandy.
    Qualified individuals affected by Hurricane Sandy are those 
individuals whose principal place of abode during the Hurricane 
Sandy period, was located in (i) the portion of the area 
determined by the President to warrant individual or individual 
and public assistance under the Stafford Act by reason of 
Hurricane Sandy or (ii) in the area for which a major disaster 
was declared by the President under section 401 of the Stafford 
Act by reason of Hurricane Sandy and such individual was 
displaced from the individual's principal place of abode.
    The provision extends the statute of limitations for 
individuals affected by Hurricane Sandy to make any claims for 
credit or refund relating to a change in the earned income of 
such individuals.

                             EFFECTIVE DATE

    The provision is effective on the date of enactment.

7. AUTOMATIC EXTENSION OF FILING DEADLINES IN CASE OF CERTAIN TAXPAYERS 
AFFECTED BY FEDERALLY DECLARED DISASTERS (SEC. 305 OF THE BILL AND SEC. 
                           7508A OF THE CODE)

                              PRESENT LAW

General time limits for filing tax returns

    Individuals generally must file their Federal income tax 
returns by April 15 of the year following the close of a 
taxable year.\266\ Present law also provides that the Secretary 
may grant reasonable extensions of time for filing such 
returns.\267\ Treasury regulations provide, upon application on 
the proper form, an automatic six-month extension (until 
October 15 for calendar-year individuals) for any individual 
timely filing that form and paying the amount of tax estimated 
to be due.\268\ In general, individuals must make quarterly 
estimated tax payments by April 15, June 15, September 15, and 
January 15 of the following taxable year. Wage withholding is 
considered to be a payment of estimated taxes.
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    \266\Sec. 6072.
    \267\Sec. 6081.
    \268\Treas. Reg. sec. 1.6081-4.
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Suspension of time periods

    In general, the Secretary may specify a period of up to one 
year that may be disregarded for performing various acts under 
the Internal Revenue Code, such as filing tax returns, paying 
taxes, or filing a claim for credit or refund of tax, for any 
taxpayer determined by the Secretary to be affected by a 
Federally declared disaster or a terroristic or military action 
with respect to any tax liability of the taxpayer.\269\ In 
addition, the period specified by the Secretary may be 
disregarded in determining the amount of any interest, penalty, 
additional amount, or addition to tax, and the amount of any 
credit or refund.
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    \269\Sec. 7508A.
---------------------------------------------------------------------------
    There are special rules provided for pensions and other 
employee benefit plans. The Secretary may prescribe a period of 
up to one year which may be disregarded in determining the date 
by which any action by a pension or other employee benefit 
plan, or by any sponsor, administrator, participant, 
beneficiary, or other person with respect to such plan, 
affected by a Federally declared disaster or a terroristic or 
military action would be required or permitted to be completed. 
A plan is not treated as operating in a manner inconsistent 
with its terms or in violation of its terms merely due to 
disregarding any such periods.
    The suspension of time may apply to the following acts:
    1. Filing any return of income, estate, gift, employment, 
or excise tax;
    2. Payment of any income, estate, or gift, employment, or 
excise tax or any installment thereof or of any other liability 
to the United States in respect thereof;
    3. Filing a petition with the Tax Court for redetermination 
of a deficiency, or for review of a decision rendered by the 
Tax Court;
    4. Allowance of a credit or refund of any tax;
    5. Filing a claim for credit or refund of any tax;
    6. Bringing suit upon any such claim for credit or refund;
    7. Assessment of any tax;
    8. Giving or making any notice or demand for the payment of 
any tax, or with respect to any liability to the United States 
in respect of any tax;
    9. Collection of the amount of any liability in respect of 
any tax;
    10. Bringing suit by the United States in respect of any 
liability in respect of any tax; and
    11. Any other act required or permitted under the internal 
revenue laws specified in regulations prescribed by the 
Secretary of the Treasury.\270\
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    \270\Sec. 7508(a)(1). Under Treasury regulations, an additional act 
was added to this list with respect to affected pension plans and 
affected taxpayers with respect to such plans: Making contributions to 
a qualified retirement plan (within the meaning of section 4974(c)) 
under section 219(f)(3), 404(a)(6), 404(h)(1)(B), or 404(m)(2); making 
distributions under section 408(d)(4); recharacterizing contributions 
under section 408A(d)(6); or making a rollover under section 402(c), 
403(a)(4), 403(b)(8), or 408(d)(3). Treas. Reg. sec. 301.7508A-
1(c)(1)(iii).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that the certainty and additional 
time provided by an automatic extension of filing deadlines for 
taxpayers affected by Federally declared disasters will ease 
the burden of tax compliance for taxpayers dealing with the 
hardship of disaster recovery.

                        EXPLANATION OF PROVISION

    The provision provides to qualified taxpayers in the case 
of a Federally declared disaster a mandatory 60-day period that 
is disregarded in determining whether the acts listed above 
were performed in the time prescribed; the amount of interest, 
penalty, additional amount, or addition to tax; and the amount 
of credit or refund. The 60-day period begins on the earliest 
incident date specified in the declaration of the relevant 
disaster and ends on the date which is 60 days after the latest 
incident date so specified. A disaster area is the geographic 
area of a Federally declared disaster, which is any disaster 
subsequently determined by the President to warrant assistance 
by the Federal government under the Stafford Act.\271\
---------------------------------------------------------------------------
    \271\Sec. 165(i)(5).
---------------------------------------------------------------------------
    Qualified taxpayers are (1) any individual whose principal 
residence is located in a disaster area, (2) any taxpayer if 
the taxpayer's principal place of business (other than the 
business of performing services as an employee) is located in a 
disaster area, (3) any individual who is a relief worker 
affiliated with a recognized government or philanthropic 
organization and who is assisting in a disaster area, (4) any 
taxpayer whose records necessary to meet a deadline for the 
acts listed above are maintained in a disaster area, (5) any 
individual visiting a disaster area who was killed or injured 
as a result of the disaster, and (6) solely with respect to a 
joint return, any spouse of an individual who is a qualified 
taxpayer.
    In the case of a pension or other employee benefit plan, or 
any sponsor, administrator, participant, beneficiary or other 
person with respect to such a plan,\272\ the provision provides 
that a rule similar to the mandatory 60-day period rule 
described above applies with respect to any of the following 
actions:
---------------------------------------------------------------------------
    \272\For this purpose, a definition similar to the definition of 
``qualified taxpayer'' is intended to generally apply.
---------------------------------------------------------------------------
          1. Making contributions to a section 401(a) qualified 
        retirement plan, a section 403(a) annuity, a section 
        403(b) tax-sheltered annuity, or a section 408 
        individual retirement account or annuity (IRA);
          2. Making distributions of contributions to an IRA 
        prior to the due date for filing the individual's tax 
        return for the year in which the contribution was made;
          3. Recharacterizing IRA contributions by making a 
        trustee-to-trustee transfer from a traditional IRA to a 
        Roth IRA, or vice versa, before the due date (including 
        extensions) for the individual's income tax return for 
        that year;\273\ or
---------------------------------------------------------------------------
    \273\In the case of a recharacterization, the contribution will be 
treated as having been made to the transferee IRA (and not the 
original, transferor IRA) as of the date of the original contribution. 
Pursuant to section 13611 of Pub. L. No. 115-97, this rule does not 
apply to a conversion contribution to a Roth IRA effective for taxable 
years beginning after December 31, 2017.
---------------------------------------------------------------------------
      4. Making a rollover.\274\
---------------------------------------------------------------------------
    \274\Such actions are those provided under Treas. Reg. sec. 
301.7508A-1(c)(1)(iii), described above.
---------------------------------------------------------------------------
    The mandatory 60-day period provided under the provision is 
in addition to, or concurrent with as the case may be, any 
period of suspension provided by the Secretary.

                             EFFECTIVE DATE

    The provision applies to Federally declared disasters 
declared after the date of enactment.

8. MODIFICATION OF THE TAX RATE FOR THE EXCISE TAX ON INVESTMENT INCOME 
OF PRIVATE FOUNDATIONS (SEC. 306 OF THE BILL AND SEC. 4940 OF THE CODE)

                              PRESENT LAW

Excise tax on the net investment income of private foundations

    Under section 4940(a), private foundations that are 
recognized as exempt from Federal income tax under section 
501(a) (other than exempt operating foundations\275\) are 
subject to a two-percent excise tax on their net investment 
income. Net investment income generally includes interest, 
dividends, rents, royalties (and income from similar sources), 
and capital gain net income, and is reduced by expenses 
incurred to earn this income. The two-percent rate of tax is 
reduced to one-percent in any year in which a foundation 
exceeds the average historical level of its charitable 
distributions. Specifically, the excise tax rate is reduced if 
the foundation's qualifying distributions (generally, amounts 
paid to accomplish exempt purposes)\276\ equal or exceed the 
sum of (1) the amount of the foundation's assets for the 
taxable year multiplied by the average percentage of the 
foundation's qualifying distributions over the five taxable 
years immediately preceding the taxable year in question, and 
(2) one percent of the net investment income of the foundation 
for the taxable year.\277\ In addition, the foundation cannot 
have been subject to tax in any of the five preceding years for 
failure to meet minimum qualifying distribution requirements in 
section 4942.
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    \275\Sec. 4940(d)(1). Exempt operating foundations generally 
include organizations such as museums or libraries that devote their 
assets to operating charitable programs but have difficulty meeting the 
``public support'' tests necessary not to be classified as a private 
foundation. To be an exempt operating foundation, an organization must: 
(1) be an operating foundation (as defined in section 4942(j)(3)); (2) 
be publicly supported for at least 10 taxable years; (3) have a 
governing body no more than 25 percent of whom are disqualified persons 
and that is broadly representative of the general public; and (4) have 
no officers who are disqualified persons. Sec. 4940(d)(2).
    \276\Sec. 4942(g).
    \277\Sec. 4940(e).
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    Private foundations that are not exempt from tax under 
section 501(a), such as certain charitable trusts, are subject 
to an excise tax under section 4940(b). The tax is equal to the 
excess of the sum of the excise tax that would have been 
imposed under section 4940(a) if the foundation were tax exempt 
and the amount of the tax on unrelated business income that 
would have been imposed if the foundation were tax exempt, over 
the income tax imposed on the foundation under subtitle A of 
the Code.
    Private foundations are required to make a minimum amount 
of qualifying distributions each year to avoid tax under 
section 4942. The minimum amount of qualifying distributions a 
foundation has to make to avoid tax under section 4942 is 
reduced by the amount of section 4940 excise taxes paid.\278\
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    \278\Sec. 4942(d)(2).
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                           REASONS FOR CHANGE

    Under the present-law, two-tier private foundation excise 
tax rate structure, a foundation must carefully manage the 
timing and amount of its grant making to minimize its excise 
tax burden. Compliance can be costly and consume resources that 
otherwise would have been used for grant making or other 
charitable activity.
    In addition, to qualify for the lower, one-percent tax rate 
in a year, a foundation must ensure that its distributions for 
the year exceed a historical, average level of distributions. 
This structure creates an incentive for foundations to limit 
distributions in any one year, because a significant increase 
in distributions will raise the foundation's average level of 
distributions, making it more difficult to qualify for the 
reduced rate in future years. As a result, a foundation that 
might have been inclined to distribute an unusually large 
amount in a time of public need, such as during the response to 
a natural disaster, has a disincentive to do so.
    For these reasons, the Committee believes it is appropriate 
to replace the present-law, two-tier private foundation excise 
tax rate structure with a simplified structure that uses a 
single tax rate of 1.39 percent, the revenue-neutral rate.

                        EXPLANATION OF PROVISION

    The provision replaces the two rates of excise tax on tax-
exempt private foundations with a single rate of tax of 1.39 
percent. Thus, under the provision, a tax-exempt private 
foundation generally is subject to an excise tax of 1.39 
percent on its net investment income. A taxable private 
foundation is subject to an excise tax equal to the excess (if 
any) of the sum of the 1.39-percent net investment income 
excise tax and the amount of the tax on unrelated business 
income (both calculated as if the foundation were tax-exempt), 
over the income tax imposed on the foundation. The provision 
repeals the special reduced excise tax rate for private 
foundations that exceed their historical level of qualifying 
distributions.

                             EFFECTIVE DATE

    The provision is effective for taxable years beginning 
after the date of enactment.

 9. ADDITIONAL LOW-INCOME HOUSING TAX CREDIT ALLOCATIONS FOR QUALIFIED 
2017 AND 2018 CALIFORNIA DISASTER AREAS (SEC. 307 OF THE BILL AND SEC. 
                            42 OF THE CODE)

                              PRESENT LAW

In general

    The low-income housing tax credit may be claimed over a 10-
year period for the cost of building rental housing occupied by 
tenants having incomes below specified levels. The amount of 
the credit for any taxable year in the credit period is the 
applicable percentage of the qualified basis of each qualified 
low-income building. The qualified basis of any qualified low-
income building for any taxable year equals the applicable 
fraction of the eligible basis of the building.
    The credit percentage for newly constructed or 
substantially rehabilitated housing that is not Federally 
subsidized is adjusted monthly by the IRS so that the 10 annual 
installments of the credit have a present value of 70 percent 
of the total qualified basis. The credit percentage for newly 
constructed or substantially rehabilitated housing that is 
Federally subsidized and for existing housing that is 
substantially rehabilitated is calculated to have a present 
value of 30 percent of qualified basis. These are referred to 
as the 70-percent credit and 30-percent credit, respectively.

Credit ceiling

    Credits are first allocated from the Federal government to 
each State according to population, then allocated by each 
State to developers according to State determined Qualified 
Allocation Plans (``QAPs''). QAPs must set forth selection 
criterion to be used to determine housing priorities; give 
preference to projects serving the lowest income tenants for 
the longest periods of time, and which are located in qualified 
census tracts that contribute to a concerted community 
revitalization plan; and provide a procedure for monitoring 
noncompliance and notifying the IRS of any noncompliance.\279\
---------------------------------------------------------------------------
    \279\Sec. 42(m).
---------------------------------------------------------------------------
    In addition to other requirements, a low-income housing 
credit is allowable only if the owner of a qualified building 
receives a housing credit allocation from the State or local 
housing credit agency. The total amount of housing credits 
available for allocation by each State is limited by a ceiling. 
For determining the current-year State dollar amount of the 
ceiling in any calendar year, the greater of (1) $1.75 
multiplied by the State population, or (2) $2,000,000 is taken 
into account, with both amounts indexed for inflation. For 
2019, the indexed amount is $2.76 per resident with a minimum 
annual cap of $3,166,875 for certain States with small 
populations.\280\ These limits do not apply in the case of 
projects that also receive financing with proceeds of tax-
exempt bonds issued subject to the private activity bond volume 
limit.
---------------------------------------------------------------------------
    \280\These amounts include a temporary increase enacted in the 
Consolidated Appropriations Act of 2018, Pub. L. No. 115-141.
---------------------------------------------------------------------------

Carryover allocation rule

    A low-income housing credit is allowable only if the owner 
of a qualified building receives a housing credit allocation 
from the State or local housing credit agency. In general, the 
allocation must be made not later than the close of the 
calendar year in which the building is placed in service. One 
exception to this rule is a carryover allocation. In the case 
of a carryover allocation, an allocation may be made to a 
building that has not yet been placed in service, provided 
that: (1) more than 10 percent of the taxpayer's reasonably 
expected basis in the project (as of the close of the second 
calendar year following the calendar year of the allocation) is 
incurred as of the later of six months after the allocation is 
made or the end of the calendar year in which the allocation is 
made; and (2) the building is placed in service not later than 
the close of the second calendar year following the calendar 
year of the allocation.

                           REASONS FOR CHANGE

    The Committee is concerned that many homes of low-income 
families were destroyed in the 2017 and 2018 wildfires in 
California. Therefore, the Committee wishes to promote the 
construction or rehabilitation of affordable housing in 
affected areas of California by providing the state with 
additional low-income housing credits.

                        EXPLANATION OF PROVISION

    Under the provision, in calendar year 2019, the State 
housing credit ceiling is increased for California. The 
California credit ceiling is increased by the amount of the 
aggregate housing credits allocated by the State housing credit 
agencies of California for 2019 to buildings located in 
qualified 2017 and 2018 California disaster areas,\281\ up to 
the average amount of the State's housing credit ceiling in 
2017 and 2018.\282\
---------------------------------------------------------------------------
    \281\Qualified 2017 and 2018 California disaster areas are those 
which are determined by the President to warrant assistance from the 
Federal government under the Stafford Act by reason of a disaster which 
begins or ends in calendar year 2017 or 2018, as specified by the 
Federal Emergency Management Agency.
    \282\This average amount is 50% of the sum of the State housing 
credit ceiling for California for calendar years 2017 and 2018.
---------------------------------------------------------------------------
    The provision also specifies that allocations are treated 
as made first from these additional amounts for purposes of 
determining the unused State housing credit ceiling to be 
carried over in a calendar year.

                             EFFECTIVE DATE

    The provision is effective upon enactment.

      10. TREATMENT OF CERTAIN POSSESSIONS (SEC. 308 OF THE BILL)

                              PRESENT LAW

    Citizens of the United States are generally subject to 
Federal income tax on their worldwide income, including those 
citizens in the U.S. possessions or territories. Residents of 
the U.S. possessions are generally subject to the Federal 
income tax system based on their status as U.S. citizens or 
residence in the possessions, with certain special rules for 
determining residence and source of income specific to the 
possession. Broadly, a bona fide individual resident of a 
possession is exempt from U.S. tax on income derived from 
sources within that possession but is subject to U.S. tax on 
U.S.-source and non-possession-source income.\283\
---------------------------------------------------------------------------
    \283\See secs. 932, 933, and 937.
---------------------------------------------------------------------------
    The application of the Federal tax rules to the possessions 
varies from one possession to another. Three possessions, Guam, 
the Northern Mariana Islands, and the U.S. Virgin Islands, are 
referred to as mirror Code possessions because the Code serves 
as the internal tax law of those possessions (substituting the 
particular possessions for the United States wherever the Code 
refers to the United States). A resident of one of those 
possessions generally files a single tax return only with the 
possession of which the individual is a resident, and not with 
the United States. American Samoa and Puerto Rico, by contrast, 
are non-mirror Code possessions. These two possessions have 
their own internal tax laws, and a resident of either American 
Samoa or Puerto Rico may be required to file income tax returns 
with both the possessions of residence and the United States.

                           REASONS FOR CHANGE

    The Committee recognizes the importance of providing 
funding to all of the possessions, the citizens of which are 
U.S. citizens or nationals, in order to assist in disaster 
recovery.

                        EXPLANATION OF PROVISION

    The provision requires the Secretary to make a payment to 
the mirror Code possessions in an amount equal to the loss in 
revenue by reason of the temporary disaster-related tax relief 
allowable by reason of Title III of the bill to residents of 
such possessions against their income tax. This amount will be 
determined by the Secretary based on information provided by 
the governments of the respective possessions.
    The provision requires the Secretary to make a payment to 
the non-mirror Code possessions in an amount estimated by the 
Secretary as the aggregate benefits (if any) of the temporary 
disaster-related tax relief that would have been provided to 
residents of such possessions if a mirror code tax system had 
been in effect in such possession. Accordingly, the amount of 
each payment to a non-mirror Code possession will be an 
estimate of the aggregate benefit that would be allowed to the 
possession's residents if the temporary tax relief provided by 
Title III of the bill to U.S. residents were provided by the 
possession to its residents. This payment will not be made 
unless the possession has a plan that has been approved by the 
Secretary under which the possession will promptly distribute 
the payments to its residents.

                             EFFECTIVE DATE

    The provision is effective on the date of enactment.

                      III. VOTES OF THE COMMITTEE

    Pursuant to clause 3(b) of rule XIII of the Rules of the 
House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of H.R. 3301, the ``Taxpayer Certainty and 
Disaster Tax Relief Act of 2019,'' on June 20, 2019.
    An amendment to the amendment in the nature of a substitute 
offered by Representative Schweikert, which would make 
permanent the current individual tax rates, was defeated by a 
roll call vote of 16 yeas to 24 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........  .......  .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......  .......  .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Smith of Missouri, which would make 
permanent the increased child tax credit, was defeated by a 
roll call vote of 16 yeas to 24 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........  .......  .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......  .......  .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Marchant, which would permanently 
lower the threshold for an itemized medical expense deduction 
from 10 percent of adjusted gross income to 7.5 percent, was 
defeated by a roll call vote of 16 yeas to 25 nays. The vote 
was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........  .......  .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Reed, which would make permanent the 
family and medical leave tax credit, was defeated by a roll 
call vote of 17 yeas to 23 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........  .......  .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................       X   .......  .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......  .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Rice, which would make permanent 
increased standard deduction, was defeated by a roll call vote 
of 16 yeas to 24 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........  .......  .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......  .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Estes, which would make permanent the 
railroad maintenance tax credit at 30% (instead of 50%) of 
eligible expenses, was withdrawn.
    An amendment to the amendment in the nature of a substitute 
offered by Representative Smith of Nebraska, which would extend 
and phase out certain biodiesel and renewable diesel tax 
provisions, was withdrawn.
    An amendment to the amendment in the nature of a substitute 
offered by Representative Estes, which would make permanent the 
tax treatment of certain income earned by controlled foreign 
corporations, was defeated by a roll call vote of 16 yeas to 22 
nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........  .......  .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......  .......  .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......  .......  .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......  .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Walorski, which would permanently 
repeal the 2.3 percent excise tax on medical devices, was 
defeated by a roll call vote of 16 yeas to 22 nays. The vote 
was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........  .......  .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......  .......  .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......  .......  .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......  .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Kelly, which would permanently repeal 
the 40 percent excise tax on high-cost employer-sponsored 
health coverage, was defeated by a roll call vote of 16 yeas to 
23 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........       X   .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......  .......  .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......  .......  .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......  .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Holding was ruled nongermane. Mr. 
Holding moved to appeal the ruling of the Chair. A motion was 
made by Representative Thompson to table the appeal of the 
ruling of the Chair. The motion passed by a roll call vote of 
23 yeas to 16 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................       X   .......  .........  Mr. Brady..........  .......       X   .........
Mr. Lewis........................       X   .......  .........  Mr. Nunes..........  .......       X   .........
Mr. Doggett......................       X   .......  .........  Mr. Buchanan.......  .......       X   .........
Mr. Thompson.....................       X   .......  .........  Mr. Smith..........  .......       X   .........
Mr. Larson.......................       X   .......  .........  Mr. Marchant.......  .......  .......  .........
Mr. Blumenauer...................       X   .......  .........  Mr. Reed...........  .......       X   .........
Mr. Kind.........................       X   .......  .........  Mr. Kelly..........  .......       X   .........
Mr. Pascrell.....................       X   .......  .........  Mr. Holding........  .......       X   .........
Mr. Davis........................       X   .......  .........  Mr. Smith..........  .......       X   .........
Ms. Sanchez......................       X   .......  .........  Mr. Rice...........  .......       X   .........
Mr. Higgins......................       X   .......  .........  Mr. Schweikert.....  .......       X   .........
Ms. Sewell.......................       X   .......  .........  Ms. Walorski.......  .......       X   .........
Ms. DelBene......................       X   .......  .........  Mr. LaHood (IL)....  .......       X   .........
Ms. Chu (CA).....................       X   .......  .........  Mr. Wenstrup.......  .......       X   .........
Ms. Moore........................  .......  .......  .........  Mr. Arrington......  .......       X   .........
Mr. Kildee.......................       X   .......  .........  Mr. Ferguson.......  .......       X   .........
Mr. Boyle........................       X   .......  .........  Mr. Estes..........  .......       X   .........
Mr. Beyer........................       X   .......  .........
Mr. Evans........................       X   .......  .........
Mr. Schneider....................       X   .......  .........
Mr. Suozzi.......................       X   .......  .........
Mr. Panetta......................       X   .......  .........
Ms. Murphy.......................       X   .......  .........
Mr. Gomez........................       X   .......  .........
Mr. Horsford.....................  .......  .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Nunes, which would make permanent the 
100% expensing, was defeated by a roll call vote of 17 yeas to 
23 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........       X   .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......  .......  .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......  .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Schweikert, which would make certain 
technical corrections to legislation enacted in 2017, was 
defeated by a roll call vote of 17 yeas to 24 nays. The vote 
was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........       X   .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......  .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Ferguson was ruled nongermane. Mr. 
Ferguson moved to appeal the ruling of the Chair and Mr. 
Thompson moved to table the appeal. The motion to table the 
appeal passed by a roll call vote of 24 yeas to 16 nays. The 
vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................       X   .......  .........  Mr. Brady..........  .......       X   .........
Mr. Lewis........................       X   .......  .........  Mr. Nunes..........  .......       X   .........
Mr. Doggett......................       X   .......  .........  Mr. Buchanan.......  .......       X   .........
Mr. Thompson.....................       X   .......  .........  Mr. Smith..........  .......       X   .........
Mr. Larson.......................       X   .......  .........  Mr. Marchant.......  .......       X   .........
Mr. Blumenauer...................       X   .......  .........  Mr. Reed...........  .......  .......  .........
Mr. Kind.........................       X   .......  .........  Mr. Kelly..........  .......       X   .........
Mr. Pascrell.....................       X   .......  .........  Mr. Holding........  .......       X   .........
Mr. Davis........................       X   .......  .........  Mr. Smith..........  .......       X   .........
Ms. Sanchez......................       X   .......  .........  Mr. Rice...........  .......       X   .........
Mr. Higgins......................       X   .......  .........  Mr. Schweikert.....  .......       X   .........
Ms. Sewell.......................       X   .......  .........  Ms. Walorski.......  .......       X   .........
Ms. DelBene......................       X   .......  .........  Mr. LaHood (IL)....  .......       X   .........
Ms. Chu (CA).....................       X   .......  .........  Mr. Wenstrup.......  .......       X   .........
Ms. Moore........................       X   .......  .........  Mr. Arrington......  .......       X   .........
Mr. Kildee.......................       X   .......  .........  Mr. Ferguson.......  .......       X   .........
Mr. Boyle........................       X   .......  .........  Mr. Estes..........  .......       X   .........
Mr. Beyer........................       X   .......  .........
Mr. Evans........................       X   .......  .........
Mr. Schneider....................       X   .......  .........
Mr. Suozzi.......................       X   .......  .........
Mr. Panetta......................       X   .......  .........
Ms. Murphy.......................       X   .......  .........
Mr. Gomez........................       X   .......  .........
Mr. Horsford.....................  .......  .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Smith of Missouri, which would make 
certain expenses eligible under section 529, was defeated by a 
roll call vote of 16 yeas to 24 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........  .......  .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......  .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Smith of Missouri, which would 
prevent an increase in the death tax, was defeated by a roll 
call vote of 16 yeas to 24 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........  .......  .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......  .......  .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Rice, which would modify the low-
income housing credit allocation for certain disaster areas, 
was defeated by a roll call vote of 17 yeas to 25 nays. The 
vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........       X   .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X   .........
Mr. Evans........................  .......       X   .........
Mr. Schneider....................  .......       X   .........
Mr. Suozzi.......................  .......       X   .........
Mr. Panetta......................  .......       X   .........
Ms. Murphy.......................  .......       X   .........
Mr. Gomez........................  .......       X   .........
Mr. Horsford.....................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Doggett, which would strike the 
production credit for Indian coal facilities, passed by a voice 
vote (with a quorum being present).
    An amendment to the amendment in the nature of a substitute 
offered by Representative Brady, which would clarify the 
alternative fuel mixture tax credit without a retroactive tax 
increase, failed by a voice vote (with a quorum being present).
    An amendment to the amendment in the nature of a substitute 
offered by Representative Wenstrup, which would make permanent 
the modernization of the taxation of craft beverages, was 
withdrawn.
    An amendment to the amendment in the nature of a substitute 
offered by Representative Schweikert, which would provide tax 
incentives for certain energy-producing activities, was 
withdrawn.
    An amendment to the amendment in the nature of a substitute 
offered by Representative Brady, which would modify the 
discharge of acquisition indebtedness not includible in gross 
income, was defeated by a roll call vote of 17 yeas to 25 nays. 
The vote was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................  .......       X   .........  Mr. Brady..........       X   .......  .........
Mr. Lewis........................  .......       X   .........  Mr. Nunes..........       X   .......  .........
Mr. Doggett......................  .......       X   .........  Mr. Buchanan.......       X   .......  .........
Mr. Thompson.....................  .......       X   .........  Mr. Smith..........       X   .......  .........
Mr. Larson.......................  .......       X   .........  Mr. Marchant.......       X   .......  .........
Mr. Blumenauer...................  .......       X   .........  Mr. Reed...........       X   .......  .........
Mr. Kind.........................  .......       X   .........  Mr. Kelly..........       X   .......  .........
Mr. Pascrell.....................  .......       X   .........  Mr. Holding........       X   .......  .........
Mr. Davis........................  .......       X   .........  Mr. Smith..........       X   .......  .........
Ms. Sanchez......................  .......       X   .........  Mr. Rice...........       X   .......  .........
Mr. Higgins......................  .......       X   .........  Mr. Schweikert.....       X   .......  .........
Ms. Sewell.......................  .......       X   .........  Ms. Walorski.......       X   .......  .........
Ms. DelBene......................  .......       X   .........  Mr. LaHood (IL)....       X   .......  .........
Ms. Chu (CA).....................  .......       X   .........  Mr. Wenstrup.......       X   .......  .........
Ms. Moore........................  .......       X   .........  Mr. Arrington......       X   .......  .........
Mr. Kildee.......................  .......       X   .........  Mr. Ferguson.......       X   .......  .........
Mr. Boyle........................  .......       X   .........  Mr. Estes..........       X   .......  .........
Mr. Beyer........................  .......       X
Mr. Evans........................  .......       X
Mr. Schneider....................  .......       X
Mr. Suozzi.......................  .......       X
Mr. Panetta......................  .......       X
Ms. Murphy.......................  .......       X
Mr. Gomez........................  .......       X
Mr. Horsford.....................  .......       X   .........  ...................
----------------------------------------------------------------------------------------------------------------

    An amendment to the amendment in the nature of a substitute 
offered by Representative Smith of Nebraska, which would strike 
the extension of the wind energy production tax credit, was 
withdrawn.
    The Chairman's Amendment to the amendment in the nature of 
a substitute as amended was agreed to by voice vote (with a 
quorum being present).
    H.R. 3301 was ordered favorably reported to the House of 
Representatives as amended by an amendment in the nature of a 
substitute by a roll call vote of 25 yeas to 17 nays. The vote 
was as follows:

----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Neal.........................       X   .......  .........  Mr. Brady..........  .......       X   .........
Mr. Lewis........................       X   .......  .........  Mr. Nunes..........  .......       X   .........
Mr. Doggett......................       X   .......  .........  Mr. Buchanan.......  .......       X   .........
Mr. Thompson.....................       X   .......  .........  Mr. Smith..........  .......       X   .........
Mr. Larson.......................       X   .......  .........  Mr. Marchant.......  .......       X   .........
Mr. Blumenauer...................       X   .......  .........  Mr. Reed...........  .......       X   .........
Mr. Kind.........................       X   .......  .........  Mr. Kelly..........  .......       X   .........
Mr. Pascrell.....................       X   .......  .........  Mr. Holding........  .......       X   .........
Mr. Davis........................       X   .......  .........  Mr. Smith (MO).....  .......       X   .........
Ms. Sanchez......................       X   .......  .........  Mr. Rice...........  .......       X   .........
Mr. Higgins......................       X   .......  .........  Mr. Schweikert.....  .......       X   .........
Ms. Sewell.......................       X   .......  .........  Ms. Walorski.......  .......       X   .........
Ms. DelBene......................       X   .......  .........  Mr. LaHood.........  .......       X   .........
Ms. Chu..........................       X   .......  .........  Mr. Wenstrup.......  .......       X   .........
Ms. Moore........................       X   .......  .........  Mr. Arrington......  .......       X   .........
Mr. Kildee.......................       X   .......  .........  Mr. Ferguson.......  .......       X   .........
Mr. Boyle........................       X   .......  .........  Mr. Estes..........  .......       X   .........
Mr. Beyer........................       X   .......
Mr. Evans........................       X   .......  .........
Mr. Schneider....................       X   .......  .........
Mr. Suozzi.......................       X   .......  .........
Mr. Panetta......................       X   .......  .........
Ms. Murphy.......................       X   .......  .........
Mr. Gomez........................       X   .......  .........
Mr. Horsford.....................       X   .......  .........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill.
    The bill is estimated to decrease Federal fiscal year 
budget receipts by $4.894 billion dollars for the period 2019 
through 2029.

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    Pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives, the Committee states that the bill 
involves no new or increased budget authority. The Committee 
further states that the revenue-reducing provisions of the bill 
include increased tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, requiring a cost estimate prepared by 
CBO, the following statement by CBO is provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, July 9, 2019.
Hon. Richard Neal,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3301, the Taxpayer 
Certainty and Disaster Tax Relief Act of 2019. It contains 
estimates of tax provisions prepared by the staff of the Joint 
Committee on Taxation.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Ellen Steele.
            Sincerely,
                                         Phillip L. Swagel,
                                                          Director.
    Enclosure.

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    The bill would
           Extend certain expiring tax provisions, 
        including provisions related to tax relief and support 
        for families and individuals; incentives for 
        employment, economic growth, and community development; 
        and incentives for energy production, efficiency, and 
        green economy jobs
           Reduce the unified credit against the estate 
        tax beginning after December 31, 2022
           Provide tax relief for areas affected by 
        certain natural disasters in 2018 and 2019
    Estimated budgetary effects would primarily stem from
           The extension of biodiesel and renewable 
        diesel incentives, an employer credit for paid family 
        and medical leave, and the exclusion from gross income 
        of discharge of qualified personal residence 
        indebtedness
           Accelerating the reduction in the unified 
        credit against the estate tax by three years
           New rules related to the deduction for 
        qualified disaster-related personal casualty losses
    The Congressional Budget Act of 1974, as amended, 
stipulates that revenue estimates provided by the staff of the 
Joint Committee on Taxation (JCT) are the official estimates 
for all tax legislation considered by the Congress. CBO 
therefore incorporates such estimates into its cost estimates 
of the effects of legislation. All of the estimates for the 
provisions of H.R. 3301 were provided by JCT.
    Bill summary: H.R. 3301, the Taxpayer Certainty and 
Disaster Tax Relief Act of 2019, would extend a number of 
expiring tax provisions, reduce the unified credit against the 
estate tax beginning in 2022, and provide tax relief for 
certain areas affected by natural disasters.
    Estimated Federal cost: The estimated budgetary effect of 
H.R. 3301 is shown in Table 1. The costs of the legislation 
fall within budget function 550 (health) and budget function 
600 (income security).

                                                                       TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 3301
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       By fiscal year, millions of dollars--
                                                  ----------------------------------------------------------------------------------------------------------------------------------------------
                                                      2019       2020       2021       2022       2023       2024       2025       2026       2027       2028       2029    2019-2024  2019-2029
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Increases or Decreases (-) in Revenues
 
Title I. Extension of Certain Expiring Provisions    -10,831    -12,139     -6,707         -1       -295       -543       -523       -478       -513       -521       -483    -30,519    -33,042
Title II. Estate and Gift Tax--Reduction of                0          0         19        144      1,121     10,264     11,481     11,990      1,733        667        142     11,548     37,561
 Unified Credit Against Estate Tax...............
Title III. Disaster Tax Relief...................     -5,651     -3,036          7       -106         62         63       -100       -100       -100       -100        -98     -8,658     -9,155
Total Revenues...................................    -16,482    -15,175     -6,681         37        888      9,784     10,858     11,412      1,120         46       -439    -27,629     -4,636
    On-Budget....................................    -16,482    -15,182     -6,684         37        888      9,784     10,858     11,412      1,120         46       -439    -27,638     -4,645
    Off-Budget...................................          0          7          3          0          0          0          0          0          0          0          0          9          9
 
                                                                          Increases or Decreases (-) in Direct Spending
 
Title I. Extension of Certain Expiring
 Provisions:
    Estimated Budget Authority...................          0         26          9          0          0          0          0          0          0          0          0         35         35
    Estimated Outlays............................          0         26          9          0          0          0          0          0          0          0          0         35         35
Title III. Disaster Tax Relief:
    Estimated Budget Authority...................         88         22          0          0          0          0          0          0          0          0          0        110        110
    Estimated Outlays............................         88         22          0          0          0          0          0          0          0          0          0        110        110
Total Estimated Changes in Direct Spending:
    Estimated Budget Authority...................         88         48          9          0          0          0          0          0          0          0          0        145        145
    Estimated Outlays............................         88         48          9          0          0          0          0          0          0          0          0        145        145
 
                                                    Net Increase or Decrease (-) in the Deficit From Changes in Direct Spending and Revenues
 
Effect on the Deficit............................     16,570     15,223      6,690        -37       -888     -9,784    -10,858    -11,412     -1,120        -46        439     27,774      4,781
    On-Budget Deficit............................     16,570     15,230      6,693        -37       -888     -9,784    -10,858    -11,412     -1,120        -46        439     27,783      4,790
    Off-Budget Deficit...........................          0         -7         -3          0          0          0          0          0          0          0          0         -9         -9
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
Components may not sum to totals because of rounding. * = between -$500,000 and $500,000.

    Basis of estimate: The Congressional Budget Act of 1974, as 
amended, stipulates that revenue estimates provided by the 
staff of the Joint Committee on Taxation will be the official 
estimates for all tax legislation considered by the Congress. 
As such, CBO incorporates those estimates into its cost 
estimates of the effects of legislation. All of the estimates 
for the provisions of H.R. 3301 were provided by JCT.

Revenues

    On net, JCT estimates, enacting the bill would decrease 
revenues by $4.6 billion over the 2019-2029 period.
    Title I. Extension of Certain Expiring Tax Provisions. 
Title I would extend certain expiring tax provisions. These tax 
provisions include individual income tax provisions; incentives 
related to employment, economic growth, and community 
development; incentives for energy production, efficiency, and 
green economy jobs; and other provisions expiring at the end of 
2019. JCT estimates that those provisions would, on net, reduce 
revenues by $33.0 billion over the 2019-2029 period.
    Title II. Estate and Gift Tax--Reduction of Unified Credit 
Against Estate Tax. Title II would reduce the unified credit 
against the estate tax. The exclusion for the estate and gift 
tax was expanded from $5 million to $10 million (indexed for 
inflation) under Public Law 115-97 for decedents dying from 
December 31, 2017 to January 1, 2026. This provision 
accelerates the expiration of that measure by three years to 
December 31, 2022. JCT estimates that this provision would, on 
net, increase revenues by $37.6 billion over the 2019-2029 
period.
    Title III. Disaster Tax Relief. Title III would provide tax 
relief to areas affected by certain natural disasters in 2018 
and part of 2019. Title III includes special rules for claiming 
the itemized deduction for qualified disaster-related personal 
casualty losses and for early withdrawals for disaster-related 
uses of retirement funds. JCT estimates that this provision 
would, on net, reduce revenues by $9.2 billion over the 2019-
2029 period.

Direct spending

    On net, JCT estimates, enacting the bill would increase 
direct spending by $145 million over the 2019-2029 period.
    Title I. Extension of Certain Expiring Tax Provisions. 
Title I would extend the health coverage tax credit, which is a 
credit for health insurance costs of eligible individuals, for 
12 months. JCT estimates that the extension of the credit would 
increase direct spending by $35 million over the 2019-2029 
period.
    Title III. Disaster Tax Relief. Title III would permit 
individuals living in areas affected by natural disasters to 
calculate their earned income tax credit and additional child 
tax credit using their earned income from the prior tax year. 
JCT estimates that this provision would increase direct 
spending by $110 million over the 2019-2029 period.

Uncertainty

    These budgetary estimates are uncertain because they rely 
on underlying projections and other estimates that are 
uncertain. Specifically, they are based in part on CBO's 
economic projections for the next decade under current law, and 
on estimates of changes in taxpayers' behavior in response to 
changes in tax rules.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in Table 2. 
Only on-budget changes to outlays or revenues are subject to 
pay-as-you-go procedures.

                                                                 Table 2.--CBO'S ESTIMATE OF PAY-AS-YOU-GO EFFECTS OF H.R. 3301
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       By fiscal year, millions of dollars--
                                                  ----------------------------------------------------------------------------------------------------------------------------------------------
                                                      2019       2020       2021       2022       2023       2024       2025       2026       2027       2028       2029    2019-2024  2019-2029
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Net Increase or Decrease (-) in the [On-Budget] Deficit
 
Statutory Pay-As-You-Go Effect...................     16,570     15,230      6,693        -37       -888     -9,784    -10,858    -11,412     -1,120        -46        439     27,783      4,790
Memorandum:
    Change in Outlays............................         88         48          9          0          0          0          0          0          0          0          0        145        145
    Change in On-Budget Revenues.................    -16,482    -15,182     -6,684         37        888      9,784     10,858     11,412      1,120         46       -439    -27,638     -4,645
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Increase in long-term deficits: None.
    JCT estimates that enacting H.R. 3301 would not increase 
on-budget deficits by more than $5 billion in at least one of 
the four consecutive 10-year periods beginning in 2030.
    Mandates: JCT has determined that H.R. 3301 would impose no 
intergovernmental mandates as defined in the Unfunded Mandates 
Reform Act (UMRA).
    JCT has determined that H.R. 3301 would impose a private-
sector mandate as defined in UMRA by reducing the unified 
credit against the estate tax. JCT estimates that the aggregate 
direct cost of the mandate would exceed the annual private-
sector threshold established in UMRA ($164 million in 2019, 
adjusted annually for inflation).
    Estimate prepared by: Staff of the Joint Committee on 
Taxation and Ellen Steele; Mandates: Staff of the Joint 
Committee on Taxation.
    Estimate reviewed by: Joshua Shakin, Chief, Revenue 
Estimating Unit; John McClelland, Assistant Director for Tax 
Analysis.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee made findings and recommendations that are 
reflected in this report.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

            D. Applicability of House Rule XXI, Clause 5(b)

    Clause 5(b) of rule XXI of the Rules of the House of 
Representatives provides, in part, that ``It shall not be in 
order to consider a bill, joint resolution, amendment, or 
conference report carrying a retroactive Federal income tax 
rate increase.'' The Committee, after careful review, states 
that the bill does not involve any retroactive Federal income 
tax rate increase within the meaning of the rule.

                       E. Tax Complexity Analysis

    Section 4022(b) of Public Law 105-206, the Internal Revenue 
Service Restructuring and Reform Act of 1998 (the ``RRA''), 
requires the staff of the Joint Committee on Taxation (in 
consultation with the Internal Revenue Service and the Treasury 
Department) to provide a tax complexity analysis. The 
complexity analysis is required for all legislation reported by 
the Senate Committee on Finance, the House Committee on Ways 
and Means, or any committee of conference if the legislation 
includes a provision that directly or indirectly amends the 
Internal Revenue Code of 1986 and has widespread applicability 
to individuals or small businesses.
    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the RRA because the bill 
contains no provision that amends the Internal Revenue Code of 
1986 and has ``widespread applicability'' to individuals or 
small businesses within the meaning of the rule.

  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   G. Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
to Congress pursuant to section 21 of Public Law 111-139; or 
(3) a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance, published 
pursuant section 6104 of title 31, United States Code.

                              H. Hearings

    In compliance with Sec. 103(i) of H. Res. 6 (116th 
Congress), the following hearing was used to develop or 
consider H.R. 3301: The Select Revenue Measures Subcommittee 
hearing on Temporary Policy in the Internal Revenue Code held 
on Tuesday, March 12, 2019. The following related hearings were 
held: (a) The full Committee hearing on the 2017 Tax Law and 
Who It Left Behind, held on March 27, 2019; and (b) The Member 
Day Hearing held on June 4, 2019.

              VI. CHANGES IN EXISTING LAW MADE BY THE BILL


            A. Changes in Existing Law Proposed by the Bill

    Pursuant to clause 3(e)(1)(B) of rule XIII of the Rules of 
the House of Representatives, changes in existing law proposed 
by the bill are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new matter is printed in 
italic, existing law in which no change is proposed is shown in 
roman):

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986




           *       *       *       *       *       *       *
Subtitle A--Income Taxes

           *       *       *       *       *       *       *


CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


Subchapter A--DETERMINATION OF TAX LIABILITY

           *       *       *       *       *       *       *


PART IV--CREDITS AGAINST TAX

           *       *       *       *       *       *       *



Subpart A--NONREFUNDABLE PERSONAL CREDITS

           *       *       *       *       *       *       *



SEC. 25C. NONBUSINESS ENERGY PROPERTY.

  (a) Allowance of credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this 
chapter for the taxable year an amount equal to the sum of--
          (1) 10 percent of the amount paid or incurred by the 
        taxpayer for qualified energy efficiency improvements 
        installed during such taxable year, and
          (2) the amount of the residential energy property 
        expenditures paid or incurred by the taxpayer during 
        such taxable year.
  (b) Limitations.--
          (1) Lifetime limitation.--The credit allowed under 
        this section with respect to any taxpayer for any 
        taxable year shall not exceed the excess (if any) of 
        $500 over the aggregate credits allowed under this 
        section with respect to such taxpayer for all prior 
        taxable years ending after December 31, 2005.
          (2) Windows.--In the case of amounts paid or incurred 
        for components described in subsection (c)(3)(B) by any 
        taxpayer for any taxable year, the credit allowed under 
        this section with respect to such amounts for such year 
        shall not exceed the excess (if any) of $200 over the 
        aggregate credits allowed under this section with 
        respect to such amounts for all prior taxable years 
        ending after December 31, 2005.
          (3) Limitation on residential energy property 
        expenditures.--The amount of the credit allowed under 
        this section by reason of subsection (a)(2) shall not 
        exceed--
                  (A) $50 for any advanced main air circulating 
                fan,
                  (B) $150 for any qualified natural gas, 
                propane, or oil furnace or hot water boiler, 
                and
                  (C) $300 for any item of energy-efficient 
                building property.
  (c) Qualified energy efficiency improvements.--For purposes 
of this section--
          (1) In general.--The term ``qualified energy 
        efficiency improvements'' means any energy efficient 
        building envelope component, if--
                  (A) such component is installed in or on a 
                dwelling unit located in the United States and 
                owned and used by the taxpayer as the 
                taxpayer's principal residence (within the 
                meaning of section 121),
                  (B) the original use of such component 
                commences with the taxpayer, and
                  (C) such component reasonably can be expected 
                to remain in use for at least 5 years.
          (2) Energy efficient building envelope component.--
        The term ``energy efficient building envelope 
        component'' means a building envelope component which 
        meets--
                  (A) applicable Energy Star program 
                requirements, in the case of a roof or roof 
                products,
                  (B) version 6.0 Energy Star program 
                requirements, in the case of an exterior 
                window, a skylight, or an exterior door, and
                  (C) the prescriptive criteria for such 
                component established by the 2009 International 
                Energy Conservation Code, as such Code 
                (including supplements) is in effect on the 
                date of the enactment of the American Recovery 
                and Reinvestment Tax Act of 2009, in the case 
                of any other component.
          (3) Building envelope component.--The term ``building 
        envelope component'' means--
                  (A) any insulation material or system which 
                is specifically and primarily designed to 
                reduce the heat loss or gain of a dwelling unit 
                when installed in or on such dwelling unit,
                  (B) exterior windows (including skylights),
                  (C) exterior doors, and
                  (D) any metal roof or asphalt roof installed 
                on a dwelling unit, but only if such roof has 
                appropriate pigmented coatings or cooling 
                granules which are specifically and primarily 
                designed to reduce the heat gain of such 
                dwelling unit.
          (4) Manufactured homes included.--The term ``dwelling 
        unit'' includes a manufactured home which conforms to 
        Federal Manufactured Home Construction and Safety 
        Standards (part 3280 of title 24, Code of Federal 
        Regulations).
  (d) Residential energy property expenditures.--For purposes 
of this section--
          (1) In general.--The term ``residential energy 
        property expenditures'' means expenditures made by the 
        taxpayer for qualified energy property which is--
                  (A) installed on or in connection with a 
                dwelling unit located in the United States and 
                owned and used by the taxpayer as the 
                taxpayer's principal residence (within the 
                meaning of section 121), and
                  (B) originally placed in service by the 
                taxpayer.
        Such term includes expenditures for labor costs 
        properly allocable to the onsite preparation, assembly, 
        or original installation of the property.
          (2) Qualified energy property.--
                  (A) In general.--The term ``qualified energy 
                property'' means--
                          (i) energy-efficient building 
                        property,
                          (ii) a qualified natural gas, 
                        propane, or oil furnace or hot water 
                        boiler, or
                          (iii) an advanced main air 
                        circulating fan.
                  (B) Performance and quality standards.--
                Property described under subparagraph (A) shall 
                meet the performance and quality standards, and 
                the certification requirements (if any), 
                which--
                          (i) have been prescribed by the 
                        Secretary by regulations (after 
                        consultation with the Secretary of 
                        Energy or the Administrator of the 
                        Environmental Protection Agency, as 
                        appropriate), and
                          (ii) are in effect at the time of the 
                        acquisition of the property, or at the 
                        time of the completion of the 
                        construction, reconstruction, or 
                        erection of the property, as the case 
                        may be.
                  (C) Requirements and standards for air 
                conditioners and heat pumps.--The standards and 
                requirements prescribed by the Secretary under 
                subparagraph (B) with respect to the energy 
                efficiency ratio (EER) for central air 
                conditioners and electric heat pumps--
                          (i) shall require measurements to be 
                        based on published data which is tested 
                        by manufacturers at 95 degrees 
                        Fahrenheit, and
                          (ii) may be based on the certified 
                        data of the Air Conditioning and 
                        Refrigeration Institute that are 
                        prepared in partnership with the 
                        Consortium for Energy Efficiency.
          (3) Energy-efficient building property.--The term 
        ``energy-efficient building property'' means--
                  (A) an electric heat pump water heater which 
                yields [an energy factor of at least 2.0] a 
                Uniform Energy Factor of at least 2.2 in the 
                standard Department of Energy test procedure,
                  (B) an electric heat pump which achieves the 
                highest efficiency tier established by the 
                Consortium for Energy Efficiency, as in effect 
                on January 1, 2009,
                  (C) a central air conditioner which achieves 
                the highest efficiency tier established by the 
                Consortium for Energy Efficiency, as in effect 
                on January 1, 2009,
                  (D) a natural gas, propane, or oil water 
                heater which has either [an energy factor] a 
                Uniform Energy Factor of at least 0.82 or a 
                thermal efficiency of at least 90 percent, and
                  (E) a stove which uses the burning of biomass 
                fuel to heat a dwelling unit located in the 
                United States and used as a residence by the 
                taxpayer, or to heat water for use in such a 
                dwelling unit, and which has a thermal 
                efficiency rating of at least 75 percent.
          (4) Qualified natural gas, propane, or oil furnace or 
        hot water boiler.--The term ``qualified natural gas, 
        propane, or oil furnace or hot water boiler'' means a 
        natural gas, propane, or oil furnace or hot water 
        boiler which achieves an annual fuel utilization 
        efficiency rate of not less than 95.
          (5) Advanced main air circulating fan.--The term 
        ``advanced main air circulating fan'' means a fan used 
        in a natural gas, propane, or oil furnace and which has 
        an annual electricity use of no more than 2 percent of 
        the total annual energy use of the furnace (as 
        determined in the standard Department of Energy test 
        procedures).
          (6) Biomass fuel.--The term ``biomass fuel'' means 
        any plant-derived fuel available on a renewable or 
        recurring basis, including agricultural crops and 
        trees, wood and wood waste and residues (including wood 
        pellets), plants (including aquatic plants), grasses, 
        residues, and fibers.
  (e) Special rules.--For purposes of this section--
          (1) Application of rules.--Rules similar to the rules 
        under paragraphs (4), (5), (6), (7), and (8) of section 
        25D(e) shall apply.
          (2) Joint ownership of energy items.--
                  (A) In general.--Any expenditure otherwise 
                qualifying as an expenditure under this section 
                shall not be treated as failing to so qualify 
                merely because such expenditure was made with 
                respect to two or more dwelling units.
                  (B) Limits applied separately.--In the case 
                of any expenditure described in subparagraph 
                (A), the amount of the credit allowable under 
                subsection (a) shall (subject to paragraph (1)) 
                be computed separately with respect to the 
                amount of the expenditure made for each 
                dwelling unit.
          (3) Property financed by subsidized energy 
        financing.--For purposes of determining the amount of 
        expenditures made by any individual with respect to any 
        property, there shall not be taken into account 
        expenditures which are made from subsidized energy 
        financing (as defined in section 48(a)(4)(C)).
  (f) Basis adjustments.--For purposes of this subtitle, if a 
credit is allowed under this section for any expenditure with 
respect to any property, the increase in the basis of such 
property which would (but for this subsection) result from such 
expenditure shall be reduced by the amount of the credit so 
allowed.
  (g) Termination.--This section shall not apply with respect 
to any property placed in service--
          (1) after December 31, 2007, and before January 1, 
        2009, or
          (2) after [December 31, 2017] December 31, 2020.

           *       *       *       *       *       *       *


Subpart B--OTHER CREDITS

           *       *       *       *       *       *       *



SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT.

  (a) Allowance of credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an 
amount equal to the sum of--
          (1) the new qualified fuel cell motor vehicle credit 
        determined under subsection (b),
          (2) the new advanced lean burn technology motor 
        vehicle credit determined under subsection (c),
          (3) the new qualified hybrid motor vehicle credit 
        determined under subsection (d),
          (4) the new qualified alternative fuel motor vehicle 
        credit determined under subsection (e), and
          (5) the plug-in conversion credit determined under 
        subsection (i).
  (b) New qualified fuel cell motor vehicle credit.--
          (1) In general.--For purposes of subsection (a), the 
        new qualified fuel cell motor vehicle credit determined 
        under this subsection with respect to a new qualified 
        fuel cell motor vehicle placed in service by the 
        taxpayer during the taxable year is--
                  (A) $8,000 ($4,000 in the case of a vehicle 
                placed in service after December 31, 2009), if 
                such vehicle has a gross vehicle weight rating 
                of not more than 8,500 pounds,
                  (B) $10,000, if such vehicle has a gross 
                vehicle weight rating of more than 8,500 pounds 
                but not more than 14,000 pounds,
                  (C) $20,000, if such vehicle has a gross 
                vehicle weight rating of more than 14,000 
                pounds but not more than 26,000 pounds, and
                  (D) $40,000, if such vehicle has a gross 
                vehicle weight rating of more than 26,000 
                pounds.
          (2) Increase for fuel efficiency.--
                  (A) In general.--The amount determined under 
                paragraph (1)(A) with respect to a new 
                qualified fuel cell motor vehicle which is a 
                passenger automobile or light truck shall be 
                increased by--
                          (i) $1,000, if such vehicle achieves 
                        at least 150 percent but less than 175 
                        percent of the 2002 model year city 
                        fuel economy,
                          (ii) $1,500, if such vehicle achieves 
                        at least 175 percent but less than 200 
                        percent of the 2002 model year city 
                        fuel economy,
                          (iii) $2,000, if such vehicle 
                        achieves at least 200 percent but less 
                        than 225 percent of the 2002 model year 
                        city fuel economy,
                          (iv) $2,500, if such vehicle achieves 
                        at least 225 percent but less than 250 
                        percent of the 2002 model year city 
                        fuel economy,
                          (v) $3,000, if such vehicle achieves 
                        at least 250 percent but less than 275 
                        percent of the 2002 model year city 
                        fuel economy,
                          (vi) $3,500, if such vehicle achieves 
                        at least 275 percent but less than 300 
                        percent of the 2002 model year city 
                        fuel economy, and
                          (vii) $4,000, if such vehicle 
                        achieves at least 300 percent of the 
                        2002 model year city fuel economy.
                  (B) 2002 model year city fuel economy.--For 
                purposes of subparagraph (A), the 2002 model 
                year city fuel economy with respect to a 
                vehicle shall be determined in accordance with 
                the following tables:
                          (i) In the case of a passenger 
                        automobile:
                          (ii) In the case of a light truck:
                  (C) Vehicle inertia weight class.--For 
                purposes of subparagraph (B), the term 
                ``vehicle inertia weight class'' has the same 
                meaning as when defined in regulations 
                prescribed by the Administrator of the 
                Environmental Protection Agency for purposes of 
                the administration of title II of the Clean Air 
                Act (42 U.S.C. 7521 et seq.).
          (3) New qualified fuel cell motor vehicle.--For 
        purposes of this subsection, the term ``new qualified 
        fuel cell motor vehicle'' means a motor vehicle--
                  (A) which is propelled by power derived from 
                1 or more cells which convert chemical energy 
                directly into electricity by combining oxygen 
                with hydrogen fuel which is stored on board the 
                vehicle in any form and may or may not require 
                reformation prior to use,
                  (B) which, in the case of a passenger 
                automobile or light truck, has received on or 
                after the date of the enactment of this section 
                a certificate that such vehicle meets or 
                exceeds the Bin 5 Tier II emission level 
                established in regulations prescribed by the 
                Administrator of the Environmental Protection 
                Agency under section 202(i) of the Clean Air 
                Act for that make and model year vehicle,
                  (C) the original use of which commences with 
                the taxpayer,
                  (D) which is acquired for use or lease by the 
                taxpayer and not for resale, and
                  (E) which is made by a manufacturer.
  (c) New advanced lean burn technology motor vehicle credit.--
          (1) In general.--For purposes of subsection (a), the 
        new advanced lean burn technology motor vehicle credit 
        determined under this subsection for the taxable year 
        is the credit amount determined under paragraph (2) 
        with respect to a new advanced lean burn technology 
        motor vehicle placed in service by the taxpayer during 
        the taxable year.
          (2) Credit amount.--
                  (A) Fuel economy.--
                          (i) In general.--The credit amount 
                        determined under this paragraph shall 
                        be determined in accordance with the 
                        following table:
                          (ii) 2002 model year city fuel 
                        economy.--For purposes of clause (i), 
                        the 2002 model year city fuel economy 
                        with respect to a vehicle shall be 
                        determined on a gasoline gallon 
                        equivalent basis as determined by the 
                        Administrator of the Environmental 
                        Protection Agency using the tables 
                        provided in subsection (b)(2)(B) with 
                        respect to such vehicle.
                  (B) Conservation credit.--The amount 
                determined under subparagraph (A) with respect 
                to a new advanced lean burn technology motor 
                vehicle shall be increased by the conservation 
                credit amount determined in accordance with the 
                following table:
          (3) New advanced lean burn technology motor 
        vehicle.--For purposes of this subsection, the term 
        ``new advanced lean burn technology motor vehicle'' 
        means a passenger automobile or a light truck--
                  (A) with an internal combustion engine 
                which--
                          (i) is designed to operate primarily 
                        using more air than is necessary for 
                        complete combustion of the fuel,
                          (ii) incorporates direct injection,
                          (iii) achieves at least 125 percent 
                        of the 2002 model year city fuel 
                        economy,
                          (iv) for 2004 and later model 
                        vehicles, has received a certificate 
                        that such vehicle meets or exceeds--
                                  (I) in the case of a vehicle 
                                having a gross vehicle weight 
                                rating of 6,000 pounds or less, 
                                the Bin 5 Tier II emission 
                                standard established in 
                                regulations prescribed by the 
                                Administrator of the 
                                Environmental Protection Agency 
                                under section 202(i) of the 
                                Clean Air Act for that make and 
                                model year vehicle, and
                                  (II) in the case of a vehicle 
                                having a gross vehicle weight 
                                rating of more than 6,000 
                                pounds but not more than 8,500 
                                pounds, the Bin 8 Tier II 
                                emission standard which is so 
                                established,
                  (B) the original use of which commences with 
                the taxpayer,
                  (C) which is acquired for use or lease by the 
                taxpayer and not for resale, and
                  (D) which is made by a manufacturer.
          (4) Lifetime fuel savings.--For purposes of this 
        subsection, the term ``lifetime fuel savings'' means, 
        in the case of any new advanced lean burn technology 
        motor vehicle, an amount equal to the excess (if any) 
        of--
                  (A) 120,000 divided by the 2002 model year 
                city fuel economy for the vehicle inertia 
                weight class, over
                  (B) 120,000 divided by the city fuel economy 
                for such vehicle.
  (d) New qualified hybrid motor vehicle credit.--
          (1) In general.--For purposes of subsection (a), the 
        new qualified hybrid motor vehicle credit determined 
        under this subsection for the taxable year is the 
        credit amount determined under paragraph (2) with 
        respect to a new qualified hybrid motor vehicle placed 
        in service by the taxpayer during the taxable year.
          (2) Credit amount.--
                  (A) Credit amount for passenger automobiles 
                and light trucks.--In the case of a new 
                qualified hybrid motor vehicle which is a 
                passenger automobile or light truck and which 
                has a gross vehicle weight rating of not more 
                than 8,500 pounds, the amount determined under 
                this paragraph is the sum of the amounts 
                determined under clauses (i) and (ii).
                          (i) Fuel economy.--The amount 
                        determined under this clause is the 
                        amount which would be determined under 
                        subsection (c)(2)(A) if such vehicle 
                        were a vehicle referred to in such 
                        subsection.
                          (ii) Conservation credit.--The amount 
                        determined under this clause is the 
                        amount which would be determined under 
                        subsection (c)(2)(B) if such vehicle 
                        were a vehicle referred to in such 
                        subsection.
                  (B) Credit amount for other motor vehicles.--
                          (i) In general.--In the case of any 
                        new qualified hybrid motor vehicle to 
                        which subparagraph (A) does not apply, 
                        the amount determined under this 
                        paragraph is the amount equal to the 
                        applicable percentage of the qualified 
                        incremental hybrid cost of the vehicle 
                        as certified under clause (v).
                          (ii) Applicable percentage.--For 
                        purposes of clause (i), the applicable 
                        percentage is--
                                  (I) 20 percent if the vehicle 
                                achieves an increase in city 
                                fuel economy relative to a 
                                comparable vehicle of at least 
                                30 percent but less than 40 
                                percent,
                                  (II) 30 percent if the 
                                vehicle achieves such an 
                                increase of at least 40 percent 
                                but less than 50 percent, and
                                  (III) 40 percent if the 
                                vehicle achieves such an 
                                increase of at least 50 
                                percent.
                          (iii) Qualified incremental hybrid 
                        cost.--For purposes of this 
                        subparagraph, the qualified incremental 
                        hybrid cost of any vehicle is equal to 
                        the amount of the excess of the 
                        manufacturer's suggested retail price 
                        for such vehicle over such price for a 
                        comparable vehicle, to the extent such 
                        amount does not exceed--
                                  (I) $7,500, if such vehicle 
                                has a gross vehicle weight 
                                rating of not more than 14,000 
                                pounds,
                                  (II) $15,000, if such vehicle 
                                has a gross vehicle weight 
                                rating of more than 14,000 
                                pounds but not more than 26,000 
                                pounds, and
                                  (III) $30,000, if such 
                                vehicle has a gross vehicle 
                                weight rating of more than 
                                26,000 pounds.
                          (iv) Comparable vehicle.--For 
                        purposes of this subparagraph, the term 
                        ``comparable vehicle'' means, with 
                        respect to any new qualified hybrid 
                        motor vehicle, any vehicle which is 
                        powered solely by a gasoline or diesel 
                        internal combustion engine and which is 
                        comparable in weight, size, and use to 
                        such vehicle.
                          (v) Certification.--A certification 
                        described in clause (i) shall be made 
                        by the manufacturer and shall be 
                        determined in accordance with guidance 
                        prescribed by the Secretary. Such 
                        guidance shall specify procedures and 
                        methods for calculating fuel economy 
                        savings and incremental hybrid costs.
          (3) New qualified hybrid motor vehicle.--For purposes 
        of this subsection--
                  (A) In general.--The term ``new qualified 
                hybrid motor vehicle'' means a motor vehicle--
                          (i) which draws propulsion energy 
                        from onboard sources of stored energy 
                        which are both--
                                  (I) an internal combustion or 
                                heat engine using consumable 
                                fuel, and
                                  (II) a rechargeable energy 
                                storage system,
                          (ii) which, in the case of a vehicle 
                        to which paragraph (2)(A) applies, has 
                        received a certificate of conformity 
                        under the Clean Air Act and meets or 
                        exceeds the equivalent qualifying 
                        California low emission vehicle 
                        standard under section 243(e)(2) of the 
                        Clean Air Act for that make and model 
                        year, and
                                  (I) in the case of a vehicle 
                                having a gross vehicle weight 
                                rating of 6,000 pounds or less, 
                                the Bin 5 Tier II emission 
                                standard established in 
                                regulations prescribed by the 
                                Administrator of the 
                                Environmental Protection Agency 
                                under section 202(i) of the 
                                Clean Air Act for that make and 
                                model year vehicle, and
                                  (II) in the case of a vehicle 
                                having a gross vehicle weight 
                                rating of more than 6,000 
                                pounds but not more than 8,500 
                                pounds, the Bin 8 Tier II 
                                emission standard which is so 
                                established,
                          (iii) which has a maximum available 
                        power of at least--
                                  (I) 4 percent in the case of 
                                a vehicle to which paragraph 
                                (2)(A) applies,
                                  (II) 10 percent in the case 
                                of a vehicle which has a gross 
                                vehicle weight rating of more 
                                than 8,500 pounds and not more 
                                than 14,000 pounds, and
                                  (III) 15 percent in the case 
                                of a vehicle in excess of 
                                14,000 pounds,
                          (iv) which, in the case of a vehicle 
                        to which paragraph (2)(B) applies, has 
                        an internal combustion or heat engine 
                        which has received a certificate of 
                        conformity under the Clean Air Act as 
                        meeting the emission standards set in 
                        the regulations prescribed by the 
                        Administrator of the Environmental 
                        Protection Agency for 2004 through 2007 
                        model year diesel heavy duty engines or 
                        ottocycle heavy duty engines, as 
                        applicable,
                          (v) the original use of which 
                        commences with the taxpayer,
                          (vi) which is acquired for use or 
                        lease by the taxpayer and not for 
                        resale, and
                          (vii) which is made by a 
                        manufacturer.
                Such term shall not include any vehicle which 
                is not a passenger automobile or light truck if 
                such vehicle has a gross vehicle weight rating 
                of less than 8,500 pounds.
                  (B) Consumable fuel.--For purposes of 
                subparagraph (A)(i)(I), the term ``consumable 
                fuel'' means any solid, liquid, or gaseous 
                matter which releases energy when consumed by 
                an auxiliary power unit.
                  (C) Maximum available power.--
                          (i) Certain passenger automobiles and 
                        light trucks.--In the case of a vehicle 
                        to which paragraph (2)(A) applies, the 
                        term ``maximum available power'' means 
                        the maximum power available from the 
                        rechargeable energy storage system, 
                        during a standard 10 second pulse power 
                        or equivalent test, divided by such 
                        maximum power and the SAE net power of 
                        the heat engine.
                          (ii) Other motor vehicles.--In the 
                        case of a vehicle to which paragraph 
                        (2)(B) applies, the term ``maximum 
                        available power'' means the maximum 
                        power available from the rechargeable 
                        energy storage system, during a 
                        standard 10 second pulse power or 
                        equivalent test, divided by the 
                        vehicle's total traction power. For 
                        purposes of the preceding sentence, the 
                        term ``total traction power'' means the 
                        sum of the peak power from the 
                        rechargeable energy storage system and 
                        the heat engine peak power of the 
                        vehicle, except that if such storage 
                        system is the sole means by which the 
                        vehicle can be driven, the total 
                        traction power is the peak power of 
                        such storage system.
                  (D) Exclusion of plug-in vehicles.--Any 
                vehicle with respect to which a credit is 
                allowable under section 30D (determined without 
                regard to subsection (c) thereof) shall not be 
                taken into account under this section.
  (e) New qualified alternative fuel motor vehicle credit.--
          (1) Allowance of credit.--Except as provided in 
        paragraph (5), the new qualified alternative fuel motor 
        vehicle credit determined under this subsection is an 
        amount equal to the applicable percentage of the 
        incremental cost of any new qualified alternative fuel 
        motor vehicle placed in service by the taxpayer during 
        the taxable year.
          (2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage with respect to any new 
        qualified alternative fuel motor vehicle is--
                  (A) 50 percent, plus
                  (B) 30 percent, if such vehicle--
                          (i) has received a certificate of 
                        conformity under the Clean Air Act and 
                        meets or exceeds the most stringent 
                        standard available for certification 
                        under the Clean Air Act for that make 
                        and model year vehicle (other than a 
                        zero emission standard), or
                          (ii) has received an order certifying 
                        the vehicle as meeting the same 
                        requirements as vehicles which may be 
                        sold or leased in California and meets 
                        or exceeds the most stringent standard 
                        available for certification under the 
                        State laws of California (enacted in 
                        accordance with a waiver granted under 
                        section 209(b) of the Clean Air Act) 
                        for that make and model year vehicle 
                        (other than a zero emission standard).
        For purposes of the preceding sentence, in the case of 
        any new qualified alternative fuel motor vehicle which 
        weighs more than 14,000 pounds gross vehicle weight 
        rating, the most stringent standard available shall be 
        such standard available for certification on the date 
        of the enactment of the Energy Tax Incentives Act of 
        2005.
          (3) Incremental cost.--For purposes of this 
        subsection, the incremental cost of any new qualified 
        alternative fuel motor vehicle is equal to the amount 
        of the excess of the manufacturer's suggested retail 
        price for such vehicle over such price for a gasoline 
        or diesel fuel motor vehicle of the same model, to the 
        extent such amount does not exceed--
                  (A) $5,000, if such vehicle has a gross 
                vehicle weight rating of not more than 8,500 
                pounds,
                  (B) $10,000, if such vehicle has a gross 
                vehicle weight rating of more than 8,500 pounds 
                but not more than 14,000 pounds,
                  (C) $25,000, if such vehicle has a gross 
                vehicle weight rating of more than 14,000 
                pounds but not more than 26,000 pounds, and
                  (D) $40,000, if such vehicle has a gross 
                vehicle weight rating of more than 26,000 
                pounds.
          (4) New qualified alternative fuel motor vehicle.--
        For purposes of this subsection--
                  (A) In general.--The term ``new qualified 
                alternative fuel motor vehicle'' means any 
                motor vehicle--
                          (i) which is only capable of 
                        operating on an alternative fuel,
                          (ii) the original use of which 
                        commences with the taxpayer,
                          (iii) which is acquired by the 
                        taxpayer for use or lease, but not for 
                        resale, and
                          (iv) which is made by a manufacturer.
                  (B) Alternative fuel.--The term ``alternative 
                fuel'' means compressed natural gas, liquefied 
                natural gas, liquefied petroleum gas, hydrogen, 
                and any liquid at least 85 percent of the 
                volume of which consists of methanol.
          (5) Credit for mixed-fuel vehicles.--
                  (A) In general.--In the case of a mixed-fuel 
                vehicle placed in service by the taxpayer 
                during the taxable year, the credit determined 
                under this subsection is an amount equal to--
                          (i) in the case of a 75/25 mixed-fuel 
                        vehicle, 70 percent of the credit which 
                        would have been allowed under this 
                        subsection if such vehicle was a 
                        qualified alternative fuel motor 
                        vehicle, and
                          (ii) in the case of a 90/10 mixed-
                        fuel vehicle, 90 percent of the credit 
                        which would have been allowed under 
                        this subsection if such vehicle was a 
                        qualified alternative fuel motor 
                        vehicle.
                  (B) Mixed-fuel vehicle.--For purposes of this 
                subsection, the term ``mixed-fuel vehicle'' 
                means any motor vehicle described in 
                subparagraph (C) or (D) of paragraph (3), 
                which--
                          (i) is certified by the manufacturer 
                        as being able to perform efficiently in 
                        normal operation on a combination of an 
                        alternative fuel and a petroleum-based 
                        fuel,
                          (ii) either--
                                  (I) has received a 
                                certificate of conformity under 
                                the Clean Air Act, or
                                  (II) has received an order 
                                certifying the vehicle as 
                                meeting the same requirements 
                                as vehicles which may be sold 
                                or leased in California and 
                                meets or exceeds the low 
                                emission vehicle standard under 
                                section 88.105-94 of title 40, 
                                Code of Federal Regulations, 
                                for that make and model year 
                                vehicle,
                          (iii) the original use of which 
                        commences with the taxpayer,
                          (iv) which is acquired by the 
                        taxpayer for use or lease, but not for 
                        resale, and
                          (v) which is made by a manufacturer.
                  (C) 75/25 mixed-fuel vehicle.--For purposes 
                of this subsection, the term ``75/25 mixed-fuel 
                vehicle'' means a mixed-fuel vehicle which 
                operates using at least 75 percent alternative 
                fuel and not more than 25 percent petroleum-
                based fuel.
                  (D) 90/10 mixed-fuel vehicle.--For purposes 
                of this subsection, the term ``90/10 mixed-fuel 
                vehicle'' means a mixed-fuel vehicle which 
                operates using at least 90 percent alternative 
                fuel and not more than 10 percent petroleum-
                based fuel.
  (f) Limitation on number of new qualified hybrid and advanced 
lean-burn technology vehicles eligible for credit.--
          (1) In general.--In the case of a qualified vehicle 
        sold during the phaseout period, only the applicable 
        percentage of the credit otherwise allowable under 
        subsection (c) or (d) shall be allowed.
          (2) Phaseout period.--For purposes of this 
        subsection, the phaseout period is the period beginning 
        with the second calendar quarter following the calendar 
        quarter which includes the first date on which the 
        number of qualified vehicles manufactured by the 
        manufacturer of the vehicle referred to in paragraph 
        (1) sold for use in the United States after December 
        31, 2005, is at least 60,000.
          (3) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage is--
                  (A) 50 percent for the first 2 calendar 
                quarters of the phaseout period,
                  (B) 25 percent for the 3d and 4th calendar 
                quarters of the phaseout period, and
                  (C) 0 percent for each calendar quarter 
                thereafter.
          (4) Controlled groups.--
                  (A) In general.--For purposes of this 
                subsection, all persons treated as a single 
                employer under subsection (a) or (b) of section 
                52 or subsection (m) or (o) of section 414 
                shall be treated as a single manufacturer.
                  (B) Inclusion of foreign corporations.--For 
                purposes of subparagraph (A), in applying 
                subsections (a) and (b) of section 52 to this 
                section, section 1563 shall be applied without 
                regard to subsection (b)(2)(C) thereof.
          (5) Qualified vehicle.--For purposes of this 
        subsection, the term ``qualified vehicle'' means any 
        new qualified hybrid motor vehicle (described in 
        subsection (d)(2)(A)) and any new advanced lean burn 
        technology motor vehicle.
  (g) Application with other credits.--
          (1) Business credit treated as part of general 
        business credit.--So much of the credit which would be 
        allowed under subsection (a) for any taxable year 
        (determined without regard to this subsection) that is 
        attributable to property of a character subject to an 
        allowance for depreciation shall be treated as a credit 
        listed in section 38(b) for such taxable year (and not 
        allowed under subsection (a)).
          (2) Personal credit.--For purposes of this title, the 
        credit allowed under subsection (a) for any taxable 
        year (determined after application of paragraph (1)) 
        shall be treated as a credit allowable under subpart A 
        for such taxable year.
  (h) Other definitions and special rules.--For purposes of 
this section--
          (1) Motor vehicle.--The term ``motor vehicle'' means 
        any vehicle which is manufactured primarily for use on 
        public streets, roads, and highways (not including a 
        vehicle operated exclusively on a rail or rails) and 
        which has at least 4 wheels.
          (2) City fuel economy.--The city fuel economy with 
        respect to any vehicle shall be measured in a manner 
        which is substantially similar to the manner city fuel 
        economy is measured in accordance with procedures under 
        part 600 of subchapter Q of chapter I of title 40, Code 
        of Federal Regulations, as in effect on the date of the 
        enactment of this section.
          (3) Other terms.--The terms ``automobile'', 
        ``passenger automobile'', ``medium duty passenger 
        vehicle'', ``light truck'', and ``manufacturer'' have 
        the meanings given such terms in regulations prescribed 
        by the Administrator of the Environmental Protection 
        Agency for purposes of the administration of title II 
        of the Clean Air Act (42 U.S.C. 7521 et seq.).
          (4) Reduction in basis.--For purposes of this 
        subtitle, the basis of any property for which a credit 
        is allowable under subsection (a) shall be reduced by 
        the amount of such credit so allowed (determined 
        without regard to subsection (g)).
          (5) No double benefit.--The amount of any deduction 
        or other credit allowable under this chapter--
                  (A) for any incremental cost taken into 
                account in computing the amount of the credit 
                determined under subsection (e) shall be 
                reduced by the amount of such credit 
                attributable to such cost, and
                  (B) with respect to a vehicle described under 
                subsection (b) or (c), shall be reduced by the 
                amount of credit allowed under subsection (a) 
                for such vehicle for the taxable year 
                (determined without regard to subsection (g)).
          (6) Property used by tax-exempt entity.--In the case 
        of a vehicle whose use is described in paragraph (3) or 
        (4) of section 50(b) and which is not subject to a 
        lease, the person who sold such vehicle to the person 
        or entity using such vehicle shall be treated as the 
        taxpayer that placed such vehicle in service, but only 
        if such person clearly discloses to such person or 
        entity in a document the amount of any credit allowable 
        under subsection (a) with respect to such vehicle 
        (determined without regard to subsection (g)). For 
        purposes of subsection (g), property to which this 
        paragraph applies shall be treated as of a character 
        subject to an allowance for depreciation.
          (7) Property used outside United States, etc., not 
        qualified.--No credit shall be allowable under 
        subsection (a) with respect to any property referred to 
        in section 50(b)(1) or with respect to the portion of 
        the cost of any property taken into account under 
        section 179.
          (8) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any credit 
        allowable under subsection (a) with respect to any 
        property which ceases to be property eligible for such 
        credit (including recapture in the case of a lease 
        period of less than the economic life of a vehicle), 
        except that no benefit shall be recaptured if such 
        property ceases to be eligible for such credit by 
        reason of conversion to a qualified plug-in electric 
        drive motor vehicle.
          (9) Election to not take credit.--No credit shall be 
        allowed under subsection (a) for any vehicle if the 
        taxpayer elects to not have this section apply to such 
        vehicle.
          (10) Interaction with air quality and motor vehicle 
        safety standards.--Unless otherwise provided in this 
        section, a motor vehicle shall not be considered 
        eligible for a credit under this section unless such 
        vehicle is in compliance with--
                  (A) the applicable provisions of the Clean 
                Air Act for the applicable make and model year 
                of the vehicle (or applicable air quality 
                provisions of State law in the case of a State 
                which has adopted such provision under a waiver 
                under section 209(b) of the Clean Air Act), and
                  (B) the motor vehicle safety provisions of 
                sections 30101 through 30169 of title 49, 
                United States Code.
  (i) Plug-in conversion credit.--
          (1) In general.--For purposes of subsection (a), the 
        plug-in conversion credit determined under this 
        subsection with respect to any motor vehicle which is 
        converted to a qualified plug-in electric drive motor 
        vehicle is 10 percent of so much of the cost of the 
        converting such vehicle as does not exceed $40,000.
          (2) Qualified plug-in electric drive motor vehicle.--
        For purposes of this subsection, the term ``qualified 
        plug-in electric drive motor vehicle'' means any new 
        qualified plug-in electric drive motor vehicle (as 
        defined in section 30D, determined without regard to 
        whether such vehicle is made by a manufacturer or 
        whether the original use of such vehicle commences with 
        the taxpayer).
          (3) Credit allowed in addition to other credits.--The 
        credit allowed under this subsection shall be allowed 
        with respect to a motor vehicle notwithstanding whether 
        a credit has been allowed with respect to such motor 
        vehicle under this section (other than this subsection) 
        in any preceding taxable year.
          (4) Termination.--This subsection shall not apply to 
        conversions made after December 31, 2011.
  (j) Regulations.--
          (1) In general.--Except as provided in paragraph (2), 
        the Secretary shall promulgate such regulations as 
        necessary to carry out the provisions of this section.
          (2) Coordination in prescription of certain 
        regulations.--The Secretary of the Treasury, in 
        coordination with the Secretary of Transportation and 
        the Administrator of the Environmental Protection 
        Agency, shall prescribe such regulations as necessary 
        to determine whether a motor vehicle meets the 
        requirements to be eligible for a credit under this 
        section.
  (k) Termination.--This section shall not apply to any 
property purchased after--
          (1) in the case of a new qualified fuel cell motor 
        vehicle (as described in subsection (b)), [December 31, 
        2017] December 31, 2020,
          (2) in the case of a new advanced lean burn 
        technology motor vehicle (as described in subsection 
        (c)) or a new qualified hybrid motor vehicle (as 
        described in subsection (d)(2)(A)), December 31, 2010,
          (3) in the case of a new qualified hybrid motor 
        vehicle (as described in subsection (d)(2)(B)), 
        December 31, 2009, and
          (4) in the case of a new qualified alternative fuel 
        vehicle (as described in subsection (e)), December 31, 
        2010.

