[115th Congress Public Law 97]
[From the U.S. Government Publishing Office]



[[Page 2053]]

                                     

                                     

                                     

                                     

                                     




    NOTE: Public Law 115-97 is re-printed to remove the editorial 
description contained on the original half title page of the printed 
Slip law.

<star> (Star Print)

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Public Law 115-97
115th Congress

                                 An Act


 
    To provide for reconciliation pursuant to titles II and V of the 
 concurrent resolution on the budget for fiscal year 2018. <<NOTE: Dec. 
                         22, 2017 -  [H.R. 1]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

                                 TITLE I

SECTION 11000. SHORT TITLE, ETC.

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

                    Subtitle A--Individual Tax Reform

                         PART I--TAX RATE REFORM

SEC. 11001. MODIFICATION OF RATES.

    (a) <<NOTE: 26 USC 1.>>  In General.--Section 1 is amended by adding 
at the end the following new subsection:

    ``(j) Modifications for Taxable Years 2018 Through 2025.--
            ``(1) In general.--In the case of a taxable year beginning 
        after December 31, 2017, and before January 1, 2026--
                    ``(A) subsection (i) shall not apply, and
                    ``(B) this section (other than subsection (i)) shall 
                be applied as provided in paragraphs (2) through (6).
            ``(2) Rate tables.--
                    ``(A) Married individuals filing joint returns and 
                surviving spouses.--The following table shall be applied 
                in lieu of the table contained in subsection (a):


 
       ``If taxable income is:                    The tax is:
------------------------------------------------------------------------
Not over $19,050.....................  10% of taxable income.
Over $19,050 but not over $77,400....  $1,905, plus 12% of the excess
                                        over $19,050.
Over $77,400 but not over $165,000...  $8,907, plus 22% of the excess
                                        over $77,400.
Over $165,000 but not over $315,000..  $28,179, plus 24% of the excess
                                        over $165,000.
Over $315,000 but not over $400,000..  $64,179, plus 32% of the excess
                                        over $315,000.

[[Page 131 STAT. 2055]]

 
Over $400,000 but not over $600,000..  $91,379, plus 35% of the excess
                                        over $400,000.
Over $600,000........................  $161,379, plus 37% of the excess
                                        over $600,000.


                    ``(B) Heads of households.--The following table 
                shall be applied in lieu of the table contained in 
                subsection (b):


 
       ``If taxable income is:                    The tax is:
------------------------------------------------------------------------
Not over $13,600.....................  10% of taxable income.
Over $13,600 but not over $51,800....  $1,360, plus 12% of the excess
                                        over $13,600.
Over $51,800 but not over $82,500....  $5,944, plus 22% of the excess
                                        over $51,800.
Over $82,500 but not over $157,500...  $12,698, plus 24% of the excess
                                        over $82,500.
Over $157,500 but not over $200,000..  $30,698, plus 32% of the excess
                                        over $157,500.
Over $200,000 but not over $500,000..  $44,298, plus 35% of the excess
                                        over $200,000.
Over $500,000........................  $149,298, plus 37% of the excess
                                        over $500,000.


                    ``(C) Unmarried individuals other than surviving 
                spouses and heads of households.--The following table 
                shall be applied in lieu of the table contained in 
                subsection (c):


 
       ``If taxable income is:                    The tax is:
------------------------------------------------------------------------
Not over $9,525......................  10% of taxable income.
Over $9,525 but not over $38,700.....  $952.50, plus 12% of the excess
                                        over $9,525.
Over $38,700 but not over $82,500....  $4,453.50, plus 22% of the excess
                                        over $38,700.
Over $82,500 but not over $157,500...  $14,089.50, plus 24% of the
                                        excess over $82,500.
Over $157,500 but not over $200,000..  $32,089.50, plus 32% of the
                                        excess over $157,500.
Over $200,000 but not over $500,000..  $45,689.50, plus 35% of the
                                        excess over $200,000.
Over $500,000........................  $150,689.50, plus 37% of the
                                        excess over $500,000.


                    ``(D) Married individuals filing separate returns.--
                The following table shall be applied in lieu of the 
                table contained in subsection (d):


 
       ``If taxable income is:                    The tax is:
------------------------------------------------------------------------
Not over $9,525......................  10% of taxable income.
Over $9,525 but not over $38,700.....  $952.50, plus 12% of the excess
                                        over $9,525.
Over $38,700 but not over $82,500....  $4,453.50, plus 22% of the excess
                                        over $38,700.
Over $82,500 but not over $157,500...  $14,089.50, plus 24% of the
                                        excess over $82,500.
Over $157,500 but not over $200,000..  $32,089.50, plus 32% of the
                                        excess over $157,500.
Over $200,000 but not over $300,000..  $45,689.50, plus 35% of the
                                        excess over $200,000.

[[Page 131 STAT. 2056]]

 
Over $300,000........................  $80,689.50, plus 37% of the
                                        excess over $300,000.


                    ``(E) Estates and trusts.--The following table shall 
                be applied in lieu of the table contained in subsection 
                (e):


 
       ``If taxable income is:                    The tax is:
------------------------------------------------------------------------
Not over $2,550......................  10% of taxable income.
Over $2,550 but not over $9,150......  $255, plus 24% of the excess over
                                        $2,550.
Over $9,150 but not over $12,500.....  $1,839, plus 35% of the excess
                                        over $9,150.
Over $12,500.........................  $3,011.50, plus 37% of the excess
                                        over $12,500.


                    ``(F) References to rate tables.--Any reference in 
                this title to a rate of tax under subsection (c) shall 
                be treated as a reference to the corresponding rate 
                bracket under subparagraph (C) of this paragraph, except 
                that the reference in section 3402(q)(1) to the third 
                lowest rate of tax applicable under subsection (c) shall 
                be treated as a reference to the fourth lowest rate of 
                tax under subparagraph (C).
            ``(3) Adjustments.--
                    ``(A) No adjustment in 2018.--The tables contained 
                in paragraph (2) shall apply without adjustment for 
                taxable years beginning after December 31, 2017, and 
                before January 1, 2019.
                    ``(B) Subsequent years.--For taxable years beginning 
                after December 31, 2018, the Secretary shall prescribe 
                tables which shall apply in lieu of the tables contained 
                in paragraph (2) in the same manner as under paragraphs 
                (1) and (2) of subsection (f) (applied without regard to 
                clauses (i) and (ii) of subsection (f)(2)(A)), except 
                that in prescribing such tables--
                          ``(i) subsection (f)(3) shall be applied by 
                      substituting `calendar year 2017' for `calendar 
                      year 2016' in subparagraph (A)(ii) thereof,
                          ``(ii) subsection (f)(7)(B) shall apply to any 
                      unmarried individual other than a surviving spouse 
                      or head of household, and
                          ``(iii) subsection (f)(8) shall not apply.
            ``(4) Special rules for certain children with unearned 
        income.--
                    ``(A) In general.--In the case of a child to whom 
                subsection (g) applies for the taxable year, the rules 
                of subparagraphs (B) and (C) shall apply in lieu of the 
                rule under subsection (g)(1).
                    ``(B) Modifications to applicable rate brackets.--In 
                determining the amount of tax imposed by this section 
                for the taxable year on a child described in 
                subparagraph (A), the income tax table otherwise 
                applicable under this subsection to the child shall be 
                applied with the following modifications:

[[Page 131 STAT. 2057]]

                          ``(i) 24-percent bracket.--The maximum taxable 
                      income which is taxed at a rate below 24 percent 
                      shall not be more than the sum of--
                                    ``(I) the earned taxable income of 
                                such child, plus
                                    ``(II) the minimum taxable income 
                                for the 24-percent bracket in the table 
                                under paragraph (2)(E) (as adjusted 
                                under paragraph (3)) for the taxable 
                                year.
                          ``(ii) 35-percent bracket.--The maximum 
                      taxable income which is taxed at a rate below 35 
                      percent shall not be more than the sum of--
                                    ``(I) the earned taxable income of 
                                such child, plus
                                    ``(II) the minimum taxable income 
                                for the 35-percent bracket in the table 
                                under paragraph (2)(E) (as adjusted 
                                under paragraph (3)) for the taxable 
                                year.
                          ``(iii) 37-percent bracket.--The maximum 
                      taxable income which is taxed at a rate below 37 
                      percent shall not be more than the sum of--
                                    ``(I) the earned taxable income of 
                                such child, plus
                                    ``(II) the minimum taxable income 
                                for the 37-percent bracket in the table 
                                under paragraph (2)(E) (as adjusted 
                                under paragraph (3)) for the taxable 
                                year.
                    ``(C) Coordination with capital gains rates.--For 
                purposes of applying section 1(h) (after the 
                modifications under paragraph (5)(A))--
                          ``(i) the maximum zero rate amount shall not 
                      be more than the sum of--
                                    ``(I) the earned taxable income of 
                                such child, plus
                                    ``(II) the amount in effect under 
                                paragraph (5)(B)(i)(IV) for the taxable 
                                year, and
                          ``(ii) the maximum 15-percent rate amount 
                      shall not be more than the sum of--
                                    ``(I) the earned taxable income of 
                                such child, plus
                                    ``(II) the amount in effect under 
                                paragraph (5)(B)(ii)(IV) for the taxable 
                                year.
                    ``(D) Earned taxable income.--For purposes of this 
                paragraph, the term `earned taxable income' means, with 
                respect to any child for any taxable year, the taxable 
                income of such child reduced (but not below zero) by the 
                net unearned income (as defined in subsection (g)(4)) of 
                such child.
            ``(5) Application of current income tax brackets to capital 
        gains brackets.--
                    ``(A) In general.--Section 1(h)(1) shall be 
                applied--
                          ``(i) by substituting `below the maximum zero 
                      rate amount' for `which would (without regard to 
                      this paragraph) be taxed at a rate below 25 
                      percent' in subparagraph (B)(i), and
                          ``(ii) by substituting `below the maximum 15-
                      percent rate amount' for `which would (without 
                      regard

[[Page 131 STAT. 2058]]

                      to this paragraph) be taxed at a rate below 39.6 
                      percent' in subparagraph (C)(ii)(I).
                    ``(B) Maximum amounts defined.--For purposes of 
                applying section 1(h) with the modifications described 
                in subparagraph (A)--
                          ``(i) Maximum zero rate amount.--The maximum 
                      zero rate amount shall be--
                                    ``(I) in the case of a joint return 
                                or surviving spouse, $77,200,
                                    ``(II) in the case of an individual 
                                who is a head of household (as defined 
                                in section 2(b)), $51,700,
                                    ``(III) in the case of any other 
                                individual (other than an estate or 
                                trust), an amount equal to \1/2\ of the 
                                amount in effect for the taxable year 
                                under subclause (I), and
                                    ``(IV) in the case of an estate or 
                                trust, $2,600.
                          ``(ii) Maximum 15-percent rate amount.--The 
                      maximum 15-percent rate amount shall be--
                                    ``(I) in the case of a joint return 
                                or surviving spouse, $479,000 (\1/2\ 
                                such amount in the case of a married 
                                individual filing a separate return),
                                    ``(II) in the case of an individual 
                                who is the head of a household (as 
                                defined in section 2(b)), $452,400,
                                    ``(III) in the case of any other 
                                individual (other than an estate or 
                                trust), $425,800, and
                                    ``(IV) in the case of an estate or 
                                trust, $12,700.
                    ``(C) Inflation adjustment.--In the case of any 
                taxable year beginning after 2018, each of the dollar 
                amounts in clauses (i) and (ii) of subparagraph (B) 
                shall be increased by an amount equal to--
                          ``(i) such dollar amount, multiplied by
                          ``(ii) the cost-of-living adjustment 
                      determined under subsection (f)(3) for the 
                      calendar year in which the taxable year begins, 
                      determined by substituting `calendar year 2017' 
                      for `calendar year 2016' in subparagraph (A)(ii) 
                      thereof.
                If any increase under this subparagraph is not a 
                multiple of $50, such increase shall be rounded to the 
                next lowest multiple of $50.
            ``(6) Section 15 not to apply.--Section 15 shall not apply 
        to any change in a rate of tax by reason of this subsection.''.

    (b) Due Diligence Tax Preparer Requirement With Respect to Head of 
Household Filing Status.--Subsection (g) of section 6695 is 
amended <<NOTE: 26 USC 6695.>>  to read as follows:

    ``(g) Failure to Be Diligent in Determining Eligibility for Certain 
Tax Benefits.--Any person who is a tax return preparer with respect to 
any return or claim for refund who fails to comply with due diligence 
requirements imposed by the Secretary by regulations with respect to 
determining--
            ``(1) eligibility to file as a head of household (as defined 
        in section 2(b)) on the return, or
            ``(2) eligibility for, or the amount of, the credit 
        allowable by section 24, 25A(a)(1), or 32,

shall pay a penalty of $500 for each such failure.''.

[[Page 131 STAT. 2059]]

    (c) <<NOTE: 26 USC 1 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 11002. INFLATION ADJUSTMENTS BASED ON CHAINED CPI.

    (a) <<NOTE: 26 USC 1.>>  In General.--Subsection (f) of section 1 is 
amended by striking paragraph (3) and by inserting after paragraph (2) 
the following new paragraph:
            ``(3) Cost-of-living adjustment.--For purposes of this 
        subsection--
                    ``(A) In general.--The cost-of-living adjustment for 
                any calendar year is the percentage (if any) by which--
                          ``(i) the C-CPI-U for the preceding calendar 
                      year, exceeds
                          ``(ii) the CPI for calendar year 2016, 
                      multiplied by the amount determined under 
                      subparagraph (B).
                    ``(B) Amount determined.--The amount determined 
                under this clause is the amount obtained by dividing--
                          ``(i) the C-CPI-U for calendar year 2016, by
                          ``(ii) the CPI for calendar year 2016.
                    ``(C) Special rule for adjustments with a base year 
                after 2016.--For purposes of any provision of this title 
                which provides for the substitution of a year after 2016 
                for `2016' in subparagraph (A)(ii), subparagraph (A) 
                shall be applied by substituting `the C-CPI-U for 
                calendar year 2016' for `the CPI for calendar year 2016' 
                and all that follows in clause (ii) thereof.''.

    (b) C-CPI-U.--Subsection (f) of section 1 is amended by striking 
paragraph (7), by redesignating paragraph (6) as paragraph (7), and by 
inserting after paragraph (5) the following new paragraph:
            ``(6) C-CPI-U.--For purposes of this subsection--
                    ``(A) In general.--The term `C-CPI-U' means the 
                Chained Consumer Price Index for All Urban Consumers (as 
                published by the Bureau of Labor Statistics of the 
                Department of Labor). The values of the Chained Consumer 
                Price Index for All Urban Consumers taken into account 
                for purposes of determining the cost-of-living 
                adjustment for any calendar year under this subsection 
                shall be the latest values so published as of the date 
                on which such Bureau publishes the initial value of the 
                Chained Consumer Price Index for All Urban Consumers for 
                the month of August for the preceding calendar year.
                    ``(B) Determination for calendar year.--The C-CPI-U 
                for any calendar year is the average of the C-CPI-U as 
                of the close of the 12-month period ending on August 31 
                of such calendar year.''.

    (c) Application to Permanent Tax Tables.--
            (1) In general.--Section 1(f)(2)(A) is amended to read as 
        follows:
                    ``(A) except as provided in paragraph (8), by 
                increasing the minimum and maximum dollar amounts for 
                each bracket for which a tax is imposed under such table 
                by the cost-of-living adjustment for such calendar year, 
                determined--
                          ``(i) except as provided in clause (ii), by 
                      substituting `1992' for `2016' in paragraph 
                      (3)(A)(ii), and
                          ``(ii) in the case of adjustments to the 
                      dollar amounts at which the 36 percent rate 
                      bracket begins

[[Page 131 STAT. 2060]]

                      or at which the 39.6 percent rate bracket begins, 
                      by substituting `1993' for `2016' in paragraph 
                      (3)(A)(ii),''.
            (2) <<NOTE: 26 USC 1.>>  Conforming amendments.--Section 
        1(i) is amended--
                    (A) by striking ``for `1992' in subparagraph (B)'' 
                in paragraph (1)(C) and inserting ``for `2016' in 
                subparagraph (A)(ii)'', and
                    (B) by striking ``subsection (f)(3)(B) shall be 
                applied by substituting `2012' for `1992' '' in 
                paragraph (3)(C) and inserting ``subsection 
                (f)(3)(A)(ii) shall be applied by substituting `2012' 
                for `2016' ''.

    (d) Application to Other Internal Revenue Code of 1986 Provisions.--
            (1) The following sections are each amended by striking 
        ``for `calendar year 1992' in subparagraph (B)'' and inserting 
        ``for `calendar year 2016' in subparagraph (A)(ii)'':
                    (A) Section 23(h)(2).
                    (B) Paragraphs (1)(A)(ii) and (2)(A)(ii) of section 
                25A(h).
                    (C) Section 25B(b)(3)(B).
                    (D) Subsection (b)(2)(B)(ii)(II), and clauses (i) 
                and (ii) of subsection (j)(1)(B), of section 32.
                    (E) Section 36B(f)(2)(B)(ii)(II).
                    (F) Section 41(e)(5)(C)(i).
                    (G) Subsections (e)(3)(D)(ii) and (h)(3)(H)(i)(II) 
                of section 42.
                    (H) Section 45R(d)(3)(B)(ii).
                    (I) Section 55(d)(4)(A)(ii).
                    (J) Section 62(d)(3)(B).
                    (K) Section 63(c)(4)(B).
                    (L) Section 125(i)(2)(B).
                    (M) Section 135(b)(2)(B)(ii).
                    (N) Section 137(f)(2).
                    (O) Section 146(d)(2)(B).
                    (P) Section 147(c)(2)(H)(ii).
                    (Q) Section 151(d)(4)(B).
                    (R) Section 179(b)(6)(A)(ii).
                    (S) Subsections (b)(5)(C)(i)(II) and (g)(8)(B) of 
                section 219.
                    (T) Section 220(g)(2).
                    (U) Section 221(f)(1)(B).
                    (V) Section 223(g)(1)(B).
                    (W) Section 408A(c)(3)(D)(ii).
                    (X) Section 430(c)(7)(D)(vii)(II).
                    (Y) Section 512(d)(2)(B).
                    (Z) Section 513(h)(2)(C)(ii).
                    (AA) Section 831(b)(2)(D)(ii).
                    (BB) Section 877A(a)(3)(B)(i)(II).
                    (CC) Section 2010(c)(3)(B)(ii).
                    (DD) Section 2032A(a)(3)(B).
                    (EE) Section 2503(b)(2)(B).
                    (FF) Section 4261(e)(4)(A)(ii).
                    (GG) Section 5000A(c)(3)(D)(ii).
                    (HH) Section 6323(i)(4)(B).
                    (II) Section 6334(g)(1)(B).
                    (JJ) Section 6601(j)(3)(B).
                    (KK) Section 6651(i)(1).
                    (LL) Section 6652(c)(7)(A).
                    (MM) Section 6695(h)(1).

[[Page 131 STAT. 2061]]

                    (NN) Section 6698(e)(1).
                    (OO) Section 6699(e)(1).
                    (PP) Section 6721(f)(1).
                    (QQ) Section 6722(f)(1).
                    (RR) Section 7345(f)(2).
                    (SS) Section 7430(c)(1).
                    (TT) Section 9831(d)(2)(D)(ii)(II).
            (2) <<NOTE: 26 USC 41, 68.>>  Sections 41(e)(5)(C)(ii) and 
        68(b)(2)(B) are each amended--
                    (A) by striking ``1(f)(3)(B)'' and inserting 
                ``1(f)(3)(A)(ii)'', and
                    (B) by striking ``1992'' and inserting ``2016''.
            (3) Section 42(h)(6)(G) is amended--
                    (A) by striking ``for `calendar year 1987' '' in 
                clause (i)(II) and inserting ``for `calendar year 2016' 
                in subparagraph (A)(ii) thereof'', and
                    (B) by striking ``if the CPI for any calendar year'' 
                and all that follows in clause (ii) and inserting ``if 
                the C-CPI-U for any calendar year (as defined in section 
                1(f)(6)) exceeds the C-CPI-U for the preceding calendar 
                year by more than 5 percent, the C-CPI-U for the base 
                calendar year shall be increased such that such excess 
                shall never be taken into account under clause (i). In 
                the case of a base calendar year before 2017, the C-CPI-
                U for such year shall be determined by multiplying the 
                CPI for such year by the amount determined under section 
                1(f)(3)(B).''.
            (4) Section 59(j)(2)(B) is amended by striking ``for `1992' 
        in subparagraph (B)'' and inserting ``for `2016' in subparagraph 
        (A)(ii)''.
            (5) Section 132(f)(6)(A)(ii) is amended by striking ``for 
        `calendar year 1992' '' and inserting ``for `calendar year 2016' 
        in subparagraph (A)(ii) thereof''.
            (6) Section 162(o)(3) is amended by striking ``adjusted for 
        changes in the Consumer Price Index (as defined in section 
        1(f)(5)) since 1991'' and inserting ``adjusted by increasing any 
        such amount under the 1991 agreement by an amount equal to--
                    ``(A) such amount, multiplied by
                    ``(B) the cost-of-living adjustment determined under 
                section 1(f)(3) for the calendar year in which the 
                taxable year begins, by substituting `calendar year 
                1990' for `calendar year 2016' in subparagraph (A)(ii) 
                thereof''.
            (7) So much of clause (ii) of section 213(d)(10)(B) as 
        precedes the last sentence is amended to read as follows:
                          ``(ii) Medical care cost adjustment.--For 
                      purposes of clause (i), the medical care cost 
                      adjustment for any calendar year is the percentage 
                      (if any) by which--
                                    ``(I) the medical care component of 
                                the C-CPI-U (as defined in section 
                                1(f)(6)) for August of the preceding 
                                calendar year, exceeds
                                    ``(II) such component of the CPI (as 
                                defined in section 1(f)(4)) for August 
                                of 1996, multiplied by the amount 
                                determined under section 1(f)(3)(B).''.
            (8) Subparagraph (B) of section 280F(d)(7) is amended to 
        read as follows:

[[Page 131 STAT. 2062]]

                    ``(B) Automobile price inflation adjustment.--For 
                purposes of this paragraph--
                          ``(i) In general.--The automobile price 
                      inflation adjustment for any calendar year is the 
                      percentage (if any) by which--
                                    ``(I) the C-CPI-U automobile 
                                component for October of the preceding 
                                calendar year, exceeds
                                    ``(II) the automobile component of 
                                the CPI (as defined in section 1(f)(4)) 
                                for October of 1987, multiplied by the 
                                amount determined under 1(f)(3)(B).
                          ``(ii) C-CPI-U automobile component.--The term 
                      `C-CPI-U automobile component' means the 
                      automobile component of the Chained Consumer Price 
                      Index for All Urban Consumers (as described in 
                      section 1(f)(6)).''.
            (9) <<NOTE: 26 USC 911.>>  Section 911(b)(2)(D)(ii)(II) is 
        amended by striking ``for `1992' in subparagraph (B)'' and 
        inserting ``for `2016' in subparagraph (A)(ii)''.
            (10) Paragraph (2) of section 1274A(d) is amended to read as 
        follows:
            ``(2) Adjustment for inflation.--In the case of any debt 
        instrument arising out of a sale or exchange during any calendar 
        year after 1989, each dollar amount contained in the preceding 
        provisions of this section shall be increased by an amount equal 
        to--
                    ``(A) such amount, multiplied by
                    ``(B) the cost-of-living adjustment determined under 
                section 1(f)(3) for the calendar year in which the 
                taxable year begins, by substituting `calendar year 
                1988' for `calendar year 2016' in subparagraph (A)(ii) 
                thereof.
        Any increase under the preceding sentence shall be rounded to 
        the nearest multiple of $100 (or, if such increase is a multiple 
        of $50, such increase shall be increased to the nearest multiple 
        of $100).''.
            (11) Section 4161(b)(2)(C)(i)(II) is amended by striking 
        ``for `1992' in subparagraph (B)'' and inserting ``for `2016' in 
        subparagraph (A)(ii)''.
            (12) Section 4980I(b)(3)(C)(v)(II) is amended by striking 
        ``for `1992' in subparagraph (B)'' and inserting ``for `2016' in 
        subparagraph (A)(ii)''.
            (13) Section 6039F(d) is amended by striking ``subparagraph 
        (B) thereof shall be applied by substituting `1995' for `1992' 
        '' and inserting ``subparagraph (A)(ii) thereof shall be applied 
        by substituting `1995' for `2016' ''.
            (14) Section 7872(g)(5) is amended to read as follows:
            ``(5) Adjustment of limit for inflation.--In the case of any 
        loan made during any calendar year after 1986, the dollar amount 
        in paragraph (2) shall be increased by an amount equal to--
                    ``(A) such amount, multiplied by
                    ``(B) the cost-of-living adjustment determined under 
                section 1(f)(3) for the calendar year in which the 
                taxable year begins, by substituting `calendar year 
                1985' for `calendar year 2016' in subparagraph (A)(ii) 
                thereof.
        Any increase under the preceding sentence shall be rounded to 
        the nearest multiple of $100 (or, if such increase is a multiple

[[Page 131 STAT. 2063]]

        of $50, such increase shall be increased to the nearest multiple 
        of $100).''.

    (e) <<NOTE: 26 USC 1 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.

 PART II--DEDUCTION FOR QUALIFIED BUSINESS INCOME OF PASS-THRU ENTITIES

SEC. 11011. DEDUCTION FOR QUALIFIED BUSINESS INCOME.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
adding at the end the following new section:
``SEC. 199A. <<NOTE: 26 USC 199A.>>  QUALIFIED BUSINESS INCOME.

    ``(a) In General.--In the case of a taxpayer other than a 
corporation, there shall be allowed as a deduction for any taxable year 
an amount equal to the sum of--
            ``(1) the lesser of--
                    ``(A) the combined qualified business income amount 
                of the taxpayer, or
                    ``(B) an amount equal to 20 percent of the excess 
                (if any) of--
                          ``(i) the taxable income of the taxpayer for 
                      the taxable year, over
                          ``(ii) the sum of any net capital gain (as 
                      defined in section 1(h)), plus the aggregate 
                      amount of the qualified cooperative dividends, of 
                      the taxpayer for the taxable year, plus
            ``(2) the lesser of--
                    ``(A) 20 percent of the aggregate amount of the 
                qualified cooperative dividends of the taxpayer for the 
                taxable year, or
                    ``(B) taxable income (reduced by the net capital 
                gain (as so defined)) of the taxpayer for the taxable 
                year.

The amount determined under the preceding sentence shall not exceed the 
taxable income (reduced by the net capital gain (as so defined)) of the 
taxpayer for the taxable year.
    ``(b) Combined Qualified Business Income Amount.--For purposes of 
this section--
            ``(1) In general.--The term `combined qualified business 
        income amount' means, with respect to any taxable year, an 
        amount equal to--
                    ``(A) the sum of the amounts determined under 
                paragraph (2) for each qualified trade or business 
                carried on by the taxpayer, plus
                    ``(B) 20 percent of the aggregate amount of the 
                qualified REIT dividends and qualified publicly traded 
                partnership income of the taxpayer for the taxable year.
            ``(2) Determination of deductible amount for each trade or 
        business.--The amount determined under this paragraph with 
        respect to any qualified trade or business is the lesser of--
                    ``(A) 20 percent of the taxpayer's qualified 
                business income with respect to the qualified trade or 
                business, or
                    ``(B) the greater of--
                          ``(i) 50 percent of the W-2 wages with respect 
                      to the qualified trade or business, or

[[Page 131 STAT. 2064]]

                          ``(ii) the sum of 25 percent of the W-2 wages 
                      with respect to the qualified trade or business, 
                      plus 2.5 percent of the unadjusted basis 
                      immediately after acquisition of all qualified 
                      property.
            ``(3) Modifications to limit based on taxable income.--
                    ``(A) Exception from limit.--In the case of any 
                taxpayer whose taxable income for the taxable year does 
                not exceed the threshold amount, paragraph (2) shall be 
                applied without regard to subparagraph (B).
                    ``(B) Phase-in of limit for certain taxpayers.--
                          ``(i) In general.--If--
                                    ``(I) the taxable income of a 
                                taxpayer for any taxable year exceeds 
                                the threshold amount, but does not 
                                exceed the sum of the threshold amount 
                                plus $50,000 ($100,000 in the case of a 
                                joint return), and
                                    ``(II) the amount determined under 
                                paragraph (2)(B) (determined without 
                                regard to this subparagraph) with 
                                respect to any qualified trade or 
                                business carried on by the taxpayer is 
                                less than the amount determined under 
                                paragraph (2)(A) with respect such trade 
                                or business,
                      then paragraph (2) shall be applied with respect 
                      to such trade or business without regard to 
                      subparagraph (B) thereof and by reducing the 
                      amount determined under subparagraph (A) thereof 
                      by the amount determined under clause (ii).
                          ``(ii) Amount of reduction.--The amount 
                      determined under this subparagraph is the amount 
                      which bears the same ratio to the excess amount 
                      as--
                                    ``(I) the amount by which the 
                                taxpayer's taxable income for the 
                                taxable year exceeds the threshold 
                                amount, bears to
                                    ``(II) $50,000 ($100,000 in the case 
                                of a joint return).
                          ``(iii) Excess amount.--For purposes of clause 
                      (ii), the excess amount is the excess of--
                                    ``(I) the amount determined under 
                                paragraph (2)(A) (determined without 
                                regard to this paragraph), over
                                    ``(II) the amount determined under 
                                paragraph (2)(B) (determined without 
                                regard to this paragraph).
            ``(4) Wages, etc.--
                    ``(A) In general.--The term `W-2 wages' means, with 
                respect to any person for any taxable year of such 
                person, the amounts described in paragraphs (3) and (8) 
                of section 6051(a) paid by such person with respect to 
                employment of employees by such person during the 
                calendar year ending during such taxable year.
                    ``(B) Limitation to wages attributable to qualified 
                business income.--Such term shall not include any amount 
                which is not properly allocable to qualified business 
                income for purposes of subsection (c)(1).
                    ``(C) Return requirement.--Such term shall not 
                include any amount which is not properly included in a 
                return filed with the Social Security Administration on

[[Page 131 STAT. 2065]]

                or before the 60th day after the due date (including 
                extensions) for such return.
            ``(5) Acquisitions, dispositions, and short taxable years.--
        The Secretary shall provide for the application of this 
        subsection in cases of a short taxable year or where the 
        taxpayer acquires, or disposes of, the major portion of a trade 
        or business or the major portion of a separate unit of a trade 
        or business during the taxable year.
            ``(6) Qualified property.--For purposes of this section:
                    ``(A) In general.--The term `qualified property' 
                means, with respect to any qualified trade or business 
                for a taxable year, tangible property of a character 
                subject to the allowance for depreciation under section 
                167--
                          ``(i) which is held by, and available for use 
                      in, the qualified trade or business at the close 
                      of the taxable year,
                          ``(ii) which is used at any point during the 
                      taxable year in the production of qualified 
                      business income, and
                          ``(iii) the depreciable period for which has 
                      not ended before the close of the taxable year.
                    ``(B) Depreciable period.--The term `depreciable 
                period' means, with respect to qualified property of a 
                taxpayer, the period beginning on the date the property 
                was first placed in service by the taxpayer and ending 
                on the later of--
                          ``(i) the date that is 10 years after such 
                      date, or
                          ``(ii) the last day of the last full year in 
                      the applicable recovery period that would apply to 
                      the property under section 168 (determined without 
                      regard to subsection (g) thereof).

    ``(c) Qualified Business Income.--For purposes of this section--
            ``(1) In general.--The term `qualified business income' 
        means, for any taxable year, the net amount of qualified items 
        of income, gain, deduction, and loss with respect to any 
        qualified trade or business of the taxpayer. Such term shall not 
        include any qualified REIT dividends, qualified cooperative 
        dividends, or qualified publicly traded partnership income.
            ``(2) Carryover of losses.--If the net amount of qualified 
        income, gain, deduction, and loss with respect to qualified 
        trades or businesses of the taxpayer for any taxable year is 
        less than zero, such amount shall be treated as a loss from a 
        qualified trade or business in the succeeding taxable year.
            ``(3) Qualified items of income, gain, deduction, and 
        loss.--For purposes of this subsection--
                    ``(A) In general.--The term `qualified items of 
                income, gain, deduction, and loss' means items of 
                income, gain, deduction, and loss to the extent such 
                items are--
                          ``(i) effectively connected with the conduct 
                      of a trade or business within the United States 
                      (within the meaning of section 864(c), determined 
                      by substituting `qualified trade or business 
                      (within the meaning of section 199A)' for 
                      `nonresident alien individual or a foreign 
                      corporation' or for `a foreign corporation' each 
                      place it appears), and

[[Page 131 STAT. 2066]]

                          ``(ii) included or allowed in determining 
                      taxable income for the taxable year.
                    ``(B) Exceptions.--The following investment items 
                shall not be taken into account as a qualified item of 
                income, gain, deduction, or loss:
                          ``(i) Any item of short-term capital gain, 
                      short-term capital loss, long-term capital gain, 
                      or long-term capital loss.
                          ``(ii) Any dividend, income equivalent to a 
                      dividend, or payment in lieu of dividends 
                      described in section 954(c)(1)(G).
                          ``(iii) Any interest income other than 
                      interest income which is properly allocable to a 
                      trade or business.
                          ``(iv) Any item of gain or loss described in 
                      subparagraph (C) or (D) of section 954(c)(1) 
                      (applied by substituting `qualified trade or 
                      business' for `controlled foreign corporation').
                          ``(v) Any item of income, gain, deduction, or 
                      loss taken into account under section 954(c)(1)(F) 
                      (determined without regard to clause (ii) thereof 
                      and other than items attributable to notional 
                      principal contracts entered into in transactions 
                      qualifying under section 1221(a)(7)).
                          ``(vi) Any amount received from an annuity 
                      which is not received in connection with the trade 
                      or business.
                          ``(vii) Any item of deduction or loss properly 
                      allocable to an amount described in any of the 
                      preceding clauses.
            ``(4) Treatment of reasonable compensation and guaranteed 
        payments.--Qualified business income shall not include--
                    ``(A) reasonable compensation paid to the taxpayer 
                by any qualified trade or business of the taxpayer for 
                services rendered with respect to the trade or business,
                    ``(B) any guaranteed payment described in section 
                707(c) paid to a partner for services rendered with 
                respect to the trade or business, and
                    ``(C) to the extent provided in regulations, any 
                payment described in section 707(a) to a partner for 
                services rendered with respect to the trade or business.

    ``(d) Qualified Trade or Business.--For purposes of this section--
            ``(1) In general.--The term `qualified trade or business' 
        means any trade or business other than--
                    ``(A) a specified service trade or business, or
                    ``(B) the trade or business of performing services 
                as an employee.
            ``(2) Specified service trade or business.--The term 
        `specified service trade or business' means any trade or 
        business--
                    ``(A) which is described in section 1202(e)(3)(A) 
                (applied without regard to the words `engineering, 
                architecture,') or which would be so described if the 
                term `employees or owners' were substituted for 
                `employees' therein, or
                    ``(B) which involves the performance of services 
                that consist of investing and investment management, 
                trading,

[[Page 131 STAT. 2067]]

                or dealing in securities (as defined in section 
                475(c)(2)), partnership interests, or commodities (as 
                defined in section 475(e)(2)).
            ``(3) Exception for specified service businesses based on 
        taxpayer's income.--
                    ``(A) In general.--If, for any taxable year, the 
                taxable income of any taxpayer is less than the sum of 
                the threshold amount plus $50,000 ($100,000 in the case 
                of a joint return), then--
                          ``(i) any specified service trade or business 
                      of the taxpayer shall not fail to be treated as a 
                      qualified trade or business due to paragraph 
                      (1)(A), but
                          ``(ii) only the applicable percentage of 
                      qualified items of income, gain, deduction, or 
                      loss, and the W-2 wages and the unadjusted basis 
                      immediately after acquisition of qualified 
                      property, of the taxpayer allocable to such 
                      specified service trade or business shall be taken 
                      into account in computing the qualified business 
                      income, W-2 wages, and the unadjusted basis 
                      immediately after acquisition of qualified 
                      property of the taxpayer for the taxable year for 
                      purposes of applying this section.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the term `applicable percentage' 
                means, with respect to any taxable year, 100 percent 
                reduced (not below zero) by the percentage equal to the 
                ratio of--
                          ``(i) the taxable income of the taxpayer for 
                      the taxable year in excess of the threshold 
                      amount, bears to
                          ``(ii) $50,000 ($100,000 in the case of a 
                      joint return).

    ``(e) Other Definitions.--For purposes of this section--
            ``(1) Taxable income.--Taxable income shall be computed 
        without regard to the deduction allowable under this section.
            ``(2) Threshold amount.--
                    ``(A) In general.--The term `threshold amount' means 
                $157,500 (200 percent of such amount in the case of a 
                joint return).
                    ``(B) Inflation adjustment.--In the case of any 
                taxable year beginning after 2018, the dollar amount in 
                subparagraph (A) shall be increased by an amount equal 
                to--
                          ``(i) such dollar amount, multiplied by
                          ``(ii) the cost-of-living adjustment 
                      determined under section 1(f)(3) for the calendar 
                      year in which the taxable year begins, determined 
                      by substituting `calendar year 2017' for `calendar 
                      year 2016' in subparagraph (A)(ii) thereof.
                The amount of any increase under the preceding sentence 
                shall be rounded as provided in section 1(f)(7).
            ``(3) Qualified reit dividend.--The term `qualified REIT 
        dividend' means any dividend from a real estate investment trust 
        received during the taxable year which--
                    ``(A) is not a capital gain dividend, as defined in 
                section 857(b)(3), and
                    ``(B) is not qualified dividend income, as defined 
                in section 1(h)(11).

[[Page 131 STAT. 2068]]

            ``(4) Qualified cooperative dividend.--The term `qualified 
        cooperative dividend' means any patronage dividend (as defined 
        in section 1388(a)), any per-unit retain allocation (as defined 
        in section 1388(f)), and any qualified written notice of 
        allocation (as defined in section 1388(c)), or any similar 
        amount received from an organization described in subparagraph 
        (B)(ii), which--
                    ``(A) is includible in gross income, and
                    ``(B) is received from--
                          ``(i) an organization or corporation described 
                      in section 501(c)(12) or 1381(a), or
                          ``(ii) an organization which is governed under 
                      this title by the rules applicable to cooperatives 
                      under this title before the enactment of 
                      subchapter T.
            ``(5) Qualified publicly traded partnership income.--The 
        term `qualified publicly traded partnership income' means, with 
        respect to any qualified trade or business of a taxpayer, the 
        sum of--
                    ``(A) the net amount of such taxpayer's allocable 
                share of each qualified item of income, gain, deduction, 
                and loss (as defined in subsection (c)(3) and determined 
                after the application of subsection (c)(4)) from a 
                publicly traded partnership (as defined in section 
                7704(a)) which is not treated as a corporation under 
                section 7704(c), plus
                    ``(B) any gain recognized by such taxpayer upon 
                disposition of its interest in such partnership to the 
                extent such gain is treated as an amount realized from 
                the sale or exchange of property other than a capital 
                asset under section 751(a).

    ``(f) Special Rules.--
            ``(1) Application to partnerships and s corporations.--
                    ``(A) In general.--In the case of a partnership or S 
                corporation--
                          ``(i) this section shall be applied at the 
                      partner or shareholder level,
                          ``(ii) each partner or shareholder shall take 
                      into account such person's allocable share of each 
                      qualified item of income, gain, deduction, and 
                      loss, and
                          ``(iii) each partner or shareholder shall be 
                      treated for purposes of subsection (b) as having 
                      W-2 wages and unadjusted basis immediately after 
                      acquisition of qualified property for the taxable 
                      year in an amount equal to such person's allocable 
                      share of the W-2 wages and the unadjusted basis 
                      immediately after acquisition of qualified 
                      property of the partnership or S corporation for 
                      the taxable year (as determined under regulations 
                      prescribed by the Secretary).
                For purposes of clause (iii), a partner's or 
                shareholder's allocable share of W-2 wages shall be 
                determined in the same manner as the partner's or 
                shareholder's allocable share of wage expenses. For 
                purposes of such clause, partner's or shareholder's 
                allocable share of the unadjusted basis immediately 
                after acquisition of qualified property shall be 
                determined in the same manner as the partner's or 
                shareholder's allocable share of depreciation. For 
                purposes of this subparagraph, in the case of an S 
                corporation,

[[Page 131 STAT. 2069]]

                an allocable share shall be the shareholder's pro rata 
                share of an item.
                    ``(B) Application to trusts and estates.--Rules 
                similar to the rules under section 199(d)(1)(B)(i) (as 
                in effect on December 1, 2017) for the apportionment of 
                W-2 wages shall apply to the apportionment of W-2 wages 
                and the apportionment of unadjusted basis immediately 
                after acquisition of qualified property under this 
                section.
                    ``(C) Treatment of trades or business in puerto 
                rico.--
                          ``(i) In general.--In the case of any taxpayer 
                      with qualified business income from sources within 
                      the commonwealth of Puerto Rico, if all such 
                      income is taxable under section 1 for such taxable 
                      year, then for purposes of determining the 
                      qualified business income of such taxpayer for 
                      such taxable year, the term `United States' shall 
                      include the Commonwealth of Puerto Rico.
                          ``(ii) Special rule for applying limit.--In 
                      the case of any taxpayer described in clause (i), 
                      the determination of W-2 wages of such taxpayer 
                      with respect to any qualified trade or business 
                      conducted in Puerto Rico shall be made without 
                      regard to any exclusion under section 3401(a)(8) 
                      for remuneration paid for services in Puerto Rico.
            ``(2) Coordination with minimum tax.--For purposes of 
        determining alternative minimum taxable income under section 55, 
        qualified business income shall be determined without regard to 
        any adjustments under sections 56 through 59.
            ``(3) Deduction limited to income taxes.--The deduction 
        under subsection (a) shall only be allowed for purposes of this 
        chapter.
            ``(4) Regulations.--The Secretary shall prescribe such 
        regulations as are necessary to carry out the purposes of this 
        section, including regulations--
                    ``(A) for requiring or restricting the allocation of 
                items and wages under this section and such reporting 
                requirements as the Secretary determines appropriate, 
                and
                    ``(B) for the application of this section in the 
                case of tiered entities.

    ``(g) Deduction Allowed to Specified Agricultural or Horticultural 
Cooperatives.--
            ``(1) In general.--In the case of any taxable year of a 
        specified agricultural or horticultural cooperative beginning 
        after December 31, 2017, there shall be allowed a deduction in 
        an amount equal to the lesser of--
                    ``(A) 20 percent of the excess (if any) of--
                          ``(i) the gross income of a specified 
                      agricultural or horticultural cooperative, over
                          ``(ii) the qualified cooperative dividends (as 
                      defined in subsection (e)(4)) paid during the 
                      taxable year for the taxable year, or
                    ``(B) the greater of--
                          ``(i) 50 percent of the W-2 wages of the 
                      cooperative with respect to its trade or business, 
                      or
                          ``(ii) the sum of 25 percent of the W-2 wages 
                      of the cooperative with respect to its trade or 
                      business,

[[Page 131 STAT. 2070]]

                      plus 2.5 percent of the unadjusted basis 
                      immediately after acquisition of all qualified 
                      property of the cooperative.
            ``(2) Limitation.--The amount determined under paragraph (1) 
        shall not exceed the taxable income of the specified 
        agricultural or horticultural for the taxable year.
            ``(3) Specified agricultural or horticultural cooperative.--
        For purposes of this subsection, the term `specified 
        agricultural or horticultural cooperative' means an organization 
        to which part I of subchapter T applies which is engaged in--
                    ``(A) the manufacturing, production, growth, or 
                extraction in whole or significant part of any 
                agricultural or horticultural product,
                    ``(B) the marketing of agricultural or horticultural 
                products which its patrons have so manufactured, 
                produced, grown, or extracted, or
                    ``(C) the provision of supplies, equipment, or 
                services to farmers or to organizations described in 
                subparagraph (A) or (B).

    ``(h) Anti-abuse Rules.--The Secretary shall--
            ``(1) apply rules similar to the rules under section 
        179(d)(2) in order to prevent the manipulation of the 
        depreciable period of qualified property using transactions 
        between related parties, and
            ``(2) prescribe rules for determining the unadjusted basis 
        immediately after acquisition of qualified property acquired in 
        like-kind exchanges or involuntary conversions.

    ``(i) Termination.--This section shall not apply to taxable years 
beginning after December 31, 2025.''.
    (b) Treatment of Deduction in Computing Adjusted Gross and Taxable 
Income.--
            (1) Deduction not allowed in computing adjusted gross 
        income.--Section 62(a) <<NOTE: 26 USC 62.>>  is amended by 
        adding at the end the following new sentence: ``The deduction 
        allowed by section 199A shall not be treated as a deduction 
        described in any of the preceding paragraphs of this 
        subsection.''.
            (2) Deduction allowed to nonitemizers.--Section 63(b) is 
        amended by striking ``and'' at the end of paragraph (1), by 
        striking the period at the end of paragraph (2) and inserting 
        ``, and'', and by adding at the end the following new paragraph:
            ``(3) the deduction provided in section 199A.''.
            (3) Deduction allowed to itemizers without limits on 
        itemized deductions.--Section 63(d) is amended by striking 
        ``and'' at the end of paragraph (1), by striking the period at 
        the end of paragraph (2) and inserting ``, and'', and by adding 
        at the end the following new paragraph:
            ``(3) the deduction provided in section 199A.''.
            (4) Conforming amendment.--Section 3402(m)(1) is amended by 
        inserting ``and the estimated deduction allowed under section 
        199A'' after ``chapter 1''.

    (c) Accuracy-Related Penalty on Determination of Applicable 
Percentage.--Section 6662(d)(1) is amended by inserting at the end the 
following new subparagraph:
                    ``(C) Special rule for taxpayers claiming section 
                199a deduction.--In the case of any taxpayer who claims 
                the deduction allowed under section 199A for the taxable

[[Page 131 STAT. 2071]]

                year, subparagraph (A) shall be applied by substituting 
                `5 percent' for `10 percent'.''.

    (d) Conforming Amendments.--
            (1) Section 172(d) <<NOTE: 26 USC 172.>>  is amended by 
        adding at the end the following new paragraph:
            ``(8) Qualified business income deduction.--The deduction 
        under section 199A shall not be allowed.''.
            (2) Section 246(b)(1) is amended by inserting ``199A,'' 
        before ``243(a)(1)''.
            (3) Section 613(a) is amended by inserting ``and without the 
        deduction under section 199A'' after ``and without the deduction 
        under section 199''.
            (4) Section 613A(d)(1) is amended by redesignating 
        subparagraphs (C), (D), and (E) as subparagraphs (D), (E), and 
        (F), respectively, and by inserting after subparagraph (B), the 
        following new subparagraph:
                    ``(C) any deduction allowable under section 199A,''.
            (5) Section 170(b)(2)(D) is amended by striking ``and'' in 
        clause (iv), by striking the period at the end of clause (v), 
        and by adding at the end the following new clause:
                          ``(vi) section 199A(g).''.
            (6) The table of sections for part VI of subchapter B of 
        chapter 1 <<NOTE: 26 USC 161 prec.>>  is amended by inserting at 
        the end the following new item:

``Sec. 199A. Qualified business income.''.

    (e) <<NOTE: 26 USC 62 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 11012. LIMITATION ON LOSSES FOR TAXPAYERS OTHER THAN 
                            CORPORATIONS.

    (a) In General.--Section 461 is amended by adding at the end the 
following new subsection:
    ``(l) Limitation on Excess Business Losses of Noncorporate 
Taxpayers.--
            ``(1) Limitation.--In the case of taxable year of a taxpayer 
        other than a corporation beginning after December 31, 2017, and 
        before January 1, 2026--
                    ``(A) subsection (j) (relating to limitation on 
                excess farm losses of certain taxpayers) shall not 
                apply, and
                    ``(B) any excess business loss of the taxpayer for 
                the taxable year shall not be allowed.
            ``(2) Disallowed loss carryover.--Any loss which is 
        disallowed under paragraph (1) shall be treated as a net 
        operating loss carryover to the following taxable year under 
        section 172.
            ``(3) Excess business loss.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `excess business loss' 
                means the excess (if any) of--
                          ``(i) the aggregate deductions of the taxpayer 
                      for the taxable year which are attributable to 
                      trades or businesses of such taxpayer (determined 
                      without regard to whether or not such deductions 
                      are disallowed for such taxable year under 
                      paragraph (1)), over
                          ``(ii) the sum of--

[[Page 131 STAT. 2072]]

                                    ``(I) the aggregate gross income or 
                                gain of such taxpayer for the taxable 
                                year which is attributable to such 
                                trades or businesses, plus
                                    ``(II) $250,000 (200 percent of such 
                                amount in the case of a joint return).
                    ``(B) Adjustment for inflation.--In the case of any 
                taxable year beginning after December 31, 2018, the 
                $250,000 amount in subparagraph (A)(ii)(II) shall be 
                increased by an amount equal to--
                          ``(i) such dollar amount, multiplied by
                          ``(ii) the cost-of-living adjustment 
                      determined under section 1(f)(3) for the calendar 
                      year in which the taxable year begins, determined 
                      by substituting `2017' for `2016' in subparagraph 
                      (A)(ii) thereof.
                      If any amount as increased under the preceding 
                      sentence is not a multiple of $1,000, such amount 
                      shall be rounded to the nearest multiple of 
                      $1,000.
            ``(4) Application of subsection in case of partnerships and 
        s corporations.--In the case of a partnership or S corporation--
                    ``(A) this subsection shall be applied at the 
                partner or shareholder level, and
                    ``(B) each partner's or shareholder's allocable 
                share of the items of income, gain, deduction, or loss 
                of the partnership or S corporation for any taxable year 
                from trades or businesses attributable to the 
                partnership or S corporation shall be taken into account 
                by the partner or shareholder in applying this 
                subsection to the taxable year of such partner or 
                shareholder with or within which the taxable year of the 
                partnership or S corporation ends.
        For purposes of this paragraph, in the case of an S corporation, 
        an allocable share shall be the shareholder's pro rata share of 
        an item.
            ``(5) Additional reporting.--The Secretary shall prescribe 
        such additional reporting requirements as the Secretary 
        determines necessary to carry out the purposes of this 
        subsection.
            ``(6) Coordination with section 469.--This subsection shall 
        be applied after the application of section 469.''.

    (b) <<NOTE: 26 USC 461 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.

           PART III--TAX BENEFITS FOR FAMILIES AND INDIVIDUALS

SEC. 11021. INCREASE IN STANDARD DEDUCTION.

    (a) In General.--Subsection (c) of section 63 <<NOTE: 26 USC 63.>>  
is amended by adding at the end the following new paragraph:
            ``(7) Special rules for taxable years 2018 through 2025.--In 
        the case of a taxable year beginning after December 31, 2017, 
        and before January 1, 2026--
                    ``(A) Increase in standard deduction.--Paragraph (2) 
                shall be applied--
                          ``(i) by substituting `$18,000' for `$4,400' 
                      in subparagraph (B), and
                          ``(ii) by substituting `$12,000' for `$3,000' 
                      in subparagraph (C).
                    ``(B) Adjustment for inflation.--

[[Page 131 STAT. 2073]]

                          ``(i) In general.--Paragraph (4) shall not 
                      apply to the dollar amounts contained in 
                      paragraphs (2)(B) and (2)(C).
                          ``(ii) Adjustment of increased amounts.--In 
                      the case of a taxable year beginning after 2018, 
                      the $18,000 and $12,000 amounts in subparagraph 
                      (A) shall each be increased by an amount equal 
                      to--
                                    ``(I) such dollar amount, multiplied 
                                by
                                    ``(II) the cost-of-living adjustment 
                                determined under section 1(f)(3) for the 
                                calendar year in which the taxable year 
                                begins, determined by substituting 
                                `2017' for `2016' in subparagraph 
                                (A)(ii) thereof.
                      If any increase under this clause is not a 
                      multiple of $50, such increase shall be rounded to 
                      the next lowest multiple of $50.''.

    (b) <<NOTE: 26 USC 63 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 11022. INCREASE IN AND MODIFICATION OF CHILD TAX CREDIT.

    (a) In General.--Section 24 <<NOTE: 26 USC 24.>>  is amended by 
adding at the end the following new subsection:

    ``(h) Special Rules for Taxable Years 2018 Through 2025.--
            ``(1) In general.--In the case of a taxable year beginning 
        after December 31, 2017, and before January 1, 2026, this 
        section shall be applied as provided in paragraphs (2) through 
        (7).
            ``(2) Credit amount.--Subsection (a) shall be applied by 
        substituting `$2,000' for `$1,000'.
            ``(3) Limitation.--In lieu of the amount determined under 
        subsection (b)(2), the threshold amount shall be $400,000 in the 
        case of a joint return ($200,000 in any other case).
            ``(4) Partial credit allowed for certain other dependents.--
                    ``(A) In general.--The credit determined under 
                subsection (a) (after the application of paragraph (2)) 
                shall be increased by $500 for each dependent of the 
                taxpayer (as defined in section 152) other than a 
                qualifying child described in subsection (c).
                    ``(B) Exception for certain noncitizens.--
                Subparagraph (A) shall not apply with respect to any 
                individual who would not be a dependent if subparagraph 
                (A) of section 152(b)(3) were applied without regard to 
                all that follows `resident of the United States'.
                    ``(C) Certain qualifying children.--In the case of 
                any qualifying child with respect to whom a credit is 
                not allowed under this section by reason of paragraph 
                (7), such child shall be treated as a dependent to whom 
                subparagraph (A) applies.
            ``(5) Maximum amount of refundable credit.--
                    ``(A) In general.--The amount determined under 
                subsection (d)(1)(A) with respect to any qualifying 
                child shall not exceed $1,400, and such subsection shall 
                be applied without regard to paragraph (4) of this 
                subsection.
                    ``(B) Adjustment for inflation.--In the case of a 
                taxable year beginning after 2018, the $1,400 amount in

[[Page 131 STAT. 2074]]

                subparagraph (A) shall be increased by an amount equal 
                to--
                          ``(i) such dollar amount, multiplied by
                          ``(ii) the cost-of-living adjustment 
                      determined under section 1(f)(3) for the calendar 
                      year in which the taxable year begins, determined 
                      by substituting `2017' for `2016' in subparagraph 
                      (A)(ii) thereof.
                If any increase under this clause is not a multiple of 
                $100, such increase shall be rounded to the next lowest 
                multiple of $100.
            ``(6) Earned income threshold for refundable credit.--
        Subsection (d)(1)(B)(i) shall be applied by substituting 
        `$2,500' for `$3,000'.
            ``(7) Social security number required.--No credit shall be 
        allowed under this section to a taxpayer with respect to any 
        qualifying child unless the taxpayer includes the social 
        security number of such child on the return of tax for the 
        taxable year. For purposes of the preceding sentence, the term 
        `social security number' means a social security number issued 
        to an individual by the Social Security Administration, but only 
        if the social security number is issued--
                    ``(A) to a citizen of the United States or pursuant 
                to subclause (I) (or that portion of subclause (III) 
                that relates to subclause (I)) of section 
                205(c)(2)(B)(i) of the Social Security Act, and
                    ``(B) before the due date for such return.''.

    (b) <<NOTE: 26 USC 24 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 11023. INCREASED LIMITATION FOR CERTAIN CHARITABLE 
                            CONTRIBUTIONS.

    (a) In General.--Section 170(b)(1) <<NOTE: 26 USC 170.>>  is amended 
by redesignating subparagraph (G) as subparagraph (H) and by inserting 
after subparagraph (F) the following new subparagraph:
                    ``(G) Increased limitation for cash contributions.--
                          ``(i) In general.--In the case of any 
                      contribution of cash to an organization described 
                      in subparagraph (A), the total amount of such 
                      contributions which may be taken into account 
                      under subsection (a) for any taxable year 
                      beginning after December 31, 2017, and before 
                      January 1, 2026, shall not exceed 60 percent of 
                      the taxpayer's contribution base for such year.
                          ``(ii) Carryover.--If the aggregate amount of 
                      contributions described in clause (i) exceeds the 
                      applicable limitation under clause (i) for any 
                      taxable year described in such clause, such excess 
                      shall be treated (in a manner consistent with the 
                      rules of subsection (d)(1)) as a charitable 
                      contribution to which clause (i) applies in each 
                      of the 5 succeeding years in order of time.
                          ``(iii) Coordination with subparagraphs (a) 
                      and (b).--
                                    ``(I) In general.--Contributions 
                                taken into account under this 
                                subparagraph shall not be taken into 
                                account under subparagraph (A).

[[Page 131 STAT. 2075]]

                                    ``(II) Limitation reduction.--For 
                                each taxable year described in clause 
                                (i), and each taxable year to which any 
                                contribution under this subparagraph is 
                                carried over under clause (ii), 
                                subparagraph (A) shall be applied by 
                                reducing (but not below zero) the 
                                contribution limitation allowed for the 
                                taxable year under such subparagraph by 
                                the aggregate contributions allowed 
                                under this subparagraph for such taxable 
                                year, and subparagraph (B) shall be 
                                applied by treating any reference to 
                                subparagraph (A) as a reference to both 
                                subparagraph (A) and this 
                                subparagraph.''.

    (b) <<NOTE: 26 USC 170 note.>>  Effective Date.--The amendment made 
by this section shall apply to contributions in taxable years beginning 
after December 31, 2017.
SEC. 11024. INCREASED CONTRIBUTIONS TO ABLE ACCOUNTS.

    (a) Increase in Limitation for Contributions From Compensation of 
Individuals With Disabilities.--
            (1) In general.--Section 529A(b)(2)(B) <<NOTE: 26 USC 
        529A.>>  is amended to read as follows:
                    ``(B) except in the case of contributions under 
                subsection (c)(1)(C), if such contribution to an ABLE 
                account would result in aggregate contributions from all 
                contributors to the ABLE account for the taxable year 
                exceeding the sum of--
                          ``(i) the amount in effect under section 
                      2503(b) for the calendar year in which the taxable 
                      year begins, plus
                          ``(ii) in the case of any contribution by a 
                      designated beneficiary described in paragraph (7) 
                      before January 1, 2026, the lesser of--
                                    ``(I) compensation (as defined by 
                                section 219(f)(1)) includible in the 
                                designated beneficiary's gross income 
                                for the taxable year, or
                                    ``(II) an amount equal to the 
                                poverty line for a one-person household, 
                                as determined for the calendar year 
                                preceding the calendar year in which the 
                                taxable year begins.''.
            (2) Responsibility for contribution limitation.--Paragraph 
        (2) of section 529A(b) is amended by adding at the end the 
        following: ``A designated beneficiary (or a person acting on 
        behalf of such beneficiary) shall maintain adequate records for 
        purposes of ensuring, and shall be responsible for ensuring, 
        that the requirements of subparagraph (B)(ii) are met.''
            (3) Eligible designated beneficiary.--Section 529A(b) is 
        amended by adding at the end the following:
            ``(7) Special rules related to contribution limit.--For 
        purposes of paragraph (2)(B)(ii)--
                    ``(A) Designated beneficiary.--A designated 
                beneficiary described in this paragraph is an employee 
                (including an employee within the meaning of section 
                401(c)) with respect to whom--
                          ``(i) no contribution is made for the taxable 
                      year to a defined contribution plan (within the 
                      meaning of section 414(i)) with respect to which 
                      the requirements of section 401(a) or 403(a) are 
                      met,

[[Page 131 STAT. 2076]]

                          ``(ii) no contribution is made for the taxable 
                      year to an annuity contract described in section 
                      403(b), and
                          ``(iii) no contribution is made for the 
                      taxable year to an eligible deferred compensation 
                      plan described in section 457(b).
                    ``(B) Poverty line.--The term `poverty line' has the 
                meaning given such term by section 673 of the Community 
                Services Block Grant Act (42 U.S.C. 9902).''.

    (b) Allowance of Saver's Credit for ABLE Contributions by Account 
Holder.--Section 25B(d)(1) <<NOTE: 26 USC 25B.>>  is amended by striking 
``and'' at the end of subparagraph (B)(ii), by striking the period at 
the end of subparagraph (C) and inserting ``, and'', and by inserting at 
the end the following:
                    ``(D) the amount of contributions made before 
                January 1, 2026, by such individual to the ABLE account 
                (within the meaning of section 529A) of which such 
                individual is the designated beneficiary.''.

    (c) <<NOTE: 26 USC 25B note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after the date of 
the enactment of this Act.
SEC. 11025. ROLLOVERS TO ABLE PROGRAMS FROM 529 PROGRAMS.

    (a) In General.--Clause (i) of section 529(c)(3)(C) <<NOTE: 26 USC 
529.>>  is amended by striking ``or'' at the end of subclause (I), by 
striking the period at the end of subclause (II) and inserting ``, or'', 
and by adding at the end the following:
                                    ``(III) before January 1, 2026, to 
                                an ABLE account (as defined in section 
                                529A(e)(6)) of the designated 
                                beneficiary or a member of the family of 
                                the designated beneficiary.
                      Subclause (III) shall not apply to so much of a 
                      distribution which, when added to all other 
                      contributions made to the ABLE account for the 
                      taxable year, exceeds the limitation under section 
                      529A(b)(2)(B)(i).''.

    (b) <<NOTE: 26 USC 529 note.>>  Effective Date.--The amendments made 
by this section shall apply to distributions after the date of the 
enactment of this Act.
SEC. 11026. <<NOTE: 26 USC 112 note.>>  TREATMENT OF CERTAIN 
                            INDIVIDUALS PERFORMING SERVICES IN THE 
                            SINAI PENINSULA OF EGYPT.

    (a) In General.--For purposes of the following provisions of the 
Internal Revenue Code of 1986, with respect to the applicable period, a 
qualified hazardous duty area shall be treated in the same manner as if 
it were a combat zone (as determined under section 112 of such Code):
            (1) Section 2(a)(3) (relating to special rule where deceased 
        spouse was in missing status).
            (2) Section 112 (relating to the exclusion of certain combat 
        pay of members of the Armed Forces).
            (3) Section 692 (relating to income taxes of members of 
        Armed Forces on death).
            (4) Section 2201 (relating to members of the Armed Forces 
        dying in combat zone or by reason of combat-zone-incurred 
        wounds, etc.).
            (5) Section 3401(a)(1) (defining wages relating to combat 
        pay for members of the Armed Forces).

[[Page 131 STAT. 2077]]

            (6) Section 4253(d) (relating to the taxation of phone 
        service originating from a combat zone from members of the Armed 
        Forces).
            (7) Section 6013(f)(1) (relating to joint return where 
        individual is in missing status).
            (8) Section 7508 (relating to time for performing certain 
        acts postponed by reason of service in combat zone).

    (b) Qualified Hazardous Duty Area.--For purposes of this section, 
the term ``qualified hazardous duty area'' means the Sinai Peninsula of 
Egypt, if as of the date of the enactment of this section any member of 
the Armed Forces of the United States is entitled to special pay under 
section 310 of title 37, United States Code (relating to special pay; 
duty subject to hostile fire or imminent danger), for services performed 
in such location. Such term includes such location only during the 
period such entitlement is in effect.
    (c) Applicable Period.--
            (1) In general.--Except as provided in paragraph (2), the 
        applicable period is--
                    (A) the portion of the first taxable year ending 
                after June 9, 2015, which begins on such date, and
                    (B) any subsequent taxable year beginning before 
                January 1, 2026.
            (2) Withholding.--In the case of subsection (a)(5), the 
        applicable period is--
                    (A) the portion of the first taxable year ending 
                after the date of the enactment of this Act which begins 
                on such date, and
                    (B) any subsequent taxable year beginning before 
                January 1, 2026.

    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        provisions of this section shall take effect on June 9, 2015.
            (2) Withholding.--Subsection (a)(5) shall apply to 
        remuneration paid after the date of the enactment of this Act.
SEC. 11027. TEMPORARY REDUCTION IN MEDICAL EXPENSE DEDUCTION 
                            FLOOR.

    (a) In General.--Subsection (f) of section 213 <<NOTE: 26 USC 
213.>>  is amended to read as follows:

    ``(f) Special Rules for 2013 Through 2018.--In the case of any 
taxable year--
            ``(1) beginning after December 31, 2012, and ending before 
        January 1, 2017, in the case of a taxpayer if such taxpayer or 
        such taxpayer's spouse has attained age 65 before the close of 
        such taxable year, and
            ``(2) beginning after December 31, 2016, and ending before 
        January 1, 2019, in the case of any taxpayer,

subsection (a) shall be applied with respect to a taxpayer by 
substituting `7.5 percent' for `10 percent'.''.
    (b) Minimum Tax Preference Not to Apply.--Section 56(b)(1)(B) is 
amended by adding at the end the following new sentence: ``This 
subparagraph shall not apply to taxable years beginning after December 
31, 2016, and ending before January 1, 2019''.
    (c) <<NOTE: 26 USC 56 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2016.

[[Page 131 STAT. 2078]]

SEC. 11028. RELIEF FOR 2016 DISASTER AREAS.

    (a) In General.--For purposes of this section, the term ``2016 
disaster area'' means any area with respect to which a major disaster 
has been declared by the President under section 401 of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act during calendar 
year 2016.
    (b) Special Rules for Use of Retirement Funds With Respect to Areas 
Damaged by 2016 Disasters.--
            (1) Tax-favored withdrawals from retirement plans.--
                    (A) In general.--Section 72(t) of the Internal 
                Revenue Code of 1986 shall not apply to any qualified 
                2016 disaster distribution.
                    (B) Aggregate dollar limitation.--
                          (i) In general.--For purposes of this 
                      subsection, the aggregate amount of distributions 
                      received by an individual which may be treated as 
                      qualified 2016 disaster distributions for any 
                      taxable year shall not exceed the excess (if any) 
                      of--
                                    (I) $100,000, over
                                    (II) the aggregate amounts treated 
                                as qualified 2016 disaster distributions 
                                received by such individual for all 
                                prior taxable years.
                          (ii) Treatment of plan distributions.--If a 
                      distribution to an individual would (without 
                      regard to clause (i)) be a qualified 2016 disaster 
                      distribution, a plan shall not be treated as 
                      violating any requirement of this title merely 
                      because the plan treats such distribution as a 
                      qualified 2016 disaster distribution, unless the 
                      aggregate amount of such distributions from all 
                      plans maintained by the employer (and any member 
                      of any controlled group which includes the 
                      employer) to such individual exceeds $100,000.
                          (iii) Controlled group.--For purposes of 
                      clause (ii), the term ``controlled group'' means 
                      any group treated as a single employer under 
                      subsection (b), (c), (m), or (o) of section 414 of 
                      the Internal Revenue Code of 1986.
                    (C) Amount distributed may be repaid.--
                          (i) In general.--Any individual who receives a 
                      qualified 2016 disaster distribution may, at any 
                      time during the 3-year period beginning on the day 
                      after the date on which such distribution was 
                      received, make one or more contributions in an 
                      aggregate amount not to exceed the amount of such 
                      distribution to an eligible retirement plan of 
                      which such individual is a beneficiary and to 
                      which a rollover contribution of such distribution 
                      could be made under section 402(c), 403(a)(4), 
                      403(b)(8), 408(d)(3), or 457(e)(16) of the 
                      Internal Revenue Code of 1986, as the case may be.
                          (ii) Treatment of repayments of distributions 
                      from eligible retirement plans other than iras.--
                      For purposes of the Internal Revenue Code of 1986, 
                      if a contribution is made pursuant to clause (i) 
                      with respect to a qualified 2016 disaster 
                      distribution from an eligible retirement plan 
                      other than an individual retirement plan, then the 
                      taxpayer shall, to the extent of the amount of the 
                      contribution, be treated as having

[[Page 131 STAT. 2079]]

                      received the qualified 2016 disaster distribution 
                      in an eligible rollover distribution (as defined 
                      in section 402(c)(4) of the Internal Revenue Code 
                      of 1986) and as having transferred the amount to 
                      the eligible retirement plan in a direct trustee 
                      to trustee transfer within 60 days of the 
                      distribution.
                          (iii) Treatment of repayments for 
                      distributions from iras.--For purposes of the 
                      Internal Revenue Code of 1986, if a contribution 
                      is made pursuant to clause (i) with respect to a 
                      qualified 2016 disaster distribution from an 
                      individual retirement plan (as defined by section 
                      7701(a)(37) of the Internal Revenue Code of 1986), 
                      then, to the extent of the amount of the 
                      contribution, the qualified 2016 disaster 
                      distribution shall be treated as a distribution 
                      described in section 408(d)(3) of such Code and as 
                      having been transferred to the eligible retirement 
                      plan in a direct trustee to trustee transfer 
                      within 60 days of the distribution.
                    (D) Definitions.--For purposes of this paragraph--
                          (i) Qualified 2016 disaster distribution.--
                      Except as provided in subparagraph (B), the term 
                      ``qualified 2016 disaster distribution'' means any 
                      distribution from an eligible retirement plan made 
                      on or after January 1, 2016, and before January 1, 
                      2018, to an individual whose principal place of 
                      abode at any time during calendar year 2016 was 
                      located in a disaster area described in subsection 
                      (a) and who has sustained an economic loss by 
                      reason of the events giving rise to the 
                      Presidential declaration described in subsection 
                      (a) which was applicable to such area.
                          (ii) Eligible retirement plan.--The term 
                      ``eligible retirement plan'' shall have the 
                      meaning given such term by section 402(c)(8)(B) of 
                      the Internal Revenue Code of 1986.
                    (E) Income inclusion spread over 3-year period.--
                          (i) In general.--In the case of any qualified 
                      2016 disaster distribution, unless the taxpayer 
                      elects not to have this subparagraph apply for any 
                      taxable year, any amount required to be included 
                      in gross income for such taxable year shall be so 
                      included ratably over the 3-taxable-year period 
                      beginning with such taxable year.
                          (ii) Special rule.--For purposes of clause 
                      (i), rules similar to the rules of subparagraph 
                      (E) of section 408A(d)(3) of the Internal Revenue 
                      Code of 1986 shall apply.
                    (F) Special rules.--
                          (i) Exemption of distributions from trustee to 
                      trustee transfer and withholding rules.--For 
                      purposes of sections 401(a)(31), 402(f), and 3405 
                      of the Internal Revenue Code of 1986, qualified 
                      2016 disaster distribution shall not be treated as 
                      eligible rollover distributions.
                          (ii) Qualified 2016 disaster distributions 
                      treated as meeting plan distribution 
                      requirements.--For purposes of the Internal 
                      Revenue Code

[[Page 131 STAT. 2080]]

                      of 1986, a qualified 2016 disaster distribution 
                      shall be treated as meeting the requirements of 
                      sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 
                      403(b)(11), and 457(d)(1)(A) of the Internal 
                      Revenue Code of 1986.
            (2) Provisions relating to plan amendments.--
                    (A) In general.--If this paragraph applies to any 
                amendment to any plan or annuity contract, such plan or 
                contract shall be treated as being operated in 
                accordance with the terms of the plan during the period 
                described in subparagraph (B)(ii)(I).
                    (B) Amendments to which subsection applies.--
                          (i) In general.--This paragraph shall apply to 
                      any amendment to any plan or annuity contract 
                      which is made--
                                    (I) pursuant to any provision of 
                                this section, or pursuant to any 
                                regulation under any provision of this 
                                section, and
                                    (II) on or before the last day of 
                                the first plan year beginning on or 
                                after January 1, 2018, or such later 
                                date as the Secretary prescribes.
                      In the case of a governmental plan (as defined in 
                      section 414(d) of the Internal Revenue Code of 
                      1986), subclause (II) shall be applied by 
                      substituting the date which is 2 years after the 
                      date otherwise applied under subclause (II).
                          (ii) Conditions.--This paragraph shall not 
                      apply to any amendment to a plan or contract 
                      unless such amendment applies retroactively for 
                      such period, and shall not apply to any such 
                      amendment unless the plan or contract is operated 
                      as if such amendment were in effect during the 
                      period--
                                    (I) beginning on the date that this 
                                section or the regulation described in 
                                clause (i)(I) takes effect (or in the 
                                case of a plan or contract amendment not 
                                required by this section or such 
                                regulation, the effective date specified 
                                by the plan), and
                                    (II) ending on the date described in 
                                clause (i)(II) (or, if earlier, the date 
                                the plan or contract amendment is 
                                adopted).