SEC. 30C. ALTERNATIVE FUEL VEHICLE REFUELING PROPERTY CREDIT.

  (a) Credit allowed.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an 
amount equal to 30 percent of the cost of any qualified 
alternative fuel vehicle refueling property placed in service 
by the taxpayer during the taxable year.
  (b) Limitation.--The credit allowed under subsection (a) with 
respect to all qualified alternative fuel vehicle refueling 
property placed in service by the taxpayer during the taxable 
year at a location shall not exceed--
          (1) $30,000 in the case of a property of a character 
        subject to an allowance for depreciation, and
          (2) $1,000 in any other case.
  (c) Qualified alternative fuel vehicle refueling property.--
For purposes of this section, the term ``qualified alternative 
fuel vehicle refueling property'' has the same meaning as the 
term ``qualified clean-fuel vehicle refueling property'' would 
have under section 179A if--
          (1) paragraph (1) of section 179A(d) did not apply to 
        property installed on property which is used as the 
        principal residence (within the meaning of section 121) 
        of the taxpayer, and
          (2) only the following were treated as clean-burning 
        fuels for purposes of section 179A(d):
                  (A) Any fuel at least 85 percent of the 
                volume of which consists of one or more of the 
                following: ethanol, natural gas, compressed 
                natural gas, liquified natural gas, liquefied 
                petroleum gas, or hydrogen.
                  (B) Any mixture--
                          (i) which consists of two or more of 
                        the following: biodiesel (as defined in 
                        section 40A(d)(1)), diesel fuel (as 
                        defined in section 4083(a)(3)), or 
                        kerosene, and
                          (ii) at least 20 percent of the 
                        volume of which consists of biodiesel 
                        (as so defined) determined without 
                        regard to any kerosene in such mixture.
                  (C) Electricity.
  (d) Application with other credits.--
          (1) Business credit treated as part of general 
        business credit.--So much of the credit which would be 
        allowed under subsection (a) for any taxable year 
        (determined without regard to this subsection) that is 
        attributable to property of a character subject to an 
        allowance for depreciation shall be treated as a credit 
        listed in section 38(b) for such taxable year (and not 
        allowed under subsection (a)).
          (2) Personal credit.--The credit allowed under 
        subsection (a) (after the application of paragraph (1)) 
        for any taxable year shall not exceed the excess (if 
        any) of--
                  (A) the regular tax liability (as defined in 
                section 26(b)) reduced by the sum of the 
                credits allowable under subpart A and section 
                27, over
                  (B) the tentative minimum tax for the taxable 
                year.
  (e) Special rules.--For purposes of this section--
          (1) Reduction in basis.--For purposes of this 
        subtitle, the basis of any property for which a credit 
        is allowable under subsection (a) shall be reduced by 
        the amount of such credit so allowed (determined 
        without regard to subsection (d)).
          (2) Property used by tax-exempt entity.--In the case 
        of any qualified alternative fuel vehicle refueling 
        property the use of which is described in paragraph (3) 
        or (4) of section 50(b) and which is not subject to a 
        lease, the person who sold such property to the person 
        or entity using such property shall be treated as the 
        taxpayer that placed such property in service, but only 
        if such person clearly discloses to such person or 
        entity in a document the amount of any credit allowable 
        under subsection (a) with respect to such property 
        (determined without regard to subsection (d)). For 
        purposes of subsection (d), property to which this 
        paragraph applies shall be treated as of a character 
        subject to an allowance for depreciation.
          (3) Property used outside United States not 
        qualified.--No credit shall be allowable under 
        subsection (a) with respect to any property referred to 
        in section 50(b)(1) or with respect to the portion of 
        the cost of any property taken into account under 
        section 179.
          (4) Election not to take credit.--No credit shall be 
        allowed under subsection (a) for any property if the 
        taxpayer elects not to have this section apply to such 
        property.
          (5) Recapture rules.--Rules similar to the rules of 
        section 179A(e)(4) shall apply.
          (6) Reference.--For purposes of this section, any 
        reference to section 179A shall be treated as a 
        reference to such section as in effect immediately 
        before its repeal.
  (f) Regulations.--The Secretary shall prescribe such 
regulations as necessary to carry out the provisions of this 
section.
  (g) Termination.--This section shall not apply to any 
property placed in service after [December 31, 2017] December 
31, 2020.

SEC. 30D. NEW QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR VEHICLES.

  (a) Allowance of credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an 
amount equal to the sum of the credit amounts determined under 
subsection (b) with respect to each new qualified plug-in 
electric drive motor vehicle placed in service by the taxpayer 
during the taxable year.
  (b) Per vehicle dollar limitation.--
          (1) In general.--The amount determined under this 
        subsection with respect to any new qualified plug-in 
        electric drive motor vehicle is the sum of the amounts 
        determined under paragraphs (2) and (3) with respect to 
        such vehicle.
          (2) Base amount.--The amount determined under this 
        paragraph is $2,500.
          (3) Battery capacity.--In the case of a vehicle which 
        draws propulsion energy from a battery with not less 
        than 5 kilowatt hours of capacity, the amount 
        determined under this paragraph is $417, plus $417 for 
        each kilowatt hour of capacity in excess of 5 kilowatt 
        hours. The amount determined under this paragraph shall 
        not exceed $5,000.
  (c) Application with other credits.--
          (1) Business credit treated as part of general 
        business credit.--So much of the credit which would be 
        allowed under subsection (a) for any taxable year 
        (determined without regard to this subsection) that is 
        attributable to property of a character subject to an 
        allowance for depreciation shall be treated as a credit 
        listed in section 38(b) for such taxable year (and not 
        allowed under subsection (a)).
          (2) Personal credit.--For purposes of this title, the 
        credit allowed under subsection (a) for any taxable 
        year (determined after application of paragraph (1)) 
        shall be treated as a credit allowable under subpart A 
        for such taxable year.
  (d) New qualified plug-in electric drive motor vehicle.--For 
purposes of this section--
          (1) In general.--The term ``new qualified plug-in 
        electric drive motor vehicle'' means a motor vehicle--
                  (A) the original use of which commences with 
                the taxpayer,
                  (B) which is acquired for use or lease by the 
                taxpayer and not for resale,
                  (C) which is made by a manufacturer,
                  (D) which is treated as a motor vehicle for 
                purposes of title II of the Clean Air Act,
                  (E) which has a gross vehicle weight rating 
                of less than 14,000 pounds, and
                  (F) which is propelled to a significant 
                extent by an electric motor which draws 
                electricity from a battery which--
                          (i) has a capacity of not less than 4 
                        kilowatt hours, and
                          (ii) is capable of being recharged 
                        from an external source of electricity.
          (2) Motor vehicle.--The term ``motor vehicle'' means 
        any vehicle which is manufactured primarily for use on 
        public streets, roads, and highways (not including a 
        vehicle operated exclusively on a rail or rails) and 
        which has at least 4 wheels.
          (3) Manufacturer.--The term ``manufacturer'' has the 
        meaning given such term in regulations prescribed by 
        the Administrator of the Environmental Protection 
        Agency for purposes of the administration of title II 
        of the Clean Air Act (42 U.S.C. 7521 et seq.).
          (4) Battery capacity.--The term ``capacity'' means, 
        with respect to any battery, the quantity of 
        electricity which the battery is capable of storing, 
        expressed in kilowatt hours, as measured from a 100 
        percent state of charge to a 0 percent state of charge.
  (e) Limitation on number of new qualified plug-in electric 
drive motor vehicles eligible for credit.--
          (1) In general.--In the case of a new qualified plug-
        in electric drive motor vehicle sold during the 
        phaseout period, only the applicable percentage of the 
        credit otherwise allowable under subsection (a) shall 
        be allowed.
          (2) Phaseout period.--For purposes of this 
        subsection, the phaseout period is the period beginning 
        with the second calendar quarter following the calendar 
        quarter which includes the first date on which the 
        number of new qualified plug-in electric drive motor 
        vehicles manufactured by the manufacturer of the 
        vehicle referred to in paragraph (1) sold for use in 
        the United States after December 31, 2009, is at least 
        200,000.
          (3) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage is--
                  (A) 50 percent for the first 2 calendar 
                quarters of the phaseout period,
                  (B) 25 percent for the 3d and 4th calendar 
                quarters of the phaseout period, and
                  (C) 0 percent for each calendar quarter 
                thereafter.
          (4) Controlled groups.--Rules similar to the rules of 
        section 30B(f)(4) shall apply for purposes of this 
        subsection.
  (f) Special rules.--
          (1) Basis reduction.--For purposes of this subtitle, 
        the basis of any property for which a credit is 
        allowable under subsection (a) shall be reduced by the 
        amount of such credit so allowed (determined without 
        regard to subsection (c)).
          (2) No double benefit.--The amount of any deduction 
        or other credit allowable under this chapter for a 
        vehicle for which a credit is allowable under 
        subsection (a) shall be reduced by the amount of credit 
        allowed under such subsection for such vehicle 
        (determined without regard to subsection (c)).
          (3) Property used by tax-exempt entity.--In the case 
        of a vehicle the use of which is described in paragraph 
        (3) or (4) of section 50(b) and which is not subject to 
        a lease, the person who sold such vehicle to the person 
        or entity using such vehicle shall be treated as the 
        taxpayer that placed such vehicle in service, but only 
        if such person clearly discloses to such person or 
        entity in a document the amount of any credit allowable 
        under subsection (a) with respect to such vehicle 
        (determined without regard to subsection (c)). For 
        purposes of subsection (c), property to which this 
        paragraph applies shall be treated as of a character 
        subject to an allowance for depreciation.
          (4) Property used outside United States not 
        qualified.--No credit shall be allowable under 
        subsection (a) with respect to any property referred to 
        in section 50(b)(1).
          (5) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any credit 
        allowable under subsection (a) with respect to any 
        property which ceases to be property eligible for such 
        credit.
          (6) Election not to take credit.--No credit shall be 
        allowed under subsection (a) for any vehicle if the 
        taxpayer elects to not have this section apply to such 
        vehicle.
          (7) Interaction with air quality and motor vehicle 
        safety standards.--A vehicle shall not be considered 
        eligible for a credit under this section unless such 
        vehicle is in compliance with--
                  (A) the applicable provisions of the Clean 
                Air Act for the applicable make and model year 
                of the vehicle (or applicable air quality 
                provisions of State law in the case of a State 
                which has adopted such provision under a waiver 
                under section 209(b) of the Clean Air Act), and
                  (B) the motor vehicle safety provisions of 
                sections 30101 through 30169 of title 49, 
                United States Code.
  (g) Credit allowed for 2- and 3-wheeled plug-in electric 
vehicles.--
          (1) In general.--In the case of a qualified 2- or 3-
        wheeled plug-in electric vehicle--
                  (A) there shall be allowed as a credit 
                against the tax imposed by this chapter for the 
                taxable year an amount equal to the sum of the 
                applicable amount with respect to each such 
                qualified 2- or 3-wheeled plug-in electric 
                vehicle placed in service by the taxpayer 
                during the taxable year, and
                  (B) the amount of the credit allowed under 
                subparagraph (A) shall be treated as a credit 
                allowed under subsection (a).
          (2) Applicable amount.--For purposes of paragraph 
        (1), the applicable amount is an amount equal to the 
        lesser of--
                  (A) 10 percent of the cost of the qualified 
                2- or 3-wheeled plug-in electric vehicle, or
                  (B) $2,500.
          (3) Qualified 2- or 3-wheeled plug-in electric 
        vehicle.--The term ``qualified 2- or 3-wheeled plug-in 
        electric vehicle'' means any vehicle which--
                  (A) has 2 or 3 wheels,
                  (B) meets the requirements of subparagraphs 
                (A), (B), (C), (E), and (F) of subsection 
                (d)(1) (determined by substituting ``2.5 
                kilowatt hours'' for ``4 kilowatt hours'' in 
                subparagraph (F)(i)),
                  (C) is manufactured primarily for use on 
                public streets, roads, and highways,
                  (D) is capable of achieving a speed of 45 
                miles per hour or greater, and
                  (E) is acquired--
                          (i) after December 31, 2011, and 
                        before January 1, 2014, or
                          (ii) in the case of a vehicle that 
                        has 2 wheels, after December 31, 2014, 
                        and before [January 1, 2018] January 1, 
                        2021.

Subpart C--REFUNDABLE CREDITS

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SEC. 35. HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS.

  (a) In general.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by subtitle A an 
amount equal to 72.5 percent of the amount paid by the taxpayer 
for coverage of the taxpayer and qualifying family members 
under qualified health insurance for eligible coverage months 
beginning in the taxable year.
  (b) Eligible coverage month.--For purposes of this section--
          (1) In general.--The term ``eligible coverage month'' 
        means any month if--
                  (A) as of the first day of such month, the 
                taxpayer--
                          (i) is an eligible individual,
                          (ii) is covered by qualified health 
                        insurance, the premium for which is 
                        paid by the taxpayer,
                          (iii) does not have other specified 
                        coverage, and
                          (iv) is not imprisoned under Federal, 
                        State, or local authority, and
                  (B) such month begins more than 90 days after 
                the date of the enactment of the Trade Act of 
                2002, and before [January 1, 2020] January 1, 
                2021.
          (2) Joint returns.--In the case of a joint return, 
        the requirements of paragraph (1)(A) shall be treated 
        as met with respect to any month if at least 1 spouse 
        satisfies such requirements.
  (c) Eligible individual.--For purposes of this section--
          (1) In general.--The term ``eligible individual'' 
        means--
                  (A) an eligible TAA recipient,
                  (B) an eligible alternative TAA recipient, 
                and
                  (C) an eligible PBGC pension recipient.
          (2) Eligible TAA recipient.--
                  (A) In general.--Except as provided in 
                subparagraph (B), the term ``eligible TAA 
                recipient'' means, with respect to any month, 
                any individual who is receiving for any day of 
                such month a trade readjustment allowance under 
                chapter 2 of title II of the Trade Act of 1974 
                or who would be eligible to receive such 
                allowance if section 231 of such Act were 
                applied without regard to subsection (a)(3)(B) 
                of such section. An individual shall continue 
                to be treated as an eligible TAA recipient 
                during the first month that such individual 
                would otherwise cease to be an eligible TAA 
                recipient by reason of the preceding sentence.
                  (B) Special rule.--In the case of any 
                eligible coverage month beginning after the 
                date of the enactment of this paragraph, the 
                term ``eligible TAA recipient'' means, with 
                respect to any month, any individual who--
                          (i) is receiving for any day of such 
                        month a trade readjustment allowance 
                        under chapter 2 of title II of the 
                        Trade Act of 1974,
                          (ii) would be eligible to receive 
                        such allowance except that such 
                        individual is in a break in training 
                        provided under a training program 
                        approved under section 236 of such Act 
                        that exceeds the period specified in 
                        section 233(e) of such Act, but is 
                        within the period for receiving such 
                        allowances provided under section 
                        233(a) of such Act, or
                          (iii) is receiving unemployment 
                        compensation (as defined in section 
                        85(b)) for any day of such month and 
                        who would be eligible to receive such 
                        allowance for such month if section 231 
                        of such Act were applied without regard 
                        to subsections (a)(3)(B) and (a)(5) 
                        thereof.
                An individual shall continue to be treated as 
                an eligible TAA recipient during the first 
                month that such individual would otherwise 
                cease to be an eligible TAA recipient by reason 
                of the preceding sentence.
          (3) Eligible alternative TAA recipient.--The term 
        ``eligible alternative TAA recipient'' means, with 
        respect to any month, any individual who--
                  (A) is a worker described in section 
                246(a)(3)(B) of the Trade Act of 1974 who is 
                participating in the program established under 
                section 246(a)(1) of such Act, and
                  (B) is receiving a benefit for such month 
                under section 246(a)(2) of such Act.
        An individual shall continue to be treated as an 
        eligible alternative TAA recipient during the first 
        month that such individual would otherwise cease to be 
        an eligible alternative TAA recipient by reason of the 
        preceding sentence.
          (4) Eligible PBGC pension recipient.--The term 
        ``eligible PBGC pension recipient'' means, with respect 
        to any month, any individual who--
                  (A) has attained age 55 as of the first day 
                of such month, and
                  (B) is receiving a benefit for such month any 
                portion of which is paid by the Pension Benefit 
                Guaranty Corporation under title IV of the 
                Employee Retirement Income Security Act of 
                1974.
  (d) Qualifying family member.--For purposes of this section--
          (1) In general.--The term ``qualifying family 
        member'' means--
                  (A) the taxpayer's spouse, and
                  (B) any dependent of the taxpayer with 
                respect to whom the taxpayer is entitled to a 
                deduction under section 151(c).
        Such term does not include any individual who has other 
        specified coverage.
          (2) Special dependency test in case of divorced 
        parents, etc..--If section 152(e) applies to any child 
        with respect to any calendar year, in the case of any 
        taxable year beginning in such calendar year, such 
        child shall be treated as described in paragraph (1)(B) 
        with respect to the custodial parent (as defined in 
        section 152(e)(4)(A)) and not with respect to the 
        noncustodial parent.
  (e) Qualified health insurance.--For purposes of this 
section--
          (1) In general.--The term ``qualified health 
        insurance'' means any of the following:
                  (A) Coverage under a COBRA continuation 
                provision (as defined in section 9832(d)(1)).
                  (B) State-based continuation coverage 
                provided by the State under a State law that 
                requires such coverage.
                  (C) Coverage offered through a qualified 
                State high risk pool (as defined in section 
                2744(c)(2) of the Public Health Service Act).
                  (D) Coverage under a health insurance program 
                offered for State employees.
                  (E) Coverage under a State-based health 
                insurance program that is comparable to the 
                health insurance program offered for State 
                employees.
                  (F) Coverage through an arrangement entered 
                into by a State and--
                          (i) a group health plan (including 
                        such a plan which is a multiemployer 
                        plan as defined in section 3(37) of the 
                        Employee Retirement Income Security Act 
                        of 1974),
                          (ii) an issuer of health insurance 
                        coverage,
                          (iii) an administrator, or
                          (iv) an employer.
                  (G) Coverage offered through a State 
                arrangement with a private sector health care 
                coverage purchasing pool.
                  (H) Coverage under a State-operated health 
                plan that does not receive any Federal 
                financial participation.
                  (I) Coverage under a group health plan that 
                is available through the employment of the 
                eligible individual's spouse.
                  (J) In the case of any eligible individual 
                and such individual's qualifying family 
                members, coverage under individual health 
                insurance (other than coverage enrolled in 
                through an Exchange established under the 
                Patient Protection and Affordable Care Act). 
                For purposes of this subparagraph, the term 
                ``individual health insurance'' means any 
                insurance which constitutes medical care 
                offered to individuals other than in connection 
                with a group health plan and does not include 
                Federal- or State-based health insurance 
                coverage.
                  (K) Coverage under an employee benefit plan 
                funded by a voluntary employees' beneficiary 
                association (as defined in section 501(c)(9)) 
                established pursuant to an order of a 
                bankruptcy court, or by agreement with an 
                authorized representative, as provided in 
                section 1114 of title 11, United States Code.
          (2) Requirements for state-based coverage.--
                  (A) In general.--The term ``qualified health 
                insurance'' does not include any coverage 
                described in subparagraphs (B) through (H) of 
                paragraph (1) unless the State involved has 
                elected to have such coverage treated as 
                qualified health insurance under this section 
                and such coverage meets the following 
                requirements:
                          (i) Guaranteed issue.--Each 
                        qualifying individual is guaranteed 
                        enrollment if the individual pays the 
                        premium for enrollment or provides a 
                        qualified health insurance costs credit 
                        eligibility certificate described in 
                        section 7527 and pays the remainder of 
                        such premium.
                          (ii) No imposition of preexisting 
                        condition exclusion.--No pre-existing 
                        condition limitations are imposed with 
                        respect to any qualifying individual.
                          (iii) Nondiscriminatory premium.--The 
                        total premium (as determined without 
                        regard to any subsidies) with respect 
                        to a qualifying individual may not be 
                        greater than the total premium (as so 
                        determined) for a similarly situated 
                        individual who is not a qualifying 
                        individual.
                          (iv) Same benefits.--Benefits under 
                        the coverage are the same as (or 
                        substantially similar to) the benefits 
                        provided to similarly situated 
                        individuals who are not qualifying 
                        individuals.
                  (B) Qualifying individual.--For purposes of 
                this paragraph, the term ``qualifying 
                individual'' means--
                          (i) an eligible individual for whom, 
                        as of the date on which the individual 
                        seeks to enroll in the coverage 
                        described in subparagraphs (B) through 
                        (H) of paragraph (1), the aggregate of 
                        the periods of creditable coverage (as 
                        defined in section 9801(c)) is 3 months 
                        or longer and who, with respect to any 
                        month, meets the requirements of 
                        clauses (iii) and (iv) of subsection 
                        (b)(1)(A); and
                          (ii) the qualifying family members of 
                        such eligible individual.
          (3) Exception.--The term ``qualified health 
        insurance'' shall not include--
                  (A) a flexible spending or similar 
                arrangement, and
                  (B) any insurance if substantially all of its 
                coverage is of excepted benefits described in 
                section 9832(c).
  (f) Other specified coverage.--For purposes of this section, 
an individual has other specified coverage for any month if, as 
of the first day of such month--
          (1) Subsidized coverage.--
                  (A) In general.--Such individual is covered 
                under any insurance which constitutes medical 
                care (except insurance substantially all of the 
                coverage of which is of excepted benefits 
                described in section 9832(c)) under any health 
                plan maintained by any employer (or former 
                employer) of the taxpayer or the taxpayer's 
                spouse and at least 50 percent of the cost of 
                such coverage (determined under section 4980B) 
                is paid or incurred by the employer.
                  (B) Eligible alternative TAA recipients.--In 
                the case of an eligible alternative TAA 
                recipient, such individual is either--
                          (i) eligible for coverage under any 
                        qualified health insurance (other than 
                        insurance described in subparagraph 
                        (A), (B), or (F) of subsection (e)(1)) 
                        under which at least 50 percent of the 
                        cost of coverage (determined under 
                        section 4980B(f)(4)) is paid or 
                        incurred by an employer (or former 
                        employer) of the taxpayer or the 
                        taxpayer's spouse, or
                          (ii) covered under any such qualified 
                        health insurance under which any 
                        portion of the cost of coverage (as so 
                        determined) is paid or incurred by an 
                        employer (or former employer) of the 
                        taxpayer or the taxpayer's spouse.
                  (C) Treatment of cafeteria plans.--For 
                purposes of subparagraphs (A) and (B), the cost 
                of coverage shall be treated as paid or 
                incurred by an employer to the extent the 
                coverage is in lieu of a right to receive cash 
                or other qualified benefits under a cafeteria 
                plan (as defined in section 125(d)).
          (2) Coverage under Medicare, Medicaid, or SCHIP.--
        Such individual--
                  (A) is entitled to benefits under part A of 
                title XVIII of the Social Security Act or is 
                enrolled under part B of such title, or
                  (B) is enrolled in the program under title 
                XIX or XXI of such Act (other than under 
                section 1928 of such Act).
          (3) Certain other coverage.--Such individual--
                  (A) is enrolled in a health benefits plan 
                under chapter 89 of title 5, United States 
                Code, or
                  (B) is entitled to receive benefits under 
                chapter 55 of title 10, United States Code.
  (g) Special rules.--
          (1) Coordination with advance payments of credit.--
        With respect to any taxable year, the amount which 
        would (but for this subsection) be allowed as a credit 
        to the taxpayer under subsection (a) shall be reduced 
        (but not below zero) by the aggregate amount paid on 
        behalf of such taxpayer under section 7527 for months 
        beginning in such taxable year.
          (2) Coordination with other deductions.--Amounts 
        taken into account under subsection (a) shall not be 
        taken into account in determining any deduction allowed 
        under section 162(l) or 213.
          (3) Medical and health savings accounts.--Amounts 
        distributed from an Archer MSA (as defined in section 
        220(d)) or from a health savings account (as defined in 
        section 223(d)) shall not be taken into account under 
        subsection (a).
          (4) Denial of credit to dependents.--No credit shall 
        be allowed under this section to any individual with 
        respect to whom a deduction under section 151 is 
        allowable to another taxpayer for a taxable year 
        beginning in the calendar year in which such 
        individual's taxable year begins.
          (5) Both spouses eligible individuals.--The spouse of 
        the taxpayer shall not be treated as a qualifying 
        family member for purposes of subsection (a), if--
                  (A) the taxpayer is married at the close of 
                the taxable year,
                  (B) the taxpayer and the taxpayer's spouse 
                are both eligible individuals during the 
                taxable year, and
                  (C) the taxpayer files a separate return for 
                the taxable year.
          (6) Marital status; certain married individuals 
        living apart.--Rules similar to the rules of paragraphs 
        (3) and (4) of section 21(e) shall apply for purposes 
        of this section.
          (7) Insurance which covers other individuals.--For 
        purposes of this section, rules similar to the rules of 
        section 213(d)(6) shall apply with respect to any 
        contract for qualified health insurance under which 
        amounts are payable for coverage of an individual other 
        than the taxpayer and qualifying family members.
          (8) Treatment of payments.--For purposes of this 
        section--
                  (A) Payments by Secretary.--Payments made by 
                the Secretary on behalf of any individual under 
                section 7527 (relating to advance payment of 
                credit for health insurance costs of eligible 
                individuals) shall be treated as having been 
                made by the taxpayer on the first day of the 
                month for which such payment was made.
                  (B) Payments by taxpayer.--Payments made by 
                the taxpayer for eligible coverage months shall 
                be treated as having been made by the taxpayer 
                on the first day of the month for which such 
                payment was made.
          (9) COBRA premium assistance.--In the case of an 
        assistance eligible individual who receives premium 
        reduction for COBRA continuation coverage under section 
        3001(a) of title III of division B of the American 
        Recovery and Reinvestment Act of 2009 for any month 
        during the taxable year, such individual shall not be 
        treated as an eligible individual, a certified 
        individual, or a qualifying family member for purposes 
        of this section or section 7527 with respect to such 
        month.
          (10) Continued qualification of family members after 
        certain events.--
                  (A) Medicare eligibility.--In the case of any 
                month which would be an eligible coverage month 
                with respect to an eligible individual but for 
                subsection (f)(2)(A), such month shall be 
                treated as an eligible coverage month with 
                respect to such eligible individual solely for 
                purposes of determining the amount of the 
                credit under this section with respect to any 
                qualifying family members of such individual 
                (and any advance payment of such credit under 
                section 7527). This subparagraph shall only 
                apply with respect to the first 24 months after 
                such eligible individual is first entitled to 
                the benefits described in subsection (f)(2)(A).
                  (B) Divorce.--In the case of the finalization 
                of a divorce between an eligible individual and 
                such individual's spouse, such spouse shall be 
                treated as an eligible individual for purposes 
                of this section and section 7527 for a period 
                of 24 months beginning with the date of such 
                finalization, except that the only qualifying 
                family members who may be taken into account 
                with respect to such spouse are those 
                individuals who were qualifying family members 
                immediately before such finalization.
                  (C) Death.--In the case of the death of an 
                eligible individual--
                          (i) any spouse of such individual 
                        (determined at the time of such death) 
                        shall be treated as an eligible 
                        individual for purposes of this section 
                        and section 7527 for a period of 24 
                        months beginning with the date of such 
                        death, except that the only qualifying 
                        family members who may be taken into 
                        account with respect to such spouse are 
                        those individuals who were qualifying 
                        family members immediately before such 
                        death, and
                          (ii) any individual who was a 
                        qualifying family member of the 
                        decedent immediately before such death 
                        (or, in the case of an individual to 
                        whom paragraph (4) applies, the 
                        taxpayer to whom the deduction under 
                        section 151 is allowable) shall be 
                        treated as an eligible individual for 
                        purposes of this section and section 
                        7527 for a period of 24 months 
                        beginning with the date of such death, 
                        except that in determining the amount 
                        of such credit only such qualifying 
                        family member may be taken into 
                        account.
          (11) Election.--
                  (A) In general.--This section shall not apply 
                to any taxpayer for any eligible coverage month 
                unless such taxpayer elects the application of 
                this section for such month.
                  (B) Timing and applicability of election.--
                Except as the Secretary may provide--
                          (i) an election to have this section 
                        apply for any eligible coverage month 
                        in a taxable year shall be made not 
                        later than the due date (including 
                        extensions) for the return of tax for 
                        the taxable year; and
                          (ii) any election for this section to 
                        apply for an eligible coverage month 
                        shall apply for all subsequent eligible 
                        coverage months in the taxable year 
                        and, once made, shall be irrevocable 
                        with respect to such months.
          (12) Coordination with premium tax credit.--
                  (A) In general.--An eligible coverage month 
                to which the election under paragraph (11) 
                applies shall not be treated as a coverage 
                month (as defined in section 36B(c)(2)) for 
                purposes of section 36B with respect to the 
                taxpayer.
                  (B) Coordination with advance payments of 
                premium tax credit.--In the case of a taxpayer 
                who makes the election under paragraph (11) 
                with respect to any eligible coverage month in 
                a taxable year or on behalf of whom any advance 
                payment is made under section 7527 with respect 
                to any month in such taxable year--
                          (i) the tax imposed by this chapter 
                        for the taxable year shall be increased 
                        by the excess, if any, of--
                                  (I) the sum of any advance 
                                payments made on behalf of the 
                                taxpayer under section 1412 of 
                                the Patient Protection and 
                                Affordable Care Act and section 
                                7527 for months during such 
                                taxable year, over
                                  (II) the sum of the credits 
                                allowed under this section 
                                (determined without regard to 
                                paragraph (1)) and section 36B 
                                (determined without regard to 
                                subsection (f)(1) thereof) for 
                                such taxable year; and
                          (ii) section 36B(f)(2) shall not 
                        apply with respect to such taxpayer for 
                        such taxable year, except that if such 
                        taxpayer received any advance payments 
                        under section 7527 for any month in 
                        such taxable year and is later allowed 
                        a credit under section 36B for such 
                        taxable year, then section 36B(f)(2)(B) 
                        shall be applied by substituting the 
                        amount determined under clause (i) for 
                        the amount determined under section 
                        36B(f)(2)(A).
          (13) Regulations.--The Secretary may prescribe such 
        regulations and other guidance as may be necessary or 
        appropriate to carry out this section, section 6050T, 
        and section 7527.

           *       *       *       *       *       *       *


Subpart D--BUSINESS RELATED CREDITS

           *       *       *       *       *       *       *



SEC. 40. ALCOHOL, ETC., USED AS FUEL.

  (a) General rule.--For purposes of section 38, the alcohol 
fuels credit determined under this section for the taxable year 
is an amount equal to the sum of--
          (1) the alcohol mixture credit,
          (2) the alcohol credit,
          (3) in the case of an eligible small ethanol 
        producer, the small ethanol producer credit, plus
          (4) the second generation biofuel producer credit.
  (b) Definition of alcohol mixture credit, alcohol credit, and 
small ethanol producer credit.--For purposes of this section, 
and except as provided in subsection (h)--
          (1) Alcohol mixture credit.--
                  (A) In general.--The alcohol mixture credit 
                of any taxpayer for any taxable year is 60 
                cents for each gallon of alcohol used by the 
                taxpayer in the production of a qualified 
                mixture.
                  (B) Qualified mixture.--The term ``qualified 
                mixture'' means a mixture of alcohol and 
                gasoline or of alcohol and a special fuel 
                which--
                          (i) is sold by the taxpayer producing 
                        such mixture to any person for use as a 
                        fuel, or
                          (ii) is used as a fuel by the 
                        taxpayer producing such mixture.
                  (C) Sale or use must be in trade or business, 
                etc..--Alcohol used in the production of a 
                qualified mixture shall be taken into account--
                          (i) only if the sale or use described 
                        in subparagraph (B) is in a trade or 
                        business of the taxpayer, and
                          (ii) for the taxable year in which 
                        such sale or use occurs.
                  (D) Casual off-farm production not 
                eligible.--No credit shall be allowed under 
                this section with respect to any casual off-
                farm production of a qualified mixture.
          (2) Alcohol credit.--
                  (A) In general.--The alcohol credit of any 
                taxpayer for any taxable year is 60 cents for 
                each gallon of alcohol which is not in a 
                mixture with gasoline or a special fuel (other 
                than any denaturant) and which during the 
                taxable year--
                          (i) is used by the taxpayer as a fuel 
                        in a trade or business, or
                          (ii) is sold by the taxpayer at 
                        retail to a person and placed in the 
                        fuel tank of such person's vehicle.
                  (B) User credit not to apply to alcohol sold 
                at retail.--No credit shall be allowed under 
                subparagraph (A)(i) with respect to any alcohol 
                which was sold in a retail sale described in 
                subparagraph (A)(ii).
          (3) Smaller credit for lower proof alcohol.--In the 
        case of any alcohol with a proof which is at least 150 
        but less than 190, paragraphs (1)(A) and (2)(A) shall 
        be applied by substituting ``45 cents'' for ``60 
        cents''.
          (4) Small ethanol producer credit.--
                  (A) In general.--The small ethanol producer 
                credit of any eligible small ethanol producer 
                for any taxable year is 10 cents for each 
                gallon of qualified ethanol fuel production of 
                such producer.
                  (B) Qualified ethanol fuel production.--For 
                purposes of this paragraph, the term 
                ``qualified ethanol fuel production'' means any 
                alcohol which is ethanol which is produced by 
                an eligible small ethanol producer, and which 
                during the taxable year--
                          (i) is sold by such producer to 
                        another person--
                                  (I) for use by such other 
                                person in the production of a 
                                qualified mixture in such other 
                                person's trade or business 
                                (other than casual off-farm 
                                production),
                                  (II) for use by such other 
                                person as a fuel in a trade or 
                                business, or
                                  (III) who sells such ethanol 
                                at retail to another person and 
                                places such ethanol in the fuel 
                                tank of such other person, or
                          (ii) is used or sold by such producer 
                        for any purpose described in clause 
                        (i).
                  (C) Limitation.--The qualified ethanol fuel 
                production of any producer for any taxable year 
                shall not exceed 15,000,000 gallons (determined 
                without regard to any qualified second 
                generation biofuel production).
                  (D) Additional distillation excluded.--The 
                qualified ethanol fuel production of any 
                producer for any taxable year shall not include 
                any alcohol which is purchased by the producer 
                and with respect to which such producer 
                increases the proof of the alcohol by 
                additional distillation.
          (5) Adding of denaturants not treated as mixture.--
        The adding of any denaturant to alcohol shall not be 
        treated as the production of a mixture.
          (6) Second generation biofuel producer credit.--
                  (A) In general.--The second generation 
                biofuel producer credit of any taxpayer is an 
                amount equal to the applicable amount for each 
                gallon of qualified second generation biofuel 
                production.
                  (B) Applicable amount.--For purposes of 
                subparagraph (A), the applicable amount means 
                $1.01, except that such amount shall, in the 
                case of second generation biofuel which is 
                alcohol, be reduced by the sum of--
                          (i) the amount of the credit in 
                        effect for such alcohol under 
                        subsection (b)(1) (without regard to 
                        subsection (b)(3)) at the time of the 
                        qualified second generation biofuel 
                        production, plus
                          (ii) in the case of ethanol, the 
                        amount of the credit in effect under 
                        subsection (b)(4) at the time of such 
                        production.
                  (C) Qualified second generation biofuel 
                production.--For purposes of this section, the 
                term ``qualified second generation biofuel 
                production'' means any second generation 
                biofuel which is produced by the taxpayer, and 
                which during the taxable year--
                          (i) is sold by the taxpayer to 
                        another person--
                                  (I) for use by such other 
                                person in the production of a 
                                qualified second generation 
                                biofuel mixture in such other 
                                person's trade or business 
                                (other than casual off-farm 
                                production),
                                  (II) for use by such other 
                                person as a fuel in a trade or 
                                business, or
                                  (III) who sells such second 
                                generation biofuel at retail to 
                                another person and places such 
                                second generation biofuel in 
                                the fuel tank of such other 
                                person, or
                          (ii) is used or sold by the taxpayer 
                        for any purpose described in clause 
                        (i).
                The qualified second generation biofuel 
                production of any taxpayer for any taxable year 
                shall not include any alcohol which is 
                purchased by the taxpayer and with respect to 
                which such producer increases the proof of the 
                alcohol by additional distillation.
                  (D) Qualified second generation biofuel 
                mixture.--For purposes of this paragraph, the 
                term ``qualified second generation biofuel 
                mixture'' means a mixture of second generation 
                biofuel and gasoline or of second generation 
                biofuel and a special fuel which--
                          (i) is sold by the person producing 
                        such mixture to any person for use as a 
                        fuel, or
                          (ii) is used as a fuel by the person 
                        producing such mixture.
                  (E) Second generation biofuel.--For purposes 
                of this paragraph--
                          (i) In general.--The term ``second 
                        generation biofuel'' means any liquid 
                        fuel which--
                                  (I) is derived by, or from, 
                                qualified feedstocks, and
                                  (II) meets the registration 
                                requirements for fuels and fuel 
                                additives established by the 
                                Environmental Protection Agency 
                                under section 211 of the Clean 
                                Air Act (42 U.S.C. 7545).
                          (ii) Exclusion of low-proof 
                        alcohol.--The term ``second generation 
                        biofuel'' shall not include any alcohol 
                        with a proof of less than 150. The 
                        determination of the proof of any 
                        alcohol shall be made without regard to 
                        any added denaturants.
                          (iii) Exclusion of certain fuels.--
                        The term ``second generation biofuel'' 
                        shall not include any fuel if--
                                  (I) more than 4 percent of 
                                such fuel (determined by 
                                weight) is any combination of 
                                water and sediment,
                                  (II) the ash content of such 
                                fuel is more than 1 percent 
                                (determined by weight), or
                                  (III) such fuel has an acid 
                                number greater than 25.
                  (F) Qualified feedstock.--For purposes of 
                this paragraph, the term ``qualified 
                feedstock'' means--
                          (i) any lignocellulosic or 
                        hemicellulosic matter that is available 
                        on a renewable or recurring basis, and
                          (ii) any cultivated algae, 
                        cyanobacteria, or lemna.
                  (G) Special rules for algae.--In the case of 
                fuel which is derived by, or from, feedstock 
                described in subparagraph (F)(ii) and which is 
                sold by the taxpayer to another person for 
                refining by such other person into a fuel which 
                meets the requirements of subparagraph 
                (E)(i)(II) and the refined fuel is not excluded 
                under subparagraph (E)(iii)--
                          (i) such sale shall be treated as 
                        described in subparagraph (C)(i),
                          (ii) such fuel shall be treated as 
                        meeting the requirements of 
                        subparagraph (E)(i)(II) and as not 
                        being excluded under subparagraph 
                        (E)(iii) in the hands of such taxpayer, 
                        and
                          (iii) except as provided in this 
                        subparagraph, such fuel (and any fuel 
                        derived from such fuel) shall not be 
                        taken into account under subparagraph 
                        (C) with respect to the taxpayer or any 
                        other person.
                  (H) Allocation of second generation biofuel 
                producer credit to patrons of cooperative.--
                Rules similar to the rules under subsection 
                (g)(6) shall apply for purposes of this 
                paragraph.
                  (I) Registration requirement.--No credit 
                shall be determined under this paragraph with 
                respect to any taxpayer unless such taxpayer is 
                registered with the Secretary as a producer of 
                second generation biofuel under section 4101.
                  (J) Application of paragraph.--
                          (i) In general.--This paragraph shall 
                        apply with respect to qualified second 
                        generation biofuel production after 
                        December 31, 2008, and before [January 
                        1, 2018] January 1, 2021.
                          (ii) No carryover to certain years 
                        after expiration.--If this paragraph 
                        ceases to apply for any period by 
                        reason of clause (i), rules similar to 
                        the rules of subsection (e)(2) shall 
                        apply.
  (c) Coordination with exemption from excise tax.--The amount 
of the credit determined under this section with respect to any 
alcohol shall, under regulations prescribed by the Secretary, 
be properly reduced to take into account any benefit provided 
with respect to such alcohol solely by reason of the 
application of section 4041(b)(2), section 6426, or section 
6427(e).
  (d) Definitions and special rules.--For purposes of this 
section--
          (1) Alcohol defined.--
                  (A) In general.--The term ``alcohol'' 
                includes methanol and ethanol but does not 
                include--
                          (i) alcohol produced from petroleum, 
                        natural gas, or coal (including peat), 
                        or
                          (ii) alcohol with a proof of less 
                        than 150.
                  (B) Determination of proof.--The 
                determination of the proof of any alcohol shall 
                be made without regard to any added 
                denaturants.
          (2) Special fuel defined.--The term ``special fuel'' 
        includes any liquid fuel (other than gasoline) which is 
        suitable for use in an internal combustion engine.
          (3) Mixture or alcohol not used as a fuel, etc..--
                  (A) Mixtures.--If--
                          (i) any credit was determined under 
                        this section with respect to alcohol 
                        used in the production of any qualified 
                        mixture, and
                          (ii) any person--
                                  (I) separates the alcohol 
                                from the mixture, or
                                  (II) without separation, uses 
                                the mixture other than as a 
                                fuel,
                then there is hereby imposed on such person a 
                tax equal to 60 cents a gallon (45 cents in the 
                case of alcohol with a proof less than 190) for 
                each gallon of alcohol in such mixture.
                  (B) Alcohol.--If--
                          (i) any credit was determined under 
                        this section with respect to the retail 
                        sale of any alcohol, and
                          (ii) any person mixes such alcohol or 
                        uses such alcohol other than as a fuel,
                then there is hereby imposed on such person a 
                tax equal to 60 cents a gallon (45 cents in the 
                case of alcohol with a proof less than 190) for 
                each gallon of such alcohol.
                  (C) Small ethanol producer credit.--If--
                          (i) any credit was determined under 
                        subsection (a)(3), and
                          (ii) any person does not use such 
                        fuel for a purpose described in 
                        subsection (b)(4)(B),
                then there is hereby imposed on such person a 
                tax equal to 10 cents a gallon for each gallon 
                of such alcohol.
                  (D) Second generation biofuel producer 
                credit.--If--
                          (i) any credit is allowed under 
                        subsection (a)(4), and
                          (ii) any person does not use such 
                        fuel for a purpose described in 
                        subsection (b)(6)(C),
                then there is hereby imposed on such person a 
                tax equal to the applicable amount (as defined 
                in subsection (b)(6)(B)) for each gallon of 
                such second generation biofuel.
                  (E) Applicable laws.--All provisions of law, 
                including penalties, shall, insofar as 
                applicable and not inconsistent with this 
                section, apply in respect of any tax imposed 
                under subparagraph (A), (B), (C), or (D) as if 
                such tax were imposed by section 4081 and not 
                by this chapter.
          (4) Volume of alcohol.--For purposes of determining 
        under subsection (a) the number of gallons of alcohol 
        with respect to which a credit is allowable under 
        subsection (a), the volume of alcohol shall include the 
        volume of any denaturant (including gasoline) which is 
        added under any formulas approved by the Secretary to 
        the extent that such denaturants do not exceed 2 
        percent of the volume of such alcohol (including 
        denaturants).
          (5) Pass-thru in the case of estates and trusts.--
        Under regulations prescribed by the Secretary, rules 
        similar to the rules of subsection (d) of section 52 
        shall apply.
          (6) Special rule for second generation biofuel 
        producer credit.--No second generation biofuel producer 
        credit shall be determined under subsection (a) with 
        respect to any second generation biofuel unless such 
        second generation biofuel is produced in the United 
        States and used as a fuel in the United States. For 
        purposes of this subsection, the term ``United States'' 
        includes any possession of the United States.
          (7) Limitation to alcohol with connection to the 
        United States.--No credit shall be determined under 
        this section with respect to any alcohol which is 
        produced outside the United States for use as a fuel 
        outside the United States. For purposes of this 
        paragraph, the term ``United States'' includes any 
        possession of the United States.
  (e) Termination.--
          (1) In general.--This section shall not apply to any 
        sale or use--
                  (A) for any period after December 31, 2011, 
                or
                  (B) for any period before January 1, 2012, 
                during which the rates of tax under section 
                4081(a)(2)(A) are 4.3 cents per gallon.
          (2) No carryovers to certain years after 
        expiration.--If this section ceases to apply for any 
        period by reason of paragraph (1), no amount 
        attributable to any sale or use before the first day of 
        such period may be carried under section 39 by reason 
        of this section (treating the amount allowed by reason 
        of this section as the first amount allowed by this 
        subpart) to any taxable year beginning after the 3-
        taxable-year period beginning with the taxable year in 
        which such first day occurs.
          (3) Exception for second generation biofuel producer 
        credit.--Paragraph (1) shall not apply to the portion 
        of the credit allowed under this section by reason of 
        subsection (a)(4).
  (f) Election to have alcohol fuels credit not apply.--
          (1) In general.--A taxpayer may elect to have this 
        section not apply for any taxable year.
          (2) Time for making election.--An election under 
        paragraph (1) for any taxable year may be made (or 
        revoked) at any time before the expiration of the 3-
        year period beginning on the last date prescribed by 
        law for filing the return for such taxable year 
        (determined without regard to extensions).
          (3) Manner of making election.--An election under 
        paragraph (1) (or revocation thereof) shall be made in 
        such manner as the Secretary may by regulations 
        prescribe.
  (g) Definitions and special rules for eligible small ethanol 
producer credit.--For purposes of this section--
          (1) Eligible small ethanol producer.--The term 
        ``eligible small ethanol producer'' means a person who, 
        at all times during the taxable year, has a productive 
        capacity for alcohol (as defined in subsection 
        (d)(1)(A) without regard to clauses (i) and (ii)) not 
        in excess of 60,000,000 gallons.
          (2) Aggregation rule.--For purposes of the 15,000,000 
        gallon limitation under subsection (b)(4)(C) and the 
        60,000,000 gallon limitation under paragraph (1), all 
        members of the same controlled group of corporations 
        (within the meaning of section 267(f)) and all persons 
        under common control (within the meaning of section 
        52(b) but determined by treating an interest of more 
        than 50 percent as a controlling interest) shall be 
        treated as 1 person.
          (3) Partnership, S corporations, and other pass-thru 
        entities.--In the case of a partnership, trust, S 
        corporation, or other pass-thru entity, the limitations 
        contained in subsection (b)(4)(C) and paragraph (1) 
        shall be applied at the entity level and at the partner 
        or similar level.
          (4) Allocation.--For purposes of this subsection, in 
        the case of a facility in which more than 1 person has 
        an interest, productive capacity shall be allocated 
        among such persons in such manner as the Secretary may 
        prescribe.
          (5) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary--
                  (A) to prevent the credit provided for in 
                subsection (a)(3) from directly or indirectly 
                benefiting any person with a direct or indirect 
                productive capacity of more than 60,000,000 
                gallons of alcohol during the taxable year, or
                  (B) to prevent any person from directly or 
                indirectly benefiting with respect to more than 
                15,000,000 gallons during the taxable year.
          (6) Allocation of small ethanol producer credit to 
        patrons of cooperative.--
                  (A) Election to allocate.--
                          (i) In general.--In the case of a 
                        cooperative organization described in 
                        section 1381(a), any portion of the 
                        credit determined under subsection 
                        (a)(3) for the taxable year may, at the 
                        election of the organization, be 
                        apportioned pro rata among patrons of 
                        the organization on the basis of the 
                        quantity or value of business done with 
                        or for such patrons for the taxable 
                        year.
                          (ii) Form and effect of election.--An 
                        election under clause (i) for any 
                        taxable year shall be made on a timely 
                        filed return for such year. Such 
                        election, once made, shall be 
                        irrevocable for such taxable year. Such 
                        election shall not take effect unless 
                        the organization designates the 
                        apportionment as such in a written 
                        notice mailed to its patrons during the 
                        payment period described in section 
                        1382(d).
                  (B) Treatment of organizations and patrons.--
                          (i) Organizations.--The amount of the 
                        credit not apportioned to patrons 
                        pursuant to subparagraph (A) shall be 
                        included in the amount determined under 
                        subsection (a)(3) for the taxable year 
                        of the organization.
                          (ii) Patrons.--The amount of the 
                        credit apportioned to patrons pursuant 
                        to subparagraph (A) shall be included 
                        in the amount determined under such 
                        subsection for the first taxable year 
                        of each patron ending on or after the 
                        last day of the payment period (as 
                        defined in section 1382(d)) for the 
                        taxable year of the organization or, if 
                        earlier, for the taxable year of each 
                        patron ending on or after the date on 
                        which the patron receives notice from 
                        the cooperative of the apportionment.
                          (iii) Special rules for decrease in 
                        credits for taxable year.--If the 
                        amount of the credit of the 
                        organization determined under such 
                        subsection for a taxable year is less 
                        than the amount of such credit shown on 
                        the return of the organization for such 
                        year, an amount equal to the excess 
                        of--
                                  (I) such reduction, over
                                  (II) the amount not 
                                apportioned to such patrons 
                                under subparagraph (A) for the 
                                taxable year,
                 shall be treated as an increase in tax imposed 
                by this chapter on the organization. Such 
                increase shall not be treated as tax imposed by 
                this chapter for purposes of determining the 
                amount of any credit under this chapter or for 
                purposes of section 55.
  (h) Reduced credit for ethanol blenders.--
          (1) In general.--In the case of any alcohol mixture 
        credit or alcohol credit with respect to any sale or 
        use of alcohol which is ethanol during calendar years 
        2001 through 2011--
                  (A) subsections (b)(1)(A) and (b)(2)(A) shall 
                be applied by substituting ``the blender 
                amount'' for ``60 cents'',
                  (B) subsection (b)(3) shall be applied by 
                substituting ``the low-proof blender amount'' 
                for ``45 cents'' and ``the blender amount'' for 
                ``60 cents'', and
                  (C) subparagraphs (A) and (B) of subsection 
                (d)(3) shall be applied by substituting ``the 
                blender amount'' for ``60 cents'' and ``the 
                low-proof blender amount'' for ``45 cents''.
          (2) Amounts.--For purposes of paragraph (1), the 
        blender amount and the low-proof blender amount shall 
        be determined in accordance with the following table:
          (3) Reduction delayed until annual production or 
        importation of 7,500,000,000 gallons.--
                  (A) In general.--In the case of any calendar 
                year beginning after 2008, if the Secretary 
                makes a determination described in subparagraph 
                (B) with respect to all preceding calendar 
                years beginning after 2007, the last row in the 
                table in paragraph (2) shall be applied by 
                substituting ``51 cents'' for ``45 cents''.
                  (B) Determination.--A determination described 
                in this subparagraph with respect to any 
                calendar year is a determination, in 
                consultation with the Administrator of the 
                Environmental Protection Agency, that an amount 
                less than 7,500,000,000 gallons of ethanol 
                (including cellulosic ethanol) has been 
                produced in or imported into the United States 
                in such year.

SEC. 40A. BIODIESEL AND RENEWABLE DIESEL USED AS FUEL.

  (a) General rule.--For purposes of section 38, the biodiesel 
fuels credit determined under this section for the taxable year 
is an amount equal to the sum of--
          (1) the biodiesel mixture credit, plus
          (2) the biodiesel credit, plus
          (3) in the case of an eligible small agri-biodiesel 
        producer, the small agri-biodiesel producer credit.
  (b) Definition of biodiesel mixture credit, biodiesel credit, 
and small agri-biodiesel producer credit.--For purposes of this 
section--
          (1) Biodiesel mixture credit.--
                  (A) In general.--The biodiesel mixture credit 
                of any taxpayer for any taxable year is $1.00 
                for each gallon of biodiesel used by the 
                taxpayer in the production of a qualified 
                biodiesel mixture.
                  (B) Qualified biodiesel mixture.--The term 
                ``qualified biodiesel mixture'' means a mixture 
                of biodiesel and diesel fuel (as defined in 
                section 4083(a)(3)), determined without regard 
                to any use of kerosene, which--
                          (i) is sold by the taxpayer producing 
                        such mixture to any person for use as a 
                        fuel, or
                          (ii) is used as a fuel by the 
                        taxpayer producing such mixture.
                  (C) Sale or use must be in trade or business, 
                etc..--Biodiesel used in the production of a 
                qualified biodiesel mixture shall be taken into 
                account--
                          (i) only if the sale or use described 
                        in subparagraph (B) is in a trade or 
                        business of the taxpayer, and
                          (ii) for the taxable year in which 
                        such sale or use occurs.
                  (D) Casual off-farm production not 
                eligible.--No credit shall be allowed under 
                this section with respect to any casual off-
                farm production of a qualified biodiesel 
                mixture.
          (2) Biodiesel credit.--
                  (A) In general.--The biodiesel credit of any 
                taxpayer for any taxable year is $1.00 for each 
                gallon of biodiesel which is not in a mixture 
                with diesel fuel and which during the taxable 
                year--
                          (i) is used by the taxpayer as a fuel 
                        in a trade or business, or
                          (ii) is sold by the taxpayer at 
                        retail to a person and placed in the 
                        fuel tank of such person's vehicle.
                  (B) User credit not to apply to biodiesel 
                sold at retail.--No credit shall be allowed 
                under subparagraph (A)(i) with respect to any 
                biodiesel which was sold in a retail sale 
                described in subparagraph (A)(ii).
          (3) Certification for biodiesel.--No credit shall be 
        allowed under paragraph (1) or (2) of subsection (a) 
        unless the taxpayer obtains a certification (in such 
        form and manner as prescribed by the Secretary) from 
        the producer or importer of the biodiesel which 
        identifies the product produced and the percentage of 
        biodiesel and agri-biodiesel in the product.
          (4) Small agri-biodiesel producer credit.--
                  (A) In general.--The small agri-biodiesel 
                producer credit of any eligible small agri-
                biodiesel producer for any taxable year is 10 
                cents for each gallon of qualified agri-
                biodiesel production of such producer.
                  (B) Qualified agri-biodiesel production.--For 
                purposes of this paragraph, the term 
                ``qualified agri-biodiesel production'' means 
                any agri-biodiesel which is produced by an 
                eligible small agri-biodiesel producer, and 
                which during the taxable year--
                          (i) is sold by such producer to 
                        another person--
                                  (I) for use by such other 
                                person in the production of a 
                                qualified biodiesel mixture in 
                                such other person's trade or 
                                business (other than casual 
                                off-farm production),
                                  (II) for use by such other 
                                person as a fuel in a trade or 
                                business, or
                                  (III) who sells such agri-
                                biodiesel at retail to another 
                                person and places such agri-
                                biodiesel in the fuel tank of 
                                such other person, or
                          (ii) is used or sold by such producer 
                        for any purpose described in clause 
                        (i).
                  (C) Limitation.--The qualified agri-biodiesel 
                production of any producer for any taxable year 
                shall not exceed 15,000,000 gallons.
  (c) Coordination with credit against excise tax.--The amount 
of the credit determined under this section with respect to any 
biodiesel shall be properly reduced to take into account any 
benefit provided with respect to such biodiesel solely by 
reason of the application of section 6426 or 6427(e).
  (d) Definitions and special rules.--For purposes of this 
section--
          (1) Biodiesel.--The term ``biodiesel'' means the 
        monoalkyl esters of long chain fatty acids derived from 
        plant or animal matter which meet--
                  (A) the registration requirements for fuels 
                and fuel additives established by the 
                Environmental Protection Agency under section 
                211 of the Clean Air Act (42 U.S.C. 7545), and
                  (B) the requirements of the American Society 
                of Testing and Materials D6751.
        Such term shall not include any liquid with respect to 
        which a credit may be determined under section 40.
          (2) Agri-biodiesel.--The term ``agri-biodiesel'' 
        means biodiesel derived solely from virgin oils, 
        including esters derived from virgin vegetable oils 
        from corn, soybeans, sunflower seeds, cottonseeds, 
        canola, crambe, rapeseeds, safflowers, flaxseeds, rice 
        bran, mustard seeds, and camelina, and from animal 
        fats.
          (3) Mixture or biodiesel not used as a fuel, etc..--
                  (A) Mixtures.--If--
                          (i) any credit was determined under 
                        this section with respect to biodiesel 
                        used in the production of any qualified 
                        biodiesel mixture, and
                          (ii) any person--
                                  (I) separates the biodiesel 
                                from the mixture, or
                                  (II) without separation, uses 
                                the mixture other than as a 
                                fuel,
                then there is hereby imposed on such person a 
                tax equal to the product of the rate applicable 
                under subsection (b)(1)(A) and the number of 
                gallons of such biodiesel in such mixture.
                  (B) Biodiesel.--If--
                          (i) any credit was determined under 
                        this section with respect to the retail 
                        sale of any biodiesel, and
                          (ii) any person mixes such biodiesel 
                        or uses such biodiesel other than as a 
                        fuel,
                then there is hereby imposed on such person a 
                tax equal to the product of the rate applicable 
                under subsection (b)(2)(A) and the number of 
                gallons of such biodiesel.
                  (C) Producer credit.--If--
                          (i) any credit was determined under 
                        subsection (a)(3), and
                          (ii) any person does not use such 
                        fuel for a purpose described in 
                        subsection (b)(4)(B),
                then there is hereby imposed on such person a 
                tax equal to 10 cents a gallon for each gallon 
                of such agri-biodiesel.
                  (D) Applicable laws.--All provisions of law, 
                including penalties, shall, insofar as 
                applicable and not inconsistent with this 
                section, apply in respect of any tax imposed 
                under subparagraph (A) or (B) as if such tax 
                were imposed by section 4081 and not by this 
                chapter.
          (4) Pass-thru in the case of estates and trusts.--
        Under regulations prescribed by the Secretary, rules 
        similar to the rules of subsection (d) of section 52 
        shall apply.
          (5) Limitation to biodiesel with connection to the 
        United States.--No credit shall be determined under 
        this section with respect to any biodiesel which is 
        produced outside the United States for use as a fuel 
        outside the United States. For purposes of this 
        paragraph, the term ``United States'' includes any 
        possession of the United States.
  (e) Definitions and special rules for small agri-biodiesel 
producer credit.--For purposes of this section--
          (1) Eligible small agri-biodiesel producer.--The term 
        ``eligible small agri-biodiesel producer'' means a 
        person who, at all times during the taxable year, has a 
        productive capacity for agri-biodiesel not in excess of 
        60,000,000 gallons.
          (2) Aggregation rule.--For purposes of the 15,000,000 
        gallon limitation under subsection (b)(4)(C) and the 
        60,000,000 gallon limitation under paragraph (1), all 
        members of the same controlled group of corporations 
        (within the meaning of section 267(f)) and all persons 
        under common control (within the meaning of section 
        52(b) but determined by treating an interest of more 
        than 50 percent as a controlling interest) shall be 
        treated as 1 person.
          (3) Partnership, S corporation, and other pass-thru 
        entities.--In the case of a partnership, trust, S 
        corporation, or other pass-thru entity, the limitations 
        contained in subsection (b)(4)(C) and paragraph (1) 
        shall be applied at the entity level and at the partner 
        or similar level.
          (4) Allocation.--For purposes of this subsection, in 
        the case of a facility in which more than 1 person has 
        an interest, productive capacity shall be allocated 
        among such persons in such manner as the Secretary may 
        prescribe.
          (5) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary--
                  (A) to prevent the credit provided for in 
                subsection (a)(3) from directly or indirectly 
                benefiting any person with a direct or indirect 
                productive capacity of more than 60,000,000 
                gallons of agri-biodiesel during the taxable 
                year, or
                  (B) to prevent any person from directly or 
                indirectly benefiting with respect to more than 
                15,000,000 gallons during the taxable year.
          (6) Allocation of small agri-biodiesel credit to 
        patrons of cooperative.--
                  (A) Election to allocate.--
                          (i) In general.--In the case of a 
                        cooperative organization described in 
                        section 1381(a), any portion of the 
                        credit determined under subsection 
                        (a)(3) for the taxable year may, at the 
                        election of the organization, be 
                        apportioned pro rata among patrons of 
                        the organization on the basis of the 
                        quantity or value of business done with 
                        or for such patrons for the taxable 
                        year.
                          (ii) Form and effect of election.--An 
                        election under clause (i) for any 
                        taxable year shall be made on a timely 
                        filed return for such year. Such 
                        election, once made, shall be 
                        irrevocable for such taxable year. Such 
                        election shall not take effect unless 
                        the organization designates the 
                        apportionment as such in a written 
                        notice mailed to its patrons during the 
                        payment period described in section 
                        1382(d).
                  (B) Treatment of organizations and patrons.--
                          (i) Organizations.--The amount of the 
                        credit not apportioned to patrons 
                        pursuant to subparagraph (A) shall be 
                        included in the amount determined under 
                        subsection (a)(3) for the taxable year 
                        of the organization.
                          (ii) Patrons.--The amount of the 
                        credit apportioned to patrons pursuant 
                        to subparagraph (A) shall be included 
                        in the amount determined under such 
                        subsection for the first taxable year 
                        of each patron ending on or after the 
                        last day of the payment period (as 
                        defined in section 1382(d)) for the 
                        taxable year of the organization or, if 
                        earlier, for the taxable year of each 
                        patron ending on or after the date on 
                        which the patron receives notice from 
                        the cooperative of the apportionment.
                          (iii) Special rules for decrease in 
                        credits for taxable year.--If the 
                        amount of the credit of the 
                        organization determined under such 
                        subsection for a taxable year is less 
                        than the amount of such credit shown on 
                        the return of the organization for such 
                        year, an amount equal to the excess 
                        of--
                                  (I) such reduction, over
                                  (II) the amount not 
                                apportioned to such patrons 
                                under subparagraph (A) for the 
                                taxable year,
                 shall be treated as an increase in tax imposed 
                by this chapter on the organization. Such 
                increase shall not be treated as tax imposed by 
                this chapter for purposes of determining the 
                amount of any credit under this chapter or for 
                purposes of section 55.
  (f) Renewable diesel.--For purposes of this title--
          (1) Treatment in the same manner as biodiesel.--
        Except as provided in paragraph (2), renewable diesel 
        shall be treated in the same manner as biodiesel.
          (2) Exception.--Subsection (b)(4) shall not apply 
        with respect to renewable diesel.
          (3) Renewable diesel defined.--The term ``renewable 
        diesel'' means liquid fuel derived from biomass which 
        meets--
                  (A) the registration requirements for fuels 
                and fuel additives established by the 
                Environmental Protection Agency under section 
                211 of the Clean Air Act (42 U.S.C. 7545), and
                  (B) the requirements of the American Society 
                of Testing and Materials D975 or D396, or other 
                equivalent standard approved by the Secretary.
        Such term shall not include any liquid with respect to 
        which a credit may be determined under section 40. Such 
        term does not include any fuel derived from 
        coprocessing biomass with a feedstock which is not 
        biomass. For purposes of this paragraph, the term 
        ``biomass'' has the meaning given such term by section 
        45K(c)(3).
          (4) Certain aviation fuel.--
                  (A) In general.--Except as provided in the 
                last 3 sentences of paragraph (3), the term 
                ``renewable diesel'' shall include fuel derived 
                from biomass which meets the requirements of a 
                Department of Defense specification for 
                military jet fuel or an American Society of 
                Testing and Materials specification for 
                aviation turbine fuel.
                  (B) Application of mixture credits.--In the 
                case of fuel which is treated as renewable 
                diesel solely by reason of subparagraph (A), 
                subsection (b)(1) and section 6426(c) shall be 
                applied with respect to such fuel by treating 
                kerosene as though it were diesel fuel.
  (g) Termination.--This section shall not apply to any sale or 
use after [December 31, 2017] December 31, 2020.

           *       *       *       *       *       *       *


SEC. 45. ELECTRICITY PRODUCED FROM CERTAIN RENEWABLE RESOURCES, ETC.