    (c) Special Rules for Personal Casualty Losses Related to 2016 Major 
Disaster.--
            (1) In general.--If an individual has a net disaster loss 
        for any taxable year beginning after December 31, 2015, and 
        before January 1, 2018--
                    (A) the amount determined under section 
                165(h)(2)(A)(ii) of the Internal Revenue Code of 1986 
                shall be equal to the sum of--
                          (i) such net disaster loss, and
                          (ii) so much of the excess referred to in the 
                      matter preceding clause (i) of section 
                      165(h)(2)(A) of such Code (reduced by the amount 
                      in clause (i) of this subparagraph) as exceeds 10 
                      percent of the adjusted gross income of the 
                      individual,
                    (B) section 165(h)(1) of such Code shall be applied 
                by substituting ``$500'' for ``$500 ($100 for taxable 
                years beginning after December 31, 2009)'',

[[Page 131 STAT. 2081]]

                    (C) the standard deduction determined under section 
                63(c) of such Code shall be increased by the net 
                disaster loss, and
                    (D) section 56(b)(1)(E) of such Code shall not apply 
                to so much of the standard deduction as is attributable 
                to the increase under subparagraph (C) of this 
                paragraph.
            (2) Net disaster loss.--For purposes of this subsection, the 
        term ``net disaster loss'' means the excess of qualified 
        disaster-related personal casualty losses over personal casualty 
        gains (as defined in section 165(h)(3)(A) of the Internal 
        Revenue Code of 1986).
            (3) Qualified disaster-related personal casualty losses.--
        For purposes of this paragraph, the term ``qualified disaster-
        related personal casualty losses'' means losses described in 
        section 165(c)(3) of the Internal Revenue Code of 1986 which 
        arise in a disaster area described in subsection (a) on or after 
        January 1, 2016, and which are attributable to the events giving 
        rise to the Presidential declaration described in subsection (a) 
        which was applicable to such area.

                           PART IV--EDUCATION

SEC. 11031. TREATMENT OF STUDENT LOANS DISCHARGED ON ACCOUNT OF 
                            DEATH OR DISABILITY.

    (a) In General.--Section 108(f) <<NOTE: 26 USC 108.>>  is amended by 
adding at the end the following new paragraph:
            ``(5) Discharges on account of death or disability.--
                    ``(A) In general.--In the case of an individual, 
                gross income does not include any amount which (but for 
                this subsection) would be includible in gross income for 
                such taxable year by reasons of the discharge (in whole 
                or in part) of any loan described in subparagraph (B) 
                after December 31, 2017, and before January 1, 2026, if 
                such discharge was--
                          ``(i) pursuant to subsection (a) or (d) of 
                      section 437 of the Higher Education Act of 1965 or 
                      the parallel benefit under part D of title IV of 
                      such Act (relating to the repayment of loan 
                      liability),
                          ``(ii) pursuant to section 464(c)(1)(F) of 
                      such Act, or
                          ``(iii) otherwise discharged on account of the 
                      death or total and permanent disability of the 
                      student.
                    ``(B) Loans described.--A loan is described in this 
                subparagraph if such loan is--
                          ``(i) a student loan (as defined in paragraph 
                      (2)), or
                          ``(ii) a private education loan (as defined in 
                      section 140(7) of the Consumer Credit Protection 
                      Act (15 U.S.C. 1650(7))).''.

    (b) <<NOTE: 26 USC 108 note.>>  Effective Date.--The amendment made 
by this section shall apply to discharges of indebtedness after December 
31, 2017.
SEC. 11032. 529 ACCOUNT FUNDING FOR ELEMENTARY AND SECONDARY 
                            EDUCATION.

    (a) In General.--
            (1) In general.--Section 529(c) is amended by adding at the 
        end the following new paragraph:

[[Page 131 STAT. 2082]]

            ``(7) Treatment of elementary and secondary tuition.--Any 
        reference in this subsection to the term `qualified higher 
        education expense' shall include a reference to expenses for 
        tuition in connection with enrollment or attendance at an 
        elementary or secondary public, private, or religious school.''.
            (2) Limitation.--Section 529(e)(3)(A) <<NOTE: 26 USC 529.>>  
        is amended by adding at the end the following: ``The amount of 
        cash distributions from all qualified tuition programs described 
        in subsection (b)(1)(A)(ii) with respect to a beneficiary during 
        any taxable year shall, in the aggregate, include not more than 
        $10,000 in expenses described in subsection (c)(7) incurred 
        during the taxable year.''.

    (b) <<NOTE: 26 USC 529 note.>>  Effective Date.--The amendments made 
by this section shall apply to distributions made after December 31, 
2017.

                    PART V--DEDUCTIONS AND EXCLUSIONS

SEC. 11041. SUSPENSION OF DEDUCTION FOR PERSONAL EXEMPTIONS.

    (a) In General.--Subsection (d) of section 151 is amended--
            (1) by striking ``In the case of'' in paragraph (4) and 
        inserting ``Except as provided in paragraph (5), in the case 
        of'', and
            (2) by adding at the end the following new paragraph:
            ``(5) Special rules for taxable years 2018 through 2025.--In 
        the case of a taxable year beginning after December 31, 2017, 
        and before January 1, 2026--
                    ``(A) Exemption amount.--The term `exemption amount' 
                means zero.
                    ``(B) References.--For purposes of any other 
                provision of this title, the reduction of the exemption 
                amount to zero under subparagraph (A) shall not be taken 
                into account in determining whether a deduction is 
                allowed or allowable, or whether a taxpayer is entitled 
                to a deduction, under this section.''.

    (b) Application to Estates and Trusts.--Section 642(b)(2)(C) is 
amended by adding at the end the following new clause:
                          ``(iii) Years when personal exemption amount 
                      is zero.--
                                    ``(I) In general.--In the case of 
                                any taxable year in which the exemption 
                                amount under section 151(d) is zero, 
                                clause (i) shall be applied by 
                                substituting `$4,150' for `the exemption 
                                amount under section 151(d)'.
                                    ``(II) Inflation adjustment.--In the 
                                case of any taxable year beginning in a 
                                calendar year after 2018, the $4,150 
                                amount in subparagraph (A) shall be 
                                increased in the same manner as provided 
                                in section 6334(d)(4)(C).''.

    (c) Modification of Wage Withholding Rules.--
            (1) In general.--Section 3402(a)(2) is amended by striking 
        ``means the amount'' and all that follows and inserting ``means 
        the amount by which the wages exceed the taxpayer's withholding 
        allowance, prorated to the payroll period.''.
            (2) Conforming amendments.--
                    (A) Section 3401 is amended by striking subsection 
                (e).

[[Page 131 STAT. 2083]]

                    (B) Paragraphs (1) and (2) of section 
                3402(f) <<NOTE: 26 USC 3402.>>  are amended to read as 
                follows:
            ``(1) In general.--Under rules determined by the Secretary, 
        an employee receiving wages shall on any day be entitled to a 
        withholding allowance determined based on--
                    ``(A) whether the employee is an individual for whom 
                a deduction is allowable with respect to another 
                taxpayer under section 151;
                    ``(B) if the employee is married, whether the 
                employee's spouse is entitled to an allowance, or would 
                be so entitled if such spouse were an employee receiving 
                wages, under subparagraph (A) or (D), but only if such 
                spouse does not have in effect a withholding allowance 
                certificate claiming such allowance;
                    ``(C) the number of individuals with respect to 
                whom, on the basis of facts existing at the beginning of 
                such day, there may reasonably be expected to be 
                allowable a credit under section 24(a) for the taxable 
                year under subtitle A in respect of which amounts 
                deducted and withheld under this chapter in the calendar 
                year in which such day falls are allowed as a credit;
                    ``(D) any additional amounts to which the employee 
                elects to take into account under subsection (m), but 
                only if the employee's spouse does not have in effect a 
                withholding allowance certificate making such an 
                election;
                    ``(E) the standard deduction allowable to such 
                employee (one-half of such standard deduction in the 
                case of an employee who is married (as determined under 
                section 7703) and whose spouse is an employee receiving 
                wages subject to withholding); and
                    ``(F) whether the employee has withholding allowance 
                certificates in effect with respect to more than 1 
                employer.
            ``(2) Allowance certificates.--
                    ``(A) On commencement of employment.--On or before 
                the date of the commencement of employment with an 
                employer, the employee shall furnish the employer with a 
                signed withholding allowance certificate relating to the 
                withholding allowance claimed by the employee, which 
                shall in no event exceed the amount to which the 
                employee is entitled.
                    ``(B) Change of status.--If, on any day during the 
                calendar year, an employee's withholding allowance is in 
                excess of the withholding allowance to which the 
                employee would be entitled had the employee submitted a 
                true and accurate withholding allowance certificate to 
                the employer on that day, the employee shall within 10 
                days thereafter furnish the employer with a new 
                withholding allowance certificate. If, on any day during 
                the calendar year, an employee's withholding allowance 
                is greater than the withholding allowance claimed, the 
                employee may furnish the employer with a new withholding 
                allowance certificate relating to the withholding 
                allowance to which the employee is so entitled, which 
                shall in no event exceed the amount to which the 
                employee is entitled on such day.
                    ``(C) Change of status which affects next calendar 
                year.--If on any day during the calendar year the

[[Page 131 STAT. 2084]]

                withholding allowance to which the employee will be, or 
                may reasonably be expected to be, entitled at the 
                beginning of the employee's next taxable year under 
                subtitle A is different from the allowance to which the 
                employee is entitled on such day, the employee shall, in 
                such cases and at such times as the Secretary shall by 
                regulations prescribe, furnish the employer with a 
                withholding allowance certificate relating to the 
                withholding allowance which the employee claims with 
                respect to such next taxable year, which shall in no 
                event exceed the withholding allowance to which the 
                employee will be, or may reasonably be expected to be, 
                so entitled.''.
                    (C) Subsections (b)(1), (b)(2), (f)(3), (f)(4), 
                (f)(5), (f)(7) (including the heading thereof), (g)(4), 
                (l)(1), (l)(2), and (n) of section 3402 are each amended 
                by striking ``exemption'' each place it appears and 
                inserting ``allowance''.
                    (D) The heading of section 3402(f) is amended by 
                striking ``Exemptions'' and inserting ``Allowance''.
                    (E) Section 3402(m) is amended by striking 
                ``additional withholding allowances or additional 
                reductions in withholding under this subsection. In 
                determining the number of additional withholding 
                allowances'' and inserting ``an additional withholding 
                allowance or additional reductions in withholding under 
                this subsection. In determining the additional 
                withholding allowance''.
                    (F) Paragraphs (3) and (4) of section 3405(a) (and 
                the heading for such paragraph (4)) <<NOTE: 26 USC 
                3405.>>  are each amended by striking ``exemption'' each 
                place it appears and inserting ``allowance''.
                    (G) Section 3405(a)(4) is amended by striking 
                ``shall be determined'' and all that follows through ``3 
                withholding exemptions'' and inserting ``shall be 
                determined under rules prescribed by the Secretary''.

    (d) Exception for Determining Property Exempt From Levy.--Section 
6334(d) is amended by adding at the end the following new paragraph:
            ``(4) Years when personal exemption amount is zero.--
                    ``(A) In general.--In the case of any taxable year 
                in which the exemption amount under section 151(d) is 
                zero, paragraph (2) shall not apply and for purposes of 
                paragraph (1) the term `exempt amount' means an amount 
                equal to--
                          ``(i) the sum of the amount determined under 
                      subparagraph (B) and the standard deduction, 
                      divided by
                          ``(ii) 52.
                    ``(B) Amount determined.--For purposes of 
                subparagraph (A), the amount determined under this 
                subparagraph is $4,150 multiplied by the number of the 
                taxpayer's dependents for the taxable year in which the 
                levy occurs.
                    ``(C) Inflation adjustment.--In the case of any 
                taxable year beginning in a calendar year after 2018, 
                the $4,150 amount in subparagraph (B) shall be increased 
                by an amount equal to--
                          ``(i) such dollar amount, multiplied by
                          ``(ii) the cost-of-living adjustment 
                      determined under section 1(f)(3) for the calendar 
                      year in which

[[Page 131 STAT. 2085]]

                      the taxable year begins, determined by 
                      substituting `2017' for `2016' in subparagraph 
                      (A)(ii) thereof.
                If any increase determined under the preceding sentence 
                is not a multiple of $100, such increase shall be 
                rounded to the next lowest multiple of $100.
                    ``(D) Verified statement.--Unless the taxpayer 
                submits to the Secretary a written and properly verified 
                statement specifying the facts necessary to determine 
                the proper amount under subparagraph (A), subparagraph 
                (A) shall be applied as if the taxpayer were a married 
                individual filing a separate return with no 
                dependents.''.

    (e) Persons Required to Make Returns of Income.--Section 6012 is 
amended <<NOTE: 26 USC 6012.>>  by adding at the end the following new 
subsection:

    ``(f) Special Rule for Taxable Years 2018 Through 2025.--In the case 
of a taxable year beginning after December 31, 2017, and before January 
1, 2026, subsection (a)(1) shall not apply, and every individual who has 
gross income for the taxable year shall be required to make returns with 
respect to income taxes under subtitle A, except that a return shall not 
be required of--
            ``(1) an individual who is not married (determined by 
        applying section 7703) and who has gross income for the taxable 
        year which does not exceed the standard deduction applicable to 
        such individual for such taxable year under section 63, or
            ``(2) an individual entitled to make a joint return if--
                    ``(A) the gross income of such individual, when 
                combined with the gross income of such individual's 
                spouse, for the taxable year does not exceed the 
                standard deduction which would be applicable to the 
                taxpayer for such taxable year under section 63 if such 
                individual and such individual's spouse made a joint 
                return,
                    ``(B) such individual and such individual's spouse 
                have the same household as their home at the close of 
                the taxable year,
                    ``(C) such individual's spouse does not make a 
                separate return, and
                    ``(D) neither such individual nor such individual's 
                spouse is an individual described in section 63(c)(5) 
                who has income (other than earned income) in excess of 
                the amount in effect under section 63(c)(5)(A).''.

    (f) <<NOTE: 26 USC 151 note.>>  Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2017.
            (2) Wage withholding.--The Secretary of the Treasury may 
        administer section 3402 for taxable years beginning before 
        January 1, 2019, without regard to the amendments made by 
        subsections (a) and (c).
SEC. 11042. LIMITATION ON DEDUCTION FOR STATE AND LOCAL, ETC. 
                            TAXES.

    (a) In General.--Subsection (b) of section 164 is amended by adding 
at the end the following new paragraph:
            ``(6) Limitation on individual deductions for taxable years 
        2018 through 2025.--In the case of an individual and a taxable 
        year beginning after December 31, 2017, and before January 1, 
        2026--

[[Page 131 STAT. 2086]]

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

    (b) <<NOTE: 26 USC 164 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2016.
SEC. 11043. LIMITATION ON DEDUCTION FOR QUALIFIED RESIDENCE 
                            INTEREST.

    (a) In General.--Section 163(h)(3) <<NOTE: 26 USC 163.>>  is amended 
by adding at the end the following new subparagraph:
                    ``(F) Special rules for taxable years 2018 through 
                2025.--
                          ``(i) In general.--In the case of taxable 
                      years beginning after December 31, 2017, and 
                      before January 1, 2026--
                                    ``(I) Disallowance of home equity 
                                indebtedness interest.--Subparagraph 
                                (A)(ii) shall not apply.
                                    ``(II) Limitation on acquisition 
                                indebtedness.--Subparagraph (B)(ii) 
                                shall be applied by substituting 
                                `$750,000 ($375,000' for `$1,000,000 
                                ($500,000'.
                                    ``(III) Treatment of indebtedness 
                                incurred on or before december 15, 
                                2017.--Subclause (II) shall not apply to 
                                any indebtedness incurred on or before 
                                December 15, 2017, and, in applying such 
                                subclause to any indebtedness incurred 
                                after such date, the limitation under 
                                such subclause shall be reduced (but not 
                                below zero) by the amount of any 
                                indebtedness incurred on or before 
                                December 15, 2017, which is treated as 
                                acquisition indebtedness for purposes of 
                                this subsection for the taxable year.
                                    ``(IV) Binding contract exception.--
                                In the case of a taxpayer who enters 
                                into a written binding contract before 
                                December 15, 2017, to close on the 
                                purchase of a principal residence before 
                                January 1, 2018, and who purchases such 
                                residence before April 1, 2018, 
                                subclause (III) shall be applied by 
                                substituting `April 1, 2018' for 
                                `December 15, 2017'.
                          ``(ii) Treatment of limitation in taxable 
                      years after december 31, 2025.--In the case of 
                      taxable years

[[Page 131 STAT. 2087]]

                      beginning after December 31, 2025, the limitation 
                      under subparagraph (B)(ii) shall be applied to the 
                      aggregate amount of indebtedness of the taxpayer 
                      described in subparagraph (B)(i) without regard to 
                      the taxable year in which the indebtedness was 
                      incurred.
                          ``(iii) Treatment of refinancings of 
                      indebtedness.--
                                    ``(I) In general.--In the case of 
                                any indebtedness which is incurred to 
                                refinance indebtedness, such refinanced 
                                indebtedness shall be treated for 
                                purposes of clause (i)(III) as incurred 
                                on the date that the original 
                                indebtedness was incurred to the extent 
                                the amount of the indebtedness resulting 
                                from such refinancing does not exceed 
                                the amount of the refinanced 
                                indebtedness.
                                    ``(II) Limitation on period of 
                                refinancing.--Subclause (I) shall not 
                                apply to any indebtedness after the 
                                expiration of the term of the original 
                                indebtedness or, if the principal of 
                                such original indebtedness is not 
                                amortized over its term, the expiration 
                                of the term of the 1st refinancing of 
                                such indebtedness (or if earlier, the 
                                date which is 30 years after the date of 
                                such 1st refinancing).
                          ``(iv) Coordination with exclusion of income 
                      from discharge of indebtedness.--Section 108(h)(2) 
                      shall be applied without regard to this 
                      subparagraph.''.

    (b) <<NOTE: 26 USC 163 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 11044. MODIFICATION OF DEDUCTION FOR PERSONAL CASUALTY 
                            LOSSES.

    (a) In General.--Subsection (h) of section 165 <<NOTE: 26 USC 
165.>>  is amended by adding at the end the following new paragraph:
            ``(5) Limitation for taxable years 2018 through 2025.--
                    ``(A) In general.--In the case of an individual, 
                except as provided in subparagraph (B), any personal 
                casualty loss which (but for this paragraph) would be 
                deductible in a taxable year beginning after December 
                31, 2017, and before January 1, 2026, shall be allowed 
                as a deduction under subsection (a) only to the extent 
                it is attributable to a Federally declared disaster (as 
                defined in subsection (i)(5)).
                    ``(B) Exception related to personal casualty 
                gains.--If a taxpayer has personal casualty gains for 
                any taxable year to which subparagraph (A) applies--
                          ``(i) subparagraph (A) shall not apply to the 
                      portion of the personal casualty loss not 
                      attributable to a Federally declared disaster (as 
                      so defined) to the extent such loss does not 
                      exceed such gains, and
                          ``(ii) in applying paragraph (2) for purposes 
                      of subparagraph (A) to the portion of personal 
                      casualty loss which is so attributable to such a 
                      disaster, the amount of personal casualty gains 
                      taken into account under paragraph (2)(A) shall be 
                      reduced by the portion of such gains taken into 
                      account under clause (i).''.

[[Page 131 STAT. 2088]]

    (b) <<NOTE: 26 USC 165 note.>>  Effective Date.--The amendment made 
by this section shall apply to losses incurred in taxable years 
beginning after December 31, 2017.
SEC. 11045. SUSPENSION OF MISCELLANEOUS ITEMIZED DEDUCTIONS.

    (a) In General.--Section 67 <<NOTE: 26 USC 67.>>  is amended by 
adding at the end the following new subsection:

    ``(g) Suspension for Taxable Years 2018 Through 2025.--
Notwithstanding subsection (a), no miscellaneous itemized deduction 
shall be allowed for any taxable year beginning after December 31, 2017, 
and before January 1, 2026.''.
    (b) <<NOTE: 26 USC 67 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 11046. SUSPENSION OF OVERALL LIMITATION ON ITEMIZED 
                            DEDUCTIONS.

    (a) In General.--Section 68 is amended by adding at the end the 
following new subsection:
    ``(f) Section Not to Apply.--This section shall not apply to any 
taxable year beginning after December 31, 2017, and before January 1, 
2026.''.
    (b) <<NOTE: 26 USC 68 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 11047. SUSPENSION OF EXCLUSION FOR QUALIFIED BICYCLE 
                            COMMUTING REIMBURSEMENT.

    (a) In General.--Section 132(f) is amended by adding at the end the 
following new paragraph:
            ``(8) Suspension of qualified bicycle commuting 
        reimbursement exclusion.--Paragraph (1)(D) shall not apply to 
        any taxable year beginning after December 31, 2017, and before 
        January 1, 2026.''.

    (b) <<NOTE: 26 USC 132 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 11048. SUSPENSION OF EXCLUSION FOR QUALIFIED MOVING EXPENSE 
                            REIMBURSEMENT.

    (a) In General.--Section 132(g) is amended--
            (1) by striking ``For purposes of this section, the term'' 
        and inserting ``For purposes of this section--
            ``(1) In general.--The term'', and
            (2) by adding at the end the following new paragraph:
            ``(2) Suspension for taxable years 2018 through 2025.--
        Except in the case of a member of the Armed Forces of the United 
        States on active duty who moves pursuant to a military order and 
        incident to a permanent change of station, subsection (a)(6) 
        shall not apply to any taxable year beginning after December 31, 
        2017, and before January 1, 2026.''.

    (b) <<NOTE: 26 USC 132 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 11049. SUSPENSION OF DEDUCTION FOR MOVING EXPENSES.

    (a) In General.--Section 217 is amended by adding at the end the 
following new subsection:
    ``(k) Suspension of Deduction for Taxable Years 2018 Through 2025.--
Except in the case of an individual to whom subsection (g) applies, this 
section shall not apply to any taxable

[[Page 131 STAT. 2089]]

year beginning after December 31, 2017, and before January 1, 2026.''.
    (b) <<NOTE: 26 USC 217 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 11050. LIMITATION ON WAGERING LOSSES.

    (a) In General.--Section 165(d) <<NOTE: 26 USC 165.>>  is amended by 
adding at the end the following: ``For purposes of the preceding 
sentence, in the case of taxable years beginning after December 31, 
2017, and before January 1, 2026, the term `losses from wagering 
transactions' includes any deduction otherwise allowable under this 
chapter incurred in carrying on any wagering transaction.''.

    (b) <<NOTE: 26 USC 165 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 11051. REPEAL OF DEDUCTION FOR ALIMONY PAYMENTS.

    (a) In General.--Part VII of subchapter B is amended by striking 
section 215 (and by striking the item relating to such section in the 
table of sections <<NOTE: 26 USC 211 prec.>>  for such subpart).

    (b) Conforming Amendments.--
            (1) Corresponding repeal of provisions providing for 
        inclusion of alimony in gross income.--
                    (A) Subsection (a) of section 61 is amended by 
                striking paragraph (8) and by redesignating paragraphs 
                (9) through (15) as paragraphs (8) through (14), 
                respectively.
                    (B) Part II of subchapter B of chapter 1 is amended 
                by striking section 71 (and by striking the item 
                relating to such section in the table of 
                sections <<NOTE: 26 USC 71 prec.>>  for such part).
                    (C) Subpart F of part I of subchapter J of chapter 1 
                is amended by striking section 682 (and by striking the 
                item relating to such section <<NOTE: 26 USC 681 
                prec.>>  in the table of sections for such subpart).
            (2) Related to repeal of section 215.--
                    (A) Section 62(a) is amended by striking paragraph 
                (10).
                    (B) Section 3402(m)(1) is amended by striking 
                ``(other than paragraph (10) thereof)''.
                    (C) Section 6724(d)(3) is amended by striking 
                subparagraph (C) and by redesignating subparagraph (D) 
                as subparagraph (C).
            (3) Related to repeal of section 71.--
                    (A) Section 121(d)(3) is amended--
                          (i) by striking ``(as defined in section 
                      71(b)(2))'' in subparagraph (B), and
                          (ii) by adding at the end the following new 
                      subparagraph:
                    ``(C) Divorce or separation instrument.--For 
                purposes of this paragraph, the term `divorce or 
                separation instrument' means--
                          ``(i) a decree of divorce or separate 
                      maintenance or a written instrument incident to 
                      such a decree,
                          ``(ii) a written separation agreement, or
                          ``(iii) a decree (not described in clause (i)) 
                      requiring a spouse to make payments for the 
                      support or maintenance of the other spouse.''.
                    (B) Section 152(d)(5) is amended to read as follows:
            ``(5) Special rules for support.--
                    ``(A) In general.--For purposes of this subsection--

[[Page 131 STAT. 2090]]

                          ``(i) payments to a spouse of alimony or 
                      separate maintenance payments shall not be treated 
                      as a payment by the payor spouse for the support 
                      of any dependent, and
                          ``(ii) in the case of the remarriage of a 
                      parent, support of a child received from the 
                      parent's spouse shall be treated as received from 
                      the parent.
                    ``(B) Alimony or separate maintenance payment.--For 
                purposes of subparagraph (A), the term `alimony or 
                separate maintenance payment' means any payment in cash 
                if--
                          ``(i) such payment is received by (or on 
                      behalf of) a spouse under a divorce or separation 
                      instrument (as defined in section 121(d)(3)(C)),
                          ``(ii) in the case of an individual legally 
                      separated from the individual's spouse under a 
                      decree of divorce or of separate maintenance, the 
                      payee spouse and the payor spouse are not members 
                      of the same household at the time such payment is 
                      made, and
                          ``(iii) there is no liability to make any such 
                      payment for any period after the death of the 
                      payee spouse and there is no liability to make any 
                      payment (in cash or property) as a substitute for 
                      such payments after the death of the payee 
                      spouse.''.
                    (C) Section 219(f)(1) <<NOTE: 26 USC 219.>>  is 
                amended by striking the third sentence.
                    (D) Section 220(f)(7) is amended by striking 
                ``subparagraph (A) of section 71(b)(2)'' and inserting 
                ``clause (i) of section 121(d)(3)(C)''.
                    (E) Section 223(f)(7) is amended by striking 
                ``subparagraph (A) of section 71(b)(2)'' and inserting 
                ``clause (i) of section 121(d)(3)(C)''.
                    (F) Section 382(l)(3)(B)(iii) is amended by striking 
                ``section 71(b)(2)'' and inserting ``section 
                121(d)(3)(C)''.
                    (G) Section 408(d)(6) is amended by striking 
                ``subparagraph (A) of section 71(b)(2)'' and inserting 
                ``clause (i) of section 121(d)(3)(C)''.
            (4) Additional conforming amendments.--Section 7701(a)(17) 
        is amended--
                    (A) by striking ``sections 682 and 2516'' and 
                inserting ``section 2516'', and
                    (B) by striking ``such sections'' each place it 
                appears and inserting ``such section''.

    (c) <<NOTE: 26 USC 61 note.>>  Effective Date.--The amendments made 
by this section shall apply to--
            (1) any divorce or separation instrument (as defined in 
        section 71(b)(2) of the Internal Revenue Code of 1986 as in 
        effect before the date of the enactment of this Act) executed 
        after December 31, 2018, and
            (2) any divorce or separation instrument (as so defined) 
        executed on or before such date and modified after such date if 
        the modification expressly provides that the amendments made by 
        this section apply to such modification.

[[Page 131 STAT. 2091]]

           PART VI--INCREASE IN ESTATE AND GIFT TAX EXEMPTION

SEC. 11061. INCREASE IN ESTATE AND GIFT TAX EXEMPTION.

    (a) In General.--Section 2010(c)(3) <<NOTE: 26 USC 2010.>>  is 
amended by adding at the end the following new subparagraph:
                    ``(C) Increase in basic exclusion amount.--In the 
                case of estates of decedents dying or gifts made after 
                December 31, 2017, and before January 1, 2026, 
                subparagraph (A) shall be applied by substituting 
                `$10,000,000' for `$5,000,000'.''.

    (b) Conforming Amendment.--Subsection (g) of section 2001 is amended 
to read as follows:
    ``(g) Modifications to Tax Payable.--
            ``(1) Modifications to gift tax payable to reflect different 
        tax rates.--For purposes of applying subsection (b)(2) with 
        respect to 1 or more gifts, the rates of tax under subsection 
        (c) in effect at the decedent's death shall, in lieu of the 
        rates of tax in effect at the time of such gifts, be used both 
        to compute--
                    ``(A) the tax imposed by chapter 12 with respect to 
                such gifts, and
                    ``(B) the credit allowed against such tax under 
                section 2505, including in computing--
                          ``(i) the applicable credit amount under 
                      section 2505(a)(1), and
                          ``(ii) the sum of the amounts allowed as a 
                      credit for all preceding periods under section 
                      2505(a)(2).
            ``(2) Modifications to estate tax payable to reflect 
        different basic exclusion amounts.--The Secretary shall 
        prescribe such regulations as may be necessary or appropriate to 
        carry out this section with respect to any difference between--
                    ``(A) the basic exclusion amount under section 
                2010(c)(3) applicable at the time of the decedent's 
                death, and
                    ``(B) the basic exclusion amount under such section 
                applicable with respect to any gifts made by the 
                decedent.''.

    (c) <<NOTE: 26 USC 2001 note.>>  Effective Date.--The amendments 
made by this section shall apply to estates of decedents dying and gifts 
made after December 31, 2017.

        PART VII--EXTENSION OF TIME LIMIT FOR CONTESTING IRS LEVY

SEC. 11071. EXTENSION OF TIME LIMIT FOR CONTESTING IRS LEVY.

    (a) Extension of Time for Return of Property Subject to Levy.--
Subsection (b) of section 6343 is amended by striking ``9 months'' and 
inserting ``2 years''.
    (b) Period of Limitation on Suits.--Subsection (c) of section 6532 
is amended--
            (1) by striking ``9 months'' in paragraph (1) and inserting 
        ``2 years'', and
            (2) by striking ``9-month'' in paragraph (2) and inserting 
        ``2-year''.

[[Page 131 STAT. 2092]]

    (c) <<NOTE: 26 USC 6343 note.>>  Effective Date.--The amendments 
made by this section shall apply to--
            (1) levies made after the date of the enactment of this Act, 
        and
            (2) levies made on or before such date if the 9-month period 
        has not expired under section 6343(b) of the Internal Revenue 
        Code of 1986 (without regard to this section) as of such date.

                      PART VIII--INDIVIDUAL MANDATE

SEC. 11081. ELIMINATION OF SHARED RESPONSIBILITY PAYMENT FOR 
                            INDIVIDUALS FAILING TO MAINTAIN 
                            MINIMUM ESSENTIAL COVERAGE.

    (a) In General.--Section 5000A(c) <<NOTE: 26 USC 5000A.>>  is 
amended--
            (1) in paragraph (2)(B)(iii), by striking ``2.5 percent'' 
        and inserting ``Zero percent'', and
            (2) in paragraph (3)--
                    (A) by striking ``$695'' in subparagraph (A) and 
                inserting ``$0'', and
                    (B) by striking subparagraph (D).

    (b) <<NOTE: 26 USC 5000A note.>>  Effective Date.--The amendments 
made by this section shall apply to months beginning after December 31, 
2018.

                   Subtitle B--Alternative Minimum Tax

SEC. 12001. REPEAL OF TAX FOR CORPORATIONS.

    (a) In General.--Section 55(a) is amended by striking ``There'' and 
inserting ``In the case of a taxpayer other than a corporation, there''.
    (b) Conforming Amendments.--
            (1) Section 38(c)(6) is amended by adding at the end the 
        following new subparagraph:
                    ``(E) Corporations.--In the case of a corporation, 
                this subsection shall be applied by treating the 
                corporation as having a tentative minimum tax of 
                zero.''.
            (2) Section 53(d)(2) is amended by inserting ``, except that 
        in the case of a corporation, the tentative minimum tax shall be 
        treated as zero'' before the period at the end.
            (3)(A) Section 55(b)(1) is amended to read as follows:
            ``(1) Amount of tentative tax.--
                    ``(A) In general.--The tentative minimum tax for the 
                taxable year is the sum of--
                          ``(i) 26 percent of so much of the taxable 
                      excess as does not exceed $175,000, plus
                          ``(ii) 28 percent of so much of the taxable 
                      excess as exceeds $175,000.
                The amount determined under the preceding sentence shall 
                be reduced by the alternative minimum tax foreign tax 
                credit for the taxable year.
                    ``(B) Taxable excess.--For purposes of this 
                subsection, the term `taxable excess' means so much of 
                the alternative minimum taxable income for the taxable 
                year as exceeds the exemption amount.
                    ``(C) Married individual filing separate return.--In 
                the case of a married individual filing a separate 
                return,

[[Page 131 STAT. 2093]]

                subparagraph (A) shall be applied by substituting 50 
                percent of the dollar amount otherwise applicable under 
                clause (i) and clause (ii) thereof. For purposes of the 
                preceding sentence, marital status shall be determined 
                under section 7703.''.
            (B) Section 55(b)(3) <<NOTE: 26 USC 55.>>  is amended by 
        striking ``paragraph (1)(A)(i)'' and inserting ``paragraph 
        (1)(A)''.
            (C) Section 59(a) is amended--
                    (i) by striking ``subparagraph (A)(i) or (B)(i) of 
                section 55(b)(1) (whichever applies) in lieu of the 
                highest rate of tax specified in section 1 or 11 
                (whichever applies)'' in paragraph (1)(C) and inserting 
                ``section 55(b)(1) in lieu of the highest rate of tax 
                specified in section 1'', and
                    (ii) in paragraph (2), by striking ``means'' and all 
                that follows and inserting ``means the amount determined 
                under the first sentence of section 55(b)(1)(A).''.
            (D) Section 897(a)(2)(A) is amended by striking ``section 
        55(b)(1)(A)'' and inserting ``section 55(b)(1)''.
            (E) Section 911(f) is amended--
                    (i) in paragraph (1)(B)--
                          (I) by striking ``section 55(b)(1)(A)(ii)'' 
                      and inserting ``section 55(b)(1)(B)'', and
                          (II) by striking ``section 55(b)(1)(A)(i)'' 
                      and inserting ``section 55(b)(1)(A)'', and
                    (ii) in paragraph (2)(B), by striking ``section 
                55(b)(1)(A)(ii)'' each place it appears and inserting 
                ``section 55(b)(1)(B)''.
            (4) Section 55(c)(1) is amended by striking ``, the section 
        936 credit allowable under section 27(b), and the Puerto Rico 
        economic activity credit under section 30A''.
            (5) Section 55(d), as amended by section 11002, is amended--
                    (A) by striking paragraph (2) and redesignating 
                paragraphs (3) and (4) as paragraphs (2) and (3), 
                respectively,
                    (B) in paragraph (2) (as so redesignated), by 
                inserting ``and'' at the end of subparagraph (B), by 
                striking ``, and'' at the end of subparagraph (C) and 
                inserting a period, and by striking subparagraph (D), 
                and
                    (C) in paragraph (3) (as so redesignated)--
                          (i) by striking ``(b)(1)(A)(i)'' in 
                      subparagraph (B)(i) and inserting ``(b)(1)(A)'', 
                      and
                          (ii) by striking ``paragraph (3)'' in 
                      subparagraph (B)(iii) and inserting ``paragraph 
                      (2)''.
            (6) Section 55 is amended by striking subsection (e).
            (7) Section 56(b)(2) is amended by striking subparagraph (C) 
        and by redesignating subparagraph (D) as subparagraph (C).
            (8)(A) Section 56 is amended by striking subsections (c) and 
        (g).
            (B) Section 847 is amended by striking the last sentence of 
        paragraph (9).
            (C) Section 848 is amended by striking subsection (i).
            (9) Section 58(a) is amended by striking paragraph (3) and 
        redesignating paragraph (4) as paragraph (3).
            (10) Section 59 is amended by striking subsections (b) and 
        (f).