  (a) General rule.--For purposes of section 38, the renewable 
electricity production credit for any taxable year is an amount 
equal to the product of--
          (1) 1.5 cents, multiplied by
          (2) the kilowatt hours of electricity--
                  (A) produced by the taxpayer--
                          (i) from qualified energy resources, 
                        and
                          (ii) at a qualified facility during 
                        the 10-year period beginning on the 
                        date the facility was originally placed 
                        in service, and
                  (B) sold by the taxpayer to an unrelated 
                person during the taxable year.
  (b) Limitations and adjustments.--
          (1) Phaseout of credit.--The amount of the credit 
        determined under subsection (a) shall be reduced by an 
        amount which bears the same ratio to the amount of the 
        credit (determined without regard to this paragraph) 
        as--
                  (A) the amount by which the reference price 
                for the calendar year in which the sale occurs 
                exceeds 8 cents, bears to
                  (B) 3 cents.
          (2) Credit and phaseout adjustment based on 
        inflation.--The 1.5 cent amount in subsection (a), the 
        8 cent amount in paragraph (1), the $4.375 amount in 
        subsection (e)(8)(A), the $2 amount in subsection 
        (e)(8)(D)(ii)(I), and in subsection (e)(8)(B)(i) the 
        reference price of fuel used as a feedstock (within the 
        meaning of subsection (c)(7)(A)) in 2002 shall each be 
        adjusted by multiplying such amount by the inflation 
        adjustment factor for the calendar year in which the 
        sale occurs. If any amount as increased under the 
        preceding sentence is not a multiple of 0.1 cent, such 
        amount shall be rounded to the nearest multiple of 0.1 
        cent.
          (3) Credit reduced for grants, tax-exempt bonds, 
        subsidized energy financing, and other credits.--The 
        amount of the credit determined under subsection (a) 
        with respect to any project for any taxable year 
        (determined after the application of paragraphs (1) and 
        (2)) shall be reduced by the amount which is the 
        product of the amount so determined for such year and 
        the lesser of 1/2 or a fraction--
                  (A) the numerator of which is the sum, for 
                the taxable year and all prior taxable years, 
                of--
                          (i) grants provided by the United 
                        States, a State, or a political 
                        subdivision of a State for use in 
                        connection with the project,
                          (ii) proceeds of an issue of State or 
                        local government obligations used to 
                        provide financing for the project the 
                        interest on which is exempt from tax 
                        under section 103,
                          (iii) the aggregate amount of 
                        subsidized energy financing provided 
                        (directly or indirectly) under a 
                        Federal, State, or local program 
                        provided in connection with the 
                        project, and
                          (iv) the amount of any other credit 
                        allowable with respect to any property 
                        which is part of the project, and
                  (B) the denominator of which is the aggregate 
                amount of additions to the capital account for 
                the project for the taxable year and all prior 
                taxable years.
        The amounts under the preceding sentence for any 
        taxable year shall be determined as of the close of the 
        taxable year. This paragraph shall not apply with 
        respect to any facility described in subsection 
        (d)(2)(A)(ii).
          (4) Credit rate and period for electricity produced 
        and sold from certain facilities.--
                  (A) Credit rate.--In the case of electricity 
                produced and sold in any calendar year after 
                2003 at any qualified facility described in 
                paragraph (3), (5), (6), (7), (9), or (11) of 
                subsection (d), the amount in effect under 
                subsection (a)(1) for such calendar year 
                (determined before the application of the last 
                sentence of paragraph (2) of this subsection) 
                shall be reduced by one-half.
                  (B) Credit period.--
                          (i) In general.--Except as provided 
                        in clause (ii) or clause (iii), in the 
                        case of any facility described in 
                        paragraph (3), (4), (5), (6), or (7) of 
                        subsection (d), the 5-year period 
                        beginning on the date the facility was 
                        originally placed in service shall be 
                        substituted for the 10-year period in 
                        subsection (a)(2)(A)(ii).
                          (ii) Certain open-loop biomass 
                        facilities.--In the case of any 
                        facility described in subsection 
                        (d)(3)(A)(ii) placed in service before 
                        the date of the enactment of this 
                        paragraph, the 5-year period beginning 
                        on January 1, 2005, shall be 
                        substituted for the 10-year period in 
                        subsection (a)(2)(A)(ii).
                          (iii) Termination.--Clause (i) shall 
                        not apply to any facility placed in 
                        service after the date of the enactment 
                        of this clause.
          (5) Phaseout of credit for wind facilities.--In the 
        case of any facility using wind to produce electricity, 
        the amount of the credit determined under subsection 
        (a) (determined after the application of paragraphs 
        (1), (2), and (3) and without regard to this paragraph) 
        shall be reduced by--
                  (A) in the case of any facility the 
                construction of which begins after December 31, 
                2016, and before January 1, 2018, 20 percent,
                  (B) in the case of any facility the 
                construction of which begins after December 31, 
                2017, and before January 1, 2019, 40 percent, 
                and
                  (C) in the case of any facility the 
                construction of which begins after December 31, 
                2018, [and before January 1, 2020,] 60 percent.
  (c) Resources.--For purposes of this section:
          (1) In general.--The term ``qualified energy 
        resources'' means--
                  (A) wind,
                  (B) closed-loop biomass,
                  (C) open-loop biomass,
                  (D) geothermal energy,
                  (E) solar energy,
                  (F) small irrigation power,
                  (G) municipal solid waste,
                  (H) qualified hydropower production, and
                  (I) marine and hydrokinetic renewable energy.
          (2) Closed-loop biomass.--The term ``closed-loop 
        biomass'' means any organic material from a plant which 
        is planted exclusively for purposes of being used at a 
        qualified facility to produce electricity.
          (3) Open-loop biomass.--
                  (A) In general.--The term ``open-loop 
                biomass'' means--
                          (i) any agricultural livestock waste 
                        nutrients, or
                          (ii) any solid, nonhazardous, 
                        cellulosic waste material or any lignin 
                        material which is derived from--
                                  (I) any of the following 
                                forest-related resources: mill 
                                and harvesting residues, 
                                precommercial thinnings, slash, 
                                and brush,
                                  (II) solid wood waste 
                                materials, including waste 
                                pallets, crates, dunnage, 
                                manufacturing and construction 
                                wood wastes (other than 
                                pressure-treated, chemically-
                                treated, or painted wood 
                                wastes), and landscape or 
                                right-of-way tree trimmings, 
                                but not including municipal 
                                solid waste, gas derived from 
                                the biodegradation of solid 
                                waste, or paper which is 
                                commonly recycled, or
                                  (III) agriculture sources, 
                                including orchard tree crops, 
                                vineyard, grain, legumes, 
                                sugar, and other crop by-
                                products or residues.
                Such term shall not include closed-loop biomass 
                or biomass burned in conjunction with fossil 
                fuel (cofiring) beyond such fossil fuel 
                required for startup and flame stabilization.
                  (B) Agricultural livestock waste nutrients.--
                          (i) In general.--The term 
                        ``agricultural livestock waste 
                        nutrients'' means agricultural 
                        livestock manure and litter, including 
                        wood shavings, straw, rice hulls, and 
                        other bedding material for the 
                        disposition of manure.
                          (ii) Agricultural livestock.--The 
                        term ``agricultural livestock'' 
                        includes bovine, swine, poultry, and 
                        sheep.
          (4) Geothermal energy.--The term ``geothermal 
        energy'' means energy derived from a geothermal deposit 
        (within the meaning of section 613(e)(2)).
          (5) Small irrigation power.--The term ``small 
        irrigation power'' means power--
                  (A) generated without any dam or impoundment 
                of water through an irrigation system canal or 
                ditch, and
                  (B) the nameplate capacity rating of which is 
                not less than 150 kilowatts but is less than 5 
                megawatts.
          (6) Municipal solid waste.--The term ``municipal 
        solid waste'' has the meaning given the term ``solid 
        waste'' under section 1004(27) of the Solid Waste 
        Disposal Act (42 U.S.C. 6903), except that such term 
        does not include paper which is commonly recycled and 
        which has been segregated from other solid waste (as so 
        defined).
          (7) Refined coal.--
                  (A) In general.--The term ``refined coal'' 
                means a fuel--
                          (i) which--
                                  (I) is a liquid, gaseous, or 
                                solid fuel produced from coal 
                                (including lignite) or high 
                                carbon fly ash, including such 
                                fuel used as a feedstock,
                                  (II) is sold by the taxpayer 
                                with the reasonable expectation 
                                that it will be used for the 
                                purpose of producing steam, and
                                  (III) is certified by the 
                                taxpayer as resulting (when 
                                used in the production of 
                                steam) in a qualified emission 
                                reduction, or
                          (ii) which is steel industry fuel.
                  (B) Qualified emission reduction.--The term 
                ``qualified emission reduction'' means a 
                reduction of at least 20 percent of the 
                emissions of nitrogen oxide and at least 40 
                percent of the emissions of either sulfur 
                dioxide or mercury released when burning the 
                refined coal (excluding any dilution caused by 
                materials combined or added during the 
                production process), as compared to the 
                emissions released when burning the feedstock 
                coal or comparable coal predominantly available 
                in the marketplace as of January 1, 2003.
                  (C) Steel industry fuel.--
                          (i) In general.--The term ``steel 
                        industry fuel'' means a fuel which--
                                  (I) is produced through a 
                                process of liquifying coal 
                                waste sludge and distributing 
                                it on coal, and
                                  (II) is used as a feedstock 
                                for the manufacture of coke.
                          (ii) Coal waste sludge.--The term 
                        ``coal waste sludge'' means the tar 
                        decanter sludge and related byproducts 
                        of the coking process, including such 
                        materials that have been stored in 
                        ground, in tanks and in lagoons, that 
                        have been treated as hazardous wastes 
                        under applicable Federal environmental 
                        rules absent liquefaction and 
                        processing with coal into a feedstock 
                        for the manufacture of coke.
          (8) Qualified hydropower production.--
                  (A) In general.--The term ``qualified 
                hydropower production'' means--
                          (i) in the case of any hydroelectric 
                        dam which was placed in service on or 
                        before the date of the enactment of 
                        this paragraph, the incremental 
                        hydropower production for the taxable 
                        year, and
                          (ii) in the case of any 
                        nonhydroelectric dam described in 
                        subparagraph (C), the hydropower 
                        production from the facility for the 
                        taxable year.
                  (B) Determination of incremental hydropower 
                production.--
                          (i) In general.--For purposes of 
                        subparagraph (A), incremental 
                        hydropower production for any taxable 
                        year shall be equal to the percentage 
                        of average annual hydropower production 
                        at the facility attributable to the 
                        efficiency improvements or additions of 
                        capacity placed in service after the 
                        date of the enactment of this 
                        paragraph, determined by using the same 
                        water flow information used to 
                        determine an historic average annual 
                        hydropower production baseline for such 
                        facility. Such percentage and baseline 
                        shall be certified by the Federal 
                        Energy Regulatory Commission.
                          (ii) Operational changes 
                        disregarded.--For purposes of clause 
                        (i), the determination of incremental 
                        hydropower production shall not be 
                        based on any operational changes at 
                        such facility not directly associated 
                        with the efficiency improvements or 
                        additions of capacity.
                  (C) Nonhydroelectric dam.--For purposes of 
                subparagraph (A), a facility is described in 
                this subparagraph if--
                          (i) the hydroelectric project 
                        installed on the nonhydroelectric dam 
                        is licensed by the Federal Energy 
                        Regulatory Commission and meets all 
                        other applicable environmental, 
                        licensing, and regulatory requirements,
                          (ii) the nonhydroelectric dam was 
                        placed in service before the date of 
                        the enactment of this paragraph and 
                        operated for flood control, navigation, 
                        or water supply purposes and did not 
                        produce hydroelectric power on the date 
                        of the enactment of this paragraph, and
                          (iii) the hydroelectric project is 
                        operated so that the water surface 
                        elevation at any given location and 
                        time that would have occurred in the 
                        absence of the hydroelectric project is 
                        maintained, subject to any license 
                        requirements imposed under applicable 
                        law that change the water surface 
                        elevation for the purpose of improving 
                        environmental quality of the affected 
                        waterway.
                The Secretary, in consultation with the Federal 
                Energy Regulatory Commission, shall certify if 
                a hydroelectric project licensed at a 
                nonhydroelectric dam meets the criteria in 
                clause (iii). Nothing in this section shall 
                affect the standards under which the Federal 
                Energy Regulatory Commission issues licenses 
                for and regulates hydropower projects under 
                part I of the Federal Power Act.
          (9) Indian coal.--
                  (A) In general.--The term ``Indian coal'' 
                means coal which is produced from coal reserves 
                which, on June 14, 2005--
                          (i) were owned by an Indian tribe, or
                          (ii) were held in trust by the United 
                        States for the benefit of an Indian 
                        tribe or its members.
                  (B) Indian tribe.--For purposes of this 
                paragraph, the term ``Indian tribe'' has the 
                meaning given such term by section 
                7871(c)(3)(E)(ii).
          (10) Marine and hydrokinetic renewable energy.--
                  (A) In general.--The term ``marine and 
                hydrokinetic renewable energy'' means energy 
                derived from--
                          (i) waves, tides, and currents in 
                        oceans, estuaries, and tidal areas,
                          (ii) free flowing water in rivers, 
                        lakes, and streams,
                          (iii) free flowing water in an 
                        irrigation system, canal, or other man-
                        made channel, including projects that 
                        utilize nonmechanical structures to 
                        accelerate the flow of water for 
                        electric power production purposes, or
                          (iv) differentials in ocean 
                        temperature (ocean thermal energy 
                        conversion).
                  (B) Exceptions.--Such term shall not include 
                any energy which is derived from any source 
                which utilizes a dam, diversionary structure 
                (except as provided in subparagraph (A)(iii)), 
                or impoundment for electric power production 
                purposes.
  (d) Qualified facilities.--For purposes of this section:
          (1) Wind facility.--In the case of a facility using 
        wind to produce electricity, the term ``qualified 
        facility'' means any facility owned by the taxpayer 
        which is originally placed in service after December 
        31, 1993, and the construction of which begins before 
        [January 1, 2020] January 1, 2021. Such term shall not 
        include any facility with respect to which any 
        qualified small wind energy property expenditure (as 
        defined in subsection (d)(4) of section 25D) is taken 
        into account in determining the credit under such 
        section.
          (2) Closed-loop biomass facility.--
                  (A) In general.--In the case of a facility 
                using closed-loop biomass to produce 
                electricity, the term ``qualified facility'' 
                means any facility--
                          (i) owned by the taxpayer which is 
                        originally placed in service after 
                        December 31, 1992, and the construction 
                        of which begins before [January 1, 
                        2018] January 1, 2021, or
                          (ii) owned by the taxpayer which 
                        before [January 1, 2018] January 1, 
                        2021, is originally placed in service 
                        and modified to use closed-loop biomass 
                        to co-fire with coal, with other 
                        biomass, or with both, but only if the 
                        modification is approved under the 
                        Biomass Power for Rural Development 
                        Programs or is part of a pilot project 
                        of the Commodity Credit Corporation as 
                        described in 65 Fed. Reg. 63052.
                For purposes of clause (ii), a facility shall 
                be treated as modified before [January 1, 2018] 
                January 1, 2021, if the construction of such 
                modification begins before such date.
                  (B) Expansion of facility.--Such term shall 
                include a new unit placed in service after the 
                date of the enactment of this subparagraph in 
                connection with a facility described in 
                subparagraph (A)(i), but only to the extent of 
                the increased amount of electricity produced at 
                the facility by reason of such new unit.
                  (C) Special rules.--In the case of a 
                qualified facility described in subparagraph 
                (A)(ii)--
                          (i) the 10-year period referred to in 
                        subsection (a) shall be treated as 
                        beginning no earlier than the date of 
                        the enactment of this clause, and
                          (ii) if the owner of such facility is 
                        not the producer of the electricity, 
                        the person eligible for the credit 
                        allowable under subsection (a) shall be 
                        the lessee or the operator of such 
                        facility.
          (3) Open-loop biomass facilities.--
                  (A) In general.--In the case of a facility 
                using open-loop biomass to produce electricity, 
                the term ``qualified facility'' means any 
                facility owned by the taxpayer which--
                          (i) in the case of a facility using 
                        agricultural livestock waste 
                        nutrients--
                                  (I) is originally placed in 
                                service after the date of the 
                                enactment of this subclause and 
                                the construction of which 
                                begins before [January 1, 2018] 
                                January 1, 2021, and
                                  (II) the nameplate capacity 
                                rating of which is not less 
                                than 150 kilowatts, and
                          (ii) in the case of any other 
                        facility, the construction of which 
                        begins before [January 1, 2018] January 
                        1, 2021.
                  (B) Expansion of facility.--Such term shall 
                include a new unit placed in service after the 
                date of the enactment of this subparagraph in 
                connection with a facility described in 
                subparagraph (A), but only to the extent of the 
                increased amount of electricity produced at the 
                facility by reason of such new unit.
                  (C) Credit eligibility.--In the case of any 
                facility described in subparagraph (A), if the 
                owner of such facility is not the producer of 
                the electricity, the person eligible for the 
                credit allowable under subsection (a) shall be 
                the lessee or the operator of such facility.
          (4) Geothermal or solar energy facility.--In the case 
        of a facility using geothermal or solar energy to 
        produce electricity, the term ``qualified facility'' 
        means any facility owned by the taxpayer which is 
        originally placed in service after the date of the 
        enactment of this paragraph and which--
                  (A) in the case of a facility using solar 
                energy, is placed in service before January 1, 
                2006, or
                  (B) in the case of a facility using 
                geothermal energy, the construction of which 
                begins before [January 1, 2018] January 1, 
                2021.
        Such term shall not include any property described in 
        section 48(a)(3) the basis of which is taken into 
        account by the taxpayer for purposes of determining the 
        energy credit under section 48.
          (5) Small irrigation power facility.--In the case of 
        a facility using small irrigation power to produce 
        electricity, the term ``qualified facility'' means any 
        facility owned by the taxpayer which is originally 
        placed in service after the date of the enactment of 
        this paragraph and before October 3, 2008.
          (6) Landfill gas facilities.--In the case of a 
        facility producing electricity from gas derived from 
        the biodegradation of municipal solid waste, the term 
        ``qualified facility'' means any facility owned by the 
        taxpayer which is originally placed in service after 
        the date of the enactment of this paragraph and the 
        construction of which begins before [January 1, 2018] 
        January 1, 2021.
          (7) Trash facilities.--In the case of a facility 
        (other than a facility described in paragraph (6)) 
        which uses municipal solid waste to produce 
        electricity, the term ``qualified facility'' means any 
        facility owned by the taxpayer which is originally 
        placed in service after the date of the enactment of 
        this paragraph and the construction of which begins 
        before [January 1, 2018] January 1, 2021. Such term 
        shall include a new unit placed in service in 
        connection with a facility placed in service on or 
        before the date of the enactment of this paragraph, but 
        only to the extent of the increased amount of 
        electricity produced at the facility by reason of such 
        new unit.
          (8) Refined coal production facility.--In the case of 
        a facility that produces refined coal, the term 
        ``refined coal production facility'' means--
                  (A) with respect to a facility producing 
                steel industry fuel, any facility (or any 
                modification to a facility) which is placed in 
                service before January 1, 2010, and
                  (B) with respect to any other facility 
                producing refined coal, any facility placed in 
                service after the date of the enactment of the 
                American Jobs Creation Act of 2004 and before 
                January 1, 2012.
          (9) Qualified hydropower facility.--
                  (A) In general.--In the case of a facility 
                producing qualified hydroelectric production 
                described in subsection (c)(8), the term 
                ``qualified facility'' means--
                          (i) in the case of any facility 
                        producing incremental hydropower 
                        production, such facility but only to 
                        the extent of its incremental 
                        hydropower production attributable to 
                        efficiency improvements or additions to 
                        capacity described in subsection 
                        (c)(8)(B) placed in service after the 
                        date of the enactment of this paragraph 
                        and before [January 1, 2018] January 1, 
                        2021, and
                          (ii) any other facility placed in 
                        service after the date of the enactment 
                        of this paragraph and the construction 
                        of which begins before [January 1, 
                        2018] January 1, 2021.
                  (B) Credit period.--In the case of a 
                qualified facility described in subparagraph 
                (A), the 10-year period referred to in 
                subsection (a) shall be treated as beginning on 
                the date the efficiency improvements or 
                additions to capacity are placed in service.
                  (C) Special rule.--For purposes of 
                subparagraph (A)(i), an efficiency improvement 
                or addition to capacity shall be treated as 
                placed in service before [January 1, 2018] 
                January 1, 2021, if the construction of such 
                improvement or addition begins before such 
                date.
          (10) Indian coal production facility.--The term 
        ``Indian coal production facility'' means a facility 
        that produces Indian coal.
          (11) Marine and hydrokinetic renewable energy 
        facilities.--In the case of a facility producing 
        electricity from marine and hydrokinetic renewable 
        energy, the term ``qualified facility'' means any 
        facility owned by the taxpayer--
                  (A) which has a nameplate capacity rating of 
                at least 150 kilowatts, and
                  (B) which is originally placed in service on 
                or after the date of the enactment of this 
                paragraph and the construction of which begins 
                before [January 1, 2018] January 1, 2021.
  (e) Definitions and special rules.--For purposes of this 
section--
          (1) Only production in the United States taken into 
        account.--Sales shall be taken into account under this 
        section only with respect to electricity the production 
        of which is within--
                  (A) the United States (within the meaning of 
                section 638(1)), or
                  (B) a possession of the United States (within 
                the meaning of section 638(2)).
          (2) Computation of inflation adjustment factor and 
        reference price.--
                  (A) In general.--The Secretary shall, not 
                later than April 1 of each calendar year, 
                determine and publish in the Federal Register 
                the inflation adjustment factor and the 
                reference price for such calendar year in 
                accordance with this paragraph.
                  (B) Inflation adjustment factor.--The term 
                ``inflation adjustment factor'' means, with 
                respect to a calendar year, a fraction the 
                numerator of which is the GDP implicit price 
                deflator for the preceding calendar year and 
                the denominator of which is the GDP implicit 
                price deflator for the calendar year 1992. The 
                term ``GDP implicit price deflator'' means the 
                most recent revision of the implicit price 
                deflator for the gross domestic product as 
                computed and published by the Department of 
                Commerce before March 15 of the calendar year.
                  (C) Reference price.--The term ``reference 
                price'' means, with respect to a calendar year, 
                the Secretary's determination of the annual 
                average contract price per kilowatt hour of 
                electricity generated from the same qualified 
                energy resource and sold in the previous year 
                in the United States. For purposes of the 
                preceding sentence, only contracts entered into 
                after December 31, 1989, shall be taken into 
                account.
          (3) Production attributable to the taxpayer.--In the 
        case of a facility in which more than 1 person has an 
        ownership interest, except to the extent provided in 
        regulations prescribed by the Secretary, production 
        from the facility shall be allocated among such persons 
        in proportion to their respective ownership interests 
        in the gross sales from such facility.
          (4) Related persons.--Persons shall be treated as 
        related to each other if such persons would be treated 
        as a single employer under the regulations prescribed 
        under section 52(b). In the case of a corporation which 
        is a member of an affiliated group of corporations 
        filing a consolidated return, such corporation shall be 
        treated as selling electricity to an unrelated person 
        if such electricity is sold to such a person by another 
        member of such group.
          (5) Pass-thru in the case of estates and trusts.--
        Under regulations prescribed by the Secretary, rules 
        similar to the rules of subsection (d) of section 52 
        shall apply.
          (7) Credit not to apply to electricity sold to 
        utilities under certain contracts.--
                  (A) In general.--The credit determined under 
                subsection (a) shall not apply to electricity--
                          (i) produced at a qualified facility 
                        described in subsection (d)(1) which is 
                        originally placed in service after June 
                        30, 1999, and
                          (ii) sold to a utility pursuant to a 
                        contract originally entered into before 
                        January 1, 1987 (whether or not amended 
                        or restated after that date).
                  (B) Exception.--Subparagraph (A) shall not 
                apply if--
                          (i) the prices for energy and 
                        capacity from such facility are 
                        established pursuant to an amendment to 
                        the contract referred to in 
                        subparagraph (A)(ii),
                          (ii) such amendment provides that the 
                        prices set forth in the contract which 
                        exceed avoided cost prices determined 
                        at the time of delivery shall apply 
                        only to annual quantities of 
                        electricity (prorated for partial 
                        years) which do not exceed the greater 
                        of--
                                  (I) the average annual 
                                quantity of electricity sold to 
                                the utility under the contract 
                                during calendar years 1994, 
                                1995, 1996, 1997, and 1998, or
                                  (II) the estimate of the 
                                annual electricity production 
                                set forth in the contract, or, 
                                if there is no such estimate, 
                                the greatest annual quantity of 
                                electricity sold to the utility 
                                under the contract in any of 
                                the calendar years 1996, 1997, 
                                or 1998, and
                          (iii) such amendment provides that 
                        energy and capacity in excess of the 
                        limitation in clause (ii) may be--
                                  (I) sold to the utility only 
                                at prices that do not exceed 
                                avoided cost prices determined 
                                at the time of delivery, or
                                  (II) sold to a third party 
                                subject to a mutually agreed 
                                upon advance notice to the 
                                utility.
                For purposes of this subparagraph, avoided cost 
                prices shall be determined as provided for in 
                18 CFR 292.304(d)(1) or any successor 
                regulation.
          (8) Refined coal production facilities.--
                  (A) Determination of credit amount.--In the 
                case of a producer of refined coal, the credit 
                determined under this section (without regard 
                to this paragraph) for any taxable year shall 
                be increased by an amount equal to $4.375 per 
                ton of qualified refined coal--
                          (i) produced by the taxpayer at a 
                        refined coal production facility during 
                        the 10-year period beginning on the 
                        date the facility was originally placed 
                        in service, and
                          (ii) sold by the taxpayer--
                                  (I) to an unrelated person, 
                                and
                                  (II) during such 10-year 
                                period and such taxable year.
                  (B) Phaseout of credit.--The amount of the 
                increase determined under subparagraph (A) 
                shall be reduced by an amount which bears the 
                same ratio to the amount of the increase 
                (determined without regard to this 
                subparagraph) as--
                          (i) the amount by which the reference 
                        price of fuel used as a feedstock 
                        (within the meaning of subsection 
                        (c)(7)(A)) for the calendar year in 
                        which the sale occurs exceeds an amount 
                        equal to 1.7 multiplied by the 
                        reference price for such fuel in 2002, 
                        bears to
                          (ii) $8.75.
                  (C) Application of rules.--Rules similar to 
                the rules of the subsection (b)(3) and 
                paragraphs (1) through (5) of this subsection 
                shall apply for purposes of determining the 
                amount of any increase under this paragraph.
                  (D) Special rule for steel industry fuel.--
                          (i) In general.--In the case of a 
                        taxpayer who produces steel industry 
                        fuel--
                                  (I) this paragraph shall be 
                                applied separately with respect 
                                to steel industry fuel and 
                                other refined coal, and
                                  (II) in applying this 
                                paragraph to steel industry 
                                fuel, the modifications in 
                                clause (ii) shall apply.
                          (ii) Modifications.--
                                  (I) Credit amount.--
                                Subparagraph (A) shall be 
                                applied by substituting ``$2 
                                per barrel-of-oil equivalent'' 
                                for ``$4.375 per ton''.
                                  (II) Credit period.--In lieu 
                                of the 10-year period referred 
                                to in clauses (i) and (ii)(II) 
                                of subparagraph (A), the credit 
                                period shall be the period 
                                beginning on the later of the 
                                date such facility was 
                                originally placed in service, 
                                the date the modifications 
                                described in clause (iii) were 
                                placed in service, or October 
                                1, 2008, and ending on the 
                                later of December 31, 2009, or 
                                the date which is 1 year after 
                                the date such facility or the 
                                modifications described in 
                                clause (iii) were placed in 
                                service.
                                  (III) No phaseout.--
                                Subparagraph (B) shall not 
                                apply.
                          (iii) Modifications.--The 
                        modifications described in this clause 
                        are modifications to an existing 
                        facility which allow such facility to 
                        produce steel industry fuel.
                          (iv) Barrel-of-oil equivalent.--For 
                        purposes of this subparagraph, a 
                        barrel-of-oil equivalent is the amount 
                        of steel industry fuel that has a Btu 
                        content of 5,800,000 Btus.
          (9) Coordination with credit for producing fuel from 
        a nonconventional source.--
                  (A) In general.--The term ``qualified 
                facility'' shall not include any facility which 
                produces electricity from gas derived from the 
                biodegradation of municipal solid waste if such 
                biodegradation occurred in a facility (within 
                the meaning of section 45K) the production from 
                which is allowed as a credit under section 45K 
                for the taxable year or any prior taxable year.
                  (B) Refined coal facilities.--
                          (i) In general.--The term ``refined 
                        coal production facility'' shall not 
                        include any facility the production 
                        from which is allowed as a credit under 
                        section 45K for the taxable year or any 
                        prior taxable year (or under section 
                        29, as in effect on the day before the 
                        date of enactment of the Energy Tax 
                        Incentives Act of 2005, for any prior 
                        taxable year).
                          (ii) Exception for steel industry 
                        coal.--In the case of a facility 
                        producing steel industry fuel, clause 
                        (i) shall not apply to so much of the 
                        refined coal produced at such facility 
                        as is steel industry fuel.
          (10) Indian coal production facilities.--
                  (A) Determination of credit amount.--In the 
                case of a producer of Indian coal, the credit 
                determined under this section (without regard 
                to this paragraph) for any taxable year shall 
                be increased by an amount equal to the 
                applicable dollar amount per ton of Indian 
                coal--
                          (i) produced by the taxpayer at an 
                        Indian coal production facility during 
                        the [12-year period] 15-year period 
                        beginning on January 1, 2006, and
                          (ii) sold by the taxpayer--
                                  (I) to an unrelated person 
                                (either directly by the 
                                taxpayer or after sale or 
                                transfer to one or more related 
                                persons), and
                                  (II) during such [12-year 
                                period] 15-year period and such 
                                taxable year.
                  (B) Applicable dollar amount.--
                          (i) In general.--The term 
                        ``applicable dollar amount'' for any 
                        taxable year beginning in a calendar 
                        year means--
                                  (I) $1.50 in the case of 
                                calendar years 2006 through 
                                2009, and
                                  (II) $2.00 in the case of 
                                calendar years beginning after 
                                2009.
                          (ii) Inflation adjustment.--In the 
                        case of any calendar year after 2006, 
                        each of the dollar amounts under clause 
                        (i) shall be equal to the product of 
                        such dollar amount and the inflation 
                        adjustment factor determined under 
                        paragraph (2)(B) for the calendar year, 
                        except that such paragraph shall be 
                        applied by substituting ``2005'' for 
                        ``1992''.
                  (C) Application of rules.--Rules similar to 
                the rules of the subsection (b)(3) and 
                paragraphs (1), (3), (4), and (5) of this 
                subsection shall apply for purposes of 
                determining the amount of any increase under 
                this paragraph.
          (11) Allocation of credit to patrons of agricultural 
        cooperative.--
                  (A) Election to allocate.--
                          (i) In general.--In the case of an 
                        eligible cooperative organization, any 
                        portion of the credit determined under 
                        subsection (a) for the taxable year 
                        may, at the election of the 
                        organization, be apportioned among 
                        patrons of the organization on the 
                        basis of the amount of business done by 
                        the patrons during the taxable year.
                          (ii) Form and effect of election.--An 
                        election under clause (i) for any 
                        taxable year shall be made on a timely 
                        filed return for such year. Such 
                        election, once made, shall be 
                        irrevocable for such taxable year. Such 
                        election shall not take effect unless 
                        the organization designates the 
                        apportionment as such in a written 
                        notice mailed to its patrons during the 
                        payment period described in section 
                        1382(d).
                  (B) Treatment of organizations and patrons.--
                The amount of the credit apportioned to any 
                patrons under subparagraph (A)--
                          (i) shall not be included in the 
                        amount determined under subsection (a) 
                        with respect to the organization for 
                        the taxable year, and
                          (ii) shall be included in the amount 
                        determined under subsection (a) for the 
                        first taxable year of each patron 
                        ending on or after the last day of the 
                        payment period (as defined in section 
                        1382(d)) for the taxable year of the 
                        organization or, if earlier, for the 
                        taxable year of each patron ending on 
                        or after the date on which the patron 
                        receives notice from the cooperative of 
                        the apportionment.
                  (C) Special rules for decrease in credits for 
                taxable year.--If the amount of the credit of a 
                cooperative organization determined under 
                subsection (a) for a taxable year is less than 
                the amount of such credit shown on the return 
                of the cooperative organization for such year, 
                an amount equal to the excess of--
                          (i) such reduction, over
                          (ii) the amount not apportioned to 
                        such patrons under subparagraph (A) for 
                        the taxable year,
                shall be treated as an increase in tax imposed 
                by this chapter on the organization. Such 
                increase shall not be treated as tax imposed by 
                this chapter for purposes of determining the 
                amount of any credit under this chapter.
                  (D) Eligible cooperative defined.--For 
                purposes of this section the term ``eligible 
                cooperative'' means a cooperative organization 
                described in section 1381(a) which is owned 
                more than 50 percent by agricultural producers 
                or by entities owned by agricultural producers. 
                For this purpose an entity owned by an 
                agricultural producer is one that is more than 
                50 percent owned by agricultural producers.

SEC. 45A. INDIAN EMPLOYMENT CREDIT.

  (a) Amount of credit.--For purposes of section 38, the amount 
of the Indian employment credit determined under this section 
with respect to any employer for any taxable year is an amount 
equal to 20 percent of the excess (if any) of--
          (1) the sum of--
                  (A) the qualified wages paid or incurred 
                during such taxable year, plus
                  (B) qualified employee health insurance costs 
                paid or incurred during such taxable year, over
          (2) the sum of the qualified wages and qualified 
        employee health insurance costs (determined as if this 
        section were in effect) which were paid or incurred by 
        the employer (or any predecessor) during calendar year 
        1993.
  (b) Qualified wages; qualified employee health insurance 
costs.--For purposes of this section--
          (1) Qualified wages.--
                  (A) In general.--The term ``qualified wages'' 
                means any wages paid or incurred by an employer 
                for services performed by an employee while 
                such employee is a qualified employee.
                  (B) Coordination with work opportunity 
                credit.--The term ``qualified wages'' shall not 
                include wages attributable to service rendered 
                during the 1-year period beginning with the day 
                the individual begins work for the employer if 
                any portion of such wages is taken into account 
                in determining the credit under section 51. If 
                any portion of wages are taken into account 
                under subsection (e)(1)(A) of section 51, the 
                preceding sentence shall be applied by 
                substituting ``2-year period'' for ``1-year 
                period''.
          (2) Qualified employee health insurance costs.--
                  (A) In general.--The term ``qualified 
                employee health insurance costs'' means any 
                amount paid or incurred by an employer for 
                health insurance to the extent such amount is 
                attributable to coverage provided to any 
                employee while such employee is a qualified 
                employee.
                  (B) Exception for amounts paid under salary 
                reduction arrangements.--No amount paid or 
                incurred for health insurance pursuant to a 
                salary reduction arrangement shall be taken 
                into account under subparagraph (A).
          (3) Limitation.--The aggregate amount of qualified 
        wages and qualified employee health insurance costs 
        taken into account with respect to any employee for any 
        taxable year (and for the base period under subsection 
        (a)(2)) shall not exceed $20,000.
  (c) Qualified employee.--For purposes of this section--
          (1) In general.--Except as otherwise provided in this 
        subsection, the term ``qualified employee'' means, with 
        respect to any period, any employee of an employer if--
                  (A) the employee is an enrolled member of an 
                Indian tribe or the spouse of an enrolled 
                member of an Indian tribe,
                  (B) substantially all of the services 
                performed during such period by such employee 
                for such employer are performed within an 
                Indian reservation, and
                  (C) the principal place of abode of such 
                employee while performing such services is on 
                or near the reservation in which the services 
                are performed.
          (2) Individuals receiving wages in excess of $30,000 
        not eligible.--An employee shall not be treated as a 
        qualified employee for any taxable year of the employer 
        if the total amount of the wages paid or incurred by 
        such employer to such employee during such taxable year 
        (whether or not for services within an Indian 
        reservation) exceeds the amount determined at an annual 
        rate of $30,000.
          (3) Inflation adjustment.--The Secretary shall adjust 
        the $30,000 amount under paragraph (2) for years 
        beginning after 1994 at the same time and in the same 
        manner as under section 415(d), except that the base 
        period taken into account for purposes of such 
        adjustment shall be the calendar quarter beginning 
        October 1, 1993.
          (4) Employment must be trade or business 
        employment.--An employee shall be treated as a 
        qualified employee for any taxable year of the employer 
        only if more than 50 percent of the wages paid or 
        incurred by the employer to such employee during such 
        taxable year are for services performed in a trade or 
        business of the employer. Any determination as to 
        whether the preceding sentence applies with respect to 
        any employee for any taxable year shall be made without 
        regard to subsection (e)(2).
          (5) Certain employees not eligible.--The term 
        ``qualified employee'' shall not include--
                  (A) any individual described in subparagraph 
                (A), (B), or (C) of section 51(i)(1),
                  (B) any 5-percent owner (as defined in 
                section 416(i)(1)(B)), and
                  (C) any individual if the services performed 
                by such individual for the employer involve the 
                conduct of class I, II, or III gaming as 
                defined in section 4 of the Indian Gaming 
                Regulatory Act (25 U.S.C. 2703), or are 
                performed in a building housing such gaming 
                activity.
          (6) Indian tribe defined.--The term ``Indian tribe'' 
        means any Indian tribe, band, nation, pueblo, or other 
        organized group or community, including any Alaska 
        Native village, or regional or village corporation, as 
        defined in, or established pursuant to, the Alaska 
        Native Claims Settlement Act (43 U.S.C. 1601 et seq.) 
        which is recognized as eligible for the special 
        programs and services provided by the United States to 
        Indians because of their status as Indians.
          (7) Indian reservation defined.--The term ``Indian 
        reservation'' has the meaning given such term by 
        section 168(j)(6).
  (d) Early termination of employment by employer.--
          (1) In general.--If the employment of any employee is 
        terminated by the taxpayer before the day 1 year after 
        the day on which such employee began work for the 
        employer--
                  (A) no wages (or qualified employee health 
                insurance costs) with respect to such employee 
                shall be taken into account under subsection 
                (a) for the taxable year in which such 
                employment is terminated, and
                  (B) the tax under this chapter for the 
                taxable year in which such employment is 
                terminated shall be increased by the aggregate 
                credits (if any) allowed under section 38(a) 
                for prior taxable years by reason of wages (or 
                qualified employee health insurance costs) 
                taken into account with respect to such 
                employee.
          (2) Carrybacks and carryovers adjusted.--In the case 
        of any termination of employment to which paragraph (1) 
        applies, the carrybacks and carryovers under section 39 
        shall be properly adjusted.
          (3) Subsection not to apply in certain cases.--
                  (A) In general.--Paragraph (1) shall not 
                apply to--
                          (i) a termination of employment of an 
                        employee who voluntarily leaves the 
                        employment of the taxpayer,
                          (ii) a termination of employment of 
                        an individual who before the close of 
                        the period referred to in paragraph (1) 
                        becomes disabled to perform the 
                        services of such employment unless such 
                        disability is removed before the close 
                        of such period and the taxpayer fails 
                        to offer reemployment to such 
                        individual, or
                          (iii) a termination of employment of 
                        an individual if it is determined under 
                        the applicable State unemployment 
                        compensation law that the termination 
                        was due to the misconduct of such 
                        individual.
                  (B) Changes in form of business.--For 
                purposes of paragraph (1), the employment 
                relationship between the taxpayer and an 
                employee shall not be treated as terminated--
                          (i) by a transaction to which section 
                        381(a) applies if the employee 
                        continues to be employed by the 
                        acquiring corporation, or
                          (ii) by reason of a mere change in 
                        the form of conducting the trade or 
                        business of the taxpayer if the 
                        employee continues to be employed in 
                        such trade or business and the taxpayer 
                        retains a substantial interest in such 
                        trade or business.
          (4) Special rule.--Any increase in tax under 
        paragraph (1) shall not be treated as a tax imposed by 
        this chapter for purposes of--
                  (A) determining the amount of any credit 
                allowable under this chapter, and
                  (B) determining the amount of the tax imposed 
                by section 55.
  (e) Other definitions and special rules.--For purposes of 
this section--
          (1) Wages.--The term ``wages'' has the same meaning 
        given to such term in section 51.
          (2) Controlled groups.--(A) All employers treated as 
        a single employer under section (a) or (b) of section 
        52 shall be treated as a single employer for purposes 
        of this section.
                  (B) The credit (if any) determined under this 
                section with respect to each such employer 
                shall be its proportionate share of the wages 
                and qualified employee health insurance costs 
                giving rise to such credit.
          (3) Certain other rules made applicable.--Rules 
        similar to the rules of section 51(k) and subsections 
        (c), (d), and (e) of section 52 shall apply.
          (4) Coordination with nonrevenue laws.--Any reference 
        in this section to a provision not contained in this 
        title shall be treated for purposes of this section as 
        a reference to such provision as in effect on the date 
        of the enactment of this paragraph.
          (5) Special rule for short taxable years.--For any 
        taxable year having less than 12 months, the amount 
        determined under subsection (a)(2) shall be multiplied 
        by a fraction, the numerator of which is the number of 
        days in the taxable year and the denominator of which 
        is 365.
  (f) Termination.--This section shall not apply to taxable 
years beginning after [December 31, 2017] December 31, 2020.

           *       *       *       *       *       *       *


SEC. 45D. NEW MARKETS TAX CREDIT.

  (a) Allowance of credit.--
          (1) In general.--For purposes of section 38, in the 
        case of a taxpayer who holds a qualified equity 
        investment on a credit allowance date of such 
        investment which occurs during the taxable year, the 
        new markets tax credit determined under this section 
        for such taxable year is an amount equal to the 
        applicable percentage of the amount paid to the 
        qualified community development entity for such 
        investment at its original issue.
          (2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage is--
                  (A) 5 percent with respect to the first 3 
                credit allowance dates, and
                  (B) 6 percent with respect to the remainder 
                of the credit allowance dates.
          (3) Credit allowance date.--For purposes of paragraph 
        (1), the term ``credit allowance date'' means, with 
        respect to any qualified equity investment--
                  (A) the date on which such investment is 
                initially made, and
                  (B) each of the 6 anniversary dates of such 
                date thereafter.
  (b) Qualified equity investment.--For purposes of this 
section--
          (1) In general.--The term ``qualified equity 
        investment'' means any equity investment in a qualified 
        community development entity if--
                  (A) such investment is acquired by the 
                taxpayer at its original issue (directly or 
                through an underwriter) solely in exchange for 
                cash,
                  (B) substantially all of such cash is used by 
                the qualified community development entity to 
                make qualified low-income community 
                investments, and
                  (C) such investment is designated for 
                purposes of this section by the qualified 
                community development entity.
        Such term shall not include any equity investment 
        issued by a qualified community development entity more 
        than 5 years after the date that such entity receives 
        an allocation under subsection (f). Any allocation not 
        used within such 5-year period may be reallocated by 
        the Secretary under subsection (f).
          (2) Limitation.--The maximum amount of equity 
        investments issued by a qualified community development 
        entity which may be designated under paragraph (1)(C) 
        by such entity shall not exceed the portion of the 
        limitation amount allocated under subsection (f) to 
        such entity.
          (3) Safe harbor for determining use of cash.--The 
        requirement of paragraph (1)(B) shall be treated as met 
        if at least 85 percent of the aggregate gross assets of 
        the qualified community development entity are invested 
        in qualified low-income community investments.
          (4) Treatment of subsequent purchasers.--The term 
        ``qualified equity investment'' includes any equity 
        investment which would (but for paragraph (1)(A)) be a 
        qualified equity investment in the hands of the 
        taxpayer if such investment was a qualified equity 
        investment in the hands of a prior holder.
          (5) Redemptions.--A rule similar to the rule of 
        section 1202(c)(3) shall apply for purposes of this 
        subsection.
          (6) Equity investment.--The term ``equity 
        investment'' means--
                  (A) any stock (other than nonqualified 
                preferred stock as defined in section 
                351(g)(2)) in an entity which is a corporation, 
                and
                  (B) any capital interest in an entity which 
                is a partnership.
  (c) Qualified community development entity.--For purposes of 
this section--
          (1) In general.--The term ``qualified community 
        development entity'' means any domestic corporation or 
        partnership if--
                  (A) the primary mission of the entity is 
                serving, or providing investment capital for, 
                low-income communities or low-income persons,
                  (B) the entity maintains accountability to 
                residents of low-income communities through 
                their representation on any governing board of 
                the entity or on any advisory board to the 
                entity, and
                  (C) the entity is certified by the Secretary 
                for purposes of this section as being a 
                qualified community development entity.
          (2) Special rules for certain organizations.--The 
        requirements of paragraph (1) shall be treated as met 
        by--
                  (A) any specialized small business investment 
                company (as defined in section 1044(c)(3)), and
                  (B) any community development financial 
                institution (as defined in section 103 of the 
                Community Development Banking and Financial 
                Institutions Act of 1994 (12 U.S.C. 4702)).
  (d) Qualified low-income community investments.--For purposes 
of this section--
          (1) In general.--The term ``qualified low-income 
        community investment'' means--
                  (A) any capital or equity investment in, or 
                loan to, any qualified active low-income 
                community business,
                  (B) the purchase from another qualified 
                community development entity of any loan made 
                by such entity which is a qualified low-income 
                community investment,
                  (C) financial counseling and other services 
                specified in regulations prescribed by the 
                Secretary to businesses located in, and 
                residents of, low-income communities, and
                  (D) any equity investment in, or loan to, any 
                qualified community development entity.
          (2) Qualified active low-income community business.--
                  (A) In general.--For purposes of paragraph 
                (1), the term ``qualified active low-income 
                community business'' means, with respect to any 
                taxable year, any corporation (including a 
                nonprofit corporation) or partnership if for 
                such year--
                          (i) at least 50 percent of the total 
                        gross income of such entity is derived 
                        from the active conduct of a qualified 
                        business within any low-income 
                        community,
                          (ii) a substantial portion of the use 
                        of the tangible property of such entity 
                        (whether owned or leased) is within any 
                        low-income community,
                          (iii) a substantial portion of the 
                        services performed for such entity by 
                        its employees are performed in any low-
                        income community,
                          (iv) less than 5 percent of the 
                        average of the aggregate unadjusted 
                        bases of the property of such entity is 
                        attributable to collectibles (as 
                        defined in section 408(m)(2)) other 
                        than collectibles that are held 
                        primarily for sale to customers in the 
                        ordinary course of such business, and
                          (v) less than 5 percent of the 
                        average of the aggregate unadjusted 
                        bases of the property of such entity is 
                        attributable to nonqualified financial 
                        property (as defined in section 
                        1397C(e)).
                  (B) Proprietorship.--Such term shall include 
                any business carried on by an individual as a 
                proprietor if such business would meet the 
                requirements of subparagraph (A) were it 
                incorporated.
                  (C) Portions of business may be qualified 
                active low-income community business.--The term 
                ``qualified active low-income community 
                business'' includes any trades or businesses 
                which would qualify as a qualified active low-
                income community business if such trades or 
                businesses were separately incorporated.
          (3) Qualified business.--For purposes of this 
        subsection, the term ``qualified business'' has the 
        meaning given to such term by section 1397C(d); except 
        that--
                  (A) in lieu of applying paragraph (2)(B) 
                thereof, the rental to others of real property 
                located in any low-income community shall be 
                treated as a qualified business if there are 
                substantial improvements located on such 
                property, and
                  (B) paragraph (3) thereof shall not apply.
  (e) Low-income community.--For purposes of this section--
          (1) In general.--The term ``low-income community'' 
        means any population census tract if--
                  (A) the poverty rate for such tract is at 
                least 20 percent, or
                  (B)(i) in the case of a tract not located 
                within a metropolitan area, the median family 
                income for such tract does not exceed 80 
                percent of statewide median family income, or
                          (ii) in the case of a tract located 
                        within a metropolitan area, the median 
                        family income for such tract does not 
                        exceed 80 percent of the greater of 
                        statewide median family income or the 
                        metropolitan area median family income.
        Subparagraph (B) shall be applied using possessionwide 
        median family income in the case of census tracts 
        located within a possession of the United States.
          (2) Targeted populations.--The Secretary shall 
        prescribe regulations under which 1 or more targeted 
        populations (within the meaning of section 103(20) of 
        the Riegle Community Development and Regulatory 
        Improvement Act of 1994 (12 U.S.C. 4702(20))) may be 
        treated as low-income communities. Such regulations 
        shall include procedures for determining which entities 
        are qualified active low-income community businesses 
        with respect to such populations.
          (3) Areas not within census tracts.--In the case of 
        an area which is not tracted for population census 
        tracts, the equivalent county divisions (as defined by 
        the Bureau of the Census for purposes of defining 
        poverty areas) shall be used for purposes of 
        determining poverty rates and median family income.
          (4) Tracts with low population.--A population census 
        tract with a population of less than 2,000 shall be 
        treated as a low-income community for purposes of this 
        section if such tract--
                  (A) is within an empowerment zone the 
                designation of which is in effect under section 
                1391, and
                  (B) is contiguous to 1 or more low-income 
                communities (determined without regard to this 
                paragraph).
          (5) Modification of income requirement for census 
        tracts within high migration rural counties.--
                  (A) In general.--In the case of a population 
                census tract located within a high migration 
                rural county, paragraph (1)(B)(i) shall be 
                applied by substituting ``85 percent'' for ``80 
                percent''.
                  (B) High migration rural county.--For 
                purposes of this paragraph, the term ``high 
                migration rural county'' means any county 
                which, during the 20-year period ending with 
                the year in which the most recent census was 
                conducted, has a net out-migration of 
                inhabitants from the county of at least 10 
                percent of the population of the county at the 
                beginning of such period.
  (f) National limitation on amount of investments 
designated.--
          (1) In general.--There is a new markets tax credit 
        limitation for each calendar year. Such limitation is--
                  (A) $1,000,000,000 for 2001,
                  (B) $1,500,000,000 for 2002 and 2003,
                  (C) $2,000,000,000 for 2004 and 2005,
                  (D) $3,500,000,000 for 2006 and 2007,
                  (E) $5,000,000,000 for 2008,
                  (F) $5,000,000,000 for 2009, [and]
                  (G) $3,500,000,000 for each of calendar years 
                2010 through 2019[.], and
                  (H) $5,000,000,000 for 2020.
          (2) Allocation of limitation.--The limitation under 
        paragraph (1) shall be allocated by the Secretary among 
        qualified community development entities selected by 
        the Secretary. In making allocations under the 
        preceding sentence, the Secretary shall give priority 
        to any entity--
                  (A) with a record of having successfully 
                provided capital or technical assistance to 
                disadvantaged businesses or communities, or
                  (B) which intends to satisfy the requirement 
                under subsection (b)(1)(B) by making qualified 
                low-income community investments in 1 or more 
                businesses in which persons unrelated to such 
                entity (within the meaning of section 267(b) or 
                707(b)(1)) hold the majority equity interest.
          (3) Carryover of unused limitation.--If the new 
        markets tax credit limitation for any calendar year 
        exceeds the aggregate amount allocated under paragraph 
        (2) for such year, such limitation for the succeeding 
        calendar year shall be increased by the amount of such 
        excess. No amount may be carried under the preceding 
        sentence to any calendar year after [2024] 2025.
  (g) Recapture of credit in certain cases.--
          (1) In general.--If, at any time during the 7-year 
        period beginning on the date of the original issue of a 
        qualified equity investment in a qualified community 
        development entity, there is a recapture event with 
        respect to such investment, then the tax imposed by 
        this chapter for the taxable year in which such event 
        occurs shall be increased by the credit recapture 
        amount.
          (2) Credit recapture amount.--For purposes of 
        paragraph (1), the credit recapture amount is an amount 
        equal to the sum of--
                  (A) the aggregate decrease in the credits 
                allowed to the taxpayer under section 38 for 
                all prior taxable years which would have 
                resulted if no credit had been determined under 
                this section with respect to such investment, 
                plus
                  (B) interest at the underpayment rate 
                established under section 6621 on the amount 
                determined under subparagraph (A) for each 
                prior taxable year for the period beginning on 
                the due date for filing the return for the 
                prior taxable year involved.
        No deduction shall be allowed under this chapter for 
        interest described in subparagraph (B).
          (3) Recapture event.--For purposes of paragraph (1), 
        there is a recapture event with respect to an equity 
        investment in a qualified community development entity 
        if--
                  (A) such entity ceases to be a qualified 
                community development entity,
                  (B) the proceeds of the investment cease to 
                be used as required of subsection (b)(1)(B), or
                  (C) such investment is redeemed by such 
                entity.
          (4) Special rules.--
                  (A) Tax benefit rule.--The tax for the 
                taxable year shall be increased under paragraph 
                (1) only with respect to credits allowed by 
                reason of this section which were used to 
                reduce tax liability. In the case of credits 
                not so used to reduce tax liability, the 
                carryforwards and carrybacks under section 39 
                shall be appropriately adjusted.
                  (B) No credits against tax.--Any increase in 
                tax under this subsection shall not be treated 
                as a tax imposed by this chapter for purposes 
                of determining the amount of any credit under 
                this chapter or for purposes of section 55.
  (h) Basis reduction.--The basis of any qualified equity 
investment shall be reduced by the amount of any credit 
determined under this section with respect to such investment. 
This subsection shall not apply for purposes of section 1202.
  (i) Regulations.--The Secretary shall prescribe such 
regulations as may be appropriate to carry out this section, 
including regulations--
          (1) which limit the credit for investments which are 
        directly or indirectly subsidized by other Federal tax 
        benefits (including the credit under section 42 and the 
        exclusion from gross income under section 103),
          (2) which prevent the abuse of the purposes of this 
        section,
          (3) which provide rules for determining whether the 
        requirement of subsection (b)(1)(B) is treated as met,
          (4) which impose appropriate reporting requirements,
          (5) which apply the provisions of this section to 
        newly formed entities, and
          (6) which ensure that non-metropolitan counties 
        receive a proportional allocation of qualified equity 
        investments.

           *       *       *       *       *       *       *


SEC. 45G. RAILROAD TRACK MAINTENANCE CREDIT.

  (a) General rule.--For purposes of section 38, the railroad 
track maintenance credit determined under this section for the 
taxable year is an amount equal to 50 percent of the qualified 
railroad track maintenance expenditures paid or incurred by an 
eligible taxpayer during the taxable year.
  (b) Limitation.--
          (1) In general.--The credit allowed under subsection 
        (a) for any taxable year shall not exceed the product 
        of--
                  (A) $3,500, multiplied by
                  (B) the sum of--
                          (i) the number of miles of railroad 
                        track owned or leased by the eligible 
                        taxpayer as of the close of the taxable 
                        year, and
                          (ii) the number of miles of railroad 
                        track assigned for purposes of this 
                        subsection to the eligible taxpayer by 
                        a Class II or Class III railroad which 
                        owns or leases such railroad track as 
                        of the close of the taxable year.
          (2) Assignments.--With respect to any assignment of a 
        mile of railroad track under paragraph (1)(B)(ii)--
                  (A) such assignment may be made only once per 
                taxable year of the Class II or Class III 
                railroad and shall be treated as made as of the 
                close of such taxable year,
                  (B) such mile may not be taken into account 
                under this section by such railroad for such 
                taxable year, and
                  (C) such assignment shall be taken into 
                account for the taxable year of the assignee 
                which includes the date that such assignment is 
                treated as effective.
  (c) Eligible taxpayer.--For purposes of this section, the 
term ``eligible taxpayer'' means--
          (1) any Class II or Class III railroad, and
          (2) any person who transports property using the rail 
        facilities of a Class II or Class III railroad or who 
        furnishes railroad-related property or services to a 
        Class II or Class III railroad, but only with respect 
        to miles of railroad track assigned to such person by 
        such Class II or Class III railroad for purposes of 
        subsection (b).
  (d) Qualified railroad track maintenance expenditures.--For 
purposes of this section, the term ``qualified railroad track 
maintenance expenditures'' means gross expenditures (whether or 
not otherwise chargeable to capital account) for maintaining 
railroad track (including roadbed, bridges, and related track 
structures) owned or leased as of January 1, 2015, by a Class 
II or Class III railroad (determined without regard to any 
consideration for such expenditures given by the Class II or 
Class III railroad which made the assignment of such track).
  (e) Other definitions and special rules.--
          (1) Class II or Class III railroad.--For purposes of 
        this section, the terms ``Class II railroad'' and 
        ``Class III railroad'' have the respective meanings 
        given such terms by the Surface Transportation Board.
          (2) Controlled groups.--Rules similar to the rules of 
        paragraph (1) of section 41(f) shall apply for purposes 
        of this section.
          (3) Basis adjustment.--For purposes of this subtitle, 
        if a credit is allowed under this section with respect 
        to any railroad track, the basis of such track shall be 
        reduced by the amount of the credit so allowed.
  (f) Application of section.--This section shall apply to 
qualified railroad track maintenance expenditures paid or 
incurred during taxable years beginning after December 31, 
2004, and before [January 1, 2018] January 1, 2021.

           *       *       *       *       *       *       *


SEC. 45L. NEW ENERGY EFFICIENT HOME CREDIT.

  (a) Allowance of credit.--
          (1) In general.--For purposes of section 38, in the 
        case of an eligible contractor, the new energy 
        efficient home credit for the taxable year is the 
        applicable amount for each qualified new energy 
        efficient home which is--
                  (A) constructed by the eligible contractor, 
                and
                  (B) acquired by a person from such eligible 
                contractor for use as a residence during the 
                taxable year.
          (2) Applicable amount.--For purposes of paragraph 
        (1), the applicable amount is an amount equal to--
                  (A) in the case of a dwelling unit described 
                in paragraph (1) or (2) of subsection (c), 
                $2,000, and
                  (B) in the case of a dwelling unit described 
                in paragraph (3) of subsection (c), $1,000.
  (b) Definitions.--For purposes of this section--
          (1) Eligible contractor.--The term ``eligible 
        contractor'' means--
                  (A) the person who constructed the qualified 
                new energy efficient home, or
                  (B) in the case of a qualified new energy 
                efficient home which is a manufactured home, 
                the manufactured home producer of such home.
          (2) Qualified new energy efficient home.--The term 
        ``qualified new energy efficient home'' means a 
        dwelling unit--
                  (A) located in the United States,
                  (B) the construction of which is 
                substantially completed after the date of the 
                enactment of this section, and
                  (C) which meets the energy saving 
                requirements of subsection (c).
          (3) Construction.--The term ``construction'' includes 
        substantial reconstruction and rehabilitation.
          (4) Acquire.--The term ``acquire'' includes purchase.
  (c) Energy saving requirements.--A dwelling unit meets the 
energy saving requirements of this subsection if such unit is--
          (1) certified--
                  (A) to have a level of annual heating and 
                cooling energy consumption which is at least 50 
                percent below the annual level of heating and 
                cooling energy consumption of a comparable 
                dwelling unit--
                          (i) which is constructed in 
                        accordance with the standards of 
                        chapter 4 of the 2006 International 
                        Energy Conservation Code, as such Code 
                        (including supplements) is in effect on 
                        January 1, 2006, and
                          (ii) for which the heating and 
                        cooling equipment efficiencies 
                        correspond to the minimum allowed under 
                        the regulations established by the 
                        Department of Energy pursuant to the 
                        National Appliance Energy Conservation 
                        Act of 1987 and in effect at the time 
                        of completion of construction, and
                  (B) to have building envelope component 
                improvements account for at least 1/5 of such 
                50 percent,
          (2) a manufactured home which conforms to Federal 
        Manufactured Home Construction and Safety Standards 
        (part 3280 of title 24, Code of Federal Regulations) 
        and which meets the requirements of paragraph (1), or
          (3) a manufactured home which conforms to Federal 
        Manufactured Home Construction and Safety Standards 
        (part 3280 of title 24, Code of Federal Regulations) 
        and which--
                  (A) meets the requirements of paragraph (1) 
                applied by substituting ``30 percent'' for ``50 
                percent'' both places it appears therein and by 
                substituting ``1/3'' for ``1/5'' in 
                subparagraph (B) thereof, or
                  (B) meets the requirements established by the 
                Administrator of the Environmental Protection 
                Agency under the Energy Star Labeled Homes 
                program.
  (d) Certification.--
          (1) Method of certification.--A certification 
        described in subsection (c) shall be made in accordance 
        with guidance prescribed by the Secretary, after 
        consultation with the Secretary of Energy. Such 
        guidance shall specify procedures and methods for 
        calculating energy and cost savings.
          (2) Form.--Any certification described in subsection 
        (c) shall be made in writing in a manner which 
        specifies in readily verifiable fashion the energy 
        efficient building envelope components and energy 
        efficient heating or cooling equipment installed and 
        their respective rated energy efficiency performance.
  (e) Basis adjustment.--For purposes of this subtitle, if a 
credit is allowed under this section in connection with any 
expenditure for any property, the increase in the basis of such 
property which would (but for this subsection) result from such 
expenditure shall be reduced by the amount of the credit so 
determined.
  (f) Coordination with investment credit.--For purposes of 
this section, expenditures taken into account under section 47 
or 48(a) shall not be taken into account under this section.
  (g) Termination.--This section shall not apply to any 
qualified new energy efficient home acquired after [December 
31, 2017] December 31, 2020.

           *       *       *       *       *       *       *


SEC. 45N. MINE RESCUE TEAM TRAINING CREDIT.

  (a) Amount of credit.--For purposes of section 38, the mine 
rescue team training credit determined under this section with 
respect to each qualified mine rescue team employee of an 
eligible employer for any taxable year is an amount equal to 
the lesser of--
          (1) 20 percent of the amount paid or incurred by the 
        taxpayer during the taxable year with respect to the 
        training program costs of such qualified mine rescue 
        team employee (including wages of such employee while 
        attending such program), or
          (2) $10,000.
  (b) Qualified mine rescue team employee.--For purposes of 
this section, the term ``qualified mine rescue team employee'' 
means with respect to any taxable year any full-time employee 
of the taxpayer who is--
          (1) a miner eligible for more than 6 months of such 
        taxable year to serve as a mine rescue team member as a 
        result of completing, at a minimum, an initial 20-hour 
        course of instruction as prescribed by the Mine Safety 
        and Health Administration's Office of Educational 
        Policy and Development, or
          (2) a miner eligible for more than 6 months of such 
        taxable year to serve as a mine rescue team member by 
        virtue of receiving at least 40 hours of refresher 
        training in such instruction.
  (c) Eligible employer.--For purposes of this section, the 
term ``eligible employer'' means any taxpayer which employs 
individuals as miners in underground mines in the United 
States.
  (d) Wages.--For purposes of this section, the term ``wages'' 
has the meaning given to such term by subsection (b) of section 
3306 (determined without regard to any dollar limitation 
contained in such section).
  (e) Termination.--This section shall not apply to taxable 
years beginning after [December 31, 2017] December 31, 2020.

           *       *       *       *       *       *       *


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.
  (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] December 
31, 2020.

Subpart E--RULES FOR COMPUTING INVESTMENT CREDIT

           *       *       *       *       *       *       *


SEC. 48. ENERGY CREDIT.

  (a) Energy credit.--
          (1) In general.--For purposes of section 46, except 
        as provided in paragraphs (1)(B), (2)(B), and (3)(B) of 
        subsection (c), the energy credit for any taxable year 
        is the energy percentage of the basis of each energy 
        property placed in service during such taxable year.
          (2) Energy percentage.--
                  (A) In general.--Except as provided in 
                paragraphs (6) and (7), the energy percentage 
                is--
                          (i) 30 percent in the case of--
                                  (I) qualified fuel cell 
                                property,
                                  (II) energy property 
                                described in paragraph 
                                (3)(A)(i) but only with respect 
                                to property the construction of 
                                which begins before January 1, 
                                2022,
                                  (III) energy property 
                                described in paragraph 
                                (3)(A)(ii), and
                                  (IV) qualified small wind 
                                energy property, and
                          (ii) in the case of any energy 
                        property to which clause (i) does not 
                        apply, 10 percent.
                  (B) Coordination with rehabilitation 
                credit.--The energy percentage shall not apply 
                to that portion of the basis of any property 
                which is attributable to qualified 
                rehabilitation expenditures.
          (3) Energy property.--For purposes of this subpart, 
        the term ``energy property'' means any property--
                  (A) which is--
                          (i) equipment which uses solar energy 
                        to generate electricity, to heat or 
                        cool (or provide hot water for use in) 
                        a structure, or to provide solar 
                        process heat, excepting property used 
                        to generate energy for the purposes of 
                        heating a swimming pool,
                          (ii) equipment which uses solar 
                        energy to illuminate the inside of a 
                        structure using fiber-optic distributed 
                        sunlight but only with respect to 
                        property the construction of which 
                        begins before January 1, 2022,
                          (iii) equipment used to produce, 
                        distribute, or use energy derived from 
                        a geothermal deposit (within the 
                        meaning of section 613(e)(2)), but 
                        only, in the case of electricity 
                        generated by geothermal power, up to 
                        (but not including) the electrical 
                        transmission stage,
                          (iv) qualified fuel cell property or 
                        qualified microturbine property,
                          (v) combined heat and power system 
                        property,
                          (vi) qualified small wind energy 
                        property, or
                          (vii) equipment which uses the ground 
                        or ground water as a thermal energy 
                        source to heat a structure or as a 
                        thermal energy sink to cool a 
                        structure, but only with respect to 
                        property the construction of which 
                        begins before January 1, 2022,
                  (B)(i) the construction, reconstruction, or 
                erection of which is completed by the taxpayer, 
                or
                          (ii) which is acquired by the 
                        taxpayer if the original use of such 
                        property commences with the taxpayer,
                  (C) with respect to which depreciation (or 
                amortization in lieu of depreciation) is 
                allowable, and
                  (D) which meets the performance and quality 
                standards (if any) which--
                          (i) have been prescribed by the 
                        Secretary by regulations (after 
                        consultation with the Secretary of 
                        Energy), and
                          (ii) are in effect at the time of the 
                        acquisition of the property.
        Such term shall not include any property which is part 
        of a facility the production from which is allowed as a 
        credit under section 45 for the taxable year or any 
        prior taxable year.
          (4) Special rule for property financed by subsidized 
        energy financing or industrial development bonds.--
                  (A) Reduction of basis.--For purposes of 
                applying the energy percentage to any property, 
                if such property is financed in whole or in 
                part by--
                          (i) subsidized energy financing, or
                          (ii) the proceeds of a private 
                        activity bond (within the meaning of 
                        section 141) the interest on which is 
                        exempt from tax under section 103,
                the amount taken into account as the basis of 
                such property shall not exceed the amount which 
                (but for this subparagraph) would be so taken 
                into account multiplied by the fraction 
                determined under subparagraph (B).
                  (B) Determination of fraction.--For purposes 
                of subparagraph (A), the fraction determined 
                under this subparagraph is 1 reduced by a 
                fraction--
                          (i) the numerator of which is that 
                        portion of the basis of the property 
                        which is allocable to such financing or 
                        proceeds, and
                          (ii) the denominator of which is the 
                        basis of the property.
                  (C) Subsidized energy financing.--For 
                purposes of subparagraph (A), the term 
                ``subsidized energy financing'' means financing 
                provided under a Federal, State, or local 
                program a principal purpose of which is to 
                provide subsidized financing for projects 
                designed to conserve or produce energy.
                  (D) Termination.--This paragraph shall not 
                apply to periods after December 31, 2008, under 
                rules similar to the rules of section 48(m) (as 
                in effect on the day before the date of the 
                enactment of the Revenue Reconciliation Act of 
                1990).
          (5) Election to treat qualified facilities as energy 
        property.--
                  (A) In general.--In the case of any qualified 
                property which is part of a qualified 
                investment credit facility--
                          (i) such property shall be treated as 
                        energy property for purposes of this 
                        section, and
                          (ii) the energy percentage with 
                        respect to such property shall be 30 
                        percent.
                  (B) Denial of production credit.--No credit 
                shall be allowed under section 45 for any 
                taxable year with respect to any qualified 
                investment credit facility.
                  (C) Qualified investment credit facility.--
                For purposes of this paragraph, the term 
                ``qualified investment credit facility'' means 
                any facility--
                          (i) which is a qualified facility 
                        (within the meaning of section 45) 
                        described in paragraph (1), (2), (3), 
                        (4), (6), (7), (9), or (11) of section 
                        45(d),
                          (ii) which is placed in service after 
                        2008 and the construction of which 
                        begins before [January 1, 2018 (January 
                        1, 2020, in the case of any facility 
                        which is described in paragraph (1) of 
                        section 45(d))] January 1, 2021, and
                          (iii) with respect to which--
                                  (I) no credit has been 
                                allowed under section 45, and
                                  (II) the taxpayer makes an 
                                irrevocable election to have 
                                this paragraph apply.
                  (D) Qualified property.--For purposes of this 
                paragraph, the term ``qualified property'' 
                means property--
                          (i) which is--
                                  (I) tangible personal 
                                property, or
                                  (II) other tangible property 
                                (not including a building or 
                                its structural components), but 
                                only if such property is used 
                                as an integral part of the 
                                qualified investment credit 
                                facility,
                          (ii) with respect to which 
                        depreciation (or amortization in lieu 
                        of depreciation) is allowable,
                          (iii) which is constructed, 
                        reconstructed, erected, or acquired by 
                        the taxpayer, and
                          (iv) the original use of which 
                        commences with the taxpayer.
                  (E) Phaseout of credit for wind facilities.--
                In the case of any facility using wind to 
                produce electricity which is treated as energy 
                property by reason of this paragraph, the 
                amount of the credit determined under this 
                section (determined after the application of 
                paragraphs (1) and (2) and without regard to 
                this subparagraph) shall be reduced by--
                          (i) in the case of any facility the 
                        construction of which begins after 
                        December 31, 2016, and before January 
                        1, 2018, 20 percent,
                          (ii) in the case of any facility the 
                        construction of which begins after 
                        December 31, 2017, and before January 
                        1, 2019, 40 percent, and
                          (iii) in the case of any facility the 
                        construction of which begins after 
                        December 31, 2018, [and before January 
                        1, 2020,] 60 percent.
          (6) Phaseout for solar energy property.--
                  (A) In general.--Subject to subparagraph (B), 
                in the case of any energy property described in 
                paragraph (3)(A)(i) the construction of which 
                begins before January 1, 2022, the energy 
                percentage determined under paragraph (2) shall 
                be equal to--
                          (i) in the case of any property the 
                        construction of which begins after 
                        December 31, 2019, and before January 
                        1, 2021, 26 percent, and
                          (ii) in the case of any property the 
                        construction of which begins after 
                        December 31, 2020, and before January 
                        1, 2022, 22 percent.
                  (B) Placed in service deadline.--In the case 
                of any energy property described in paragraph 
                (3)(A)(i) the construction of which begins 
                before January 1, 2022, and which is not placed 
                in service before January 1, 2024, the energy 
                percentage determined under paragraph (2) shall 
                be equal to 10 percent.
          (7) Phaseout for fiber-optic solar, qualified fuel 
        cell, and qualified small wind energy property.--
                  (A) In general.--Subject to subparagraph (B), 
                in the case of any qualified fuel cell 
                property, qualified small wind property, or 
                energy property described in paragraph 
                (3)(A)(ii), the energy percentage determined 
                under paragraph (2) shall be equal to--
                          (i) in the case of any property the 
                        construction of which begins after 
                        December 31, 2019, and before January 
                        1, 2021, 26 percent, and
                          (ii) in the case of any property the 
                        construction of which begins after 
                        December 31, 2020, and before January 
                        1, 2022, 22 percent.
                  (B) Placed in service deadline.--In the case 
                of any energy property described in 
                subparagraph (A) which is not placed in service 
                before January 1, 2024, the energy percentage 
                determined under paragraph (2) shall be equal 
                to 0 percent.
  (b) Certain progress expenditure rules made applicable.--
Rules similar to the rules of subsections (c)(4) and (d) of 
section 46 (as in effect on the day before the date of the 
enactment of the Revenue Reconciliation Act of 1990) shall 
apply for purposes of subsection (a).
  (c) Definitions.--For purposes of this section--
          (1) Qualified fuel cell property.--
                  (A) In general.--The term ``qualified fuel 
                cell property'' means a fuel cell power plant 
                which--
                          (i) has a nameplate capacity of at 
                        least 0.5 kilowatt of electricity using 
                        an electrochemical process, and
                          (ii) has an electricity-only 
                        generation efficiency greater than 30 
                        percent.
                  (B) Limitation.--In the case of qualified 
                fuel cell property placed in service during the 
                taxable year, the credit otherwise determined 
                under subsection (a) for such year with respect 
                to such property shall not exceed an amount 
                equal to $1,500 for each 0.5 kilowatt of 
                capacity of such property.
                  (C) Fuel cell power plant.--The term ``fuel 
                cell power plant'' means an integrated system 
                comprised of a fuel cell stack assembly and 
                associated balance of plant components which 
                converts a fuel into electricity using 
                electrochemical means.
                  (D) Termination.--The term ``qualified fuel 
                cell property'' shall not include any property 
                the construction of which does not begin before 
                January 1, 2022.
          (2) Qualified microturbine property.--
                  (A) In general.--The term ``qualified 
                microturbine property'' means a stationary 
                microturbine power plant which--
                          (i) has a nameplate capacity of less 
                        than 2,000 kilowatts, and
                          (ii) has an electricity-only 
                        generation efficiency of not less than 
                        26 percent at International Standard 
                        Organization conditions.
                  (B) Limitation.--In the case of qualified 
                microturbine property placed in service during 
                the taxable year, the credit otherwise 
                determined under subsection (a) for such year 
                with respect to such property shall not exceed 
                an amount equal to $200 for each kilowatt of 
                capacity of such property.
                  (C) Stationary microturbine power plant.--The 
                term ``stationary microturbine power plant'' 
                means an integrated system comprised of a gas 
                turbine engine, a combustor, a recuperator or 
                regenerator, a generator or alternator, and 
                associated balance of plant components which 
                converts a fuel into electricity and thermal 
                energy. Such term also includes all secondary 
                components located between the existing 
                infrastructure for fuel delivery and the 
                existing infrastructure for power distribution, 
                including equipment and controls for meeting 
                relevant power standards, such as voltage, 
                frequency, and power factors.
                  (D) Termination.--The term ``qualified 
                microturbine property'' shall not include any 
                property the construction of which does not 
                begin before January 1, 2022.
          (3) Combined heat and power system property.--
                  (A) Combined heat and power system 
                property.--The term ``combined heat and power 
                system property'' means property comprising a 
                system--
                          (i) which uses the same energy source 
                        for the simultaneous or sequential 
                        generation of electrical power, 
                        mechanical shaft power, or both, in 
                        combination with the generation of 
                        steam or other forms of useful thermal 
                        energy (including heating and cooling 
                        applications),
                          (ii) which produces--
                                  (I) at least 20 percent of 
                                its total useful energy in the 
                                form of thermal energy which is 
                                not used to produce electrical 
                                or mechanical power (or 
                                combination thereof), and
                                  (II) at least 20 percent of 
                                its total useful energy in the 
                                form of electrical or 
                                mechanical power (or 
                                combination thereof),
                          (iii) the energy efficiency 
                        percentage of which exceeds 60 percent, 
                        and
                          (iv) the construction of which begins 
                        before January 1, 2022.
                  (B) Limitation.--
                          (i) In general.--In the case of 
                        combined heat and power system property 
                        with an electrical capacity in excess 
                        of the applicable capacity placed in 
                        service during the taxable year, the 
                        credit under subsection (a)(1) 
                        (determined without regard to this 
                        paragraph) for such year shall be equal 
                        to the amount which bears the same 
                        ratio to such credit as the applicable 
                        capacity bears to the capacity of such 
                        property.
                          (ii) Applicable capacity.--For 
                        purposes of clause (i), the term 
                        ``applicable capacity'' means 15 
                        megawatts or a mechanical energy 
                        capacity of more than 20,000 horsepower 
                        or an equivalent combination of 
                        electrical and mechanical energy 
                        capacities.
                          (iii) Maximum capacity.--The term 
                        ``combined heat and power system 
                        property'' shall not include any 
                        property comprising a system if such 
                        system has a capacity in excess of 50 
                        megawatts or a mechanical energy 
                        capacity in excess of 67,000 horsepower 
                        or an equivalent combination of 
                        electrical and mechanical energy 
                        capacities.
                  (C) Special rules.--
                          (i) Energy efficiency percentage.--
                        For purposes of this paragraph, the 
                        energy efficiency percentage of a 
                        system is the fraction--
                                  (I) the numerator of which is 
                                the total useful electrical, 
                                thermal, and mechanical power 
                                produced by the system at 
                                normal operating rates, and 
                                expected to be consumed in its 
                                normal application, and
                                  (II) the denominator of which 
                                is the lower heating value of 
                                the fuel sources for the 
                                system.
                          (ii) Determinations made on Btu 
                        basis.--The energy efficiency 
                        percentage and the percentages under 
                        subparagraph (A)(ii) shall be 
                        determined on a Btu basis.
                          (iii) Input and output property not 
                        included.--The term ``combined heat and 
                        power system property'' does not 
                        include property used to transport the 
                        energy source to the facility or to 
                        distribute energy produced by the 
                        facility.
                  (D) Systems using biomass.--If a system is 
                designed to use biomass (within the meaning of 
                paragraphs (2) and (3) of section 45(c) without 
                regard to the last sentence of paragraph 
                (3)(A)) for at least 90 percent of the energy 
                source--
                          (i) subparagraph (A)(iii) shall not 
                        apply, but
                          (ii) the amount of credit determined 
                        under subsection (a) with respect to 
                        such system shall not exceed the amount 
                        which bears the same ratio to such 
                        amount of credit (determined without 
                        regard to this subparagraph) as the 
                        energy efficiency percentage of such 
                        system bears to 60 percent.
          (4) Qualified small wind energy property.--
                  (A) In general.--The term ``qualified small 
                wind energy property'' means property which 
                uses a qualifying small wind turbine to 
                generate electricity.
                  (B) Qualifying small wind turbine.--The term 
                ``qualifying small wind turbine'' means a wind 
                turbine which has a nameplate capacity of not 
                more than 100 kilowatts.
                  (C) Termination.--The term ``qualified small 
                wind energy property'' shall not include any 
                property the construction of which does not 
                begin before January 1, 2022.
  (d) Coordination with Department of Treasury grants.--In the 
case of any property with respect to which the Secretary makes 
a grant under section 1603 of the American Recovery and 
Reinvestment Tax Act of 2009--
          (1) Denial of production and investment credits.--No 
        credit shall be determined under this section or 
        section 45 with respect to such property for the 
        taxable year in which such grant is made or any 
        subsequent taxable year.
          (2) Recapture of credits for progress expenditures 
        made before grant.--If a credit was determined under 
        this section with respect to such property for any 
        taxable year ending before such grant is made--
                  (A) the tax imposed under subtitle A on the 
                taxpayer for the taxable year in which such 
                grant is made shall be increased by so much of 
                such credit as was allowed under section 38,
                  (B) the general business carryforwards under 
                section 39 shall be adjusted so as to recapture 
                the portion of such credit which was not so 
                allowed, and
                  (C) the amount of such grant shall be 
                determined without regard to any reduction in 
                the basis of such property by reason of such 
                credit.
          (3) Treatment of grants.--Any such grant--
                  (A) shall not be includible in the gross 
                income or alternative minimum taxable income of 
                the taxpayer, but
                  (B) shall be taken into account in 
                determining the basis of the property to which 
                such grant relates, except that the basis of 
                such property shall be reduced under section 
                50(c) in the same manner as a credit allowed 
                under subsection (a).

           *       *       *       *       *       *       *


Subpart F--RULES FOR COMPUTING WORK OPPORTUNITY CREDIT

           *       *       *       *       *       *       *


SEC. 51. AMOUNT OF CREDIT.

  (a) Determination of amount.--For purposes of section 38, the 
amount of the work opportunity credit determined under this 
section for the taxable year shall be equal to 40 percent of 
the qualified first-year wages for such year.
  (b) Qualified wages defined.--For purposes of this subpart--
          (1) In general.--The term ``qualified wages'' means 
        the wages paid or incurred by the employer during the 
        taxable year to individuals who are members of a 
        targeted group.
          (2) Qualified first-year wages.--The term ``qualified 
        first-year wages'' means, with respect to any 
        individual, qualified wages attributable to service 
        rendered during the 1-year period beginning with the 
        day the individual begins work for the employer.
          (3) Limitation on wages per year taken into 
        account.--The amount of the qualified first-year wages 
        which may be taken into account with respect to any 
        individual shall not exceed $6,000 per year ($12,000 
        per year in the case of any individual who is a 
        qualified veteran by reason of subsection 
        (d)(3)(A)(ii)(I), $14,000 per year in the case of any 
        individual who is a qualified veteran by reason of 
        subsection (d)(3)(A)(iv), and $24,000 per year in the 
        case of any individual who is a qualified veteran by 
        reason of subsection (d)(3)(A)(ii)(II)).
  (c) Wages defined.--For purposes of this subpart--
          (1) In general.--Except as otherwise provided in this 
        subsection and subsection (h)(2), the term ``wages'' 
        has the meaning given to such term by subsection (b) of 
        section 3306 (determined without regard to any dollar 
        limitation contained in such section).
          (2) On-the-job training and work supplementation 
        payments.--
                  (A) Exclusion for employers receiving on-the-
                job training payments.--The term ``wages'' 
                shall not include any amounts paid or incurred 
                by an employer for any period to any individual 
                for whom the employer receives federally funded 
                payments for on-the-job training of such 
                individual for such period.
                  (B) Reduction for work supplementation 
                payments to employers.--The amount of wages 
                which would (but for this subparagraph) be 
                qualified wages under this section for an 
                employer with respect to an individual for a 
                taxable year shall be reduced by an amount 
                equal to the amount of the payments made to 
                such employer (however utilized by such 
                employer) with respect to such individual for 
                such taxable year under a program established 
                under section 482(e) of the Social Security 
                Act.
          (3) Payments for services during labor disputes.--
        If--
                  (A) the principal place of employment of an 
                individual with the employer is at a plant or 
                facility, and
                  (B) there is a strike or lockout involving 
                employees at such plant or facility,
        the term ``wages'' shall not include any amount paid or 
        incurred by the employer to such individual for 
        services which are the same as, or substantially 
        similar to, those services performed by employees 
        participating in, or affected by, the strike or lockout 
        during the period of such strike or lockout.
          (4) Termination.--The term ``wages'' shall not 
        include any amount paid or incurred to an individual 
        who begins work for the employer after [December 31, 
        2019] December 31, 2020.
          (5) Coordination with payroll tax forgiveness.--The 
        term ``wages'' shall not include any amount paid or 
        incurred to a qualified individual (as defined in 
        section 3111(d)(3))   during the 1-year period 
        beginning on the hiring date of such individual by a 
        qualified employer (as defined in section 3111(d))   
        unless such qualified employer makes an election not to 
        have section 3111(d)   apply.
  (d) Members of targeted groups.--For purposes of this 
subpart--
          (1) In general.--An individual is a member of a 
        targeted group if such individual is--
                  (A) a qualified IV-A recipient,
                  (B) a qualified veteran,
                  (C) a qualified ex-felon,
                  (D) a designated community resident,
                  (E) a vocational rehabilitation referral,
                  (F) a qualified summer youth employee,
                  (G) a qualified supplemental nutrition 
                assistance program benefits recipient,
                  (H) a qualified SSI recipient,
                  (I) a long-term family assistance recipient, 
                or
                  (J) a qualified long-term unemployment 
                recipient.
          (2) Qualified IV-A recipient.--
                  (A) In general.--The term ``qualified IV-A 
                recipient'' means any individual who is 
                certified by the designated local agency as 
                being a member of a family receiving assistance 
                under a IV-A program for any 9 months during 
                the 18-month period ending on the hiring date.
                  (B) IV-A program.--For purposes of this 
                paragraph, the term ``IV-A program'' means any 
                program providing assistance under a State 
                program funded under part A of title IV of the 
                Social Security Act and any successor of such 
                program.
          (3) Qualified veteran.--
                  (A) In general.--The term ``qualified 
                veteran'' means any veteran who is certified by 
                the designated local agency as--
                          (i) being a member of a family 
                        receiving assistance under a 
                        supplemental nutrition assistance 
                        program under the Food and Nutrition 
                        Act of 2008 for at least a 3-month 
                        period ending during the 12-month 
                        period ending on the hiring date,
                          (ii) entitled to compensation for a 
                        service-connected disability, and--
                                  (I) having a hiring date 
                                which is not more that 1 year 
                                after having been discharged or 
                                released from active duty in 
                                the Armed Forces of the United 
                                States, or
                                  (II) having aggregate periods 
                                of unemployment during the 1-
                                year period ending on the 
                                hiring date which equal or 
                                exceed 6 months,
                          (iii) having aggregate periods of 
                        unemployment during the 1-year period 
                        ending on the hiring date which equal 
                        or exceed 4 weeks (but less than 6 
                        months), or
                          (iv) having aggregate periods of 
                        unemployment during the 1-year period 
                        ending on the hiring date which equal 
                        or exceed 6 months.
                  (B) Veteran.--For purposes of subparagraph 
                (A), the term ``veteran'' means any individual 
                who is certified by the designated local agency 
                as--
                          (i)(I) having served on active duty 
                        (other than active duty for training) 
                        in the Armed Forces of the United 
                        States for a period of more than 180 
                        days, or
                                  (II) having been discharged 
                                or released from active duty in 
                                the Armed Forces of the United 
                                States for a service-connected 
                                disability, and
                          (ii) not having any day during the 
                        60-day period ending on the hiring date 
                        which was a day of extended active duty 
                        in the Armed Forces of the United 
                        States.
                For purposes of clause (ii), the term 
                ``extended active duty'' means a period of more 
                than 90 days during which the individual was on 
                active duty (other than active duty for 
                training).
                  (C) Other definitions.--For purposes of 
                subparagraph (A), the terms ``compensation'' 
                and ``service-connected'' have the meanings 
                given such terms under section 101 of title 38, 
                United States Code.
          (4) Qualified ex-felon.--The term ``qualified ex-
        felon'' means any individual who is certified by the 
        designated local agency--
                  (A) as having been convicted of a felony 
                under any statute of the United States or any 
                State, and
                  (B) as having a hiring date which is not more 
                than 1 year after the last date on which such 
                individual was so convicted or was released 
                from prison.
          (5) Designated community residents.--
                  (A) In general.--The term ``designated 
                community resident'' means any individual who 
                is certified by the designated local agency--
                          (i) as having attained age 18 but not 
                        age 40 on the hiring date, and
                          (ii) as having his principal place of 
                        abode within an empowerment zone, 
                        enterprise community, renewal 
                        community, or rural renewal county.
                  (B) Individual must continue to reside in 
                zone, community, or county.--In the case of a 
                designated community resident, the term 
                ``qualified wages'' shall not include wages 
                paid or incurred for services performed while 
                the individual's principal place of abode is 
                outside an empowerment zone, enterprise 
                community, renewal community, or rural renewal 
                county.
                  (C) Rural renewal county.--For purposes of 
                this paragraph, the term ``rural renewal 
                county'' means any county which--
                          (i) is outside a metropolitan 
                        statistical area (defined as such by 
                        the Office of Management and Budget), 
                        and
                          (ii) during the 5-year periods 1990 
                        through 1994 and 1995 through 1999 had 
                        a net population loss.
          (6) Vocational rehabilitation referral.--The term 
        ``vocational rehabilitation referral'' means any 
        individual who is certified by the designated local 
        agency as--
                  (A) having a physical or mental disability 
                which, for such individual, constitutes or 
                results in a substantial handicap to 
                employment, and
                  (B) having been referred to the employer upon 
                completion of (or while receiving) 
                rehabilitative services pursuant to--
                          (i) an individualized written plan 
                        for employment under a State plan for 
                        vocational rehabilitation services 
                        approved under the Rehabilitation Act 
                        of 1973,
                          (ii) a program of vocational 
                        rehabilitation carried out under 
                        chapter 31 of title 38, United States 
                        Code, or
                          (iii) an individual work plan 
                        developed and implemented by an 
                        employment network pursuant to 
                        subsection (g) of section 1148 of the 
                        Social Security Act with respect to 
                        which the requirements of such 
                        subsection are met.
          (7) Qualified summer youth employee.--
                  (A) In general.--The term ``qualified summer 
                youth employee'' means any individual--
                          (i) who performs services for the 
                        employer between May 1 and September 
                        15,
                          (ii) who is certified by the 
                        designated local agency as having 
                        attained age 16 but not 18 on the 
                        hiring date (or if later, on May 1 of 
                        the calendar year involved),
                          (iii) who has not been an employee of 
                        the employer during any period prior to 
                        the 90-day period described in 
                        subparagraph (B)(i), and
                          (iv) who is certified by the 
                        designated local agency as having his 
                        principal place of abode within an 
                        empowerment zone, enterprise community, 
                        or renewal community.
                  (B) Special rules for determining amount of 
                credit.--For purposes of applying this subpart 
                to wages paid or incurred to any qualified 
                summer youth employee--
                          (i) subsection (b)(2) shall be 
                        applied by substituting ``any 90-day 
                        period between May 1 and September 15'' 
                        for ``the 1-year period beginning with 
                        the day the individual begins work for 
                        the employer'', and
                          (ii) subsection (b)(3) shall be 
                        applied by substituting ``$3,000'' for 
                        ``$6,000''.
                The preceding sentence shall not apply to an 
                individual who, with respect to the same 
                employer, is certified as a member of another 
                targeted group after such individual has been a 
                qualified summer youth employee.
                  (C) Youth must continue to reside in zone or 
                community.--Paragraph (5)(B) shall apply for 
                purposes of subparagraph (A)(iv).
          (8) Qualified supplemental nutrition assistance 
        program benefits recipient.--
                  (A) In general.--The term ``qualified 
                supplemental nutrition assistance program 
                benefits recipient'' means any individual who 
                is certified by the designated local agency--
                          (i) as having attained age 18 but not 
                        age 40 on the hiring date, and
                          (ii) as being a member of a family--
                                  (I) receiving assistance 
                                under a supplemental nutrition 
                                assistance program under the 
                                Food and Nutrition Act of 2008 
                                for the 6-month period ending 
                                on the hiring date, or
                                  (II) receiving such 
                                assistance for at least 3 
                                months of the 5-month period 
                                ending on the hiring date, in 
                                the case of a member of a 
                                family who ceases to be 
                                eligible for such assistance 
                                under section 6(o) of the Food 
                                and Nutrition Act of 2008.
                  (B) Participation information.--
                Notwithstanding any other provision of law, the 
                Secretary of the Treasury and the Secretary of 
                Agriculture shall enter into an agreement to 
                provide information to designated local 
                agencies with respect to participation in the 
                supplemental nutrition assistance program.
          (9) Qualified SSI recipient.--The term ``qualified 
        SSI recipient'' means any individual who is certified 
        by the designated local agency as receiving 
        supplemental security income benefits under title XVI 
        of the Social Security Act (including supplemental 
        security income benefits of the type described in 
        section 1616 of such Act or section 212 of Public Law 
        93-66) for any month ending within the 60-day period 
        ending on the hiring date.
          (10) Long-term family assistance recipient.--The term 
        ``long-term family assistance recipient'' means any 
        individual who is certified by the designated local 
        agency--
                  (A) as being a member of a family receiving 
                assistance under a IV-A program (as defined in 
                paragraph (2)(B)) for at least the 18-month 
                period ending on the hiring date,
                  (B)(i) as being a member of a family 
                receiving such assistance for 18 months 
                beginning after August 5, 1997, and
                          (ii) as having a hiring date which is 
                        not more than 2 years after the end of 
                        the earliest such 18-month period, or
                  (C)(i) as being a member of a family which 
                ceased to be eligible for such assistance by 
                reason of any limitation imposed by Federal or 
                State law on the maximum period such assistance 
                is payable to a family, and
                          (ii) as having a hiring date which is 
                        not more than 2 years after the date of 
                        such cessation.
          (11) Hiring date.--The term ``hiring date'' means the 
        day the individual is hired by the employer.
          (12) Designated local agency.--The term ``designated 
        local agency'' means a State employment security agency 
        established in accordance with the Act of June 6, 1933, 
        as amended (29 U.S.C. 49-49n).
          (13) Special rules for certifications.--
                  (A) In general.--An individual shall not be 
                treated as a member of a targeted group 
                unless--
                          (i) on or before the day on which 
                        such individual begins work for the 
                        employer, the employer has received a 
                        certification from a designated local 
                        agency that such individual is a member 
                        of a targeted group, or
                          (ii)(I) on or before the day the 
                        individual is offered employment with 
                        the employer, a pre-screening notice is 
                        completed by the employer with respect 
                        to such individual, and
                                  (II) not later than the 28th 
                                day after the individual begins 
                                work for the employer, the 
                                employer submits such notice, 
                                signed by the employer and the 
                                individual under penalties of 
                                perjury, to the designated 
                                local agency as part of a 
                                written request for such a 
                                certification from such agency.
                For purposes of this paragraph, the term ``pre-
                screening notice'' means a document (in such 
                form as the Secretary shall prescribe) which 
                contains information provided by the individual 
                on the basis of which the employer believes 
                that the individual is a member of a targeted 
                group.
                  (B) Incorrect certifications.--If--
                          (i) an individual has been certified 
                        by a designated local agency as a 
                        member of a targeted group, and
                          (ii) such certification is incorrect 
                        because it was based on false 
                        information provided by such 
                        individual,
                the certification shall be revoked and wages 
                paid by the employer after the date on which 
                notice of revocation is received by the 
                employer shall not be treated as qualified 
                wages.
                  (C) Explanation of denial of request.--If a 
                designated local agency denies a request for 
                certification of membership in a targeted 
                group, such agency shall provide to the person 
                making such request a written explanation of 
                the reasons for such denial.
                  (D) Credit for unemployed veterans.--
                          (i) In general.--Notwithstanding 
                        subparagraph (A), for purposes of 
                        paragraph (3)(A)--
                                  (I) a veteran will be treated 
                                as certified by the designated 
                                local agency as having 
                                aggregate periods of 
                                unemployment meeting the 
                                requirements of clause (ii)(II) 
                                or (iv) of such paragraph 
                                (whichever is applicable) if 
                                such veteran is certified by 
                                such agency as being in receipt 
                                of unemployment compensation 
                                under State or Federal law for 
                                not less than 6 months during 
                                the 1-year period ending on the 
                                hiring date, and
                                  (II) a veteran will be 
                                treated as certified by the 
                                designated local agency as 
                                having aggregate periods of 
                                unemployment meeting the 
                                requirements of clause (iii) of 
                                such paragraph if such veteran 
                                is certified by such agency as 
                                being in receipt of 
                                unemployment compensation under 
                                State or Federal law for not 
                                less than 4 weeks (but less 
                                than 6 months) during the 1-
                                year period ending on the 
                                hiring date.
                          (ii) Regulatory authority.--The 
                        Secretary may provide alternative 
                        methods for certification of a veteran 
                        as a qualified veteran described in 
                        clause (ii)(II), (iii), or (iv) of 
                        paragraph (3)(A), at the Secretary's 
                        discretion.
          (14) Credit allowed for unemployed veterans and 
        disconnected youth hired in 2009 or 2010.--
                  (A) In general.--Any unemployed veteran or 
                disconnected youth who begins work for the 
                employer during 2009 or 2010 shall be treated 
                as a member of a targeted group for purposes of 
                this subpart.
                  (B) Definitions.--For purposes of this 
                paragraph--
                          (i) Unemployed veteran.--The term 
                        ``unemployed veteran'' means any 
                        veteran (as defined in paragraph 
                        (3)(B), determined without regard to 
                        clause (ii) thereof) who is certified 
                        by the designated local agency as--
                                  (I) having been discharged or 
                                released from active duty in 
                                the Armed Forces at any time 
                                during the 5-year period ending 
                                on the hiring date, and
                                  (II) being in receipt of 
                                unemployment compensation under 
                                State or Federal law for not 
                                less than 4 weeks during the 1-
                                year period ending on the 
                                hiring date.
                          (ii) Disconnected youth.--The term 
                        ``disconnected youth'' means any 
                        individual who is certified by the 
                        designated local agency--
                                  (I) as having attained age 16 
                                but not age 25 on the hiring 
                                date,
                                  (II) as not regularly 
                                attending any secondary, 
                                technical, or post-secondary 
                                school during the 6-month 
                                period preceding the hiring 
                                date,
                                  (III) as not regularly 
                                employed during such 6-month 
                                period, and
                                  (IV) as not readily 
                                employable by reason of lacking 
                                a sufficient number of basic 
                                skills.
          (15) Qualified long-term unemployment recipient.--The 
        term ``qualified long-term unemployment recipient'' 
        means any individual who is certified by the designated 
        local agency as being in a period of unemployment 
        which--
                  (A) is not less than 27 consecutive weeks, 
                and
                  (B) includes a period in which the individual 
                was receiving unemployment compensation under 
                State or Federal law.
  (e) Credit for second-year wages for employment of long-term 
family assistance recipients.--
          (1) In general.--With respect to the employment of a 
        long-term family assistance recipient--
                  (A) the amount of the work opportunity credit 
                determined under this section for the taxable 
                year shall include 50 percent of the qualified 
                second-year wages for such year, and
                  (B) in lieu of applying subsection (b)(3), 
                the amount of the qualified first-year wages, 
                and the amount of qualified second-year wages, 
                which may be taken into account with respect to 
                such a recipient shall not exceed $10,000 per 
                year.
          (2) Qualified second-year wages.--For purposes of 
        this subsection, the term ``qualified second-year 
        wages'' means qualified wages--
                  (A) which are paid to a long-term family 
                assistance recipient, and
                  (B) which are attributable to service 
                rendered during the 1-year period beginning on 
                the day after the last day of the 1-year period 
                with respect to such recipient determined under 
                subsection (b)(2).
          (3) Special rules for agricultural and railway 
        labor.--If such recipient is an employee to whom 
        subparagraph (A) or (B) of subsection (h)(1) applies, 
        rules similar to the rules of such subparagraphs shall 
        apply except that--
                  (A) such subparagraph (A) shall be applied by 
                substituting ``$10,000'' for ``$6,000'', and
                  (B) such subparagraph (B) shall be applied by 
                substituting ``$833.33'' for ``$500''.
  (f) Remuneration must be for trade or business employment.--
          (1) In general.--For purposes of this subpart, 
        remuneration paid by an employer to an employee during 
        any taxable year shall be taken into account only if 
        more than one-half of the remuneration so paid is for 
        services performed in a trade or business of the 
        employer.
          (2) Special rule for certain determination.--Any 
        determination as to whether paragraph (1), or 
        subparagraph (A) or (B) of subsection (h)(1), applies 
        with respect to any employee for any taxable year shall 
        be made without regard to subsections (a) and (b) of 
        section 52.
  (g) United States Employment Service to notify employers of 
availability of credit.--The United States Employment Service, 
in consultation with the Internal Revenue Service, shall take 
such steps as may be necessary or appropriate to keep employers 
apprised of the availability of the work opportunity credit 
determined under this subpart.
  (h) Special rules for agricultural labor and railway labor.--
For purposes of this subpart--
          (1) Unemployment insurance wages.--
                  (A) Agricultural labor.--If the services 
                performed by any employee for an employer 
                during more than one-half of any pay period 
                (within the meaning of section 3306(d)) taken 
                into account with respect to any year 
                constitute agricultural labor (within the 
                meaning of section 3306(k)), the term 
                ``unemployment insurance wages'' means, with 
                respect to the remuneration paid by the 
                employer to such employee for such year, an 
                amount equal to so much of such remuneration as 
                constitutes ``wages'' within the meaning of 
                section 3121(a), except that the contribution 
                and benefit base for each calendar year shall 
                be deemed to be $6,000.
                  (B) Railway labor.--If more than one-half of 
                remuneration paid by an employer to an employee 
                during any year is remuneration for service 
                described in section 3306(c)(9), the term 
                ``unemployment insurance wages'' means, with 
                respect to such employee for such year, an 
                amount equal to so much of the remuneration 
                paid to such employee during such year which 
                would be subject to contributions under section 
                8(a) of the Railroad Unemployment Insurance Act 
                (45 U.S.C. 358(a)) if the maximum amount 
                subject to such contributions were $500 per 
                month.
          (2) Wages.--In any case to which subparagraph (A) or 
        (B) of paragraph (1) applies, the term ``wages'' means 
        unemployment insurance wages (determined without regard 
        to any dollar limitation).
  (i) Certain individuals ineligible.--
          (1) Related individuals.--No wages shall be taken 
        into account under subsection (a) with respect to an 
        individual who--
                  (A) bears any of the relationships described 
                in subparagraphs (A) through (G) of section 
                152(d)(2) to the taxpayer, or, if the taxpayer 
                is a corporation, to an individual who owns, 
                directly or indirectly, more than 50 percent in 
                value of the outstanding stock of the 
                corporation, or, if the taxpayer is an entity 
                other than a corporation, to any individual who 
                owns, directly or indirectly, more than 50 
                percent of the capital and profits interests in 
                the entity (determined with the application of 
                section 267(c)),
                  (B) if the taxpayer is an estate or trust, is 
                a grantor, beneficiary, or fiduciary of the 
                estate or trust, or is an individual who bears 
                any of the relationships described in 
                subparagraphs (A) through (G) of section 
                152(d)(2) to a grantor, beneficiary, or 
                fiduciary of the estate or trust, or
                  (C) is a dependent (described in section 
                152(d)(2)(H)) of the taxpayer, or, if the 
                taxpayer is a corporation, of an individual 
                described in subparagraph (A), or, if the 
                taxpayer is an estate or trust, of a grantor, 
                beneficiary, or fiduciary of the estate or 
                trust.
          (2) Nonqualifying rehires.--No wages shall be taken 
        into account under subsection (a) with respect to any 
        individual if, prior to the hiring date of such 
        individual, such individual had been employed by the 
        employer at any time.
          (3) Individuals not meeting minimum employment 
        periods.--
                  (A) Reduction of credit for individuals 
                performing fewer than 400 hours of service.--In 
                the case of an individual who has performed at 
                least 120 hours, but less than 400 hours, of 
                service for the employer, subsection (a) shall 
                be applied by substituting ``25 percent'' for 
                ``40 percent''.
                  (B) Denial of credit for individuals 
                performing fewer than 120 hours of service.--No 
                wages shall be taken into account under 
                subsection (a) with respect to any individual 
                unless such individual has performed at least 
                120 hours of service for the employer.
  (j) Election to have work opportunity credit not apply.--
          (1) In general.--A taxpayer may elect to have this 
        section not apply for any taxable year.
          (2) Time for making election.--An election under 
        paragraph (1) for any taxable year may be made (or 
        revoked) at any time before the expiration of the 3-
        year period beginning on the last date prescribed by 
        law for filing the return for such taxable year 
        (determined without regard to extensions).
          (3) Manner of making election.--An election under 
        paragraph (1) (or revocation thereof) shall be made in 
        such manner as the Secretary may by regulations 
        prescribe.
  (k) Treatment of successor employers; treatment of employees 
performing services for other persons.--
          (1) Treatment of successor employers.--Under 
        regulations prescribed by the Secretary, in the case of 
        a successor employer referred to in section 3306(b)(1), 
        the determination of the amount of the credit under 
        this section with respect to wages paid by such 
        successor employer shall be made in the same manner as 
        if such wages were paid by the predecessor employer 
        referred to in such section.
          (2) Treatment of employees performing services for 
        other persons.--No credit shall be determined under 
        this section with respect to remuneration paid by an 
        employer to an employee for services performed by such 
        employee for another person unless the amount 
        reasonably expected to be received by the employer for 
        such services from such other person exceeds the 
        remuneration paid by the employer to such employee for 
        such services.

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PART VI--ALTERNATIVE MINIMUM TAX

           *       *       *       *       *       *       *


SEC. 56. ADJUSTMENTS IN COMPUTING ALTERNATIVE MINIMUM TAXABLE INCOME.

  (a) Adjustments applicable to all taxpayers.--In determining 
the amount of the alternative minimum taxable income for any 
taxable year the following treatment shall apply (in lieu of 
the treatment applicable for purposes of computing the regular 
tax):
          (1) Depreciation.--
                  (A) In general.--
                          (i) Property other than certain 
                        personal property.--Except as provided 
                        in clause (ii), the depreciation 
                        deduction allowable under section 167 
                        with respect to any tangible property 
                        placed in service after December 31, 
                        1986, shall be determined under the 
                        alternative system of section 168(g). 
                        In the case of property placed in 
                        service after December 31, 1998, the 
                        preceding sentence shall not apply but 
                        clause (ii) shall continue to apply.
                          (ii) 150-percent declining balance 
                        method for certain property.--The 
                        method of depreciation used shall be--
                                  (I) the 150 percent declining 
                                balance method,
                                  (II) switching to the 
                                straight line method for the 
                                1st taxable year for which 
                                using the straight line method 
                                with respect to the adjusted 
                                basis as of the beginning of 
                                the year will yield a higher 
                                allowance.
                 The preceding sentence shall not apply to any 
                section 1250 property (as defined in section 
                1250(c)) (and the straight line method shall be 
                used for such section 1250 property) or to any 
                other property if the depreciation deduction 
                determined under section 168 with respect to 
                such other property for purposes of the regular 
                tax is determined by using the straight line 
                method.
                  (B) Exception for certain property.--This 
                paragraph shall not apply to property described 
                in paragraph (1), (2), (3), or (4) of section 
                168(f), or in section 168(e)(3)(C)(iv).
                  (C) Coordination with transitional rules.--
                          (i) In general.--This paragraph shall 
                        not apply to property placed in service 
                        after December 31, 1986, to which the 
                        amendments made by section 201 of the 
                        Tax Reform Act of 1986 do not apply by 
                        reason of section 203, 204, or 251(d) 
                        of such Act.
                          (ii) Treatment of certain property 
                        placed in service before 1987.--This 
                        paragraph shall apply to any property 
                        to which the amendments made by section 
                        201 of the Tax Reform Act of 1986 apply 
                        by reason of an election under section 
                        203(a)(1)(B) of such Act without regard 
                        to the requirement of subparagraph (A) 
                        that the property be placed in service 
                        after December 31, 1986.
                  (D) Normalization rules.--With respect to 
                public utility property described in section 
                168(i)(10), the Secretary shall prescribe the 
                requirements of a normalization method of 
                accounting for this section.
          (2) Mining exploration and development costs.--
                  (A) In general.--With respect to each mine or 
                other natural deposit (other than an oil, gas, 
                or geothermal well) of the taxpayer, the amount 
                allowable as a deduction under section 616(a) 
                or 617(a) (determined without regard to section 
                291(b)) in computing the regular tax for costs 
                paid or incurred after December 31, 1986, shall 
                be capitalized and amortized ratably over the 
                10-year period beginning with the taxable year 
                in which the expenditures were made.
                  (B) Loss allowed.--If a loss is sustained 
                with respect to any property described in 
                subparagraph (A), a deduction shall be allowed 
                for the expenditures described in subparagraph 
                (A) for the taxable year in which such loss is 
                sustained in an amount equal to the lesser of--
                          (i) the amount allowable under 
                        section 165(a) for the expenditures if 
                        they had remained capitalized, or
                          (ii) the amount of such expenditures 
                        which have not previously been 
                        amortized under subparagraph (A).
          (3) Treatment of certain long-term contracts.--In the 
        case of any long-term contract entered into by the 
        taxpayer on or after March 1, 1986, the taxable income 
        from such contract shall be determined under the 
        percentage of completion method of accounting (as 
        modified by section 460(b)). For purposes of the 
        preceding sentence, in the case of a contract described 
        in section 460(e)(1), the percentage of the contract 
        completed shall be determined under section 460(b)(1) 
        by using the simplified procedures for allocation of 
        costs prescribed under section 460(b)(3). The first 
        sentence of this paragraph shall not apply to any home 
        construction contract (as defined in section 
        460(e)(6)).
          (4) Alternative tax net operating loss deduction.--
        The alternative tax net operating loss deduction shall 
        be allowed in lieu of the net operating loss deduction 
        allowed under section 172.
          (5) Pollution control facilities.--In the case of any 
        certified pollution control facility placed in service 
        after December 31, 1986, the deduction allowable under 
        section 169 (without regard to section 291) shall be 
        determined under the alternative system of section 
        168(g). In the case of such a facility placed in 
        service after December 31, 1998, such deduction shall 
        be determined under section 168 using the straight line 
        method.
          (6) Adjusted basis.--The adjusted basis of any 
        property to which paragraph (1) or (5) applies (or with 
        respect to which there are any expenditures to which 
        paragraph (2) or subsection (b)(2) applies) shall be 
        determined on the basis of the treatment prescribed in 
        paragraph (1), (2), or (5), or subsection (b)(2), 
        whichever applies.
          (7) Section 87 not applicable.--Section 87 (relating 
        to alcohol fuel credit) shall not apply.
  (b) Adjustments applicable to individuals.--In determining 
the amount of the alternative minimum taxable income of any 
taxpayer (other than a corporation), the following treatment 
shall apply (in lieu of the treatment applicable for purposes 
of computing the regular tax):
          (1) Limitation on deductions.--
                  (A) In general.--No deduction shall be 
                allowed--
                          (i) for any miscellaneous itemized 
                        deduction (as defined in section 
                        67(b)), or
                          (ii) for any taxes described in 
                        paragraph (1), (2), or (3) of section 
                        164(a) or clause (ii) of section 
                        164(b)(5)(A).
                Clause (ii) shall not apply to any amount 
                allowable in computing adjusted gross income.
                  [(B) Medical expenses.--In determining the 
                amount allowable as a deduction under section 
                213, subsection (a) of section 213 shall be 
                applied without regard to subsection (f) of 
                such section. This subparagraph shall not apply 
                to taxable years beginning after December 31, 
                2016, and ending before January 1, 2019 ]
                  [(C)] (B) Interest.--In determining the 
                amount allowable as a deduction for interest, 
                subsections (d) and (h) of section 163 shall 
                apply, except that--
                          (i) in lieu of the exception under 
                        section 163(h)(2)(D), the term 
                        ``personal interest'' shall not include 
                        any qualified housing interest (as 
                        defined in subsection (e)),
                          (ii) interest on any specified 
                        private activity bond (and any amount 
                        treated as interest on a specified 
                        private activity bond under section 
                        57(a)(5)(B)), and any deduction 
                        referred to in section 57(a)(5)(A), 
                        shall be treated as includible in gross 
                        income (or as deductible) for purposes 
                        of applying section 163(d),
                          (iii) in lieu of the exception under 
                        section 163(d)(3)(B)(i), the term 
                        ``investment interest'' shall not 
                        include any qualified housing interest 
                        (as defined in subsection (e)), and
                          (iv) the adjustments of this section 
                        and sections 57 and 58 shall apply in 
                        determining net investment income under 
                        section 163(d).
                  [(D)] (C) Treatment of certain recoveries.--
                No recovery of any tax to which subparagraph 
                (A)(ii) applied shall be included in gross 
                income for purposes of determining alternative 
                minimum taxable income.
                  [(E)] (D) Standard deduction and deduction 
                for personal exemptions not allowed.--The 
                standard deduction under section 63(c), the 
                deduction for personal exemptions under section 
                151, and the deduction under section 642(b) 
                shall not be allowed.
                  [(F)] (E) Section 68 not applicable.--Section 
                68 shall not apply.
          (2) Circulation and research and experimental 
        expenditures.--
                  (A) In general.--The amount allowable as a 
                deduction under section 173 or 174(a) in 
                computing the regular tax for amounts paid or 
                incurred after December 31, 1986, shall be 
                capitalized and--
                          (i) in the case of circulation 
                        expenditures described in section 173, 
                        shall be amortized ratably over the 3-
                        year period beginning with the taxable 
                        year in which the expenditures were 
                        made, or
                          (ii) in the case of research and 
                        experimental expenditures described in 
                        section 174(a), shall be amortized 
                        ratably over the 10-year period 
                        beginning with the taxable year in 
                        which the expenditures were made.
                  (B) Loss allowed.--If a loss is sustained 
                with respect to any property described in 
                subparagraph (A), a deduction shall be allowed 
                for the expenditures described in subparagraph 
                (A) for the taxable year in which such loss is 
                sustained in an amount equal to the lesser of--
                          (i) the amount allowable under 
                        section 165(a) for the expenditures if 
                        they had remained capitalized, or
                          (ii) the amount of such expenditures 
                        which have not previously been 
                        amortized under subparagraph (A).
                  (C) Exception for certain research and 
                experimental expenditures.--If the taxpayer 
                materially participates (within the meaning of 
                section 469(h)) in an activity, this paragraph 
                shall not apply to any amount allowable as a 
                deduction under section 174(a) for expenditures 
                paid or incurred in connection with such 
                activity.
          (3) Treatment of incentive stock options.--Section 
        421 shall not apply to the transfer of stock acquired 
        pursuant to the exercise of an incentive stock option 
        (as defined in section 422). Section 422(c)(2) shall 
        apply in any case where the disposition and the 
        inclusion for purposes of this part are within the same 
        taxable year and such section shall not apply in any 
        other case. The adjusted basis of any stock so acquired 
        shall be determined on the basis of the treatment 
        prescribed by this paragraph.
  (d) Alternative tax net operating loss deduction defined.--
          (1) In general.--For purposes of subsection (a)(4), 
        the term ``alternative tax net operating loss 
        deduction'' means the net operating loss deduction 
        allowable for the taxable year under section 172, 
        except that--
                  (A) the amount of such deduction shall not 
                exceed the sum of--
                          (i) the lesser of--
                                  (I) the amount of such 
                                deduction attributable to net 
                                operating losses (other than 
                                the deduction described in 
                                clause (ii)(I)), or
                                  (II) 90 percent of 
                                alternative minimum taxable 
                                income determined without 
                                regard to such deduction and 
                                the deduction under section 
                                199, plus
                          (ii) the lesser of--
                                  (I) the amount of such 
                                deduction attributable to an 
                                applicable net operating loss 
                                with respect to which an 
                                election is made under section 
                                172(b)(1)(H) (as in effect 
                                before its repeal by the Tax 
                                Increase Prevention Act of 
                                2014), or
                                  (II) alternative minimum 
                                taxable income determined 
                                without regard to such 
                                deduction and the deduction 
                                under section 199   reduced by 
                                the amount determined under 
                                clause (i), and
                  (B) in determining the amount of such 
                deduction--
                          (i) the net operating loss (within 
                        the meaning of section 172(c)) for any 
                        loss year shall be adjusted as provided 
                        in paragraph (2), and
                          (ii) appropriate adjustments in the 
                        application of section 172(b)(2) shall 
                        be made to take into account the 
                        limitation of subparagraph (A).
          (2) Adjustments to net operating loss computation.--
                  (A) Post-1986 loss years.--In the case of a 
                loss year beginning after December 31, 1986, 
                the net operating loss for such year under 
                section 172(c) shall--
                          (i) be determined with the 
                        adjustments provided in this section 
                        and section 58, and
                          (ii) be reduced by the items of tax 
                        preference determined under section 57 
                        for such year.
                An item of tax preference shall be taken into 
                account under clause (ii) only to the extent 
                such item increased the amount of the net 
                operating loss for the taxable year under 
                section 172(c).
                  (B) Pre-1987 years.--In the case of loss 
                years beginning before January 1, 1987, the 
                amount of the net operating loss which may be 
                carried over to taxable years beginning after 
                December 31, 1986, for purposes of paragraph 
                (2), shall be equal to the amount which may be 
                carried from the loss year to the first taxable 
                year of the taxpayer beginning after December 
                31, 1986.
  (e) Qualified housing interest.--For purposes of this part--
          (1) In general.--The term ``qualified housing 
        interest'' means interest which is qualified residence 
        interest (as defined in section 163(h)(3)) and is paid 
        or accrued during the taxable year on indebtedness 
        which is incurred in acquiring, constructing, or 
        substantially improving any property which--
                  (A) is the principal residence (within the 
                meaning of section 121) of the taxpayer at the 
                time such interest accrues, or
                  (B) is a qualified dwelling which is a 
                qualified residence (within the meaning of 
                section 163(h)(4)).
        Such term also includes interest on any indebtedness 
        resulting from the refinancing of indebtedness meeting 
        the requirements of the preceding sentence; but only to 
        the extent that the amount of the indebtedness 
        resulting from such refinancing does not exceed the 
        amount of the refinanced indebtedness immediately 
        before the refinancing.
          (2) Qualified dwelling.--The term ``qualified 
        dwelling'' means any--
                  (A) house,
                  (B) apartment,
                  (C) condominium, or
                  (D) mobile home not used on a transient basis 
                (within the meaning of section 
                7701(a)(19)(C)(v)),
        including all structures or other property appurtenant 
        thereto.
          (3) Special rule for indebtedness incurred before 
        July 1, 1982.--The term ``qualified housing interest'' 
        includes interest which is qualified residence interest 
        (as defined in section 163(h)(3)) and is paid or 
        accrued on indebtedness which--
                  (A) was incurred by the taxpayer before July 
                1, 1982, and
                  (B) is secured by property which, at the time 
                such indebtedness was incurred, was--
                          (i) the principal residence (within 
                        the meaning of section 121) of the 
                        taxpayer, or
                          (ii) a qualified dwelling used by the 
                        taxpayer (or any member of his family 
                        (within the meaning of section 
                        267(c)(4))).

           *       *       *       *       *       *       *


Subchapter B--COMPUTATION OF TAXABLE INCOME

           *       *       *       *       *       *       *


PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME

           *       *       *       *       *       *       *


SEC. 108. INCOME FROM DISCHARGE OF INDEBTEDNESS.

  (a) Exclusion from gross income.--
          (1) In general.--Gross income does not include any 
        amount which (but for this subsection) would be 
        includible in gross income by reason of the discharge 
        (in whole or in part) of indebtedness of the taxpayer 
        if--
                  (A) the discharge occurs in a title 11 case,
                  (B) the discharge occurs when the taxpayer is 
                insolvent,
                  (C) the indebtedness discharged is qualified 
                farm indebtedness,
                  (D) in the case of a taxpayer other than a C 
                corporation, the indebtedness discharged is 
                qualified real property business indebtedness, 
                or
                  (E) the indebtedness discharged is qualified 
                principal residence indebtedness which is 
                discharged--
                          (i) before [January 1, 2018] January 
                        1, 2021, or
                          (ii) subject to an arrangement that 
                        is entered into and evidenced in 
                        writing before [January 1, 2018] 
                        January 1, 2021.
          (2) Coordination of exclusions.--
                  (A) Title 11 exclusion takes precedence.--
                Subparagraphs (B), (C), (D), and (E) of 
                paragraph (1) shall not apply to a discharge 
                which occurs in a title 11 case.
                  (B) Insolvency exclusion takes precedence 
                over qualified farm exclusion and qualified 
                real property business exclusion.--
                Subparagraphs (C) and (D) of paragraph (1) 
                shall not apply to a discharge to the extent 
                the taxpayer is insolvent.
                  (C) Principal residence exclusion takes 
                precedence over insolvency exclusion unless 
                elected otherwise.--Paragraph (1)(B) shall not 
                apply to a discharge to which paragraph (1)(E) 
                applies unless the taxpayer elects to apply 
                paragraph (1)(B) in lieu of paragraph (1)(E).
          (3) Insolvency exclusion limited to amount of 
        insolvency.--In the case of a discharge to which 
        paragraph (1)(B) applies, the amount excluded under 
        paragraph (1)(B) shall not exceed the amount by which 
        the taxpayer is insolvent.
  (b) Reduction of tax attributes.--
          (1) In general.--The amount excluded from gross 
        income under subparagraph (A), (B), or (C) of 
        subsection (a)(1) shall be applied to reduce the tax 
        attributes of the taxpayer as provided in paragraph 
        (2).
          (2) Tax attributes affected; order of reduction.--
        Except as provided in paragraph (5), the reduction 
        referred to in paragraph (1) shall be made in the 
        following tax attributes in the following order:
                  (A) NOL.--Any net operating loss for the 
                taxable year of the discharge, and any net 
                operating loss carryover to such taxable year.
                  (B) General business credit.--Any carryover 
                to or from the taxable year of a discharge of 
                an amount for purposes for determining the 
                amount allowable as a credit under section 38 
                (relating to general business credit).
                  (C) Minimum tax credit.--The amount of the 
                minimum tax credit available under section 
                53(b) as of the beginning of the taxable year 
                immediately following the taxable year of the 
                discharge.
                  (D) Capital loss carryovers.--Any net capital 
                loss for the taxable year of the discharge, and 
                any capital loss carryover to such taxable year 
                under section 1212.
                  (E) Basis reduction.--
                          (i) In general.--The basis of the 
                        property of the taxpayer.
                          (ii) Cross reference.--For provisions 
                        for making the reduction described in 
                        clause (i), see section 1017.
                  (F) Passive activity loss and credit 
                carryovers.--Any passive activity loss or 
                credit carryover of the taxpayer under section 
                469(b) from the taxable year of the discharge.
                  (G) Foreign tax credit carryovers.--Any 
                carryover to or from the taxable year of the 
                discharge for purposes of determining the 
                amount of the credit allowable under section 
                27.
          (3) Amount of reduction.--
                  (A) In general.--Except as provided in 
                subparagraph (B), the reductions described in 
                paragraph (2) shall be one dollar for each 
                dollar excluded by subsection (a).
                  (B) Credit carryover reduction.--The 
                reductions described in subparagraphs (B), (C), 
                and (G) shall be 331/3 cents for each dollar 
                excluded by subsection (a). The reduction 
                described in subparagraph (F) in any passive 
                activity credit carryover shall be 331/3 cents 
                for each dollar excluded by subsection (a).
          (4) Ordering rules.--
                  (A) Reductions made after determination of 
                tax for year.--The reductions described in 
                paragraph (2) shall be made after the 
                determination of the tax imposed by this 
                chapter for the taxable year of the discharge.
                  (B) Reductions under subparagraph (A) or (D) 
                of paragraph (2).--The reductions described in 
                subparagraph (A) or (D) of paragraph (2) (as 
                the case may be) shall be made first in the 
                loss for the taxable year of the discharge and 
                then in the carryovers to such taxable year in 
                the order of the taxable years from which each 
                such carryover arose.
                  (C) Reductions under subparagraphs (B) and 
                (G) of paragraph (2).--The reductions described 
                in subparagraphs (B) and (G) of paragraph (2) 
                shall be made in the order in which carryovers 
                are taken into account under this chapter for 
                the taxable year of the discharge.
          (5) Election to apply reduction first against 
        depreciable property.--
                  (A) In general.--The taxpayer may elect to 
                apply any portion of the reduction referred to 
                in paragraph (1) to the reduction under section 
                1017 of the basis of the depreciable property 
                of the taxpayer.
                  (B) Limitation.--The amount to which an 
                election under subparagraph (A) applies shall 
                not exceed the aggregate adjusted bases of the 
                depreciable property held by the taxpayer as of 
                the beginning of the taxable year following the 
                taxable year in which the discharge occurs.
                  (C) Other tax attributes not reduced.--
                Paragraph (2) shall not apply to any amount to 
                which an election under this paragraph applies.
  (c) Treatment of discharge of qualified real property 
business indebtedness.--
          (1) Basis reduction.--
                  (A) In general.--The amount excluded from 
                gross income under subparagraph (D) of 
                subsection (a)(1) shall be applied to reduce 
                the basis of the depreciable real property of 
                the taxpayer.
                  (B) Cross reference.--For provisions making 
                the reduction described in subparagraph (A), 
                see section 1017.
          (2) Limitations.--
                  (A) Indebtedness in excess of value.--The 
                amount excluded under subparagraph (D) of 
                subsection (a)(1) with respect to any qualified 
                real property business indebtedness shall not 
                exceed the excess (if any) of--
                          (i) the outstanding principal amount 
                        of such indebtedness (immediately 
                        before the discharge), over
                          (ii) the fair market value of the 
                        real property described in paragraph 
                        (3)(A) (as of such time), reduced by 
                        the outstanding principal amount of any 
                        other qualified real property business 
                        indebtedness secured by such property 
                        (as of such time).
                  (B) Overall limitation.--The amount excluded 
                under subparagraph (D) of subsection (a)(1) 
                shall not exceed the aggregate adjusted bases 
                of depreciable real property (determined after 
                any reductions under subsections (b) and (g)) 
                held by the taxpayer immediately before the 
                discharge (other than depreciable real property 
                acquired in contemplation of such discharge).
          (3) Qualified real property business indebtedness.--
        The term ``qualified real property business 
        indebtedness'' means indebtedness which--
                  (A) was incurred or assumed by the taxpayer 
                in connection with real property used in a 
                trade or business and is secured by such real 
                property,
                  (B) was incurred or assumed before January 1, 
                1993, or if incurred or assumed on or after 
                such date, is qualified acquisition 
                indebtedness, and
                  (C) with respect to which such taxpayer makes 
                an election to have this paragraph apply.
        Such term shall not include qualified farm 
        indebtedness. Indebtedness under subparagraph (B) shall 
        include indebtedness resulting from the refinancing of 
        indebtedness under subparagraph (B) (or this sentence), 
        but only to the extent it does not exceed the amount of 
        the indebtedness being refinanced.
          (4) Qualified acquisition indebtedness.--For purposes 
        of paragraph (3)(B), the term ``qualified acquisition 
        indebtedness'' means, with respect to any real property 
        described in paragraph (3)(A), indebtedness incurred or 
        assumed to acquire, construct, reconstruct, or 
        substantially improve such property.
          (5) Regulations.--The Secretary shall issue such 
        regulations as are necessary to carry out this 
        subsection, including regulations preventing the abuse 
        of this subsection through cross-collateralization or 
        other means.
  (d) Meaning of terms; special rules relating to certain 
provisions.--
          (1) Indebtedness of taxpayer.--For purposes of this 
        section, the term ``indebtedness of the taxpayer'' 
        means any indebtedness--
                  (A) for which the taxpayer is liable, or
                  (B) subject to which the taxpayer holds 
                property.
          (2) Title 11 case.--For purposes of this section, the 
        term ``title 11 case'' means a case under title 11 of 
        the United States Code (relating to bankruptcy), but 
        only if the taxpayer is under the jurisdiction of the 
        court in such case and the discharge of indebtedness is 
        granted by the court or is pursuant to a plan approved 
        by the court.
          (3) Insolvent.--For purposes of this section, the 
        term ``insolvent'' means the excess of liabilities over 
        the fair market value of assets. With respect to any 
        discharge, whether or not the taxpayer is insolvent, 
        and the amount by which the taxpayer is insolvent, 
        shall be determined on the basis of the taxpayer's 
        assets and liabilities immediately before the 
        discharge.
          (5) Depreciable property.--The term ``depreciable 
        property'' has the same meaning as when used in section 
        1017.
          (6) Certain provisions to be applied at partner 
        level.--In the case of a partnership, subsections (a), 
        (b), (c), and (g) shall be applied at the partner 
        level.
          (7) Special rules for S corporation.--
                  (A) Certain provisions to be applied at 
                corporate level.--In the case of an S 
                corporation, subsections (a), (b), (c), and (g) 
                shall be applied at the corporate level, 
                including by not taking into account under 
                section 1366(a) any amount excluded under 
                subsection (a) of this section.
                  (B) Reduction in carryover of disallowed 
                losses and deductions.--In the case of an S 
                corporation, for purposes of subparagraph (A) 
                of subsection (b)(2), any loss or deduction 
                which is disallowed for the taxable year of the 
                discharge under section 1366(d)(1) shall be 
                treated as a net operating loss for such 
                taxable year. The preceding sentence shall not 
                apply to any discharge to the extent that 
                subsection (a)(1)(D) applies to such discharge.
                  (C) Coordination with basis adjustments under 
                section 1367(b)(2).--For purposes of subsection 
                (e)(6), a shareholder's adjusted basis in 
                indebtedness of an S corporation shall be 
                determined without regard to any adjustments 
                made under section 1367(b)(2).
          (8) Reductions of tax attributes in title 11 cases of 
        individuals to be made by estate.--In any case under 
        chapter 7 or 11 of title 11 of the United States Code 
        to which section 1398 applies, for purposes of 
        paragraphs (1) and (5) of subsection (b) the estate 
        (and not the individual) shall be treated as the 
        taxpayer. The preceding sentence shall not apply for 
        purposes of applying section 1017 to property 
        transferred by the estate to the individual.
          (9) Time for making election, etc..--
                  (A) Time.--An election under paragraph (5) of 
                subsection (b) or under paragraph (3)(C) of 
                subsection (c) shall be made on the taxpayer's 
                return for the taxable year in which the 
                discharge occurs or at such other time as may 
                be permitted in regulations prescribed by the 
                Secretary.
                  (B) Revocation only with consent.--An 
                election referred to in subparagraph (A), once 
                made, may be revoked only with the consent of 
                the Secretary.
                  (C) Manner.--An election referred to in 
                subparagraph (A) shall be made in such manner 
                as the Secretary may by regulations prescribe.
          (10) Cross reference.--For provision that no 
        reduction is to be made in the basis of exempt property 
        of an individual debtor, see section 1017(c)(1).
  (e) General rules for discharge of indebtedness (including 
discharges not in title 11 cases or insolvency).--For purposes 
of this title--
          (1) No other insolvency exception.--Except as 
        otherwise provided in this section, there shall be no 
        insolvency exception from the general rule that gross 
        income includes income from the discharge of 
        indebtedness.
          (2) Income not realized to extent of lost 
        deductions.--No income shall be realized from the 
        discharge of indebtedness to the extent that payment of 
        the liability would have given rise to a deduction.
          (3) Adjustments for unamortized premium and 
        discount.--The amount taken into account with respect 
        to any discharge shall be properly adjusted for 
        unamortized premium and unamortized discount with 
        respect to the indebtedness discharged.
          (4) Acquisition of indebtedness by person related to 
        debtor.--
                  (A) Treated as acquisition by debtor.--For 
                purposes of determining income of the debtor 
                from discharge of indebtedness, to the extent 
                provided in regulations prescribed by the 
                Secretary, the acquisition of outstanding 
                indebtedness by a person bearing a relationship 
                to the debtor specified in section 267(b) or 
                707(b)(1) from a person who does not bear such 
                a relationship to the debtor shall be treated 
                as the acquisition of such indebtedness by the 
                debtor. Such regulations shall provide for such 
                adjustments in the treatment of any subsequent 
                transactions involving the indebtedness as may 
                be appropriate by reason of the application of 
                the preceding sentence.
                  (B) Members of family.--For purposes of this 
                paragraph, sections 267(b) and 707(b)(1) shall 
                be applied as if section 267(c)(4) provided 
                that the family of an individual consists of 
                the individual's spouse, the individual's 
                children, grandchildren, and parents, and any 
                spouse of the individual's children or 
                grandchildren.
                  (C) Entities under common control treated as 
                related.--For purposes of this paragraph, two 
                entities which are treated as a single employer 
                under subsection (b) or (c) of section 414 
                shall be treated as bearing a relationship to 
                each other which is described in section 
                267(b).
          (5) Purchase-money debt reduction for solvent debtor 
        treated as price reduction.--If--
                  (A) the debt of a purchaser of property to 
                the seller of such property which arose out of 
                the purchase of such property is reduced,
                  (B) such reduction does not occur--
                          (i) in a title 11 case, or
                          (ii) when the purchaser is insolvent, 
                        and
                  (C) but for this paragraph, such reduction 
                would be treated as income to the purchaser 
                from the discharge of indebtedness,
        then such reduction shall be treated as a purchase 
        price adjustment.
          (6) Indebtedness contributed to capital.--Except as 
        provided in regulations, for purposes of determining 
        income of the debtor from discharge of indebtedness, if 
        a debtor corporation acquires its indebtedness from a 
        shareholder as a contribution to capital--
                  (A) section 118 shall not apply, but
                  (B) such corporation shall be treated as 
                having satisfied the indebtedness with an 
                amount of money equal to the shareholder's 
                adjusted basis in the indebtedness.
          (7) Recapture of gain on subsequent sale of stock.--
                  (A) In general.--If a creditor acquires stock 
                of a debtor corporation in satisfaction of such 
                corporation's indebtedness, for purposes of 
                section 1245--
                          (i) such stock (and any other 
                        property the basis of which is 
                        determined in whole or in part by 
                        reference to the adjusted basis of such 
                        stock) shall be treated as section 1245 
                        property,
                          (ii) the aggregate amount allowed to 
                        the creditor--
                                  (I) as deductions under 
                                subsection (a) or (b) of 
                                section 166 (by reason of the 
                                worthlessness or partial 
                                worthlessness of the 
                                indebtedness), or
                                  (II) as an ordinary loss on 
                                the exchange,
                 shall be treated as an amount allowed as a 
                deduction for depreciation, and
                          (iii) an exchange of such stock 
                        qualifying under section 354(a), 
                        355(a), or 356(a) shall be treated as 
                        an exchange to which section 1245(b)(3) 
                        applies.
                The amount determined under clause (ii) shall 
                be reduced by the amount (if any) included in 
                the creditor's gross income on the exchange.
                  (B) Special rule for cash basis taxpayers.--
                In the case of any creditor who computes his 
                taxable income under the cash receipts and 
                disbursements method, proper adjustment shall 
                be made in the amount taken into account under 
                clause (ii) of subparagraph (A) for any amount 
                which was not included in the creditor's gross 
                income but which would have been included in 
                such gross income if such indebtedness had been 
                satisfied in full.
                  (C) Stock of parent corporation.--For 
                purposes of this paragraph, stock of a 
                corporation in control (within the meaning of 
                section 368(c)) of the debtor corporation shall 
                be treated as stock of the debtor corporation.
                  (D) Treatment of successor corporation.--For 
                purposes of this paragraph, the term ``debtor 
                corporation'' includes a successor corporation.
                  (E) Partnership rule.--Under regulations 
                prescribed by the Secretary, rules similar to 
                the rules of the foregoing subparagraphs of 
                this paragraph shall apply with respect to the 
                indebtedness of a partnership.
          (8) Indebtedness satisfied by corporate stock or 
        partnership interest.--For purposes of determining 
        income of a debtor from discharge of indebtedness, if--
                  (A) a debtor corporation transfers stock, or
                  (B) a debtor partnership transfers a capital 
                or profits interest in such partnership,
        to a creditor in satisfaction of its recourse or 
        nonrecourse indebtedness, such corporation or 
        partnership shall be treated as having satisfied the 
        indebtedness with an amount of money equal to the fair 
        market value of the stock or interest. In the case of 
        any partnership, any discharge of indebtedness income 
        recognized under this paragraph shall be included in 
        the distributive shares of taxpayers which were the 
        partners in the partnership immediately before such 
        discharge.
          (9) Discharge of indebtedness income not taken into 
        account in determining whether entity meets REIT 
        qualifications.--Any amount included in gross income by 
        reason of the discharge of indebtedness shall not be 
        taken into account for purposes of paragraphs (2) and 
        (3) of section 856(c).
          (10) Indebtedness satisfied by issuance of debt 
        instrument.--
                  (A) In general.--For purposes of determining 
                income of a debtor from discharge of 
                indebtedness, if a debtor issues a debt 
                instrument in satisfaction of indebtedness, 
                such debtor shall be treated as having 
                satisfied the indebtedness with an amount of 
                money equal to the issue price of such debt 
                instrument.
                  (B) Issue price.--For purposes of 
                subparagraph (A), the issue price of any debt 
                instrument shall be determined under sections 
                1273 and 1274. For purposes of the preceding 
                sentence, section 1273(b)(4) shall be applied 
                by reducing the stated redemption price of any 
                instrument by the portion of such stated 
                redemption price which is treated as interest 
                for purposes of this chapter.
  (f) Student loans.--
          (1) In general.--In the case of an individual, gross 
        income does not include any amount which (but for this 
        subsection) would be includible in gross income by 
        reason of the discharge (in whole or in part) of any 
        student loan if such discharge was pursuant to a 
        provision of such loan under which all or part of the 
        indebtedness of the individual would be discharged if 
        the individual worked for a certain period of time in 
        certain professions for any of a broad class of 
        employers.
          (2) Student loan.--For purposes of this subsection, 
        the term ``student loan'' means any loan to an 
        individual to assist the individual in attending an 
        educational organization described in section 
        170(b)(1)(A)(ii) made by--
                  (A) the United States, or an instrumentality 
                or agency thereof,
                  (B) a State, territory, or possession of the 
                United States, or the District of Columbia, or 
                any political subdivision thereof,
                  (C) a public benefit corporation--
                          (i) which is exempt from taxation 
                        under section 501(c)(3),
                          (ii) which has assumed control over a 
                        State, county, or municipal hospital, 
                        and
                          (iii) whose employees have been 
                        deemed to be public employees under 
                        State law, or
                  (D) any educational organization described in 
                section 170(b)(1)(A)(ii) if such loan is made--
                          (i) pursuant to an agreement with any 
                        entity described in subparagraph (A), 
                        (B), or (C) under which the funds from 
                        which the loan was made were provided 
                        to such educational organization, or
                          (ii) pursuant to a program of such 
                        educational organization which is 
                        designed to encourage its students to 
                        serve in occupations with unmet needs 
                        or in areas with unmet needs and under 
                        which the services provided by the 
                        students (or former students) are for 
                        or under the direction of a 
                        governmental unit or an organization 
                        described in section 501(c)(3) and 
                        exempt from tax under section 501(a).
        The term ``student loan'' includes any loan made by an 
        educational organization described in section 
        170(b)(1)(A)(ii) or by an organization exempt from tax 
        under section 501(a) to refinance a loan to an 
        individual to assist the individual in attending any 
        such educational organization but only if the 
        refinancing loan is pursuant to a program of the 
        refinancing organization which is designed as described 
        in subparagraph (D)(ii).
          (3) Exception for discharges on account of services 
        performed for certain lenders.--Paragraph (1) shall not 
        apply to the discharge of a loan made by an 
        organization described in paragraph (2)(D) if the 
        discharge is on account of services performed for 
        either such organization.
          (4) Payments under national health service corps loan 
        repayment program and certain state loan repayment 
        programs.--In the case of an individual, gross income 
        shall not include any amount received under section 
        338B(g) of the Public Health Service Act, under a State 
        program described in section 338I of such Act, or under 
        any other State loan repayment or loan forgiveness 
        program that is intended to provide for the increased 
        availability of health care services in underserved or 
        health professional shortage areas (as determined by 
        such State).
          (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))).
  (g) Special rules for discharge of qualified farm 
indebtedness.--
          (1) Discharge must be by qualified person.--
                  (A) In general.--Subparagraph (C) of 
                subsection (a)(1) shall apply only if the 
                discharge is by a qualified person.
                  (B) Qualified person.--For purposes of 
                subparagraph (A), the term ``qualified person'' 
                has the meaning given to such term by section 
                49(a)(1)(D)(iv); except that such term shall 
                include any Federal, State, or local government 
                or agency or instrumentality thereof.
          (2) Qualified farm indebtedness.--For purposes of 
        this section, indebtedness of a taxpayer shall be 
        treated as qualified farm indebtedness if--
                  (A) such indebtedness was incurred directly 
                in connection with the operation by the 
                taxpayer of the trade or business of farming, 
                and
                  (B) 50 percent or more of the aggregate gross 
                receipts of the taxpayer for the 3 taxable 
                years preceding the taxable year in which the 
                discharge of such indebtedness occurs is 
                attributable to the trade or business of 
                farming.
          (3) Amount excluded cannot exceed sum of tax 
        attributes and business and investment assets.--
                  (A) In general.--The amount excluded under 
                subparagraph (C) of subsection (a)(1) shall not 
                exceed the sum of--
                          (i) the adjusted tax attributes of 
                        the taxpayer, and
                          (ii) the aggregate adjusted bases of 
                        qualified property held by the taxpayer 
                        as of the beginning of the taxable year 
                        following the taxable year in which the 
                        discharge occurs.
                  (B) Adjusted tax attributes.--For purposes of 
                subparagraph (A), the term ``adjusted tax 
                attributes'' means the sum of the tax 
                attributes described in subparagraphs (A), (B), 
                (C), (D), (F), and (G) of subsection (b)(2) 
                determined by taking into account $3 for each 
                $1 of the attributes described in subparagraphs 
                (B), (C), and (G) of subsection (b)(2) and the 
                attribute described in subparagraph (F) of 
                subsection (b)(2) to the extent attributable to 
                any passive activity credit carryover.
                  (C) Qualified property.--For purposes of this 
                paragraph, the term ``qualified property'' 
                means any property which is used or is held for 
                use in a trade or business or for the 
                production of income.
                  (D) Coordination with insolvency exclusion.--
                For purposes of this paragraph, the adjusted 
                basis of any qualified property and the amount 
                of the adjusted tax attributes shall be 
                determined after any reduction under subsection 
                (b) by reason of amounts excluded from gross 
                income under subsection (a)(1)(B).
  (h) Special rules relating to qualified principal residence 
indebtedness.--
          (1) Basis reduction.--The amount excluded from gross 
        income by reason of subsection (a)(1)(E) shall be 
        applied to reduce (but not below zero) the basis of the 
        principal residence of the taxpayer.
          (2) Qualified principal residence indebtedness.--For 
        purposes of this section, the term ``qualified 
        principal residence indebtedness'' means acquisition 
        indebtedness (within the meaning of section 
        163(h)(3)(B), applied by substituting ``$2,000,000 
        ($1,000,000'' for ``$1,000,000 ($500,000'' in clause 
        (ii) thereof and determined without regard to the 
        substitution described in section 163(h)(3)(F)(i)(II)) 
        with respect to the principal residence of the 
        taxpayer.
          (3) Exception for certain discharges not related to 
        taxpayer's financial condition.--Subsection (a)(1)(E) 
        shall not apply to the discharge of a loan if the 
        discharge is on account of services performed for the 
        lender or any other factor not directly related to a 
        decline in the value of the residence or to the 
        financial condition of the taxpayer.
          (4) Ordering rule.--If any loan is discharged, in 
        whole or in part, and only a portion of such loan is 
        qualified principal residence indebtedness, subsection 
        (a)(1)(E) shall apply only to so much of the amount 
        discharged as exceeds the amount of the loan (as 
        determined immediately before such discharge) which is 
        not qualified principal residence indebtedness.
          (5) Principal residence.--For purposes of this 
        subsection, the term ``principal residence'' has the 
        same meaning as when used in section 121.
  (i) Deferral and ratable inclusion of income arising from 
business indebtedness discharged by the reacquisition of a debt 
instrument.--
          (1) In general.--At the election of the taxpayer, 
        income from the discharge of indebtedness in connection 
        with the reacquisition after December 31, 2008, and 
        before January 1, 2011, of an applicable debt 
        instrument shall be includible in gross income ratably 
        over the 5-taxable-year period beginning with--
                  (A) in the case of a reacquisition occurring 
                in 2009, the fifth taxable year following the 
                taxable year in which the reacquisition occurs, 
                and
                  (B) in the case of a reacquisition occurring 
                in 2010, the fourth taxable year following the 
                taxable year in which the reacquisition occurs.
          (2) Deferral of deduction for original issue discount 
        in debt for debt exchanges.--
                  (A) In general.--If, as part of a 
                reacquisition to which paragraph (1) applies, 
                any debt instrument is issued for the 
                applicable debt instrument being reacquired (or 
                is treated as so issued under subsection (e)(4) 
                and the regulations thereunder) and there is 
                any original issue discount determined under 
                subpart A of part V of subchapter P of this 
                chapter with respect to the debt instrument so 
                issued--
                          (i) except as provided in clause 
                        (ii), no deduction otherwise allowable 
                        under this chapter shall be allowed to 
                        the issuer of such debt instrument with 
                        respect to the portion of such original 
                        issue discount which--
                                  (I) accrues before the 1st 
                                taxable year in the 5-taxable-
                                year period in which income 
                                from the discharge of 
                                indebtedness attributable to 
                                the reacquisition of the debt 
                                instrument is includible under 
                                paragraph (1), and
                                  (II) does not exceed the 
                                income from the discharge of 
                                indebtedness with respect to 
                                the debt instrument being 
                                reacquired, and
                          (ii) the aggregate amount of 
                        deductions disallowed under clause (i) 
                        shall be allowed as a deduction ratably 
                        over the 5-taxable-year period 
                        described in clause (i)(I).
                If the amount of the original issue discount 
                accruing before such 1st taxable year exceeds 
                the income from the discharge of indebtedness 
                with respect to the applicable debt instrument 
                being reacquired, the deductions shall be 
                disallowed in the order in which the original 
                issue discount is accrued.
                  (B) Deemed debt for debt exchanges.--For 
                purposes of subparagraph (A), if any debt 
                instrument is issued by an issuer and the 
                proceeds of such debt instrument are used 
                directly or indirectly by the issuer to 
                reacquire an applicable debt instrument of the 
                issuer, the debt instrument so issued shall be 
                treated as issued for the debt instrument being 
                reacquired. If only a portion of the proceeds 
                from a debt instrument are so used, the rules 
                of subparagraph (A) shall apply to the portion 
                of any original issue discount on the newly 
                issued debt instrument which is equal to the 
                portion of the proceeds from such instrument 
                used to reacquire the outstanding instrument.
          (3) Applicable debt instrument.--For purposes of this 
        subsection--
                  (A) Applicable debt instrument.--The term 
                ``applicable debt instrument'' means any debt 
                instrument which was issued by--
                          (i) a C corporation, or
                          (ii) any other person in connection 
                        with the conduct of a trade or business 
                        by such person.
                  (B) Debt instrument.--The term ``debt 
                instrument'' means a bond, debenture, note, 
                certificate, or any other instrument or 
                contractual arrangement constituting 
                indebtedness (within the meaning of section 
                1275(a)(1)).
          (4) Reacquisition.--For purposes of this subsection--
                  (A) In general.--The term ``reacquisition'' 
                means, with respect to any applicable debt 
                instrument, any acquisition of the debt 
                instrument by--
                          (i) the debtor which issued (or is 
                        otherwise the obligor under) the debt 
                        instrument, or
                          (ii) a related person to such debtor.
                  (B) Acquisition.--The term ``acquisition'' 
                shall, with respect to any applicable debt 
                instrument, include an acquisition of the debt 
                instrument for cash, the exchange of the debt 
                instrument for another debt instrument 
                (including an exchange resulting from a 
                modification of the debt instrument), the 
                exchange of the debt instrument for corporate 
                stock or a partnership interest, and the 
                contribution of the debt instrument to capital. 
                Such term shall also include the complete 
                forgiveness of the indebtedness by the holder 
                of the debt instrument.
          (5) Other definitions and rules.--For purposes of 
        this subsection--
                  (A) Related person.--The determination of 
                whether a person is related to another person 
                shall be made in the same manner as under 
                subsection (e)(4).
                  (B) Election.--
                          (i) In general.--An election under 
                        this subsection with respect to any 
                        applicable debt instrument shall be 
                        made by including with the return of 
                        tax imposed by chapter 1 for the 
                        taxable year in which the reacquisition 
                        of the debt instrument occurs a 
                        statement which--
                                  (I) clearly identifies such 
                                instrument, and
                                  (II) includes the amount of 
                                income to which paragraph (1) 
                                applies and such other 
                                information as the Secretary 
                                may prescribe.
                          (ii) Election irrevocable.--Such 
                        election, once made, is irrevocable.
                          (iii) Pass-thru entities.--In the 
                        case of a partnership, S corporation, 
                        or other pass-thru entity, the election 
                        under this subsection shall be made by 
                        the partnership, the S corporation, or 
                        other entity involved.
                  (C) Coordination with other exclusions.--If a 
                taxpayer elects to have this subsection apply 
                to an applicable debt instrument, subparagraphs 
                (A), (B), (C), and (D) of subsection (a)(1) 
                shall not apply to the income from the 
                discharge of such indebtedness for the taxable 
                year of the election or any subsequent taxable 
                year.
                  (D) Acceleration of deferred items.--
                          (i) In general.--In the case of the 
                        death of the taxpayer, the liquidation 
                        or sale of substantially all the assets 
                        of the taxpayer (including in a title 
                        11 or similar case), the cessation of 
                        business by the taxpayer, or similar 
                        circumstances, any item of income or 
                        deduction which is deferred under this 
                        subsection (and has not previously been 
                        taken into account) shall be taken into 
                        account in the taxable year in which 
                        such event occurs (or in the case of a 
                        title 11 or similar case, the day 
                        before the petition is filed).
                          (ii) Special rule for pass-thru 
                        entities.--The rule of clause (i) shall 
                        also apply in the case of the sale or 
                        exchange or redemption of an interest 
                        in a partnership, S corporation, or 
                        other pass-thru entity by a partner, 
                        shareholder, or other person holding an 
                        ownership interest in such entity.
          (6) Special rule for partnerships.--In the case of a 
        partnership, any income deferred under this subsection 
        shall be allocated to the partners in the partnership 
        immediately before the discharge in the manner such 
        amounts would have been included in the distributive 
        shares of such partners under section 704 if such 
        income were recognized at such time. Any decrease in a 
        partner's share of partnership liabilities as a result 
        of such discharge shall not be taken into account for 
        purposes of section 752 at the time of the discharge to 
        the extent it would cause the partner to recognize gain 
        under section 731. Any decrease in partnership 
        liabilities deferred under the preceding sentence shall 
        be taken into account by such partner at the same time, 
        and to the extent remaining in the same amount, as 
        income deferred under this subsection is recognized.
          (7) Secretarial authority.--The Secretary may 
        prescribe such regulations, rules, or other guidance as 
        may be necessary or appropriate for purposes of 
        applying this subsection, including--
                  (A) extending the application of the rules of 
                paragraph (5)(D) to other circumstances where 
                appropriate,
                  (B) requiring reporting of the election (and 
                such other information as the Secretary may 
                require) on returns of tax for subsequent 
                taxable years, and
                  (C) rules for the application of this 
                subsection to partnerships, S corporations, and 
                other pass-thru entities, including for the 
                allocation of deferred deductions.

           *       *       *       *       *       *       *


PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS

           *       *       *       *       *       *       *


SEC. 163. INTEREST.