[[Page 131 STAT. 2094]]

            (11) Section 11(d) <<NOTE: 26 USC 11.>>  is amended by 
        striking ``the taxes imposed by subsection (a) and section 55'' 
        and inserting ``the tax imposed by subsection (a)''.
            (12) Section 12 is amended by striking paragraph (7).
            (13) Section 168(k) is amended by striking paragraph (4).
            (14) Section 882(a)(1) is amended by striking ``, 55,''.
            (15) Section 962(a)(1) is amended by striking ``sections 11 
        and 55'' and inserting ``section 11''.
            (16) Section 1561(a) is amended--
                    (A) by inserting ``and'' at the end of paragraph 
                (1), by striking ``, and'' at the end of paragraph (2) 
                and inserting a period, and by striking paragraph (3), 
                and
                    (B) by striking the last sentence.
            (17) Section 6425(c)(1)(A) is amended to read as follows:
                    ``(A) the tax imposed by section 11 or 1201(a), or 
                subchapter L of chapter 1, whichever is applicable, 
                over''.
            (18) Section 6655(e)(2) is amended by striking ``and 
        alternative minimum taxable income'' each place it appears in 
        subparagraphs (A) and (B)(i).
            (19) Section 6655(g)(1)(A) is amended by inserting ``plus'' 
        at the end of clause (i), by striking clause (ii), and by 
        redesignating clause (iii) as clause (ii).

    (c) <<NOTE: 26 USC 11 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 12002. CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY OF 
                            CORPORATIONS.

    (a) Credits Treated as Refundable.--Section 53 is amended by adding 
at the end the following new subsection:
    ``(e) Portion of Credit Treated as Refundable.--
            ``(1) In general.--In the case of any taxable year of a 
        corporation beginning in 2018, 2019, 2020, or 2021, the 
        limitation under subsection (c) shall be increased by the AMT 
        refundable credit amount for such year.
            ``(2) AMT refundable credit amount.--For purposes of 
        paragraph (1), the AMT refundable credit amount is an amount 
        equal to 50 percent (100 percent in the case of a taxable year 
        beginning in 2021) of the excess (if any) of--
                    ``(A) the minimum tax credit determined under 
                subsection (b) for the taxable year, over
                    ``(B) the minimum tax credit allowed under 
                subsection (a) for such year (before the application of 
                this subsection for such year).
            ``(3) Credit refundable.--For purposes of this title (other 
        than this section), the credit allowed by reason of this 
        subsection shall be treated as a credit allowed under subpart C 
        (and not this subpart).
            ``(4) Short taxable years.--In the case of any taxable year 
        of less than 365 days, the AMT refundable credit amount 
        determined under paragraph (2) with respect to such taxable year 
        shall be the amount which bears the same ratio to such amount 
        determined without regard to this paragraph as the number of 
        days in such taxable year bears to 365.''.

    (b) Treatment of References.--Section 53(d) is amended by adding at 
the end the following new paragraph:
            ``(3) AMT term references.--In the case of a corporation, 
        any references in this subsection to section 55, 56, or 57 shall

[[Page 131 STAT. 2095]]

        be treated as a reference to such section as in effect before 
        the amendments made by Tax Cuts and Jobs Act.''.

    (c) Conforming Amendment.--Section 1374(b)(3)(B) <<NOTE: 26 USC 
1374.>>  is amended by striking the last sentence thereof.

    (d) <<NOTE: 26 USC 53 note.>>  Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2017.
            (2) Conforming amendment.--The amendment made by subsection 
        (c) shall apply to taxable years beginning after December 31, 
        2021.
SEC. 12003. INCREASED EXEMPTION FOR INDIVIDUALS.

    (a) In General.--Section 55(d), as amended by the preceding 
provisions of this Act, is amended by adding at the end the following 
new paragraph:
            ``(4) Special rule for taxable years beginning after 2017 
        and before 2026.--
                    ``(A) In general.--In the case of any taxable year 
                beginning after December 31, 2017, and before January 1, 
                2026--
                          ``(i) paragraph (1) shall be applied--
                                    ``(I) by substituting `$109,400' for 
                                `$78,750' in subparagraph (A), and
                                    ``(II) by substituting `$70,300' for 
                                `$50,600' in subparagraph (B), and
                          ``(ii) paragraph (2) shall be applied--
                                    ``(I) by substituting `$1,000,000' 
                                for `$150,000' in subparagraph (A),
                                    ``(II) by substituting `50 percent 
                                of the dollar amount applicable under 
                                subparagraph (A)' for `$112,500' in 
                                subparagraph (B), and
                                    ``(III) in the case of a taxpayer 
                                described in paragraph (1)(D), without 
                                regard to the substitution under 
                                subclause (I).
                    ``(B) Inflation adjustment.--
                          ``(i) In general.--In the case of any taxable 
                      year beginning in a calendar year after 2018, the 
                      amounts described in clause (ii) shall each be 
                      increased by an amount equal to--
                                    ``(I) such dollar amount, multiplied 
                                by
                                    ``(II) the cost-of-living adjustment 
                                determined under section 1(f)(3) for the 
                                calendar year in which the taxable year 
                                begins, determined by substituting 
                                `calendar year 2017' for `calendar year 
                                2016' in subparagraph (A)(ii) thereof.
                          ``(ii) Amounts described.--The amounts 
                      described in this clause are the $109,400 amount 
                      in subparagraph (A)(i)(I), the $70,300 amount in 
                      subparagraph (A)(i)(II), and the $1,000,000 amount 
                      in subparagraph (A)(ii)(I).
                          ``(iii) Rounding.--Any increased amount 
                      determined under clause (i) shall be rounded to 
                      the nearest multiple of $100.
                          ``(iv) Coordination with current 
                      adjustments.--In the case of any taxable year to 
                      which subparagraph (A) applies, no adjustment 
                      shall be made under paragraph (3) to any of the 
                      numbers which

[[Page 131 STAT. 2096]]

                      are substituted under subparagraph (A) and 
                      adjusted under this subparagraph.''.

    (b) <<NOTE: 26 USC 55 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.

                 Subtitle C--Business-related Provisions

                      PART I--CORPORATE PROVISIONS

SEC. 13001. 21-PERCENT CORPORATE TAX RATE.

    (a) In General.--Subsection (b) of section 11 <<NOTE: 26 USC 11.>>  
is amended to read as follows:

    ``(b) Amount of Tax.--The amount of the tax imposed by subsection 
(a) shall be 21 percent of taxable income.''.
    (b) Conforming Amendments.--
            (1) The following sections are each amended by striking 
        ``section 11(b)(1)'' and inserting ``section 11(b)'':
                    (A) Section 280C(c)(3)(B)(ii)(II).
                    (B) Paragraphs (2)(B) and (6)(A)(ii) of section 
                860E(e).
                    (C) Section 7874(e)(1)(B).
            (2)(A) Part I of subchapter P of chapter 1 is amended by 
        striking section 1201 (and by striking the item relating to such 
        section in the table of sections <<NOTE: 26 USC 1201 prec.>>  
        for such part).
            (B) Section 12 is amended by striking paragraphs (4) and 
        (6), and by redesignating paragraph (5) as paragraph (4).
            (C) Section 453A(c)(3) is amended by striking ``or 1201 
        (whichever is appropriate)''.
            (D) Section 527(b) is amended--
                    (i) by striking paragraph (2), and
                    (ii) by striking all that precedes ``is hereby 
                imposed'' and inserting:

    ``(b) Tax Imposed.--A tax''.
            (E) Sections 594(a) is amended by striking ``taxes imposed 
        by section 11 or 1201(a)'' and inserting ``tax imposed by 
        section 11''.
            (F) Section 691(c)(4) is amended by striking ``1201,''.
            (G) Section 801(a) is amended--
                    (i) by striking paragraph (2), and
                    (ii) by striking all that precedes ``is hereby 
                imposed'' and inserting:

    ``(a) Tax Imposed.--A tax''.
            (H) Section 831(e) is amended by striking paragraph (1) and 
        by redesignating paragraphs (2) and (3) as paragraphs (1) and 
        (2), respectively.
            (I) Sections 832(c)(5) and 834(b)(1)(D) are each amended by 
        striking ``sec. 1201 and following,''.
            (J) Section 852(b)(3)(A) is amended by striking ``section 
        1201(a)'' and inserting ``section 11(b)''.
            (K) Section 857(b)(3) is amended--
                    (i) by striking subparagraph (A) and redesignating 
                subparagraphs (B) through (F) as subparagraphs (A) 
                through (E), respectively,
                    (ii) in subparagraph (C), as so redesignated--
                          (I) by striking ``subparagraph (A)(ii)'' in 
                      clause (i) thereof and inserting ``paragraph 
                      (1)'',

[[Page 131 STAT. 2097]]

                          (II) by striking ``the tax imposed by 
                      subparagraph (A)(ii)'' in clauses (ii) and (iv) 
                      thereof and inserting ``the tax imposed by 
                      paragraph (1) on undistributed capital gain'',
                    (iii) in subparagraph (E), as so redesignated, by 
                striking ``subparagraph (B) or (D)'' and inserting 
                ``subparagraph (A) or (C)'', and
                    (iv) by adding at the end the following new 
                subparagraph:
                    ``(F) Undistributed capital gain.--For purposes of 
                this paragraph, the term `undistributed capital gain' 
                means the excess of the net capital gain over the 
                deduction for dividends paid (as defined in section 561) 
                determined with reference to capital gain dividends 
                only.''.
            (L) Section 882(a)(1), as amended by section 
        12001, <<NOTE: 26 USC 882.>>  is further amended by striking 
        ``or 1201(a)''.
            (M) Section 904(b) is amended--
                    (i) by striking ``or 1201(a)'' in paragraph (2)(C),
                    (ii) by striking paragraph (3)(D) and inserting the 
                following:
                    ``(D) Capital gain rate differential.--There is a 
                capital gain rate differential for any year if 
                subsection (h) of section 1 applies to such taxable 
                year.'', and
                    (iii) by striking paragraph (3)(E) and inserting the 
                following:
                    ``(E) Rate differential portion.--The rate 
                differential portion of foreign source net capital gain, 
                net capital gain, or the excess of net capital gain from 
                sources within the United States over net capital gain, 
                as the case may be, is the same proportion of such 
                amount as--
                          ``(i) the excess of--
                                    ``(I) the highest rate of tax set 
                                forth in subsection (a), (b), (c), (d), 
                                or (e) of section 1 (whichever applies), 
                                over
                                    ``(II) the alternative rate of tax 
                                determined under section 1(h), bears to
                          ``(ii) that rate referred to in subclause 
                      (I).''.
            (N) Section 1374(b) is amended by striking paragraph (4).
            (O) Section 1381(b) is amended by striking ``taxes imposed 
        by section 11 or 1201'' and inserting ``tax imposed by section 
        11''.
            (P) Sections 6425(c)(1)(A), as amended by section 12001, and 
        6655(g)(1)(A)(i) are each amended by striking ``or 1201(a),''.
            (Q) Section 7518(g)(6)(A) is amended by striking ``or 
        1201(a)''.
            (3)(A) Section 1445(e)(1) is amended--
                    (i) by striking ``35 percent'' and inserting ``the 
                highest rate of tax in effect for the taxable year under 
                section 11(b)'', and
                    (ii) by striking ``of the gain'' and inserting 
                ``multiplied by the gain''.
            (B) Section 1445(e)(2) is amended by striking ``35 percent 
        of the amount'' and inserting ``the highest rate of tax in 
        effect for the taxable year under section 11(b) multiplied by 
        the amount''.
            (C) Section 1445(e)(6) is amended--

[[Page 131 STAT. 2098]]

                    (i) by striking ``35 percent'' and inserting ``the 
                highest rate of tax in effect for the taxable year under 
                section 11(b)'', and
                    (ii) by striking ``of the amount'' and inserting 
                ``multiplied by the amount''.
            (D) Section 1446(b)(2)(B) <<NOTE: 26 USC 1446.>>  is amended 
        by striking ``section 11(b)(1)'' and inserting ``section 
        11(b)''.
            (4) Section 852(b)(1) is amended by striking the last 
        sentence.
            (5)(A) Part I of subchapter B of chapter 5 is amended by 
        striking section 1551 (and by striking the item relating to such 
        section in the table of sections <<NOTE: 26 USC 1551 prec.>>  
        for such part).
            (B) Section 535(c)(5) is amended to read as follows:
            ``(5) Cross reference.--For limitation on credit provided in 
        paragraph (2) or (3) in the case of certain controlled 
        corporations, see section 1561.''.
            (6)(A) Section 1561, as amended by section 12001, is amended 
        to read as follows:
``SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS CREDIT IN THE CASE 
                          OF CERTAIN CONTROLLED CORPORATIONS.

    ``(a) In General.--The component members of a controlled group of 
corporations on a December 31 shall, for their taxable years which 
include such December 31, be limited for purposes of this subtitle to 
one $250,000 ($150,000 if any component member is a corporation 
described in section 535(c)(2)(B)) amount for purposes of computing the 
accumulated earnings credit under section 535(c)(2) and (3). Such amount 
shall be divided equally among the component members of such group on 
such December 31 unless the Secretary prescribes regulations permitting 
an unequal allocation of such amount.
    ``(b) Certain Short Taxable Years.--If a corporation has a short 
taxable year which does not include a December 31 and is a component 
member of a controlled group of corporations with respect to such 
taxable year, then for purposes of this subtitle, the amount to be used 
in computing the accumulated earnings credit under section 535(c)(2) and 
(3) of such corporation for such taxable year shall be the amount 
specified in subsection (a) with respect to such group, divided by the 
number of corporations which are component members of such group on the 
last day of such taxable year. For purposes of the preceding sentence, 
section 1563(b) shall be applied as if such last day were substituted 
for December 31.''.
                    (B) The table of sections for part II of subchapter 
                B of chapter 5 <<NOTE: 26 USC 1561 prec.>>  is amended 
                by striking the item relating to section 1561 and 
                inserting the following new item:

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

            (7) Section 7518(g)(6)(A) is amended--
                    (A) by striking ``With respect to the portion'' and 
                inserting ``In the case of a taxpayer other than a 
                corporation, with respect to the portion'', and
                    (B) by striking ``(34 percent in the case of a 
                corporation)''.

    (c) <<NOTE: 28 USC 11 note.>>  Effective Date.--

[[Page 131 STAT. 2099]]

            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by subsections (a) and (b) shall 
        apply to taxable years beginning after December 31, 2017.
            (2) Withholding.--The amendments made by subsection (b)(3) 
        shall apply to distributions made after December 31, 2017.
            (3) Certain transfers.--The amendments made by subsection 
        (b)(6) shall apply to transfers made after December 31, 2017.

    (d) <<NOTE: 26 USC 168 note.>>  Normalization Requirements.--
            (1) In general.--A normalization method of accounting shall 
        not be treated as being used with respect to any public utility 
        property for purposes of section 167 or 168 of the Internal 
        Revenue Code of 1986 if the taxpayer, in computing its cost of 
        service for ratemaking purposes and reflecting operating results 
        in its regulated books of account, reduces the excess tax 
        reserve more rapidly or to a greater extent than such reserve 
        would be reduced under the average rate assumption method.
            (2) Alternative method for certain taxpayers.--If, as of the 
        first day of the taxable year that includes the date of 
        enactment of this Act--
                    (A) the taxpayer was required by a regulatory agency 
                to compute depreciation for public utility property on 
                the basis of an average life or composite rate method, 
                and
                    (B) the taxpayer's books and underlying records did 
                not contain the vintage account data necessary to apply 
                the average rate assumption method,
        the taxpayer will be treated as using a normalization method of 
        accounting if, with respect to such jurisdiction, the taxpayer 
        uses the alternative method for public utility property that is 
        subject to the regulatory authority of that jurisdiction.
            (3) Definitions.--For purposes of this subsection--
                    (A) Excess tax reserve.--The term ``excess tax 
                reserve'' means the excess of--
                          (i) the reserve for deferred taxes (as 
                      described in section 168(i)(9)(A)(ii) of the 
                      Internal Revenue Code of 1986) as of the day 
                      before the corporate rate reductions provided in 
                      the amendments made by this section take effect, 
                      over
                          (ii) the amount which would be the balance in 
                      such reserve if the amount of such reserve were 
                      determined by assuming that the corporate rate 
                      reductions provided in this Act were in effect for 
                      all prior periods.
                    (B) Average rate assumption method.--The average 
                rate assumption method is the method under which the 
                excess in the reserve for deferred taxes is reduced over 
                the remaining lives of the property as used in its 
                regulated books of account which gave rise to the 
                reserve for deferred taxes. Under such method, during 
                the time period in which the timing differences for the 
                property reverse, the amount of the adjustment to the 
                reserve for the deferred taxes is calculated by 
                multiplying--
                          (i) the ratio of the aggregate deferred taxes 
                      for the property to the aggregate timing 
                      differences for the property as of the beginning 
                      of the period in question, by

[[Page 131 STAT. 2100]]

                          (ii) the amount of the timing differences 
                      which reverse during such period.
                    (C) Alternative method.--The ``alternative method'' 
                is the method in which the taxpayer--
                          (i) computes the excess tax reserve on all 
                      public utility property included in the plant 
                      account on the basis of the weighted average life 
                      or composite rate used to compute depreciation for 
                      regulatory purposes, and
                          (ii) reduces the excess tax reserve ratably 
                      over the remaining regulatory life of the 
                      property.
            (4) Tax increased for normalization violation.--If, for any 
        taxable year ending after the date of the enactment of this Act, 
        the taxpayer does not use a normalization method of accounting 
        for the corporate rate reductions provided in the amendments 
        made by this section--
                    (A) the taxpayer's tax for the taxable year shall be 
                increased by the amount by which it reduces its excess 
                tax reserve more rapidly than permitted under a 
                normalization method of accounting, and
                    (B) such taxpayer shall not be treated as using a 
                normalization method of accounting for purposes of 
                subsections (f)(2) and (i)(9)(C) of section 168 of the 
                Internal Revenue Code of 1986.
SEC. 13002. REDUCTION IN DIVIDEND RECEIVED DEDUCTIONS TO REFLECT 
                            LOWER CORPORATE INCOME TAX RATES.

    (a) Dividends Received by Corporations.--
            (1) In general.--Section 243(a)(1) <<NOTE: 26 USC 243.>>  is 
        amended by striking ``70 percent'' and inserting ``50 percent''.
            (2) Dividends from 20-percent owned corporations.--Section 
        243(c)(1) is amended--
                    (A) by striking ``80 percent'' and inserting ``65 
                percent'', and
                    (B) by striking ``70 percent'' and inserting ``50 
                percent''.
            (3) Conforming amendment.--The heading for section 243(c) is 
        amended by striking ``Retention of 80-percent Dividend Received 
        Deduction'' and inserting ``Increased Percentage''.

    (b) Dividends Received From FSC.--Section 245(c)(1)(B) is amended--
            (1) by striking ``70 percent'' and inserting ``50 percent'', 
        and
            (2) by striking ``80 percent'' and inserting ``65 percent''.

    (c) Limitation on Aggregate Amount of Deductions.--Section 246(b)(3) 
is amended--
            (1) by striking ``80 percent'' in subparagraph (A) and 
        inserting ``65 percent'', and
            (2) by striking ``70 percent'' in subparagraph (B) and 
        inserting ``50 percent''.

    (d) Reduction in Deduction Where Portfolio Stock Is Debt-financed.--
Section 246A(a)(1) is amended--
            (1) by striking ``70 percent'' and inserting ``50 percent'', 
        and
            (2) by striking ``80 percent'' and inserting ``65 percent''.

    (e) Income From Sources Within the United States.--Section 861(a)(2) 
is amended--

[[Page 131 STAT. 2101]]

            (1) by striking ``100/70th'' and inserting ``100/50th'' in 
        subparagraph (B), and
            (2) in the flush sentence at the end--
                    (A) by striking ``100/80th'' and inserting ``100/
                65th'', and
                    (B) by striking ``100/70th'' and inserting ``100/
                50th''.

    (f) <<NOTE: 26 USC 243 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.

                     PART II--SMALL BUSINESS REFORMS

SEC. 13101. MODIFICATIONS OF RULES FOR EXPENSING DEPRECIABLE 
                            BUSINESS ASSETS.

    (a) Increase in Limitation.--
            (1) Dollar limitation.--Section 179(b)(1) <<NOTE: 26 USC 
        179.>>  is amended by striking ``$500,000'' and inserting 
        ``$1,000,000''.
            (2) Reduction in limitation.--Section 179(b)(2) is amended 
        by striking ``$2,000,000'' and inserting ``$2,500,000''.
            (3) Inflation adjustments.--
                    (A) In general.--Subparagraph (A) of section 
                179(b)(6), as amended by section 11002(d), is amended--
                          (i) by striking ``2015'' and inserting 
                      ``2018'', and
                          (ii) in clause (ii), by striking ``calendar 
                      year 2014'' and inserting ``calendar year 2017''.
                    (B) Sport utility vehicles.--Section 179(b)(6) is 
                amended--
                          (i) in subparagraph (A), by striking 
                      ``paragraphs (1) and (2)'' and inserting 
                      ``paragraphs (1), (2), and (5)(A)'', and
                          (ii) in subparagraph (B), by inserting ``($100 
                      in the case of any increase in the amount under 
                      paragraph (5)(A))'' after ``$10,000''.

    (b) Section 179 Property To Include Qualified Real Property.--
            (1) In general.--Subparagraph (B) of section 179(d)(1) is 
        amended to read as follows:
                    ``(B) which is--
                          ``(i) section 1245 property (as defined in 
                      section 1245(a)(3)), or
                          ``(ii) at the election of the taxpayer, 
                      qualified real property (as defined in subsection 
                      (f)), and''.
            (2) Qualified real property defined.--Subsection (f) of 
        section 179 is amended to read as follows:

    ``(f) Qualified Real Property.--For purposes of this section, the 
term `qualified real property' means--
            ``(1) any qualified improvement property described in 
        section 168(e)(6), and
            ``(2) any of the following improvements to nonresidential 
        real property placed in service after the date such property was 
        first placed in service:
                    ``(A) Roofs.
                    ``(B) Heating, ventilation, and air-conditioning 
                property.
                    ``(C) Fire protection and alarm systems.
                    ``(D) Security systems.''.

[[Page 131 STAT. 2102]]

    (c) Repeal of Exclusion for Certain Property.--The last sentence of 
section 179(d)(1) <<NOTE: 26 USC 179.>>  is amended by inserting 
``(other than paragraph (2) thereof)'' after ``section 50(b)''.

    (d) <<NOTE: 26 USC 179 note.>>  Effective Date.--The amendments made 
by this section shall apply to property placed in service in taxable 
years beginning after December 31, 2017.
SEC. 13102. SMALL BUSINESS ACCOUNTING METHOD REFORM AND 
                            SIMPLIFICATION.

    (a) Modification of Limitation on Cash Method of Accounting.--
            (1) Increased limitation.--So much of section 448(c) as 
        precedes paragraph (2) is amended to read as follows:

    ``(c) Gross Receipts Test.--For purposes of this section--
            ``(1) In general.--A corporation or partnership meets the 
        gross receipts test of this subsection for any taxable year if 
        the average annual gross receipts of such entity for the 3-
        taxable-year period ending with the taxable year which precedes 
        such taxable year does not exceed $25,000,000.''.
            (2) Application of exception on annual basis.--Section 
        448(b)(3) is amended to read as follows:
            ``(3) Entities which meet gross receipts test.--Paragraphs 
        (1) and (2) of subsection (a) shall not apply to any corporation 
        or partnership for any taxable year if such entity (or any 
        predecessor) meets the gross receipts test of subsection (c) for 
        such taxable year.''.
            (3) Inflation adjustment.--Section 448(c) is amended by 
        adding at the end the following new paragraph:
            ``(4) Adjustment for inflation.--In the case of any taxable 
        year beginning after December 31, 2018, the dollar amount in 
        paragraph (1) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined under 
                section 1(f)(3) for the calendar year in which the 
                taxable year begins, by substituting `calendar year 
                2017' for `calendar year 2016' in subparagraph (A)(ii) 
                thereof.
        If any amount as increased under the preceding sentence is not a 
        multiple of $1,000,000, such amount shall be rounded to the 
        nearest multiple of $1,000,000.''.
            (4) Coordination with section 481.--Section 448(d)(7) is 
        amended to read as follows:
            ``(7) Coordination with section 481.--Any change in method 
        of accounting made pursuant to this section shall be treated for 
        purposes of section 481 as initiated by the taxpayer and made 
        with the consent of the Secretary.''.
            (5) Application of exception to corporations engaged in 
        farming.--
                    (A) In general.--Section 447(c) is amended--
                          (i) by inserting ``for any taxable year'' 
                      after ``not being a corporation'' in the matter 
                      preceding paragraph (1), and
                          (ii) by amending paragraph (2) to read as 
                      follows:
            ``(2) a corporation which meets the gross receipts test of 
        section 448(c) for such taxable year.''.
                    (B) Coordination with section 481.--Section 447(f) 
                is amended to read as follows:

[[Page 131 STAT. 2103]]

    ``(f) Coordination With Section 481.--Any change in method of 
accounting made pursuant to this section shall be treated for purposes 
of section 481 as initiated by the taxpayer and made with the consent of 
the Secretary.''.
                    (C) Conforming amendments.--Section 447 <<NOTE: 26 
                USC 447.>>  is amended--
                          (i) by striking subsections (d), (e), (h), and 
                      (i), and
                          (ii) by redesignating subsections (f) and (g) 
                      (as amended by subparagraph (B)) as subsections 
                      (d) and (e), respectively.

    (b) Exemption From UNICAP Requirements.--
            (1) In general.--Section 263A is amended by redesignating 
        subsection (i) as subsection (j) and by inserting after 
        subsection (h) the following new subsection:

    ``(i) Exemption for Certain Small Businesses.--
            ``(1) In general.--In the case of any taxpayer (other than a 
        tax shelter prohibited from using the cash receipts and 
        disbursements method of accounting under section 448(a)(3)) 
        which meets the gross receipts test of section 448(c) for any 
        taxable year, this section shall not apply with respect to such 
        taxpayer for such taxable year.
            ``(2) Application of gross receipts test to individuals, 
        etc.-- In the case of any taxpayer which is not a corporation or 
        a partnership, the gross receipts test of section 448(c) shall 
        be applied in the same manner as if each trade or business of 
        such taxpayer were a corporation or partnership.
            ``(3) Coordination with section 481.--Any change in method 
        of accounting made pursuant to this subsection shall be treated 
        for purposes of section 481 as initiated by the taxpayer and 
        made with the consent of the Secretary.''.
            (2) Conforming amendment.--Section 263A(b)(2) is amended to 
        read as follows:
            ``(2) Property acquired for resale.--Real or personal 
        property described in section 1221(a)(1) which is acquired by 
        the taxpayer for resale.''.

    (c) Exemption From Inventories.--Section 471 is amended by 
redesignating subsection (c) as subsection (d) and by inserting after 
subsection (b) the following new subsection:
    ``(c) Exemption for Certain Small Businesses.--
            ``(1) In general.--In the case of any taxpayer (other than a 
        tax shelter prohibited from using the cash receipts and 
        disbursements method of accounting under section 448(a)(3)) 
        which meets the gross receipts test of section 448(c) for any 
        taxable year--
                    ``(A) subsection (a) shall not apply with respect to 
                such taxpayer for such taxable year, and
                    ``(B) the taxpayer's method of accounting for 
                inventory for such taxable year shall not be treated as 
                failing to clearly reflect income if such method 
                either--
                          ``(i) treats inventory as non-incidental 
                      materials and supplies, or
                          ``(ii) conforms to such taxpayer's method of 
                      accounting reflected in an applicable financial 
                      statement of the taxpayer with respect to such 
                      taxable year or, if the taxpayer does not have any 
                      applicable financial statement with respect to 
                      such taxable year,

[[Page 131 STAT. 2104]]

                      the books and records of the taxpayer prepared in 
                      accordance with the taxpayer's accounting 
                      procedures.
            ``(2) Applicable financial statement.--For purposes of this 
        subsection, the term `applicable financial statement' has the 
        meaning given the term in section 451(b)(3).
            ``(3) Application of gross receipts test to individuals, 
        etc.--In the case of any taxpayer which is not a corporation or 
        a partnership, the gross receipts test of section 448(c) shall 
        be applied in the same manner as if each trade or business of 
        such taxpayer were a corporation or partnership.
            ``(4) Coordination with section 481.--Any change in method 
        of accounting made pursuant to this subsection shall be treated 
        for purposes of section 481 as initiated by the taxpayer and 
        made with the consent of the Secretary.''.

    (d) Exemption From Percentage Completion for Long-term Contracts.--
            (1) In general.--Section 460(e)(1)(B) <<NOTE: 26 USC 460.>>  
        is amended--
                    (A) by inserting ``(other than a tax shelter 
                prohibited from using the cash receipts and 
                disbursements method of accounting under section 
                448(a)(3))'' after ``taxpayer'' in the matter preceding 
                clause (i), and
                    (B) by amending clause (ii) to read as follows:
                          ``(ii) who meets the gross receipts test of 
                      section 448(c) for the taxable year in which such 
                      contract is entered into.''.
            (2) Conforming amendments.--Section 460(e) is amended by 
        striking paragraphs (2) and (3), by redesignating paragraphs 
        (4), (5), and (6) as paragraphs (3), (4), and (5), respectively, 
        and by inserting after paragraph (1) the following new 
        paragraph:
            ``(2) Rules related to gross receipts test.--
                    ``(A) Application of gross receipts test to 
                individuals, etc.-- For purposes of paragraph 
                (1)(B)(ii), in the case of any taxpayer which is not a 
                corporation or a partnership, the gross receipts test of 
                section 448(c) shall be applied in the same manner as if 
                each trade or business of such taxpayer were a 
                corporation or partnership.
                    ``(B) Coordination with section 481.--Any change in 
                method of accounting made pursuant to paragraph 
                (1)(B)(ii) shall be treated as initiated by the taxpayer 
                and made with the consent of the Secretary. Such change 
                shall be effected on a cut-off basis for all similarly 
                classified contracts entered into on or after the year 
                of change.''.

    (e) <<NOTE: 26 USC 263A note.>>  Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2017.
            (2) Preservation of suspense account rules with respect to 
        any existing suspense accounts.--So much of the amendments made 
        by subsection (a)(5)(C) as relate to section 447(i) of the 
        Internal Revenue Code of 1986 shall not apply with respect to 
        any suspense account established under such section before the 
        date of the enactment of this Act.
            (3) Exemption from percentage completion for long-term 
        contracts.--The amendments made by subsection (d) shall apply to 
        contracts entered into after December 31, 2017, in taxable years 
        ending after such date.

[[Page 131 STAT. 2105]]

             PART III--COST RECOVERY AND ACCOUNTING METHODS

                        Subpart A--Cost Recovery

SEC. 13201. TEMPORARY 100-PERCENT EXPENSING FOR CERTAIN BUSINESS 
                            ASSETS.

    (a) Increased Expensing.--
            (1) In general.--Section 168(k) <<NOTE: 26 USC 168.>>  is 
        amended--
                    (A) in paragraph (1)(A), by striking ``50 percent'' 
                and inserting ``the applicable percentage'', and
                    (B) in paragraph (5)(A)(i), by striking ``50 
                percent'' and inserting ``the applicable percentage''.
            (2) Applicable percentage.--Paragraph (6) of section 168(k) 
        is amended to read as follows:
            ``(6) Applicable percentage.--For purposes of this 
        subsection--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the term `applicable percentage' means--
                          ``(i) in the case of property placed in 
                      service after September 27, 2017, and before 
                      January 1, 2023, 100 percent,
                          ``(ii) in the case of property placed in 
                      service after December 31, 2022, and before 
                      January 1, 2024, 80 percent,
                          ``(iii) in the case of property placed in 
                      service after December 31, 2023, and before 
                      January 1, 2025, 60 percent,
                          ``(iv) in the case of property placed in 
                      service after December 31, 2024, and before 
                      January 1, 2026, 40 percent, and
                          ``(v) in the case of property placed in 
                      service after December 31, 2025, and before 
                      January 1, 2027, 20 percent.
                    ``(B) Rule for property with longer production 
                periods.--In the case of property described in 
                subparagraph (B) or (C) of paragraph (2), the term 
                `applicable percentage' means--
                          ``(i) in the case of property placed in 
                      service after September 27, 2017, and before 
                      January 1, 2024, 100 percent,
                          ``(ii) in the case of property placed in 
                      service after December 31, 2023, and before 
                      January 1, 2025, 80 percent,
                          ``(iii) in the case of property placed in 
                      service after December 31, 2024, and before 
                      January 1, 2026, 60 percent,
                          ``(iv) in the case of property placed in 
                      service after December 31, 2025, and before 
                      January 1, 2027, 40 percent, and
                          ``(v) in the case of property placed in 
                      service after December 31, 2026, and before 
                      January 1, 2028, 20 percent.
                    ``(C) Rule for plants bearing fruits and nuts.--In 
                the case of a specified plant described in paragraph 
                (5), the term `applicable percentage' means--

[[Page 131 STAT. 2106]]

                          ``(i) in the case of a plant which is planted 
                      or grafted after September 27, 2017, and before 
                      January 1, 2023, 100 percent,
                          ``(ii) in the case of a plant which is planted 
                      or grafted after December 31, 2022, and before 
                      January 1, 2024, 80 percent,
                          ``(iii) in the case of a plant which is 
                      planted or grafted after December 31, 2023, and 
                      before January 1, 2025, 60 percent,
                          ``(iv) in the case of a plant which is planted 
                      or grafted after December 31, 2024, and before 
                      January 1, 2026, 40 percent, and
                          ``(v) in the case of a plant which is planted 
                      or grafted after December 31, 2025, and before 
                      January 1, 2027, 20 percent.''.
            (3) Conforming amendment.--
                    (A) Paragraph (5) of section 168(k) <<NOTE: 26 USC 
                168.>>  is amended by striking subparagraph (F).
                    (B) Section 168(k) is amended by adding at the end 
                the following new paragraph:
            ``(8) Phase down.--In the case of qualified property 
        acquired by the taxpayer before September 28, 2017, and placed 
        in service by the taxpayer after September 27, 2017, paragraph 
        (6) shall be applied by substituting for each percentage 
        therein--
                    ``(A) `50 percent' in the case of--
                          ``(i) property placed in service before 
                      January 1, 2018, and
                          ``(ii) property described in subparagraph (B) 
                      or (C) of paragraph (2) which is placed in service 
                      in 2018,
                    ``(B) `40 percent' in the case of--
                          ``(i) property placed in service in 2018 
                      (other than property described in subparagraph (B) 
                      or (C) of paragraph (2)), and
                          ``(ii) property described in subparagraph (B) 
                      or (C) of paragraph (2) which is placed in service 
                      in 2019,
                    ``(C) `30 percent' in the case of--
                          ``(i) property placed in service in 2019 
                      (other than property described in subparagraph (B) 
                      or (C) of paragraph (2)), and
                          ``(ii) property described in subparagraph (B) 
                      or (C) of paragraph (2) which is placed in service 
                      in 2020, and
                    ``(D) `0 percent' in the case of--
                          ``(i) property placed in service after 2019 
                      (other than property described in subparagraph (B) 
                      or (C) of paragraph (2)), and
                          ``(ii) property described in subparagraph (B) 
                      or (C) of paragraph (2) which is placed in service 
                      after 2020.''.