  (a) General rule.--There shall be allowed as a deduction all 
interest paid or accrued within the taxable year on 
indebtedness.
  (b) Installment purchases where interest charge is not 
separately stated.--
          (1) General rule.--If personal property or 
        educational services are purchased under a contract--
                  (A) which provides that payment of part or 
                all of the purchase price is to be made in 
                installments, and
                  (B) in which carrying charges are separately 
                stated but the interest charge cannot be 
                ascertained,
        then the payments made during the taxable year under 
        the contract shall be treated for purposes of this 
        section as if they included interest equal to 6 percent 
        of the average unpaid balance under the contract during 
        the taxable year. For purposes of the preceding 
        sentence, the average unpaid balance is the sum of the 
        unpaid balance outstanding on the first day of each 
        month beginning during the taxable year, divided by 12. 
        For purposes of this paragraph, the term ``educational 
        services'' means any service (including lodging) which 
        is purchased from an educational organization described 
        in section 170(b)(1)(A)(ii) and which is provided for a 
        student of such organization.
          (2) Limitation.--In the case of any contract to which 
        paragraph (1) applies, the amount treated as interest 
        for any taxable year shall not exceed the aggregate 
        carrying charges which are properly attributable to 
        such taxable year.
  (c) Redeemable ground rents.--For purposes of this subtitle, 
any annual or periodic rental under a redeemable ground rent 
(excluding amounts in redemption thereof) shall be treated as 
interest on an indebtedness secured by a mortgage.
  (d) Limitation on investment interest.--
          (1) In general.--In the case of a taxpayer other than 
        a corporation, the amount allowed as a deduction under 
        this chapter for investment interest for any taxable 
        year shall not exceed the net investment income of the 
        taxpayer for the taxable year.
          (2) Carryforward of disallowed interest.--The amount 
        not allowed as a deduction for any taxable year by 
        reason of paragraph (1) shall be treated as investment 
        interest paid or accrued by the taxpayer in the 
        succeeding taxable year.
          (3) Investment interest.--For purposes of this 
        subsection--
                  (A) In general.--The term ``investment 
                interest'' means any interest allowable as a 
                deduction under this chapter (determined 
                without regard to paragraph (1)) which is paid 
                or accrued on indebtedness properly allocable 
                to property held for investment.
                  (B) Exceptions.--The term ``investment 
                interest'' shall not include--
                          (i) any qualified residence interest 
                        (as defined in subsection (h)(3)), or
                          (ii) any interest which is taken into 
                        account under section 469 in computing 
                        income or loss from a passive activity 
                        of the taxpayer.
                  (C) Personal property used in short sale.--
                For purposes of this paragraph, the term 
                ``interest'' includes any amount allowable as a 
                deduction in connection with personal property 
                used in a short sale.
          (4) Net investment income.--For purposes of this 
        subsection--
                  (A) In general.--The term ``net investment 
                income'' means the excess of--
                          (i) investment income, over
                          (ii) investment expenses.
                  (B) Investment income.--The term ``investment 
                income'' means the sum of--
                          (i) gross income from property held 
                        for investment (other than any gain 
                        taken into account under clause 
                        (ii)(I)),
                          (ii) the excess (if any) of--
                                  (I) the net gain attributable 
                                to the disposition of property 
                                held for investment, over
                                  (II) the net capital gain 
                                determined by only taking into 
                                account gains and losses from 
                                dispositions of property held 
                                for investment, plus
                          (iii) so much of the net capital gain 
                        referred to in clause (ii)(II) (or, if 
                        lesser, the net gain referred to in 
                        clause (ii)(I)) as the taxpayer elects 
                        to take into account under this clause.
                Such term shall include qualified dividend 
                income (as defined in section 1(h)(11)(B)) only 
                to the extent the taxpayer elects to treat such 
                income as investment income for purposes of 
                this subsection.
                  (C) Investment expenses.--The term 
                ``investment expenses'' means the deductions 
                allowed under this chapter (other than for 
                interest) which are directly connected with the 
                production of investment income.
                  (D) Income and expenses from passive 
                activities.--Investment income and investment 
                expenses shall not include any income or 
                expenses taken into account under section 469 
                in computing income or loss from a passive 
                activity.
          (5) Property held for investment.--For purposes of 
        this subsection--
                  (A) In general.--The term ``property held for 
                investment'' shall include--
                          (i) any property which produces 
                        income of a type described in section 
                        469(e)(1), and
                          (ii) any interest held by a taxpayer 
                        in an activity involving the conduct of 
                        a trade or business--
                                  (I) which is not a passive 
                                activity, and
                                  (II) with respect to which 
                                the taxpayer does not 
                                materially participate.
                  (B) Investment expenses.--In the case of 
                property described in subparagraph (A)(i), 
                expenses shall be allocated to such property in 
                the same manner as under section 469.
                  (C) Terms.--For purposes of this paragraph, 
                the terms ``activity'', ``passive activity'', 
                and ``materially participate'' have the 
                meanings given such terms by section 469.
  (e) Original issue discount.--
          (1) In general.--The portion of the original issue 
        discount with respect to any debt instrument which is 
        allowable as a deduction to the issuer for any taxable 
        year shall be equal to the aggregate daily portions of 
        the original issue discount for days during such 
        taxable year.
          (2) Definitions and special rules.--For purposes of 
        this subsection--
                  (A) Debt instrument.--The term ``debt 
                instrument'' has the meaning given such term by 
                section 1275(a)(1).
                  (B) Daily portions.--The daily portion of the 
                original issue discount for any day shall be 
                determined under section 1272(a) (without 
                regard to paragraph (7) thereof and without 
                regard to section 1273(a)(3)).
                  (C) Short-term obligations.--In the case of 
                an obligor of a short-term obligation (as 
                defined in section 1283(a)(1)(A)) who uses the 
                cash receipts and disbursements method of 
                accounting, the original issue discount (and 
                any other interest payable) on such obligation 
                shall be deductible only when paid.
          (3) Special rule for original issue discount on 
        obligation held by related foreign person.--
                  (A) In general.--If any debt instrument 
                having original issue discount is held by a 
                related foreign person, any portion of such 
                original issue discount shall not be allowable 
                as a deduction to the issuer until paid. The 
                preceding sentence shall not apply to the 
                extent that the original issue discount is 
                effectively connected with the conduct by such 
                foreign related person of a trade or business 
                within the United States unless such original 
                issue discount is exempt from taxation (or is 
                subject to a reduced rate of tax) pursuant to a 
                treaty obligation of the United States.
                  (B) Special rule for certain foreign 
                entities.--
                          (i) In general.--In the case of any 
                        debt instrument having original issue 
                        discount which is held by a related 
                        foreign person which is a controlled 
                        foreign corporation (as defined in 
                        section 957) or a passive foreign 
                        investment company (as defined in 
                        section 1297), a deduction shall be 
                        allowable to the issuer with respect to 
                        such original issue discount for any 
                        taxable year before the taxable year in 
                        which paid only to the extent such 
                        original issue discount is includible 
                        (determined without regard to properly 
                        allocable deductions and qualified 
                        deficits under section 952(c)(1)(B)) 
                        during such prior taxable year in the 
                        gross income of a United States person 
                        who owns (within the meaning of section 
                        958(a)) stock in such corporation.
                          (ii) Secretarial authority.--The 
                        Secretary may by regulation exempt 
                        transactions from the application of 
                        clause (i), including any transaction 
                        which is entered into by a payor in the 
                        ordinary course of a trade or business 
                        in which the payor is predominantly 
                        engaged.
                  (C) Related foreign person.--For purposes of 
                subparagraph (A), the term ``related foreign 
                person'' means any person--
                          (i) who is not a United States 
                        person, and
                          (ii) who is related (within the 
                        meaning of section 267(b)) to the 
                        issuer.
          (4) Exception.--This subsection shall not apply to 
        any debt instrument described in section 1272(a)(2)(D) 
        (relating to loans between natural persons).
          (5) Special rules for original issue discount on 
        certain high yield obligations.--
                  (A) In general.--In the case of an applicable 
                high yield discount obligation issued by a 
                corporation--
                          (i) no deduction shall be allowed 
                        under this chapter for the disqualified 
                        portion of the original issue discount 
                        on such obligation, and
                          (ii) the remainder of such original 
                        issue discount shall not be allowable 
                        as a deduction until paid.
                For purposes of this paragraph, rules similar 
                to the rules of subsection (i)(3)(B) shall 
                apply in determining the amount of the original 
                issue discount and when the original issue 
                discount is paid.
                  (B) Disqualified portion treated as stock 
                distribution for purposes of dividend received 
                deduction.--
                          (i) In general.--Solely for purposes 
                        of sections 243, 245, 246, and 246A, 
                        the dividend equivalent portion of any 
                        amount includible in gross income of a 
                        corporation under section 1272(a) in 
                        respect of an applicable high yield 
                        discount obligation shall be treated as 
                        a dividend received by such corporation 
                        from the corporation issuing such 
                        obligation.
                          (ii) Dividend equivalent portion.--
                        For purposes of clause (i), the 
                        dividend equivalent portion of any 
                        amount includible in gross income under 
                        section 1272(a) in respect of an 
                        applicable high yield discount 
                        obligation is the portion of the amount 
                        so includible--
                                  (I) which is attributable to 
                                the disqualified portion of the 
                                original issue discount on such 
                                obligation, and
                                  (II) which would have been 
                                treated as a dividend if it had 
                                been a distribution made by the 
                                issuing corporation with 
                                respect to stock in such 
                                corporation.
                  (C) Disqualified portion.--
                          (i) In general.--For purposes of this 
                        paragraph, the disqualified portion of 
                        the original issue discount on any 
                        applicable high yield discount 
                        obligation is the lesser of--
                                  (I) the amount of such 
                                original issue discount, or
                                  (II) the portion of the total 
                                return on such obligation which 
                                bears the same ratio to such 
                                total return as the 
                                disqualified yield on such 
                                obligation bears to the yield 
                                to maturity on such obligation.
                          (ii) Definitions.--For purposes of 
                        clause (i), the term ``disqualified 
                        yield'' means the excess of the yield 
                        to maturity on the obligation over the 
                        sum referred to in subsection (i)(1)(B) 
                        plus 1 percentage point, and the term 
                        ``total return'' is the amount which 
                        would have been the original issue 
                        discount on the obligation if interest 
                        described in the parenthetical in 
                        section 1273(a)(2) were included in the 
                        stated redemption price at maturity.
                  (D) Exception for S corporations.--This 
                paragraph shall not apply to any obligation 
                issued by any corporation for any period for 
                which such corporation is an S corporation.
                  (E) Effect on earnings and profits.--This 
                paragraph shall not apply for purposes of 
                determining earnings and profits; except that, 
                for purposes of determining the dividend 
                equivalent portion of any amount includible in 
                gross income under section 1272(a) in respect 
                of an applicable high yield discount 
                obligation, no reduction shall be made for any 
                amount attributable to the disqualified portion 
                of any original issue discount on such 
                obligation.
                  (F) Suspension of application of paragraph.--
                          (i) Temporary suspension.--This 
                        paragraph shall not apply to any 
                        applicable high yield discount 
                        obligation issued during the period 
                        beginning on September 1, 2008, and 
                        ending on December 31, 2009, in 
                        exchange (including an exchange 
                        resulting from a modification of the 
                        debt instrument) for an obligation 
                        which is not an applicable high yield 
                        discount obligation and the issuer (or 
                        obligor) of which is the same as the 
                        issuer (or obligor) of such applicable 
                        high yield discount obligation. The 
                        preceding sentence shall not apply to 
                        any obligation the interest on which is 
                        interest described in section 871(h)(4) 
                        (without regard to subparagraph (D) 
                        thereof) or to any obligation issued to 
                        a related person (within the meaning of 
                        section 108(e)(4)).
                          (ii) Successive application.--Any 
                        obligation to which clause (i) applies 
                        shall not be treated as an applicable 
                        high yield discount obligation for 
                        purposes of applying this subparagraph 
                        to any other obligation issued in 
                        exchange for such obligation.
                          (iii) Secretarial authority to 
                        suspend application.--The Secretary may 
                        apply this paragraph with respect to 
                        debt instruments issued in periods 
                        following the period described in 
                        clause (i) if the Secretary determines 
                        that such application is appropriate in 
                        light of distressed conditions in the 
                        debt capital markets.
                  (G) Cross reference.--For definition of 
                applicable high yield discount obligation, see 
                subsection (i).
          (6) Cross references.--For provision relating to 
        deduction of original issue discount on tax-exempt 
        obligation, see section 1288.
          For special rules in the case of the borrower under 
        certain loans for personal use, see section 1275(b).
  (f) Denial of deduction for interest on certain obligations 
not in registered form.--
          (1) In general.--Nothing in subsection (a) or in any 
        other provision of law shall be construed to provide a 
        deduction for interest on any registration-required 
        obligation unless such obligation is in registered 
        form.
          (2) Registration-required obligation.--For purposes 
        of this section--
                  (A) In general.--The term ``registration-
                required obligation'' means any obligation 
                (including any obligation issued by a 
                governmental entity) other than an obligation 
                which--
                          (i) is issued by a natural person,
                          (ii) is not of a type offered to the 
                        public, or
                          (iii) has a maturity (at issue) of 
                        not more than 1 year.
                  (B) Authority to include other obligations.--
                Clauses (ii) and (iii) of subparagraph (A) 
                shall not apply to any obligation if--
                          (i) such obligation is of a type 
                        which the Secretary has determined by 
                        regulations to be used frequently in 
                        avoiding Federal taxes, and
                          (ii) such obligation is issued after 
                        the date on which the regulations 
                        referred to in clause (i) take effect.
          (3) Book entries permitted, etc..--For purposes of 
        this subsection, rules similar to the rules of section 
        149(a)(3) shall apply, except that a dematerialized 
        book entry system or other book entry system specified 
        by the Secretary shall be treated as a book entry 
        system described in such section.
  (g) Reduction of deduction where section 25 credit taken.--
The amount of the deduction under this section for interest 
paid or accrued during any taxable year on indebtedness with 
respect to which a mortgage credit certificate has been issued 
under section 25 shall be reduced by the amount of the credit 
allowable with respect to such interest under section 25 
(determined without regard to section 26).
  (h) Disallowance of deduction for personal interest.--
          (1) In general.--In the case of a taxpayer other than 
        a corporation, no deduction shall be allowed under this 
        chapter for personal interest paid or accrued during 
        the taxable year.
          (2) Personal interest.--For purposes of this 
        subsection, the term ``personal interest'' means any 
        interest allowable as a deduction under this chapter 
        other than--
                  (A) interest paid or accrued on indebtedness 
                properly allocable to a trade or business 
                (other than the trade or business of performing 
                services as an employee),
                  (B) any investment interest (within the 
                meaning of subsection (d)),
                  (C) any interest which is taken into account 
                under section 469 in computing income or loss 
                from a passive activity of the taxpayer,
                  (D) any qualified residence interest (within 
                the meaning of paragraph (3)),
                  (E) any interest payable under section 6601 
                on any unpaid portion of the tax imposed by 
                section 2001 for the period during which an 
                extension of time for payment of such tax is in 
                effect under section 6163, and
                  (F) any interest allowable as a deduction 
                under section 221 (relating to interest on 
                educational loans).
          (3) Qualified residence interest.--For purposes of 
        this subsection--
                  (A) In general.--The term ``qualified 
                residence interest'' means any interest which 
                is paid or accrued during the taxable year on--
                          (i) acquisition indebtedness with 
                        respect to any qualified residence of 
                        the taxpayer, or
                          (ii) home equity indebtedness with 
                        respect to any qualified residence of 
                        the taxpayer.
                For purposes of the preceding sentence, the 
                determination of whether any property is a 
                qualified residence of the taxpayer shall be 
                made as of the time the interest is accrued.
                  (B) Acquisition indebtedness.--
                          (i) In general.--The term 
                        ``acquisition indebtedness'' means any 
                        indebtedness which--
                                  (I) is incurred in acquiring, 
                                constructing, or substantially 
                                improving any qualified 
                                residence of the taxpayer, and
                                  (II) is secured by such 
                                residence.
                 Such term also includes any indebtedness 
                secured by such residence resulting from the 
                refinancing of indebtedness meeting the 
                requirements of the preceding sentence (or this 
                sentence); but only to the extent the amount of 
                the indebtedness resulting from such 
                refinancing does not exceed the amount of the 
                refinanced indebtedness.
                          (ii) $1,000,000 limitation.--The 
                        aggregate amount treated as acquisition 
                        indebtedness for any period shall not 
                        exceed $1,000,000 ($500,000 in the case 
                        of a married individual filing a 
                        separate return).
                  (C) Home equity indebtedness.--
                          (i) In general.--The term ``home 
                        equity indebtedness'' means any 
                        indebtedness (other than acquisition 
                        indebtedness) secured by a qualified 
                        residence to the extent the aggregate 
                        amount of such indebtedness does not 
                        exceed--
                                  (I) the fair market value of 
                                such qualified residence, 
                                reduced by
                                  (II) the amount of 
                                acquisition indebtedness with 
                                respect to such residence.
                          (ii) Limitation.--The aggregate 
                        amount treated as home equity 
                        indebtedness for any period shall not 
                        exceed $100,000 ($50,000 in the case of 
                        a separate return by a married 
                        individual).
                  (D) Treatment of indebtedness incurred on or 
                before October 13, 1987.--
                          (i) In general.--In the case of any 
                        pre-October 13, 1987, indebtedness--
                                  (I) such indebtedness shall 
                                be treated as acquisition 
                                indebtedness, and
                                  (II) the limitation of 
                                subparagraph (B)(ii) shall not 
                                apply.
                          (ii) Reduction in $1,000,000 
                        limitation.--The limitation of 
                        subparagraph (B)(ii) shall be reduced 
                        (but not below zero) by the aggregate 
                        amount of outstanding pre-October 13, 
                        1987, indebtedness.
                          (iii) Pre-October 13, 1987, 
                        indebtedness.--The term ``pre-October 
                        13, 1987, indebtedness'' means--
                                  (I) any indebtedness which 
                                was incurred on or before 
                                October 13, 1987, and which was 
                                secured by a qualified 
                                residence on October 13, 1987, 
                                and at all times thereafter 
                                before the interest is paid or 
                                accrued, or
                                  (II) any indebtedness which 
                                is secured by the qualified 
                                residence and was incurred 
                                after October 13, 1987, to 
                                refinance indebtedness 
                                described in subclause (I) (or 
                                refinanced indebtedness meeting 
                                the requirements of this 
                                subclause) to the extent 
                                (immediately after the 
                                refinancing) the principal 
                                amount of the indebtedness 
                                resulting from the refinancing 
                                does not exceed the principal 
                                amount of the refinanced 
                                indebtedness (immediately 
                                before the refinancing).
                          (iv) Limitation on period of 
                        refinancing.--Subclause (II) of clause 
                        (iii) shall not apply to any 
                        indebtedness after--
                                  (I) the expiration of the 
                                term of the indebtedness 
                                described in clause (iii)(I), 
                                or
                                  (II) if the principal of the 
                                indebtedness described in 
                                clause (iii)(I) 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).
                  (E) Mortgage insurance premiums treated as 
                interest.--
                          (i) In general.--Premiums paid or 
                        accrued for qualified mortgage 
                        insurance by a taxpayer during the 
                        taxable year in connection with 
                        acquisition indebtedness with respect 
                        to a qualified residence of the 
                        taxpayer shall be treated for purposes 
                        of this section as interest which is 
                        qualified residence interest.
                          (ii) Phaseout.--The amount otherwise 
                        treated as interest under clause (i) 
                        shall be reduced (but not below zero) 
                        by 10 percent of such amount for each 
                        $1,000 ($500 in the case of a married 
                        individual filing a separate return) 
                        (or fraction thereof) that the 
                        taxpayer's adjusted gross income for 
                        the taxable year exceeds $100,000 
                        ($50,000 in the case of a married 
                        individual filing a separate return).
                          (iii) Limitation.--Clause (i) shall 
                        not apply with respect to any mortgage 
                        insurance contracts issued before 
                        January 1, 2007.
                          (iv) Termination.--Clause (i) shall 
                        not apply to amounts--
                                  (I) paid or accrued after 
                                [December 31, 2017] December 
                                31, 2020, or
                                  (II) properly allocable to 
                                any period after such date.
                  (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.
          (4) Other definitions and special rules.--For 
        purposes of this subsection--
                  (A) Qualified residence.--
                          (i) In general.--The term ``qualified 
                        residence'' means--
                                  (I) the principal residence 
                                (within the meaning of section 
                                121) of the taxpayer, and
                                  (II) 1 other residence of the 
                                taxpayer which is selected by 
                                the taxpayer for purposes of 
                                this subsection for the taxable 
                                year and which is used by the 
                                taxpayer as a residence (within 
                                the meaning of section 
                                280A(d)(1)).
                          (ii) Married individuals filing 
                        separate returns.--If a married couple 
                        does not file a joint return for the 
                        taxable year--
                                  (I) such couple shall be 
                                treated as 1 taxpayer for 
                                purposes of clause (i), and
                                  (II) each individual shall be 
                                entitled to take into account 1 
                                residence unless both 
                                individuals consent in writing 
                                to 1 individual taking into 
                                account the principal residence 
                                and 1 other residence.
                          (iii) Residence not rented.--For 
                        purposes of clause (i)(II), 
                        notwithstanding section 280A(d)(1), if 
                        the taxpayer does not rent a dwelling 
                        unit at any time during a taxable year, 
                        such unit may be treated as a residence 
                        for such taxable year.
                  (B) Special rule for cooperative housing 
                corporations.--Any indebtedness secured by 
                stock held by the taxpayer as a tenant-
                stockholder (as defined in section 216) in a 
                cooperative housing corporation (as so defined) 
                shall be treated as secured by the house or 
                apartment which the taxpayer is entitled to 
                occupy as such a tenant-stockholder. If stock 
                described in the preceding sentence may not be 
                used to secure indebtedness, indebtedness shall 
                be treated as so secured if the taxpayer 
                establishes to the satisfaction of the 
                Secretary that such indebtedness was incurred 
                to acquire such stock.
                  (C) Unenforceable security interests.--
                Indebtedness shall not fail to be treated as 
                secured by any property solely because, under 
                any applicable State or local homestead or 
                other debtor protection law in effect on August 
                16, 1986, the security interest is ineffective 
                or the enforceability of the security interest 
                is restricted.
                  (D) Special rules for estates and trusts.--
                For purposes of determining whether any 
                interest paid or accrued by an estate or trust 
                is qualified residence interest, any residence 
                held by such estate or trust shall be treated 
                as a qualified residence of such estate or 
                trust if such estate or trust establishes that 
                such residence is a qualified residence of a 
                beneficiary who has a present interest in such 
                estate or trust or an interest in the residuary 
                of such estate or trust.
                  (E) Qualified mortgage insurance.--The term 
                ``qualified mortgage insurance'' means--
                          (i) mortgage insurance provided by 
                        the Department of Veterans Affairs, the 
                        Federal Housing Administration, or the 
                        Rural Housing Service, and
                          (ii) private mortgage insurance (as 
                        defined by section 2 of the Homeowners 
                        Protection Act of 1998 (12 U.S.C. 
                        4901), as in effect on the date of the 
                        enactment of this subparagraph).
                  (F) Special rules for prepaid qualified 
                mortgage insurance.--Any amount paid by the 
                taxpayer for qualified mortgage insurance that 
                is properly allocable to any mortgage the 
                payment of which extends to periods that are 
                after the close of the taxable year in which 
                such amount is paid shall be chargeable to 
                capital account and shall be treated as paid in 
                such periods to which so allocated. No 
                deduction shall be allowed for the unamortized 
                balance of such account if such mortgage is 
                satisfied before the end of its term. The 
                preceding sentences shall not apply to amounts 
                paid for qualified mortgage insurance provided 
                by the Department of Veterans Affairs or the 
                Rural Housing Service.
  (i) Applicable high yield discount obligation.--
          (1) In general.--For purposes of this section, the 
        term ``applicable high yield discount obligation'' 
        means any debt instrument if--
                  (A) the maturity date of such instrument is 
                more than 5 years from the date of issue,
                  (B) the yield to maturity on such instrument 
                equals or exceeds the sum of--
                          (i) the applicable Federal rate in 
                        effect under section 1274(d) for the 
                        calendar month in which the obligation 
                        is issued, plus
                          (ii) 5 percentage points, and
                  (C) such instrument has significant original 
                issue discount.
        For purposes of subparagraph (B)(i), the Secretary may 
        by regulation (i) permit a rate to be used with respect 
        to any debt instrument which is higher than the 
        applicable Federal rate if the taxpayer establishes to 
        the satisfaction of the Secretary that such higher rate 
        is based on the same principles as the applicable 
        Federal rate and is appropriate for the term of the 
        instrument, or (ii) permit, on a temporary basis, a 
        rate to be used with respect to any debt instrument 
        which is higher than the applicable Federal rate if the 
        Secretary determines that such rate is appropriate in 
        light of distressed conditions in the debt capital 
        markets.
          (2) Significant original issue discount.--For 
        purposes of paragraph (1)(C), a debt instrument shall 
        be treated as having significant original issue 
        discount if--
                  (A) the aggregate amount which would be 
                includible in gross income with respect to such 
                instrument for periods before the close of any 
                accrual period (as defined in section 
                1272(a)(5)) ending after the date 5 years after 
                the date of issue, exceeds--
                  (B) the sum of--
                          (i) the aggregate amount of interest 
                        to be paid under the instrument before 
                        the close of such accrual period, and
                          (ii) the product of the issue price 
                        of such instrument (as defined in 
                        sections 1273(b) and 1274(a)) and its 
                        yield to maturity.
          (3) Special rules.--For purposes of determining 
        whether a debt instrument is an applicable high yield 
        discount obligation--
                  (A) any payment under the instrument shall be 
                assumed to be made on the last day permitted 
                under the instrument, and
                  (B) any payment to be made in the form of 
                another obligation of the issuer (or a related 
                person within the meaning of section 453(f)(1)) 
                shall be assumed to be made when such 
                obligation is required to be paid in cash or in 
                property other than such obligation.
        Except for purposes of paragraph (1)(B), any reference 
        to an obligation in subparagraph (B) of this paragraph 
        shall be treated as including a reference to stock.
          (4) Debt instrument.--For purposes of this 
        subsection, the term ``debt instrument'' means any 
        instrument which is a debt instrument as defined in 
        section 1275(a).
          (5) Regulations.--The Secretary shall prescribe such 
        regulations as may be appropriate to carry out the 
        purposes of this subsection and subsection (e)(5), 
        including--
                  (A) regulations providing for modifications 
                to the provisions of this subsection and 
                subsection (e)(5) in the case of varying rates 
                of interest, put or call options, indefinite 
                maturities, contingent payments, assumptions of 
                debt instruments, conversion rights, or other 
                circumstances where such modifications are 
                appropriate to carry out the purposes of this 
                subsection and subsection (e)(5), and
                  (B) regulations to prevent avoidance of the 
                purposes of this subsection and subsection 
                (e)(5) through the use of issuers other than C 
                corporations, agreements to borrow amounts due 
                under the debt instrument, or other 
                arrangements.
  (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
                                  (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).
  (k) Section 6166 interest.--No deduction shall be allowed 
under this section for any interest payable under section 6601 
on any unpaid portion of the tax imposed by section 2001 for 
the period during which an extension of time for payment of 
such tax is in effect under section 6166.
  (l) Disallowance of deduction on certain debt instruments of 
corporations.--
          (1) In general.--No deduction shall be allowed under 
        this chapter for any interest paid or accrued on a 
        disqualified debt instrument.
          (2) Disqualified debt instrument.--For purposes of 
        this subsection, the term ``disqualified debt 
        instrument'' means any indebtedness of a corporation 
        which is payable in equity of the issuer or a related 
        party or equity held by the issuer (or any related 
        party) in any other person.
          (3) Special rules for amounts payable in equity.--For 
        purposes of paragraph (2), indebtedness shall be 
        treated as payable in equity of the issuer or any other 
        person only if--
                  (A) a substantial amount of the principal or 
                interest is required to be paid or converted, 
                or at the option of the issuer or a related 
                party is payable in, or convertible into, such 
                equity,
                  (B) a substantial amount of the principal or 
                interest is required to be determined, or at 
                the option of the issuer or a related party is 
                determined, by reference to the value of such 
                equity, or
                  (C) the indebtedness is part of an 
                arrangement which is reasonably expected to 
                result in a transaction described in 
                subparagraph (A) or (B).
        For purposes of this paragraph, principal or interest 
        shall be treated as required to be so paid, converted, 
        or determined if it may be required at the option of 
        the holder or a related party and there is a 
        substantial certainty the option will be exercised.
          (4) Capitalization allowed with respect to equity of 
        persons other than issuer and related parties.--If the 
        disqualified debt instrument of a corporation is 
        payable in equity held by the issuer (or any related 
        party) in any other person (other than a related 
        party), the basis of such equity shall be increased by 
        the amount not allowed as a deduction by reason of 
        paragraph (1) with respect to the instrument.
          (5) Exception for certain instruments issued by 
        dealers in securities.--For purposes of this 
        subsection, the term ``disqualified debt instrument'' 
        does not include indebtedness issued by a dealer in 
        securities (or a related party) which is payable in, or 
        by reference to, equity (other than equity of the 
        issuer or a related party) held by such dealer in its 
        capacity as a dealer in securities. For purposes of 
        this paragraph, the term ``dealer in securities'' has 
        the meaning given such term by section 475.
          (6) Related party.--For purposes of this subsection, 
        a person is a related party with respect to another 
        person if such person bears a relationship to such 
        other person described in section 267(b) or 707(b).
          (7) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry 
        out the purposes of this subsection, including 
        regulations preventing avoidance of this subsection 
        through the use of an issuer other than a corporation.
  (m) Interest on unpaid taxes attributable to nondisclosed 
reportable transactions.--No deduction shall be allowed under 
this chapter for any interest paid or accrued under section 
6601 on any underpayment of tax which is attributable to the 
portion of any reportable transaction understatement (as 
defined in section 6662A(b)) with respect to which the 
requirement of section 6664(d)(2)(A)   is not met.
  (n) Cross references.--
                  (1) For disallowance of certain amounts paid 
                in connection with insurance, endowment, or 
                annuity contracts, see section 264.
                  (2) For disallowance of deduction for 
                interest relating to tax-exempt income, see 
                section 265(a)(2).
                  (3) For disallowance of deduction for 
                carrying charges chargeable to capital account, 
                see section 266.
                  (4) For disallowance of interest with respect 
                to transactions between related taxpayers, see 
                section 267.
                  (5) For treatment of redeemable ground rents 
                and real property held subject to liabilities 
                under redeemable ground rents, see section 
                1055.

           *       *       *       *       *       *       *


SEC. 168. ACCELERATED COST RECOVERY SYSTEM.

  (a) General rule.--Except as otherwise provided in this 
section, the depreciation deduction provided by section 167(a) 
for any tangible property shall be determined by using--
          (1) the applicable depreciation method,
          (2) the applicable recovery period, and
          (3) the applicable convention.
  (b) Applicable depreciation method.--For purposes of this 
section--
          (1) In general.--Except as provided in paragraphs (2) 
        and (3), the applicable depreciation method is--
                  (A) the 200 percent declining balance method,
                  (B) switching to the straight line method for 
                the 1st taxable year for which using the 
                straight line method with respect to the 
                adjusted basis as of the beginning of such year 
                will yield a larger allowance.
          (2) 150 percent declining balance method in certain 
        cases.--Paragraph (1) shall be applied by substituting 
        ``150 percent'' for ``200 percent'' in the case of--
                  (A) any 15-year or 20-year property not 
                referred to in paragraph (3),
                  (B) any property (other than property 
                described in paragraph (3)) which is a 
                qualified smart electric meter or qualified 
                smart electric grid system, or
                  (C) any property (other than property 
                described in paragraph (3)) with respect to 
                which the taxpayer elects under paragraph (5) 
                to have the provisions of this paragraph apply.
          (3) Property to which straight line method applies.--
        The applicable depreciation method shall be the 
        straight line method in the case of the following 
        property:
                  (A) Nonresidential real property.
                  (B) Residential rental property.
                  (C) Any railroad grading or tunnel bore.
                  (D) Property with respect to which the 
                taxpayer elects under paragraph (5) to have the 
                provisions of this paragraph apply.
                  (E) Property described in subsection 
                (e)(3)(D)(ii).
                  (F) Water utility property described in 
                subsection (e)(5).
                  (G) Qualified improvement property described 
                in subsection (e)(6).
          (4) Salvage value treated as zero.--Salvage value 
        shall be treated as zero.
          (5) Election.--An election under paragraph (2)(D) or 
        (3)(D) may be made with respect to 1 or more classes of 
        property for any taxable year and once made with 
        respect to any class shall apply to all property in 
        such class placed in service during such taxable year. 
        Such an election, once made, shall be irrevocable.
  (c) Applicable recovery period.--For purposes of this 
section, the applicable recovery period shall be determined in 
accordance with the following table:
  (d) Applicable convention.--For purposes of this section--
          (1) In general.--Except as otherwise provided in this 
        subsection, the applicable convention is the half-year 
        convention.
          (2) Real property.--In the case of--
                  (A) nonresidential real property,
                  (B) residential rental property, and
                  (C) any railroad grading or tunnel bore,
        the applicable convention is the mid-month convention.
          (3) Special rule where substantial property placed in 
        service during last 3 months of taxable year.--
                  (A) In general.--Except as provided in 
                regulations, if during any taxable year--
                          (i) the aggregate bases of property 
                        to which this section applies placed in 
                        service during the last 3 months of the 
                        taxable year, exceed
                          (ii) 40 percent of the aggregate 
                        bases of property to which this section 
                        applies placed in service during such 
                        taxable year,
        the applicable convention for all property to which 
        this section applies placed in service during such 
        taxable year shall be the mid-quarter convention.
                  (B) Certain property not taken into 
                account.--For purposes of subparagraph (A), 
                there shall not be taken into account--
                          (i) any nonresidential real property, 
                        residential rental property, and 
                        railroad grading or tunnel bore, and
                          (ii) any other property placed in 
                        service and disposed of during the same 
                        taxable year.
          (4) Definitions.--
                  (A) Half-year convention.--The half-year 
                convention is a convention which treats all 
                property placed in service during any taxable 
                year (or disposed of during any taxable year) 
                as placed in service (or disposed of) on the 
                mid-point of such taxable year.
                  (B) Mid-month convention.--The mid-month 
                convention is a convention which treats all 
                property placed in service during any month (or 
                disposed of during any month) as placed in 
                service (or disposed of) on the mid-point of 
                such month.
                  (C) Mid-quarter convention.--The mid-quarter 
                convention is a convention which treats all 
                property placed in service during any quarter 
                of a taxable year (or disposed of during any 
                quarter of a taxable year) as placed in service 
                (or disposed of) on the mid-point of such 
                quarter.
  (e) Classification of property.--For purposes of this 
section--
          (1) In general.--Except as otherwise provided in this 
        subsection, property shall be classified under the 
        following table:
          (2) Residential rental or nonresidential real 
        property.--
                  (A) Residential rental property.--
                          (i) Residential rental property.--The 
                        term ``residential rental property'' 
                        means any building or structure if 80 
                        percent or more of the gross rental 
                        income from such building or structure 
                        for the taxable year is rental income 
                        from dwelling units.
                          (ii) Definitions.--For purposes of 
                        clause (i)--
                                  (I) the term ``dwelling 
                                unit'' means a house or 
                                apartment used to provide 
                                living accommodations in a 
                                building or structure, but does 
                                not include a unit in a hotel, 
                                motel, or other establishment 
                                more than one-half of the units 
                                in which are used on a 
                                transient basis, and
                                  (II) if any portion of the 
                                building or structure is 
                                occupied by the taxpayer, the 
                                gross rental income from such 
                                building or structure shall 
                                include the rental value of the 
                                portion so occupied.
                  (B) Nonresidential real property.--The term 
                ``nonresidential real property'' means section 
                1250 property which is not--
                          (i) residential rental property, or
                          (ii) property with a class life of 
                        less than 27.5 years.
          (3) Classification of certain property.--
                  (A) 3-year property.--The term ``3-year 
                property'' includes--
                          (i) any race horse--
                                  (I) which is placed in 
                                service before January 1, 2018, 
                                and
                                  (II) which is placed in 
                                service after December 31, 
                                2017, and which is more than 2 
                                years old at the time such 
                                horse is placed in service by 
                                such purchaser,
                          (ii) any horse other than a race 
                        horse which is more than 12 years old 
                        at the time it is placed in service, 
                        and
                          (iii) any qualified rent-to-own 
                        property.
                  (B) 5-year property.--The term ``5-year 
                property'' includes--
                          (i) any automobile or light general 
                        purpose truck,
                          (ii) any semi-conductor manufacturing 
                        equipment,
                          (iii) any computer-based telephone 
                        central office switching equipment,
                          (iv) any qualified technological 
                        equipment,
                          (v) any section 1245 property used in 
                        connection with research and 
                        experimentation,
                          (vi) any property which--
                                  (I) is described in 
                                subparagraph (A) of section 
                                48(a)(3) (or would be so 
                                described if ``solar or wind 
                                energy'' were substituted for 
                                ``solar energy'' in clause (i) 
                                thereof and the last sentence 
                                of such section did not apply 
                                to such subparagraph),
                                  (II) is described in 
                                paragraph (15) of section 48(l) 
                                (as in effect on the day before 
                                the date of the enactment of 
                                the Revenue Reconciliation Act 
                                of 1990) and has a power 
                                production capacity of not 
                                greater than 80 megawatts, or
                                  (III) is described in section 
                                48(l)(3)(A)(ix) (as in effect 
                                on the day before the date of 
                                the enactment of the Revenue 
                                Reconciliation Act of 1990), 
                                and
                          (vii) any machinery or equipment 
                        (other than any grain bin, cotton 
                        ginning asset, fence, or other land 
                        improvement) which is used in a farming 
                        business (as defined in section 
                        263A(e)(4)), the original use of which 
                        commences with the taxpayer after 
                        December 31, 2017.
                Nothing in any provision of law shall be 
                construed to treat property as not being 
                described in subclause (I) or (II) of clause 
                (vi) by reason of being public utility 
                property.
                  (C) 7-year property.--The term ``7-year 
                property'' includes--
                          (i) any railroad track,
                          (ii) any motorsports entertainment 
                        complex,
                          (iii) any Alaska natural gas 
                        pipeline,
                          (iv) any natural gas gathering line 
                        the original use of which commences 
                        with the taxpayer after April 11, 2005, 
                        and
                          (v) any property which--
                                  (I) does not have a class 
                                life, and
                                  (II) is not otherwise 
                                classified under paragraph (2) 
                                or this paragraph.
                  (D) 10-year property.--The term ``10-year 
                property'' includes--
                          (i) any single purpose agricultural 
                        or horticultural structure (within the 
                        meaning of subsection (i)(13)),
                          (ii) any tree or vine bearing fruit 
                        or nuts,
                          (iii) any qualified smart electric 
                        meter, and
                          (iv) any qualified smart electric 
                        grid system.
                  (E) 15-year property.--The term ``15-year 
                property'' includes--
                          (i) any municipal wastewater 
                        treatment plant,
                          (ii) any telephone distribution plant 
                        and comparable equipment used for 2-way 
                        exchange of voice and data 
                        communications,
                          (iii) any section 1250 property which 
                        is a retail motor fuels outlet (whether 
                        or not food or other convenience items 
                        are sold at the outlet),
                          (iv) initial clearing and grading 
                        land improvements with respect to gas 
                        utility property,
                          (v) any section 1245 property (as 
                        defined in section 1245(a)(3)) used in 
                        the transmission at 69 or more 
                        kilovolts of electricity for sale and 
                        the original use of which commences 
                        with the taxpayer after April 11, 2005, 
                        and
                          (vi) any natural gas distribution 
                        line the original use of which 
                        commences with the taxpayer after April 
                        11, 2005, and which is placed in 
                        service before January 1, 2011.
                  (F) 20-year property.--The term ``20-year 
                property'' means initial clearing and grading 
                land improvements with respect to any electric 
                utility transmission and distribution plant.
          (4) Railroad grading or tunnel bore.--The term 
        ``railroad grading or tunnel bore'' means all 
        improvements resulting from excavations (including 
        tunneling), construction of embankments, clearings, 
        diversions of roads and streams, sodding of slopes, and 
        from similar work necessary to provide, construct, 
        reconstruct, alter, protect, improve, replace, or 
        restore a roadbed or right-of-way for railroad track.
          (5) Water utility property.--The term ``water utility 
        property'' means property--
                  (A) which is an integral part of the 
                gathering, treatment, or commercial 
                distribution of water, and which, without 
                regard to this paragraph, would be 20-year 
                property, and
                  (B) any municipal sewer.
          (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.
  (f) Property to which section does not apply.--This section 
shall not apply to--
          (1) Certain methods of depreciation.--Any property 
        if--
                  (A) the taxpayer elects to exclude such 
                property from the application of this section, 
                and
                  (B) for the 1st taxable year for which a 
                depreciation deduction would be allowable with 
                respect to such property in the hands of the 
                taxpayer, the property is properly depreciated 
                under the unit-of-production method or any 
                method of depreciation not expressed in a term 
                of years (other than the retirement-
                replacement-betterment method or similar 
                method).
          (2) Certain public utility property.--Any public 
        utility property (within the meaning of subsection 
        (i)(10)) if the taxpayer does not use a normalization 
        method of accounting.
          (3) Films and video tape.--Any motion picture film or 
        video tape.
          (4) Sound recordings.--Any works which result from 
        the fixation of a series of musical, spoken, or other 
        sounds, regardless of the nature of the material (such 
        as discs, tapes, or other phonorecordings) in which 
        such sounds are embodied.
          (5) Certain property placed in service in churning 
        transactions.--
                  (A) In general.--Property--
                          (i) described in paragraph (4) of 
                        section 168(e) (as in effect before the 
                        amendments made by the Tax Reform Act 
                        of 1986), or
                          (ii) which would be described in such 
                        paragraph if such paragraph were 
                        applied by substituting ``1987'' for 
                        ``1981'' and ``1986'' for ``1980'' each 
                        place such terms appear.
                  (B) Subparagraph (A)(ii) not to apply.--
                Clause (ii) of subparagraph (A) shall not apply 
                to--
                          (i) any residential rental property 
                        or nonresidential real property,
                          (ii) any property if, for the 1st 
                        taxable year in which such property is 
                        placed in service--
                                  (I) the amount allowable as a 
                                deduction under this section 
                                (as in effect before the date 
                                of the enactment of this 
                                paragraph) with respect to such 
                                property is greater than,
                                  (II) the amount allowable as 
                                a deduction under this section 
                                (as in effect on or after such 
                                date and using the half-year 
                                convention) for such taxable 
                                year, or
                          (iii) any property to which this 
                        section (as amended by the Tax Reform 
                        Act of 1986) applied in the hands of 
                        the transferor.
                  (C) Special rule.--In the case of any 
                property to which this section would apply but 
                for this paragraph, the depreciation deduction 
                under section 167 shall be determined under the 
                provisions of this section as in effect before 
                the amendments made by section 201 of the Tax 
                Reform Act of 1986.
  (g) Alternative depreciation system for certain property.--
          (1) In general.--In the case of--
                  (A) any tangible property which during the 
                taxable year is used predominantly outside the 
                United States,
                  (B) any tax-exempt use property,
                  (C) any tax-exempt bond financed property,
                  (D) any imported property covered by an 
                Executive order under paragraph (6),
                  (E) any property to which an election under 
                paragraph (7) applies,
                  (F) any property described in paragraph (8), 
                and
                  (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)),
        the depreciation deduction provided by section 167(a) 
        shall be determined under the alternative depreciation 
        system.
          (2) Alternative depreciation system.--For purposes of 
        paragraph (1), the alternative depreciation system is 
        depreciation determined by using--
                  (A) the straight line method (without regard 
                to salvage value),
                  (B) the applicable convention determined 
                under subsection (d), and
                  (C) a recovery period determined under the 
                following table:
          (3) Special rules for determining class life.--
                  (A) Tax-exempt use property subject to 
                lease.--In the case of any tax-exempt use 
                property subject to a lease, the recovery 
                period used for purposes of paragraph (2) shall 
                (notwithstanding any other subparagraph of this 
                paragraph) in no event be less than 125 percent 
                of the lease term.
                  (B) Special rule for certain property 
                assigned to classes.--For purposes of paragraph 
                (2), in the case of property described in any 
                of the following subparagraphs of subsection 
                (e)(3), the class life shall be determined as 
                follows:
                  (C) Qualified technological equipment.--In 
                the case of any qualified technological 
                equipment, the recovery period used for 
                purposes of paragraph (2) shall be 5 years.
                  (D) Automobiles, etc..--In the case of any 
                automobile or light general purpose truck, the 
                recovery period used for purposes of paragraph 
                (2) shall be 5 years.
                  (E) Certain real property.--In the case of 
                any section 1245 property which is real 
                property with no class life, the recovery 
                period used for purposes of paragraph (2) shall 
                be 40 years.
          (4) Exception for certain property used outside 
        United States.--Subparagraph (A) of paragraph (1) shall 
        not apply to--
                  (A) any aircraft which is registered by the 
                Administrator of the Federal Aviation Agency 
                and which is operated to and from the United 
                States or is operated under contract with the 
                United States;
                  (B) rolling stock which is used within and 
                without the United States and which is--
                          (i) of a rail carrier subject to part 
                        A of subtitle IV of title 49, or
                          (ii) of a United States person (other 
                        than a corporation described in clause 
                        (i)) but only if the rolling stock is 
                        not leased to one or more foreign 
                        persons for periods aggregating more 
                        than 12 months in any 24-month period;
                  (C) any vessel documented under the laws of 
                the United States which is operated in the 
                foreign or domestic commerce of the United 
                States;
                  (D) any motor vehicle of a United States 
                person (as defined in section 7701(a)(30)) 
                which is operated to and from the United 
                States;
                  (E) any container of a United States person 
                which is used in the transportation of property 
                to and from the United States;
                  (F) any property (other than a vessel or an 
                aircraft) of a United States person which is 
                used for the purpose of exploring for, 
                developing, removing, or transporting resources 
                from the outer Continental Shelf (within the 
                meaning of section 2 of the Outer Continental 
                Shelf Lands Act, as amended and supplemented; 
                (43 U.S.C. 1331));
                  (G) any property which is owned by a domestic 
                corporation or by a United States citizen 
                (other than a citizen entitled to the benefits 
                of section 931 or 933) and which is used 
                predominantly in a possession of the United 
                States by such a corporation or such a citizen, 
                or by a corporation created or organized in, or 
                under the law of, a possession of the United 
                States;
                  (H) any communications satellite (as defined 
                in section 103(3) of the Communications 
                Satellite Act of 1962, 47 U.S.C. 702(3)), or 
                any interest therein, of a United States 
                person;
                  (I) any cable, or any interest therein, of a 
                domestic corporation engaged in furnishing 
                telephone service to which section 
                168(i)(10)(C) applies (or of a wholly owned 
                domestic subsidiary of such a corporation), if 
                such cable is part of a submarine cable system 
                which constitutes part of a communication link 
                exclusively between the United States and one 
                or more foreign countries;
                  (J) any property (other than a vessel or an 
                aircraft) of a United States person which is 
                used in international or territorial waters 
                within the northern portion of the Western 
                Hemisphere for the purpose of exploring for, 
                developing, removing, or transporting resources 
                from ocean waters or deposits under such 
                waters;
                  (K) any property described in section 
                48(l)(3)(A)(ix) (as in effect on the day before 
                the date of the enactment of the Revenue 
                Reconciliation Act of 1990) which is owned by a 
                United States person and which is used in 
                international or territorial waters to generate 
                energy for use in the United States; and
                  (L) any satellite (not described in 
                subparagraph (H)) or other spacecraft (or any 
                interest therein) held by a United States 
                person if such satellite or other spacecraft 
                was launched from within the United States.
        For purposes of subparagraph (J), the term ``northern 
        portion of the Western Hemisphere'' means the area 
        lying west of the 30th meridian west of Greenwich, east 
        of the international dateline, and north of the 
        Equator, but not including any foreign country which is 
        a country of South America.
          (5) Tax-exempt bond financed property.--For purposes 
        of this subsection--
                  (A) In general.--Except as otherwise provided 
                in this paragraph, the term ``tax-exempt bond 
                financed property'' means any property to the 
                extent such property is financed (directly or 
                indirectly) by an obligation the interest on 
                which is exempt from tax under section 103(a).
                  (B) Allocation of bond proceeds.--For 
                purposes of subparagraph (A), the proceeds of 
                any obligation shall be treated as used to 
                finance property acquired in connection with 
                the issuance of such obligation in the order in 
                which such property is placed in service.
                  (C) Qualified residential rental projects.--
                The term ``tax-exempt bond financed property'' 
                shall not include any qualified residential 
                rental project (within the meaning of section 
                142(a)(7)).
          (6) Imported property.--
                  (A) Countries maintaining trade restrictions 
                or engaging in discriminatory acts.--If the 
                President determines that a foreign country--
                          (i) maintains nontariff trade 
                        restrictions, including variable import 
                        fees, which substantially burden United 
                        States commerce in a manner 
                        inconsistent with provisions of trade 
                        agreements, or
                          (ii) engages in discriminatory or 
                        other acts (including tolerance of 
                        international cartels) or policies 
                        unjustifiably restricting United States 
                        commerce,
                the President may by Executive order provide 
                for the application of paragraph (1)(D) to any 
                article or class of articles manufactured or 
                produced in such foreign country for such 
                period as may be provided by such Executive 
                order. Any period specified in the preceding 
                sentence shall not apply to any property 
                ordered before (or the construction, 
                reconstruction, or erection of which began 
                before) the date of the Executive order unless 
                the President determines an earlier date to be 
                in the public interest and specifies such date 
                in the Executive order.
                  (B) Imported property.--For purposes of this 
                subsection, the term ``imported property'' 
                means any property if--
                          (i) such property was completed 
                        outside the United States, or
                          (ii) less than 50 percent of the 
                        basis of such property is attributable 
                        to value added within the United 
                        States.
                For purposes of this subparagraph, the term 
                ``United States'' includes the Commonwealth of 
                Puerto Rico and the possessions of the United 
                States.
          (7) Election to use alternative depreciation 
        system.--
                  (A) In general.--If the taxpayer makes an 
                election under this paragraph with respect to 
                any class of property for any taxable year, the 
                alternative depreciation system under this 
                subsection shall apply to all property in such 
                class placed in service during such taxable 
                year. Notwithstanding the preceding sentence, 
                in the case of nonresidential real property or 
                residential rental property, such election may 
                be made separately with respect to each 
                property.
                  (B) Election irrevocable.--An election under 
                subparagraph (A), once made, shall be 
                irrevocable.
          (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)).
  (h) Tax-exempt use property.--
          (1) In general.--For purposes of this section--
                  (A) Property other than nonresidential real 
                property.--Except as otherwise provided in this 
                subsection, the term ``tax-exempt use 
                property'' means that portion of any tangible 
                property (other than nonresidential real 
                property) leased to a tax-exempt entity.
                  (B) Nonresidential real property.--
                          (i) In general.--In the case of 
                        nonresidential real property, the term 
                        ``tax-exempt use property'' means that 
                        portion of the property leased to a 
                        tax-exempt entity in a disqualified 
                        lease.
                          (ii) Disqualified lease.--For 
                        purposes of this subparagraph, the term 
                        ``disqualified lease'' means any lease 
                        of the property to a tax-exempt entity, 
                        but only if--
                                  (I) part or all of the 
                                property was financed (directly 
                                or indirectly) by an obligation 
                                the interest on which is exempt 
                                from tax under section 103(a) 
                                and such entity (or a related 
                                entity) participated in such 
                                financing,
                                  (II) under such lease there 
                                is a fixed or determinable 
                                price purchase or sale option 
                                which involves such entity (or 
                                a related entity) or there is 
                                the equivalent of such an 
                                option,
                                  (III) such lease has a lease 
                                term in excess of 20 years, or
                                  (IV) such lease occurs after 
                                a sale (or other transfer) of 
                                the property by, or lease of 
                                the property from, such entity 
                                (or a related entity) and such 
                                property has been used by such 
                                entity (or a related entity) 
                                before such sale (or other 
                                transfer) or lease.
                          (iii) 35-percent threshold test.--
                        Clause (i) shall apply to any property 
                        only if the portion of such property 
                        leased to tax-exempt entities in 
                        disqualified leases is more than 35 
                        percent of the property.
                          (iv) Treatment of improvements.--For 
                        purposes of this subparagraph, 
                        improvements to a property (other than 
                        land) shall not be treated as a 
                        separate property.
                          (v) Leasebacks during 1st 3 months of 
                        use not taken into account.--Subclause 
                        (IV) of clause (ii) shall not apply to 
                        any property which is leased within 3 
                        months after the date such property is 
                        first used by the tax-exempt entity (or 
                        a related entity).
                  (C) Exception for short-term leases.--
                          (i) In general.--Property shall not 
                        be treated as tax-exempt use property 
                        merely by reason of a short-term lease.
                          (ii) Short-term lease.--For purposes 
                        of clause (i), the term ``short-term 
                        lease'' means any lease the term of 
                        which is--
                                  (I) less than 3 years, and
                                  (II) less than the greater of 
                                1 year or 30 percent of the 
                                property's present class life.
                 In the case of nonresidential real property 
                and property with no present class life, 
                subclause (II) shall not apply.
                  (D) Exception where property used in 
                unrelated trade or business.--The term ``tax-
                exempt use property'' shall not include any 
                portion of a property if such portion is 
                predominantly used by the tax-exempt entity 
                (directly or through a partnership of which 
                such entity is a partner) in an unrelated trade 
                or business the income of which is subject to 
                tax under section 511. For purposes of 
                subparagraph (B)(iii), any portion of a 
                property so used shall not be treated as leased 
                to a tax-exempt entity in a disqualified lease.
                  (E) Nonresidential real property defined.--
                For purposes of this paragraph, the term 
                ``nonresidential real property'' includes 
                residential rental property.
          (2) Tax-exempt entity.--
                  (A) In general.--For purposes of this 
                subsection, the term ``tax-exempt entity'' 
                means--
                          (i) the United States, any State or 
                        political subdivision thereof, any 
                        possession of the United States, or any 
                        agency or instrumentality of any of the 
                        foregoing,
                          (ii) an organization (other than a 
                        cooperative described in section 521) 
                        which is exempt from tax imposed by 
                        this chapter,
                          (iii) any foreign person or entity, 
                        and
                          (iv) any Indian tribal government 
                        described in section 7701(a)(40).
                For purposes of applying this subsection, any 
                Indian tribal government referred to in clause 
                (iv) shall be treated in the same manner as a 
                State.
                  (B) Exception for certain property subject to 
                United States tax and used by foreign person or 
                entity.--Clause (iii) of subparagraph (A) shall 
                not apply with respect to any property if more 
                than 50 percent of the gross income for the 
                taxable year derived by the foreign person or 
                entity from the use of such property is--
                          (i) subject to tax under this 
                        chapter, or
                          (ii) included under section 951 in 
                        the gross income of a United States 
                        shareholder for the taxable year with 
                        or within which ends the taxable year 
                        of the controlled foreign corporation 
                        in which such income was derived.
                For purposes of the preceding sentence, any 
                exclusion or exemption shall not apply for 
                purposes of determining the amount of the gross 
                income so derived, but shall apply for purposes 
                of determining the portion of such gross income 
                subject to tax under this chapter.
                  (C) Foreign person or entity.--For purposes 
                of this paragraph, the term ``foreign person or 
                entity'' means--
                          (i) any foreign government, any 
                        international organization, or any 
                        agency or instrumentality of any of the 
                        foregoing, and
                          (ii) any person who is not a United 
                        States person.
                Such term does not include any foreign 
                partnership or other foreign pass-thru entity.
                  (D) Treatment of certain taxable 
                instrumentalities.--For purposes of this 
                subsection, a corporation shall not be treated 
                as an instrumentality of the United States or 
                of any State or political subdivision thereof 
                if--
                          (i) all of the activities of such 
                        corporation are subject to tax under 
                        this chapter, and
                          (ii) a majority of the board of 
                        directors of such corporation is not 
                        selected by the United States or any 
                        State or political subdivision thereof.
                  (E) Certain previously tax-exempt 
                organizations.--
                          (i) In general.--For purposes of this 
                        subsection, an organization shall be 
                        treated as an organization described in 
                        subparagraph (A)(ii) with respect to 
                        any property (other than property held 
                        by such organization) if such 
                        organization was an organization (other 
                        than a cooperative described in section 
                        521) exempt from tax imposed by this 
                        chapter at any time during the 5-year 
                        period ending on the date such property 
                        was first used by such organization. 
                        The preceding sentence and subparagraph 
                        (D)(ii) shall not apply to the Federal 
                        Home Loan Mortgage Corporation.
                          (ii) Election not to have clause (i) 
                        apply.--
                                  (I) In general.--In the case 
                                of an organization formerly 
                                exempt from tax under section 
                                501(a) as an organization 
                                described in section 
                                501(c)(12), clause (i) shall 
                                not apply to such organization 
                                with respect to any property if 
                                such organization elects not to 
                                be exempt from tax under 
                                section 501(a) during the tax-
                                exempt use period with respect 
                                to such property.
                                  (II) Tax-exempt use period.--
                                For purposes of subclause (I), 
                                the term ``tax-exempt use 
                                period'' means the period 
                                beginning with the taxable year 
                                in which the property described 
                                in subclause (I) is first used 
                                by the organization and ending 
                                with the close of the 15th 
                                taxable year following the last 
                                taxable year of the applicable 
                                recovery period of such 
                                property.
                                  (III) Election.--Any election 
                                under subclause (I), once made, 
                                shall be irrevocable.
                          (iii) Treatment of successor 
                        organizations.--Any organization which 
                        is engaged in activities substantially 
                        similar to those engaged in by a 
                        predecessor organization shall succeed 
                        to the treatment under this 
                        subparagraph of such predecessor 
                        organization.
                          (iv) First used.--For purposes of 
                        this subparagraph, property shall be 
                        treated as first used by the 
                        organization--
                                  (I) when the property is 
                                first placed in service under a 
                                lease to such organization, or
                                  (II) in the case of property 
                                leased to (or held by) a 
                                partnership (or other pass-thru 
                                entity) in which the 
                                organization is a member, the 
                                later of when such property is 
                                first used by such partnership 
                                or pass-thru entity or when 
                                such organization is first a 
                                member of such partnership or 
                                pass-thru entity.
          (3) Special rules for certain high technology 
        equipment.--
                  (A) Exemption where lease term is 5 years or 
                less.--For purposes of this section, the term 
                ``tax-exempt use property'' shall not include 
                any qualified technological equipment if the 
                lease to the tax-exempt entity has a lease term 
                of 5 years or less. Notwithstanding subsection 
                (i)(3)(A)(i), in determining a lease term for 
                purposes of the preceding sentence, there shall 
                not be taken into account any option of the 
                lessee to renew at the fair market value rent 
                determined at the time of renewal; except that 
                the aggregate period not taken into account by 
                reason of this sentence shall not exceed 24 
                months.
                  (B) Exception for certain property.--
                          (i) In general.--For purposes of 
                        subparagraph (A), the term ``qualified 
                        technological equipment'' shall not 
                        include any property leased to a tax-
                        exempt entity if--
                                  (I) part or all of the 
                                property was financed (directly 
                                or indirectly) by an obligation 
                                the interest on which is exempt 
                                from tax under section 103(a),
                                  (II) such lease occurs after 
                                a sale (or other transfer) of 
                                the property by, or lease of 
                                such property from, such entity 
                                (or related entity) and such 
                                property has been used by such 
                                entity (or a related entity) 
                                before such sale (or other 
                                transfer) or lease, or
                                  (III) such tax-exempt entity 
                                is the United States or any 
                                agency or instrumentality of 
                                the United States.
                          (ii) Leasebacks during 1st 3 months 
                        of use not taken into account.--
                        Subclause (II) of clause (i) shall not 
                        apply to any property which is leased 
                        within 3 months after the date such 
                        property is first used by the tax-
                        exempt entity (or a related entity).
          (4) Related entities.--For purposes of this 
        subsection--
                  (A)(i) Each governmental unit and each agency 
                or instrumentality of a governmental unit is 
                related to each other such unit, agency, or 
                instrumentality which directly or indirectly 
                derives its powers, rights, and duties in whole 
                or in part from the same sovereign authority.
                          (ii) For purposes of clause (i), the 
                        United States, each State, and each 
                        possession of the United States shall 
                        be treated as a separate sovereign 
                        authority.
                  (B) Any entity not described in subparagraph 
                (A)(i) is related to any other entity if the 2 
                entities have--
                          (i) significant common purposes and 
                        substantial common membership, or
                          (ii) directly or indirectly 
                        substantial common direction or 
                        control.
                  (C)(i) An entity is related to another entity 
                if either entity owns (directly or through 1 or 
                more entities) a 50 percent or greater interest 
                in the capital or profits of the other entity.
                          (ii) For purposes of clause (i), 
                        entities treated as related under 
                        subparagraph (A) or (B) shall be 
                        treated as 1 entity.
                  (D) An entity is related to another entity 
                with respect to a transaction if such 
                transaction is part of an attempt by such 
                entities to avoid the application of this 
                subsection.
          (5) Tax-exempt use of property leased to 
        partnerships, etc., determined at partner level.--For 
        purposes of this subsection--
                  (A) In general.--In the case of any property 
                which is leased to a partnership, the 
                determination of whether any portion of such 
                property is tax-exempt use property shall be 
                made by treating each tax-exempt entity 
                partner's proportionate share (determined under 
                paragraph (6)(C)) of such property as being 
                leased to such partner.
                  (B) Other pass-thru entities; tiered 
                entities.--Rules similar to the rules of 
                subparagraph (A) shall also apply in the case 
                of any pass-thru entity other than a 
                partnership and in the case of tiered 
                partnerships and other entities.
                  (C) Presumption with respect to foreign 
                entities.--Unless it is otherwise established 
                to the satisfaction of the Secretary, it shall 
                be presumed that the partners of a foreign 
                partnership (and the beneficiaries of any other 
                foreign pass-thru entity) are persons who are 
                not United States persons.
          (6) Treatment of property owned by partnerships, 
        etc..--
                  (A) In general.--For purposes of this 
                subsection, if--
                          (i) any property which (but for this 
                        subparagraph) is not tax-exempt use 
                        property is owned by a partnership 
                        which has both a tax-exempt entity and 
                        a person who is not a tax-exempt entity 
                        as partners, and
                          (ii) any allocation to the tax-exempt 
                        entity of partnership items is not a 
                        qualified allocation,
                an amount equal to such tax-exempt entity's 
                proportionate share of such property shall 
                (except as provided in paragraph (1)(D)) be 
                treated as tax-exempt use property.
                  (B) Qualified allocation.--For purposes of 
                subparagraph (A), the term ``qualified 
                allocation'' means any allocation to a tax-
                exempt entity which--
                          (i) is consistent with such entity's 
                        being allocated the same distributive 
                        share of each item of income, gain, 
                        loss, deduction, credit, and basis and 
                        such share remains the same during the 
                        entire period the entity is a partner 
                        in the partnership, and
                          (ii) has substantial economic effect 
                        within the meaning of section 
                        704(b)(2).
                For purposes of this subparagraph, items 
                allocated under section 704(c) shall not be 
                taken into account.
                  (C) Determination of proportionate share.--
                          (i) In general.--For purposes of 
                        subparagraph (A), a tax-exempt entity's 
                        proportionate share of any property 
                        owned by a partnership shall be 
                        determined on the basis of such 
                        entity's share of partnership items of 
                        income or gain (excluding gain 
                        allocated under section 704(c)), 
                        whichever results in the largest 
                        proportionate share.
                          (ii) Determination where allocations 
                        vary.--For purposes of clause (i), if a 
                        tax-exempt entity's share of 
                        partnership items of income or gain 
                        (excluding gain allocated under section 
                        704(c)) may vary during the period such 
                        entity is a partner in the partnership, 
                        such share shall be the highest share 
                        such entity may receive.
                  (D) Determination of whether property used in 
                unrelated trade or business.--For purposes of 
                this subsection, in the case of any property 
                which is owned by a partnership which has both 
                a tax-exempt entity and a person who is not a 
                tax-exempt entity as partners, the 
                determination of whether such property is used 
                in an unrelated trade or business of such an 
                entity shall be made without regard to section 
                514.
                  (E) Other pass-thru entities; tiered 
                entities.--Rules similar to the rules of 
                subparagraphs (A), (B), (C), and (D) shall also 
                apply in the case of any pass-thru entity other 
                than a partnership and in the case of tiered 
                partnerships and other entities.
                  (F) Treatment of certain taxable entities.--
                          (i) In general.--For purposes of this 
                        paragraph and paragraph (5), except as 
                        otherwise provided in this 
                        subparagraph, any tax-exempt controlled 
                        entity shall be treated as a tax-exempt 
                        entity.
                          (ii) Election.--If a tax-exempt 
                        controlled entity makes an election 
                        under this clause--
                                  (I) such entity shall not be 
                                treated as a tax-exempt entity 
                                for purposes of this paragraph 
                                and paragraph (5), and
                                  (II) any gain recognized by a 
                                tax-exempt entity on any 
                                disposition of an interest in 
                                such entity (and any dividend 
                                or interest received or accrued 
                                by a tax-exempt entity from 
                                such tax-exempt controlled 
                                entity) shall be treated as 
                                unrelated business taxable 
                                income for purposes of section 
                                511.
                 Any such election shall be irrevocable and 
                shall bind all tax-exempt entities holding 
                interests in such tax-exempt controlled entity. 
                For purposes of subclause (II), there shall 
                only be taken into account dividends which are 
                properly allocable to income of the tax-exempt 
                controlled entity which was not subject to tax 
                under this chapter.
                          (iii) Tax-exempt controlled entity.--
                                  (I) In general.--The term 
                                ``tax-exempt controlled 
                                entity'' means any corporation 
                                (which is not a tax-exempt 
                                entity determined without 
                                regard to this subparagraph and 
                                paragraph (2)(E)) if 50 percent 
                                or more (in value) of the stock 
                                in such corporation is held by 
                                1 or more tax-exempt entities 
                                (other than a foreign person or 
                                entity).
                                  (II) Only 5-percent 
                                shareholders taken into account 
                                in case of publicly traded 
                                stock.--For purposes of 
                                subclause (I), in the case of a 
                                corporation the stock of which 
                                is publicly traded on an 
                                established securities market, 
                                stock held by a tax-exempt 
                                entity shall not be taken into 
                                account unless such entity 
                                holds at least 5 percent (in 
                                value) of the stock in such 
                                corporation. For purposes of 
                                this subclause, related 
                                entities (within the meaning of 
                                paragraph (4)) shall be treated 
                                as 1 entity.
                                  (III) Section 318 to apply.--
                                For purposes of this clause, a 
                                tax-exempt entity shall be 
                                treated as holding stock which 
                                it holds through application of 
                                section 318 (determined without 
                                regard to the 50-percent 
                                limitation contained in 
                                subsection (a)(2)(C) thereof).
                  (G) Regulations.--For purposes of determining 
                whether there is a qualified allocation under 
                subparagraph (B), the regulations prescribed 
                under paragraph (8) for purposes of this 
                paragraph--
                          (i) shall set forth the proper 
                        treatment for partnership guaranteed 
                        payments, and
                          (ii) may provide for the exclusion or 
                        segregation of items.
          (7) Lease.--For purposes of this subsection, the term 
        ``lease'' includes any grant of a right to use 
        property.
          (8) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry 
        out the purposes of this subsection.
  (i) Definitions and special rules.--For purposes of this 
section--
          (1) Class life.--Except as provided in this section, 
        the term ``class life'' means the class life (if any) 
        which would be applicable with respect to any property 
        as of January 1, 1986, under subsection (m) of section 
        167 (determined without regard to paragraph (4) and as 
        if the taxpayer had made an election under such 
        subsection). The Secretary, through an office 
        established in the Treasury, shall monitor and analyze 
        actual experience with respect to all depreciable 
        assets. The reference in this paragraph to subsection 
        (m) of section 167 shall be treated as a reference to 
        such subsection as in effect on the day before the date 
        of the enactment of the Revenue Reconciliation Act of 
        1990.
          (2) Qualified technological equipment.--
                  (A) In general.--The term ``qualified 
                technological equipment'' means--
                          (i) any computer or peripheral 
                        equipment,
                          (ii) any high technology telephone 
                        station equipment installed on the 
                        customer's premises, and
                          (iii) any high technology medical 
                        equipment.
                  (B) Computer or peripheral equipment 
                defined.--For purposes of this paragraph--
                          (i) In general.--The term ``computer 
                        or peripheral equipment'' means--
                                  (I) any computer, and
                                  (II) any related peripheral 
                                equipment.
                          (ii) Computer.--The term ``computer'' 
                        means a programmable electronically 
                        activated device which--
                                  (I) is capable of accepting 
                                information, applying 
                                prescribed processes to the 
                                information, and supplying the 
                                results of these processes with 
                                or without human intervention, 
                                and
                                  (II) consists of a central 
                                processing unit containing 
                                extensive storage, logic, 
                                arithmetic, and control 
                                capabilities.
                          (iii) Related peripheral equipment.--
                        The term ``related peripheral 
                        equipment'' means any auxiliary machine 
                        (whether on-line or off-line) which is 
                        designed to be placed under the control 
                        of the central processing unit of a 
                        computer.
                          (iv) Exceptions.--The term ``computer 
                        or peripheral equipment'' shall not 
                        include--
                                  (I) any equipment which is an 
                                integral part of other property 
                                which is not a computer,
                                  (II) typewriters, 
                                calculators, adding and 
                                accounting machines, copiers, 
                                duplicating equipment, and 
                                similar equipment, and
                                  (III) equipment of a kind 
                                used primarily for amusement or 
                                entertainment of the user.
                  (C) High technology medical equipment.--For 
                purposes of this paragraph, the term ``high 
                technology medical equipment'' means any 
                electronic, electromechanical, or computer-
                based high technology equipment used in the 
                screening, monitoring, observation, diagnosis, 
                or treatment of patients in a laboratory, 
                medical, or hospital environment.
          (3) Lease term.--
                  (A) In general.--In determining a lease 
                term--
                          (i) there shall be taken into account 
                        options to renew,
                          (ii) the term of a lease shall 
                        include the term of any service 
                        contract or similar arrangement 
                        (whether or not treated as a lease 
                        under section 7701(e))--
                                  (I) which is part of the same 
                                transaction (or series of 
                                related transactions) which 
                                includes the lease, and
                                  (II) which is with respect to 
                                the property subject to the 
                                lease or substantially similar 
                                property, and
                          (iii) 2 or more successive leases 
                        which are part of the same transaction 
                        (or a series of related transactions) 
                        with respect to the same or 
                        substantially similar property shall be 
                        treated as 1 lease.
                  (B) Special rule for fair rental options on 
                nonresidential real property or residential 
                rental property.--For purposes of clause (i) of 
                subparagraph (A), in the case of nonresidential 
                real property or residential rental property, 
                there shall not be taken into account any 
                option to renew at fair market value, 
                determined at the time of renewal.
          (4) General asset accounts.--Under regulations, a 
        taxpayer may maintain 1 or more general asset accounts 
        for any property to which this section applies. Except 
        as provided in regulations, all proceeds realized on 
        any disposition of property in a general asset account 
        shall be included in income as ordinary income.
          (5) Changes in use.--The Secretary shall, by 
        regulations, provide for the method of determining the 
        deduction allowable under section 167(a) with respect 
        to any tangible property for any taxable year (and the 
        succeeding taxable years) during which such property 
        changes status under this section but continues to be 
        held by the same person.
          (6) Treatments of additions or improvements to 
        property.--In the case of any addition to (or 
        improvement of) any property--
                  (A) any deduction under subsection (a) for 
                such addition or improvement shall be computed 
                in the same manner as the deduction for such 
                property would be computed if such property had 
                been placed in service at the same time as such 
                addition or improvement, and
                  (B) the applicable recovery period for such 
                addition or improvement shall begin on the 
                later of--
                          (i) the date on which such addition 
                        (or improvement) is placed in service, 
                        or
                          (ii) the date on which the property 
                        with respect to which such addition (or 
                        improvement) was made is placed in 
                        service.
          (7) Treatment of certain transferees.--
                  (A) In general.--In the case of any property 
                transferred in a transaction described in 
                subparagraph (B), the transferee shall be 
                treated as the transferor for purposes of 
                computing the depreciation deduction determined 
                under this section with respect to so much of 
                the basis in the hands of the transferee as 
                does not exceed the adjusted basis in the hands 
                of the transferor. In any case where this 
                section as in effect before the amendments made 
                by section 201 of the Tax Reform Act of 1986 
                applied to the property in the hands of the 
                transferor, the reference in the preceding 
                sentence to this section shall be treated as a 
                reference to this section as so in effect.
                  (B) Transactions covered.--The transactions 
                described in this subparagraph are--
                          (i) any transaction described in 
                        section 332, 351, 361, 721, or 731, and
                          (ii) any transaction between members 
                        of the same affiliated group during any 
                        taxable year for which a consolidated 
                        return is made by such group.
                  (C) Property reacquired by the taxpayer.--
                Under regulations, property which is disposed 
                of and then reacquired by the taxpayer shall be 
                treated for purposes of computing the deduction 
                allowable under subsection (a) as if such 
                property had not been disposed of.
          (8) Treatment of leasehold improvements.--
                  (A) In general.--In the case of any building 
                erected (or improvements made) on leased 
                property, if such building or improvement is 
                property to which this section applies, the 
                depreciation deduction shall be determined 
                under the provisions of this section.
                  (B) Treatment of lessor improvements which 
                are abandoned at termination of lease.--An 
                improvement--
                          (i) which is made by the lessor of 
                        leased property for the lessee of such 
                        property, and
                          (ii) which is irrevocably disposed of 
                        or abandoned by the lessor at the 
                        termination of the lease by such 
                        lessee,
                shall be treated for purposes of determining 
                gain or loss under this title as disposed of by 
                the lessor when so disposed of or abandoned.
                  (C) Cross reference.--For treatment of 
                qualified long-term real property constructed 
                or improved in connection with cash or rent 
                reduction from lessor to lessee, see section 
                110(b).
          (9) Normalization rules.--
                  (A) In general.--In order to use a 
                normalization method of accounting with respect 
                to any public utility property for purposes of 
                subsection (f)(2)--
                          (i) the taxpayer must, in computing 
                        its tax expense for purposes of 
                        establishing its cost of service for 
                        ratemaking purposes and reflecting 
                        operating results in its regulated 
                        books of account, use a method of 
                        depreciation with respect to such 
                        property that is the same as, and a 
                        depreciation period for such property 
                        that is no shorter than, the method and 
                        period used to compute its depreciation 
                        expense for such purposes; and
                          (ii) if the amount allowable as a 
                        deduction under this section with 
                        respect to such property (respecting 
                        all elections made by the taxpayer 
                        under this section) differs from the 
                        amount that would be allowable as a 
                        deduction under section 167 using the 
                        method (including the period, first and 
                        last year convention, and salvage 
                        value) used to compute regulated tax 
                        expense under clause (i), the taxpayer 
                        must make adjustments to a reserve to 
                        reflect the deferral of taxes resulting 
                        from such difference.
                  (B) Use of inconsistent estimates and 
                projections, etc..--
                          (i) In general.--One way in which the 
                        requirements of subparagraph (A) are 
                        not met is if the taxpayer, for 
                        ratemaking purposes, uses a procedure 
                        or adjustment which is inconsistent 
                        with the requirements of subparagraph 
                        (A).
                          (ii) Use of inconsistent estimates 
                        and projections.--The procedures and 
                        adjustments which are to be treated as 
                        inconsistent for purposes of clause (i) 
                        shall include any procedure or 
                        adjustment for ratemaking purposes 
                        which uses an estimate or projection of 
                        the taxpayer's tax expense, 
                        depreciation expense, or reserve for 
                        deferred taxes under subparagraph 
                        (A)(ii) unless such estimate or 
                        projection is also used, for ratemaking 
                        purposes, with respect to the other 2 
                        such items and with respect to the rate 
                        base.
                          (iii) Regulatory authority.--The 
                        Secretary may by regulations prescribe 
                        procedures and adjustments (in addition 
                        to those specified in clause (ii)) 
                        which are to be treated as inconsistent 
                        for purposes of clause (i).
                  (C) Public utility property which does not 
                meet normalization rules.--In the case of any 
                public utility property to which this section 
                does not apply by reason of subsection (f)(2), 
                the allowance for depreciation under section 
                167(a) shall be an amount computed using the 
                method and period referred to in subparagraph 
                (A)(i).
          (10) Public utility property.--The term ``public 
        utility property'' means property used predominantly in 
        the trade or business of the furnishing or sale of--
                  (A) electrical energy, water, or sewage 
                disposal services,
                  (B) gas or steam through a local distribution 
                system,
                  (C) telephone services, or other 
                communication services if furnished or sold by 
                the Communications Satellite Corporation for 
                purposes authorized by the Communications 
                Satellite Act of 1962 (47 U.S.C. 701), or
                  (D) transportation of gas or steam by 
                pipeline,
        if the rates for such furnishing or sale, as the case 
        may be, have been established or approved by a State or 
        political subdivision thereof, by any agency or 
        instrumentality of the United States, or by a public 
        service or public utility commission or other similar 
        body of any State or political subdivision thereof.
          (11) Research and experimentation.--The term 
        ``research and experimentation'' has the same meaning 
        as the term research and experimental has under section 
        174.
          (12) Section 1245 and 1250 property.--The terms 
        ``section 1245 property'' and ``section 1250 property'' 
        have the meanings given such terms by sections 
        1245(a)(3) and 1250(c), respectively.
          (13) Single purpose agricultural or horticultural 
        structure.--
                  (A) In general.--The term ``single purpose 
                agricultural or horticultural structure'' 
                means--
                          (i) a single purpose livestock 
                        structure, and
                          (ii) a single purpose horticultural 
                        structure.
                  (B) Definitions.--For purposes of this 
                paragraph--
                          (i) Single purpose livestock 
                        structure.--The term ``single purpose 
                        livestock structure'' means any 
                        enclosure or structure specifically 
                        designed, constructed, and used--
                                  (I) for housing, raising, and 
                                feeding a particular type of 
                                livestock and their produce, 
                                and
                                  (II) for housing the 
                                equipment (including any 
                                replacements) necessary for the 
                                housing, raising, and feeding 
                                referred to in subclause (I).
                          (ii) Single purpose horticultural 
                        structure.--The term ``single purpose 
                        horticultural structure'' means--
                                  (I) a greenhouse specifically 
                                designed, constructed, and used 
                                for the commercial production 
                                of plants, and
                                  (II) a structure specifically 
                                designed, constructed, and used 
                                for the commercial production 
                                of mushrooms.
                          (iii) Structures which include work 
                        space.--An enclosure or structure which 
                        provides work space shall be treated as 
                        a single purpose agricultural or 
                        horticultural structure only if such 
                        work space is solely for--
                                  (I) the stocking, caring for, 
                                or collecting of livestock or 
                                plants (as the case may be) or 
                                their produce,
                                  (II) the maintenance of the 
                                enclosure or structure, and
                                  (III) the maintenance or 
                                replacement of the equipment or 
                                stock enclosed or housed 
                                therein.
                          (iv) Livestock.--The term 
                        ``livestock'' includes poultry.
          (14) Qualified rent-to-own property.--
                  (A) In general.--The term ``qualified rent-
                to-own property'' means property held by a 
                rent-to-own dealer for purposes of being 
                subject to a rent-to-own contract.
                  (B) Rent-to-own dealer.--The term ``rent-to-
                own dealer'' means a person that, in the 
                ordinary course of business, regularly enters 
                into rent-to-own contracts with customers for 
                the use of consumer property, if a substantial 
                portion of those contracts terminate and the 
                property is returned to such person before the 
                receipt of all payments required to transfer 
                ownership of the property from such person to 
                the customer.
                  (C) Consumer property.--The term ``consumer 
                property'' means tangible personal property of 
                a type generally used within the home for 
                personal use.
                  (D) Rent-to-own contract.--The term ``rent-
                to-own contract'' means any lease for the use 
                of consumer property between a rent-to-own 
                dealer and a customer who is an individual 
                which--
                          (i) is titled ``Rent-to-Own 
                        Agreement'' or ``Lease Agreement with 
                        Ownership Option,'' or uses other 
                        similar language,
                          (ii) provides for level (or 
                        decreasing where no payment is less 
                        than 40 percent of the largest 
                        payment), regular periodic payments 
                        (for a payment period which is a week 
                        or month),
                          (iii) provides that legal title to 
                        such property remains with the rent-to-
                        own dealer until the customer makes all 
                        the payments described in clause (ii) 
                        or early purchase payments required 
                        under the contract to acquire legal 
                        title to the item of property,
                          (iv) provides a beginning date and a 
                        maximum period of time for which the 
                        contract may be in effect that does not 
                        exceed 156 weeks or 36 months from such 
                        beginning date (including renewals or 
                        options to extend),
                          (v) provides for payments within the 
                        156-week or 36-month period that, in 
                        the aggregate, generally exceed the 
                        normal retail price of the consumer 
                        property plus interest,
                          (vi) provides for payments under the 
                        contract that, in the aggregate, do not 
                        exceed $10,000 per item of consumer 
                        property,
                          (vii) provides that the customer does 
                        not have any legal obligation to make 
                        all the payments referred to in clause 
                        (ii) set forth under the contract, and 
                        that at the end of each payment period 
                        the customer may either continue to use 
                        the consumer property by making the 
                        payment for the next payment period or 
                        return such property to the rent-to-own 
                        dealer in good working order, in which 
                        case the customer does not incur any 
                        further obligations under the contract 
                        and is not entitled to a return of any 
                        payments previously made under the 
                        contract, and
                          (viii) provides that the customer has 
                        no right to sell, sublease, mortgage, 
                        pawn, pledge, encumber, or otherwise 
                        dispose of the consumer property until 
                        all the payments stated in the contract 
                        have been made.
          (15) Motorsports entertainment complex.--
                  (A) In general.--The term ``motorsports 
                entertainment complex'' means a racing track 
                facility which--
                          (i) is permanently situated on land, 
                        and
                          (ii) during the 36-month period 
                        following the first day of the month in 
                        which the asset is placed in service, 
                        hosts 1 or more racing events for 
                        automobiles (of any type), trucks, or 
                        motorcycles which are open to the 
                        public for the price of admission.
                  (B) Ancillary and support facilities.--Such 
                term shall include, if owned by the taxpayer 
                who owns the complex and provided for the 
                benefit of patrons of the complex--
                          (i) ancillary facilities and land 
                        improvements in support of the 
                        complex's activities (including parking 
                        lots, sidewalks, waterways, bridges, 
                        fences, and landscaping),
                          (ii) support facilities (including 
                        food and beverage retailing, souvenir 
                        vending, and other nonlodging 
                        accommodations), and
                          (iii) appurtenances associated with 
                        such facilities and related attractions 
                        and amusements (including ticket 
                        booths, race track surfaces, suites and 
                        hospitality facilities, grandstands and 
                        viewing structures, props, walls, 
                        facilities that support the delivery of 
                        entertainment services, other special 
                        purpose structures, facades, shop 
                        interiors, and buildings).
                  (C) Exception.--Such term shall not include 
                any transportation equipment, administrative 
                services assets, warehouses, administrative 
                buildings, hotels, or motels.
                  (D) Termination.--Such term shall not include 
                any property placed in service after [December 
                31, 2017] December 31, 2020.
          (16) Alaska natural gas pipeline.--The term ``Alaska 
        natural gas pipeline'' means the natural gas pipeline 
        system located in the State of Alaska which--
                  (A) has a capacity of more than 
                500,000,000,000 Btu of natural gas per day, and
                  (B) is--
                          (i) placed in service after December 
                        31, 2013, or
                          (ii) treated as placed in service on 
                        January 1, 2014, if the taxpayer who 
                        places such system in service before 
                        January 1, 2014, elects such treatment.
        Such term includes the pipe, trunk lines, related 
        equipment, and appurtenances used to carry natural gas, 
        but does not include any gas processing plant.
          (17) Natural gas gathering line.--The term ``natural 
        gas gathering line'' means--
                  (A) the pipe, equipment, and appurtenances 
                determined to be a gathering line by the 
                Federal Energy Regulatory Commission, and
                  (B) the pipe, equipment, and appurtenances 
                used to deliver natural gas from the wellhead 
                or a commonpoint to the point at which such gas 
                first reaches--
                          (i) a gas processing plant,
                          (ii) an interconnection with a 
                        transmission pipeline for which a 
                        certificate as an interstate 
                        transmission pipeline has been issued 
                        by the Federal Energy Regulatory 
                        Commission,
                          (iii) an interconnection with an 
                        intrastate transmission pipeline, or
                          (iv) a direct interconnection with a 
                        local distribution company, a gas 
                        storage facility, or an industrial 
                        consumer.
          (18) Qualified smart electric meters.--
                  (A) In general.--The term ``qualified smart 
                electric meter'' means any smart electric meter 
                which--
                          (i) is placed in service by a 
                        taxpayer who is a supplier of electric 
                        energy or a provider of electric energy 
                        services, and
                          (ii) does not have a class life 
                        (determined without regard to 
                        subsection (e)) of less than 16 years.
                  (B) Smart electric meter.--For purposes of 
                subparagraph (A), the term ``smart electric 
                meter'' means any time-based meter and related 
                communication equipment which is capable of 
                being used by the taxpayer as part of a system 
                that--
                          (i) measures and records electricity 
                        usage data on a time-differentiated 
                        basis in at least 24 separate time 
                        segments per day,
                          (ii) provides for the exchange of 
                        information between supplier or 
                        provider and the customer's electric 
                        meter in support of time-based rates or 
                        other forms of demand response,
                          (iii) provides data to such supplier 
                        or provider so that the supplier or 
                        provider can provide energy usage 
                        information to customers 
                        electronically, and
                          (iv) provides net metering.
          (19) Qualified smart electric grid systems.--
                  (A) In general.--The term ``qualified smart 
                electric grid system'' means any smart grid 
                property which--
                          (i) is used as part of a system for 
                        electric distribution grid 
                        communications, monitoring, and 
                        management placed in service by a 
                        taxpayer who is a supplier of electric 
                        energy or a provider of electric energy 
                        services, and
                          (ii) does not have a class life 
                        (determined without regard to 
                        subsection (e)) of less than 16 years.
                  (B) Smart grid property.--For the purposes of 
                subparagraph (A), the term ``smart grid 
                property'' means electronics and related 
                equipment that is capable of--
                          (i) sensing, collecting, and 
                        monitoring data of or from all portions 
                        of a utility's electric distribution 
                        grid,
                          (ii) providing real-time, two-way 
                        communications to monitor or manage 
                        such grid, and
                          (iii) providing real time analysis of 
                        and event prediction based upon 
                        collected data that can be used to 
                        improve electric distribution system 
                        reliability, quality, and performance.
  (j) Property on Indian reservations.--
          (1) In general.--For purposes of subsection (a), the 
        applicable recovery period for qualified Indian 
        reservation property shall be determined in accordance 
        with the table contained in paragraph (2) in lieu of 
        the table contained in subsection (c).
          (2) Applicable recovery period for Indian reservation 
        property.--For purposes of paragraph (1)--
          (3) Deduction allowed in computing minimum tax.--For 
        purposes of determining alternative minimum taxable 
        income under section 55, the deduction under subsection 
        (a) for qualified Indian reservation property shall be 
        determined under this section without regard to any 
        adjustment under section 56.
          (4) Qualified Indian reservation property defined.--
        For purposes of this subsection--
                  (A) In general.--The term ``qualified Indian 
                reservation property'' means property which is 
                property described in the table in paragraph 
                (2) and which is--
                          (i) used by the taxpayer 
                        predominantly in the active conduct of 
                        a trade or business within an Indian 
                        reservation,
                          (ii) not used or located outside the 
                        Indian reservation on a regular basis,
                          (iii) not acquired (directly or 
                        indirectly) by the taxpayer from a 
                        person who is related to the taxpayer 
                        (within the meaning of section 
                        465(b)(3)(C)), and
                          (iv) not property (or any portion 
                        thereof) placed in service for purposes 
                        of conducting or housing class I, II, 
                        or III gaming (as defined in section 4 
                        of the Indian Regulatory Act (25 U.S.C. 
                        2703)).
                  (B) Exception for alternative depreciation 
                property.--The term ``qualified Indian 
                reservation property'' does not include any 
                property to which the alternative depreciation 
                system under subsection (g) applies, 
                determined--
                          (i) without regard to subsection 
                        (g)(7) (relating to election to use 
                        alternative depreciation system), and
                          (ii) after the application of section 
                        280F(b) (relating to listed property 
                        with limited business use).
                  (C) Special rule for reservation 
                infrastructure investment.--
                          (i) In general.--Subparagraph (A)(ii) 
                        shall not apply to qualified 
                        infrastructure property located outside 
                        of the Indian reservation if the 
                        purpose of such property is to connect 
                        with qualified infrastructure property 
                        located within the Indian reservation.
                          (ii) Qualified infrastructure 
                        property.--For purposes of this 
                        subparagraph, the term ``qualified 
                        infrastructure property'' means 
                        qualified Indian reservation property 
                        (determined without regard to 
                        subparagraph (A)(ii)) which--
                                  (I) benefits the tribal 
                                infrastructure,
                                  (II) is available to the 
                                general public, and
                                  (III) is placed in service in 
                                connection with the taxpayer's 
                                active conduct of a trade or 
                                business within an Indian 
                                reservation.
                 Such term includes, but is not limited to, 
                roads, power lines, water systems, railroad 
                spurs, and communications facilities.
          (5) Real estate rentals.--For purposes of this 
        subsection, the rental to others of real property 
        located within an Indian reservation shall be treated 
        as the active conduct of a trade or business within an 
        Indian reservation.
          (6) Indian reservation defined.--For purposes of this 
        subsection, the term ``Indian reservation'' means a 
        reservation, as defined in--
                  (A) section 3(d) of the Indian Financing Act 
                of 1974 (25 U.S.C. 1452(d)), or
                  (B) section 4(10) of the Indian Child Welfare 
                Act of 1978 (25 U.S.C. 1903(10)).
        For purposes of the preceding sentence, such section 
        3(d) shall be applied by treating the term ``former 
        Indian reservations in Oklahoma'' as including only 
        lands which are within the jurisdictional area of an 
        Oklahoma Indian tribe (as determined by the Secretary 
        of the Interior) and are recognized by such Secretary 
        as eligible for trust land status under 25 CFR Part 151 
        (as in effect on the date of the enactment of this 
        sentence).
          (7) Coordination with nonrevenue laws.--Any reference 
        in this subsection to a provision not contained in this 
        title shall be treated for purposes of this subsection 
        as a reference to such provision as in effect on the 
        date of the enactment of this paragraph.
          (8) Election out.--If a taxpayer makes an election 
        under this paragraph with respect to any class of 
        property for any taxable year, paragraph (1) shall not 
        apply to all property in such class placed in service 
        during such taxable year. Such election, once made, 
        shall be irrevocable.
          (9) Termination.--This subsection shall not apply to 
        property placed in service after [December 31, 2017] 
        December 31, 2020.
  (k) Special allowance for certain property.--
          (1) Additional allowance.--In the case of any 
        qualified property--
                  (A) the depreciation deduction provided by 
                section 167(a) for the taxable year in which 
                such property is placed in service shall 
                include an allowance equal to the applicable 
                percentage of the adjusted basis of the 
                qualified property, and
                  (B) the adjusted basis of the qualified 
                property shall be reduced by the amount of such 
                deduction before computing the amount otherwise 
                allowable as a depreciation deduction under 
                this chapter for such taxable year and any 
                subsequent taxable year.
          (2) Qualified property.--For purposes of this 
        subsection--
                  (A) In general.--The term ``qualified 
                property'' means property--
                          (i)(I) to which this section applies 
                        which has a recovery period of 20 years 
                        or less,
                                  (II) which is computer 
                                software (as defined in section 
                                167(f)(1)(B)) for which a 
                                deduction is allowable under 
                                section 167(a) without regard 
                                to this subsection,
                                  (III) which is water utility 
                                property, or
                                  (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,
                          (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
                          (iii) which is placed in service by 
                        the taxpayer before January 1, 2027.
                  (B) Certain property having longer production 
                periods treated as qualified property.--
                          (i) In general.--The term ``qualified 
                        property'' includes any property if 
                        such property--
                                  (I) meets the requirements of 
                                clauses (i) and (ii) of 
                                subparagraph (A),
                                  (II) is placed in service by 
                                the taxpayer before January 1, 
                                2028,
                                  (III) is acquired by the 
                                taxpayer (or acquired pursuant 
                                to a written binding contract 
                                entered into) before January 1, 
                                2027,
                                  (IV) has a recovery period of 
                                at least 10 years or is 
                                transportation property,
                                  (V) is subject to section 
                                263A, and
                                  (VI) meets the requirements 
                                of clause (iii) of section 
                                263A(f)(1)(B) (determined as if 
                                such clause also applies to 
                                property which has a long 
                                useful life (within the meaning 
                                of section 263A(f))).
                          (ii) Only pre-January 1, 2027 basis 
                        eligible for additional allowance.--In 
                        the case of property which is qualified 
                        property solely by reason of clause 
                        (i), paragraph (1) shall apply only to 
                        the extent of the adjusted basis 
                        thereof attributable to manufacture, 
                        construction, or production before 
                        January 1, 2027.
                          (iii) Transportation property.--For 
                        purposes of this subparagraph, the term 
                        ``transportation property'' means 
                        tangible personal property used in the 
                        trade or business of transporting 
                        persons or property.
                          (iv) Application of subparagraph.--
                        This subparagraph shall not apply to 
                        any property which is described in 
                        subparagraph (C).
                  (C) Certain aircraft.--The term ``qualified 
                property'' includes property--
                          (i) which meets the requirements of 
                        subparagraph (A)(ii) and subclauses 
                        (II) and (III) of subparagraph (B)(i),
                          (ii) which is an aircraft which is 
                        not a transportation property (as 
                        defined in subparagraph (B)(iii)) other 
                        than for agricultural or firefighting 
                        purposes,
                          (iii) which is purchased and on which 
                        such purchaser, at the time of the 
                        contract for purchase, has made a 
                        nonrefundable deposit of the lesser 
                        of--
                                  (I) 10 percent of the cost, 
                                or
                                  (II) $100,000, and
                          (iv) which has--
                                  (I) an estimated production 
                                period exceeding 4 months, and
                                  (II) a cost exceeding 
                                $200,000.
                  (D) Exception for alternative depreciation 
                property.--The term ``qualified property'' 
                shall not include any property to which the 
                alternative depreciation system under 
                subsection (g) applies, determined--
                          (i) without regard to paragraph (7) 
                        of subsection (g) (relating to election 
                        to have system apply), and
                          (ii) after application of section 
                        280F(b) (relating to listed property 
                        with limited business use).
                  (E) Special rules.--
                          (i) Self-constructed property.--In 
                        the case of a taxpayer manufacturing, 
                        constructing, or producing property for 
                        the taxpayer's own use, the 
                        requirements of subclause (III) of 
                        subparagraph (B)(i) shall be treated as 
                        met if the taxpayer begins 
                        manufacturing, constructing, or 
                        producing the property before January 
                        1, 2027.
                          (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).
                          (iii) Syndication.--For purposes of 
                        subparagraph (A)(ii), if--
                                  (I) property is used by a 
                                lessor of such property and 
                                such use is the lessor's first 
                                use of such property,
                                  (II) such property is sold by 
                                such lessor or any subsequent 
                                purchaser within 3 months after 
                                the date such property was 
                                originally placed in service 
                                (or, in the case of multiple 
                                units of property subject to 
                                the same lease, within 3 months 
                                after the date the final unit 
                                is placed in service, so long 
                                as the period between the time 
                                the first unit is placed in 
                                service and the time the last 
                                unit is placed in service does 
                                not exceed 12 months), and
                                  (III) the user of such 
                                property after the last sale 
                                during such 3-month period 
                                remains the same as when such 
                                property was originally placed 
                                in service,
                 such property shall be treated as originally 
                placed in service not earlier than the date of 
                such last sale.
                  (F) Coordination with section 280F.--For 
                purposes of section 280F--
                          (i) Automobiles.--In the case of a 
                        passenger automobile (as defined in 
                        section 280F(d)(5)) which is qualified 
                        property, the Secretary shall increase 
                        the limitation under section 
                        280F(a)(1)(A)(i) by $8,000.
                          (ii) Listed property.--The deduction 
                        allowable under paragraph (1) shall be 
                        taken into account in computing any 
                        recapture amount under section 
                        280F(b)(2).
                          (iii) Phase down.--In the case of a 
                        passenger automobile acquired by the 
                        taxpayer before September 28, 2017, and 
                        placed in service by the taxpayer after 
                        September 27, 2017, clause (i) shall be 
                        applied by substituting for 
                        ``$8,000''--
                                  (I) in the case of an 
                                automobile placed in service 
                                during 2018, $6,400, and
                                  (II) in the case of an 
                                automobile placed in service 
                                during 2019, $4,800.
                  (G) Deduction allowed in computing minimum 
                tax.--For purposes of determining alternative 
                minimum taxable income under section 55, the 
                deduction under section 167 for qualified 
                property shall be determined without regard to 
                any adjustment under section 56.
                  (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.
          (5) Special rules for certain plants bearing fruits 
        and nuts.--
                  (A) In general.--In the case of any specified 
                plant which is planted before January 1, 2027, 
                or is grafted before such date to a plant that 
                has already been planted, by the taxpayer in 
                the ordinary course of the taxpayer's farming 
                business (as defined in section 263A(e)(4)) 
                during a taxable year for which the taxpayer 
                has elected the application of this paragraph--
                          (i) a depreciation deduction equal to 
                        the applicable percentage of the 
                        adjusted basis of such specified plant 
                        shall be allowed under section 167(a) 
                        for the taxable year in which such 
                        specified plant is so planted or 
                        grafted, and
                          (ii) the adjusted basis of such 
                        specified plant shall be reduced by the 
                        amount of such deduction.
                  (B) Specified plant.--For purposes of this 
                paragraph, the term ``specified plant'' means--
                          (i) any tree or vine which bears 
                        fruits or nuts, and
                          (ii) any other plant which will have 
                        more than one crop or yield of fruits 
                        or nuts and which generally has a pre-
                        productive period of more than 2 years 
                        from the time of planting or grafting 
                        to the time at which such plant begins 
                        bearing a marketable crop or yield of 
                        fruits or nuts.
                Such term shall not include any property which 
                is planted or grafted outside of the United 
                States.
                  (C) Election revocable only with consent.--An 
                election under this paragraph may be revoked 
                only with the consent of the Secretary.
                  (D) Additional depreciation may be claimed 
                only once.--If this paragraph applies to any 
                specified plant, such specified plant shall not 
                be treated as qualified property in the taxable 
                year in which placed in service.
                  (E) Deduction allowed in computing minimum 
                tax.--Rules similar to the rules of paragraph 
                (2)(G) shall apply for purposes of this 
                paragraph.
          (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.
          (7) Election out.--If a taxpayer makes an election 
        under this paragraph with respect to any class of 
        property for any taxable year, paragraphs (1) and 
        (2)(F) shall not apply to any qualified property in 
        such class placed in service during such taxable year. 
        An election under this paragraph may be revoked only 
        with the consent of the Secretary.
          (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.
          (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.
          (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.
  (l) Special allowance for second generation biofuel plant 
property.--
          (1) Additional allowance.--In the case of any 
        qualified second generation biofuel plant property--
                  (A) the depreciation deduction provided by 
                section 167(a) for the taxable year in which 
                such property is placed in service shall 
                include an allowance equal to 50 percent of the 
                adjusted basis of such property, and
                  (B) the adjusted basis of such property shall 
                be reduced by the amount of such deduction 
                before computing the amount otherwise allowable 
                as a depreciation deduction under this chapter 
                for such taxable year and any subsequent 
                taxable year.
          (2) Qualified second generation biofuel plant 
        property.--The term ``qualified second generation 
        biofuel plant property'' means property of a character 
        subject to the allowance for depreciation--
                  (A) which is used in the United States solely 
                to produce second generation biofuel (as 
                defined in section 40(b)(6)(E)),
                  (B) the original use of which commences with 
                the taxpayer after the date of the enactment of 
                this subsection,
                  (C) which is acquired by the taxpayer by 
                purchase (as defined in section 179(d)) after 
                the date of the enactment of this subsection, 
                but only if no written binding contract for the 
                acquisition was in effect on or before the date 
                of the enactment of this subsection, and
                  (D) which is placed in service by the 
                taxpayer before [January 1, 2018] January 1, 
                2021.
          (3) Exceptions.--
                  (A) Bonus depreciation property under 
                subsection (k).--Such term shall not include 
                any property to which subsection (k) applies.
                  (B) Alternative depreciation property.--Such 
                term shall not include any property described 
                in subsection (k)(2)(D).
                  (C) Tax-exempt bond-financed property.--Such 
                term shall not include any property any portion 
                of which is financed with the proceeds of any 
                obligation the interest on which is exempt from 
                tax under section 103.
                  (D) Election out.--If a taxpayer makes an 
                election under this subparagraph with respect 
                to any class of property for any taxable year, 
                this subsection shall not apply to all property 
                in such class placed in service during such 
                taxable year.
          (4) Special rules.--For purposes of this subsection, 
        rules similar to the rules of subsection (k)(2)(E) 
        shall apply.
          (5) Allowance against alternative minimum tax.--For 
        purposes of this subsection, rules similar to the rules 
        of subsection (k)(2)(G) shall apply.
          (6) Recapture.--For purposes of this subsection, 
        rules similar to the rules under section 179(d)(10) 
        shall apply with respect to any qualified second 
        generation biofuel plant property which ceases to be 
        qualified second generation biofuel plant property.
          (7) Denial of double benefit.--Paragraph (1) shall 
        not apply to any qualified second generation biofuel 
        plant property with respect to which an election has 
        been made under section 179C (relating to election to 
        expense certain refineries).
  (m) Special allowance for certain reuse and recycling 
property.--
          (1) In general.--In the case of any qualified reuse 
        and recycling property--
                  (A) the depreciation deduction provided by 
                section 167(a) for the taxable year in which 
                such property is placed in service shall 
                include an allowance equal to 50 percent of the 
                adjusted basis of the qualified reuse and 
                recycling property, and
                  (B) the adjusted basis of the qualified reuse 
                and recycling property shall be reduced by the 
                amount of such deduction before computing the 
                amount otherwise allowable as a depreciation 
                deduction under this chapter for such taxable 
                year and any subsequent taxable year.
          (2) Qualified reuse and recycling property.--For 
        purposes of this subsection--
                  (A) In general.--The term ``qualified reuse 
                and recycling property'' means any reuse and 
                recycling property--
                          (i) to which this section applies,
                          (ii) which has a useful life of at 
                        least 5 years,
                          (iii) the original use of which 
                        commences with the taxpayer after 
                        August 31, 2008, and
                          (iv) which is--
                                  (I) acquired by purchase (as 
                                defined in section 179(d)(2)) 
                                by the taxpayer after August 
                                31, 2008, but only if no 
                                written binding contract for 
                                the acquisition was in effect 
                                before September 1, 2008, or
                                  (II) acquired by the taxpayer 
                                pursuant to a written binding 
                                contract which was entered into 
                                after August 31, 2008.
                  (B) Exceptions.--
                          (i) Bonus depreciation property under 
                        subsection (k).--The term ``qualified 
                        reuse and recycling property'' shall 
                        not include any property to which 
                        subsection (k) (determined without 
                        regard to paragraph (4) thereof) 
                        applies.
                          (ii) Alternative depreciation 
                        property.--The term ``qualified reuse 
                        and recycling property'' shall not 
                        include any property to which the 
                        alternative depreciation system under 
                        subsection (g) applies, determined 
                        without regard to paragraph (7) of 
                        subsection (g) (relating to election to 
                        have system apply).
                          (iii) Election out.--If a taxpayer 
                        makes an election under this clause 
                        with respect to any class of property 
                        for any taxable year, this subsection 
                        shall not apply to all property in such 
                        class placed in service during such 
                        taxable year.
                  (C) Special rule for self-constructed 
                property.--In the case of a taxpayer 
                manufacturing, constructing, or producing 
                property for the taxpayer's own use, the 
                requirements of clause (iv) of subparagraph (A) 
                shall be treated as met if the taxpayer begins 
                manufacturing, constructing, or producing the 
                property after August 31, 2008.
                  (D) Deduction allowed in computing minimum 
                tax.--For purposes of determining alternative 
                minimum taxable income under section 55, the 
                deduction under subsection (a) for qualified 
                reuse and recycling property shall be 
                determined under this section without regard to 
                any adjustment under section 56.
          (3) Definitions.--For purposes of this subsection--
                  (A) Reuse and recycling property.--
                          (i) In general.--The term ``reuse and 
                        recycling property'' means any 
                        machinery and equipment (not including 
                        buildings or real estate), along with 
                        all appurtenances thereto, including 
                        software necessary to operate such 
                        equipment, which is used exclusively to 
                        collect, distribute, or recycle 
                        qualified reuse and recyclable 
                        materials.
                          (ii) Exclusion.--Such term does not 
                        include rolling stock or other 
                        equipment used to transport reuse and 
                        recyclable materials.
                  (B) Qualified reuse and recyclable 
                materials.--
                          (i) In general.--The term ``qualified 
                        reuse and recyclable materials'' means 
                        scrap plastic, scrap glass, scrap 
                        textiles, scrap rubber, scrap 
                        packaging, recovered fiber, scrap 
                        ferrous and nonferrous metals, or 
                        electronic scrap generated by an 
                        individual or business.
                          (ii) Electronic scrap.--For purposes 
                        of clause (i), the term ``electronic 
                        scrap'' means--
                                  (I) any cathode ray tube, 
                                flat panel screen, or similar 
                                video display device with a 
                                screen size greater than 4 
                                inches measured diagonally, or
                                  (II) any central processing 
                                unit.
                  (C) Recycling or recycle.--The term 
                ``recycling'' or ``recycle'' means that process 
                (including sorting) by which worn or 
                superfluous materials are manufactured or 
                processed into specification grade commodities 
                that are suitable for use as a replacement or 
                substitute for virgin materials in 
                manufacturing tangible consumer and commercial 
                products, including packaging.