    (b) Extension.--
            (1) In general.--Section 168(k) is amended--
                    (A) in paragraph (2)--
                          (i) in subparagraph (A)(iii), clauses (i)(III) 
                      and (ii) of subparagraph (B), and subparagraph 
                      (E)(i), by striking ``January 1, 2020'' each place 
                      it appears and inserting ``January 1, 2027'', and
                          (ii) in subparagraph (B)--

[[Page 131 STAT. 2107]]

                                    (I) in clause (i)(II), by striking 
                                ``January 1, 2021'' and inserting 
                                ``January 1, 2028'', and
                                    (II) in the heading of clause (ii), 
                                by striking ``pre-january 1, 2020'' and 
                                inserting ``pre-january 1, 2027'', and
                    (B) in paragraph (5)(A), by striking ``January 1, 
                2020'' and inserting ``January 1, 2027''.
            (2) Conforming amendments.--
                    (A) Clause (ii) of section 460(c)(6)(B) <<NOTE: 26 
                USC 460.>>  is amended by striking ``January 1, 2020 
                (January 1, 2021'' and inserting ``January 1, 2027 
                (January 1, 2028''.
                    (B) The heading of section 168(k) is amended by 
                striking ``Acquired After December 31, 2007, and Before 
                January 1, 2020''.

    (c) Application to Used Property.--
            (1) In general.--Section 168(k)(2)(A)(ii) is amended to read 
        as follows:
                          ``(ii) the original use of which begins with 
                      the taxpayer or the acquisition of which by the 
                      taxpayer meets the requirements of clause (ii) of 
                      subparagraph (E), and''.
            (2) Acquisition requirements.--Section 168(k)(2)(E)(ii) is 
        amended to read as follows:
                          ``(ii) Acquisition requirements.--An 
                      acquisition of property meets the requirements of 
                      this clause if--
                                    ``(I) such property was not used by 
                                the taxpayer at any time prior to such 
                                acquisition, and
                                    ``(II) the acquisition of such 
                                property meets the requirements of 
                                paragraphs (2)(A), (2)(B), (2)(C), and 
                                (3) of section 179(d).'',
            (3) Anti-abuse rules.--Section 168(k)(2)(E) is further 
        amended by amending clause (iii)(I) to read as follows:
                                    ``(I) property is used by a lessor 
                                of such property and such use is the 
                                lessor's first use of such property,''.

    (d) Exception for Certain Property.--Section 168(k), as amended by 
this section, is amended by adding at the end the following new 
paragraph:
            ``(9) Exception for certain property.--The term `qualified 
        property' shall not include--
                    ``(A) any property which is primarily used in a 
                trade or business described in clause (iv) of section 
                163(j)(7)(A), or
                    ``(B) any property used in a trade or business that 
                has had floor plan financing indebtedness (as defined in 
                paragraph (9) of section 163(j)), if the floor plan 
                financing interest related to such indebtedness was 
                taken into account under paragraph (1)(C) of such 
                section.''.

    (e) Special Rule.--Section 168(k), as amended by this section, is 
amended by adding at the end the following new paragraph:
            ``(10) Special rule for property placed in service during 
        certain periods.--
                    ``(A) In general.--In the case of qualified property 
                placed in service by the taxpayer during the first 
                taxable year ending after September 27, 2017, if the 
                taxpayer elects to have this paragraph apply for such 
                taxable year,

[[Page 131 STAT. 2108]]

                paragraphs (1)(A) and (5)(A)(i) shall be applied by 
                substituting `50 percent' for `the applicable 
                percentage'.
                    ``(B) Form of election.--Any election under this 
                paragraph shall be made at such time and in such form 
                and manner as the Secretary may prescribe.''.

    (f) Coordination With Section 280F.--Clause (iii) of section 
168(k)(2)(F) is amended <<NOTE: 26 USC 168.>>  by striking ``placed in 
service by the taxpayer after December 31, 2017'' and inserting 
``acquired by the taxpayer before September 28, 2017, and placed in 
service by the taxpayer after September 27, 2017''.

    (g) Qualified Film and Television and Live Theatrical Productions.--
            (1) In general.--Clause (i) of section 168(k)(2)(A), as 
        amended by section 13204, is amended--
                    (A) in subclause (II), by striking ``or'',
                    (B) in subclause (III), by adding ``or'' after the 
                comma, and
                    (C) by adding at the end the following:
                          ``(IV) which is a qualified film or television 
                      production (as defined in subsection (d) of 
                      section 181) for which a deduction would have been 
                      allowable under section 181 without regard to 
                      subsections (a)(2) and (g) of such section or this 
                      subsection, or
                          ``(V) which is a qualified live theatrical 
                      production (as defined in subsection (e) of 
                      section 181) for which a deduction would have been 
                      allowable under section 181 without regard to 
                      subsections (a)(2) and (g) of such section or this 
                      subsection,''.
            (2) Production placed in service.--Paragraph (2) of section 
        168(k) is amended by adding at the end the following:
                    ``(H) Production placed in service.--For purposes of 
                subparagraph (A)--
                          ``(i) a qualified film or television 
                      production shall be considered to be placed in 
                      service at the time of initial release or 
                      broadcast, and
                          ``(ii) a qualified live theatrical production 
                      shall be considered to be placed in service at the 
                      time of the initial live staged performance.''.

    (h) <<NOTE: 26 USC 168 note.>>  Effective Date.--
            (1) In general.--Except as provided by paragraph (2), the 
        amendments made by this section shall apply to property which--
                    (A) is acquired after September 27, 2017, and
                    (B) is placed in service after such date.
        For purposes of the preceding sentence, property shall not be 
        treated as acquired after the date on which a written binding 
        contract is entered into for such acquisition.
            (2) Specified plants.--The amendments made by this section 
        shall apply to specified plants planted or grafted after 
        September 27, 2017.
SEC. 13202. MODIFICATIONS TO DEPRECIATION LIMITATIONS ON LUXURY 
                            AUTOMOBILES AND PERSONAL USE PROPERTY.

    (a) Luxury Automobiles.--
            (1) In general.--280F(a)(1)(A) is amended--
                    (A) in clause (i), by striking ``$2,560'' and 
                inserting ``$10,000'',

[[Page 131 STAT. 2109]]

                    (B) in clause (ii), by striking ``$4,100'' and 
                inserting ``$16,000'',
                    (C) in clause (iii), by striking ``$2,450'' and 
                inserting ``$9,600'', and
                    (D) in clause (iv), by striking ``$1,475'' and 
                inserting ``$5,760''.
            (2) Conforming amendments.--
                    (A) Clause (ii) of section 280F(a)(1)(B) <<NOTE: 26 
                USC 280F.>>  is amended by striking ``$1,475'' in the 
                text and heading and inserting ``$5,760''.
                    (B) Paragraph (7) of section 280F(d) is amended--
                          (i) in subparagraph (A), by striking ``1988'' 
                      and inserting ``2018'', and
                          (ii) in subparagraph (B)(i)(II), by striking 
                      ``1987'' and inserting ``2017''.

    (b) Removal of Computer Equipment From Listed Property.--
            (1) In general.--Section 280F(d)(4)(A) is amended--
                    (A) by inserting ``and'' at the end of clause (iii),
                    (B) by striking clause (iv), and
                    (C) by redesignating clause (v) as clause (iv).
            (2) Conforming amendment.--Section 280F(d)(4) is amended by 
        striking subparagraph (B) and by redesignating subparagraph (C) 
        as subparagraph (B).

    (c) <<NOTE: 26 USC 280F note.>>  Effective Date.--The amendments 
made by this section shall apply to property placed in service after 
December 31, 2017, in taxable years ending after such date.
SEC. 13203. MODIFICATIONS OF TREATMENT OF CERTAIN FARM PROPERTY.

    (a) Treatment of Certain Farm Property as 5-Year Property.--Clause 
(vii) of section 168(e)(3)(B) is amended by striking ``after December 
31, 2008, and which is placed in service before January 1, 2010'' and 
inserting ``after December 31, 2017''.
    (b) Repeal of Required Use of 150-Percent Declining Balance 
Method.--Section 168(b)(2) is amended by striking subparagraph (B) and 
by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), 
respectively.
    (c) <<NOTE: 26 USC 168 note.>>  Effective Date.--The amendments made 
by this section shall apply to property placed in service after December 
31, 2017, in taxable years ending after such date.
SEC. 13204. APPLICABLE RECOVERY PERIOD FOR REAL PROPERTY.

    (a) Improvements to Real Property.--
            (1) Elimination of qualified leasehold improvement, 
        qualified restaurant, and qualified retail improvement 
        property.--Subsection (e) of section 168 is amended--
                    (A) in subparagraph (E) of paragraph (3)--
                          (i) by striking clauses (iv), (v), and (ix),
                          (ii) in clause (vii), by inserting ``and'' at 
                      the end,
                          (iii) in clause (viii), by striking ``, and'' 
                      and inserting a period, and
                          (iv) by redesignating clauses (vi), (vii), and 
                      (viii), as so amended, as clauses (iv), (v), and 
                      (vi), respectively, and
                    (B) by striking paragraphs (6), (7), and (8).

[[Page 131 STAT. 2110]]

            (2) Application of straight line method to qualified 
        improvement property.--Paragraph (3) of section 168(b) is 
        amended--
                    (A) by striking subparagraphs (G), (H), and (I), and
                    (B) by inserting after subparagraph (F) the 
                following new subparagraph:
                    ``(G) Qualified improvement property described in 
                subsection (e)(6).''.
            (3) Alternative depreciation system.--
                    (A) Electing real property trade or business.--
                Subsection (g) of section 168 <<NOTE: 26 USC 168.>>  is 
                amended--
                          (i) in paragraph (1)--
                                    (I) in subparagraph (D), by striking 
                                ``and'' at the end,
                                    (II) in subparagraph (E), by 
                                inserting ``and'' at the end, and
                                    (III) by inserting after 
                                subparagraph (E) the following new 
                                subparagraph:
                    ``(F) any property described in paragraph (8),'', 
                and
                          (ii) by adding at the end the following new 
                      paragraph:
            ``(8) Electing real property trade or business.--The 
        property described in this paragraph shall consist of any 
        nonresidential real property, residential rental property, and 
        qualified improvement property held by an electing real property 
        trade or business (as defined in 163(j)(7)(B)).''.
                    (B) Qualified improvement property.--The table 
                contained in subparagraph (B) of section 168(g)(3) is 
                amended--
                          (i) by inserting after the item relating to 
                      subparagraph (D)(ii) the following new item:
        ``(D)(v)................................................    20''

                                    , and
                          (ii) by striking the item relating to 
                      subparagraph (E)(iv) and all that follows through 
                      the item relating to subparagraph (E)(ix) and 
                      inserting the following:
        ``(E)(iv)...............................................     20 
        (E)(v)..................................................     30 
        (E)(vi).................................................   35''.

                    (C) Applicable recovery period for residential 
                rental property.--The table contained in subparagraph 
                (C) of section 168(g)(2) is amended by striking clauses 
                (iii) and (iv) and inserting the following:
        ``(iii) Residential rental property....................30 years 
        (iv) Nonresidential real property......................40 years 
        (v) Any railroad grading or tunnel bore or water utility 
            property.........................................50 years''.

            (4) Conforming amendments.--
                    (A) Clause (i) of section 168(k)(2)(A) is amended--
                          (i) in subclause (II), by inserting ``or'' 
                      after the comma,
                          (ii) in subclause (III), by striking ``or'' at 
                      the end, and
                          (iii) by striking subclause (IV).
                    (B) Section 168 is amended--
                          (i) in subsection (e), as amended by paragraph 
                      (1)(B), by adding at the end the following:
            ``(6) Qualified improvement property.--

[[Page 131 STAT. 2111]]

                    ``(A) In general.--The term `qualified improvement 
                property' means any improvement to an interior portion 
                of a building which is nonresidential real property if 
                such improvement is placed in service after the date 
                such building was first placed in service.
                    ``(B) Certain improvements not included.--Such term 
                shall not include any improvement for which the 
                expenditure is attributable to--
                          ``(i) the enlargement of the building,
                          ``(ii) any elevator or escalator, or
                          ``(iii) the internal structural framework of 
                      the building.'', and
                          (ii) in subsection (k), by striking paragraph 
                      (3).

    (b) <<NOTE: 26 USC 168 note.>>  Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to property placed 
        in service after December 31, 2017.
            (2) Amendments related to electing real property trade or 
        business.--The amendments made by subsection (a)(3)(A) shall 
        apply to taxable years beginning after December 31, 2017.
SEC. 13205. USE OF ALTERNATIVE DEPRECIATION SYSTEM FOR ELECTING 
                            FARMING BUSINESSES.

    (a) In General.--Section 168(g)(1), as amended by section 13204, is 
amended <<NOTE: 26 USC 168.>>  by striking ``and'' at the end of 
subparagraph (E), by inserting ``and'' at the end of subparagraph (F), 
and by inserting after subparagraph (F) the following new subparagraph:
                    ``(G) any property with a recovery period of 10 
                years or more which is held by an electing farming 
                business (as defined in section 163(j)(7)(C)),''.

    (b) <<NOTE: 26 USC 168 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 13206. AMORTIZATION OF RESEARCH AND EXPERIMENTAL 
                            EXPENDITURES.

    (a) In General.--Section 174 is amended to read as follows:
``SEC. 174. AMORTIZATION OF RESEARCH AND EXPERIMENTAL 
                        EXPENDITURES.

    ``(a) In General.--In the case of a taxpayer's specified research or 
experimental expenditures for any taxable year--
            ``(1) except as provided in paragraph (2), no deduction 
        shall be allowed for such expenditures, and
            ``(2) the taxpayer shall--
                    ``(A) charge such expenditures to capital account, 
                and
                    ``(B) be allowed an amortization deduction of such 
                expenditures ratably over the 5-year period (15-year 
                period in the case of any specified research or 
                experimental expenditures which are attributable to 
                foreign research (within the meaning of section 
                41(d)(4)(F))) beginning with the midpoint of the taxable 
                year in which such expenditures are paid or incurred.

    ``(b) Specified Research or Experimental Expenditures.--For purposes 
of this section, the term `specified research or experimental 
expenditures' means, with respect to any taxable year, research or 
experimental expenditures which are paid or incurred

[[Page 131 STAT. 2112]]

by the taxpayer during such taxable year in connection with the 
taxpayer's trade or business.
    ``(c) Special Rules.--
            ``(1) Land and other property.--This section shall not apply 
        to any expenditure for the acquisition or improvement of land, 
        or for the acquisition or improvement of property to be used in 
        connection with the research or experimentation and of a 
        character which is subject to the allowance under section 167 
        (relating to allowance for depreciation, etc.) or section 611 
        (relating to allowance for depletion); but for purposes of this 
        section allowances under section 167, and allowances under 
        section 611, shall be considered as expenditures.
            ``(2) Exploration expenditures.--This section shall not 
        apply to any expenditure paid or incurred for the purpose of 
        ascertaining the existence, location, extent, or quality of any 
        deposit of ore or other mineral (including oil and gas).
            ``(3) Software development.--For purposes of this section, 
        any amount paid or incurred in connection with the development 
        of any software shall be treated as a research or experimental 
        expenditure.

    ``(d) Treatment Upon Disposition, Retirement, or Abandonment.--If 
any property with respect to which specified research or experimental 
expenditures are paid or incurred is disposed, retired, or abandoned 
during the period during which such expenditures are allowed as an 
amortization deduction under this section, no deduction shall be allowed 
with respect to such expenditures on account of such disposition, 
retirement, or abandonment and such amortization deduction shall 
continue with respect to such expenditures.''.
    (b) <<NOTE: 26 USC 174 note.>>  Change in Method of Accounting.--The 
amendments made by subsection (a) shall be treated as a change in method 
of accounting for purposes of section 481 of the Internal Revenue Code 
of 1986 and--
            (1) such change shall be treated as initiated by the 
        taxpayer,
            (2) such change shall be treated as made with the consent of 
        the Secretary, and
            (3) such change shall be applied only on a cut-off basis for 
        any research or experimental expenditures paid or incurred in 
        taxable years beginning after December 31, 2021, and no 
        adjustments under section 481(a) shall be made.

    (c) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 <<NOTE: 26 USC prec. 161.>>  is amended by 
striking the item relating to section 174 and inserting the following 
new item:

``Sec. 174. Amortization of research and experimental expenditures.''.

    (d) Conforming Amendments.--
            (1) Section 41(d)(1)(A) is amended by striking ``expenses 
        under section 174'' and inserting ``specified research or 
        experimental expenditures under section 174''.
            (2) Subsection (c) of section 280C is amended--
                    (A) by striking paragraph (1) and inserting the 
                following:
            ``(1) In general.--If--
                    ``(A) the amount of the credit determined for the 
                taxable year under section 41(a)(1), exceeds

[[Page 131 STAT. 2113]]

                    ``(B) the amount allowable as a deduction for such 
                taxable year for qualified research expenses or basic 
                research expenses,
        the amount chargeable to capital account for the taxable year 
        for such expenses shall be reduced by the amount of such 
        excess.'',
                    (B) by striking paragraph (2),
                    (C) by redesignating paragraphs (3) (as amended by 
                this Act) and (4) as paragraphs (2) and (3), 
                respectively, and
                    (D) in paragraph (2), as redesignated by 
                subparagraph (C), by striking ``paragraphs (1) and (2)'' 
                and inserting ``paragraph (1)''.

    (e) <<NOTE: 26 USC 41 note.>>  Effective Date.--The amendments made 
by this section shall apply to amounts paid or incurred in taxable years 
beginning after December 31, 2021.
SEC. 13207. EXPENSING OF CERTAIN COSTS OF REPLANTING CITRUS PLANTS 
                            LOST BY REASON OF CASUALTY.

    (a) In General.--Section 263A(d)(2) <<NOTE: 26 USC 263A.>>  is 
amended by adding at the end the following new subparagraph:
                    ``(C) Special temporary rule for citrus plants lost 
                by reason of casualty.--
                          ``(i) In general.--In the case of the 
                      replanting of citrus plants, subparagraph (A) 
                      shall apply to amounts paid or incurred by a 
                      person (other than the taxpayer described in 
                      subparagraph (A)) if--
                                    ``(I) the taxpayer described in 
                                subparagraph (A) has an equity interest 
                                of not less than 50 percent in the 
                                replanted citrus plants at all times 
                                during the taxable year in which such 
                                amounts were paid or incurred and such 
                                other person holds any part of the 
                                remaining equity interest, or
                                    ``(II) such other person acquired 
                                the entirety of such taxpayer's equity 
                                interest in the land on which the lost 
                                or damaged citrus plants were located at 
                                the time of such loss or damage, and the 
                                replanting is on such land.
                          ``(ii) Termination.--Clause (i) shall not 
                      apply to any cost paid or incurred after the date 
                      which is 10 years after the date of the enactment 
                      of the Tax Cuts and Jobs Act.''.

    (b) <<NOTE: 26 USC 263A note.>>  Effective Date.--The amendment made 
by this section shall apply to costs paid or incurred after the date of 
the enactment of this Act.

                      Subpart B--Accounting Methods

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

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

[[Page 131 STAT. 2114]]

            ``(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

[[Page 131 STAT. 2115]]

                Commission, but only if there is no statement of the 
                taxpayer described in subparagraph (A), or
                    ``(C) a financial statement filed by the taxpayer 
                with any other regulatory or governmental body specified 
                by the Secretary, but only if there is no statement of 
                the taxpayer described in subparagraph (A) or (B).
            ``(4) Allocation of transaction price.--For purposes of this 
        subsection, in the case of a contract which contains multiple 
        performance obligations, the allocation of the transaction price 
        to each performance obligation shall be equal to the amount 
        allocated to each performance obligation for purposes of 
        including such item in revenue in the applicable financial 
        statement of the taxpayer.
            ``(5) Group of entities.--For purposes of paragraph (1), if 
        the financial results of a taxpayer are reported on the 
        applicable financial statement (as defined in paragraph (3)) for 
        a group of entities, such statement shall be treated as the 
        applicable financial statement of the taxpayer.''.

    (b) Treatment of Advance Payments.--Section 451, as amended by 
subsection (a), <<NOTE: 26 USC 451.>>  is amended by redesignating 
subsections (c) through (j) as subsections (d) through (k), 
respectively, and by inserting after subsection (b) the following new 
subsection:

    ``(c) Treatment of Advance Payments.--
            ``(1) In general.--A taxpayer which computes taxable income 
        under the accrual method of accounting, and receives any advance 
        payment during the taxable year, shall--
                    ``(A) except as provided in subparagraph (B), 
                include such advance payment in gross income for such 
                taxable year, or
                    ``(B) if the taxpayer elects the application of this 
                subparagraph with respect to the category of advance 
                payments to which such advance payment belongs, the 
                taxpayer shall--
                          ``(i) to the extent that any portion of such 
                      advance payment is required under subsection (b) 
                      to be included in gross income in the taxable year 
                      in which such payment is received, so include such 
                      portion, and
                          ``(ii) include the remaining portion of such 
                      advance payment in gross income in the taxable 
                      year following the taxable year in which such 
                      payment is received.
            ``(2) Election.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the election under paragraph (1)(B) 
                shall be made at such time, in such form and manner, and 
                with respect to such categories of advance payments, as 
                the Secretary may provide.
                    ``(B) Period to which election applies.--An election 
                under paragraph (1)(B) shall be effective for the 
                taxable year with respect to which it is first made and 
                for all subsequent taxable years, unless the taxpayer 
                secures the consent of the Secretary to revoke such 
                election. For purposes of this title, the computation of 
                taxable income under an election made under paragraph 
                (1)(B) shall be treated as a method of accounting.
            ``(3) Taxpayers ceasing to exist.--Except as otherwise 
        provided by the Secretary, the election under paragraph (1)(B) 
        shall not apply with respect to advance payments received

[[Page 131 STAT. 2116]]

        by the taxpayer during a taxable year if such taxpayer ceases to 
        exist during (or with the close of) such taxable year.
            ``(4) Advance payment.--For purposes of this subsection--
                    ``(A) In general.--The term `advance payment' means 
                any payment--
                          ``(i) the full inclusion of which in the gross 
                      income of the taxpayer for the taxable year of 
                      receipt is a permissible method of accounting 
                      under this section (determined without regard to 
                      this subsection),
                          ``(ii) any portion of which is included in 
                      revenue by the taxpayer in a financial statement 
                      described in clause (i) or (ii) of subsection 
                      (b)(1)(A) for a subsequent taxable year, and
                          ``(iii) which is for goods, services, or such 
                      other items as may be identified by the Secretary 
                      for purposes of this clause.
                    ``(B) Exclusions.--Except as otherwise provided by 
                the Secretary, such term shall not include--
                          ``(i) rent,
                          ``(ii) insurance premiums governed by 
                      subchapter L,
                          ``(iii) payments with respect to financial 
                      instruments,
                          ``(iv) payments with respect to warranty or 
                      guarantee contracts under which a third party is 
                      the primary obligor,
                          ``(v) payments subject to section 871(a), 881, 
                      1441, or 1442,
                          ``(vi) payments in property to which section 
                      83 applies, and
                          ``(vii) any other payment identified by the 
                      Secretary for purposes of this subparagraph.
                    ``(C) Receipt.--For purposes of this subsection, an 
                item of gross income is received by the taxpayer if it 
                is actually or constructively received, or if it is due 
                and payable to the taxpayer.
                    ``(D) Allocation of transaction price.--For purposes 
                of this subsection, rules similar to subsection (b)(4) 
                shall apply.''.

    (c) <<NOTE: 26 USC 451 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.

    (d) <<NOTE: 26 USC 451 note.>>  Coordination With Section 481.--
            (1) In general.--In the case of any qualified change in 
        method of accounting for the taxpayer's first taxable year 
        beginning after December 31, 2017--
                    (A) such change shall be treated as initiated by the 
                taxpayer, and
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury.
            (2) Qualified change in method of accounting.--For purposes 
        of this subsection, the term ``qualified change in method of 
        accounting'' means any change in method of accounting which--
                    (A) is required by the amendments made by this 
                section, or

[[Page 131 STAT. 2117]]

                    (B) was prohibited under the Internal Revenue Code 
                of 1986 prior to such amendments and is permitted under 
                such Code after such amendments.

    (e) <<NOTE: 26 USC 451 note.>>  Special Rules for Original Issue 
Discount.--Notwithstanding subsection (c), in the case of income from a 
debt instrument having original issue discount--
            (1) the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2018, and
            (2) the period for taking into account any adjustments under 
        section 481 by reason of a qualified change in method of 
        accounting (as defined in subsection (d)) shall be 6 years.

           PART IV--BUSINESS-RELATED EXCLUSIONS AND DEDUCTIONS

SEC. 13301. LIMITATION ON DEDUCTION FOR INTEREST.

    (a) In General.--Section 163(j) <<NOTE: 26 USC 163.>>  is amended to 
read as follows:

    ``(j) Limitation on Business Interest.--
            ``(1) In general.--The amount allowed as a deduction under 
        this chapter for any taxable year for business interest shall 
        not exceed the sum of--
                    ``(A) the business interest income of such taxpayer 
                for such taxable year,
                    ``(B) 30 percent of the adjusted taxable income of 
                such taxpayer for such taxable year, plus
                    ``(C) the floor plan financing interest of such 
                taxpayer for such taxable year.
        The amount determined under subparagraph (B) shall not be less 
        than zero.
            ``(2) Carryforward of disallowed business interest.--The 
        amount of any business interest not allowed as a deduction for 
        any taxable year by reason of paragraph (1) shall be treated as 
        business interest paid or accrued in the succeeding taxable 
        year.
            ``(3) Exemption for certain small businesses.--In the case 
        of any taxpayer (other than a tax shelter prohibited from using 
        the cash receipts and disbursements method of accounting under 
        section 448(a)(3)) which meets the gross receipts test of 
        section 448(c) for any taxable year, paragraph (1) shall not 
        apply to such taxpayer for such taxable year. In the case of any 
        taxpayer which is not a corporation or a partnership, the gross 
        receipts test of section 448(c) shall be applied in the same 
        manner as if such taxpayer were a corporation or partnership.
            ``(4) Application to partnerships, etc.--
                    ``(A) In general.--In the case of any partnership--
                          ``(i) this subsection shall be applied at the 
                      partnership level and any deduction for business 
                      interest shall be taken into account in 
                      determining the non-separately stated taxable 
                      income or loss of the partnership, and
                          ``(ii) the adjusted taxable income of each 
                      partner of such partnership--
                                    ``(I) shall be determined without 
                                regard to such partner's distributive 
                                share of any items of income, gain, 
                                deduction, or loss of such partnership, 
                                and

[[Page 131 STAT. 2118]]

                                    ``(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

[[Page 131 STAT. 2119]]

                                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

[[Page 131 STAT. 2120]]

                      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.

[[Page 131 STAT. 2121]]

                          ``(iii) Farm machinery or equipment.
            ``(10) Cross references.--
                    ``(A) For requirement that an electing real property 
                trade or business use the alternative depreciation 
                system, see section 168(g)(1)(F).
                    ``(B) For requirement that an electing farming 
                business use the alternative depreciation system, see 
                section 168(g)(1)(G).''.

    (b) Treatment of Carryforward of Disallowed Business Interest in 
Certain Corporate Acquisitions.--
            (1) In general.--Section 381(c) <<NOTE: 26 USC 381.>>  is 
        amended by inserting after paragraph (19) the following new 
        paragraph:
            ``(20) Carryforward of disallowed business interest.--The 
        carryover of disallowed business interest described in section 
        163(j)(2) to taxable years ending after the date of distribution 
        or transfer.''.
            (2) Application of limitation.--Section 382(d) is amended by 
        adding at the end the following new paragraph:
            ``(3) Application to carryforward of disallowed interest.--
        The term `pre-change loss' shall include any carryover of 
        disallowed interest described in section 163(j)(2) under rules 
        similar to the rules of paragraph (1).''.
            (3) Conforming amendment.--Section 382(k)(1) is amended by 
        inserting after the first sentence the following: ``Such term 
        shall include any corporation entitled to use a carryforward of 
        disallowed interest described in section 381(c)(20).''.

    (c) <<NOTE: 26 USC 163 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 13302. MODIFICATION OF NET OPERATING LOSS DEDUCTION.

    (a) Limitation on Deduction.--
            (1) In general.--Section 172(a) is amended to read as 
        follows:

    ``(a) Deduction Allowed.--There shall be allowed as a deduction for 
the taxable year an amount equal to the lesser of--
            ``(1) the aggregate of the net operating loss carryovers to 
        such year, plus the net operating loss carrybacks to such year, 
        or
            ``(2) 80 percent of taxable income computed without regard 
        to the deduction allowable under this section.

For purposes of this subtitle, the term `net operating loss deduction' 
means the deduction allowed by this subsection.''.
            (2) Coordination of limitation with carrybacks and 
        carryovers.--Section 172(b)(2) is amended by striking ``shall be 
        computed--'' and all that follows and inserting ``shall--
                    ``(A) be computed with the modifications specified 
                in subsection (d) other than paragraphs (1), (4), and 
                (5) thereof, and by determining the amount of the net 
                operating loss deduction without regard to the net 
                operating loss for the loss year or for any taxable year 
                thereafter,
                    ``(B) not be considered to be less than zero, and
                    ``(C) not exceed the amount determined under 
                subsection (a)(2) for such prior taxable year.''.
            (3) Conforming amendment.--Section 172(d)(6) is amended by 
        striking ``and'' at the end of subparagraph (A), by striking the 
        period at the end of subparagraph (B) and

[[Page 131 STAT. 2122]]

        inserting ``; and'', and by adding at the end the following new 
        subparagraph:
                    ``(C) subsection (a)(2) shall be applied by 
                substituting `real estate investment trust taxable 
                income (as defined in section 857(b)(2) but without 
                regard to the deduction for dividends paid (as defined 
                in section 561))' for `taxable income'.''.

    (b) Repeal of Net Operating Loss Carryback; Indefinite 
Carryforward.--
            (1) In general.--Section 172(b)(1)(A) <<NOTE: 26 USC 172.>>  
        is amended--
                    (A) by striking ``shall be a net operating loss 
                carryback to each of the 2 taxable years'' in clause (i) 
                and inserting ``except as otherwise provided in this 
                paragraph, shall not be a net operating loss carryback 
                to any taxable year'', and
                    (B) by striking ``to each of the 20 taxable years'' 
                in clause (ii) and inserting ``to each taxable year''.
            (2) Conforming amendment.--Section 172(b)(1) is amended by 
        striking subparagraphs (B) through (F).

    (c) Treatment of Farming Losses.--
            (1) Allowance of carrybacks.--Section 172(b)(1), as amended 
        by subsection (b)(2), is amended by adding at the end the 
        following new subparagraph:
                    ``(B) Farming losses.--
                          ``(i) In general.--In the case of any portion 
                      of a net operating loss for the taxable year which 
                      is a farming loss with respect to the taxpayer, 
                      such loss shall be a net operating loss carryback 
                      to each of the 2 taxable years preceding the 
                      taxable year of such loss.
                          ``(ii) Farming loss.--For purposes of this 
                      section, the term `farming loss' means the lesser 
                      of--
                                    ``(I) the amount which would be the 
                                net operating loss for the taxable year 
                                if only income and deductions 
                                attributable to farming businesses (as 
                                defined in section 263A(e)(4)) are taken 
                                into account, or
                                    ``(II) the amount of the net 
                                operating loss for such taxable year.
                          ``(iii) Coordination with paragraph (2).--For 
                      purposes of applying paragraph (2), a farming loss 
                      for any taxable year shall be treated as a 
                      separate net operating loss for such taxable year 
                      to be taken into account after the remaining 
                      portion of the net operating loss for such taxable 
                      year.
                          ``(iv) Election.--Any taxpayer entitled to a 
                      2-year carryback under clause (i) from any loss 
                      year may elect not to have such clause apply to 
                      such loss year. Such election shall be made in 
                      such manner as prescribed by the Secretary and 
                      shall be made by the due date (including 
                      extensions of time) for filing the taxpayer's 
                      return for the taxable year of the net operating 
                      loss. Such election, once made for any taxable 
                      year, shall be irrevocable for such taxable 
                      year.''.
            (2) Conforming amendments.--

[[Page 131 STAT. 2123]]

                    (A) Section 172 <<NOTE: 26 USC 172.>>  is amended by 
                striking subsections (f), (g), and (h), and by 
                redesignating subsection (i) as subsection (f).
                    (B) Section 537(b)(4) is amended by inserting ``(as 
                in effect before the date of enactment of the Tax Cuts 
                and Jobs Act)'' after ``as defined in section 172(f)''.

    (d) Treatment of Certain Insurance Losses.--
            (1) Treatment of carryforwards and carrybacks.--Section 
        172(b)(1), as amended by subsections (b)(2) and (c)(1), is 
        amended by adding at the end the following new subparagraph:
                    ``(C) Insurance companies.--In the case of an 
                insurance company (as defined in section 816(a)) other 
                than a life insurance company, the net operating loss 
                for any taxable year--
                          ``(i) shall be a net operating loss carryback 
                      to each of the 2 taxable years preceding the 
                      taxable year of such loss, and
                          ``(ii) shall be a net operating loss carryover 
                      to each of the 20 taxable years following the 
                      taxable year of the loss.''.
            (2) Exemption from limitation.--Section 172, as amended by 
        subsection (c)(2)(A), is amended by redesignating subsection (f) 
        as subsection (g) and inserting after subsection (e) the 
        following new subsection:

    ``(f) Special Rule for Insurance Companies.--In the case of an 
insurance company (as defined in section 816(a)) other than a life 
insurance company--
            ``(1) the amount of the deduction allowed under subsection 
        (a) shall be the aggregate of the net operating loss carryovers 
        to such year, plus the net operating loss carrybacks to such 
        year, and
            ``(2) subparagraph (C) of subsection (b)(2) shall not 
        apply.''.

    (e) <<NOTE: 26 USC 172 note.>>  Effective Date.--
            (1) Net operating loss limitation.--The amendments made by 
        subsections (a) and (d)(2) shall apply to losses arising in 
        taxable years beginning after December 31, 2017.
            (2) Carryforwards and carrybacks.--The amendments made by 
        subsections (b), (c), and (d)(1) shall apply to net operating 
        losses arising in taxable years ending after December 31, 2017.
SEC. 13303. LIKE-KIND EXCHANGES OF REAL PROPERTY.

    (a) In General.--Section 1031(a)(1) is amended by striking 
``property'' each place it appears and inserting ``real property''.
    (b) Conforming Amendments.--
            (1)(A) Paragraph (2) of section 1031(a) is amended to read 
        as follows:
            ``(2) Exception for real property held for sale.--This 
        subsection shall not apply to any exchange of real property held 
        primarily for sale.''.
            (B) Section 1031 is amended by striking subsection (i).
            (2) Section 1031 is amended by striking subsection (e).
            (3) Section 1031, as amended by paragraph (2), is amended by 
        inserting after subsection (d) the following new subsection:

    ``(e) Application to Certain Partnerships.--For purposes of this 
section, an interest in a partnership which has in effect a

[[Page 131 STAT. 2124]]

valid election under section 761(a) to be excluded from the application 
of all of subchapter K shall be treated as an interest in each of the 
assets of such partnership and not as an interest in a partnership.''.
            (4) Section 1031(h) <<NOTE: 26 USC 1031.>>  is amended to 
        read as follows:

    ``(h) Special Rules for Foreign Real Property.--Real property 
located in the United States and real property located outside the 
United States are not property of a like kind.''.
            (5) The heading of section 1031 is amended by striking 
        ``property'' and inserting ``real property''.
            (6) The table of sections for part III of subchapter O of 
        chapter 1 <<NOTE: 26 USC prec. 1031.>>  is amended by striking 
        the item relating to section 1031 and inserting the following 
        new item:

``Sec. 1031. Exchange of real property held for productive use or 
           investment.''.

    (c) <<NOTE: 26 USC 1031 note.>>  Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        exchanges completed after December 31, 2017.
            (2) Transition rule.--The amendments made by this section 
        shall not apply to any exchange if--
                    (A) the property disposed of by the taxpayer in the 
                exchange is disposed of on or before December 31, 2017, 
                or
                    (B) the property received by the taxpayer in the 
                exchange is received on or before December 31, 2017.
SEC. 13304. LIMITATION ON DEDUCTION BY EMPLOYERS OF EXPENSES FOR 
                            FRINGE BENEFITS.

    (a) No Deduction Allowed for Entertainment Expenses.--
            (1) In general.--Section 274(a) is amended--
                    (A) in paragraph (1)(A), by striking ``unless'' and 
                all that follows through ``trade or business,'',
                    (B) by striking the flush sentence at the end of 
                paragraph (1), and
                    (C) by striking paragraph (2)(C).
            (2) Conforming amendments.--
                    (A) Section 274(d) is amended--
                          (i) by striking paragraph (2) and 
                      redesignating paragraphs (3) and (4) as paragraphs 
                      (2) and (3), respectively, and
                          (ii) in the flush text following paragraph (3) 
                      (as so redesignated)--
                                    (I) by striking ``, entertainment, 
                                amusement, recreation, or use of the 
                                facility or property,'' in item (B), and
                                    (II) by striking ``(D) the business 
                                relationship to the taxpayer of persons 
                                entertained, using the facility or 
                                property, or receiving the gift'' and 
                                inserting ``(D) the business 
                                relationship to the taxpayer of the 
                                person receiving the benefit'',
                    (B) Section 274 is amended by striking subsection 
                (l).
                    (C) Section 274(n) is amended by striking ``and 
                Entertainment'' in the heading.
                    (D) Section 274(n)(1) is amended to read as follows:
            ``(1) In general.--The amount allowable as a deduction under 
        this chapter for any expense for food or beverages shall

[[Page 131 STAT. 2125]]

        not exceed 50 percent of the amount of such expense which would 
        (but for this paragraph) be allowable as a deduction under this 
        chapter.''.
                    (E) Section 274(n)(2) <<NOTE: 26 USC 274.>>  is 
                amended--
                          (i) in subparagraph (B), by striking ``in the 
                      case of an expense for food or beverages,'',
                          (ii) by striking subparagraph (C) and 
                      redesignating subparagraphs (D) and (E) as 
                      subparagraphs (C) and (D), respectively,
                          (iii) by striking ``of subparagraph (E)'' the 
                      last sentence and inserting ``of subparagraph 
                      (D)'', and
                          (iv) by striking ``in subparagraph (D)'' in 
                      the last sentence and inserting ``in subparagraph 
                      (C)''.
                    (F) Clause (iv) of section 7701(b)(5)(A) is amended 
                to read as follows:
                          ``(iv) a professional athlete who is 
                      temporarily in the United States to compete in a 
                      sports event--
                                    ``(I) which is organized for the 
                                primary purpose of benefiting an 
                                organization which is described in 
                                section 501(c)(3) and exempt from tax 
                                under section 501(a),
                                    ``(II) all of the net proceeds of 
                                which are contributed to such 
                                organization, and,
                                    ``(III) which utilizes volunteers 
                                for substantially all of the work 
                                performed in carrying out such event.''.

    (b) Only 50 Percent of Expenses for Meals Provided on or Near 
Business Premises Allowed as Deduction.--Paragraph (2) of section 
274(n), as amended by subsection (a), is amended--
            (1) by striking subparagraph (B),
            (2) by redesignating subparagraphs (C) and (D) as 
        subparagraphs (B) and (C), respectively,
            (3) by striking ``of subparagraph (D)'' in the last sentence 
        and inserting ``of subparagraph (C)'', and
            (4) by striking ``in subparagraph (C)'' in the last sentence 
        and inserting ``in subparagraph (B)''.

    (c) Treatment of Transportation Benefits.--Section 274, as amended 
by subsection (a), is amended--
            (1) in subsection (a)--
                    (A) in the heading, by striking ``or Recreation'' 
                and inserting ``Recreation, or Qualified Transportation 
                Fringes'', and
                    (B) by adding at the end the following new 
                paragraph:
            ``(4) Qualified transportation fringes.--No deduction shall 
        be allowed under this chapter for the expense of any qualified 
        transportation fringe (as defined in section 132(f)) provided to 
        an employee of the taxpayer.'', and
            (2) by inserting after subsection (k) the following new 
        subsection:

    ``(l) Transportation and Commuting Benefits.--
            ``(1) In general.--No deduction shall be allowed under this 
        chapter for any expense incurred for providing any 
        transportation, or any payment or reimbursement, to an employee 
        of the taxpayer in connection with travel between the employee's 
        residence and place of employment, except as necessary for 
        ensuring the safety of the employee.

[[Page 131 STAT. 2126]]

            ``(2) Exception.--In the case of any qualified bicycle 
        commuting reimbursement (as described in section 132(f)(5)(F)), 
        this subsection shall not apply for any amounts paid or incurred 
        after December 31, 2017, and before January 1, 2026.''.

    (d) Elimination of Deduction for Meals Provided at Convenience of 
Employer.--Section 274, as amended by subsection (c), is <<NOTE: 26 USC 
274.>>  amended--
            (1) by redesignating subsection (o) as subsection (p), and
            (2) by inserting after subsection (n) the following new 
        subsection:

    ``(o) Meals Provided at Convenience of Employer.--No deduction shall 
be allowed under this chapter for--
            ``(1) any expense for the operation of a facility described 
        in section 132(e)(2), and any expense for food or beverages, 
        including under section 132(e)(1), associated with such 
        facility, or
            ``(2) any expense for meals described in section 119(a).''.

    (e) <<NOTE: 26 USC 274 note.>>  Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to amounts incurred 
        or paid after December 31, 2017.
            (2) Effective date for elimination of deduction for meals 
        provided at convenience of employer.--The amendments made by 
        subsection (d) shall apply to amounts incurred or paid after 
        December 31, 2025.
SEC. 13305. REPEAL OF DEDUCTION FOR INCOME ATTRIBUTABLE TO 
                            DOMESTIC PRODUCTION ACTIVITIES.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 199 (and by striking the item relating to such section 
in the table of sections <<NOTE: 26 USC prec. 161.>>  for such part).

    (b) Conforming Amendments.--
            (1) Sections 74(d)(2)(B), 86(b)(2)(A), 135(c)(4)(A), 
        137(b)(3)(A), 219(g)(3)(A)(ii), 221(b)(2)(C), 222(b)(2)(C), 
        246(b)(1), and 469(i)(3)(F)(iii) are each amended by striking 
        ``199,''.
            (2) Section 170(b)(2)(D), as amended by subtitle A, is 
        amended by striking clause (iv), and by redesignating clauses 
        (v) and (vi) as clauses (iv) and (v).
            (3) Section 172(d) is amended by striking paragraph (7).
            (4) Section 613(a), as amended by section 11011, is amended 
        by striking ``and without the deduction under section 199''.
            (5) Section 613A(d)(1), as amended by section 11011, is 
        amended by striking subparagraph (B) and by redesignating 
        subparagraphs (C), (D), (E), and (F) as subparagraphs (B), (C), 
        (D), and (E), respectively.

    (c) <<NOTE: 26 USC 74 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 13306. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES, AND 
                            OTHER AMOUNTS.

    (a) Denial of Deduction.--
            (1) In general.--Subsection (f) of section 162 is amended to 
        read as follows:

    ``(f) Fines, Penalties, and Other Amounts.--
            ``(1) In general.--Except as provided in the following 
        paragraphs of this subsection, no deduction otherwise allowable

[[Page 131 STAT. 2127]]

        shall be allowed under this chapter for any amount paid or 
        incurred (whether by suit, agreement, or otherwise) to, or at 
        the direction of, a government or governmental entity in 
        relation to the violation of any law or the investigation or 
        inquiry by such government or entity into the potential 
        violation of any law.
            ``(2) Exception for amounts constituting restitution or paid 
        to come into compliance with law.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any amount that--
                          ``(i) the taxpayer establishes--
                                    ``(I) constitutes restitution 
                                (including remediation of property) for 
                                damage or harm which was or may be 
                                caused by the violation of any law or 
                                the potential violation of any law, or
                                    ``(II) is paid to come into 
                                compliance with any law which was 
                                violated or otherwise involved in the 
                                investigation or inquiry described in 
                                paragraph (1),
                          ``(ii) is identified as restitution or as an 
                      amount paid to come into compliance with such law, 
                      as the case may be, in the court order or 
                      settlement agreement, and
                          ``(iii) in the case of any amount of 
                      restitution for failure to pay any tax imposed 
                      under this title in the same manner as if such 
                      amount were such tax, would have been allowed as a 
                      deduction under this chapter if it had been timely 
                      paid.
                The identification under clause (ii) alone shall not be 
                sufficient to make the establishment required under 
                clause (i).
                    ``(B) Limitation.--Subparagraph (A) shall not apply 
                to any amount paid or incurred as reimbursement to the 
                government or entity for the costs of any investigation 
                or litigation.
            ``(3) Exception for amounts paid or incurred as the result 
        of certain court orders.--Paragraph (1) shall not apply to any 
        amount paid or incurred by reason of any order of a court in a 
        suit in which no government or governmental entity is a party.
            ``(4) Exception for taxes due.--Paragraph (1) shall not 
        apply to any amount paid or incurred as taxes due.
            ``(5) Treatment of certain nongovernmental regulatory 
        entities.--For purposes of this subsection, the following 
        nongovernmental entities shall be treated as governmental 
        entities:
                    ``(A) Any nongovernmental entity which exercises 
                self-regulatory powers (including imposing sanctions) in 
                connection with a qualified board or exchange (as 
                defined in section 1256(g)(7)).
                    ``(B) To the extent provided in regulations, any 
                nongovernmental entity which exercises self-regulatory 
                powers (including imposing sanctions) as part of 
                performing an essential governmental function.''.
            (2) <<NOTE: 26 USC 162 note.>>  Effective date.--The 
        amendment made by this subsection shall apply to amounts paid or 
        incurred on or after

[[Page 131 STAT. 2128]]

        the date of the enactment of this Act, except that such 
        amendments shall not apply to amounts paid or incurred under any 
        binding order or agreement entered into before such date. Such 
        exception shall not apply to an order or agreement requiring 
        court approval unless the approval was obtained before such 
        date.

    (b) Reporting of Deductible Amounts.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 is amended by inserting after section 6050W the 
        following new section:
``SEC. 6050X. <<NOTE: 26 USC 6050X.>>  INFORMATION WITH RESPECT TO 
                            CERTAIN FINES, PENALTIES, AND OTHER 
                            AMOUNTS.

    ``(a) Requirement of Reporting.--
            ``(1) In general.--The appropriate official of any 
        government or any entity described in section 162(f)(5) which is 
        involved in a suit or agreement described in paragraph (2) shall 
        make a return in such form as determined by the Secretary 
        setting forth--
                    ``(A) the amount required to be paid as a result of 
                the suit or agreement to which paragraph (1) of section 
                162(f) applies,
                    ``(B) any amount required to be paid as a result of 
                the suit or agreement which constitutes restitution or 
                remediation of property, and
                    ``(C) any amount required to be paid as a result of 
                the suit or agreement for the purpose of coming into 
                compliance with any law which was violated or involved 
                in the investigation or inquiry.
            ``(2) Suit or agreement described.--
                    ``(A) In general.--A suit or agreement is described 
                in this paragraph if--
                          ``(i) it is--
                                    ``(I) a suit with respect to a 
                                violation of any law over which the 
                                government or entity has authority and 
                                with respect to which there has been a 
                                court order, or
                                    ``(II) an agreement which is entered 
                                into with respect to a violation of any 
                                law over which the government or entity 
                                has authority, or with respect to an 
                                investigation or inquiry by the 
                                government or entity into the potential 
                                violation of any law over which such 
                                government or entity has authority, and
                          ``(ii) the aggregate amount involved in all 
                      court orders and agreements with respect to the 
                      violation, investigation, or inquiry is $600 or 
                      more.
                    ``(B) Adjustment of reporting threshold.--The 
                Secretary shall adjust the $600 amount in subparagraph 
                (A)(ii) as necessary in order to ensure the efficient 
                administration of the internal revenue laws.
            ``(3) Time of filing.--The return required under this 
        subsection shall be filed at the time the agreement is entered 
        into, as determined by the Secretary.

    ``(b) Statements to Be Furnished to Individuals Involved in the 
Settlement.--Every person required to make a return

[[Page 131 STAT. 2129]]

under subsection (a) shall furnish to each person who is a party to the 
suit or agreement a written statement showing--
            ``(1) the name of the government or entity, and
            ``(2) the information supplied to the Secretary under 
        subsection (a)(1).

The written statement required under the preceding sentence shall be 
furnished to the person at the same time the government or entity 
provides the Secretary with the information required under subsection 
(a).
    ``(c) Appropriate Official Defined.--For purposes of this section, 
the term `appropriate official' means the officer or employee having 
control of the suit, investigation, or inquiry or the person 
appropriately designated for purposes of this section.''.
            (2) Conforming amendment.--The table of sections for subpart 
        B of part III of subchapter A of chapter 61 <<NOTE: 26 USC prec. 
        6041.>>  is amended by inserting after the item relating to 
        section 6050W the following new item:

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

            (3) <<NOTE: 26 USC 6050X note.>>  Effective date.--The 
        amendments made by this subsection shall apply to amounts paid 
        or incurred on or after the date of the enactment of this Act, 
        except that such amendments shall not apply to amounts paid or 
        incurred under any binding order or agreement entered into 
        before such date. Such exception shall not apply to an order or 
        agreement requiring court approval unless the approval was 
        obtained before such date.
SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS SUBJECT TO 
                            NONDISCLOSURE AGREEMENTS PAID IN 
                            CONNECTION WITH SEXUAL HARASSMENT OR 
                            SEXUAL ABUSE.

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

    (b) <<NOTE: 26 USC 162 note.>>  Effective Date.--The amendments made 
by this section shall apply to amounts paid or incurred after the date 
of the enactment of this Act.
SEC. 13308. REPEAL OF DEDUCTION FOR LOCAL LOBBYING EXPENSES.

    (a) In General.--Section 162(e) is amended by striking paragraphs 
(2) and (7) and by redesignating paragraphs (3), (4), (5), (6), and (8) 
as paragraphs (2), (3), (4), (5), and (6), respectively.
    (b) Conforming Amendment.--Section 6033(e)(1)(B)(ii) is amended by 
striking ``section 162(e)(5)(B)(ii)'' and inserting ``section 
162(e)(4)(B)(ii)''.
    (c) <<NOTE: 26 USC 162 note.>>  Effective Date.--The amendments made 
by this section shall apply to amounts paid or incurred on or after the 
date of the enactment of this Act.

[[Page 131 STAT. 2130]]

SEC. 13309. RECHARACTERIZATION OF CERTAIN GAINS IN THE CASE OF 
                            PARTNERSHIP PROFITS INTERESTS HELD IN 
                            CONNECTION WITH PERFORMANCE OF 
                            INVESTMENT SERVICES.

    (a) In General.--Part IV of subchapter O of chapter 1 is amended--
            (1) <<NOTE: 26 USC 1061, 1062.>>  by redesignating section 
        1061 as section 1062, and
            (2) by inserting after section 1060 the following new 
        section:
``SEC. 1061. <<NOTE: 26 USC 1061.>>  PARTNERSHIP INTERESTS HELD IN 
                          CONNECTION WITH PERFORMANCE OF SERVICES.

    ``(a) In General.--If one or more applicable partnership interests 
are held by a taxpayer at any time during the taxable year, the excess 
(if any) of--
            ``(1) the taxpayer's net long-term capital gain with respect 
        to such interests for such taxable year, over
            ``(2) the taxpayer's net long-term capital gain with respect 
        to such interests for such taxable year computed by applying 
        paragraphs (3) and (4) of sections 1222 by substituting `3 
        years' for `1 year',

shall be treated as short-term capital gain, notwithstanding section 83 
or any election in effect under section 83(b).
    ``(b) Special Rule.--To the extent provided by the Secretary, 
subsection (a) shall not apply to income or gain attributable to any 
asset not held for portfolio investment on behalf of third party 
investors.
    ``(c) Applicable Partnership Interest.--For purposes of this 
section--
            ``(1) In general.--Except as provided in this paragraph or 
        paragraph (4), the term `applicable partnership interest' means 
        any interest in a partnership which, directly or indirectly, is 
        transferred to (or is held by) the taxpayer in connection with 
        the performance of substantial services by the taxpayer, or any 
        other related person, in any applicable trade or business. The 
        previous sentence shall not apply to an interest held by a 
        person who is employed by another entity that is conducting a 
        trade or business (other than an applicable trade or business) 
        and only provides services to such other entity.
            ``(2) Applicable trade or business.--The term `applicable 
        trade or business' means any activity conducted on a regular, 
        continuous, and substantial basis which, regardless of whether 
        the activity is conducted in one or more entities, consists, in 
        whole or in part, of--
                    ``(A) raising or returning capital, and
                    ``(B) either--
                          ``(i) investing in (or disposing of) specified 
                      assets (or identifying specified assets for such 
                      investing or disposition), or
                          ``(ii) developing specified assets.
            ``(3) Specified asset.--The term `specified asset' means 
        securities (as defined in section 475(c)(2) without regard to 
        the last sentence thereof), commodities (as defined in section 
        475(e)(2)), real estate held for rental or investment, cash or 
        cash equivalents, options or derivative contracts with respect 
        to any of the foregoing, and an interest in a partnership to the 
        extent of the partnership's proportionate interest in any of the 
        foregoing.

[[Page 131 STAT. 2131]]

            ``(4) Exceptions.--The term `applicable partnership 
        interest' shall not include--
                    ``(A) any interest in a partnership directly or 
                indirectly held by a corporation, or
                    ``(B) any capital interest in the partnership which 
                provides the taxpayer with a right to share in 
                partnership capital commensurate with--
                          ``(i) the amount of capital contributed 
                      (determined at the time of receipt of such 
                      partnership interest), or
                          ``(ii) the value of such interest subject to 
                      tax under section 83 upon the receipt or vesting 
                      of such interest.
            ``(5) Third party investor.--The term `third party investor' 
        means a person who--
                    ``(A) holds an interest in the partnership which 
                does not constitute property held in connection with an 
                applicable trade or business; and
                    ``(B) is not (and has not been) actively engaged, 
                and is (and was) not related to a person so engaged, in 
                (directly or indirectly) providing substantial services 
                described in paragraph (1) for such partnership or any 
                applicable trade or business.

    ``(d) Transfer of Applicable Partnership Interest to Related 
Person.--
            ``(1) In general.--If a taxpayer transfers any applicable 
        partnership interest, directly or indirectly, to a person 
        related to the taxpayer, the taxpayer shall include in gross 
        income (as short term capital gain) the excess (if any) of--
                    ``(A) so much of the taxpayer's long-term capital 
                gains with respect to such interest for such taxable 
                year attributable to the sale or exchange of any asset 
                held for not more than 3 years as is allocable to such 
                interest, over
                    ``(B) any amount treated as short term capital gain 
                under subsection (a) with respect to the transfer of 
                such interest.
            ``(2) Related person.--For purposes of this paragraph, a 
        person is related to the taxpayer if--
                    ``(A) the person is a member of the taxpayer's 
                family within the meaning of section 318(a)(1), or
                    ``(B) the person performed a service within the 
                current calendar year or the preceding three calendar 
                years in any applicable trade or business in which or 
                for which the taxpayer performed a service.

    ``(e) Reporting.--The Secretary shall require such reporting (at the 
time and in the manner prescribed by the Secretary) as is necessary to 
carry out the purposes of this section.
    ``(f) Regulations.--The Secretary shall issue such regulations or 
other guidance as is necessary or appropriate to carry out the purposes 
of this section''.
    (b) Clerical Amendment.--The table of sections for part IV of 
subchapter O of chapter 1 <<NOTE: 16 USC prec. 1051.>>  is amended by 
striking the item relating to 1061 and inserting the following new 
items:

``Sec. 1061. Partnership interests held in connection with performance 
           of services.
``Sec. 1062. Cross references.''.

    (c) <<NOTE: 26 USC 1061 note.>>  Effective Date.--The amendments 
made by this section shall apply to taxable years beginning after 
December 31, 2017.

[[Page 131 STAT. 2132]]

SEC. 13310. PROHIBITION ON CASH, GIFT CARDS, AND OTHER NON-
                            TANGIBLE PERSONAL PROPERTY AS EMPLOYEE 
                            ACHIEVEMENT AWARDS.

    (a) In General.--Subparagraph (A) of section 274(j)(3) <<NOTE: 26 
USC 274.>>  is amended--
            (1) by striking ``The term'' and inserting the following:
                          ``(i) In general.--The term''.
            (2) by redesignating clauses (i), (ii), and (iii) as 
        subclauses (I), (II), and (III), respectively, and conforming 
        the margins accordingly, and
            (3) by adding at the end the following new clause:
                          ``(ii) Tangible personal property.--For 
                      purposes of clause (i), the term `tangible 
                      personal property' shall not include--
                                    ``(I) cash, cash equivalents, gift 
                                cards, gift coupons, or gift 
                                certificates (other than arrangements 
                                conferring only the right to select and 
                                receive tangible personal property from 
                                a limited array of such items pre-
                                selected or pre-approved by the 
                                employer), or
                                    ``(II) vacations, meals, lodging, 
                                tickets to theater or sporting events, 
                                stocks, bonds, other securities, and 
                                other similar items.''.

    (b) <<NOTE: 26 USC 274 note.>>  Effective Date.--The amendments made 
by this section shall apply to amounts paid or incurred after December 
31, 2017.
SEC. 13311. ELIMINATION OF DEDUCTION FOR LIVING EXPENSES INCURRED 
                            BY MEMBERS OF CONGRESS.

    (a) In General.--Subsection (a) of section 162 is amended in the 
matter following paragraph (3) by striking ``in excess of $3,000''.
    (b) <<NOTE: 26 USC 162 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after the date of 
the enactment of this Act.
SEC. 13312. CERTAIN CONTRIBUTIONS BY GOVERNMENTAL ENTITIES NOT 
                            TREATED AS CONTRIBUTIONS TO CAPITAL.

    (a) In General.--Section 118 is amended--
            (1) by striking subsections (b), (c), and (d),
            (2) by redesignating subsection (e) as subsection (d), and
            (3) by inserting after subsection (a) the following new 
        subsections:

    ``(b) Exceptions.--For purposes of subsection (a), the term 
`contribution to the capital of the taxpayer' does not include--
            ``(1) any contribution in aid of construction or any other 
        contribution as a customer or potential customer, and
            ``(2) any contribution by any governmental entity or civic 
        group (other than a contribution made by a shareholder as such).

    ``(c) Regulations.--The Secretary shall issue such regulations or 
other guidance as may be necessary or appropriate to carry out this 
section, including regulations or other guidance for determining whether 
any contribution constitutes a contribution in aid of construction.''.
    (b) <<NOTE: 26 USC 118 note.>>  Effective Date.--

[[Page 131 STAT. 2133]]

            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to contributions 
        made after the date of enactment of this Act.
            (2) Exception.--The amendments made by this section shall 
        not apply to any contribution, made after the date of enactment 
        of this Act by a governmental entity, which is made pursuant to 
        a master development plan that has been approved prior to such 
        date by a governmental entity.
SEC. 13313. REPEAL OF ROLLOVER OF PUBLICLY TRADED SECURITIES GAIN 
                            INTO SPECIALIZED SMALL BUSINESS 
                            INVESTMENT COMPANIES.

    (a) In General.--Part III of subchapter O of chapter 1 is amended by 
striking section 1044 (and by striking the item <<NOTE: 26 USC prec. 
1031.>>  relating to such section in the table of sections of such 
part).

    (b) Conforming Amendments.--Section 1016(a)(23) is amended--
            (1) by striking ``1044,'', and
            (2) by striking ``1044(d),''.

    (c) <<NOTE: 26 USC 1016 note.>>  Effective Date.--The amendments 
made by this section shall apply to sales after December 31, 2017.
SEC. 13314. CERTAIN SELF-CREATED PROPERTY NOT TREATED AS A CAPITAL 
                            ASSET.

    (a) Patents, etc.--Section 1221(a)(3) is amended by inserting ``a 
patent, invention, model or design (whether or not patented), a secret 
formula or process,'' before ``a copyright''.
    (b) Conforming Amendment.--Section 1231(b)(1)(C) is amended by 
inserting ``a patent, invention, model or design (whether or not 
patented), a secret formula or process,'' before ``a copyright''.
    (c) <<NOTE: 26 USC 1221 note.>>  Effective Date.--The amendments 
made by this section shall apply to dispositions after December 31, 
2017.

                        PART V--BUSINESS CREDITS

SEC. 13401. MODIFICATION OF ORPHAN DRUG CREDIT.

    (a) Credit Rate.--Subsection (a) of section 45C is amended by 
striking ``50 percent'' and inserting ``25 percent''.
    (b) Election of Reduced Credit.--Subsection (b) of section 280C is 
amended by redesignating paragraph (3) as paragraph (4) and by inserting 
after paragraph (2) the following new paragraph:
            ``(3) Election of reduced credit.--
                    ``(A) In general.--In the case of any taxable year 
                for which an election is made under this paragraph--
                          ``(i) paragraphs (1) and (2) shall not apply, 
                      and
                          ``(ii) the amount of the credit under section 
                      45C(a) shall be the amount determined under 
                      subparagraph (B).
                    ``(B) Amount of reduced credit.--The amount of 
                credit determined under this subparagraph for any 
                taxable year shall be the amount equal to the excess 
                of--
                          ``(i) the amount of credit determined under 
                      section 45C(a) without regard to this paragraph, 
                      over
                          ``(ii) the product of--
                                    ``(I) the amount described in clause 
                                (i), and
                                    ``(II) the maximum rate of tax under 
                                section 11(b).

[[Page 131 STAT. 2134]]

                    ``(C) Election.--An election under this paragraph 
                for any taxable year shall be made not later than the 
                time for filing the return of tax for such year 
                (including extensions), shall be made on such return, 
                and shall be made in such manner as the Secretary shall 
                prescribe. Such an election, once made, shall be 
                irrevocable.''.

    (c) <<NOTE: 26 USC 45C note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 13402. REHABILITATION CREDIT LIMITED TO CERTIFIED HISTORIC 
                            STRUCTURES.

    (a) In General.--Subsection (a) of section 47 <<NOTE: 26 USC 47.>>  
is amended to read as follows:

    ``(a) General Rule.--
            ``(1) In general.--For purposes of section 46, for any 
        taxable year during the 5-year period beginning in the taxable 
        year in which a qualified rehabilitated building is placed in 
        service, the rehabilitation credit for such year is an amount 
        equal to the ratable share for such year.
            ``(2) Ratable share.--For purposes of paragraph (1), the 
        ratable share for any taxable year during the period described 
        in such paragraph is the amount equal to 20 percent of the 
        qualified rehabilitation expenditures with respect to the 
        qualified rehabilitated building, as allocated ratably to each 
        year during such period.''.

    (b) Conforming Amendments.--
            (1) Section 47(c) is amended--
                    (A) in paragraph (1)--
                          (i) in subparagraph (A), by amending clause 
                      (iii) to read as follows:
                          ``(iii) such building is a certified historic 
                      structure, and'',
                          (ii) by striking subparagraph (B), and
                          (iii) by redesignating subparagraphs (C) and 
                      (D) as subparagraphs (B) and (C), respectively, 
                      and
                    (B) in paragraph (2)(B), by amending clause (iv) to 
                read as follows:
                          ``(iv) Certified historic structure.--Any 
                      expenditure attributable to the rehabilitation of 
                      a qualified rehabilitated building unless the 
                      rehabilitation is a certified rehabilitation 
                      (within the meaning of subparagraph (C)).''.
            (2) Paragraph (4) of section 145(d) is amended--
                    (A) by striking ``of section 47(c)(1)(C)'' each 
                place it appears and inserting ``of section 
                47(c)(1)(B)'', and
                    (B) by striking ``section 47(c)(1)(C)(i)'' and 
                inserting ``section 47(c)(1)(B)(i)''.

    (c) <<NOTE: 26 USC 47 note.>>  Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to amounts paid or 
        incurred after December 31, 2017.
            (2) Transition rule.--In the case of qualified 
        rehabilitation expenditures with respect to any building--
                    (A) owned or leased by the taxpayer during the 
                entirety of the period after December 31, 2017, and
                    (B) with respect to which the 24-month period 
                selected by the taxpayer under clause (i) of section 
                47(c)(1)(B) of

[[Page 131 STAT. 2135]]

                the Internal Revenue Code (as amended by subsection 
                (b)), or the 60-month period applicable under clause 
                (ii) of such section, begins not later than 180 days 
                after the date of the enactment of this Act,
        the amendments made by this section shall apply to such 
        expenditures paid or incurred after the end of the taxable year 
        in which the 24-month period, or the 60-month period, referred 
        to in subparagraph (B) ends.
SEC. 13403. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE.

    (a) In General.--
            (1) Allowance of credit.--Subpart D of part IV of subchapter 
        A of chapter 1 is amended by adding at the end the following new 
        section:
``SEC. 45S. <<NOTE: 26 USC 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

[[Page 131 STAT. 2136]]

                      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).

[[Page 131 STAT. 2137]]

    ``(e) Family and Medical Leave.--
            ``(1) In general.--Except as provided in paragraph (2), for 
        purposes of this section, the term `family and medical leave' 
        means leave for any 1 or more of the purposes described under 
        subparagraph (A), (B), (C), (D), or (E) of paragraph (1), or 
        paragraph (3), of section 102(a) of the Family and Medical Leave 
        Act of 1993, as amended, whether the leave is provided under 
        that Act or by a policy of the employer.
            ``(2) Exclusion.--If an employer provides paid leave as 
        vacation leave, personal leave, or medical or sick leave (other 
        than leave specifically for 1 or more of the purposes referred 
        to in paragraph (1)), that paid leave shall not be considered to 
        be family and medical leave under paragraph (1).
            ``(3) Definitions.--In this subsection, the terms `vacation 
        leave', `personal leave', and `medical or sick leave' mean those 
        3 types of leave, within the meaning of section 102(d)(2) of 
        that Act.

    ``(f) Determinations Made by Secretary of Treasury.--For purposes of 
this section, any determination as to whether an employer or an employee 
satisfies the applicable requirements for an eligible employer (as 
described in subsection (c)) or qualifying employee (as described in 
subsection (d)), respectively, shall be made by the Secretary based on 
such information, to be provided by the employer, as the Secretary 
determines to be necessary or appropriate.
    ``(g) Wages.--For purposes of this section, the term `wages' has the 
meaning given such term by subsection (b) of section 3306 (determined 
without regard to any dollar limitation contained in such section). Such 
term shall not include any amount taken into account for purposes of 
determining any other credit allowed under this subpart.
    ``(h) Election to Have Credit Not Apply.--
            ``(1) In general.--A taxpayer may elect to have this section 
        not apply for any taxable year.
            ``(2) Other rules.--Rules similar to the rules of paragraphs 
        (2) and (3) of section 51(j) shall apply for purposes of this 
        subsection.

    ``(i) Termination.--This section shall not apply to wages paid in 
taxable years beginning after December 31, 2019.''.
    (b) <<NOTE: 26 USC 38.>>  Credit Part of General Business Credit.--
Section 38(b) is amended by striking ``plus'' at the end of paragraph 
(35), by striking the period at the end of paragraph (36) and inserting 
``, plus'', and by adding at the end the following new paragraph:
            ``(37) in the case of an eligible employer (as defined in 
        section 45S(c)), the paid family and medical leave credit 
        determined under section 45S(a).''.

    (c) Credit Allowed Against AMT.--Subparagraph (B) of section 
38(c)(4) is amended by redesignating clauses (ix) through (xi) as 
clauses (x) through (xii), respectively, and by inserting after clause 
(viii) the following new clause:
                          ``(ix) the credit determined under section 
                      45S,''.

    (d) Conforming Amendments.--
            (1) Denial of double benefit.--Section 280C(a) is amended by 
        inserting ``45S(a),'' after ``45P(a),''.
            (2) Election to have credit not apply.--Section 6501(m) is 
        amended by inserting ``45S(h),'' after ``45H(g),''.

[[Page 131 STAT. 2138]]

            (3) Clerical amendment.--The table of sections for subpart D 
        of part IV of subchapter A of chapter 1 <<NOTE: 26 USC prec. 
        38.>>  is amended by adding at the end the following new item:

``Sec. 45S. Employer credit for paid family and medical leave.''.

    (e) <<NOTE: 26 USC 38 note.>>  Effective Date.--The amendments made 
by this section shall apply to wages paid in taxable years beginning 
after December 31, 2017.
SEC. 13404. REPEAL OF TAX CREDIT BONDS.

    (a) In General.--Part IV of subchapter A of chapter 1 <<NOTE: 26 USC 
prec. 21, prec. 54, 54, prec. 54A, 54A-54F, prec. 54AA, 54AA.>>  is 
amended by striking subparts H, I, and J (and by striking the items 
relating to such subparts in the table of subparts for such part).

    (b) <<NOTE: 26 USC prec. 6411.>>  Payments to Issuers.--Subchapter B 
of chapter 65 is amended by striking section 6431 (and by striking the 
item relating to such section in the table of sections for such 
subchapter).

    (c) Conforming Amendments.--
            (1) Part IV of subchapter U of chapter 1 is amended by 
        striking section 1397E (and by striking the item <<NOTE: 26 
        USC prec. 1397E.>>  relating to such section in the table of 
        sections for such part).
            (2) Section 54(l)(3)(B) is amended by inserting ``(as in 
        effect before its repeal by the Tax Cuts and Jobs Act)'' after 
        ``section 1397E(I)''.
            (3) Section 6211(b)(4)(A) is amended by striking ``, and 
        6431'' and inserting ``and'' before ``36B''.
            (4) Section 6401(b)(1) is amended by striking ``G, H, I, and 
        J'' and inserting ``and G''.