           *       *       *       *       *       *       *


SEC. 179D. ENERGY EFFICIENT COMMERCIAL BUILDINGS DEDUCTION.

  (a) In general.--There shall be allowed as a deduction an 
amount equal to the cost of energy efficient commercial 
building property placed in service during the taxable year.
  (b) Maximum amount of deduction.--The deduction under 
subsection (a) with respect to any building for any taxable 
year shall not exceed the excess (if any) of--
          (1) the product of--
                  (A) $1.80, and
                  (B) the square footage of the building, over
          (2) the aggregate amount of the deductions under 
        subsection (a) with respect to the building for all 
        prior taxable years.
  (c) Definitions.--For purposes of this section--
          (1) Energy efficient commercial building property.--
        The term ``energy efficient commercial building 
        property'' means property--
                  (A) with respect to which depreciation (or 
                amortization in lieu of depreciation) is 
                allowable,
                  (B) which is installed on or in any building 
                which is--
                          (i) located in the United States, and
                          (ii) within the scope of Standard 
                        90.1-2007,
                  (C) which is installed as part of--
                          (i) the interior lighting systems,
                          (ii) the heating, cooling, 
                        ventilation, and hot water systems, or
                          (iii) the building envelope, and
                  (D) which is certified in accordance with 
                subsection (d)(6) as being installed as part of 
                a plan designed to reduce the total annual 
                energy and power costs with respect to the 
                interior lighting systems, heating, cooling, 
                ventilation, and hot water systems of the 
                building by 50 percent or more in comparison to 
                a reference building which meets the minimum 
                requirements of Standard 90.1-2007 using 
                methods of calculation under subsection (d)(2).
          (2) Standard 90.1-2007.--The term ``Standard 90.1-
        2007'' means Standard 90.1-2007 of the American Society 
        of Heating, Refrigerating, and Air Conditioning 
        Engineers and the Illuminating Engineering Society of 
        North America (as in effect on the day before the date 
        of the adoption of Standard 90.1-2010 of such 
        Societies).
  (d) Special rules.--
          (1) Partial allowance.--
                  (A) In general.--Except as provided in 
                subsection (f), if--
                          (i) the requirement of subsection 
                        (c)(1)(D) is not met, but
                          (ii) there is a certification in 
                        accordance with paragraph (6) that any 
                        system referred to in subsection 
                        (c)(1)(C) satisfies the energy-savings 
                        targets established by the Secretary 
                        under subparagraph (B) with respect to 
                        such system,
                then the requirement of subsection (c)(1)(D) 
                shall be treated as met with respect to such 
                system, and the deduction under subsection (a) 
                shall be allowed with respect to energy 
                efficient commercial building property 
                installed as part of such system and as part of 
                a plan to meet such targets, except that 
                subsection (b) shall be applied to such 
                property by substituting ``$.60'' for 
                ``$1.80''.
                  (B) Regulations.--The Secretary, after 
                consultation with the Secretary of Energy, 
                shall establish a target for each system 
                described in subsection (c)(1)(C) such that, if 
                such targets were met for all such systems, the 
                building would meet the requirements of 
                subsection (c)(1)(D).
          (2) Methods of calculation.--The Secretary, after 
        consultation with the Secretary of Energy, shall 
        promulgate regulations which describe in detail methods 
        for calculating and verifying energy and power 
        consumption and cost, based on the provisions of the 
        2005 California Nonresidential Alternative Calculation 
        Method Approval Manual.
          (3) Computer software.--
                  (A) In general.--Any calculation under 
                paragraph (2) shall be prepared by qualified 
                computer software.
                  (B) Qualified computer software.--For 
                purposes of this paragraph, the term 
                ``qualified computer software'' means 
                software--
                          (i) for which the software designer 
                        has certified that the software meets 
                        all procedures and detailed methods for 
                        calculating energy and power 
                        consumption and costs as required by 
                        the Secretary,
                          (ii) which provides such forms as 
                        required to be filed by the Secretary 
                        in connection with energy efficiency of 
                        property and the deduction allowed 
                        under this section, and
                          (iii) which provides a notice form 
                        which documents the energy efficiency 
                        features of the building and its 
                        projected annual energy costs.
          (4) Allocation of deduction for public property.--In 
        the case of energy efficient commercial building 
        property installed on or in property owned by a 
        Federal, State, or local government or a political 
        subdivision thereof, the Secretary shall promulgate a 
        regulation to allow the allocation of the deduction to 
        the person primarily responsible for designing the 
        property in lieu of the owner of such property. Such 
        person shall be treated as the taxpayer for purposes of 
        this section.
          (5) Notice to owner.--Each certification required 
        under this section shall include an explanation to the 
        building owner regarding the energy efficiency features 
        of the building and its projected annual energy costs 
        as provided in the notice under paragraph (3)(B)(iii).
          (6) Certification.--
                  (A) In general.--The Secretary shall 
                prescribe the manner and method for the making 
                of certifications under this section.
                  (B) Procedures.--The Secretary shall include 
                as part of the certification process procedures 
                for inspection and testing by qualified 
                individuals described in subparagraph (C) to 
                ensure compliance of buildings with energy-
                savings plans and targets. Such procedures 
                shall be comparable, given the difference 
                between commercial and residential buildings, 
                to the requirements in the Mortgage Industry 
                National Accreditation Procedures for Home 
                Energy Rating Systems.
                  (C) Qualified individuals.--Individuals 
                qualified to determine compliance shall be only 
                those individuals who are recognized by an 
                organization certified by the Secretary for 
                such purposes.
  (e) Basis reduction.--For purposes of this subtitle, if a 
deduction is allowed under this section with respect to any 
energy efficient commercial building property, the basis of 
such property shall be reduced by the amount of the deduction 
so allowed.
  (f) Interim rules for lighting systems.--Until such time as 
the Secretary issues final regulations under subsection 
(d)(1)(B) with respect to property which is part of a lighting 
system--
          (1) In general.--The lighting system target under 
        subsection (d)(1)(A)(ii) shall be a reduction in 
        lighting power density of 25 percent (50 percent in the 
        case of a warehouse) of the minimum requirements in 
        Table 9.5.1 or Table 9.6.1 (not including additional 
        interior lighting power allowances) of Standard 90.1-
        2007.
          (2) Reduction in deduction if reduction less than 40 
        percent.--
                  (A) In general.--If, with respect to the 
                lighting system of any building other than a 
                warehouse, the reduction in lighting power 
                density of the lighting system is not at least 
                40 percent, only the applicable percentage of 
                the amount of deduction otherwise allowable 
                under this section with respect to such 
                property shall be allowed.
                  (B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage is 
                the number of percentage points (not greater 
                than 100) equal to the sum of--
                          (i) 50, and
                          (ii) the amount which bears the same 
                        ratio to 50 as the excess of the 
                        reduction of lighting power density of 
                        the lighting system over 25 percentage 
                        points bears to 15.
                  (C) Exceptions.--This subsection shall not 
                apply to any system--
                          (i) the controls and circuiting of 
                        which do not comply fully with the 
                        mandatory and prescriptive requirements 
                        of Standard 90.1-2007 and which do not 
                        include provision for bilevel switching 
                        in all occupancies except hotel and 
                        motel guest rooms, store rooms, 
                        restrooms, and public lobbies, or
                          (ii) which does not meet the minimum 
                        requirements for calculated lighting 
                        levels as set forth in the Illuminating 
                        Engineering Society of North America 
                        Lighting Handbook, Performance and 
                        Application, Ninth Edition, 2000.
  (g) Regulations.--The Secretary shall promulgate such 
regulations as necessary--
          (1) to take into account new technologies regarding 
        energy efficiency and renewable energy for purposes of 
        determining energy efficiency and savings under this 
        section, and
          (2) to provide for a recapture of the deduction 
        allowed under this section if the plan described in 
        subsection (c)(1)(D) or (d)(1)(A) is not fully 
        implemented.
  (h) Termination.--This section shall not apply with respect 
to property placed in service after [December 31, 2017] 
December 31, 2020.

           *       *       *       *       *       *       *


SEC. 181. TREATMENT OF CERTAIN QUALIFIED FILM AND TELEVISION AND LIVE 
                    THEATRICAL PRODUCTIONS.

  (a) Election to treat costs as expenses.--
          (1) In general.--A taxpayer may elect to treat the 
        cost of any qualified film or television production, 
        and any qualified live theatrical production, as an 
        expense which is not chargeable to capital account. Any 
        cost so treated shall be allowed as a deduction.
          (2) Dollar limitation.--
                  (A) In general.--Paragraph (1) shall not 
                apply to so much of the aggregate cost of any 
                qualified film or television production or any 
                qualified live theatrical production as exceeds 
                $15,000,000.
                  (B) Higher dollar limitation for productions 
                in certain areas.--In the case of any qualified 
                film or television production or any qualified 
                live theatrical production the aggregate cost 
                of which is significantly incurred in an area 
                eligible for designation as--
                          (i) a low-income community under 
                        section 45D, or
                          (ii) a distressed county or isolated 
                        area of distress by the Delta Regional 
                        Authority established under section 
                        2009aa-1 of title 7, United States 
                        Code,
                subparagraph (A) shall be applied by 
                substituting ``$20,000,000'' for 
                ``$15,000,000''.
  (b) No other deduction or amortization deduction allowable.--
With respect to the basis of any qualified film or television 
production or any qualified live theatrical production to which 
an election is made under subsection (a), no other depreciation 
or amortization deduction shall be allowable.
  (c) Election.--
          (1) In general.--An election under this section with 
        respect to any qualified film or television production 
        or any qualified live theatrical production shall be 
        made in such manner as prescribed by the Secretary and 
        by the due date (including extensions) for filing the 
        taxpayer's return of tax under this chapter for the 
        taxable year in which costs of the production are first 
        incurred.
          (2) Revocation of election.--Any election made under 
        this section may not be revoked without the consent of 
        the Secretary.
  (d) Qualified film or television production.--For purposes of 
this section--
          (1) In general.--The term ``qualified film or 
        television production'' means any production described 
        in paragraph (2) if 75 percent of the total 
        compensation of the production is qualified 
        compensation.
          (2) Production.--
                  (A) In general.--A production is described in 
                this paragraph if such production is property 
                described in section 168(f)(3).
                  (B) Special rules for television series.--In 
                the case of a television series--
                          (i) each episode of such series shall 
                        be treated as a separate production, 
                        and
                          (ii) only the first 44 episodes of 
                        such series shall be taken into 
                        account.
                  (C) Exception.--A production is not described 
                in this paragraph if records are required under 
                section 2257 of title 18, United States Code, 
                to be maintained with respect to any performer 
                in such production.
          (3) Qualified compensation.--For purposes of 
        paragraph (1)--
                  (A) In general.--The term ``qualified 
                compensation'' means compensation for services 
                performed in the United States by actors, 
                production personnel, directors, and producers.
                  (B) Participations and residuals excluded.--
                The term ``compensation'' does not include 
                participations and residuals (as defined in 
                section 167(g)(7)(B)).
  (e) Qualified live theatrical production.--For purposes of 
this section--
          (1) In general.--The term ``qualified live theatrical 
        production'' means any production described in 
        paragraph (2) if 75 percent of the total compensation 
        of the production is qualified compensation (as defined 
        in subsection (d)(3)).
          (2) Production.--
                  (A) In general.--A production is described in 
                this paragraph if such production is a live 
                staged production of a play (with or without 
                music) which is derived from a written book or 
                script and is produced or presented by a 
                taxable entity in any venue which has an 
                audience capacity of not more than 3,000 or a 
                series of venues the majority of which have an 
                audience capacity of not more than 3,000.
                  (B) Touring companies, etc..--In the case of 
                multiple live staged productions--
                          (i) for which the election under this 
                        section would be allowable to the same 
                        taxpayer, and
                          (ii) which are--
                                  (I) separate phases of a 
                                production, or
                                  (II) separate simultaneous 
                                stagings of the same production 
                                in different geographical 
                                locations (not including 
                                multiple performance locations 
                                of any one touring production),
                each such live staged production shall be 
                treated as a separate production.
                  (C) Phase.--For purposes of subparagraph (B), 
                the term ``phase'' with respect to any 
                qualified live theatrical production refers to 
                each of the following, but only if each of the 
                following is treated by the taxpayer as a 
                separate activity for all purposes of this 
                title:
                          (i) The initial staging of a live 
                        theatrical production.
                          (ii) Subsequent additional stagings 
                        or touring of such production which are 
                        produced by the same producer as the 
                        initial staging.
                  (D) Seasonal productions.--
                          (i) In general.--In the case of a 
                        live staged production not described in 
                        subparagraph (B) which is produced or 
                        presented by a taxable entity for not 
                        more than 10 weeks of the taxable year, 
                        subparagraph (A) shall be applied by 
                        substituting ``6,500'' for ``3,000''.
                          (ii) Short taxable years.--For 
                        purposes of clause (i), in the case of 
                        any taxable year of less than 12 
                        months, the number of weeks for which a 
                        production is produced or presented 
                        shall be annualized by multiplying the 
                        number of weeks the production is 
                        produced or presented during such 
                        taxable year by 12 and dividing the 
                        result by the number of months in such 
                        taxable year.
                  (E) Exception.--A production is not described 
                in this paragraph if such production includes 
                or consists of any performance of conduct 
                described in section 2257(h)(1) of title 18, 
                United States Code.
  (f) Application of certain other rules.--For purposes of this 
section, rules similar to the rules of subsections (b)(2) and 
(c)(4) of section 194 shall apply.
  (g) Termination.--This section shall not apply to qualified 
film and television productions or qualified live theatrical 
productions commencing after [December 31, 2017] December 31, 
2020.

           *       *       *       *       *       *       *


PART VII--ADDITIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS

           *       *       *       *       *       *       *


SEC. 213. MEDICAL, DENTAL, ETC., EXPENSES.

  (a) Allowance of deduction.--There shall be allowed as a 
deduction the expenses paid during the taxable year, not 
compensated for by insurance or otherwise, for medical care of 
the taxpayer, his spouse, or a dependent (as defined in section 
152, determined without regard to subsections (b)(1), (b)(2), 
and (d)(1)(B) thereof), to the extent that such expenses exceed 
10 percent of adjusted gross income.
  (b) Limitation with respect to medicine and drugs.--An amount 
paid during the taxable year for medicine or a drug shall be 
taken into account under subsection (a) only if such medicine 
or drug is a prescribed drug or is insulin.
  (c) Special rule for decedents.--
          (1) Treatment of expenses paid after death.--For 
        purposes of subsection (a), expenses for the medical 
        care of the taxpayer which are paid out of his estate 
        during the 1-year period beginning with the day after 
        the date of his death shall be treated as paid by the 
        taxpayer at the time incurred.
          (2) Limitation.--Paragraph (1) shall not apply if the 
        amount paid is allowable under section 2053 as a 
        deduction in computing the taxable estate of the 
        decedent, but this paragraph shall not apply if (within 
        the time and in the manner and form prescribed by the 
        Secretary) there is filed--
                  (A) a statement that such amount has not been 
                allowed as a deduction under section 2053, and
                  (B) a waiver of the right to have such amount 
                allowed at any time as a deduction under 
                section 2053.
  (d) Definitions.--For purposes of this section--
          (1) The term ``medical care'' means amounts paid--
                  (A) for the diagnosis, cure, mitigation, 
                treatment, or prevention of disease, or for the 
                purpose of affecting any structure or function 
                of the body,
                  (B) for transportation primarily for and 
                essential to medical care referred to in 
                subparagraph (A),
                  (C) for qualified long-term care services (as 
                defined in section 7702B(c)), or
                  (D) for insurance (including amounts paid as 
                premiums under part B of title XVIII of the 
                Social Security Act, relating to supplementary 
                medical insurance for the aged) covering 
                medical care referred to in subparagraphs (A) 
                and (B) or for any qualified long-term care 
                insurance contract (as defined in section 
                7702B(b)).
        In the case of a qualified long-term care insurance 
        contract (as defined in section 7702B(b)), only 
        eligible long-term care premiums (as defined in 
        paragraph (10)) shall be taken into account under 
        subparagraph (D).
          (2) Amounts paid for certain lodging away from home 
        treated as paid for medical care.--Amounts paid for 
        lodging (not lavish or extravagant under the 
        circumstances) while away from home primarily for and 
        essential to medical care referred to in paragraph 
        (1)(A) shall be treated as amounts paid for medical 
        care if--
                  (A) the medical care referred to in paragraph 
                (1)(A) is provided by a physician in a licensed 
                hospital (or in a medical care facility which 
                is related to, or the equivalent of, a licensed 
                hospital), and
                  (B) there is no significant element of 
                personal pleasure, recreation, or vacation in 
                the travel away from home.
        The amount taken into account under the preceding 
        sentence shall not exceed $50 for each night for each 
        individual.
          (3) Prescribed drug.--The term ``prescribed drug'' 
        means a drug or biological which requires a 
        prescription of a physician for its use by an 
        individual.
          (4) Physician.--The term ``physician'' has the 
        meaning given to such term by section 1861(r) of the 
        Social Security Act (42 U.S.C. 1395x(r)).
          (5) Special rule in the case of child of divorced 
        parents, etc.--Any child to whom section 152(e) applies 
        shall be treated as a dependent of both parents for 
        purposes of this section.
          (6) In the case of an insurance contract under which 
        amounts are payable for other than medical care 
        referred to in subparagraphs (A), (B), and (C) of 
        paragraph (1)--
                  (A) no amount shall be treated as paid for 
                insurance to which paragraph (1)(D) applies 
                unless the charge for such insurance is either 
                separately stated in the contract, or furnished 
                to the policyholder by the insurance company in 
                a separate statement,
                  (B) the amount taken into account as the 
                amount paid for such insurance shall not exceed 
                such charge, and
                  (C) no amount shall be treated as paid for 
                such insurance if the amount specified in the 
                contract (or furnished to the policyholder by 
                the insurance company in a separate statement) 
                as the charge for such insurance is 
                unreasonably large in relation to the total 
                charges under the contract.
          (7) Subject to the limitations of paragraph (6), 
        premiums paid during the taxable year by a taxpayer 
        before he attains the age of 65 for insurance covering 
        medical care (within the meaning of subparagraphs (A), 
        (B), and (C) of paragraph (1)) for the taxpayer, his 
        spouse, or a dependent after the taxpayer attains the 
        age of 65 shall be treated as expenses paid during the 
        taxable year for insurance which constitutes medical 
        care if premiums for such insurance are payable (on a 
        level payment basis) under the contract for a period of 
        10 years or more or until the year in which the 
        taxpayer attains the age of 65 (but in no case for a 
        period of less than 5 years).
          (8) The determination of whether an individual is 
        married at any time during the taxable year shall be 
        made in accordance with the provisions of section 
        6013(d) (relating to determination of status as husband 
        and wife).
          (9) Cosmetic surgery.--
                  (A) In general.--The term ``medical care'' 
                does not include cosmetic surgery or other 
                similar procedures, unless the surgery or 
                procedure is necessary to ameliorate a 
                deformity arising from, or directly related to, 
                a congenital abnormality, a personal injury 
                resulting from an accident or trauma, or 
                disfiguring disease.
                  (B) Cosmetic surgery defined.--For purposes 
                of this paragraph, the term ``cosmetic 
                surgery'' means any procedure which is directed 
                at improving the patient's appearance and does 
                not meaningfully promote the proper function of 
                the body or prevent or treat illness or 
                disease.
          (10) Eligible long-term care premiums.--
                  (A) In general.--For purposes of this 
                section, the term ``eligible long-term care 
                premiums'' means the amount paid during a 
                taxable year for any qualified long-term care 
                insurance contract (as defined in section 
                7702B(b)) covering an individual, to the extent 
                such amount does not exceed the limitation 
                determined under the following table:
                  (B) Indexing.--
                          (i) In general.--In the case of any 
                        taxable year beginning in a calendar 
                        year after 1997, each dollar amount 
                        contained in subparagraph (A) shall be 
                        increased by the medical care cost 
                        adjustment of such amount for such 
                        calendar year. If any increase 
                        determined under the preceding sentence 
                        is not a multiple of $10, such increase 
                        shall be rounded to the nearest 
                        multiple of $10.
                          (ii) Medical care cost adjustment.--
                        For purposes of clause (i), the medical 
                        care cost adjustment for any calendar 
                        year is the 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).
                 The Secretary shall, in consultation with the 
                Secretary of Health and Human Services, 
                prescribe an adjustment which the Secretary 
                determines is more appropriate for purposes of 
                this paragraph than the adjustment described in 
                the preceding sentence, and the adjustment so 
                prescribed shall apply in lieu of the 
                adjustment described in the preceding sentence.
          (11) Certain payments to relatives treated as not 
        paid for medical care.--An amount paid for a qualified 
        long-term care service (as defined in section 7702B(c)) 
        provided to an individual shall be treated as not paid 
        for medical care if such service is provided--
                  (A) by the spouse of the individual or by a 
                relative (directly or through a partnership, 
                corporation, or other entity) unless the 
                service is provided by a licensed professional 
                with respect to such service, or
                  (B) by a corporation or partnership which is 
                related (within the meaning of section 267(b) 
                or 707(b)) to the individual.
        For purposes of this paragraph, the term ``relative'' 
        means an individual bearing a relationship to the 
        individual which is described in any of subparagraphs 
        (A) through (G) of section 152(d)(2). This paragraph 
        shall not apply for purposes of section 105(b) with 
        respect to reimbursements through insurance.
  (e) Exclusion of amounts allowed for care of certain 
dependents.--Any expense allowed as a credit under section 21 
shall not be treated as an expense paid for medical care.
  [(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''.]
  (f) Temporary Special Rule.--In the case of taxable years 
beginning before January 1, 2021, subsection (a) shall be 
applied with respect to a taxpayer by substituting ``7.5 
percent'' for ``10 percent''.

           *       *       *       *       *       *       *


SEC. 222. QUALIFIED TUITION AND RELATED EXPENSES.

  (a) Allowance of deduction.--In the case of an individual, 
there shall be allowed as a deduction an amount equal to the 
qualified tuition and related expenses paid by the taxpayer 
during the taxable year.
  (b) Dollar limitations.--
          (1) In general.--The amount allowed as a deduction 
        under subsection (a) with respect to the taxpayer for 
        any taxable year shall not exceed the applicable dollar 
        limit.
          (2) Applicable dollar limit.--
                  (A) 2002 and 2003.--In the case of a taxable 
                year beginning in 2002 or 2003, the applicable 
                dollar limit shall be equal to--
                          (i) in the case of a taxpayer whose 
                        adjusted gross income for the taxable 
                        year does not exceed $65,000 ($130,000 
                        in the case of a joint return), $3,000, 
                        and--
                          (ii) in the case of any other 
                        taxpayer, zero.
                  (B) After 2003.--In the case of any taxable 
                year beginning after 2003, the applicable 
                dollar amount shall be equal to--
                          (i) in the case of a taxpayer whose 
                        adjusted gross income for the taxable 
                        year does not exceed $65,000 ($130,000 
                        in the case of a joint return), $4,000,
                          (ii) in the case of a taxpayer not 
                        described in clause (i) whose adjusted 
                        gross income for the taxable year does 
                        not exceed $80,000 ($160,000 in the 
                        case of a joint return), $2,000, and
                          (iii) in the case of any other 
                        taxpayer, zero.
                  (C) Adjusted gross income.--For purposes of 
                this paragraph, adjusted gross income shall be 
                determined--
                          (i) without regard to this section 
                        and sections 911, 931, and 933, and
                          (ii) after application of sections 
                        86, 135, 137, 219, 221, and 469.
  (c) No double benefit.--
          (1) In general.--No deduction shall be allowed under 
        subsection (a) for any expense for which a deduction is 
        allowed to the taxpayer under any other provision of 
        this chapter.
          (2) Coordination with other education incentives.--
                  (A) Denial of deduction if credit elected.--
                No deduction shall be allowed under subsection 
                (a) for a taxable year with respect to the 
                qualified tuition and related expenses with 
                respect to an individual if the taxpayer or any 
                other person elects to have section 25A apply 
                with respect to such individual for such year.
                  (B) Coordination with exclusions.--The total 
                amount of qualified tuition and related 
                expenses shall be reduced by the amount of such 
                expenses taken into account in determining any 
                amount excluded under section 135, 529(c)(1), 
                or 530(d)(2). For purposes of the preceding 
                sentence, the amount taken into account in 
                determining the amount excluded under section 
                529(c)(1) shall not include that portion of the 
                distribution which represents a return of any 
                contributions to the plan.
          (3) Dependents.--No deduction shall be allowed under 
        subsection (a) to any individual with respect to whom a 
        deduction under section 151 is allowable to another 
        taxpayer for a taxable year beginning in the calendar 
        year in which such individual's taxable year begins.
  (d) Definitions and special rules.--For purposes of this 
section--
          (1) Qualified tuition and related expenses.--The term 
        ``qualified tuition and related expenses'' has the 
        meaning given such term by section 25A(f). Such 
        expenses shall be reduced in the same manner as under 
        section 25A(g)(2).
          (2) Identification requirement.--No deduction shall 
        be allowed under subsection (a) to a taxpayer with 
        respect to the qualified tuition and related expenses 
        of an individual unless the taxpayer includes the name 
        and taxpayer identification number of the individual on 
        the return of tax for the taxable year.
          (3) Limitation on taxable year of deduction.--
                  (A) In general.--A deduction shall be allowed 
                under subsection (a) for qualified tuition and 
                related expenses for any taxable year only to 
                the extent such expenses are in connection with 
                enrollment at an institution of higher 
                education during the taxable year.
                  (B) Certain prepayments allowed.--
                Subparagraph (A) shall not apply to qualified 
                tuition and related expenses paid during a 
                taxable year if such expenses are in connection 
                with an academic term beginning during such 
                taxable year or during the first 3 months of 
                the next taxable year.
          (4) No deduction for married individuals filing 
        separate returns.--If the taxpayer is a married 
        individual (within the meaning of section 7703), this 
        section shall apply only if the taxpayer and the 
        taxpayer's spouse file a joint return for the taxable 
        year.
          (5) Nonresident aliens.--If the taxpayer is a 
        nonresident alien individual for any portion of the 
        taxable year, this section shall apply only if such 
        individual is treated as a resident alien of the United 
        States for purposes of this chapter by reason of an 
        election under subsection (g) or (h) of section 6013.
          (6) Payee statement requirement.--
                  (A) In general.--Except as otherwise provided 
                by the Secretary, no deduction shall be allowed 
                under subsection (a) unless the taxpayer 
                receives a statement furnished under section 
                6050S(d) which contains all of the information 
                required by paragraph (2) thereof.
                  (B) Statement received by dependent.--The 
                receipt of the statement referred to in 
                subparagraph (A) by an individual described in 
                subsection (c)(3) shall be treated for purposes 
                of subparagraph (A) as received by the 
                taxpayer.
          (7) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary or appropriate to carry 
        out this section, including regulations requiring 
        recordkeeping and information reporting.
  (e) Termination.--This section shall not apply to taxable 
years beginning after [December 31, 2017] December 31, 2020.

           *       *       *       *       *       *       *


PART IX--ITEMS NOT DEDUCTIBLE

           *       *       *       *       *       *       *


SEC. 263A. CAPITALIZATION AND INCLUSION IN INVENTORY COSTS OF CERTAIN 
                    EXPENSES.

  (a) Nondeductibility of certain direct and indirect costs.--
          (1) In general.--In the case of any property to which 
        this section applies, any costs described in paragraph 
        (2)--
                  (A) in the case of property which is 
                inventory in the hands of the taxpayer, shall 
                be included in inventory costs, and
                  (B) in the case of any other property, shall 
                be capitalized.
          (2) Allocable costs.--The costs described in this 
        paragraph with respect to any property are--
                  (A) the direct costs of such property, and
                  (B) such property's proper share of those 
                indirect costs (including taxes) part or all of 
                which are allocable to such property.
        Any cost which (but for this subsection) could not be 
        taken into account in computing taxable income for any 
        taxable year shall not be treated as a cost described 
        in this paragraph.
  (b) Property to which section applies.--Except as otherwise 
provided in this section, this section shall apply to--
          (1) Property produced by taxpayer.--Real or tangible 
        personal property produced by the taxpayer.
          (2) Property acquired for resale.--Real or personal 
        property described in section 1221(a)(1) which is 
        acquired by the taxpayer for resale.
For purposes of paragraph (1), the term ``tangible personal 
property'' shall include a film, sound recording, video tape, 
book, or similar property.
  (c) General exceptions.--
          (1) Personal use property.--This section shall not 
        apply to any property produced by the taxpayer for use 
        by the taxpayer other than in a trade or business or an 
        activity conducted for profit.
          (2) Research and experimental expenditures.--This 
        section shall not apply to any amount allowable as a 
        deduction under section 174.
          (3) Certain development and other costs of oil and 
        gas wells or other mineral property.--This section 
        shall not apply to any cost allowable as a deduction 
        under section 167(h), 179B, 263(c), 263(i), 291(b)(2), 
        616, or 617.
          (4) Coordination with long-term contract rules.--This 
        section shall not apply to any property produced by the 
        taxpayer pursuant to a long-term contract.
          (5) Timber and certain ornamental trees.--This 
        section shall not apply to--
                  (A) trees raised, harvested, or grown by the 
                taxpayer other than trees described in clause 
                (ii) of subsection (e)(4)(B) (after application 
                of the last sentence thereof), and
                  (B) any real property underlying such trees.
          (6) Coordination with section 59(e).--Paragraphs (2) 
        and (3) shall apply to any amount allowable as a 
        deduction under section 59(e) for qualified 
        expenditures described in subparagraphs (B), (C), (D), 
        and (E) of paragraph (2) thereof.
          (7) Coordination with section 168(k)(5).--This 
        section shall not apply to any amount allowed as a 
        deduction by reason of section 168(k)(5) (relating to 
        special rules for certain plants bearing fruits and 
        nuts).
  (d) Exception for farming businesses.--
          (1) Section not to apply to certain property.--
                  (A) In general.--This section shall not apply 
                to any of the following which is produced by 
                the taxpayer in a farming business:
                          (i) Any animal.
                          (ii) Any plant which has a 
                        preproductive period of 2 years or 
                        less.
                  (B) Exception for taxpayers required to use 
                accrual method.--Subparagraph (A) shall not 
                apply to any corporation, partnership, or tax 
                shelter required to use an accrual method of 
                accounting under section 447 or 448(a)(3).
          (2) Treatment of certain plants lost by reason of 
        casualty.--
                  (A) In general.--If plants bearing an edible 
                crop for human consumption were lost or damaged 
                (while in the hands of the taxpayer) by reason 
                of freezing temperatures, disease, drought, 
                pests, or casualty, this section shall not 
                apply to any costs of the taxpayer of 
                replanting plants bearing the same type of crop 
                (whether on the same parcel of land on which 
                such lost or damaged plants were located or any 
                other parcel of land of the same acreage in the 
                United States).
                  (B) Special rule for person with minority 
                interest who materially participates.--
                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 more than 50 percent in the plants 
                        described in subparagraph (A) at all 
                        times during the taxable year in which 
                        such amounts were paid or incurred, and
                          (ii) such other person holds any part 
                        of the remaining equity interest and 
                        materially participates in the 
                        planting, maintenance, cultivation, or 
                        development of the plants described in 
                        subparagraph (A) during the taxable 
                        year in which such amounts were paid or 
                        incurred.
                The determination of whether an individual 
                materially participates in any activity shall 
                be made in a manner similar to the manner in 
                which such determination is made under section 
                2032A(e)(6).
                  (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.
          (3) Election to have this section not apply.--
                  (A) In general.--If a taxpayer makes an 
                election under this paragraph, this section 
                shall not apply to any plant produced in any 
                farming business carried on by such taxpayer.
                  (B) Certain persons not eligible.--No 
                election may be made under this paragraph by a 
                corporation, partnership, or tax shelter, if 
                such corporation, partnership, or tax shelter 
                is required to use an accrual method of 
                accounting under section 447 or 448(a)(3).
                  (C) Special rule for citrus and almond 
                growers.--An election under this paragraph 
                shall not apply with respect to any item which 
                is attributable to the planting, cultivation, 
                maintenance, or development of any citrus or 
                almond grove (or part thereof) and which is 
                incurred before the close of the 4th taxable 
                year beginning with the taxable year in which 
                the trees were planted. For purposes of the 
                preceding sentence, the portion of a citrus or 
                almond grove planted in 1 taxable year shall be 
                treated separately from the portion of such 
                grove planted in another taxable year.
                  (D) Election.--Unless the Secretary otherwise 
                consents, an election under this paragraph may 
                be made only for the taxpayer's 1st taxable 
                year which begins after December 31, 1986, and 
                during which the taxpayer engages in a farming 
                business. Any such election, once made, may be 
                revoked only with the consent of the Secretary.
  (e) Definitions and special rules for purposes of subsection 
(d).--
          (1) Recapture of expensed amounts on disposition.--
                  (A) In general.--In the case of any plant 
                with respect to which amounts would have been 
                capitalized under subsection (a) but for an 
                election under subsection (d)(3)--
                          (i) such plant (if not otherwise 
                        section 1245 property) shall be treated 
                        as section 1245 property, and
                          (ii) for purposes of section 1245, 
                        the recapture amount shall be treated 
                        as a deduction allowed for depreciation 
                        with respect to such property.
                  (B) Recapture amount.--For purposes of 
                subparagraph (A), the term ``recapture amount'' 
                means any amount allowable as a deduction to 
                the taxpayer which, but for an election under 
                subsection (d)(3), would have been capitalized 
                with respect to the plant.
          (2) Effects of election on depreciation.--
                  (A) In general.--If the taxpayer (or any 
                related person) makes an election under 
                subsection (d)(3), the provisions of section 
                168(g)(2) (relating to alternative 
                depreciation) shall apply to all property of 
                the taxpayer used predominantly in the farming 
                business and placed in service in any taxable 
                year during which any such election is in 
                effect.
                  (B) Related person.--For purposes of 
                subparagraph (A), the term ``related person'' 
                means--
                          (i) the taxpayer and members of the 
                        taxpayer's family,
                          (ii) any corporation (including an S 
                        corporation) if 50 percent or more (in 
                        value) of the stock of such corporation 
                        is owned (directly or through the 
                        application of section 318) by the 
                        taxpayer or members of the taxpayer's 
                        family,
                          (iii) a corporation and any other 
                        corporation which is a member of the 
                        same controlled group described in 
                        section 1563(a)(1), and
                          (iv) any partnership if 50 percent or 
                        more (in value) of the interests in 
                        such partnership is owned directly or 
                        indirectly by the taxpayer or members 
                        of the taxpayer's family.
                  (C) Members of family.--For purposes of this 
                paragraph, the term ``family'' means the 
                taxpayer, the spouse of the taxpayer, and any 
                of their children who have not attained age 18 
                before the close of the taxable year.
          (3) Preproductive period.--
                  (A) In general.--For purposes of this 
                section, the term ``preproductive period'' 
                means--
                          (i) in the case of a plant which will 
                        have more than 1 crop or yield, the 
                        period before the 1st marketable crop 
                        or yield from such plant, or
                          (ii) in the case of any other plant, 
                        the period before such plant is 
                        reasonably expected to be disposed of.
                For purposes of this subparagraph, use by the 
                taxpayer in a farming business of any supply 
                produced in such business shall be treated as a 
                disposition.
                  (B) Rule for determining period.--In the case 
                of a plant grown in commercial quantities in 
                the United States, the preproductive period for 
                such plant if grown in the United States shall 
                be based on the nationwide weighted average 
                preproductive period for such plant.
          (4) Farming business.--For purposes of this section--
                  (A) In general.--The term ``farming 
                business'' means the trade or business of 
                farming.
                  (B) Certain trades and businesses included.--
                The term ``farming business'' shall include the 
                trade or business of--
                          (i) operating a nursery or sod farm, 
                        or
                          (ii) the raising or harvesting of 
                        trees bearing fruit, nuts, or other 
                        crops, or ornamental trees.
                For purposes of clause (ii), an evergreen tree 
                which is more than 6 years old at the time 
                severed from the roots shall not be treated as 
                an ornamental tree.
          (5) Certain inventory valuation methods permitted.--
        The Secretary shall by regulations permit the taxpayer 
        to use reasonable inventory valuation methods to 
        compute the amount required to be capitalized under 
        subsection (a) in the case of any plant.
  (f) Special rules for allocation of interest to property 
produced by the taxpayer.--
          (1) Interest capitalized only in certain cases.--
        Subsection (a) shall only apply to interest costs which 
        are--
                  (A) paid or incurred during the production 
                period, and
                  (B) allocable to property which is described 
                in subsection (b)(1) and which has--
                          (i) a long useful life,
                          (ii) an estimated production period 
                        exceeding 2 years, or
                          (iii) an estimated production period 
                        exceeding 1 year and a cost exceeding 
                        $1,000,000.
          (2) Allocation rules.--
                  (A) In general.--In determining the amount of 
                interest required to be capitalized under 
                subsection (a) with respect to any property--
                          (i) interest on any indebtedness 
                        directly attributable to production 
                        expenditures with respect to such 
                        property shall be assigned to such 
                        property, and
                          (ii) interest on any other 
                        indebtedness shall be assigned to such 
                        property to the extent that the 
                        taxpayer's interest costs could have 
                        been reduced if production expenditures 
                        (not attributable to indebtedness 
                        described in clause (i)) had not been 
                        incurred.
                  (B) Exception for qualified residence 
                interest.--Subparagraph (A) shall not apply to 
                any qualified residence interest (within the 
                meaning of section 163(h)).
                  (C) Special rule for flow-through entities.--
                Except as provided in regulations, in the case 
                of any flow-through entity, this paragraph 
                shall be applied first at the entity level and 
                then at the beneficiary level.
          (3) Interest relating to property used to produce 
        property.--This subsection shall apply to any interest 
        on indebtedness allocable (as determined under 
        paragraph (2)) to property used to produce property to 
        which this subsection applies to the extent such 
        interest is allocable (as so determined) to the 
        produced property.
          (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] December 31, 2020.
          (5) Definitions.--For purposes of this subsection--
                  (A) Long useful life.--Property has a long 
                useful life if such property is--
                          (i) real property, or
                          (ii) property with a class life of 20 
                        years or more (as determined under 
                        section 168).
                  (B) Production period.--The term ``production 
                period'' means, when used with respect to any 
                property, the period--
                          (i) beginning on the date on which 
                        production of the property begins, and
                          (ii) except as provided in paragraph 
                        (4), ending on the date on which the 
                        property is ready to be placed in 
                        service or is ready to be held for 
                        sale.
                  (C) Production expenditures.--The term 
                ``production expenditures'' means the costs 
                (whether or not incurred during the production 
                period) required to be capitalized under 
                subsection (a) with respect to the property.
  (g) Production.--For purposes of this section--
          (1) In general.--The term ``produce'' includes 
        construct, build, install, manufacture, develop, or 
        improve.
          (2) Treatment of property produced under contract for 
        the taxpayer.--The taxpayer shall be treated as 
        producing any property produced for the taxpayer under 
        a contract with the taxpayer; except that only costs 
        paid or incurred by the taxpayer (whether under such 
        contract or otherwise) shall be taken into account in 
        applying subsection (a) to the taxpayer.
  (h) Exemption for free lance authors, photographers, and 
artists.--
          (1) In general.--Nothing in this section shall 
        require the capitalization of any qualified creative 
        expense.
          (2) Qualified creative expense.--For purposes of this 
        subsection, the term ``qualified creative expense'' 
        means any expense--
                  (A) which is paid or incurred by an 
                individual in the trade or business of such 
                individual (other than as an employee) of being 
                a writer, photographer, or artist, and
                  (B) which, without regard to this section, 
                would be allowable as a deduction for the 
                taxable year.
        Such term does not include any expense related to 
        printing, photographic plates, motion picture films, 
        video tapes, or similar items.
          (3) Definitions.--For purposes of this subsection--
                  (A) Writer.--The term ``writer'' means any 
                individual if the personal efforts of such 
                individual create (or may reasonably be 
                expected to create) a literary manuscript, 
                musical composition (including any accompanying 
                words), or dance score.
                  (B) Photographer.--The term ``photographer'' 
                means any individual if the personal efforts of 
                such individual create (or may reasonably be 
                expected to create) a photograph or 
                photographic negative or transparency.
                  (C) Artist.--
                          (i) In general.--The term ``artist'' 
                        means any individual if the personal 
                        efforts of such individual create (or 
                        may reasonably be expected to create) a 
                        picture, painting, sculpture, statue, 
                        etching, drawing, cartoon, graphic 
                        design, or original print edition.
                          (ii) Criteria.--In determining 
                        whether any expense is paid or incurred 
                        in the trade or business of being an 
                        artist, the following criteria shall be 
                        taken into account:
                                  (I) The originality and 
                                uniqueness of the item created 
                                (or to be created).
                                  (II) The predominance of 
                                aesthetic value over 
                                utilitarian value of the item 
                                created (or to be created).
                  (D) Treatment of certain corporations.--
                          (i) In general.--If--
                                  (I) substantially all of the 
                                stock of a corporation is owned 
                                by a qualified employee-owner 
                                and members of his family (as 
                                defined in section 267(c)(4)), 
                                and
                                  (II) the principal activity 
                                of such corporation is 
                                performance of personal 
                                services directly related to 
                                the activities of the qualified 
                                employee-owner and such 
                                services are substantially 
                                performed by the qualified 
                                employee-owner,
                 this subsection shall apply to any expense of 
                such corporation which directly relates to the 
                activities of such employee-owner in the same 
                manner as if such expense were incurred by such 
                employee-owner.
                          (ii) Qualified employee-owner.--For 
                        purposes of this subparagraph, the term 
                        ``qualified employee-owner'' means any 
                        individual who is an employee-owner of 
                        the corporation (as defined in section 
                        269A(b)(2)) and who is a writer, 
                        photographer, or artist.
  (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.
  (j) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary or appropriate to carry out the 
purposes of this section, including--
          (1) regulations to prevent the use of related 
        parties, pass-thru entities, or intermediaries to avoid 
        the application of this section, and
          (2) regulations providing for simplified procedures 
        for the application of this section in the case of 
        property described in subsection (b)(2).