    (d) <<NOTE: 26 USC 54 note.>>  Effective Date.--The amendments made 
by this section shall apply to bonds issued after December 31, 2017.

     PART VI--PROVISIONS RELATED TO SPECIFIC ENTITIES AND INDUSTRIES

                    Subpart A--Partnership Provisions

SEC. 13501. TREATMENT OF GAIN OR LOSS OF FOREIGN PERSONS FROM SALE 
                            OR EXCHANGE OF INTERESTS IN 
                            PARTNERSHIPS ENGAGED IN TRADE OR 
                            BUSINESS WITHIN THE UNITED STATES.

    (a) Amount Treated as Effectively Connected.--
            (1) In general.--Section 864(c) is amended by adding at the 
        end the following:
            ``(8) Gain or loss of foreign persons from sale or exchange 
        of certain partnership interests.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this subtitle, if a nonresident alien 
                individual or foreign corporation owns, directly or 
                indirectly, an interest in a partnership which is 
                engaged in any trade or business within the United 
                States, gain or loss on the sale or exchange of all (or 
                any portion of) such interest shall be treated as 
                effectively connected with the conduct of such trade or 
                business to the extent such gain or loss does not exceed 
                the amount determined under subparagraph (B).

[[Page 131 STAT. 2139]]

                    ``(B) Amount treated as effectively connected.--The 
                amount determined under this subparagraph with respect 
                to any partnership interest sold or exchanged--
                          ``(i) in the case of any gain on the sale or 
                      exchange of the partnership interest, is--
                                    ``(I) the portion of the partner's 
                                distributive share of the amount of gain 
                                which would have been effectively 
                                connected with the conduct of a trade or 
                                business within the United States if the 
                                partnership had sold all of its assets 
                                at their fair market value as of the 
                                date of the sale or exchange of such 
                                interest, or
                                    ``(II) zero if no gain on such 
                                deemed sale would have been so 
                                effectively connected, and
                          ``(ii) in the case of any loss on the sale or 
                      exchange of the partnership interest, is--
                                    ``(I) the portion of the partner's 
                                distributive share of the amount of loss 
                                on the deemed sale described in clause 
                                (i)(I) which would have been so 
                                effectively connected, or
                                    ``(II) zero if no loss on such 
                                deemed sale would be have been so 
                                effectively connected.
                      For purposes of this subparagraph, a partner's 
                      distributive share of gain or loss on the deemed 
                      sale shall be determined in the same manner as 
                      such partner's distributive share of the non-
                      separately stated taxable income or loss of such 
                      partnership.
                    ``(C) Coordination with united states real property 
                interests.--If a partnership described in subparagraph 
                (A) holds any United States real property interest (as 
                defined in section 897(c)) at the time of the sale or 
                exchange of the partnership interest, then the gain or 
                loss treated as effectively connected income under 
                subparagraph (A) shall be reduced by the amount so 
                treated with respect to such United States real property 
                interest under section 897.
                    ``(D) Sale or exchange.--For purposes of this 
                paragraph, the term `sale or exchange' means any sale, 
                exchange, or other disposition.
                    ``(E) Secretarial authority.--The Secretary shall 
                prescribe such regulations or other guidance as the 
                Secretary determines appropriate for the application of 
                this paragraph, including with respect to exchanges 
                described in section 332, 351, 354, 355, 356, or 361.''.
            (2) Conforming amendments.--Section 864(c)(1) <<NOTE: 26 USC 
        864.>>  is amended--
                    (A) by striking ``and (7)'' in subparagraph (A), and 
                inserting ``(7), and (8)'', and
                    (B) by striking ``or (7)'' in subparagraph (B), and 
                inserting ``(7), or (8)''.

    (b) Withholding Requirements.--Section 1446 is amended by 
redesignating subsection (f) as subsection (g) and by inserting after 
subsection (e) the following:
    ``(f) Special Rules for Withholding on Dispositions of Partnership 
Interests.--
            ``(1) In general.--Except as provided in this subsection, if 
        any portion of the gain (if any) on any disposition of an

[[Page 131 STAT. 2140]]

        interest in a partnership would be treated under section 
        864(c)(8) as effectively connected with the conduct of a trade 
        or business within the United States, the transferee shall be 
        required to deduct and withhold a tax equal to 10 percent of the 
        amount realized on the disposition.
            ``(2) Exception if nonforeign affidavit furnished.--
                    ``(A) In general.--No person shall be required to 
                deduct and withhold any amount under paragraph (1) with 
                respect to any disposition if the transferor furnishes 
                to the transferee an affidavit by the transferor 
                stating, under penalty of perjury, the transferor's 
                United States taxpayer identification number and that 
                the transferor is not a foreign person.
                    ``(B) False affidavit.--Subparagraph (A) shall not 
                apply to any disposition if--
                          ``(i) the transferee has actual knowledge that 
                      the affidavit is false, or the transferee receives 
                      a notice (as described in section 1445(d)) from a 
                      transferor's agent or transferee's agent that such 
                      affidavit or statement is false, or
                          ``(ii) the Secretary by regulations requires 
                      the transferee to furnish a copy of such affidavit 
                      or statement to the Secretary and the transferee 
                      fails to furnish a copy of such affidavit or 
                      statement to the Secretary at such time and in 
                      such manner as required by such regulations.
                    ``(C) Rules for agents.--The rules of section 
                1445(d) shall apply to a transferor's agent or 
                transferee's agent with respect to any affidavit 
                described in subparagraph (A) in the same manner as such 
                rules apply with respect to the disposition of a United 
                States real property interest under such section.
            ``(3) Authority of secretary to prescribe reduced amount.--
        At the request of the transferor or transferee, the Secretary 
        may prescribe a reduced amount to be withheld under this section 
        if the Secretary determines that to substitute such reduced 
        amount will not jeopardize the collection of the tax imposed 
        under this title with respect to gain treated under section 
        864(c)(8) as effectively connected with the conduct of a trade 
        or business with in the United States.
            ``(4) Partnership to withhold amounts not withheld by the 
        transferee.--If a transferee fails to withhold any amount 
        required to be withheld under paragraph (1), the partnership 
        shall be required to deduct and withhold from distributions to 
        the transferee a tax in an amount equal to the amount the 
        transferee failed to withhold (plus interest under this title on 
        such amount).
            ``(5) Definitions.--Any term used in this subsection which 
        is also used under section 1445 shall have the same meaning as 
        when used in such section.
            ``(6) Regulations.--The Secretary shall prescribe such 
        regulations or other guidance as may be necessary to carry out 
        the purposes of this subsection, including regulations providing 
        for exceptions from the provisions of this subsection.''.

    (c) Effective Dates.--

[[Page 131 STAT. 2141]]

            (1) <<NOTE: 26 USC 864 note.>>  Subsection (a).--The 
        amendments made by subsection (a) shall apply to sales, 
        exchanges, and dispositions on or after November 27, 2017.
            (2) <<NOTE: 26 USC 1446 note.>>  Subsection (b).--The 
        amendment made by subsection (b) shall apply to sales, 
        exchanges, and dispositions after December 31, 2017.
SEC. 13502. MODIFY DEFINITION OF SUBSTANTIAL BUILT-IN LOSS IN THE 
                            CASE OF TRANSFER OF PARTNERSHIP 
                            INTEREST.

    (a) In General.--Paragraph (1) of section 743(d) <<NOTE: 26 USC 
743.>>  is to read as follows:
            ``(1) In general.--For purposes of this section, a 
        partnership has a substantial built-in loss with respect to a 
        transfer of an interest in the partnership if--
                    ``(A) the partnership's adjusted basis in the 
                partnership property exceeds by more than $250,000 the 
                fair market value of such property, or
                    ``(B) the transferee partner would be allocated a 
                loss of more than $250,000 if the partnership assets 
                were sold for cash equal to their fair market value 
                immediately after such transfer.''.

    (b) <<NOTE: 26 USC 743 note.>>  Effective Date.--The amendments made 
by this section shall apply to transfers of partnership interests after 
December 31, 2017.
SEC. 13503. CHARITABLE CONTRIBUTIONS AND FOREIGN TAXES TAKEN INTO 
                            ACCOUNT IN DETERMINING LIMITATION ON 
                            ALLOWANCE OF PARTNER'S SHARE OF LOSS.

    (a) In General.--Subsection (d) of section 704 is amended--
            (1) by striking ``A partner's distributive share'' and 
        inserting the following:
            ``(1) In general.--A partner's distributive share'',
            (2) by striking ``Any excess of such loss'' and inserting 
        the following:
            ``(2) Carryover.--Any excess of such loss'', and
            (3) by adding at the end the following new paragraph:
            ``(3) Special rules.--
                    ``(A) In general.--In determining the amount of any 
                loss under paragraph (1), there shall be taken into 
                account the partner's distributive share of amounts 
                described in paragraphs (4) and (6) of section 702(a).
                    ``(B) Exception.--In the case of a charitable 
                contribution of property whose fair market value exceeds 
                its adjusted basis, subparagraph (A) shall not apply to 
                the extent of the partner's distributive share of such 
                excess.''.

    (b) <<NOTE: 26 USC 704 note.>>  Effective Date.--The amendments made 
by this section shall apply to partnership taxable years beginning after 
December 31, 2017.
SEC. 13504. REPEAL OF TECHNICAL TERMINATION OF PARTNERSHIPS.

    (a) In General.--Paragraph (1) of section 708(b) is amended--
            (1) by striking ``, or'' at the end of subparagraph (A) and 
        all that follows and inserting a period, and
            (2) by striking ``only if--'' and all that follows through 
        ``no part of any business'' and inserting the following: ``only 
        if no part of any business''.

    (b) Conforming Amendment.--

[[Page 131 STAT. 2142]]

            (1) Section 168(i)(7)(B) <<NOTE: 26 USC 168.>>  is amended 
        by striking the second sentence.
            (2) Section 743(e) is amended by striking paragraph (4) and 
        redesignating paragraphs (5), (6), and (7) as paragraphs (4), 
        (5), and (6).

    (c) <<NOTE: 26 USC 168 note.>>  Effective Date.--The amendments made 
by this section shall apply to partnership taxable years beginning after 
December 31, 2017.

                      Subpart B--Insurance Reforms

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

    (a) In General.--Section 805(b) is amended by striking paragraph (4) 
and by redesignating paragraph (5) as paragraph (4).
    (b) Conforming Amendments.--
            (1) Part I of subchapter L of chapter 1 is amended by 
        striking section 810 (and by striking the item <<NOTE: 26 
        USC prec. 804.>>  relating to such section in the table of 
        sections for such part).
            (2)(A) Part III of subchapter L of chapter 1 is amended by 
        striking section 844 (and by striking the item <<NOTE: 26 
        USC prec. 841.>>  relating to such section in the table of 
        sections for such part).
            (B) Section 831(b)(3) is amended by striking ``except as 
        provided in section 844,''
            (3) Section 381 is amended by striking subsection (d).
            (4) Section 805(a)(4)(B)(ii) is amended to read as follows:
                          ``(ii) the deduction allowed under section 
                      172,''.
            (5) Section 805(a) is amended by striking paragraph (5).
            (6) Section 805(b)(2)(A)(iv) is amended to read as follows:
                          ``(iv) any net operating loss carryback to the 
                      taxable year under section 172, and''.
            (7) Section 953(b)(1)(B) is amended to read as follows:
                    ``(B) So much of section 805(a)(8) as relates to the 
                deduction allowed under section 172.''.
            (8) Section 1351(i)(3) is amended by striking ``or the 
        operations loss deduction under section 810,''.

    (c) <<NOTE: 26 USC 381 note.>>  Effective Date.--The amendments made 
by this section shall apply to losses arising in taxable years beginning 
after December 31, 2017.
SEC. 13512. REPEAL OF SMALL LIFE INSURANCE COMPANY DEDUCTION.

    (a) In General.--Part I of subchapter L of chapter 1 is amended by 
striking section 806 (and by striking the item <<NOTE: 26 USC prec. 
804.>>  relating to such section in the table of sections for such 
part).

    (b) Conforming Amendments.--
            (1) Section 453B(e) is amended--
                    (A) by striking ``(as defined in section 
                806(b)(3))'' in paragraph (2)(B), and
                    (B) by adding at the end the following new 
                paragraph:
            ``(3) Noninsurance business.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `noninsurance business' means any activity 
                which is not an insurance business.
                    ``(B) Certain activities treated as insurance 
                businesses.--For purposes of subparagraph (A), any 
                activity which is not an insurance business shall be 
                treated as an insurance business if--

[[Page 131 STAT. 2143]]

                          ``(i) it is of a type traditionally carried on 
                      by life insurance companies for investment 
                      purposes, but only if the carrying on of such 
                      activity (other than in the case of real estate) 
                      does not constitute the active conduct of a trade 
                      or business, or
                          ``(ii) it involves the performance of 
                      administrative services in connection with plans 
                      providing life insurance, pension, or accident and 
                      health benefits.''.
            (2) Section 465(c)(7)(D)(v)(II) <<NOTE: 26 USC 465.>>  is 
        amended by striking ``section 806(b)(3)'' and inserting 
        ``section 453B(e)(3)''.
            (3) Section 801(a)(2) is amended by striking subparagraph 
        (C).
            (4) Section 804 is amended by striking ``means--'' and all 
        that follows and inserting ``means the general deductions 
        provided in section 805.''.
            (5) Section 805(a)(4)(B), as amended by this Act, is amended 
        by striking clause (i) and by redesignating clauses (ii), (iii), 
        and (iv) as clauses (i), (ii), and (iii), respectively.
            (6) Section 805(b)(2)(A), as amended by this Act, is amended 
        by striking clause (iii) and by redesignating clauses (iv) and 
        (v) as clauses (iii) and (iv), respectively.
            (7) Section 842(c) is amended by striking paragraph (1) and 
        by redesignating paragraphs (2) and (3) as paragraphs (1) and 
        (2), respectively.
            (8) Section 953(b)(1), as amended by section 13511, is 
        amended by striking subparagraph (A) and by redesignating 
        subparagraphs (B) and (C) as subparagraphs (A) and (B), 
        respectively.

    (c) <<NOTE: 26 USC 453B note.>>  Effective Date.--The amendments 
made by this section shall apply to taxable years beginning after 
December 31, 2017.
SEC. 13513. ADJUSTMENT FOR CHANGE IN COMPUTING RESERVES.

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

    (b) <<NOTE: 26 USC 807 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 13514. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS TO 
                            SHAREHOLDERS FROM PRE-1984 
                            POLICYHOLDERS SURPLUS ACCOUNT.

    (a) In General.--Subpart D of part I of subchapter L is amended by 
striking section 815 (and by striking the item <<NOTE: 26 USC prec. 
811.>>  relating to such section in the table of sections for such 
subpart).

    (b) Conforming Amendment.--Section 801 is amended by striking 
subsection (c).

[[Page 131 STAT. 2144]]

    (c) <<NOTE: 26 USC 801 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.

    (d) <<NOTE: 26 USC 801 note.>>  Phased Inclusion of Remaining 
Balance of Policyholders Surplus Accounts.--In the case of any stock 
life insurance company which has a balance (determined as of the close 
of such company's last taxable year beginning before January 1, 2018) in 
an existing policyholders surplus account (as defined in section 815 of 
the Internal Revenue Code of 1986, as in effect before its repeal), the 
tax imposed by section 801 of such Code for the first 8 taxable years 
beginning after December 31, 2017, shall be the amount which would be 
imposed by such section for such year on the sum of--
            (1) life insurance company taxable income for such year 
        (within the meaning of such section 801 but not less than zero), 
        plus
            (2) \1/8\ of such balance.
SEC. 13515. MODIFICATION OF PRORATION RULES FOR PROPERTY AND 
                            CASUALTY INSURANCE COMPANIES.

    (a) In General.--Section 832(b)(5)(B) is amended--
            (1) by striking ``15 percent'' and inserting ``the 
        applicable percentage'', and
            (2) by inserting at the end the following new sentence: 
        ``For purposes of this subparagraph, the applicable percentage 
        is 5.25 percent divided by the highest rate in effect under 
        section 11(b).''.

    (b) <<NOTE: 26 USC 832 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 13516. REPEAL OF SPECIAL ESTIMATED TAX PAYMENTS.

    (a) In General.--Part III of subchapter L of chapter 1 is amended by 
striking section 847 (and by striking the item <<NOTE: 26 USC prec. 
841.>>  relating to such section in the table of sections for such 
part).

    (b) <<NOTE: 26 USC 847 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 13517. COMPUTATION OF LIFE INSURANCE TAX RESERVES.

    (a) In General.--
            (1) Appropriate rate of interest.--The second sentence of 
        section 807(c) is amended to read as follows: ``For purposes of 
        paragraph (3), the appropriate rate of interest is the highest 
        rate or rates permitted to be used to discount the obligations 
        by the National Association of Insurance Commissioners as of the 
        date the reserve is determined.''.
            (2) Method of computing reserves.--Section 807(d) is 
        amended--
                    (A) by striking paragraphs (1), (2), (4), and (5),
                    (B) by redesignating paragraph (6) as paragraph (4),
                    (C) by inserting before paragraph (3) the following 
                new paragraphs:
            ``(1) Determination of reserve.--
                    ``(A) In general.--For purposes of this part (other 
                than section 816), the amount of the life insurance 
                reserves for any contract (other than a contract to 
                which subparagraph (B) applies) shall be the greater 
                of--
                          ``(i) the net surrender value of such 
                      contract, or
                          ``(ii) 92.81 percent of the reserve determined 
                      under paragraph (2).

[[Page 131 STAT. 2145]]

                    ``(B) Variable contracts.--For purposes of this part 
                (other than section 816), the amount of the life 
                insurance reserves for a variable contract shall be 
                equal to the sum of--
                          ``(i) the greater of--
                                    ``(I) the net surrender value of 
                                such contract, or
                                    ``(II) the portion of the reserve 
                                that is separately accounted for under 
                                section 817, plus
                          ``(ii) 92.81 percent of the excess (if any) of 
                      the reserve determined under paragraph (2) over 
                      the amount in clause (i).
                    ``(C) Statutory cap.--In no event shall the reserves 
                determined under subparagraphs (A) or (B) for any 
                contract as of any time exceed the amount which would be 
                taken into account with respect to such contract as of 
                such time in determining statutory reserves (as defined 
                in paragraph (4)).
                    ``(D) No double counting.--In no event shall any 
                amount or item be taken into account more than once in 
                determining any reserve under this subchapter.
            ``(2) Amount of reserve.--The amount of the reserve 
        determined under this paragraph with respect to any contract 
        shall be determined by using the tax reserve method applicable 
        to such contract.''.
                    (D) by striking ``(other than a qualified long-term 
                care insurance contract, as defined in section 
                7702B(b)), a 2-year full preliminary term method'' in 
                paragraph (3)(A)(iii) and inserting ``, the reserve 
                method prescribed by the National Association of 
                Insurance Commissioners which covers such contract as of 
                the date the reserve is determined'',
                    (E) by striking ``(as of the date of issuance)'' in 
                paragraph (3)(A)(iv)(I) and inserting ``(as of the date 
                the reserve is determined)'',
                    (F) by striking ``as of the date of the issuance 
                of'' in paragraph (3)(A)(iv)(II) and inserting ``as of 
                the date the reserve is determined for'',
                    (G) by striking ``in effect on the date of the 
                issuance of the contract'' in paragraph (3)(B)(i) and 
                inserting ``applicable to the contract and in effect as 
                of the date the reserve is determined'', and
                    (H) by striking ``in effect on the date of the 
                issuance of the contract'' in paragraph (3)(B)(ii) and 
                inserting ``applicable to the contract and in effect as 
                of the date the reserve is determined''.
            (3) Special rules.--Section 807(e) <<NOTE: 26 USC 807.>>  is 
        amended--
                    (A) by striking paragraphs (2) and (5),
                    (B) by redesignating paragraphs (3), (4), (6), and 
                (7) as paragraphs (2), (3), (4), and (5), respectively,
                    (C) by amending paragraph (2) (as so redesignated) 
                to read as follows:
            ``(2) Qualified supplemental benefits.--
                    ``(A) Qualified supplemental benefits treated 
                separately.--For purposes of this part, the amount of 
                the life insurance reserve for any qualified 
                supplemental

[[Page 131 STAT. 2146]]

                benefit shall be computed separately as though such 
                benefit were under a separate contract.
                    ``(B) Qualified supplemental benefit.--For purposes 
                of this paragraph, the term `qualified supplemental 
                benefit' means any supplemental benefit described in 
                subparagraph (C) if--
                          ``(i) there is a separately identified premium 
                      or charge for such benefit, and
                          ``(ii) any net surrender value under the 
                      contract attributable to any other benefit is not 
                      available to fund such benefit.
                    ``(C) Supplemental benefits.--For purposes of this 
                paragraph, the supplemental benefits described in this 
                subparagraph are any--
                          ``(i) guaranteed insurability,
                          ``(ii) accidental death or disability benefit,
                          ``(iii) convertibility,
                          ``(iv) disability waiver benefit, or
                          ``(v) other benefit prescribed by regulations,
                which is supplemental to a contract for which there is a 
                reserve described in subsection (c).'', and
                    (D) by adding at the end the following new 
                paragraph:
            ``(6) Reporting rules.--The Secretary shall require 
        reporting (at such time and in such manner as the Secretary 
        shall prescribe) with respect to the opening balance and closing 
        balance of reserves and with respect to the method of computing 
        reserves for purposes of determining income.''.
            (4) Definition of life insurance contract.--Section 7702 
        is <<NOTE: 26 USC 7702.>>  amended--
                    (A) by striking clause (i) of subsection (c)(3)(B) 
                and inserting the following:
                          ``(i) reasonable mortality charges which meet 
                      the requirements prescribed in regulations to be 
                      promulgated by the Secretary or that do not exceed 
                      the mortality charges specified in the prevailing 
                      commissioners' standard tables as defined in 
                      subsection (f)(10),'' and
                    (B) by adding at the end of subsection (f) the 
                following new paragraph:
            ``(10) Prevailing commissioners' standard tables.--For 
        purposes of subsection (c)(3)(B)(i), the term `prevailing 
        commissioners' standard tables' means the most recent 
        commissioners' standard tables prescribed by the National 
        Association of Insurance Commissioners which are permitted to be 
        used in computing reserves for that type of contract under the 
        insurance laws of at least 26 States when the contract was 
        issued. If the prevailing commissioners' standard tables as of 
        the beginning of any calendar year (hereinafter in this 
        paragraph referred to as the `year of change') are different 
        from the prevailing commissioners' standard tables as of the 
        beginning of the preceding calendar year, the issuer may use the 
        prevailing commissioners' standard tables as of the beginning of 
        the preceding calendar year with respect to any contract issued 
        after the change and before the close of the 3-year period 
        beginning on the first day of the year of change.''.

    (b) Conforming Amendments.--

[[Page 131 STAT. 2147]]

            (1) Section 808 <<NOTE: 26 USC 808.>>  is amended by adding 
        at the end the following new subsection:

    ``(g) Prevailing State Assumed Interest Rate.--For purposes of this 
subchapter--
            ``(1) In general.--The term `prevailing State assumed 
        interest rate' means, with respect to any contract, the highest 
        assumed interest rate permitted to be used in computing life 
        insurance reserves for insurance contracts or annuity contracts 
        (as the case may be) under the insurance laws of at least 26 
        States. For purposes of the preceding sentence, the effect of 
        nonforfeiture laws of a State on interest rates for reserves 
        shall not be taken into account.
            ``(2) When rate determined.--The prevailing State assumed 
        interest rate with respect to any contract shall be determined 
        as of the beginning of the calendar year in which the contract 
        was issued.''.
            (2) Paragraph (1) of section 811(d) is amended by striking 
        ``the greater of the prevailing State assumed interest rate or 
        applicable Federal interest rate in effect under section 807'' 
        and inserting ``the interest rate in effect under section 
        808(g)''.
            (3) Subparagraph (A) of section 846(f)(6) is amended by 
        striking ``except that'' and all that follows and inserting 
        ``except that the limitation of subsection (a)(3) shall apply, 
        and''.
            (4) Section 848(e)(1)(B)(iii) is amended by striking 
        ``807(e)(4)'' and inserting ``807(e)(3)''.
            (5) Subparagraph (B) of section 954(i)(5) is amended by 
        striking ``shall be substituted for the prevailing State assumed 
        interest rate,'' and inserting ``shall apply,''.

    (c) <<NOTE: 26 USC 807 note.>>  Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2017.
            (2) Transition rule.--For the first taxable year beginning 
        after December 31, 2017, the reserve with respect to any 
        contract (as determined under section 807(d) of the Internal 
        Revenue Code of 1986) at the end of the preceding taxable year 
        shall be determined as if the amendments made by this section 
        had applied to such reserve in such preceding taxable year.
            (3) Transition relief.--
                    (A) In general.--If--
                          (i) the reserve determined under section 
                      807(d) of the Internal Revenue Code of 1986 
                      (determined after application of paragraph (2)) 
                      with respect to any contract as of the close of 
                      the year preceding the first taxable year 
                      beginning after December 31, 2017, differs from
                          (ii) the reserve which would have been 
                      determined with respect to such contract as of the 
                      close of such taxable year under such section 
                      determined without regard to paragraph (2),
                then the difference between the amount of the reserve 
                described in clause (i) and the amount of the reserve 
                described in clause (ii) shall be taken into account 
                under the method provided in subparagraph (B).
                    (B) Method.--The method provided in this 
                subparagraph is as follows:

[[Page 131 STAT. 2148]]

                          (i) If the amount determined under 
                      subparagraph (A)(i) exceeds the amount determined 
                      under subparagraph (A)(ii), 1/8 of such excess 
                      shall be taken into account, for each of the 8 
                      succeeding taxable years, as a deduction under 
                      section 805(a)(2) or 832(c)(4) of such Code, as 
                      applicable.
                          (ii) If the amount determined under 
                      subparagraph (A)(ii) exceeds the amount determined 
                      under subparagraph (A)(i), 1/8 of such excess 
                      shall be included in gross income, for each of the 
                      8 succeeding taxable years, under section 
                      803(a)(2) or 832(b)(1)(C) of such Code, as 
                      applicable.
SEC. 13518. MODIFICATION OF RULES FOR LIFE INSURANCE PRORATION FOR 
                            PURPOSES OF DETERMINING THE DIVIDENDS 
                            RECEIVED DEDUCTION.

    (a) In General.--Section 812 <<NOTE: 26 USC 812.>>  is amended to 
read as follows:
``SEC. 812. DEFINITION OF COMPANY'S SHARE AND POLICYHOLDER'S 
                        SHARE.

    ``(a) Company's Share.--For purposes of section 805(a)(4), the term 
`company's share' means, with respect to any taxable year beginning 
after December 31, 2017, 70 percent.
    ``(b) Policyholder's Share.--For purposes of section 807, the term 
`policyholder's share' means, with respect to any taxable year beginning 
after December 31, 2017, 30 percent.''.
    (b) Conforming Amendment.--Section 817A(e)(2) is amended by striking 
``, 807(d)(2)(B), and 812'' and inserting ``and 807(d)(2)(B)''.
    (c) <<NOTE: 26 USC 812 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 13519. CAPITALIZATION OF CERTAIN POLICY ACQUISITION EXPENSES.

    (a) In General.--
            (1) Section 848(a)(2) is amended by striking ``120-month'' 
        and inserting ``180-month''.
            (2) Section 848(c)(1) is amended by striking ``1.75 
        percent'' and inserting ``2.09 percent''.
            (3) Section 848(c)(2) is amended by striking ``2.05 
        percent'' and inserting ``2.45 percent''.
            (4) Section 848(c)(3) is amended by striking ``7.7 percent'' 
        and inserting ``9.2 percent''.

    (b) Conforming Amendments.--Section 848(b)(1) is amended by striking 
``120-month'' and inserting ``180-month''.
    (c) <<NOTE: 26 USC 848 note.>>  Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to net premiums for taxable years beginning after December 
        31, 2017.
            (2) Transition rule.--Specified policy acquisition expenses 
        first required to be capitalized in a taxable year beginning 
        before January 1, 2018, will continue to be allowed as a 
        deduction ratably over the 120-month period beginning with the 
        first month in the second half of such taxable year.
SEC. 13520. TAX REPORTING FOR LIFE SETTLEMENT TRANSACTIONS.

    (a) In General.--Subpart B of part III of subchapter A of chapter 
61, as amended by section 13306, is amended by adding at the end the 
following new section:

[[Page 131 STAT. 2149]]

``SEC. 6050Y. <<NOTE: 26 USC 6050Y.>>  RETURNS RELATING TO CERTAIN 
                            LIFE INSURANCE CONTRACT TRANSACTIONS.

    ``(a) Requirement of Reporting of Certain Payments.--
            ``(1) In general.--Every person who acquires a life 
        insurance contract or any interest in a life insurance contract 
        in a reportable policy sale during any taxable year shall make a 
        return for such taxable year (at such time and in such manner as 
        the Secretary shall prescribe) setting forth--
                    ``(A) the name, address, and TIN of such person,
                    ``(B) the name, address, and TIN of each recipient 
                of payment in the reportable policy sale,
                    ``(C) the date of such sale,
                    ``(D) the name of the issuer of the life insurance 
                contract sold and the policy number of such contract, 
                and
                    ``(E) the amount of each payment.
            ``(2) Statement to be furnished to persons with respect to 
        whom information is required.--Every person required to make a 
        return under this subsection shall furnish to each person whose 
        name is required to be set forth in such return a written 
        statement showing--
                    ``(A) the name, address, and phone number of the 
                information contact of the person required to make such 
                return, and
                    ``(B) the information required to be shown on such 
                return with respect to such person, except that in the 
                case of an issuer of a life insurance contract, such 
                statement is not required to include the information 
                specified in paragraph (1)(E).

    ``(b) Requirement of Reporting of Seller's Basis in Life Insurance 
Contracts.--
            ``(1) In general.--Upon receipt of the statement required 
        under subsection (a)(2) or upon notice of a transfer of a life 
        insurance contract to a foreign person, each issuer of a life 
        insurance contract shall make a return (at such time and in such 
        manner as the Secretary shall prescribe) setting forth--
                    ``(A) the name, address, and TIN of the seller who 
                transfers any interest in such contract in such sale,
                    ``(B) the investment in the contract (as defined in 
                section 72(e)(6)) with respect to such seller, and
                    ``(C) the policy number of such contract.
            ``(2) Statement to be furnished to persons with respect to 
        whom information is required.--Every person required to make a 
        return under this subsection shall furnish to each person whose 
        name is required to be set forth in such return a written 
        statement showing--
                    ``(A) the name, address, and phone number of the 
                information contact of the person required to make such 
                return, and
                    ``(B) the information required to be shown on such 
                return with respect to each seller whose name is 
                required to be set forth in such return.

    ``(c) Requirement of Reporting With Respect to Reportable Death 
Benefits.--
            ``(1) In general.--Every person who makes a payment of 
        reportable death benefits during any taxable year shall make a 
        return for such taxable year (at such time and in such manner as 
        the Secretary shall prescribe) setting forth--

[[Page 131 STAT. 2150]]

                    ``(A) the name, address, and TIN of the person 
                making such payment,
                    ``(B) the name, address, and TIN of each recipient 
                of such payment,
                    ``(C) the date of each such payment,
                    ``(D) the gross amount of each such payment, and
                    ``(E) such person's estimate of the investment in 
                the contract (as defined in section 72(e)(6)) with 
                respect to the buyer.
            ``(2) Statement to be furnished to persons with respect to 
        whom information is required.--Every person required to make a 
        return under this subsection shall furnish to each person whose 
        name is required to be set forth in such return a written 
        statement showing--
                    ``(A) the name, address, and phone number of the 
                information contact of the person required to make such 
                return, and
                    ``(B) the information required to be shown on such 
                return with respect to each recipient of payment whose 
                name is required to be set forth in such return.

    ``(d) Definitions.--For purposes of this section:
            ``(1) Payment.--The term `payment' means, with respect to 
        any reportable policy sale, the amount of cash and the fair 
        market value of any consideration transferred in the sale.
            ``(2) Reportable policy sale.--The term `reportable policy 
        sale' has the meaning given such term in section 101(a)(3)(B).
            ``(3) Issuer.--The term `issuer' means any life insurance 
        company that bears the risk with respect to a life insurance 
        contract on the date any return or statement is required to be 
        made under this section.
            ``(4) Reportable death benefits.--The term `reportable death 
        benefits' means amounts paid by reason of the death of the 
        insured under a life insurance contract that has been 
        transferred in a reportable policy sale.''.

    (b) Clerical Amendment.--The table of sections for subpart B of part 
III of subchapter A of chapter 61, as amended by section 13306, is 
amended <<NOTE: 26 USC prec. 6041.>>  by inserting after the item 
relating to section 6050X the following new item:

``Sec. 6050Y. Returns relating to certain life insurance contract 
           transactions.''.

    (c) Conforming Amendments.--
            (1) Subsection (d) of section 6724 <<NOTE: 26 USC 6724.>>  
        is amended--
                    (A) by striking ``or'' at the end of clause (xxiv) 
                of paragraph (1)(B), by striking ``and'' at the end of 
                clause (xxv) of such paragraph and inserting ``or'', and 
                by inserting after such clause (xxv) the following new 
                clause:
                          ``(xxvi) section 6050Y (relating to returns 
                      relating to certain life insurance contract 
                      transactions), and'', and
                    (B) by striking ``or'' at the end of subparagraph 
                (HH) of paragraph (2), by striking the period at the end 
                of subparagraph (II) of such paragraph and inserting ``, 
                or'', and by inserting after such subparagraph (II) the 
                following new subparagraph:
                    ``(JJ) subsection (a)(2), (b)(2), or (c)(2) of 
                section 6050Y (relating to returns relating to certain 
                life insurance contract transactions).''.

[[Page 131 STAT. 2151]]

            (2) Section 6047 <<NOTE: 26 USC 6047.>>  is amended--
                    (A) by redesignating subsection (g) as subsection 
                (h),
                    (B) by inserting after subsection (f) the following 
                new subsection:

    ``(g) Information Relating to Life Insurance Contract 
Transactions.--This section shall not apply to any information which is 
required to be reported under section 6050Y.'', and
                    (C) by adding at the end of subsection (h), as so 
                redesignated, the following new paragraph:
            ``(4) For provisions requiring reporting of information 
        relating to certain life insurance contract transactions, see 
        section 6050Y.''.

    (d) <<NOTE: 26 USC 6047 note.>>  Effective Date.--The amendments 
made by this section shall apply to--
            (1) reportable policy sales (as defined in section 
        6050Y(d)(2) of the Internal Revenue Code of 1986 (as added by 
        subsection (a)) after December 31, 2017, and
            (2) reportable death benefits (as defined in section 
        6050Y(d)(4) of such Code (as added by subsection (a)) paid after 
        December 31, 2017.
SEC. 13521. CLARIFICATION OF TAX BASIS OF LIFE INSURANCE 
                            CONTRACTS.

    (a) Clarification With Respect to Adjustments.--Paragraph (1) of 
section 1016(a) is amended by striking subparagraph (A) and all that 
follows and inserting the following:
                    ``(A) for--
                          ``(i) taxes or other carrying charges 
                      described in section 266; or
                          ``(ii) expenditures described in section 173 
                      (relating to circulation expenditures),
                for which deductions have been taken by the taxpayer in 
                determining taxable income for the taxable year or prior 
                taxable years; or
                    ``(B) for mortality, expense, or other reasonable 
                charges incurred under an annuity or life insurance 
                contract;''.