           *       *       *       *       *       *       *


Subchapter E--ACCOUNTING PERIODS AND METHODS OF ACCOUNTING

           *       *       *       *       *       *       *


PART II--METHODS OF ACCOUNTING

           *       *       *       *       *       *       *


Subpart B--TAXABLE YEAR FOR WHICH ITEMS OF GROSS INCOME INCLUDED

           *       *       *       *       *       *       *


SEC. 451. GENERAL RULE FOR TAXABLE YEAR OF INCLUSION.

  (a) General rule.--The amount of any item of gross income 
shall be included in the gross income for the taxable year in 
which received by the taxpayer, unless, under the method of 
accounting used in computing taxable income, such amount is to 
be properly accounted for as of a different period.
  (b) Inclusion not later than for financial accounting 
purposes.--
          (1) Income taken into account in financial 
        statement.--
                  (A) In general.--In the case of a taxpayer 
                the taxable income of which is computed under 
                an accrual method of accounting, the all events 
                test with respect to any item of gross income 
                (or portion thereof) shall not be treated as 
                met any later than when such item (or portion 
                thereof) is taken into account as revenue in--
                          (i) an applicable financial statement 
                        of the taxpayer, or
                          (ii) such other financial statement 
                        as the Secretary may specify for 
                        purposes of this subsection.
                  (B) Exception.--This paragraph shall not 
                apply to--
                          (i) a taxpayer which does not have a 
                        financial statement described in clause 
                        (i) or (ii) of subparagraph (A) for a 
                        taxable year, or
                          (ii) any item of gross income in 
                        connection with a mortgage servicing 
                        contract.
                  (C) All events test.--For purposes of this 
                section, the all events test is met with 
                respect to any item of gross income if all the 
                events have occurred which fix the right to 
                receive such income and the amount of such 
                income can be determined with reasonable 
                accuracy.
          (2) Coordination with special methods of 
        accounting.--Paragraph (1) shall not apply with respect 
        to any item of gross income for which the taxpayer uses 
        a special method of accounting provided under any other 
        provision of this chapter, other than any provision of 
        part V of subchapter P (except as provided in clause 
        (ii) of paragraph (1)(B)).
          (3) Applicable financial statement.--For purposes of 
        this subsection, the term ``applicable financial 
        statement'' means--
                  (A) a financial statement which is certified 
                as being prepared in accordance with generally 
                accepted accounting principles and which is--
                          (i) a 10-K (or successor form), or 
                        annual statement to shareholders, 
                        required to be filed by the taxpayer 
                        with the United States Securities and 
                        Exchange Commission,
                          (ii) an audited financial statement 
                        of the taxpayer which is used for--
                                  (I) credit purposes,
                                  (II) reporting to 
                                shareholders, partners, or 
                                other proprietors, or to 
                                beneficiaries, or
                                  (III) any other substantial 
                                nontax purpose,
                 but only if there is no statement of the 
                taxpayer described in clause (i), or
                          (iii) filed by the taxpayer with any 
                        other Federal agency for purposes other 
                        than Federal tax purposes, but only if 
                        there is no statement of the taxpayer 
                        described in clause (i) or (ii),
                  (B) a financial statement which is made on 
                the basis of international financial reporting 
                standards and is filed by the taxpayer with an 
                agency of a foreign government which is 
                equivalent to the United States Securities and 
                Exchange Commission and which has reporting 
                standards not less stringent than the standards 
                required by such Commission, but only if there 
                is no statement of the taxpayer described in 
                subparagraph (A), or
                  (C) a financial statement filed by the 
                taxpayer with any other regulatory or 
                governmental body specified by the Secretary, 
                but only if there is no statement of the 
                taxpayer described in subparagraph (A) or (B).
          (4) Allocation of transaction price.--For purposes of 
        this subsection, in the case of a contract which 
        contains multiple performance obligations, the 
        allocation of the transaction price to each performance 
        obligation shall be equal to the amount allocated to 
        each performance obligation for purposes of including 
        such item in revenue in the applicable financial 
        statement of the taxpayer.
          (5) Group of entities.--For purposes of paragraph 
        (1), if the financial results of a taxpayer are 
        reported on the applicable financial statement (as 
        defined in paragraph (3)) for a group of entities, such 
        statement shall be treated as the applicable financial 
        statement of the taxpayer.
  (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.
  (d) Special rule in case of death.--In the case of the death 
of a taxpayer whose taxable income is computed under an accrual 
method of accounting, any amount accrued only by reason of the 
death of the taxpayer shall not be included in computing 
taxable income for the period in which falls the date of the 
taxpayer's death.
  (e) Special rule for employee tips.--For purposes of 
subsection (a), tips included in a written statement furnished 
an employer by an employee pursuant to section 6053(a) shall be 
deemed to be received at the time the written statement 
including such tips is furnished to the employer.
  (f) Special rule for crop insurance proceeds or disaster 
payments.--In the case of insurance proceeds received as a 
result of destruction or damage to crops, a taxpayer reporting 
on the cash receipts and disbursements method of accounting may 
elect to include such proceeds in income for the taxable year 
following the taxable year of destruction or damage, if he 
establishes that, under his practice, income from such crops 
would have been reported in a following taxable year. For 
purposes of the preceding sentence, payments received under the 
Agricultural Act of 1949, as amended, or title II of the 
Disaster Assistance Act of 1988, as a result of (1) destruction 
or damage to crops caused by drought, flood, or any other 
natural disaster, or (2) the inability to plant crops because 
of such a natural disaster shall be treated as insurance 
proceeds received as a result of destruction or damage to 
crops. An election under this subsection for any taxable year 
shall be made at such time and in such manner as the Secretary 
prescribes.
  (g) Special rule for proceeds from livestock sold on account 
of drought, flood, or other weather-related conditions.--
          (1) In general.--In the case of income derived from 
        the sale or exchange of livestock in excess of the 
        number the taxpayer would sell if he followed his usual 
        business practices, a taxpayer reporting on the cash 
        receipts and disbursements method of accounting may 
        elect to include such income for the taxable year 
        following the taxable year in which such sale or 
        exchange occurs if he establishes that, under his usual 
        business practices, the sale or exchange would not have 
        occurred in the taxable year in which it occurred if it 
        were not for drought, flood, or other weather-related 
        conditions, and that such conditions had resulted in 
        the area being designated as eligible for assistance by 
        the Federal Government.
          (2) Limitation.--Paragraph (1) shall apply only to a 
        taxpayer whose principal trade or business is farming 
        (within the meaning of section 6420(c)(3)).
          (3) Special election rules.--If section 1033(e)(2) 
        applies to a sale or exchange of livestock described in 
        paragraph (1), the election under paragraph (1) shall 
        be deemed valid if made during the replacement period 
        described in such section.
  (h) Special rule for utility services.--
          (1) In general.--In the case of a taxpayer the 
        taxable income of which is computed under an accrual 
        method of accounting, any income attributable to the 
        sale or furnishing of utility services to customers 
        shall be included in gross income not later than the 
        taxable year in which such services are provided to 
        such customers.
          (2) Definition and special rule.--For purposes of 
        this subsection--
                  (A) Utility services.--The term ``utility 
                services'' includes--
                          (i) the providing of electrical 
                        energy, water, or sewage disposal,
                          (ii) the furnishing of gas or steam 
                        through a local distribution system,
                          (iii) telephone or other 
                        communication services, and
                          (iv) the transporting of gas or steam 
                        by pipeline.
                  (B) Year in which services provided.--The 
                taxable year in which services are treated as 
                provided to customers shall not, in any manner, 
                be determined by reference to--
                          (i) the period in which the 
                        customers' meters are read, or
                          (ii) the period in which the taxpayer 
                        bills (or may bill) the customers for 
                        such service.
  (i) Treatment of interest on frozen deposits in certain 
financial institutions.--
          (1) In general.--In the case of interest credited 
        during any calendar year on a frozen deposit in a 
        qualified financial institution, the amount of such 
        interest includible in the gross income of a qualified 
        individual shall not exceed the sum of--
                  (A) the net amount withdrawn by such 
                individual from such deposit during such 
                calendar year, and
                  (B) the amount of such deposit which is 
                withdrawable as of the close of the taxable 
                year (determined without regard to any penalty 
                for premature withdrawals of a time deposit).
          (2) Interest tested each year.--Any interest not 
        included in gross income by reason of paragraph (1) 
        shall be treated as credited in the next calendar year.
          (3) Deferral of interest deduction.--No deduction 
        shall be allowed to any qualified financial institution 
        for interest not includible in gross income under 
        paragraph (1) until such interest is includible in 
        gross income.
          (4) Frozen deposit.--For purposes of this subsection, 
        the term ``frozen deposit'' means any deposit if, as of 
        the close of the calendar year, any portion of such 
        deposit may not be withdrawn because of--
                  (A) the bankruptcy or insolvency of the 
                qualified financial institution (or threat 
                thereof), or
                  (B) any requirement imposed by the State in 
                which such institution is located by reason of 
                the bankruptcy or insolvency (or threat 
                thereof) of 1 or more financial institutions in 
                the State.
          (5) Other definitions.--For purposes of this 
        subsection, the terms ``qualified individual'', 
        ``qualified financial institution'', and ``deposit'' 
        have the same respective meanings as when used in 
        section 165(l).
  (j) Special rule for cash options for receipt of qualified 
prizes.--
          (1) In general.--For purposes of this title, in the 
        case of an individual on the cash receipts and 
        disbursements method of accounting, a qualified prize 
        option shall be disregarded in determining the taxable 
        year for which any portion of the qualified prize is 
        properly includible in gross income of the taxpayer.
          (2) Qualified prize option; qualified prize.--For 
        purposes of this subsection--
                  (A) In general.--The term ``qualified prize 
                option'' means an option which--
                          (i) entitles an individual to receive 
                        a single cash payment in lieu of 
                        receiving a qualified prize (or 
                        remaining portion thereof), and
                          (ii) is exercisable not later than 60 
                        days after such individual becomes 
                        entitled to the qualified prize.
                  (B) Qualified prize.--The term ``qualified 
                prize'' means any prize or award which--
                          (i) is awarded as a part of a 
                        contest, lottery, jackpot, game, or 
                        other similar arrangement,
                          (ii) does not relate to any past 
                        services performed by the recipient and 
                        does not require the recipient to 
                        perform any substantial future service, 
                        and
                          (iii) is payable over a period of at 
                        least 10 years.
          (3) Partnership, etc..--The Secretary shall provide 
        for the application of this subsection in the case of a 
        partnership or other pass-through entity consisting 
        entirely of individuals described in paragraph (1).
  (k) Special rule for sales or dispositions to implement 
Federal Energy Regulatory Commission or State electric 
restructuring policy.--
          (1) In general.--In the case of any qualifying 
        electric transmission transaction for which the 
        taxpayer elects the application of this section, 
        qualified gain from such transaction shall be 
        recognized--
                  (A) in the taxable year which includes the 
                date of such transaction to the extent the 
                amount realized from such transaction exceeds--
                          (i) the cost of exempt utility 
                        property which is purchased by the 
                        taxpayer during the 4-year period 
                        beginning on such date, reduced (but 
                        not below zero) by
                          (ii) any portion of such cost 
                        previously taken into account under 
                        this subsection, and
                  (B) ratably over the 8-taxable year period 
                beginning with the taxable year which includes 
                the date of such transaction, in the case of 
                any such gain not recognized under subparagraph 
                (A).
          (2) Qualified gain.--For purposes of this subsection, 
        the term ``qualified gain'' means, with respect to any 
        qualifying electric transmission transaction in any 
        taxable year--
                  (A) any ordinary income derived from such 
                transaction which would be required to be 
                recognized under section 1245 or 1250 for such 
                taxable year (determined without regard to this 
                subsection), and
                  (B) any income derived from such transaction 
                in excess of the amount described in 
                subparagraph (A) which is required to be 
                included in gross income for such taxable year 
                (determined without regard to this subsection).
          (3) Qualifying electric transmission transaction.--
        For purposes of this subsection, the term ``qualifying 
        electric transmission transaction'' means any sale or 
        other disposition before January 1, 2008 (before 
        [January 1, 2018] January 1, 2021, in the case of a 
        qualified electric utility), of--
                  (A) property used in the trade or business of 
                providing electric transmission services, or
                  (B) any stock or partnership interest in a 
                corporation or partnership, as the case may be, 
                whose principal trade or business consists of 
                providing electric transmission services,
        but only if such sale or disposition is to an 
        independent transmission company.
          (4) Independent transmission company.--For purposes 
        of this subsection, the term ``independent transmission 
        company'' means--
                  (A) an independent transmission provider 
                approved by the Federal Energy Regulatory 
                Commission,
                  (B) a person--
                          (i) who the Federal Energy Regulatory 
                        Commission determines in its 
                        authorization of the transaction under 
                        section 203 of the Federal Power Act 
                        (16 U.S.C. 824b) or by declaratory 
                        order is not a market participant 
                        within the meaning of such Commission's 
                        rules applicable to independent 
                        transmission providers, and
                          (ii) whose transmission facilities to 
                        which the election under this 
                        subsection applies are under the 
                        operational control of a Federal Energy 
                        Regulatory Commission-approved 
                        independent transmission provider 
                        before the close of the period 
                        specified in such authorization, but 
                        not later than the date which is 4 
                        years after the close of the taxable 
                        year in which the transaction occurs, 
                        or
                  (C) in the case of facilities subject to the 
                jurisdiction of the Public Utility Commission 
                of Texas--
                          (i) a person which is approved by 
                        that Commission as consistent with 
                        Texas State law regarding an 
                        independent transmission provider, or
                          (ii) a political subdivision or 
                        affiliate thereof whose transmission 
                        facilities are under the operational 
                        control of a person described in clause 
                        (i).
          (5) Exempt utility property.--For purposes of this 
        subsection:
                  (A) In general.--The term ``exempt utility 
                property'' means property used in the trade or 
                business of--
                          (i) generating, transmitting, 
                        distributing, or selling electricity, 
                        or
                          (ii) producing, transmitting, 
                        distributing, or selling natural gas.
                  (B) Nonrecognition of gain by reason of 
                acquisition of stock.--Acquisition of control 
                of a corporation shall be taken into account 
                under this subsection with respect to a 
                qualifying electric transmission transaction 
                only if the principal trade or business of such 
                corporation is a trade or business referred to 
                in subparagraph (A).
                  (C) Exception for property located outside 
                the United States.--The term ``exempt utility 
                property'' shall not include any property which 
                is located outside the United States.
          (6) Qualified electric utility.--For purposes of this 
        subsection, the term ``qualified electric utility'' 
        means a person that, as of the date of the qualifying 
        electric transmission transaction, is vertically 
        integrated, in that it is both--
                  (A) a transmitting utility (as defined in 
                section 3(23) of the Federal Power Act (16 
                U.S.C. 796(23))) with respect to the 
                transmission facilities to which the election 
                under this subsection applies, and
                  (B) an electric utility (as defined in 
                section 3(22) of the Federal Power Act (16 
                U.S.C. 796(22))).
          (7) Special rule for consolidated groups.--In the 
        case of a corporation which is a member of an 
        affiliated group filing a consolidated return, any 
        exempt utility property purchased by another member of 
        such group shall be treated as purchased by such 
        corporation for purposes of applying paragraph (1)(A).
          (8) Time for assessment of deficiencies.--If the 
        taxpayer has made the election under paragraph (1) and 
        any gain is recognized by such taxpayer as provided in 
        paragraph (1)(B), then--
                  (A) the statutory period for the assessment 
                of any deficiency, for any taxable year in 
                which any part of the gain on the transaction 
                is realized, attributable to such gain shall 
                not expire prior to the expiration of 3 years 
                from the date the Secretary is notified by the 
                taxpayer (in such manner as the Secretary may 
                by regulations prescribe) of the purchase of 
                exempt utility property or of an intention not 
                to purchase such property, and
                  (B) such deficiency may be assessed before 
                the expiration of such 3-year period 
                notwithstanding any law or rule of law which 
                would otherwise prevent such assessment.
          (9) Purchase.--For purposes of this subsection, the 
        taxpayer shall be considered to have purchased any 
        property if the unadjusted basis of such property is 
        its cost within the meaning of section 1012.
          (10) Election.--An election under paragraph (1) shall 
        be made at such time and in such manner as the 
        Secretary may require and, once made, shall be 
        irrevocable.
          (11) Nonapplication of installment sales treatment.--
        Section 453 shall not apply to any qualifying electric 
        transmission transaction with respect to which an 
        election to apply this subsection is made.

 Subchapter N--TAX BASED ON INCOME FROM SOURCES WITHIN OR WITHOUT THE 
UNITED STATES

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PART III--INCOME FROM SOURCES WITHOUT THE UNITED STATES

           *       *       *       *       *       *       *


Subpart F--CONTROLLED FOREIGN CORPORATIONS

           *       *       *       *       *       *       *


SEC. 954. FOREIGN BASE COMPANY INCOME.

  (a) Foreign base company income.--For purposes of section 
952(a)(2), the term ``foreign base company income'' means for 
any taxable year the sum of--
          (1) the foreign personal holding company income for 
        the taxable year (determined under subsection (c) and 
        reduced as provided in subsection (b)(5)),
          (2) the foreign base company sales income for the 
        taxable year (determined under subsection (d) and 
        reduced as provided in subsection (b)(5)), and
          (3) the foreign base company services income for the 
        taxable year (determined under subsection (e) and 
        reduced as provided in subsection (b)(5)).
  (b) Exclusion and special rules.--
          (3) De minimis, etc., rules.--For purposes of 
        subsection (a) and section 953--
                  (A) De minimis rule.--If the sum of foreign 
                base company income (determined without regard 
                to paragraph (5)) and the gross insurance 
                income for the taxable year is less than the 
                lesser of--
                          (i) 5 percent of gross income, or
                          (ii) $1,000,000,
                no part of the gross income for the taxable 
                year shall be treated as foreign base company 
                income or insurance income.
                  (B) Foreign base company income and insurance 
                income in excess of 70 percent of gross 
                income.--If the sum of the foreign base company 
                income (determined without regard to paragraph 
                (5)) and the gross insurance income for the 
                taxable year exceeds 70 percent of gross 
                income, the entire gross income for the taxable 
                year shall, subject to the provisions of 
                paragraphs (4) and (5), be treated as foreign 
                base company income or insurance income 
                (whichever is appropriate).
                  (C) Gross insurance income.--For purposes of 
                subparagraphs (A) and (B), the term ``gross 
                insurance income'' means any item of gross 
                income taken into account in determining 
                insurance income under section 953.
          (4) Exception for certain income subject to high 
        foreign taxes.--For purposes of subsection (a) and 
        section 953, foreign base company income and insurance 
        income shall not include any item of income received by 
        a controlled foreign corporation if the taxpayer 
        establishes to the satisfaction of the Secretary that 
        such income was subject to an effective rate of income 
        tax imposed by a foreign country greater than 90 
        percent of the maximum rate of tax specified in section 
        11.
          (5) Deductions to be taken into account.--For 
        purposes of subsection (a), the foreign personal 
        holding company income, the foreign base company sales 
        income, and the foreign base company services income 
        shall be reduced, under regulations prescribed by the 
        Secretary, so as to take into account deductions 
        (including taxes) properly allocable to such income. 
        Except to the extent provided in regulations prescribed 
        by the Secretary, any interest which is paid or accrued 
        by the controlled foreign corporation to any United 
        States shareholder in such corporation (or any 
        controlled foreign corporation related to such a 
        shareholder) shall be allocated first to foreign 
        personal holding company income which is passive income 
        (within the meaning of section 904(d)(2)) of such 
        corporation to the extent thereof. The Secretary may, 
        by regulations, provide that the preceding sentence 
        shall apply also to interest paid or accrued to other 
        persons.
  (c) Foreign personal holding company income.--
          (1) In general.--For purposes of subsection (a)(1), 
        the term ``foreign personal holding company income'' 
        means the portion of the gross income which consists 
        of:
                  (A) Dividends, etc..--Dividends, interest, 
                royalties, rents, and annuities.
                  (B) Certain property transactions.--The 
                excess of gains over losses from the sale or 
                exchange of property--
                          (i) which gives rise to income 
                        described in subparagraph (A) (after 
                        application of paragraph (2)(A)) other 
                        than property which gives rise to 
                        income not treated as foreign personal 
                        holding company income by reason of 
                        subsection (h) or (i) for the taxable 
                        year,
                          (ii) which is an interest in a trust, 
                        partnership, or REMIC, or
                          (iii) which does not give rise to any 
                        income.
                Gains and losses from the sale or exchange of 
                any property which, in the hands of the 
                controlled foreign corporation, is property 
                described in section 1221(a)(1) shall not be 
                taken into account under this subparagraph.
                  (C) Commodities transactions.--The excess of 
                gains over losses from transactions (including 
                futures, forward, and similar transactions) in 
                any commodities. This subparagraph shall not 
                apply to gains or losses which--
                          (i) arise out of commodity hedging 
                        transactions (as defined in paragraph 
                        (5)(A)),
                          (ii) are active business gains or 
                        losses from the sale of commodities, 
                        but only if substantially all of the 
                        controlled foreign corporation's 
                        commodities are property described in 
                        paragraph (1), (2), or (8) of section 
                        1221(a), or
                          (iii) are foreign currency gains or 
                        losses (as defined in section 988(b)) 
                        attributable to any section 988 
                        transactions.
                  (D) Foreign currency gains.--The excess of 
                foreign currency gains over foreign currency 
                losses (as defined in section 988(b)) 
                attributable to any section 988 transactions. 
                This subparagraph shall not apply in the case 
                of any transaction directly related to the 
                business needs of the controlled foreign 
                corporation.
                  (E) Income equivalent to interest.--Any 
                income equivalent to interest, including income 
                from commitment fees (or similar amounts) for 
                loans actually made.
                  (F) Income from notional principal 
                contracts.--
                          (i) In general.--Net income from 
                        notional principal contracts.
                          (ii) Coordination with other 
                        categories of foreign personal holding 
                        company income.--Any item of income, 
                        gain, deduction, or loss from a 
                        notional principal contract entered 
                        into for purposes of hedging any item 
                        described in any preceding subparagraph 
                        shall not be taken into account for 
                        purposes of this subparagraph but shall 
                        be taken into account under such other 
                        subparagraph.
                  (G) Payments in lieu of dividends.--Payments 
                in lieu of dividends which are made pursuant to 
                an agreement to which section 1058 applies.
                  (H) Personal service contracts.--(i) Amounts 
                received under a contract under which the 
                corporation is to furnish personal services 
                if--
                                  (I) some person other than 
                                the corporation has the right 
                                to designate (by name or by 
                                description) the individual who 
                                is to perform the services, or
                                  (II) the individual who is to 
                                perform the services is 
                                designated (by name or by 
                                description) in the contract, 
                                and
                          (ii) amounts received from the sale 
                        or other disposition of such a 
                        contract.
                          This subparagraph shall apply with 
                        respect to amounts received for 
                        services under a particular contract 
                        only if at some time during the taxable 
                        year 25 percent or more in value of the 
                        outstanding stock of the corporation is 
                        owned, directly or indirectly, by or 
                        for the individual who has performed, 
                        is to perform, or may be designated (by 
                        name or by description) as the one to 
                        perform, such services.
          (2) Exception for certain amounts.--
                  (A) Rents and royalties derived in active 
                business.--Foreign personal holding company 
                income shall not include rents and royalties 
                which are derived in the active conduct of a 
                trade or business and which are received from a 
                person other than a related person (within the 
                meaning of subsection (d)(3)). For purposes of 
                the preceding sentence, rents derived from 
                leasing an aircraft or vessel in foreign 
                commerce shall not fail to be treated as 
                derived in the active conduct of a trade or 
                business if, as determined under regulations 
                prescribed by the Secretary, the active leasing 
                expenses are not less than 10 percent of the 
                profit on the lease.
                  (B) Certain export financing.--Foreign 
                personal holding company income shall not 
                include any interest which is derived in the 
                conduct of a banking business and which is 
                export financing interest (as defined in 
                section 904(d)(2)(G)).
                  (C) Exception for dealers.--Except as 
                provided by regulations, in the case of a 
                regular dealer in property which is property 
                described in paragraph (1)(B), forward 
                contracts, option contracts, or similar 
                financial instruments (including notional 
                principal contracts and all instruments 
                referenced to commodities), there shall not be 
                taken into account in computing foreign 
                personal holding company income--
                          (i) any item of income, gain, 
                        deduction, or loss (other than any item 
                        described in subparagraph (A), (E), or 
                        (G) of paragraph (1)) from any 
                        transaction (including hedging 
                        transactions and transactions involving 
                        physical settlement) entered into in 
                        the ordinary course of such dealer's 
                        trade or business as such a dealer, and
                          (ii) if such dealer is a dealer in 
                        securities (within the meaning of 
                        section 475), any interest or dividend 
                        or equivalent amount described in 
                        subparagraph (E) or (G) of paragraph 
                        (1) from any transaction (including any 
                        hedging transaction or transaction 
                        described in section 956(c)(2)(I)) 
                        entered into in the ordinary course of 
                        such dealer's trade or business as such 
                        a dealer in securities, but only if the 
                        income from the transaction is 
                        attributable to activities of the 
                        dealer in the country under the laws of 
                        which the dealer is created or 
                        organized (or in the case of a 
                        qualified business unit described in 
                        section 989(a), is attributable to 
                        activities of the unit in the country 
                        in which the unit both maintains its 
                        principal office and conducts 
                        substantial business activity).
          (3) Certain income received from related persons.--
                  (A) In general.--Except as provided in 
                subparagraph (B), the term ``foreign personal 
                holding company income'' does not include--
                          (i) dividends and interest received 
                        from a related person which (I) is a 
                        corporation created or organized under 
                        the laws of the same foreign country 
                        under the laws of which the controlled 
                        foreign corporation is created or 
                        organized, and (II) has a substantial 
                        part of its assets used in its trade or 
                        business located in such same foreign 
                        country, and
                          (ii) rents and royalties received 
                        from a corporation which is a related 
                        person for the use of, or the privilege 
                        of using, property within the country 
                        under the laws of which the controlled 
                        foreign corporation is created or 
                        organized.
                To the extent provided in regulations, payments 
                made by a partnership with 1 or more corporate 
                partners shall be treated as made by such 
                corporate partners in proportion to their 
                respective interests in the partnership.
                  (B) Exception not to apply to items which 
                reduce subpart F income.--Subparagraph (A) 
                shall not apply in the case of any interest, 
                rent, or royalty to the extent such interest, 
                rent, or royalty reduces the payor's subpart F 
                income or creates (or increases) a deficit 
                which under section 952(c) may reduce the 
                subpart F income of the payor or another 
                controlled foreign corporation.
                  (C) Exception for certain dividends.--
                Subparagraph (A)(i) shall not apply to any 
                dividend with respect to any stock which is 
                attributable to earnings and profits of the 
                distributing corporation accumulated during any 
                period during which the person receiving such 
                dividend did not hold such stock either 
                directly, or indirectly through a chain of one 
                or more subsidiaries each of which meets the 
                requirements of subparagraph (A)(i).
          (4) Look-thru rule for certain partnership sales.--
                  (A) In general.--In the case of any sale by a 
                controlled foreign corporation of an interest 
                in a partnership with respect to which such 
                corporation is a 25-percent owner, such 
                corporation shall be treated for purposes of 
                this subsection as selling the proportionate 
                share of the assets of the partnership 
                attributable to such interest. The Secretary 
                shall prescribe such regulations as may be 
                appropriate to prevent abuse of the purposes of 
                this paragraph, including regulations providing 
                for coordination of this paragraph with the 
                provisions of subchapter K.
                  (B) 25-percent owner.--For purposes of this 
                paragraph, the term ``25-percent owner'' means 
                a controlled foreign corporation which owns 
                directly 25 percent or more of the capital or 
                profits interest in a partnership. For purposes 
                of the preceding sentence, if a controlled 
                foreign corporation is a shareholder or partner 
                of a corporation or partnership, the controlled 
                foreign corporation shall be treated as owning 
                directly its proportionate share of any such 
                capital or profits interest held directly or 
                indirectly by such corporation or partnership. 
                If a controlled foreign corporation is treated 
                as owning a capital or profits interest in a 
                partnership under constructive ownership rules 
                similar to the rules of section 958(b), the 
                controlled foreign corporation shall be treated 
                as owning such interest directly for purposes 
                of this subparagraph.
          (5) Definition and special rules relating to 
        commodity transactions.--
                  (A) Commodity hedging transactions.--For 
                purposes of paragraph (1)(C)(i), the term 
                ``commodity hedging transaction'' means any 
                transaction with respect to a commodity if such 
                transaction--
                          (i) is a hedging transaction as 
                        defined in section 1221(b)(2), 
                        determined--
                                  (I) without regard to 
                                subparagraph (A)(ii) thereof,
                                  (II) by applying subparagraph 
                                (A)(i) thereof by substituting 
                                ``ordinary property or property 
                                described in section 1231(b)'' 
                                for ``ordinary property'', and
                                  (III) by substituting 
                                ``controlled foreign 
                                corporation'' for ``taxpayer'' 
                                each place it appears, and
                          (ii) is clearly identified as such in 
                        accordance with section 1221(a)(7).
                  (B) Treatment of dealer activities under 
                paragraph (1)(C).--Commodities with respect to 
                which gains and losses are not taken into 
                account under paragraph (2)(C) in computing a 
                controlled foreign corporation's foreign 
                personal holding company income shall not be 
                taken into account in applying the 
                substantially all test under paragraph 
                (1)(C)(ii) to such corporation.
                  (C) Regulations.--The Secretary shall 
                prescribe such regulations as are appropriate 
                to carry out the purposes of paragraph (1)(C) 
                in the case of transactions involving related 
                parties.
          (6) Look-thru rule for related controlled foreign 
        corporations.--
                  (A) In general.--For purposes of this 
                subsection, dividends, interest, rents, and 
                royalties received or accrued from a controlled 
                foreign corporation which is a related person 
                shall not be treated as foreign personal 
                holding company income to the extent 
                attributable or properly allocable (determined 
                under rules similar to the rules of 
                subparagraphs (C) and (D) of section 904(d)(3)) 
                to income of the related person which is 
                neither subpart F income nor income treated as 
                effectively connected with the conduct of a 
                trade or business in the United States. For 
                purposes of this subparagraph, interest shall 
                include factoring income which is treated as 
                income equivalent to interest for purposes of 
                paragraph (1)(E). The Secretary shall prescribe 
                such regulations as may be necessary or 
                appropriate to carry out this paragraph, 
                including such regulations as may be necessary 
                or appropriate to prevent the abuse of the 
                purposes of this paragraph.
                  (B) Exception.--Subparagraph (A) shall not 
                apply in the case of any interest, rent, or 
                royalty to the extent such interest, rent, or 
                royalty creates (or increases) a deficit which 
                under section 952(c) may reduce the subpart F 
                income of the payor or another controlled 
                foreign corporation.
                  (C) Application.--Subparagraph (A) shall 
                apply to taxable years of foreign corporations 
                beginning after December 31, 2005, and before 
                [January 1, 2020] January 1, 2021, and to 
                taxable years of United States shareholders 
                with or within which such taxable years of 
                foreign corporations end.
  (d) Foreign base company sales income.--
          (1) In general.--For purposes of subsection (a)(2), 
        the term ``foreign base company sales income'' means 
        income (whether in the form of profits, commissions, 
        fees, or otherwise) derived in connection with the 
        purchase of personal property from a related person and 
        its sale to any person, the sale of personal property 
        to any person on behalf of a related person, the 
        purchase of personal property from any person and its 
        sale to a related person, or the purchase of personal 
        property from any person on behalf of a related person 
        where--
                  (A) the property which is purchased (or in 
                the case of property sold on behalf of a 
                related person, the property which is sold) is 
                manufactured, produced, grown, or extracted 
                outside the country under the laws of which the 
                controlled foreign corporation is created or 
                organized, and
                  (B) the property is sold for use, 
                consumption, or disposition outside such 
                foreign country, or, in the case of property 
                purchased on behalf of a related person, is 
                purchased for use, consumption, or disposition 
                outside such foreign country.
        For purposes of this subsection, personal property does 
        not include agricultural commodities which are not 
        grown in the United States in commercially marketable 
        quantities.
          (2) Certain branch income.--For purposes of 
        determining foreign base company sales income in 
        situations in which the carrying on of activities by a 
        controlled foreign corporation through a branch or 
        similar establishment outside the country of 
        incorporation of the controlled foreign corporation has 
        substantially the same effect as if such branch or 
        similar establishment were a wholly owned subsidiary 
        corporation deriving such income, under regulations 
        prescribed by the Secretary the income attributable to 
        the carrying on of such activities of such branch or 
        similar establishment shall be treated as income 
        derived by a wholly owned subsidiary of the controlled 
        foreign corporation and shall constitute foreign base 
        company sales income of the controlled foreign 
        corporation.
          (3) Related person defined.--For purposes of this 
        section, a person is a related person with respect to a 
        controlled foreign corporation, if--
                  (A) such person is an individual, 
                corporation, partnership, trust, or estate 
                which controls, or is controlled by, the 
                controlled foreign corporation, or
                  (B) such person is a corporation, 
                partnership, trust, or estate which is 
                controlled by the same person or persons which 
                control the controlled foreign corporation.
        For purposes of the preceding sentence, control means, 
        with respect to a corporation, the ownership, directly 
        or indirectly, of stock possessing more than 50 percent 
        of the total voting power of all classes of stock 
        entitled to vote or of the total value of stock of such 
        corporation. In the case of a partnership, trust, or 
        estate, control means the ownership, directly or 
        indirectly, of more than 50 percent (by value) of the 
        beneficial interests in such partnership, trust, or 
        estate. For purposes of this paragraph, rules similar 
        to the rules of section 958 shall apply.
          (4) Special rule for certain timber products.--For 
        purposes of subsection (a)(2), the term ``foreign base 
        company sales income'' includes any income (whether in 
        the form of profits, commissions, fees, or otherwise) 
        derived in connection with--
                  (A) the sale of any unprocessed timber 
                referred to in section 865(b), or
                  (B) the milling of any such timber outside 
                the United States.
        Subpart G shall not apply to any amount treated as 
        subpart F income by reason of this paragraph.
  (e) Foreign base company services income.--
          (1) In general.--For purposes of subsection (a)(3), 
        the term ``foreign base company services income'' means 
        income (whether in the form of compensation, 
        commissions, fees, or otherwise) derived in connection 
        with the performance of technical, managerial, 
        engineering, architectural, scientific, skilled, 
        industrial, commercial, or like services which--
                  (A) are performed for or on behalf of any 
                related person (within the meaning of 
                subsection (d)(3)), and
                  (B) are performed outside the country under 
                the laws of which the controlled foreign 
                corporation is created or organized.
          (2) Exception.--Paragraph (1) shall not apply to 
        income derived in connection with the performance of 
        services which are directly related to--
                  (A) the sale or exchange by the controlled 
                foreign corporation of property manufactured, 
                produced, grown, or extracted by it and which 
                are performed before the time of the sale or 
                exchange, or
                  (B) an offer or effort to sell or exchange 
                such property.
        Paragraph (1) shall also not apply to income which is 
        exempt insurance income (as defined in section 953(e)) 
        or which is not treated as foreign personal holding 
        income by reason of subsection (c)(2)(C)(ii), (h), or 
        (i).
  (h) Special rule for income derived in the active conduct of 
banking, financing, or similar businesses.--
          (1) In general.--For purposes of subsection (c)(1), 
        foreign personal holding company income shall not 
        include qualified banking or financing income of an 
        eligible controlled foreign corporation.
          (2) Eligible controlled foreign corporation.--For 
        purposes of this subsection--
                  (A) In general.--The term ``eligible 
                controlled foreign corporation'' means a 
                controlled foreign corporation which--
                          (i) is predominantly engaged in the 
                        active conduct of a banking, financing, 
                        or similar business, and
                          (ii) conducts substantial activity 
                        with respect to such business.
                  (B) Predominantly engaged.--A controlled 
                foreign corporation shall be treated as 
                predominantly engaged in the active conduct of 
                a banking, financing, or similar business if--
                          (i) more than 70 percent of the gross 
                        income of the controlled foreign 
                        corporation is derived directly from 
                        the active and regular conduct of a 
                        lending or finance business from 
                        transactions with customers which are 
                        not related persons,
                          (ii) it is engaged in the active 
                        conduct of a banking business and is an 
                        institution licensed to do business as 
                        a bank in the United States (or is any 
                        other corporation not so licensed which 
                        is specified by the Secretary in 
                        regulations), or
                          (iii) it is engaged in the active 
                        conduct of a securities business and is 
                        registered as a securities broker or 
                        dealer under section 15(a) of the 
                        Securities Exchange Act of 1934 or is 
                        registered as a Government securities 
                        broker or dealer under section 15C(a) 
                        of such Act (or is any other 
                        corporation not so registered which is 
                        specified by the Secretary in 
                        regulations).
          (3) Qualified banking or financing income.--For 
        purposes of this subsection--
                  (A) In general.--The term ``qualified banking 
                or financing income'' means income of an 
                eligible controlled foreign corporation which--
                          (i) is derived in the active conduct 
                        of a banking, financing, or similar 
                        business by--
                                  (I) such eligible controlled 
                                foreign corporation, or
                                  (II) a qualified business 
                                unit of such eligible 
                                controlled foreign corporation,
                          (ii) is derived from one or more 
                        transactions--
                                  (I) with customers located in 
                                a country other than the United 
                                States, and
                                  (II) substantially all of the 
                                activities in connection with 
                                which are conducted directly by 
                                the corporation or unit in its 
                                home country, and
                          (iii) is treated as earned by such 
                        corporation or unit in its home country 
                        for purposes of such country's tax 
                        laws.
                  (B) Limitation on nonbanking and 
                nonsecurities businesses.--No income of an 
                eligible controlled foreign corporation not 
                described in clause (ii) or (iii) of paragraph 
                (2)(B) (or of a qualified business unit of such 
                corporation) shall be treated as qualified 
                banking or financing income unless more than 30 
                percent of such corporation's or unit's gross 
                income is derived directly from the active and 
                regular conduct of a lending or finance 
                business from transactions with customers which 
                are not related persons and which are located 
                within such corporation's or unit's home 
                country.
                  (C) Substantial activity requirement for 
                cross border income.--The term ``qualified 
                banking or financing income'' shall not include 
                income derived from 1 or more transactions with 
                customers located in a country other than the 
                home country of the eligible controlled foreign 
                corporation or a qualified business unit of 
                such corporation unless such corporation or 
                unit conducts substantial activity with respect 
                to a banking, financing, or similar business in 
                its home country.
                  (D) Determinations made separately.--For 
                purposes of this paragraph, the qualified 
                banking or financing income of an eligible 
                controlled foreign corporation and each 
                qualified business unit of such corporation 
                shall be determined separately for such 
                corporation and each such unit by taking into 
                account--
                          (i) in the case of the eligible 
                        controlled foreign corporation, only 
                        items of income, deduction, gain, or 
                        loss and activities of such corporation 
                        not properly allocable or attributable 
                        to any qualified business unit of such 
                        corporation, and
                          (ii) in the case of a qualified 
                        business unit, only items of income, 
                        deduction, gain, or loss and activities 
                        properly allocable or attributable to 
                        such unit.
                  (E) Direct conduct of activities.--For 
                purposes of subparagraph (A)(ii)(II), an 
                activity shall be treated as conducted directly 
                by an eligible controlled foreign corporation 
                or qualified business unit in its home country 
                if the activity is performed by employees of a 
                related person and--
                          (i) the related person is an eligible 
                        controlled foreign corporation the home 
                        country of which is the same as the 
                        home country of the corporation or unit 
                        to which subparagraph (A)(ii)(II) is 
                        being applied,
                          (ii) the activity is performed in the 
                        home country of the related person, and
                          (iii) the related person is 
                        compensated on an arm's-length basis 
                        for the performance of the activity by 
                        its employees and such compensation is 
                        treated as earned by such person in its 
                        home country for purposes of the home 
                        country's tax laws.
          (4) Lending or finance business.--For purposes of 
        this subsection, the term ``lending or finance 
        business'' means the business of--
                  (A) making loans,
                  (B) purchasing or discounting accounts 
                receivable, notes, or installment obligations,
                  (C) engaging in leasing (including entering 
                into leases and purchasing, servicing, and 
                disposing of leases and leased assets),
                  (D) issuing letters of credit or providing 
                guarantees,
                  (E) providing charge and credit card 
                services, or
                  (F) rendering services or making facilities 
                available in connection with activities 
                described in subparagraphs (A) through (E) 
                carried on by--
                          (i) the corporation (or qualified 
                        business unit) rendering services or 
                        making facilities available, or
                          (ii) another corporation (or 
                        qualified business unit of a 
                        corporation) which is a member of the 
                        same affiliated group (as defined in 
                        section 1504, but determined without 
                        regard to section 1504(b)(3)).
          (5) Other definitions.--For purposes of this 
        subsection--
                  (A) Customer.--The term ``customer'' means, 
                with respect to any controlled foreign 
                corporation or qualified business unit, any 
                person which has a customer relationship with 
                such corporation or unit and which is acting in 
                its capacity as such.
                  (B) Home country.--Except as provided in 
                regulations--
                          (i) Controlled foreign corporation.--
                        The term ``home country'' means, with 
                        respect to any controlled foreign 
                        corporation, the country under the laws 
                        of which the corporation was created or 
                        organized.
                          (ii) Qualified business unit.--The 
                        term ``home country'' means, with 
                        respect to any qualified business unit, 
                        the country in which such unit 
                        maintains its principal office.
                  (C) Located.--The determination of where a 
                customer is located shall be made under rules 
                prescribed by the Secretary.
                  (D) Qualified business unit.--The term 
                ``qualified business unit'' has the meaning 
                given such term by section 989(a).
                  (E) Related person.--The term ``related 
                person'' has the meaning given such term by 
                subsection (d)(3).
          (6) Coordination with exception for dealers.--
        Paragraph (1) shall not apply to income described in 
        subsection (c)(2)(C)(ii) of a dealer in securities 
        (within the meaning of section 475) which is an 
        eligible controlled foreign corporation described in 
        paragraph (2)(B)(iii).
          (7) Anti-abuse rules.--For purposes of applying this 
        subsection and subsection (c)(2)(C)(ii)--
                  (A) there shall be disregarded any item of 
                income, gain, loss, or deduction with respect 
                to any transaction or series of transactions 
                one of the principal purposes of which is 
                qualifying income or gain for the exclusion 
                under this section, including any transaction 
                or series of transactions a principal purpose 
                of which is the acceleration or deferral of any 
                item in order to claim the benefits of such 
                exclusion through the application of this 
                subsection,
                  (B) there shall be disregarded any item of 
                income, gain, loss, or deduction of an entity 
                which is not engaged in regular and continuous 
                transactions with customers which are not 
                related persons,
                  (C) there shall be disregarded any item of 
                income, gain, loss, or deduction with respect 
                to any transaction or series of transactions 
                utilizing, or doing business with--
                          (i) one or more entities in order to 
                        satisfy any home country requirement 
                        under this subsection, or
                          (ii) a special purpose entity or 
                        arrangement, including a 
                        securitization, financing, or similar 
                        entity or arrangement,
                if one of the principal purposes of such 
                transaction or series of transactions is 
                qualifying income or gain for the exclusion 
                under this subsection, and
                  (D) a related person, an officer, a director, 
                or an employee with respect to any controlled 
                foreign corporation (or qualified business 
                unit) which would otherwise be treated as a 
                customer of such corporation or unit with 
                respect to any transaction shall not be so 
                treated if a principal purpose of such 
                transaction is to satisfy any requirement of 
                this subsection.
          (8) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry 
        out the purposes of this subsection, subsection 
        (c)(1)(B)(i), subsection (c)(2)(C)(ii), and the last 
        sentence of subsection (e)(2).
  (i) Special rule for income derived in the active conduct of 
insurance business.--
          (1) In general.--For purposes of subsection (c)(1), 
        foreign personal holding company income shall not 
        include qualified insurance income of a qualifying 
        insurance company.
          (2) Qualified insurance income.--The term ``qualified 
        insurance income'' means income of a qualifying 
        insurance company which is--
                  (A) received from a person other than a 
                related person (within the meaning of 
                subsection (d)(3)) and derived from the 
                investments made by a qualifying insurance 
                company or a qualifying insurance company 
                branch of its reserves allocable to exempt 
                contracts or of 80 percent of its unearned 
                premiums from exempt contracts (as both are 
                determined in the manner prescribed under 
                paragraph (4)), or
                  (B) received from a person other than a 
                related person (within the meaning of 
                subsection (d)(3)) and derived from investments 
                made by a qualifying insurance company or a 
                qualifying insurance company branch of an 
                amount of its assets allocable to exempt 
                contracts equal to--
                          (i) in the case of property, 
                        casualty, or health insurance 
                        contracts, one-third of its premiums 
                        earned on such insurance contracts 
                        during the taxable year (as defined in 
                        section 832(b)(4)), and
                          (ii) in the case of life insurance or 
                        annuity contracts, 10 percent of the 
                        reserves described in subparagraph (A) 
                        for such contracts.
          (3) Principles for determining insurance income.--
        Except as provided by the Secretary, for purposes of 
        subparagraphs (A) and (B) of paragraph (2)--
                  (A) in the case of any contract which is a 
                separate account-type contract (including any 
                variable contract not meeting the requirements 
                of section 817), income credited under such 
                contract shall be allocable only to such 
                contract, and
                  (B) income not allocable under subparagraph 
                (A) shall be allocated ratably among contracts 
                not described in subparagraph (A).
          (4) Methods for determining unearned premiums and 
        reserves.--For purposes of paragraph (2)(A)--
                  (A) Property and casualty contracts.--The 
                unearned premiums and reserves of a qualifying 
                insurance company or a qualifying insurance 
                company branch with respect to property, 
                casualty, or health insurance contracts shall 
                be determined using the same methods and 
                interest rates which would be used if such 
                company or branch were subject to tax under 
                subchapter L, except that--
                          (i) the interest rate determined for 
                        the functional currency of the company 
                        or branch, and which, except as 
                        provided by the Secretary, is 
                        calculated in the same manner as the 
                        Federal mid-term rate under section 
                        1274(d), shall be substituted for the 
                        applicable Federal interest rate, and
                          (ii) such company or branch shall use 
                        the appropriate foreign loss payment 
                        pattern.
                  (B) Life insurance and annuity contracts.--
                          (i) In general.--Except as provided 
                        in clause (ii), the amount of the 
                        reserve of a qualifying insurance 
                        company or qualifying insurance company 
                        branch for any life insurance or 
                        annuity contract shall be equal to the 
                        greater of--
                                  (I) the net surrender value 
                                of such contract (as defined in 
                                section 807(e)(1)(A)), or
                                  (II) the reserve determined 
                                under paragraph (5).
                          (ii) Ruling request, etc..--The 
                        amount of the reserve under clause (i) 
                        shall be the foreign statement reserve 
                        for the contract (less any catastrophe, 
                        deficiency, equalization, or similar 
                        reserves), if, pursuant to a ruling 
                        request submitted by the taxpayer or as 
                        provided in published guidance, the 
                        Secretary determines that the factors 
                        taken into account in determining the 
                        foreign statement reserve provide an 
                        appropriate means of measuring income.
                  (C) Limitation on reserves.--In no event 
                shall the reserve determined under this 
                paragraph 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 foreign statement 
                reserves (less any catastrophe, deficiency, 
                equalization, or similar reserves).
          (5) Amount of reserve.--The amount of the reserve 
        determined under this paragraph with respect to any 
        contract shall be determined in the same manner as it 
        would be determined if the qualifying insurance company 
        or qualifying insurance company branch were subject to 
        tax under subchapter L, except that in applying such 
        subchapter--
                  (A) the interest rate determined for the 
                functional currency of the company or branch, 
                and which, except as provided by the Secretary, 
                is calculated in the same manner as the Federal 
                mid-term rate under section 1274(d), shall be 
                substituted for the applicable Federal interest 
                rate,
                  (B) the highest assumed interest rate 
                permitted to be used in determining foreign 
                statement reserves shall apply, and
                  (C) tables for mortality and morbidity which 
                reasonably reflect the current mortality and 
                morbidity risks in the company's or branch's 
                home country shall be substituted for the 
                mortality and morbidity tables otherwise used 
                for such subchapter.
        The Secretary may provide that the interest rate and 
        mortality and morbidity tables of a qualifying 
        insurance company may be used for 1 or more of its 
        qualifying insurance company branches when appropriate.
          (6) Definitions.--For purposes of this subsection, 
        any term used in this subsection which is also used in 
        section 953(e) shall have the meaning given such term 
        by section 953.

     Subchapter U--DESIGNATION AND TREATMENT OF EMPOWERMENT ZONES, 
ENTERPRISE COMMUNITIES, AND RURAL DEVELOPMENT INVESTMENT AREAS

           *       *       *       *       *       *       *


PART I--DESIGNATION

           *       *       *       *       *       *       *


SEC. 1391. DESIGNATION PROCEDURE.

  (a) In general.--From among the areas nominated for 
designation under this section, the appropriate Secretaries may 
designate empowerment zones and enterprise communities.
  (b) Number of designations.--
          (1) Enterprise communities.--The appropriate 
        Secretaries may designate in the aggregate 95 nominated 
        areas as enterprise communities under this section, 
        subject to the availability of eligible nominated 
        areas. Of that number, not more than 65 may be 
        designated in urban areas and not more than 30 may be 
        designated in rural areas.
          (2) Empowerment zones.--The appropriate Secretaries 
        may designate in the aggregate 11 nominated areas as 
        empowerment zones under this section, subject to the 
        availability of eligible nominated areas. Of that 
        number, not more than 8 may be designated in urban 
        areas and not more than 3 may be designated in rural 
        areas. If 8 empowerment zones are designated in urban 
        areas, no less than 1 shall be designated in an urban 
        area the most populous city of which has a population 
        of 500,000 or less and no less than 1 shall be a 
        nominated area which includes areas in 2 States and 
        which has a population of 50,000 or less. The Secretary 
        of Housing and Urban Development shall designate 
        empowerment zones located in urban areas in such a 
        manner that the aggregate population of all such zones 
        does not exceed 1,000,000.
  (c) Period designations may be made.--A designation may be 
made under subsection (a) only after 1993 and before 1996.
  (d) Period for which designation is in effect.--
          (1) In general.--Any designation under this section 
        shall remain in effect during the period beginning on 
        the date of the designation and ending on the earliest 
        of--
                  (A)(i) in the case of an empowerment zone, 
                [December 31, 2017] December 31, 2020, or
                          (ii) in the case of an enterprise 
                        community, the close of the 10th 
                        calendar year beginning on or after 
                        such date of designation,
                  (B) the termination date designated by the 
                State and local governments as provided for in 
                their nomination, or
                  (C) the date the appropriate Secretary 
                revokes the designation.
          (2) Revocation of designation.--The appropriate 
        Secretary may revoke the designation under this section 
        of an area if such Secretary determines that the local 
        government or the State in which it is located--
                  (A) has modified the boundaries of the area, 
                or
                  (B) is not complying substantially with, or 
                fails to make progress in achieving the 
                benchmarks set forth in, the strategic plan 
                under subsection (f)(2).
  (e) Limitations on designations.--No area may be designated 
under this section unless--
          (1) the area is nominated by 1 or more local 
        governments and the State or States in which it is 
        located for designation under this section,
          (2) such State or States and the local governments 
        have the authority--
                  (A) to nominate the area for designation 
                under this section, and
                  (B) to provide the assurances described in 
                paragraph (3),
          (3) such State or States and the local governments 
        provide written assurances satisfactory to the 
        appropriate Secretary that the strategic plan described 
        in the application under subsection (f)(2) for such 
        area will be implemented,
          (4) the appropriate Secretary determines that any 
        information furnished is reasonably accurate, and
          (5) such State or States and local governments 
        certify that no portion of the area nominated is 
        already included in an empowerment zone or in an 
        enterprise community or in an area otherwise nominated 
        to be designated under this section.
  (f) Application.--No area may be designated under this 
section unless the application for such designation--
          (1) demonstrates that the nominated area satisfies 
        the eligibility criteria described in section 1392,
          (2) includes a strategic plan for accomplishing the 
        purposes of this subchapter that--
                  (A) describes the coordinated economic, 
                human, community, and physical development plan 
                and related activities proposed for the 
                nominated area,
                  (B) describes the process by which the 
                affected community is a full partner in the 
                process of developing and implementing the plan 
                and the extent to which local institutions and 
                organizations have contributed to the planning 
                process,
                  (C) identifies the amount of State, local, 
                and private resources that will be available in 
                the nominated area and the private/public 
                partnerships to be used, which may include 
                participation by, and cooperation with, 
                universities, medical centers, and other 
                private and public entities,
                  (D) identifies the funding requested under 
                any Federal program in support of the proposed 
                economic, human, community, and physical 
                development and related activities,
                  (E) identifies baselines, methods, and 
                benchmarks for measuring the success of 
                carrying out the strategic plan, including the 
                extent to which poor persons and families will 
                be empowered to become economically self-
                sufficient, and
                  (F) does not include any action to assist any 
                establishment in relocating from one area 
                outside the nominated area to the nominated 
                area, except that assistance for the expansion 
                of an existing business entity through the 
                establishment of a new branch, affiliate, or 
                subsidiary is permitted if--
                          (i) the establishment of the new 
                        branch, affiliate, or subsidiary will 
                        not result in a decrease in employment 
                        in the area of original location or in 
                        any other area where the existing 
                        business entity conducts business 
                        operations, and
                          (ii) there is no reason to believe 
                        that the new branch, affiliate, or 
                        subsidiary is being established with 
                        the intention of closing down the 
                        operations of the existing business 
                        entity in the area of its original 
                        location or in any other area where the 
                        existing business entity conducts 
                        business operation, and
          (3) includes such other information as may be 
        required by the appropriate Secretary.
  (g) Additional designations permitted.--
          (1) In general.--In addition to the areas designated 
        under subsection (a), the appropriate Secretaries may 
        designate in the aggregate an additional 20 nominated 
        areas as empowerment zones under this section, subject 
        to the availability of eligible nominated areas. Of 
        that number, not more than 15 may be designated in 
        urban areas and not more than 5 may be designated in 
        rural areas.
          (2) Period designations may be made and take 
        effect.--A designation may be made under this 
        subsection after the date of the enactment of this 
        subsection and before January 1, 1999.
          (3) Modifications to eligibility criteria, etc..--
                  (A) Poverty rate requirement.--
                          (i) In general.--A nominated area 
                        shall be eligible for designation under 
                        this subsection only if the poverty 
                        rate for each population census tract 
                        within the nominated area is not less 
                        than 20 percent and the poverty rate 
                        for at least 90 percent of the 
                        population census tracts within the 
                        nominated area is not less than 25 
                        percent.
                          (ii) Treatment of census tracts with 
                        small populations.--A population census 
                        tract with a population of less than 
                        2,000 shall be treated as having a 
                        poverty rate of not less than 25 
                        percent if--
                                  (I) more than 75 percent of 
                                such tract is zoned for 
                                commercial or industrial use, 
                                and
                                  (II) such tract is contiguous 
                                to 1 or more other population 
                                census tracts which have a 
                                poverty rate of not less than 
                                25 percent (determined without 
                                regard to this clause).
                          (iii) Exception for developable 
                        sites.--Clause (i) shall not apply to 
                        up to 3 noncontiguous parcels in a 
                        nominated area which may be developed 
                        for commercial or industrial purposes. 
                        The aggregate area of noncontiguous 
                        parcels to which the preceding sentence 
                        applies with respect to any nominated 
                        area shall not exceed 2,000 acres.
                          (iv) Certain provisions not to 
                        apply.--Section 1392(a)(4) (and so much 
                        of paragraphs (1) and (2) of section 
                        1392(b) as relate to section 
                        1392(a)(4)) shall not apply to an area 
                        nominated for designation under this 
                        subsection.
                          (v) Special rule for rural 
                        empowerment zone.--The Secretary of 
                        Agriculture may designate not more than 
                        1 empowerment zone in a rural area 
                        without regard to clause (i) if such 
                        area satisfies emigration criteria 
                        specified by the Secretary of 
                        Agriculture.
                  (B) Size limitation.--
                          (i) In general.--The parcels 
                        described in subparagraph (A)(iii) 
                        shall not be taken into account in 
                        determining whether the requirement of 
                        subparagraph (A) or (B) of section 
                        1392(a)(3) is met.
                          (ii) Special rule for rural areas.--
                        If a population census tract (or 
                        equivalent division under section 
                        1392(b)(4)) in a rural area exceeds 
                        1,000 square miles or includes a 
                        substantial amount of land owned by the 
                        Federal, State, or local government, 
                        the nominated area may exclude such 
                        excess square mileage or governmentally 
                        owned land and the exclusion of that 
                        area will not be treated as violating 
                        the continuous boundary requirement of 
                        section 1392(a)(3)(B).
                  (C) Aggregate population limitation.--The 
                aggregate population limitation under the last 
                sentence of subsection (b)(2) shall not apply 
                to a designation under paragraph (1).
                  (D) Previously designated enterprise 
                communities may be included.--Subsection (e)(5) 
                shall not apply to any enterprise community 
                designated under subsection (a) that is also 
                nominated for designation under this 
                subsection.
                  (E) Indian reservations may be nominated.--
                          (i) In general.--Section 1393(a)(4) 
                        shall not apply to an area nominated 
                        for designation under this subsection.
                          (ii) Special rule.--An area in an 
                        Indian reservation shall be treated as 
                        nominated by a State and a local 
                        government if it is nominated by the 
                        reservation governing body (as 
                        determined by the Secretary of the 
                        Interior).
  (h) Additional designations permitted.--
          (1) In general.--In addition to the areas designated 
        under subsections (a) and (g), the appropriate 
        Secretaries may designate in the aggregate an 
        additional 9 nominated areas as empowerment zones under 
        this section, subject to the availability of eligible 
        nominated areas. Of that number, not more than seven 
        may be designated in urban areas and not more than 2 
        may be designated in rural areas.
          (2) Period designations may be made and take 
        effect.--A designation may be made under this 
        subsection after the date of the enactment of this 
        subsection and before January 1, 2002.
          (3) Modifications to eligibility criteria, etc..--The 
        rules of subsection (g)(3) shall apply to designations 
        under this subsection.
          (4) Empowerment zones which become renewal 
        communities.--The number of areas which may be 
        designated as empowerment zones under this subsection 
        shall be increased by 1 for each area which ceases to 
        be an empowerment zone by reason of section 1400E(e). 
        Each additional area designated by reason of the 
        preceding sentence shall have the same urban or rural 
        character as the area it is replacing.

           *       *       *       *       *       *       *


PART I--DESIGNATION

           *       *       *       *       *       *       *


SEC. 1391. DESIGNATION PROCEDURE.

  (a) In general.--From among the areas nominated for 
designation under this section, the appropriate Secretaries may 
designate empowerment zones and enterprise communities.
  (b) Number of designations.--
          (1) Enterprise communities.--The appropriate 
        Secretaries may designate in the aggregate 95 nominated 
        areas as enterprise communities under this section, 
        subject to the availability of eligible nominated 
        areas. Of that number, not more than 65 may be 
        designated in urban areas and not more than 30 may be 
        designated in rural areas.
          (2) Empowerment zones.--The appropriate Secretaries 
        may designate in the aggregate 11 nominated areas as 
        empowerment zones under this section, subject to the 
        availability of eligible nominated areas. Of that 
        number, not more than 8 may be designated in urban 
        areas and not more than 3 may be designated in rural 
        areas. If 8 empowerment zones are designated in urban 
        areas, no less than 1 shall be designated in an urban 
        area the most populous city of which has a population 
        of 500,000 or less and no less than 1 shall be a 
        nominated area which includes areas in 2 States and 
        which has a population of 50,000 or less. The Secretary 
        of Housing and Urban Development shall designate 
        empowerment zones located in urban areas in such a 
        manner that the aggregate population of all such zones 
        does not exceed 1,000,000.
  (c) Period designations may be made.--A designation may be 
made under subsection (a) only after 1993 and before 1996.
  (d) Period for which designation is in effect.--
          (1) In general.--Any designation under this section 
        shall remain in effect during the period beginning on 
        the date of the designation and ending on the earliest 
        of--
                  (A)(i) in the case of an empowerment zone, 
                [December 31, 2017] December 31, 2020, or
                          (ii) in the case of an enterprise 
                        community, the close of the 10th 
                        calendar year beginning on or after 
                        such date of designation,
                  (B) the termination date designated by the 
                State and local governments as provided for in 
                their nomination, or
                  (C) the date the appropriate Secretary 
                revokes the designation.
          (2) Revocation of designation.--The appropriate 
        Secretary may revoke the designation under this section 
        of an area if such Secretary determines that the local 
        government or the State in which it is located--
                  (A) has modified the boundaries of the area, 
                or
                  (B) is not complying substantially with, or 
                fails to make progress in achieving the 
                benchmarks set forth in, the strategic plan 
                under subsection (f)(2).
  (e) Limitations on designations.--No area may be designated 
under this section unless--
          (1) the area is nominated by 1 or more local 
        governments and the State or States in which it is 
        located for designation under this section,
          (2) such State or States and the local governments 
        have the authority--
                  (A) to nominate the area for designation 
                under this section, and
                  (B) to provide the assurances described in 
                paragraph (3),
          (3) such State or States and the local governments 
        provide written assurances satisfactory to the 
        appropriate Secretary that the strategic plan described 
        in the application under subsection (f)(2) for such 
        area will be implemented,
          (4) the appropriate Secretary determines that any 
        information furnished is reasonably accurate, and
          (5) such State or States and local governments 
        certify that no portion of the area nominated is 
        already included in an empowerment zone or in an 
        enterprise community or in an area otherwise nominated 
        to be designated under this section.
  (f) Application.--No area may be designated under this 
section unless the application for such designation--
          (1) demonstrates that the nominated area satisfies 
        the eligibility criteria described in section 1392,
          (2) includes a strategic plan for accomplishing the 
        purposes of this subchapter that--
                  (A) describes the coordinated economic, 
                human, community, and physical development plan 
                and related activities proposed for the 
                nominated area,
                  (B) describes the process by which the 
                affected community is a full partner in the 
                process of developing and implementing the plan 
                and the extent to which local institutions and 
                organizations have contributed to the planning 
                process,
                  (C) identifies the amount of State, local, 
                and private resources that will be available in 
                the nominated area and the private/public 
                partnerships to be used, which may include 
                participation by, and cooperation with, 
                universities, medical centers, and other 
                private and public entities,
                  (D) identifies the funding requested under 
                any Federal program in support of the proposed 
                economic, human, community, and physical 
                development and related activities,
                  (E) identifies baselines, methods, and 
                benchmarks for measuring the success of 
                carrying out the strategic plan, including the 
                extent to which poor persons and families will 
                be empowered to become economically self-
                sufficient, and
                  (F) does not include any action to assist any 
                establishment in relocating from one area 
                outside the nominated area to the nominated 
                area, except that assistance for the expansion 
                of an existing business entity through the 
                establishment of a new branch, affiliate, or 
                subsidiary is permitted if--
                          (i) the establishment of the new 
                        branch, affiliate, or subsidiary will 
                        not result in a decrease in employment 
                        in the area of original location or in 
                        any other area where the existing 
                        business entity conducts business 
                        operations, and
                          (ii) there is no reason to believe 
                        that the new branch, affiliate, or 
                        subsidiary is being established with 
                        the intention of closing down the 
                        operations of the existing business 
                        entity in the area of its original 
                        location or in any other area where the 
                        existing business entity conducts 
                        business operation, and
          (3) includes such other information as may be 
        required by the appropriate Secretary.
  (g) Additional designations permitted.--
          (1) In general.--In addition to the areas designated 
        under subsection (a), the appropriate Secretaries may 
        designate in the aggregate an additional 20 nominated 
        areas as empowerment zones under this section, subject 
        to the availability of eligible nominated areas. Of 
        that number, not more than 15 may be designated in 
        urban areas and not more than 5 may be designated in 
        rural areas.
          (2) Period designations may be made and take 
        effect.--A designation may be made under this 
        subsection after the date of the enactment of this 
        subsection and before January 1, 1999.
          (3) Modifications to eligibility criteria, etc..--
                  (A) Poverty rate requirement.--
                          (i) In general.--A nominated area 
                        shall be eligible for designation under 
                        this subsection only if the poverty 
                        rate for each population census tract 
                        within the nominated area is not less 
                        than 20 percent and the poverty rate 
                        for at least 90 percent of the 
                        population census tracts within the 
                        nominated area is not less than 25 
                        percent.
                          (ii) Treatment of census tracts with 
                        small populations.--A population census 
                        tract with a population of less than 
                        2,000 shall be treated as having a 
                        poverty rate of not less than 25 
                        percent if--
                                  (I) more than 75 percent of 
                                such tract is zoned for 
                                commercial or industrial use, 
                                and
                                  (II) such tract is contiguous 
                                to 1 or more other population 
                                census tracts which have a 
                                poverty rate of not less than 
                                25 percent (determined without 
                                regard to this clause).
                          (iii) Exception for developable 
                        sites.--Clause (i) shall not apply to 
                        up to 3 noncontiguous parcels in a 
                        nominated area which may be developed 
                        for commercial or industrial purposes. 
                        The aggregate area of noncontiguous 
                        parcels to which the preceding sentence 
                        applies with respect to any nominated 
                        area shall not exceed 2,000 acres.
                          (iv) Certain provisions not to 
                        apply.--Section 1392(a)(4) (and so much 
                        of paragraphs (1) and (2) of section 
                        1392(b) as relate to section 
                        1392(a)(4)) shall not apply to an area 
                        nominated for designation under this 
                        subsection.
                          (v) Special rule for rural 
                        empowerment zone.--The Secretary of 
                        Agriculture may designate not more than 
                        1 empowerment zone in a rural area 
                        without regard to clause (i) if such 
                        area satisfies emigration criteria 
                        specified by the Secretary of 
                        Agriculture.
                  (B) Size limitation.--
                          (i) In general.--The parcels 
                        described in subparagraph (A)(iii) 
                        shall not be taken into account in 
                        determining whether the requirement of 
                        subparagraph (A) or (B) of section 
                        1392(a)(3) is met.
                          (ii) Special rule for rural areas.--
                        If a population census tract (or 
                        equivalent division under section 
                        1392(b)(4)) in a rural area exceeds 
                        1,000 square miles or includes a 
                        substantial amount of land owned by the 
                        Federal, State, or local government, 
                        the nominated area may exclude such 
                        excess square mileage or governmentally 
                        owned land and the exclusion of that 
                        area will not be treated as violating 
                        the continuous boundary requirement of 
                        section 1392(a)(3)(B).
                  (C) Aggregate population limitation.--The 
                aggregate population limitation under the last 
                sentence of subsection (b)(2) shall not apply 
                to a designation under paragraph (1).
                  (D) Previously designated enterprise 
                communities may be included.--Subsection (e)(5) 
                shall not apply to any enterprise community 
                designated under subsection (a) that is also 
                nominated for designation under this 
                subsection.
                  (E) Indian reservations may be nominated.--
                          (i) In general.--Section 1393(a)(4) 
                        shall not apply to an area nominated 
                        for designation under this subsection.
                          (ii) Special rule.--An area in an 
                        Indian reservation shall be treated as 
                        nominated by a State and a local 
                        government if it is nominated by the 
                        reservation governing body (as 
                        determined by the Secretary of the 
                        Interior).
  (h) Additional designations permitted.--
          (1) In general.--In addition to the areas designated 
        under subsections (a) and (g), the appropriate 
        Secretaries may designate in the aggregate an 
        additional 9 nominated areas as empowerment zones under 
        this section, subject to the availability of eligible 
        nominated areas. Of that number, not more than seven 
        may be designated in urban areas and not more than 2 
        may be designated in rural areas.
          (2) Period designations may be made and take 
        effect.--A designation may be made under this 
        subsection after the date of the enactment of this 
        subsection and before January 1, 2002.
          (3) Modifications to eligibility criteria, etc..--The 
        rules of subsection (g)(3) shall apply to designations 
        under this subsection.
          (4) Empowerment zones which become renewal 
        communities.--The number of areas which may be 
        designated as empowerment zones under this subsection 
        shall be increased by 1 for each area which ceases to 
        be an empowerment zone by reason of section 1400E(e). 
        Each additional area designated by reason of the 
        preceding sentence shall have the same urban or rural 
        character as the area it is replacing.

           *       *       *       *       *       *       *


Subtitle B--Estate and Gift Taxes

           *       *       *       *       *       *       *


CHAPTER 11--ESTATE TAX

           *       *       *       *       *       *       *


Subchapter A--ESTATES OF CITIZENS OR RESIDENTS

           *       *       *       *       *       *       *


PART II--CREDITS AGAINST TAX

           *       *       *       *       *       *       *


SEC. 2010. UNIFIED CREDIT AGAINST ESTATE TAX.

  (a) General rule.--A credit of the applicable credit amount 
shall be allowed to the estate of every decedent against the 
tax imposed by section 2001.
  (b) Adjustment to credit for certain gifts made before 
1977.--The amount of the credit allowable under subsection (a) 
shall be reduced by an amount equal to 20 percent of the 
aggregate amount allowed as a specific exemption under section 
2521 (as in effect before its repeal by the Tax Reform Act of 
1976) with respect to gifts made by the decedent after 
September 8, 1976.
  (c) Applicable credit amount.--
          (1) In general.--For purposes of this section, the 
        applicable credit amount is the amount of the tentative 
        tax which would be determined under section 2001(c) if 
        the amount with respect to which such tentative tax is 
        to be computed were equal to the applicable exclusion 
        amount.
          (2) Applicable exclusion amount.--For purposes of 
        this subsection, the applicable exclusion amount is the 
        sum of--
                  (A) the basic exclusion amount, and
                  (B) in the case of a surviving spouse, the 
                deceased spousal unused exclusion amount.
          (3) Basic exclusion amount.--
                  (A) In general.--For purposes of this 
                subsection, the basic exclusion amount is 
                $5,000,000.
                  (B) Inflation adjustment.--In the case of any 
                decedent dying in a calendar year after 2011, 
                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 
                        such calendar year by substituting 
                        ``calendar year 2010'' for ``calendar 
                        year 2016'' in subparagraph (A)(ii) 
                        thereof.
                If any amount as adjusted under the preceding 
                sentence is not a multiple of $10,000, such 
                amount shall be rounded to the nearest multiple 
                of $10,000.
                  (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] January 1, 2023, subparagraph 
                (A) shall be applied by substituting 
                ``$10,000,000'' for ``$5,000,000''.
          (4) Deceased spousal unused exclusion amount.--For 
        purposes of this subsection, with respect to a 
        surviving spouse of a deceased spouse dying after 
        December 31, 2010, the term ``deceased spousal unused 
        exclusion amount'' means the lesser of--
                  (A) the basic exclusion amount, or
                  (B) the excess of--
                          (i) the applicable exclusion amount 
                        of the last such deceased spouse of 
                        such surviving spouse, over
                          (ii) the amount with respect to which 
                        the tentative tax is determined under 
                        section 2001(b)(1) on the estate of 
                        such deceased spouse.
          (5) Special rules.--
                  (A) Election required.--A deceased spousal 
                unused exclusion amount may not be taken into 
                account by a surviving spouse under paragraph 
                (2) unless the executor of the estate of the 
                deceased spouse files an estate tax return on 
                which such amount is computed and makes an 
                election on such return that such amount may be 
                so taken into account. Such election, once 
                made, shall be irrevocable. No election may be 
                made under this subparagraph if such return is 
                filed after the time prescribed by law 
                (including extensions) for filing such return.
                  (B) Examination of prior returns after 
                expiration of period of limitations with 
                respect to deceased spousal unused exclusion 
                amount.--Notwithstanding any period of 
                limitation in section 6501, after the time has 
                expired under section 6501 within which a tax 
                may be assessed under chapter 11 or 12 with 
                respect to a deceased spousal unused exclusion 
                amount, the Secretary may examine a return of 
                the deceased spouse to make determinations with 
                respect to such amount for purposes of carrying 
                out this subsection.
          (6) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry 
        out this subsection.
  (d) Limitation based on amount of tax.--The amount of the 
credit allowed by subsection (a) shall not exceed the amount of 
the tax imposed by section 2001.

           *       *       *       *       *       *       *


Subtitle D--Miscellaneous Excise Taxes

           *       *       *       *       *       *       *


CHAPTER 32--MANUFACTURERS EXCISE TAXES

           *       *       *       *       *       *       *


Subchapter B--COAL

           *       *       *       *       *       *       *


SEC. 4121. IMPOSITION OF TAX.

  (a) Tax imposed.--
          (1) In general.--There is hereby imposed on coal from 
        mines located in the United States sold by the 
        producer, a tax equal to the rate per ton determined 
        under subsection (b).
          (2) Limitation on tax.--The amount of the tax imposed 
        by paragraph (1) with respect to a ton of coal shall 
        not exceed the applicable percentage (determined under 
        subsection (b)) of the price at which such ton of coal 
        is sold by the producer.
  (b) Determination of rates and limitation on tax.--For 
purposes of subsection (a)--
          (1) the rate of tax on coal from underground mines 
        shall be $1.10,
          (2) the rate of tax on coal from surface mines shall 
        be $.55, and
          (3) the applicable percentage shall be 4.4 percent.
  (c) Tax not to apply to lignite.--The tax imposed by 
subsection (a) shall not apply in the case of lignite.
  (d) Definitions.--For purposes of this subchapter--
          (1) Coal from surface mines.--Coal shall be treated 
        as produced from a surface mine if all of the 
        geological matter above the coal being mined is removed 
        before the coal is extracted from the earth. Coal 
        extracted by auger shall be treated as coal from a 
        surface mine.
          (2) Coal from underground mines.--Coal shall be 
        treated as produced from an underground mine if it is 
        not produced from a surface mine.
          (3) United States.--The term ``United States'' has 
        the meaning given to it by paragraph (1) of section 
        638.
          (4) Ton.--The term ``ton'' means 2,000 pounds.
  (e) Reduction in amount of tax.--
          (1) In general.--Effective with respect to sales 
        after the temporary increase termination date, 
        subsection (b) shall be applied--
                  (A) by substituting ``$.50'' for ``$1.10'',
                  (B) by substituting ``$.25'' for ``$.55'', 
                and
                  (C) by substituting ``2 percent'' for ``4.4 
                percent''.
          (2) Temporary increase termination date.--For 
        purposes of paragraph (1), the temporary increase 
        termination date is the earlier of--
                  (A) [December 31, 2018] December 31, 2020, or
                  (B) the first December 31 after 2007 as of 
                which there is--
                          (i) no balance of repayable advances 
                        made to the Black Lung Disability Trust 
                        Fund, and
                          (ii) no unpaid interest on such 
                        advances.

           *       *       *       *       *       *       *


CHAPTER 38--ENVIRONMENTAL TAXES

           *       *       *       *       *       *       *


Subchapter A--TAX ON PETROLEUM

           *       *       *       *       *       *       *


SEC. 4611. IMPOSITION OF TAX.

  (a) General Rule.--There is hereby imposed a tax at the rate 
specified in subsection (c) on--
          (1) crude oil received at a United States refinery, 
        and
          (2) petroleum products entered into the United States 
        for consumption, use, or warehousing.
  (b) Tax on certain uses and exportation.--
          (1) In general.--If--
                  (A) any domestic crude oil is used in or 
                exported from the United States, and
                  (B) before such use or exportation, no tax 
                was imposed on such crude oil under subsection 
                (a),
        then a tax at the rate specified in subsection (c) is 
        hereby imposed on such crude oil.
          (2) Exception for use on premises where produced.--
        Paragraph (1) shall not apply to any use of crude oil 
        for extracting oil or natural gas on the premises where 
        such crude oil was produced.
  (c) Rate of tax.--
          (1) In general.--The rate of the taxes imposed by 
        this section is the sum of--
                  (A) the Hazardous Substance Superfund 
                financing rate, and
                  (B) the Oil Spill Liability Trust Fund 
                financing rate.
          (2) Rates.--For purposes of paragraph (1)--
                  (A) the Hazardous Substance Superfund 
                financing rate is 9.7 cents a barrel, and
                  (B) the Oil Spill Liability Trust Fund 
                financing rate is--
                          (i) in the case of crude oil received 
                        or petroleum products entered before 
                        January 1, 2017, 8 cents a barrel, and
                          (ii) in the case of crude oil 
                        received or petroleum products entered 
                        after December 31, 2016, 9 cents a 
                        barrel.
  (d) Persons liable for tax.--
          (1) Crude oil received at refinery.--The tax imposed 
        by subsection (a)(1) shall be paid by the operator of 
        the United States refinery.
          (2) Imported petroleum product.--The tax imposed by 
        subsection (a)(2) shall be paid by the person entering 
        the product for consumption, use, or warehousing.
          (3) Tax on certain uses or exports.--The tax imposed 
        by subsection (b) shall be paid by the person using or 
        exporting the crude oil, as the case may be.
  (e) Application of Hazardous Substance Superfund financing 
rate.--
          (1) In general.--Except as provided in paragraphs (2) 
        and (3), the Hazardous Substance Superfund financing 
        rate under this section shall apply after December 31, 
        1986, and before January 1, 1996.
          (2) No tax if unobligated balance in Fund exceeds 
        $3,500,000,000.--If on December 31, 1993, or December 
        31, 1994--
                  (A) the unobligated balance in the Hazardous 
                Substance Superfund exceeds $3,500,000,000, and
                  (B) the Secretary, after consultation with 
                the Administrator of the Environmental 
                Protection Agency, determines that the 
                unobligated balance in the Hazardous Substance 
                Superfund will exceed $3,500,000,000 on 
                December 31 of 1994 or 1995, respectively, if 
                no tax is imposed under this section and 
                sections 4661 and 4671,
        then no tax shall be imposed under this section (to the 
        extent attributable to the Hazardous Substance 
        Superfund financing rate) during 1994 or 1995, as the 
        case may be.
          (3) No tax if amounts collected exceed 
        $11,970,000,000.--
                  (A) Estimates by Secretary.--The Secretary as 
                of the close of each calendar quarter (and at 
                such other times as the Secretary determines 
                appropriate) shall make an estimate of the 
                amount of taxes which will be collected under 
                this section (to the extent attributable to the 
                Hazardous Substance Superfund financing rate) 
                and sections 4661 and 4671 and credited to the 
                Hazardous Substance Superfund during the period 
                beginning January 1, 1987, and ending December 
                31, 1995.
                  (B) Termination if $11,970,000,000 credited 
                before January 1, 1996.--If the Secretary 
                estimates under subparagraph (A) that more than 
                $11,970,000,000 will be credited to the Fund 
                before January 1, 1996, the Hazardous Substance 
                Superfund financing rate under this section 
                shall not apply after the date on which (as 
                estimated by the Secretary) $11,970,000,000 
                will be so credited to the Fund.
  (f) Application of Oil Spill Liability Trust Fund financing 
rate.--
          (1) In general.--Except as provided in paragraph (2), 
        the Oil Spill Liability Trust Fund financing rate under 
        subsection (c) shall apply on and after April 1, 2006, 
        or if later, the date which is 30 days after the last 
        day of any calendar quarter for which the Secretary 
        estimates that, as of the close of that quarter, the 
        unobligated balance in the Oil Spill Liability Trust 
        Fund is less than $2,000,000,000.
          (2) Termination.--The Oil Spill Liability Trust Fund 
        financing rate shall not apply after [December 31, 
        2018] December 31, 2020.

           *       *       *       *       *       *       *


     CHAPTER 42--PRIVATE FOUNDATIONS; AND CERTAIN OTHER TAX-EXEMPT 
ORGANIZATIONS

           *       *       *       *       *       *       *


Subchapter A--PRIVATE FOUNDATIONS

           *       *       *       *       *       *       *


SEC. 4940. EXCISE TAX BASED ON INVESTMENT INCOME.

  (a) Tax-exempt foundations.--There is hereby imposed on each 
private foundation which is exempt from taxation under section 
501(a) for the taxable year, with respect to the carrying on of 
its activities, a tax equal to [2 percent] 1.39 percent of the 
net investment income of such foundation for the taxable year.
  (b) Taxable foundations.--There is hereby imposed on each 
private foundation which is not exempt from taxation under 
section 501(a) for the taxable year, with respect to the 
carrying on of its activities, a tax equal to--
          (1) the amount (if any) by which the sum of (A) the 
        tax imposed under subsection (a) (computed as if such 
        subsection applied to such private foundation for the 
        taxable year), plus (B) the amount of the tax which 
        would have been imposed under section 511 for the 
        taxable year if such private foundation had been exempt 
        from taxation under section 501(a), exceeds
          (2) the tax imposed under subtitle A on such private 
        foundation for the taxable year.
  (c) Net investment income defined.--
          (1) In general.--For purposes of subsection (a), the 
        net investment income is the amount by which (A) the 
        sum of the gross investment income and the capital gain 
        net income exceeds (B) the deductions allowed by 
        paragraph (3). Except to the extent inconsistent with 
        the provisions of this section, net investment income 
        shall be determined under the principles of subtitle A.
          (2) Gross investment income.--For purposes of 
        paragraph (1), the term ``gross investment income'' 
        means the gross amount of income from interest, 
        dividends, rents, payments with respect to securities 
        loans (as defined in section 512(a)(5)), and royalties, 
        but not including any such income to the extent 
        included in computing the tax imposed by section 511. 
        Such term shall also include income from sources 
        similar to those in the preceding sentence.
          (3) Deductions.--
                  (A) In general.--For purposes of paragraph 
                (1), there shall be allowed as a deduction all 
                the ordinary and necessary expenses paid or 
                incurred for the production or collection of 
                gross investment income or for the management, 
                conservation, or maintenance of property held 
                for the production of such income, determined 
                with the modifications set forth in 
                subparagraph (B).
                  (B) Modifications.--For purposes of 
                subparagraph (A)--
                          (i) The deduction provided by section 
                        167 shall be allowed, but only on the 
                        basis of the straight line method of 
                        depreciation.
                          (ii) The deduction for depletion 
                        provided by section 611 shall be 
                        allowed, but such deduction shall be 
                        determined without regard to section 
                        613 (relating to percentage depletion).
          (4) Capital gains and losses.--For purposes of 
        paragraph (1) in determining capital gain net income--
                  (A) There shall not be taken into account any 
                gain or loss from the sale or other disposition 
                of property to the extent that such gain or 
                loss is taken into account for purposes of 
                computing the tax imposed by section 511.
                  (B) The basis for determining gain in the 
                case of property held by the private foundation 
                on December 31, 1969, and continuously 
                thereafter to the date of its disposition shall 
                be deemed to be not less than the fair market 
                value of such property on December 31, 1969.
                  (C) Losses from sales or other dispositions 
                of property shall be allowed only to the extent 
                of gains from such sales or other dispositions, 
                and there shall be no capital loss carryovers 
                or carrybacks.
                  (D) Except to the extent provided by 
                regulation, under rules similar to the rules of 
                section 1031 (including the exception under 
                subsection (a)(2) thereof), no gain or loss 
                shall be taken into account with respect to any 
                portion of property used for a period of not 
                less than 1 year for a purpose or function 
                constituting the basis of the private 
                foundation's exemption if the entire property 
                is exchanged immediately following such period 
                solely for property of like kind which is to be 
                used primarily for a purpose or function 
                constituting the basis for such foundation's 
                exemption.
          (5) Tax-exempt income.--For purposes of this section, 
        net investment income shall be determined by applying 
        section 103 (relating to State and local bonds) and 
        section 265 (relating to expenses and interest relating 
        to tax-exempt income).
  (d) Exemption for certain operating foundations.--
          (1) In general.--No tax shall be imposed by this 
        section on any private foundation which is an exempt 
        operating foundation for the taxable year.
          (2) Exempt operating foundation.--For purposes of 
        this subsection, the term ``exempt operating 
        foundation'' means, with respect to any taxable year, 
        any private foundation if--
                  (A) such foundation is an operating 
                foundation (as defined in section 4942(j)(3)),
                  (B) such foundation has been publicly 
                supported for at least 10 taxable years,
                  (C) at all times during the taxable year, the 
                governing body of such foundation--
                          (i) consists of individuals at least 
                        75 percent of whom are not disqualified 
                        individuals, and
                          (ii) is broadly representative of the 
                        general public, and
                  (D) at no time during the taxable year does 
                such foundation have an officer who is a 
                disqualified individual.
          (3) Definitions.--For purposes of this subsection--
                  (A) Publicly supported.--A private foundation 
                is publicly supported for a taxable year if it 
                meets the requirements of section 
                170(b)(1)(A)(vi) or 509(a)(2) for such taxable 
                year.
                  (B) Disqualified individual.--The term 
                ``disqualified individual'' means, with respect 
                to any private foundation, an individual who 
                is--
                          (i) a substantial contributor to the 
                        foundation,
                          (ii) an owner of more than 20 percent 
                        of--
                                  (I) the total combined voting 
                                power of a corporation,
                                  (II) the profits interest of 
                                a partnership, or
                                  (III) the beneficial interest 
                                of a trust or unincorporated 
                                enterprise,
                 which is a substantial contributor to the 
                foundation, or
                          (iii) a member of the family of any 
                        individual described in clause (i) or 
                        (ii).
                  (C) Substantial contributor.--The term 
                ``substantial contributor'' means a person who 
                is described in section 507(d)(2).
                  (D) Family.--The term ``family'' has the 
                meaning given to such term by section 4946(d).
                  (E) Constructive ownership.--The rules of 
                paragraphs (3) and (4) of section 4946(a) shall 
                apply for purposes of subparagraph (B)(ii).
  [(e) Reduction in tax where private foundation meets certain 
distribution requirements.--
          [(1) In general.--In the case of any private 
        foundation which meets the requirements of paragraph 
        (2) for any taxable year, subsection (a) shall be 
        applied with respect to such taxable year by 
        substituting ``1 percent'' for ``2 percent''.
          [(2) Requirements.--A private foundation meets the 
        requirements of this paragraph for any taxable year 
        if--
                  [(A) the amount of the qualifying 
                distributions made by the private foundation 
                during such taxable year equals or exceeds the 
                sum of--
                          [(i) an amount equal to the assets of 
                        such foundation for such taxable year 
                        multiplied by the average percentage 
                        payout for the base period, plus
                          [(ii) 1 percent of the net investment 
                        income of such foundation for such 
                        taxable year, and
                  [(B) such private foundation was not liable 
                for tax under section 4942 with respect to any 
                year in the base period.
          [(3) Average percentage payout for base period.--For 
        purposes of this subsection--
                  [(A) In general.--The average percentage 
                payout for the base period is the average of 
                the percentage payouts for taxable years in the 
                base period.
                  [(B) Percentage payout.--The term 
                ``percentage payout'' means, with respect to 
                any taxable year, the percentage determined by 
                dividing--
                          [(i) the amount of the qualifying 
                        distributions made by the private 
                        foundation during the taxable year, by
                          [(ii) the assets of the private 
                        foundation for the taxable year.
                  [(C) Special rule where tax reduced under 
                this subsection.--For purposes of this 
                paragraph, if the amount of the tax imposed by 
                this section for any taxable year in the base 
                period is reduced by reason of this subsection, 
                the amount of the qualifying distributions made 
                by the private foundation during such year 
                shall be reduced by the amount of such 
                reduction in tax.
          [(4) Base period.--For purposes of this subsection--
                  [(A) In general.--The term ``base period'' 
                means, with respect to any taxable year, the 5 
                taxable years preceding such taxable year.
                  [(B) New private foundations, etc..--If an 
                organization has not been a private foundation 
                throughout the base period referred to in 
                subparagraph (A), the base period shall consist 
                of the taxable years during which such 
                foundation has been in existence.
          [(5) Other definitions.--For purposes of this 
        subsection--
                  [(A) Qualifying distribution.--The term 
                ``qualifying distribution'' has the meaning 
                given such term by section 4942(g).
                  [(B) Assets.--The assets of a private 
                foundation for any taxable year shall be 
                treated as equal to the excess determined under 
                section 4942(e)(1).
          [(6) Treatment of successor organizations, etc..--In 
        the case of--
                  [(A) a private foundation which is a 
                successor to another private foundation, this 
                subsection shall be applied with respect to 
                such successor by taking into account the 
                experience of such other foundation, and
                  [(B) a merger, reorganization, or division of 
                a private foundation, this subsection shall be 
                applied under regulations prescribed by the 
                Secretary.]

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Subchapter A--GALLONAGE AND OCCUPATIONAL TAXES

           *       *       *       *       *       *       *


PART I--GALLONAGE TAXES

           *       *       *       *       *       *       *


Subpart A--DISTILLED SPIRITS

           *       *       *       *       *       *       *


SEC. 5001. IMPOSITION, RATE, AND ATTACHMENT OF TAX.

  (a) Rate of tax.--
          (1) General.--There is hereby imposed on all 
        distilled spirits produced in or imported into the 
        United States a tax at the rate of $13.50 on each proof 
        gallon and a proportionate tax at the like rate on all 
        fractional parts of a proof gallon.
          (2) Products containing distilled spirits.--All 
        products of distillation, by whatever name known, which 
        contain distilled spirits, on which the tax imposed by 
        law has not been paid, and any alcoholic ingredient 
        added to such products, shall be considered and taxed 
        as distilled spirits.
          (3) Wines containing more than 24 percent alcohol by 
        volume.--Wines containing more than 24 percent of 
        alcohol by volume shall be taxed as distilled spirits.
          (4) Distilled spirits withdrawn free of tax.--Any 
        person who removes, sells, transports, or uses 
        distilled spirits, withdrawn free of tax under section 
        5214(a) or section 7510, in violation of laws or 
        regulations now or hereafter in force pertaining 
        thereto, and all such distilled spirits shall be 
        subject to all provisions of law relating to distilled 
        spirits subject to tax, including those requiring 
        payment of the tax thereon; and the person so removing, 
        selling, transporting, or using the distilled spirits 
        shall be required to pay such tax.
          (5) Denatured distilled spirits or articles.--Any 
        person who produces, withdraws, sells, transports, or 
        uses denatured distilled spirits or articles in 
        violation of laws or regulations now or hereafter in 
        force pertaining thereto, and all such denatured 
        distilled spirits or articles shall be subject to all 
        provisions of law pertaining to distilled spirits that 
        are not denatured, including those requiring the 
        payment of tax thereon; and the person so producing, 
        withdrawing, selling, transporting, or using the 
        denatured distilled spirits or articles shall be 
        required to pay such tax.
          (6) Fruit-flavor concentrates.--If any volatile 
        fruit-flavor concentrate (or any fruit mash or juice 
        from which such concentrate is produced) containing 
        one-half of 1 percent or more of alcohol by volume, 
        which is manufactured free from tax under section 5511, 
        is sold, transported, or used by any person in 
        violation of the provisions of this chapter or 
        regulations promulgated thereunder, such person and 
        such concentrate, mash, or juice shall be subject to 
        all provisions of this chapter pertaining to distilled 
        spirits and wines, including those requiring the 
        payment of tax thereon; and the person so selling, 
        transporting, or using such concentrate, mash, or juice 
        shall be required to pay such tax.
          (7) Imported liqueurs and cordials.--Imported 
        liqueurs and cordials, or similar compounds, containing 
        distilled spirits, shall be taxed as distilled spirits.
          (8) Imported distilled spirits withdrawn for beverage 
        purposes.--There is hereby imposed on all imported 
        distilled spirits withdrawn from customs custody under 
        section 5232 without payment of the internal revenue 
        tax, and thereafter withdrawn from bonded premises for 
        beverage purposes, an additional tax equal to the duty 
        which would have been paid had such spirits been 
        imported for beverage purposes, less the duty 
        previously paid thereon.
          (9) Alcoholic compounds from Puerto Rico.--Except as 
        provided in section 5314, upon bay rum, or any article 
        containing distilled spirits, brought from Puerto Rico 
        into the United States for consumption or sale there is 
        hereby imposed a tax on the spirits contained therein 
        at the rate imposed on distilled spirits produced in 
        the United States.
  (b) Time of attachment on distilled spirits.--The tax shall 
attach to distilled spirits as soon as this substance is in 
existence as such, whether it be subsequently separated as pure 
or impure spirits, or be immediately, or at any subsequent 
time, transferred into any other substance, either in the 
process of original production or by any subsequent process.
  (c)  [Reduced Rate for 2018 and 2019] Temporary Reduced 
Rate.--
          (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 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.
          (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) 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.
          (4) Termination.--This subsection shall not apply to 
        distilled spirits removed after [December 31, 2019] 
        December 31, 2020.
  (d) Cross reference.--For provisions relating to the tax on 
shipments to the United States of taxable articles from Puerto 
Rico and the Virgin Islands, see section 7652.

           *       *       *       *       *       *       *


Subpart C--WINES

           *       *       *       *       *       *       *


SEC. 5041. IMPOSITION AND RATE OF TAX.

  (a) Imposition.--There is hereby imposed on all wines 
(including imitation, substandard, or artificial wine, and 
compounds sold as wine) having not in excess of 24 percent of 
alcohol by volume, in bond in, produced in, or imported into, 
the United States, taxes at the rates shown in subsection (b), 
such taxes to be determined as of the time of removal for 
consumption or sale. All wines containing more than 24 percent 
of alcohol by volume shall be classed as distilled spirits and 
taxed accordingly. Subject to subsection (h), still wines shall 
include those wines containing not more than 0.392 gram of 
carbon dioxide per hundred milliliters of wine; except that the 
Secretary may by regulations prescribe such tolerances to this 
maximum limitation as may be reasonably necessary in good 
commercial practice.
  (b) Rates of tax.--(1) On still wines containing not more 
than 14 percent (16 percent in the case of wine removed after 
December 31, 2017, and before [January 1, 2020] January 1, 2021 
of alcohol by volume, $1.07 per wine gallon;
          (2) On still wines containing more than 14 percent 
        (16 percent in the case of wine removed after December 
        31, 2017, and before [January 1, 2020] January 1, 2021   
        and not exceeding 21 percent of alcohol by volume, 
        $1.57 per wine gallon;
          (3) On still wines containing more than 21 percent 
        and not exceeding 24 percent of alcohol by volume, 
        $3.15 per wine gallon;
          (4) On champagne and other sparkling wines, $3.40 per 
        wine gallon;
          (5) On artificially carbonated wines, $3.30 per wine 
        gallon; and
          (6) On hard cider, 22.6 cents per wine gallon.
  (c) Credit for small domestic producers.--
          (1) Allowance of credit.--Except as provided in 
        paragraph (2), in the case of a person who produces not 
        more than 250,000 wine gallons of wine during the 
        calendar year, there shall be allowed as a credit 
        against any tax imposed by this title (other than 
        chapters 2, 21, and 22) of 90 cents per wine gallon on 
        the 1st 100,000 wine gallons of wine (other than wine 
        described in subsection (b)(4)) which are removed 
        during such year for consumption or sale and which have 
        been produced at qualified facilities in the United 
        States. In the case of wine described in subsection 
        (b)(6), the preceding sentence shall be applied by 
        substituting ``5.6 cents'' for ``90 cents''.
          (2) Reduction in credit.--The credit allowable by 
        paragraph (1) shall be reduced (but not below zero) by 
        1 percent for each 1,000 wine gallons of wine produced 
        in excess of 150,000 wine gallons of wine during the 
        calendar year.
          (3) Time for determining and allowing credit.--The 
        credit allowable by paragraph (1)--
                  (A) shall be determined at the same time the 
                tax is determined under subsection (a) of this 
                section, and
                  (B) shall be allowable at the time any tax 
                described in paragraph (1) is payable as if the 
                credit allowable by this subsection constituted 
                a reduction in the rate of such tax.
          (4) Controlled groups.--Rules similar to rules of 
        section 5051(a)(5) shall apply for purposes of this 
        subsection.
          (5) Denial of deduction.--Any deduction under 
        subtitle A with respect to any tax against which a 
        credit is allowed under this subsection shall only be 
        for the amount of such tax as reduced by such credit.
          (6) Credit for transferee in bond.--If--
                  (A) wine produced by any person would be 
                eligible for any credit under paragraph (1) if 
                removed by such person during the calendar 
                year,
                  (B) wine produced by such person is removed 
                during such calendar year by any other person 
                (hereafter in this paragraph referred to as the 
                ``transferee'') to whom such wine was 
                transferred in bond and who is liable for the 
                tax imposed by this section with respect to 
                such wine, and
                  (C) such producer holds title to such wine at 
                the time of its removal and provides to the 
                transferee such information as is necessary to 
                properly determine the transferee's credit 
                under this paragraph,
        then, the transferee (and not the producer) shall be 
        allowed the credit under paragraph (1) which would be 
        allowed to the producer if the wine removed by the 
        transferee had been removed by the producer on that 
        date.
          (7) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary to carry out the 
        purposes of this subsection, including regulations--
                  (A) to prevent the credit provided in this 
                subsection from benefiting any person who 
                produces more than 250,000 wine gallons of wine 
                during a calendar year, and
                  (B) to assure proper reduction of such credit 
                for persons producing more than 150,000 wine 
                gallons of wine during a calendar year.
          (8)  [Special rule for 2018 and 2019] Temporary 
        special rule.--
                  (A) In general.--In the case of wine removed 
                after December 31, 2017, and before [January 1, 
                2020] January 1, 2021, 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 
                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.
                  (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''.
          (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) Wine gallon.--For the purpose of this chapter, the term 
``wine gallon'' means a United States gallon of liquid measure 
equivalent to the volume of 231 cubic inches. On lesser 
quantities the tax shall be paid proportionately (fractions of 
less than one-tenth gallon being converted to the nearest one-
tenth gallon, and five-hundredths gallon being converted to the 
next full one-tenth gallon).
  (e) Tolerances.--Where the Secretary finds that the revenue 
will not be endangered thereby, he may by regulation prescribe 
tolerances (but not greater than 1/2 of 1 percent) for bottles 
and other containers, and, if such tolerances are prescribed, 
no assessment shall be made and no tax shall be collected for 
any excess in any case where the contents of a bottle or other 
container are within the limit of the applicable tolerance 
prescribed.
  (f) Illegally produced wine.--Notwithstanding subsection (a), 
any wine produced in the United States at any place other than 
the bonded premises provided for in this chapter shall (except 
as provided in section 5042 in the case of tax-free production) 
be subject to tax at the rate prescribed in subsection (b) at 
the time of production and whether or not removed for 
consumption or sale.
  (g) Hard cider.--For purposes of subsection (b)(6), the term 
``hard cider'' means a wine--
          (1) containing not more than 0.64 gram of carbon 
        dioxide per hundred milliliters of wine, except that 
        the Secretary may by regulations prescribe such 
        tolerances to this limitation as may be reasonably 
        necessary in good commercial practice,
          (2) which is derived primarily--
                  (A) from apples or pears, or
                  (B) from--
                          (i) apple juice concentrate or pear 
                        juice concentrate, and
                          (ii) water,
          (3) which contains no fruit product or fruit 
        flavoring other than apple or pear, and
          (4) which contains at least one-half of 1 percent and 
        less than 8.5 percent alcohol by volume.
  (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] December 31, 
        2020.

           *       *       *       *       *       *       *


Subpart D--BEER

           *       *       *       *       *       *       *


SEC. 5051. IMPOSITION AND RATE OF TAX.

  (a) Rate of tax.--
          (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] January 1, 2021, 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 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, 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.
          (2) Reduced rate for certain domestic production.--
                  (A) rate.--In the case of a brewer who 
                produces not more than 2,000,000 barrels of 
                beer during the calendar year, the per barrel 
                rate of the tax imposed by this section shall 
                be $7 ($3.50 in the case of beer removed after 
                December 31, 2017, and before [January 1, 2020] 
                January 1, 2021) on the first 60,000 barrels of 
                beer which are removed in such year for 
                consumption or sale and which have been brewed 
                or produced by such brewer at qualified 
                breweries in the United States.
                  (B) Regulations.--The Secretary may prescribe 
                such regulations as may be necessary to prevent 
                the reduced rates provided in this paragraph 
                from benefiting any person who produces more 
                than 2,000,000 barrels of beer during a 
                calendar year.
          (3) Tolerances.--Where the Secretary or his delegate 
        finds that the revenue will not be endangered thereby, 
        he may by regulations prescribe tolerances for barrels 
        and fractional parts of barrels, and, if such 
        tolerances are prescribed, no assessment shall be made 
        and no tax shall be collected for any excess in any 
        case where the contents of a barrel or a fractional 
        part of a barrel are within the limit of the applicable 
        tolerance prescribed.
          (4) Reduced tax rate for foreign manufacturers and 
        importers.--
                  (A) In general.--In the case of any barrels 
                of beer which have been brewed or produced 
                outside of the United States and imported into 
                the United States, the rate of tax applicable 
                under clause (i) of paragraph (1)(C) (referred 
                to in this paragraph as the ``reduced tax 
                rate'') may be assigned by the brewer (provided 
                that the brewer makes an election described in 
                subparagraph (B)(ii)) to any electing importer 
                of such barrels pursuant to the requirements 
                established by the Secretary under subparagraph 
                (B).
                  (B) Assignment.--The Secretary shall, through 
                such rules, regulations, and procedures as are 
                determined appropriate, establish procedures 
                for assignment of the reduced tax rate provided 
                under this paragraph, which shall include--
                          (i) a limitation to ensure that the 
                        number of barrels of beer for which the 
                        reduced tax rate has been assigned by a 
                        brewer--
                                  (I) to any importer does not 
                                exceed the number of barrels of 
                                beer brewed or produced by such 
                                brewer during the calendar year 
                                which were imported into the 
                                United States by such importer, 
                                and
                                  (II) to all importers does 
                                not exceed the 6,000,000 
                                barrels to which the reduced 
                                tax rate applies,
                          (ii) procedures that allow the 
                        election of a brewer to assign and an 
                        importer to receive the reduced tax 
                        rate provided under this paragraph,
                          (iii) requirements that the brewer 
                        provide any information as the 
                        Secretary determines necessary and 
                        appropriate for purposes of carrying 
                        out this paragraph, and
                          (iv) procedures that allow for 
                        revocation of eligibility of the brewer 
                        and the importer for the reduced tax 
                        rate provided under this paragraph in 
                        the case of any erroneous or fraudulent 
                        information provided under clause (iii) 
                        which the Secretary deems to be 
                        material to qualifying for such reduced 
                        rate.
                  (C) Controlled group.--For purposes of this 
                section, any importer making an election 
                described in subparagraph (B)(ii) shall be 
                deemed to be a member of the controlled group 
                of the brewer, as described under paragraph 
                (5).
          (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.
  (b) Assessment on materials used in production in case of 
fraud.--Nothing contained in this subpart or subchapter G shall 
be construed to authorize an assessment on the quantity of 
materials used in producing or purchased for the purpose of 
producing beer, nor shall the quantity of materials so used or 
purchased be evidence, for the purpose of taxation, of the 
quantity of beer produced; but the tax on all beer shall be 
paid as provided in section 5054, and not otherwise; except 
that this subsection shall not apply to cases of fraud, and 
nothing in this subsection shall have the effect to change the 
rules of law respecting evidence in any prosecution or suit.
  (c) Illegally produced beer.--The production of any beer at 
any place in the United States shall be subject to tax at the 
rate prescribed in subsection (a) and such tax shall be due and 
payable as provided in section 5054(a)(3) unless--
          (1) such beer is produced in a brewery qualified 
        under the provisions of subchapter G, or
          (2) such production is exempt from tax under section 
        5053(e) (relating to beer for personal or family use).

Subchapter C--OPERATION OF DISTILLED SPIRITS PLANTS

           *       *       *       *       *       *       *


PART II--OPERATIONS ON BONDED PREMISES

           *       *       *       *       *       *       *


Subpart A--GENERAL

           *       *       *       *       *       *       *


SEC. 5212. TRANSFER OF DISTILLED SPIRITS BETWEEN BONDED PREMISES.

  Bulk distilled spirits on which the internal revenue tax has 
not been paid or determined as authorized by law may, under 
such regulations as the Secretary shall prescribe, be 
transferred in bond between bonded premises in any approved 
container. For the purposes of this chapter, the removal of 
bulk distilled spirits for transfer in bond between bonded 
premises shall not be construed to be a withdrawal from bonded 
premises. The provisions of this section restricting transfers 
to bulk distilled spirits shall not apply to alcohol bottled 
under the provisions of section 5235 which is to be withdrawn 
for industrial purposes. In the case of distilled spirits 
transferred in bond after December 31, 2017, and before 
[January 1, 2020] January 1, 2021, this section shall be 
applied without regard to whether distilled spirits are bulk 
distilled spirits.

Subtitle E--Alcohol, Tobacco, and Certain Other Excise Taxes

           *       *       *       *       *       *       *


CHAPTER 51--DISTILLED SPIRITS, WINES, AND BEER

           *       *       *       *       *       *       *


Subchapter G--BREWERIES

           *       *       *       *       *       *       *


PART II--OPERATIONS

           *       *       *       *       *       *       *


SEC. 5414. REMOVALS FROM ONE BREWERY TO ANOTHER BELONGING TO THE SAME 
                    BREWER.

  (a) In general.--Beer may be removed from one brewery to 
another brewery belonging to the same brewer, 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. The removal from one brewery to another brewery 
belonging to the same brewer shall be deemed to include any 
removal from a brewery owned by one corporation to a brewery 
owned by another corporation when (1) one such corporation owns 
the controlling interest in the other such corporation, or (2) 
the controlling interest in each such corporation is owned by 
the same person or persons.
  (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] December 31, 2020.

           *       *       *       *       *       *       *


Subchapter I--MISCELLANEOUS GENERAL PROVISIONS

           *       *       *       *       *       *       *


SEC. 5555. RECORDS, STATEMENTS, AND RETURNS.

  (a) General.--Every person liable to any tax imposed by this 
chapter, or for the collection thereof, shall keep such 
records, render such statements, make such returns, and comply 
with such rules and regulations as the Secretary may prescribe. 
For calendar quarters beginning after the date of the enactment 
of this sentence, and before [January 1, 2020] January 1, 2021, 
the Secretary shall permit a person to employ a unified system 
for any records, statements, and returns required to be kept, 
rendered, or made under this section for any beer produced in 
the brewery for which the tax imposed by section 5051 has been 
determined, including any beer which has been removed for 
consumption on the premises of the brewery.
  (b) Authority to waive.--Whenever in this chapter any record 
is required to be made or kept, or statement or return is 
required to be made by any person, the Secretary may by 
regulation waive, in whole or in part, such requirement when he 
deems such requirement to no longer serve a necessary purpose. 
This subsection shall not be construed as authorizing the 
waiver of the payment of any tax.
  (c) Photographic copies.--Whenever in this chapter any record 
is required to be made and preserved by any person, the 
Secretary may by regulations authorize such person to record, 
copy, or reproduce by any photographic, photostatic, microfilm, 
microcard, miniature photographic, or other process, which 
accurately reproduces or forms a durable medium for so 
reproducing the original of such record and to retain such 
reproduction in lieu of the original. Every person who is 
authorized to retain such reproduction in lieu of the original 
shall, under such regulations as the Secretary may prescribe, 
preserve such reproduction in conveniently accessible files and 
make provision for examining, viewing, and using such 
reproduction the same as if it were the original. Such 
reproduction shall be treated and considered for all purposes 
as though it were the original record and all provisions of law 
applicable to the original shall be applicable to such 
reproduction. Such reproduction, or enlargement or facsimile 
thereof, shall be admissible in evidence in the same manner and 
under the same conditions as provided for the admission of 
reproductions, enlargements, or facsimiles of records made in 
the regular course of business under section 1732(b) of title 
28 of the United States Code.

           *       *       *       *       *       *       *


Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *


CHAPTER 65--ABATEMENTS, CREDITS, AND REFUNDS

           *       *       *       *       *       *       *


Subchapter B--RULES OF SPECIAL APPLICATION

           *       *       *       *       *       *       *


SEC. 6426. CREDIT FOR ALCOHOL FUEL, BIODIESEL, AND ALTERNATIVE FUEL 
                    MIXTURES.

  (a) Allowance of credits.--There shall be allowed as a 
credit--
          (1) against the tax imposed by section 4081 an amount 
        equal to the sum of the credits described in 
        subsections (b), (c), and (e), and
          (2) against the tax imposed by section 4041 an amount 
        equal to the sum of the credits described in subsection 
        (d).
No credit shall be allowed in the case of the credits described 
in subsections (d) and (e) unless the taxpayer is registered 
under section 4101.
  (b) Alcohol fuel mixture credit.--
          (1) In general.--For purposes of this section, the 
        alcohol fuel mixture credit is the product of the 
        applicable amount and the number of gallons of alcohol 
        used by the taxpayer in producing any alcohol fuel 
        mixture for sale or use in a trade or business of the 
        taxpayer.
          (2) Applicable amount.--For purposes of this 
        subsection--
                  (A) In general.--Except as provided in 
                subparagraphs (B) and (C), the applicable 
                amount is--
                          (i) in the case of calendar years 
                        beginning before 2009, 51 cents, and
                          (ii) in the case of calendar years 
                        beginning after 2008, 45 cents.
                  (B) Mixtures not containing ethanol.--In the 
                case of an alcohol fuel mixture in which none 
                of the alcohol consists of ethanol, the 
                applicable amount is 60 cents.
                  (C) Reduction delayed until annual production 
                or importation of 7,500,000,000 gallons.--In 
                the case of any calendar year beginning after 
                2008, if the Secretary makes a determination 
                described in section 40(h)(3)(B) with respect 
                to all preceding calendar years beginning after 
                2007, subparagraph (A)(ii) shall be applied by 
                substituting ``51 cents'' for ``45 cents''.
          (3) Alcohol fuel mixture.--For purposes of this 
        subsection, the term ``alcohol fuel mixture'' means a 
        mixture of alcohol and a taxable fuel which--
                  (A) is sold by the taxpayer producing such 
                mixture to any person for use as a fuel, or
                  (B) is used as a fuel by the taxpayer 
                producing such mixture.
        For purposes of subparagraph (A), a mixture produced by 
        any person at a refinery prior to a taxable event which 
        includes ethyl tertiary butyl ether or other ethers 
        produced from alcohol shall be treated as sold at the 
        time of its removal from the refinery (and only at such 
        time) to another person for use as a fuel.
          (4) Other definitions.--For purposes of this 
        subsection--
                  (A) Alcohol.--The term ``alcohol'' includes 
                methanol and ethanol but does not include--
                          (i) alcohol produced from petroleum, 
                        natural gas, or coal (including peat), 
                        or
                          (ii) alcohol with a proof of less 
                        than 190 (determined without regard to 
                        any added denaturants).
                Such term also includes an alcohol gallon 
                equivalent of ethyl tertiary butyl ether or 
                other ethers produced from such alcohol.
                  (B) Taxable fuel.--The term ``taxable fuel'' 
                has the meaning given such term by section 
                4083(a)(1).
          (5) Volume of alcohol.--For purposes of determining 
        under subsection (a) the number of gallons of alcohol 
        with respect to which a credit is allowable under 
        subsection (a), the volume of alcohol shall include the 
        volume of any denaturant (including gasoline) which is 
        added under any formulas approved by the Secretary to 
        the extent that such denaturants do not exceed 2 
        percent of the volume of such alcohol (including 
        denaturants).
          (6) Termination.--This subsection shall not apply to 
        any sale, use, or removal for any period after December 
        31, 2011.
  (c) Biodiesel mixture credit.--
          (1) In general.--For purposes of this section, the 
        biodiesel mixture credit is the product of the 
        applicable amount and the number of gallons of 
        biodiesel used by the taxpayer in producing any 
        biodiesel mixture for sale or use in a trade or 
        business of the taxpayer.
          (2) Applicable amount.--For purposes of this 
        subsection, the applicable amount is $1.00.
          (3) Biodiesel mixture.--For purposes of this section, 
        the term ``biodiesel mixture'' means a mixture of 
        biodiesel and diesel fuel (as defined in section 
        4083(a)(3)), determined without regard to any use of 
        kerosene, which--
                  (A) is sold by the taxpayer producing such 
                mixture to any person for use as a fuel, or
                  (B) is used as a fuel by the taxpayer 
                producing such mixture.
          (4) Certification for biodiesel.--No credit shall be 
        allowed under this subsection unless the taxpayer 
        obtains a certification (in such form and manner as 
        prescribed by the Secretary) from the producer of the 
        biodiesel which identifies the product produced and the 
        percentage of biodiesel and agri-biodiesel in the 
        product.
          (5) Other definitions.--Any term used in this 
        subsection which is also used in section 40A shall have 
        the meaning given such term by section 40A.
          (6) Termination.--This subsection shall not apply to 
        any sale, use, or removal for any period after 
        [December 31, 2017] December 31, 2020.
  (d) Alternative fuel credit.--
          (1) In general.--For purposes of this section, the 
        alternative fuel credit is the product of 50 cents and 
        the number of gallons of an alternative fuel or 
        gasoline gallon equivalents of a nonliquid alternative 
        fuel sold by the taxpayer for use as a fuel in a motor 
        vehicle or motorboat, sold by the taxpayer for use as a 
        fuel in aviation, or so used by the taxpayer.
          (2) Alternative fuel.--For purposes of this section, 
        the term ``alternative fuel'' means--
                  (A) liquefied petroleum gas,
                  (B) P Series Fuels (as defined by the 
                Secretary of Energy under section 13211(2) of 
                title 42, United States Code),
                  (C) compressed or liquefied natural gas,
                  (D) liquefied hydrogen,
                  (E) any liquid fuel which meets the 
                requirements of paragraph (4) and which is 
                derived from coal (including peat) through the 
                Fischer-Tropsch process,
                  (F) compressed or liquefied gas derived from 
                biomass (as defined in section 45K(c)(3)), and
                  (G) liquid fuel derived from biomass (as 
                defined in section 45K(c)(3)).
        Such term does not include ethanol, methanol, 
        biodiesel, or any fuel (including lignin, wood 
        residues, or spent pulping liquors) derived from the 
        production of paper or pulp.
          (3) Gasoline gallon equivalent.--For purposes of this 
        subsection, the term ``gasoline gallon equivalent'' 
        means, with respect to any nonliquid alternative fuel, 
        the amount of such fuel having a Btu content of 124,800 
        (higher heating value).
          (4) Carbon capture requirement.--
                  (A) In general.--The requirements of this 
                paragraph are met if the fuel is certified, 
                under such procedures as required by the 
                Secretary, as having been derived from coal 
                produced at a gasification facility which 
                separates and sequesters not less than the 
                applicable percentage of such facility's total 
                carbon dioxide emissions.
                  (B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage 
                is--
                          (i) 50 percent in the case of fuel 
                        produced after September 30, 2009, and 
                        on or before December 30, 2009, and
                          (ii) 75 percent in the case of fuel 
                        produced after December 30, 2009.
          (5) Termination.--This subsection shall not apply to 
        any sale or use for any period after [December 31, 
        2017] December 31, 2020.
  (e) Alternative fuel mixture credit.--
          (1) In general.--For purposes of this section, the 
        alternative fuel mixture credit is the product of 50 
        cents and the number of gallons of alternative fuel 
        used by the taxpayer in producing any alternative fuel 
        mixture for sale or use in a trade or business of the 
        taxpayer.
          (2) Alternative fuel mixture.--For purposes of this 
        section, the term ``alternative fuel mixture'' means a 
        [mixture of alternative fuel] mixture of alternative 
        fuel (other than a fuel described in subparagraph (A), 
        (C), or (F) of subsection (d)(2)) and taxable fuel (as 
        defined in subparagraph (A), (B), or (C) of section 
        4083(a)(1)) which--
                  (A) is sold by the taxpayer producing such 
                mixture to any person for use as fuel, or
                  (B) is used as a fuel by the taxpayer 
                producing such mixture.
          (3) Termination.--This subsection shall not apply to 
        any sale or use for any period after [December 31, 
        2017] December 31, 2020.
  (f) Mixture not used as a fuel, etc..--
          (1) Imposition of tax.--If--
                  (A) any credit was determined under this 
                section with respect to alcohol or biodiesel 
                used in the production of any alcohol fuel 
                mixture or biodiesel mixture, respectively, and
                  (B) any person--
                          (i) separates the alcohol or 
                        biodiesel from the mixture, or
                          (ii) without separation, uses the 
                        mixture other than as a fuel,
                then there is hereby imposed on such person a 
                tax equal to the product of the applicable 
                amount and the number of gallons of such 
                alcohol or biodiesel.
          (2) Applicable laws.--All provisions of law, 
        including penalties, shall, insofar as applicable and 
        not inconsistent with this section, apply in respect of 
        any tax imposed under paragraph (1) as if such tax were 
        imposed by section 4081 and not by this section.
  (g) Coordination with exemption from excise tax.--Rules 
similar to the rules under section 40(c) shall apply for 
purposes of this section.
  (h) Denial of double benefit.--No credit shall be determined 
under subsection (d) or (e) with respect to any fuel with 
respect to which credit may be determined under subsection (b) 
or (c) or under section 40 or 40A.
  (i) Limitation to fuels with connection to the United 
States.--
          (1) Alcohol.--No credit shall be determined under 
        this section with respect to any alcohol which is 
        produced outside the United States for use as a fuel 
        outside the United States.
          (2) Biodiesel and alternative fuels.--No credit shall 
        be determined under this section with respect to any 
        biodiesel or alternative fuel which is produced outside 
        the United States for use as a fuel outside the United 
        States.
For purposes of this subsection, the term ``United States'' 
includes any possession of the United States.
  (j) Energy equivalency determinations for liquefied petroleum 
gas and liquefied natural gas.--For purposes of determining any 
credit under this section, any reference to the number of 
gallons of an alternative fuel or the gasoline gallon 
equivalent of such a fuel shall be treated as a reference to--
          (1) in the case of liquefied petroleum gas, the 
        energy equivalent of a gallon of gasoline, as defined 
        in section 4041(a)(2)(C), and
          (2) in the case of liquefied natural gas, the energy 
        equivalent of a gallon of diesel, as defined in section 
        4041(a)(2)(D).

SEC. 6427. FUELS NOT USED FOR TAXABLE PURPOSES.

  (a) Nontaxable uses.--Except as provided in subsection (k), 
if tax has been imposed under paragraph (2) or (3) of section 
4041(a) or section 4041(c) on the sale of any fuel and the 
purchaser uses such fuel other than for the use for which sold, 
or resells such fuel, the Secretary shall pay (without 
interest) to him an amount equal to--
          (1) the amount of tax imposed on the sale of the fuel 
        to him, reduced by
          (2) if he uses the fuel, the amount of tax which 
        would have been imposed under section 4041 on such use 
        if no tax under section 4041 had been imposed on the 
        sale of the fuel.
  (b) Intercity, local, or school buses.--
          (1) Allowance.--Except as otherwise provided in this 
        subsection and subsection (k), if any fuel other than 
        gasoline (as defined in section 4083(a)) on the sale of 
        which tax was imposed by section 4041(a) or 4081 is 
        used in an automobile bus while engaged in--
                  (A) furnishing (for compensation) passenger 
                land transportation available to the general 
                public, or
                  (B) the transportation of students and 
                employees of schools (as defined in the last 
                sentence of section 4221(d)(7)(C)),
        the Secretary shall pay (without interest) to the 
        ultimate purchaser of such fuel an amount equal to the 
        product of the number of gallons of such fuel so used 
        multiplied by the rate at which tax was imposed on such 
        fuel by section 4041(a) or 4081, as the case may be.
          (2) Reduction in refund in certain cases.--
                  (A) In general.--Except as provided in 
                subparagraphs (B) and (C), the rate of tax 
                taken into account under paragraph (1) shall be 
                7.4 cents per gallon less than the aggregate 
                rate at which tax was imposed on such fuel by 
                section 4041(a) or 4081, as the case may be.
                  (B) Exception for school bus 
                transportation.--Subparagraph (A) shall not 
                apply to fuel used in an automobile bus while 
                engaged in the transportation described in 
                paragraph (1)(B).
                  (C) Exception for certain intracity 
                transportation.--Subparagraph (A) shall not 
                apply to fuel used in any automobile bus while 
                engaged in furnishing (for compensation) 
                intracity passenger land transportation--
                          (i) which is available to the general 
                        public, and
                          (ii) which is scheduled and along 
                        regular routes,
                but only if such bus is a qualified local bus.
                  (D) Qualified local bus.--For purposes of 
                this paragraph, the term ``qualified local 
                bus'' means any local bus--
                          (i) which has a seating capacity of 
                        at least 20 adults (not including the 
                        driver), and
                          (ii) which is under contract (or is 
                        receiving more than a nominal subsidy) 
                        from any State or local government (as 
                        defined in section 4221(d)) to furnish 
                        such transportation.
          (3) Limitation in case of nonscheduled intercity or 
        local buses.--Paragraph (1)(A) shall not apply in 
        respect of fuel used in any automobile bus while 
        engaged in furnishing transportation which is not 
        scheduled and not along regular routes unless the 
        seating capacity of such bus is at least 20 adults (not 
        including the driver).
          (4) Refunds for use of diesel fuel in certain 
        intercity buses.--With respect to any fuel to which 
        paragraph (2)(A) applies, if the ultimate purchaser of 
        such fuel waives (at such time and in such form and 
        manner as the Secretary shall prescribe) the right to 
        payment under paragraph (1) and assigns such right to 
        the ultimate vendor, then the Secretary shall pay the 
        amount which would be paid under paragraph (1) to such 
        ultimate vendor, but only if such ultimate vendor--
                  (A) is registered under section 4101, and
                  (B) meets the requirements of subparagraph 
                (A), (B), or (D) of section 6416(a)(1).
  (c) Use for farming purposes.--Except as provided in 
subsection (k), if any fuel on the sale of which tax was 
imposed under paragraph (2) or (3) of section 4041(a) or 
section 4041(c) is used on a farm for farming purposes (within 
the meaning of section 6420(c)), the Secretary shall pay 
(without interest) to the purchaser an amount equal to the 
amount of the tax imposed on the sale of the fuel. For purposes 
of this subsection, if fuel is used on a farm by any person 
other than the owner, tenant, or operator of such farm, the 
rules of paragraph (4) of section 6420(c) shall be applied 
(except that ``liquid taxable under section 4041'' shall be 
substituted for ``gasoline'' each place it appears in such 
paragraph (4)).
  (d) Use by certain aircraft museums or in certain other 
aircraft uses.--Except as provided in subsection (k), if--
          (1) any gasoline on which tax was imposed by section 
        4081, or
          (2) any fuel on the sale of which tax was imposed 
        under section 4041,
is used by an aircraft museum (as defined in section 
4041(h)(2)) in an aircraft or vehicle owned by such museum and 
used exclusively for purposes set forth in section 
4041(h)(2)(C), or is used in a helicopter or a fixed-wing 
aircraft for a purpose described in section 4041(l), the 
Secretary shall pay (without interest) to the ultimate 
purchaser of such gasoline or fuel an amount equal to the 
aggregate amount of the tax imposed on such gasoline or fuel.
  (e) Alcohol, biodiesel, or alternative fuel.--Except as 
provided in subsection (k)--
          (1) Used to produce a mixture.--If any person 
        produces a mixture described in section 6426 in such 
        person's trade or business, the Secretary shall pay 
        (without interest) to such person an amount equal to 
        the alcohol fuel mixture credit or the biodiesel 
        mixture credit or the alternative fuel mixture credit 
        with respect to such mixture.
          (2) Alternative fuel.--If any person sells or uses an 
        alternative fuel (as defined in section 6426(d)(2)) for 
        a purpose described in section 6426(d)(1) in such 
        person's trade or business, the Secretary shall pay 
        (without interest) to such person an amount equal to 
        the alternative fuel credit with respect to such fuel.
          (3) Coordination with other repayment provisions.--No 
        amount shall be payable under paragraph (1) or (2) with 
        respect to any mixture or alternative fuel with respect 
        to which an amount is allowed as a credit under section 
        6426.
          (4) Registration requirement for alternative fuels.--
        The Secretary shall not make any payment under this 
        subsection to any person with respect to any 
        alternative fuel credit or alternative fuel mixture 
        credit unless the person is registered under section 
        4101.
          (5) Limitation to fuels with connection to the United 
        States.--No amount shall be payable under paragraph (1) 
        or (2) with respect to any mixture or alternative fuel 
        if credit is not allowed with respect to such mixture 
        or alternative fuel by reason of section 6426(i).
          (6) Termination.--This subsection shall not apply 
        with respect to--
                  (A) any alcohol fuel mixture (as defined in 
                section 6426(b)(3)) sold or used after December 
                31, 2011,
                  (B) any biodiesel mixture (as defined in 
                section 6426(c)(3)) sold or used after 
                [December 31, 2017] December 31, 2020,
                  (C) any alternative fuel (as defined in 
                section 6426(d)(2)) sold or used after 
                [December 31, 2017] December 31, 2020, and
                  (D) any alternative fuel mixture (as defined 
                in section 6426(e)(2)) sold or used after 
                December 31, 2011.
  (h) Blend stocks not used for producing taxable fuel.--
          (1) Gasoline blend stocks or additives not used for 
        producing gasoline.--Except as provided in subsection 
        (k), if any gasoline blend stock or additive (within 
        the meaning of section 4083(a)(2)) is not used by any 
        person to produce gasoline and such person establishes 
        that the ultimate use of such gasoline blend stock or 
        additive is not to produce gasoline, the Secretary 
        shall pay (without interest) to such person an amount 
        equal to the aggregate amount of the tax imposed on 
        such person with respect to such gasoline blend stock 
        or additive.
          (2) Diesel fuel blend stocks or additives not used 
        for producing diesel.--Except as provided in subsection 
        (k), if any diesel fuel blend stock is not used by any 
        person to produce diesel fuel and such person 
        establishes that the ultimate use of such diesel fuel 
        blend stock is not to produce diesel fuel, the 
        Secretary shall pay (without interest) to such person 
        an amount equal to the aggregate amount of the tax 
        imposed on such person with respect to such diesel fuel 
        blend stock.
  (i) Time for filing claims; period covered.--
          (1) General rule.--Except as otherwise provided in 
        this subsection, not more than one claim may be filed 
        under subsection (a), (b), (c), (d), (h), (l), (m), or 
        (o) by any person with respect to fuel used during his 
        taxable year; and no claim shall be allowed under this 
        paragraph with respect to fuel used during any taxable 
        year unless filed by the purchaser not later than the 
        time prescribed by law for filing a claim for credit or 
        refund of overpayment of income tax for such taxable 
        year. For purposes of this paragraph, a person's 
        taxable year shall be his taxable year for purposes of 
        subtitle A.
          (2) Exceptions.--
                  (A) In general.--If, at the close of any 
                quarter of the taxable year of any person, at 
                least $750 is payable in the aggregate under 
                subsections (a), (b), (d), (h), (l), (m), and 
                (o) of this section and section 6421 to such 
                person with respect to fuel used during--
                          (i) such quarter, or
                          (ii) any prior quarter (for which no 
                        other claim has been filed) during such 
                        taxable year,
                a claim may be filed under this section with 
                respect to such fuel.
                  (B) Time for filing claim.--No claim filed 
                under this paragraph shall be allowed unless 
                filed during the first quarter following the 
                last quarter included in the claim.
                  (C) Nonapplication of paragraph.--This 
                paragraph shall not apply to any fuel used 
                solely in any off-highway business use 
                described in section 6421(e)(2)(C).
          (3) Special rule for mixture credits and the 
        alternative fuel credit.--
                  (A) In general.--A claim may be filed under 
                subsection (e)(1) by any person with respect to 
                a mixture described in section 6426 or under 
                subsection (e)(2) by any person with respect to 
                an alternative fuel (as defined in section 
                6426(d)(2)) for any period--
                          (i) for which $200 or more is payable 
                        under such subsection (e)(1) or (e)(2), 
                        and
                          (ii) which is not less than 1 week.
                In the case of an electronic claim, this 
                subparagraph shall be applied without regard to 
                clause (i).
                  (B) Payment of claim.--Notwithstanding 
                subsection (e)(1) or (e)(2), if the Secretary 
                has not paid pursuant to a claim filed under 
                this section within 45 days of the date of the 
                filing of such claim (20 days in the case of an 
                electronic claim), the claim shall be paid with 
                interest from such date determined by using the 
                overpayment rate and method under section 6621.
                  (C) Time for filing claim.--No claim filed 
                under this paragraph shall be allowed unless 
                filed on or before the last day of the first 
                quarter following the earliest quarter included 
                in the claim.
          (4) Special rule for vendor refunds.--
                  (A) In general.--A claim may be filed under 
                paragraph (4)(C) or (5) of subsection (l) by 
                any person with respect to fuel sold by such 
                person for any period--
                          (i) for which $200 or more ($100 or 
                        more in the case of kerosene) is 
                        payable under paragraph (4)(C) or (5) 
                        of subsection (l), and
                          (ii) which is not less than 1 week.
                Notwithstanding subsection (l)(1), paragraph 
                (3)(B) shall apply to claims filed under 
                subsections (b)(4), (l)(4)(C)(ii), and (l)(5).
                  (B) Time for filing claim.--No claim filed 
                under this paragraph shall be allowed unless 
                filed on or before the last day of the first 
                quarter following the earliest quarter included 
                in the claim.
  (j) Applicable laws.--
          (1) In general.--All provisions of law, including 
        penalties, applicable in respect of the taxes imposed 
        by sections 4041 and 4081 shall, insofar as applicable 
        and not inconsistent with this section, apply in 
        respect of the payments provided for in this section to 
        the same extent as if such payments constituted refunds 
        of overpayments of the tax so imposed.
          (2) Examination of books and witnesses.--For the 
        purpose of ascertaining the correctness of any claim 
        made under this section, or the correctness of any 
        payment made in respect of any such claim, the 
        Secretary shall have the authority granted by 
        paragraphs (1), (2), and (3) of section 7602(a) 
        (relating to examination of books and witnesses) as if 
        the claimant were the person liable for tax.
  (k) Income tax credit in lieu of payment.--
          (1) Persons not subject to income tax.--Payment shall 
        be made under this section only to--
                  (A) the United States or an agency or 
                instrumentality thereof, a State, a political 
                subdivision of a State, or any agency or 
                instrumentality of one or more States or 
                political subdivisions, or
                  (B) an organization exempt from tax under 
                section 501(a) (other than an organization 
                required to make a return of the tax imposed 
                under subtitle A for its taxable year).
          (2) Exception.--Paragraph (1) shall not apply to a 
        payment of a claim filed under paragraph (2), (3), or 
        (4) of subsection (i).
          (3) Allowance of credit against income tax.--For 
        allowances of credit against the income tax imposed by 
        subtitle A for fuel used or resold by the purchaser, 
        see section 34.
  (l) Nontaxable uses of diesel fuel and kerosene.--
          (1) In general.--Except as otherwise provided in this 
        subsection and in subsection (k), if any diesel fuel or 
        kerosene on which tax has been imposed by section 4041 
        or 4081 is used by any person in a nontaxable use, the 
        Secretary shall pay (without interest) to the ultimate 
        purchaser of such fuel an amount equal to the aggregate 
        amount of tax imposed on such fuel under section 4041 
        or 4081, as the case may be, reduced by any payment 
        made to the ultimate vendor under paragraph (4)(C)(i).
          (2) Nontaxable use.--For purposes of this subsection, 
        the term ``nontaxable use'' means any use which is 
        exempt from the tax imposed by section 4041(a)(1) other 
        than by reason of a prior imposition of tax.
          (3) Refund of certain taxes on fuel used in diesel-
        powered trains.--For purposes of this subsection, the 
        term ``nontaxable use'' includes fuel used in a diesel-
        powered train. The preceding sentence shall not apply 
        with respect to--
                  (A) the Leaking Underground Storage Tank 
                Trust Fund financing rate under sections 4041 
                and 4081, and
                  (B) so much of the rate specified in section 
                4081(a)(2)(A) as does not exceed the rate 
                applicable under section 4041(a)(1)(C)(ii).
        The preceding sentence shall not apply in the case of 
        fuel sold for exclusive use by a State or any political 
        subdivision thereof.
          (4) Refunds for kerosene used in aviation.--
                  (A) Kerosene used in commercial aviation.--In 
                the case of kerosene used in commercial 
                aviation (as defined in section 4083(b)) (other 
                than supplies for vessels or aircraft within 
                the meaning of section 4221(d)(3)), paragraph 
                (1) shall not apply to so much of the tax 
                imposed by section 4041 or 4081, as the case 
                may be, as is attributable to--
                          (i) the Leaking Underground Storage 
                        Tank Trust Fund financing rate imposed 
                        by such section, and
                          (ii) so much of the rate of tax 
                        specified in section 4041(c) or 
                        4081(a)(2)(A)(iii), as the case may be, 
                        as does not exceed 4.3 cents per 
                        gallon.
                  (B) Kerosene used in noncommercial 
                aviation.--In the case of kerosene used in 
                aviation that is not commercial aviation (as so 
                defined) (other than any use which is exempt 
                from the tax imposed by section 4041(c) other 
                than by reason of a prior imposition of tax), 
                paragraph (1) shall not apply to--
                          (i) any tax imposed by subsection (c) 
                        or (d)(2) of section 4041, and
                          (ii) so much of the tax imposed by 
                        section 4081 as is attributable to--
                                  (I) the Leaking Underground 
                                Storage Tank Trust Fund 
                                financing rate imposed by such 
                                section, and
                                  (II) so much of the rate of 
                                tax specified in section 
                                4081(a)(2)(A)(iii) as does not 
                                exceed the rate specified in 
                                section 4081(a)(2)(C)(ii).
                  (C) Payments to ultimate, registered 
                vendor.--
                          (i) In general.--With respect to any 
                        kerosene used in aviation (other than 
                        kerosene described in clause (ii) or 
                        kerosene to which paragraph (5) 
                        applies), if the ultimate purchaser of 
                        such kerosene waives (at such time and 
                        in such form and manner as the 
                        Secretary shall prescribe) the right to 
                        payment under paragraph (1) and assigns 
                        such right to the ultimate vendor, then 
                        the Secretary shall pay the amount 
                        which would be paid under paragraph (1) 
                        to such ultimate vendor, but only if 
                        such ultimate vendor--
                                  (I) is registered under 
                                section 4101, and
                                  (II) meets the requirements 
                                of subparagraph (A), (B), or 
                                (D) of section 6416(a)(1).
                          (ii) Payments for kerosene used in 
                        noncommercial aviation.--The amount 
                        which would be paid under paragraph (1) 
                        with respect to any kerosene to which 
                        subparagraph (B) applies shall be paid 
                        only to the ultimate vendor of such 
                        kerosene. A payment shall be made to 
                        such vendor if such vendor--
                                  (I) is registered under 
                                section 4101, and
                                  (II) meets the requirements 
                                of subparagraph (A), (B), or 
                                (D) of section 6416(a)(1).
          (5) Registered vendors to administer claims for 
        refund of diesel fuel or kerosene sold to State and 
        local governments.--
                  (A) In general.--Paragraph (1) shall not 
                apply to diesel fuel or kerosene used by a 
                State or local government.
                  (B) Sales of kerosene not for use in motor 
                fuel.--Paragraph (1) shall not apply to 
                kerosene (other than kerosene used in aviation) 
                sold by a vendor--
                          (i) for any use if such sale is from 
                        a pump which (as determined under 
                        regulations prescribed by the 
                        Secretary) is not suitable for use in 
                        fueling any diesel-powered highway 
                        vehicle or train, or
                          (ii) to the extent provided by the 
                        Secretary, for blending with heating 
                        oil to be used during periods of 
                        extreme or unseasonable cold.
                  (C) Payment to ultimate, registered vendor.--
                Except as provided in subparagraph (D), the 
                amount which would (but for subparagraph (A) or 
                (B)) have been paid under paragraph (1) with 
                respect to any fuel shall be paid to the 
                ultimate vendor of such fuel, if such vendor--
                          (i) is registered under section 4101, 
                        and
                          (ii) meets the requirements of 
                        subparagraph (A), (B), or (D) of 
                        section 6416(a)(1).
                  (D) Credit card issuer.--For purposes of this 
                paragraph, if the purchase of any fuel 
                described in subparagraph (A) (determined 
                without regard to the registration status of 
                the ultimate vendor) is made by means of a 
                credit card issued to the ultimate purchaser, 
                the Secretary shall pay to the person extending 
                the credit to the ultimate purchaser the amount 
                which would have been paid under paragraph (1) 
                (but for subparagraph (A)), but only if such 
                person meets the requirements of clauses (i), 
                (ii), and (iii) of section 6416(a)(4)(B). If 
                such clause (i), (ii), or (iii) is not met by 
                such person extending the credit to the 
                ultimate purchaser, then such person shall 
                collect an amount equal to the tax from the 
                ultimate purchaser and only such ultimate 
                purchaser may claim such amount.
  (m) Diesel fuel used to produce emulsion.--
          (1) In general.--Except as provided in subsection 
        (k), if any diesel fuel on which tax was imposed by 
        section 4081 at the regular tax rate is used by any 
        person in producing an emulsion described in section 
        4081(a)(2)(D) which is sold or used in such person's 
        trade or business, the Secretary shall pay (without 
        interest) to such person an amount equal to the excess 
        of the regular tax rate over the incentive tax rate 
        with respect to such fuel.
          (2) Definitions.--For purposes of paragraph (1)--
                  (A) Regular tax rate.--The term ``regular tax 
                rate'' means the aggregate rate of tax imposed 
                by section 4081 determined without regard to 
                section 4081(a)(2)(D).
                  (B) Incentive tax rate.--The term ``incentive 
                tax rate'' means the aggregate rate of tax 
                imposed by section 4081 determined with regard 
                to section 4081(a)(2)(D).
  (n) Regulations.--The Secretary may by regulations prescribe 
the conditions, not inconsistent with the provisions of this 
section, under which payments may be made under this section.
  (o) Payments for taxes imposed by section 4041(d).--For 
purposes of subsections (a), (b), and (c), the taxes imposed by 
section 4041(d) shall be treated as imposed by section 4041(a).
  (p) Cross references.--
                  (1) For civil penalty for excessive claims 
                under this section, see section 6675.
                  (2) For fraud penalties, etc., see chapter 75 
                (section 7201 and following, relating to 
                crimes, other offenses, and forfeitures).
                  (3) For treatment of an Indian tribal 
                government as a State (and a subdivision of an 
                Indian tribal government as a political 
                subdivision of a State), see section 7871.

           *       *       *       *       *       *       *


CHAPTER 77--MISCELLANEOUS PROVISIONS

           *       *       *       *       *       *       *


SEC. 7508A. AUTHORITY TO POSTPONE CERTAIN DEADLINES BY REASON OF 
                    PRESIDENTIALLY DECLARED DISASTER OR TERRORISTIC OR 
                    MILITARY ACTIONS.

  (a) In general.--In the case of a taxpayer determined by the 
Secretary to be affected by a federally declared disaster (as 
defined by section 165(i)(5)(A)) or a terroristic or military 
action (as defined in section 692(c)(2)), the Secretary may 
specify a period of up to 1 year that may be disregarded in 
determining, under the internal revenue laws, in respect of any 
tax liability of such taxpayer--
          (1) whether any of the acts described in paragraph 
        (1) of section 7508(a) were performed within the time 
        prescribed therefor (determined without regard to 
        extension under any other provision of this subtitle 
        for periods after the date (determined by the 
        Secretary) of such disaster or action),
          (2) the amount of any interest, penalty, additional 
        amount, or addition to the tax for periods after such 
        date, and
          (3) the amount of any credit or refund.
  (b) Special rules regarding pensions, etc..--In the case of a 
pension or other employee benefit plan, or any sponsor, 
administrator, participant, beneficiary, or other person with 
respect to such plan, affected by a disaster or action 
described in subsection (a), the Secretary may specify a period 
of up to 1 year which may be disregarded in determining the 
date by which any action is required or permitted to be 
completed under this title. No plan shall be treated as failing 
to be operated in accordance with the terms of the plan solely 
as the result of disregarding any period by reason of the 
preceding sentence.
  (c) Special rules for overpayments.--The rules of section 
7508(b) shall apply for purposes of this section.
  (d) Mandatory 60-day Extension.--
          (1) In general.--In the case of any qualified 
        taxpayer, the period--
                  (A) beginning on the earliest incident date 
                specified in the declaration to which the 
                disaster area referred to in paragraph (2) 
                relates, and
                  (B) ending on the date which is 60 days after 
                the latest incident date so specified,
        shall be disregarded in the same manner as a period 
        specified under subsection (a).
          (2) Qualified taxpayer.--For purposes of this 
        subsection, the term ``qualified taxpayer'' means--
                  (A) any individual whose principal residence 
                (for purposes of section 1033(h)(4)) is located 
                in a disaster area,
                  (B) any taxpayer if the taxpayer's principal 
                place of business (other than the business of 
                performing services as an employee) is located 
                in a disaster area,
                  (C) any individual who is a relief worker 
                affiliated with a recognized government or 
                philanthropic organization and who is assisting 
                in a disaster area,
                  (D) any taxpayer whose records necessary to 
                meet a deadline for an act described in section 
                7508(a)(1) are maintained in a disaster area,
                  (E) any individual visiting a disaster area 
                who was killed or injured as a result of the 
                disaster, and
                  (F) solely with respect to a joint return, 
                any spouse of an individual described in any 
                preceding subparagraph of this paragraph.
          (3) Disaster area.--For purposes of this subsection, 
        the term ``disaster area'' has the meaning given such 
        term under subparagraph (B) of section 165(i)(5) with 
        respect to a Federally declared disaster (as defined in 
        subparagraph (A) of such section).
          (4) Application to rules regarding pensions.--In the 
        case of any person described in subsection (b), a rule 
        similar to the rule of paragraph (1) shall apply for 
        purposes of subsection (b) with respect to--
                  (A) making contributions to a qualified 
                retirement plan (within the meaning of section 
                4974(c)) under section 219(f)(3), 404(a)(6), 
                404(h)(1)(B), or 404(m)(2),
                  (B) making distributions under section 
                408(d)(4),
                  (C) recharacterizing contributions under 
                section 408A(d)(6), and
                  (D) making a rollover under section 402(c), 
                403(a)(4), 403(b)(8), or 408(d)(3).
          (5) Coordination with periods specified by the 
        secretary.--Any period described in paragraph (1) with 
        respect to any person (including by reason of the 
        application of paragraph (4)) shall be in addition to 
        (or concurrent with, as the case may be) any period 
        specified under subsection (a) or (b) with respect to 
        such person.

           *       *       *       *       *       *       *

                              ----------                              


                 TAX RELIEF AND HEALTH CARE ACT OF 2006



           *       *       *       *       *       *       *
 DIVISION A--EXTENSION AND EXPANSION OF CERTAIN TAX RELIEF PROVISIONS, 
AND OTHER TAX PROVISIONS

           *       *       *       *       *       *       *


TITLE I--EXTENSION AND MODIFICATION OF CERTAIN PROVISIONS

           *       *       *       *       *       *       *


SEC. 119. AMERICAN SAMOA ECONOMIC DEVELOPMENT CREDIT.

  (a) In general.--For purposes of section 30A of the Internal 
Revenue Code of 1986, a domestic corporation shall be treated 
as a qualified domestic corporation to which such section 
applies if--
          (1) in the case of a taxable year beginning before 
        January 1, 2012, such corporation--
                  (A) is an existing credit claimant with 
                respect to American Samoa, and
                  (B) elected the application of section 936 of 
                the Internal Revenue Code of 1986 for its last 
                taxable year beginning before January 1, 2006, 
                and
          (2) in the case of a taxable year beginning after 
        December 31, 2011, such corporation meets the 
        requirements of subsection (e).
  (b) Special Rules for Application of Section.--The following 
rules shall apply in applying section 30A of the Internal 
Revenue Code of 1986 for purposes of this section:
          (1) Amount of Credit.--Notwithstanding section 
        30A(a)(1) of such Code, the amount of the credit 
        determined under section 30A(a)(1) of such Code for any 
        taxable year shall be the amount determined under 
        section 30A(d) of such Code, except that section 30A(d) 
        shall be applied without regard to paragraph (3) 
        thereof.
          (2) Separate application.--In applying section 
        30A(a)(3) of such Code in the case of a corporation 
        treated as a qualified domestic corporation by reason 
        of this section, section 30A of such Code (and so much 
        of section 936 of such Code as relates to such section 
        30A) shall be applied separately with respect to 
        American Samoa.
          (3) Foreign tax credit allowed.--Notwithstanding 
        section 30A(e) of such Code, the provisions of section 
        936(c) of such Code shall not apply with respect to the 
        credit allowed by reason of this section.
  (c) Definitions.--For purposes of this section, any term 
which is used in this section which is also used in section 30A 
or 936 of such Code shall have the same meaning given such term 
by such section 30A or 936.
  (d) Application of Section.--Notwithstanding section 30A(h) 
or section 936(j) of such Code, this section (and so much of 
section 30A and section 936 of such Code as relates to this 
section) shall apply--
          (1) in the case of a corporation that meets the 
        requirements of subparagraphs (A) and (B) of subsection 
        (a)(1), to the [first 12 taxable years] first 15 
        taxable years of such corporation which begin after 
        December 31, 2006, and before [January 1, 2018] January 
        1, 2021, and
          (2) in the case of a corporation that does not meet 
        the requirements of subparagraphs (A) and (B) of 
        subsection (a)(1), to the [first 6 taxable years] first 
        9 taxable years of such corporation which begin after 
        December 31, 2011, and before [January 1, 2018] January 
        1, 2021.
In the case of a corporation described in subsection (a)(2), 
the Internal Revenue Code of 1986 shall be applied and 
administered without regard to the amendments made by section 
401(d)(1) of the Tax Technical Corrections Act of 2018.
  (e) Qualified Production Activities Income Requirement.--A 
corporation meets the requirement of this subsection if such 
corporation has qualified production activities income, as 
defined in subsection (c) of section 199 of the Internal 
Revenue Code of 1986 (as in effect before its repeal), 
determined by substituting ``American Samoa'' for ``the United 
States'' each place it appears in paragraphs (3), (4), and (6) 
of such subsection (c), for the taxable year.

           *       *       *       *       *       *       *


                         VII. DISSENTING VIEWS

    It is ironic that legislation with ``taxpayer certainty'' 
in its title does so little to promote certainty for taxpayers. 
Instead of a serious evaluation of the dozens of temporary 
provisions--known as ``extenders''--to determine which of the 
provisions should be made permanent, allowed to expire, or be 
phased down, the bill continues the dysfunctional practice of 
extending expired or expiring provisions on a temporary basis, 
which does not provide true certainty. In addition, while the 
process of dealing with these extenders has traditionally been 
bipartisan, the bill omits a few select provisions in a manner 
that seems politically motivated rather than based on a serious 
evaluation of the merits or discussions with stakeholders. In 
addition, the bill undoes certainty previously achieved in the 
2015 PATH Act compromise, which phased out the wind production 
and investment tax credits, a bipartisan compromise that was 
and continues to be strongly supported by the wind industry 
itself. The bill would create additional uncertainty by 
attempting to ``pay for'' these temporary extensions on the 
backs of family farms and other family-owned businesses through 
an increase in death taxes. This is an approach that the 
Committee Majority knew or should have known would be 
objectionable to Republicans, thereby delaying a resolution of 
extenders as well as the tax relief disaster victims have been 
waiting for. It is also worth noting that the Majority's 
refusal to deal with technical corrections is creating crushing 
uncertainty for many taxpayers. We Committee Republicans stand 
ready to work with stakeholders and our Democratic colleagues 
to develop long-term solutions for all these issues--as we 
attempted to do with the railroad maintenance and biodiesel tax 
credits after a constructive dialogue with stakeholders. For 
the sake of taxpayer certainty, we hope our Democratic 
colleagues will work with us to resolve disaster tax relief as 
well as both extenders and technical corrections. American 
taxpayers deserve it.
                                               Kevin Brady,
                    Republican Leader, Committee on Ways and Means.

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