    (b) <<NOTE: 26 USC 1016 note.>>  Effective Date.--The amendment made 
by this section shall apply to transactions entered into after August 
25, 2009.
SEC. 13522. EXCEPTION TO TRANSFER FOR VALUABLE CONSIDERATION 
                            RULES.

    (a) In General.--Subsection (a) of section 101 is amended by 
inserting after paragraph (2) the following new paragraph:
            ``(3) Exception to valuable consideration rules for 
        commercial transfers.--
                    ``(A) In general.--The second sentence of paragraph 
                (2) shall not apply in the case of a transfer of a life 
                insurance contract, or any interest therein, which is a 
                reportable policy sale.
                    ``(B) Reportable policy sale.--For purposes of this 
                paragraph, the term `reportable policy sale' means the 
                acquisition of an interest in a life insurance contract, 
                directly or indirectly, if the acquirer has no 
                substantial family, business, or financial relationship 
                with the insured apart from the acquirer's interest in 
                such life insurance contract. For purposes of the 
                preceding sentence, the term `indirectly' applies to the 
                acquisition of an interest in a

[[Page 131 STAT. 2152]]

                partnership, trust, or other entity that holds an 
                interest in the life insurance contract.''.

    (b) <<NOTE: 26 USC 101.>>  Conforming Amendment.--Paragraph (1) of 
section 101(a) is amended by striking ``paragraph (2)'' and inserting 
``paragraphs (2) and (3)''.

    (c) <<NOTE: 26 USC 101 note.>>  Effective Date.--The amendments made 
by this section shall apply to transfers after December 31, 2017.
SEC. 13523. MODIFICATION OF DISCOUNTING RULES FOR PROPERTY AND 
                            CASUALTY INSURANCE COMPANIES.

    (a) Modification of Rate of Interest Used to Discount Unpaid 
Losses.--Paragraph (2) of section 846(c) is amended to read as follows:
            ``(2) Determination of annual rate.--The annual rate 
        determined by the Secretary under this paragraph for any 
        calendar year shall be a rate determined on the basis of the 
        corporate bond yield curve (as defined in section 
        430(h)(2)(D)(i), determined by substituting `60-month period' 
        for `24-month period' therein).''.

    (b) Modification of Computational Rules for Loss Payment Patterns.--
Section 846(d)(3) is amended by striking subparagraphs (B) through (G) 
and inserting the following new subparagraph:
                    ``(B) Treatment of certain losses.--
                          ``(i) 3-year loss payment pattern.--In the 
                      case of any line of business not described in 
                      subparagraph (A)(ii), losses paid after the 1st 
                      year following the accident year shall be treated 
                      as paid equally in the 2nd and 3rd year following 
                      the accident year.
                          ``(ii) 10-year loss payment pattern.--
                                    ``(I) In general.--The period taken 
                                into account under subparagraph (A)(ii) 
                                shall be extended to the extent required 
                                under subclause (II).
                                    ``(II) Computation of extension.--
                                The amount of losses which would have 
                                been treated as paid in the 10th year 
                                after the accident year shall be treated 
                                as paid in such 10th year and each 
                                subsequent year in an amount equal to 
                                the amount of the average of the losses 
                                treated as paid in the 7th, 8th, and 9th 
                                years after the accident year (or, if 
                                lesser, the portion of the unpaid losses 
                                not theretofore taken into account). To 
                                the extent such unpaid losses have not 
                                been treated as paid before the 24th 
                                year after the accident year, they shall 
                                be treated as paid in such 24th year.''.

    (c) Repeal of Historical Payment Pattern Election.--Section 846, as 
amended by this Act, is amended by striking subsection (e) and by 
redesignating subsections (f) and (g) as subsections (e) and (f), 
respectively.
    (d) <<NOTE: 26 USC 846 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.

    (e) <<NOTE: 26 USC 846 note.>>  Transitional Rule.--For the first 
taxable year beginning after December 31, 2017--
            (1) the unpaid losses and the expenses unpaid (as defined in 
        paragraphs (5)(B) and (6) of section 832(b) of the Internal

[[Page 131 STAT. 2153]]

        Revenue Code of 1986) at the end of the preceding taxable year, 
        and
            (2) the unpaid losses as defined in sections 807(c)(2) and 
        805(a)(1) of such Code at the end of the preceding taxable year,

shall be determined as if the amendments made by this section had 
applied to such unpaid losses and expenses unpaid in the preceding 
taxable year and by using the interest rate and loss payment patterns 
applicable to accident years ending with calendar year 2018, and any 
adjustment shall be taken into account ratably in such first taxable 
year and the 7 succeeding taxable years. For subsequent taxable years, 
such amendments shall be applied with respect to such unpaid losses and 
expenses unpaid by using the interest rate and loss payment patterns 
applicable to accident years ending with calendar year 2018.

               Subpart C--Banks and Financial Instruments

SEC. 13531. LIMITATION ON DEDUCTION FOR FDIC PREMIUMS.

    (a) In General.--Section 162, <<NOTE: 26 USC 162.>>  as amended by 
sections 13307, is amended by redesignating subsection (r) as subsection 
(s) and by inserting after subsection (q) the following new subsection:

    ``(r) Disallowance of FDIC Premiums Paid by Certain Large Financial 
Institutions.--
            ``(1) In general.--No deduction shall be allowed for the 
        applicable percentage of any FDIC premium paid or incurred by 
        the taxpayer.
            ``(2) Exception for small institutions.--Paragraph (1) shall 
        not apply to any taxpayer for any taxable year if the total 
        consolidated assets of such taxpayer (determined as of the close 
        of such taxable year) do not exceed $10,000,000,000.
            ``(3) Applicable percentage.--For purposes of this 
        subsection, the term `applicable percentage' means, with respect 
        to any taxpayer for any taxable year, the ratio (expressed as a 
        percentage but not greater than 100 percent) which--
                    ``(A) the excess of--
                          ``(i) the total consolidated assets of such 
                      taxpayer (determined as of the close of such 
                      taxable year), over
                          ``(ii) $10,000,000,000, bears to
                    ``(B) $40,000,000,000.
            ``(4) FDIC premiums.--For purposes of this subsection, the 
        term `FDIC premium' means any assessment imposed under section 
        7(b) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)).
            ``(5) Total consolidated assets.--For purposes of this 
        subsection, the term `total consolidated assets' has the meaning 
        given such term under section 165 of the Dodd-Frank Wall Street 
        Reform and Consumer Protection Act (12 U.S.C. 5365).
            ``(6) Aggregation rule.--
                    ``(A) In general.--Members of an expanded affiliated 
                group shall be treated as a single taxpayer for purposes 
                of applying this subsection.
                    ``(B) Expanded affiliated group.--
                          ``(i) In general.--For purposes of this 
                      paragraph, the term `expanded affiliated group' 
                      means an affiliated group as defined in section 
                      1504(a), determined--

[[Page 131 STAT. 2154]]

                                    ``(I) by substituting `more than 50 
                                percent' for `at least 80 percent' each 
                                place it appears, and
                                    ``(II) without regard to paragraphs 
                                (2) and (3) of section 1504(b).
                          ``(ii) Control of non-corporate entities.--A 
                      partnership or any other entity (other than a 
                      corporation) shall be treated as a member of an 
                      expanded affiliated group if such entity is 
                      controlled (within the meaning of section 
                      954(d)(3)) by members of such group (including any 
                      entity treated as a member of such group by reason 
                      of this clause).''.

    (b) <<NOTE: 26 USC 162 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 13532. REPEAL OF ADVANCE REFUNDING BONDS.

    (a) In General.--Paragraph (1) of section 149(d) <<NOTE: 26 USC 
149.>>  is amended by striking ``as part of an issue described in 
paragraph (2), (3), or (4).'' and inserting ``to advance refund another 
bond.''.

    (b) Conforming Amendments.--
            (1) Section 149(d) is amended by striking paragraphs (2), 
        (3), (4), and (6) and by redesignating paragraphs (5) and (7) as 
        paragraphs (2) and (3).
            (2) Section 148(f)(4)(C) is amended by striking clause (xiv) 
        and by redesignating clauses (xv) to (xvii) as clauses (xiv) to 
        (xvi).

    (c) <<NOTE: 26 USC 148 note.>>  Effective Date.--The amendments made 
by this section shall apply to advance refunding bonds issued after 
December 31, 2017.

                        Subpart D--S Corporations

SEC. 13541. EXPANSION OF QUALIFYING BENEFICIARIES OF AN ELECTING 
                            SMALL BUSINESS TRUST.

    (a) No Look-through for Eligibility Purposes.--Section 
1361(c)(2)(B)(v) is amended by adding at the end the following new 
sentence: ``This clause shall not apply for purposes of subsection 
(b)(1)(C).''.
    (b) <<NOTE: 26 USC 1361 note.>>  Effective Date.--The amendment made 
by this section shall take effect on January 1, 2018.
SEC. 13542. CHARITABLE CONTRIBUTION DEDUCTION FOR ELECTING SMALL 
                            BUSINESS TRUSTS.

    (a) In General.--Section 641(c)(2) is amended by inserting after 
subparagraph (D) the following new subparagraph:
                    ``(E)(i) Section 642(c) shall not apply.
                    ``(ii) For purposes of section 170(b)(1)(G), 
                adjusted gross income shall be computed in the same 
                manner as in the case of an individual, except that the 
                deductions for costs which are paid or incurred in 
                connection with the administration of the trust and 
                which would not have been incurred if the property were 
                not held in such trust shall be treated as allowable in 
                arriving at adjusted gross income.''.

    (b) <<NOTE: 26 USC 641 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2017.

[[Page 131 STAT. 2155]]

SEC. 13543. MODIFICATION OF TREATMENT OF S CORPORATION CONVERSIONS 
                            TO C CORPORATIONS.

    (a) Adjustments Attributable to Conversion From S Corporation to C 
Corporation.--Section 481 <<NOTE: 26 USC 481.>>  is amended by adding at 
the end the following new subsection:

    ``(d) Adjustments Attributable to Conversion From S Corporation to C 
Corporation.--
            ``(1) In general.--In the case of an eligible terminated S 
        corporation, any adjustment required by subsection (a)(2) which 
        is attributable to such corporation's revocation described in 
        paragraph (2)(A)(ii) shall be taken into account ratably during 
        the 6-taxable year period beginning with the year of change.
            ``(2) Eligible terminated s corporation.--For purposes of 
        this subsection, the term `eligible terminated S corporation' 
        means any C corporation--
                    ``(A) which--
                          ``(i) was an S corporation on the day before 
                      the date of the enactment of the Tax Cuts and Jobs 
                      Act, and
                          ``(ii) during the 2-year period beginning on 
                      the date of such enactment makes a revocation of 
                      its election under section 1362(a), and
                    ``(B) the owners of the stock of which, determined 
                on the date such revocation is made, are the same owners 
                (and in identical proportions) as on the date of such 
                enactment.''.

    (b) Cash Distributions Following Post-termination Transition Period 
From S Corporation Status.--Section 1371 is amended by adding at the end 
the following new subsection:
    ``(f) Cash Distributions Following Post-termination Transition 
Period.--In the case of a distribution of money by an eligible 
terminated S corporation (as defined in section 481(d)) after the post-
termination transition period, the accumulated adjustments account shall 
be allocated to such distribution, and the distribution shall be 
chargeable to accumulated earnings and profits, in the same ratio as the 
amount of such accumulated adjustments account bears to the amount of 
such accumulated earnings and profits.''.

                          PART VII--EMPLOYMENT

                         Subpart A--Compensation

SEC. 13601. MODIFICATION OF LIMITATION ON EXCESSIVE EMPLOYEE 
                            REMUNERATION.

    (a) Repeal of Performance-based Compensation and Commission 
Exceptions for Limitation on Excessive Employee Remuneration.--
            (1) In general.--Paragraph (4) of section 162(m) is amended 
        by striking subparagraphs (B) and (C) and by redesignating 
        subparagraphs (D), (E), (F), and (G) as subparagraphs (B), (C), 
        (D), and (E), respectively.
            (2) Conforming amendments.--
                    (A) Paragraphs (5)(E) and (6)(D) of section 162(m) 
                are each amended by striking ``subparagraphs (B), (C), 
                and (D)'' and inserting ``subparagraph (B)''.

[[Page 131 STAT. 2156]]

                    (B) Paragraphs (5)(G) and (6)(G) of section 162(m) 
                are each amended by striking ``(F) and (G)'' and 
                inserting ``(D) and (E)''.

    (b) Modification of Definition of Covered Employees.--Paragraph (3) 
of section 162(m) <<NOTE: 26 USC 162.>>  is amended--
            (1) in subparagraph (A), by striking ``as of the close of 
        the taxable year, such employee is the chief executive officer 
        of the taxpayer or is'' and inserting ``such employee is the 
        principal executive officer or principal financial officer of 
        the taxpayer at any time during the taxable year, or was'',
            (2) in subparagraph (B)--
                    (A) by striking ``4'' and inserting ``3'', and
                    (B) by striking ``(other than the chief executive 
                officer)'' and inserting ``(other than any individual 
                described in subparagraph (A))'', and
            (3) by striking ``or'' at the end of subparagraph (A), by 
        striking the period at the end of subparagraph (B) and inserting 
        ``, or'', and by adding at the end the following:
                    ``(C) was a covered employee of the taxpayer (or any 
                predecessor) for any preceding taxable year beginning 
                after December 31, 2016.''.

    (c) Expansion of Applicable Employer.--
            (1) In general.--Section 162(m)(2) is amended to read as 
        follows:
            ``(2) Publicly held corporation.--For purposes of this 
        subsection, the term `publicly held corporation' means any 
        corporation which is an issuer (as defined in section 3 of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78c))--
                    ``(A) the securities of which are required to be 
                registered under section 12 of such Act (15 U.S.C. 78l), 
                or
                    ``(B) that is required to file reports under section 
                15(d) of such Act (15 U.S.C. 78o(d)).''.
            (2) Conforming amendment.--Section 162(m)(3), as amended by 
        subsection (b), is amended by adding at the end the following 
        flush sentence:
            ``Such term shall include any employee who would be 
        described in subparagraph (B) if the reporting described in such 
        subparagraph were required as so described.''.

    (d) Special Rule for Remuneration Paid to Beneficiaries, etc.--
Paragraph (4) of section 162(m), as amended by subsection (a), is 
amended by adding at the end the following new subparagraph:
                    ``(F) Special rule for remuneration paid to 
                beneficiaries, etc.--Remuneration shall not fail to be 
                applicable employee remuneration merely because it is 
                includible in the income of, or paid to, a person other 
                than the covered employee, including after the death of 
                the covered employee.''.

    (e) <<NOTE: 26 USC 162 note.>>  Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2017.
            (2) Exception for binding contracts.--The amendments made by 
        this section shall not apply to remuneration which is provided 
        pursuant to a written binding contract which was in effect on 
        November 2, 2017, and which was not modified in any material 
        respect on or after such date.

[[Page 131 STAT. 2157]]

SEC. 13602. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE 
                            COMPENSATION.

    (a) In General.--Subchapter D of chapter 42 is amended by adding at 
the end the following new section:
``SEC. 4960. <<NOTE: 26 USC 4960 note.>>  TAX ON EXCESS TAX-EXEMPT 
                          ORGANIZATION EXECUTIVE COMPENSATION.

    ``(a) Tax Imposed.--There is hereby imposed a tax equal to the 
product of the rate of tax under section 11 and the sum of--
            ``(1) so much of the remuneration paid (other than any 
        excess parachute payment) by an applicable tax-exempt 
        organization for the taxable year with respect to employment of 
        any covered employee in excess of $1,000,000, plus
            ``(2) any excess parachute payment paid by such an 
        organization to any covered employee.

For purposes of the preceding sentence, remuneration shall be treated as 
paid when there is no substantial risk of forfeiture (within the meaning 
of section 457(f)(3)(B)) of the rights to such remuneration.
    ``(b) Liability for Tax.--The employer shall be liable for the tax 
imposed under subsection (a).
    ``(c) Definitions and Special Rules.--For purposes of this section--
            ``(1) Applicable tax-exempt organization.--The term 
        `applicable tax-exempt organization' means any organization 
        which for the taxable year--
                    ``(A) is exempt from taxation under section 501(a),
                    ``(B) is a farmers' cooperative organization 
                described in section 521(b)(1),
                    ``(C) has income excluded from taxation under 
                section 115(1), or
                    ``(D) is a political organization described in 
                section 527(e)(1).
            ``(2) Covered employee.--For purposes of this section, the 
        term `covered employee' means any employee (including any former 
        employee) of an applicable tax-exempt organization if the 
        employee--
                    ``(A) is one of the 5 highest compensated employees 
                of the organization for the taxable year, or
                    ``(B) was a covered employee of the organization (or 
                any predecessor) for any preceding taxable year 
                beginning after December 31, 2016.
            ``(3) Remuneration.--For purposes of this section:
                    ``(A) In general.--The term `remuneration' means 
                wages (as defined in section 3401(a)), except that such 
                term shall not include any designated Roth contribution 
                (as defined in section 402A(c)) and shall include 
                amounts required to be included in gross income under 
                section 457(f).
                    ``(B) Exception for remuneration for medical 
                services.--The term `remuneration' shall not include the 
                portion of any remuneration paid to a licensed medical 
                professional (including a veterinarian) which is for the 
                performance of medical or veterinary services by such 
                professional.
            ``(4) Remuneration from related organizations.--
                    ``(A) In general.--Remuneration of a covered 
                employee by an applicable tax-exempt organization shall 
                include any

[[Page 131 STAT. 2158]]

                remuneration paid with respect to employment of such 
                employee by any related person or governmental entity.
                    ``(B) Related organizations.--A person or 
                governmental entity shall be treated as related to an 
                applicable tax-exempt organization if such person or 
                governmental entity--
                          ``(i) controls, or is controlled by, the 
                      organization,
                          ``(ii) is controlled by one or more persons 
                      which control the organization,
                          ``(iii) is a supported organization (as 
                      defined in section 509(f)(3)) during the taxable 
                      year with respect to the organization,
                          ``(iv) is a supporting organization described 
                      in section 509(a)(3) during the taxable year with 
                      respect to the organization, or
                          ``(v) in the case of an organization which is 
                      a voluntary employees' beneficiary association 
                      described in section 501(c)(9), establishes, 
                      maintains, or makes contributions to such 
                      voluntary employees' beneficiary association.
                    ``(C) Liability for tax.--In any case in which 
                remuneration from more than one employer is taken into 
                account under this paragraph in determining the tax 
                imposed by subsection (a), each such employer shall be 
                liable for such tax in an amount which bears the same 
                ratio to the total tax determined under subsection (a) 
                with respect to such remuneration as--
                          ``(i) the amount of remuneration paid by such 
                      employer with respect to such employee, bears to
                          ``(ii) the amount of remuneration paid by all 
                      such employers to such employee.
            ``(5) Excess parachute payment.--For purposes of determining 
        the tax imposed by subsection (a)(2)--
                    ``(A) In general.--The term `excess parachute 
                payment' means an amount equal to the excess of any 
                parachute payment over the portion of the base amount 
                allocated to such payment.
                    ``(B) Parachute payment.--The term `parachute 
                payment' means any payment in the nature of compensation 
                to (or for the benefit of) a covered employee if--
                          ``(i) such payment is contingent on such 
                      employee's separation from employment with the 
                      employer, and
                          ``(ii) the aggregate present value of the 
                      payments in the nature of compensation to (or for 
                      the benefit of) such individual which are 
                      contingent on such separation equals or exceeds an 
                      amount equal to 3 times the base amount.
                    ``(C) Exception.--Such term does not include any 
                payment--
                          ``(i) described in section 280G(b)(6) 
                      (relating to exemption for payments under 
                      qualified plans),
                          ``(ii) made under or to an annuity contract 
                      described in section 403(b) or a plan described in 
                      section 457(b),
                          ``(iii) to a licensed medical professional 
                      (including a veterinarian) to the extent that such 
                      payment is

[[Page 131 STAT. 2159]]

                      for the performance of medical or veterinary 
                      services by such professional, or
                          ``(iv) to an individual who is not a highly 
                      compensated employee as defined in section 414(q).
                    ``(D) Base amount.--Rules similar to the rules of 
                280G(b)(3) shall apply for purposes of determining the 
                base amount.
                    ``(E) Property transfers; present value.--Rules 
                similar to the rules of paragraphs (3) and (4) of 
                section 280G(d) shall apply.
            ``(6) Coordination with deduction limitation.--Remuneration 
        the deduction for which is not allowed by reason of section 
        162(m) shall not be taken into account for purposes of this 
        section.

    ``(d) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to prevent avoidance of the tax under this section, 
including regulations to prevent avoidance of such tax through the 
performance of services other than as an employee or by providing 
compensation through a pass-through or other entity to avoid such 
tax.''.
    (b) Clerical Amendment.--The table of sections for subchapter D of 
chapter 42 <<NOTE: 26 USC prec. 4958.>>  is amended by adding at the end 
the following new item:

``Sec. 4960. Tax on excess tax-exempt organization executive 
           compensation.''.

    (c) <<NOTE: 26 USC 4960 note.>>  Effective Date.--The amendments 
made by this section shall apply to taxable years beginning after 
December 31, 2017.
SEC. 13603. TREATMENT OF QUALIFIED EQUITY GRANTS.

    (a) In General.--Section 83 <<NOTE: 26 USC 83.>>  is amended by 
adding at the end the following new subsection:

    ``(i) Qualified Equity Grants.--
            ``(1) In general.--For purposes of this subtitle--
                    ``(A) Timing of inclusion.--If qualified stock is 
                transferred to a qualified employee who makes an 
                election with respect to such stock under this 
                subsection, subsection (a) shall be applied by including 
                the amount determined under such subsection with respect 
                to such stock in income of the employee in the taxable 
                year determined under subparagraph (B) in lieu of the 
                taxable year described in subsection (a).
                    ``(B) Taxable year determined.--The taxable year 
                determined under this subparagraph is the taxable year 
                of the employee which includes the earliest of--
                          ``(i) the first date such qualified stock 
                      becomes transferable (including, solely for 
                      purposes of this clause, becoming transferable to 
                      the employer),
                          ``(ii) the date the employee first becomes an 
                      excluded employee,
                          ``(iii) the first date on which any stock of 
                      the corporation which issued the qualified stock 
                      becomes readily tradable on an established 
                      securities market (as determined by the Secretary, 
                      but not including any market unless such market is 
                      recognized as an established securities market by 
                      the Secretary for purposes of a provision of this 
                      title other than this subsection),

[[Page 131 STAT. 2160]]

                          ``(iv) the date that is 5 years after the 
                      first date the rights of the employee in such 
                      stock are transferable or are not subject to a 
                      substantial risk of forfeiture, whichever occurs 
                      earlier, or
                          ``(v) the date on which the employee revokes 
                      (at such time and in such manner as the Secretary 
                      provides) the election under this subsection with 
                      respect to such stock.
            ``(2) Qualified stock.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `qualified stock' means, with respect to any 
                qualified employee, any stock in a corporation which is 
                the employer of such employee, if--
                          ``(i) such stock is received--
                                    ``(I) in connection with the 
                                exercise of an option, or
                                    ``(II) in settlement of a restricted 
                                stock unit, and
                          ``(ii) such option or restricted stock unit 
                      was granted by the corporation--
                                    ``(I) in connection with the 
                                performance of services as an employee, 
                                and
                                    ``(II) during a calendar year in 
                                which such corporation was an eligible 
                                corporation.
                    ``(B) Limitation.--The term `qualified stock' shall 
                not include any stock if the employee may sell such 
                stock to, or otherwise receive cash in lieu of stock 
                from, the corporation at the time that the rights of the 
                employee in such stock first become transferable or not 
                subject to a substantial risk of forfeiture.
                    ``(C) Eligible corporation.--For purposes of 
                subparagraph (A)(ii)(II)--
                          ``(i) In general.--The term `eligible 
                      corporation' means, with respect to any calendar 
                      year, any corporation if--
                                    ``(I) no stock of such corporation 
                                (or any predecessor of such corporation) 
                                is readily tradable on an established 
                                securities market (as determined under 
                                paragraph (1)(B)(iii)) during any 
                                preceding calendar year, and
                                    ``(II) such corporation has a 
                                written plan under which, in such 
                                calendar year, not less than 80 percent 
                                of all employees who provide services to 
                                such corporation in the United States 
                                (or any possession of the United States) 
                                are granted stock options, or are 
                                granted restricted stock units, with the 
                                same rights and privileges to receive 
                                qualified stock.
                          ``(ii) Same rights and privileges.--For 
                      purposes of clause (i)(II)--
                                    ``(I) except as provided in 
                                subclauses (II) and (III), the 
                                determination of rights and privileges 
                                with respect to stock shall be made in a 
                                similar manner as under section 
                                423(b)(5),
                                    ``(II) employees shall not fail to 
                                be treated as having the same rights and 
                                privileges to receive qualified stock 
                                solely because the number of shares

[[Page 131 STAT. 2161]]

                                available to all employees is not equal 
                                in amount, so long as the number of 
                                shares available to each employee is 
                                more than a de minimis amount, and
                                    ``(III) rights and privileges with 
                                respect to the exercise of an option 
                                shall not be treated as the same as 
                                rights and privileges with respect to 
                                the settlement of a restricted stock 
                                unit.
                          ``(iii) Employee.--For purposes of clause 
                      (i)(II), the term `employee' shall not include any 
                      employee described in section 4980E(d)(4) or any 
                      excluded employee.
                          ``(iv) Special rule for calendar years before 
                      2018.--In the case of any calendar year beginning 
                      before January 1, 2018, clause (i)(II) shall be 
                      applied without regard to whether the rights and 
                      privileges with respect to the qualified stock are 
                      the same.
            ``(3) Qualified employee; excluded employee.--For purposes 
        of this subsection--
                    ``(A) In general.--The term `qualified employee' 
                means any individual who--
                          ``(i) is not an excluded employee, and
                          ``(ii) agrees in the election made under this 
                      subsection to meet such requirements as are 
                      determined by the Secretary to be necessary to 
                      ensure that the withholding requirements of the 
                      corporation under chapter 24 with respect to the 
                      qualified stock are met.
                    ``(B) Excluded employee.--The term `excluded 
                employee' means, with respect to any corporation, any 
                individual--
                          ``(i) who is a 1-percent owner (within the 
                      meaning of section 416(i)(1)(B)(ii)) at any time 
                      during the calendar year or who was such a 1 
                      percent owner at any time during the 10 preceding 
                      calendar years,
                          ``(ii) who is or has been at any prior time--
                                    ``(I) the chief executive officer of 
                                such corporation or an individual acting 
                                in such a capacity, or
                                    ``(II) the chief financial officer 
                                of such corporation or an individual 
                                acting in such a capacity,
                          ``(iii) who bears a relationship described in 
                      section 318(a)(1) to any individual described in 
                      subclause (I) or (II) of clause (ii), or
                          ``(iv) who is one of the 4 highest compensated 
                      officers of such corporation for the taxable year, 
                      or was one of the 4 highest compensated officers 
                      of such corporation for any of the 10 preceding 
                      taxable years, determined with respect to each 
                      such taxable year on the basis of the shareholder 
                      disclosure rules for compensation under the 
                      Securities Exchange Act of 1934 (as if such rules 
                      applied to such corporation).
            ``(4) Election.--
                    ``(A) Time for making election.--An election with 
                respect to qualified stock shall be made under this 
                subsection no later than 30 days after the first date 
                the rights of the employee in such stock are 
                transferable or are not subject to a substantial risk of 
                forfeiture, whichever occurs earlier, and shall be made 
                in a manner similar to the

[[Page 131 STAT. 2162]]

                manner in which an election is made under subsection 
                (b).
                    ``(B) Limitations.--No election may be made under 
                this section with respect to any qualified stock if--
                          ``(i) the qualified employee has made an 
                      election under subsection (b) with respect to such 
                      qualified stock,
                          ``(ii) any stock of the corporation which 
                      issued the qualified stock is readily tradable on 
                      an established securities market (as determined 
                      under paragraph (1)(B)(iii)) at any time before 
                      the election is made, or
                          ``(iii) such corporation purchased any of its 
                      outstanding stock in the calendar year preceding 
                      the calendar year which includes the first date 
                      the rights of the employee in such stock are 
                      transferable or are not subject to a substantial 
                      risk of forfeiture, unless--
                                    ``(I) not less than 25 percent of 
                                the total dollar amount of the stock so 
                                purchased is deferral stock, and
                                    ``(II) the determination of which 
                                individuals from whom deferral stock is 
                                purchased is made on a reasonable basis.
                    ``(C) Definitions and special rules related to 
                limitation on stock redemptions.--
                          ``(i) Deferral stock.--For purposes of this 
                      paragraph, the term `deferral stock' means stock 
                      with respect to which an election is in effect 
                      under this subsection.
                          ``(ii) Deferral stock with respect to any 
                      individual not taken into account if individual 
                      holds deferral stock with longer deferral 
                      period.--Stock purchased by a corporation from any 
                      individual shall not be treated as deferral stock 
                      for purposes of subparagraph (B)(iii) if such 
                      individual (immediately after such purchase) holds 
                      any deferral stock with respect to which an 
                      election has been in effect under this subsection 
                      for a longer period than the election with respect 
                      to the stock so purchased.
                          ``(iii) Purchase of all outstanding deferral 
                      stock.--The requirements of subclauses (I) and 
                      (II) of subparagraph (B)(iii) shall be treated as 
                      met if the stock so purchased includes all of the 
                      corporation's outstanding deferral stock.
                          ``(iv) Reporting.--Any corporation which has 
                      outstanding deferral stock as of the beginning of 
                      any calendar year and which purchases any of its 
                      outstanding stock during such calendar year shall 
                      include on its return of tax for the taxable year 
                      in which, or with which, such calendar year ends 
                      the total dollar amount of its outstanding stock 
                      so purchased during such calendar year and such 
                      other information as the Secretary requires for 
                      purposes of administering this paragraph.
            ``(5) Controlled groups.--For purposes of this subsection, 
        all persons treated as a single employer under section 414(b) 
        shall be treated as 1 corporation.

[[Page 131 STAT. 2163]]

            ``(6) Notice requirement.--Any corporation which transfers 
        qualified stock to a qualified employee shall, at the time that 
        (or a reasonable period before) an amount attributable to such 
        stock would (but for this subsection) first be includible in the 
        gross income of such employee--
                    ``(A) certify to such employee that such stock is 
                qualified stock, and
                    ``(B) notify such employee--
                          ``(i) that the employee may be eligible to 
                      elect to defer income on such stock under this 
                      subsection, and
                          ``(ii) that, if the employee makes such an 
                      election--
                                    ``(I) the amount of income 
                                recognized at the end of the deferral 
                                period will be based on the value of the 
                                stock at the time at which the rights of 
                                the employee in such stock first become 
                                transferable or not subject to 
                                substantial risk of forfeiture, 
                                notwithstanding whether the value of the 
                                stock has declined during the deferral 
                                period,
                                    ``(II) the amount of such income 
                                recognized at the end of the deferral 
                                period will be subject to withholding 
                                under section 3401(i) at the rate 
                                determined under section 3402(t), and
                                    ``(III) the responsibilities of the 
                                employee (as determined by the Secretary 
                                under paragraph (3)(A)(ii)) with respect 
                                to such withholding.
            ``(7) Restricted stock units.--This section (other than this 
        subsection), including any election under subsection (b), shall 
        not apply to restricted stock units.''.

    (b) Withholding.--
            (1) Time of withholding.--Section 3401 <<NOTE: 26 USC 
        3401.>>  is amended by adding at the end the following new 
        subsection:

    ``(i) Qualified Stock for Which an Election Is in Effect Under 
Section 83(i).--For purposes of subsection (a), qualified stock (as 
defined in section 83(i)) with respect to which an election is made 
under section 83(i) shall be treated as wages--
            ``(1) received on the earliest date described in section 
        83(i)(1)(B), and
            ``(2) in an amount equal to the amount included in income 
        under section 83 for the taxable year which includes such 
        date.''.
            (2) Amount of withholding.--Section 3402 is amended by 
        adding at the end the following new subsection:

    ``(t) Rate of Withholding for Certain Stock.--In the case of any 
qualified stock (as defined in section 83(i)(2)) with respect to which 
an election is made under section 83(i)--
            ``(1) the rate of tax under subsection (a) shall not be less 
        than the maximum rate of tax in effect under section 1, and
            ``(2) such stock shall be treated for purposes of section 
        3501(b) in the same manner as a non-cash fringe benefit.''.

    (c) Coordination With Other Deferred Compensation Rules.--
            (1) Election to apply deferral to statutory options.--
                    (A) Incentive stock options.--Section 422(b) is 
                amended by adding at the end the following: ``Such term 
                shall not include any option if an election is made 
                under

[[Page 131 STAT. 2164]]

                section 83(i) with respect to the stock received in 
                connection with the exercise of such option.''.
                    (B) <<NOTE: 26 USC 423.>>  Employee stock purchase 
                plans.--Section 423 is amended--
                          (i) in subsection (b)(5), by striking ``and'' 
                      before ``the plan'' and by inserting ``, and the 
                      rules of section 83(i) shall apply in determining 
                      which employees have a right to make an election 
                      under such section'' before the semicolon at the 
                      end, and
                          (ii) by adding at the end the following new 
                      subsection:

    ``(d) Coordination With Qualified Equity Grants.--An option for 
which an election is made under section 83(i) with respect to the stock 
received in connection with its exercise shall not be considered as 
granted pursuant an employee stock purchase plan.''.
            (2) Exclusion from definition of nonqualified deferred 
        compensation plan.--Subsection (d) of section 409A is amended by 
        adding at the end the following new paragraph:
            ``(7) Treatment of qualified stock.--An arrangement under 
        which an employee may receive qualified stock (as defined in 
        section 83(i)(2)) shall not be treated as a nonqualified 
        deferred compensation plan with respect to such employee solely 
        because of such employee's election, or ability to make an 
        election, to defer recognition of income under section 83(i).''.

    (d) Information Reporting.--Section 6051(a) is amended by striking 
``and'' at the end of paragraph (14)(B), by striking the period at the 
end of paragraph (15) and inserting a comma, and by inserting after 
paragraph (15) the following new paragraphs:
            ``(16) the amount includible in gross income under 
        subparagraph (A) of section 83(i)(1) with respect to an event 
        described in subparagraph (B) of such section which occurs in 
        such calendar year, and
            ``(17) the aggregate amount of income which is being 
        deferred pursuant to elections under section 83(i), determined 
        as of the close of the calendar year.''.

    (e) Penalty for Failure of Employer to Provide Notice of Tax 
Consequences.--Section 6652 is amended by adding at the end the 
following new subsection:
    ``(p) Failure to Provide Notice Under Section 83(i).--In the case of 
each failure to provide a notice as required by section 83(i)(6), at the 
time prescribed therefor, unless it is shown that such failure is due to 
reasonable cause and not to willful neglect, there shall be paid, on 
notice and demand of the Secretary and in the same manner as tax, by the 
person failing to provide such notice, an amount equal to $100 for each 
such failure, but the total amount imposed on such person for all such 
failures during any calendar year shall not exceed $50,000.''.
    (f) <<NOTE: 26 USC 83 note.>>  Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to stock 
        attributable to options exercised, or restricted stock units 
        settled, after December 31, 2017.
            (2) Requirement to provide notice.--The amendments made by 
        subsection (e) shall apply to failures after December 31, 2017.

    (g) <<NOTE: 26 USC 83 note.>>  Transition Rule.--Until such time as 
the Secretary (or the Secretary's delegate) issues regulations or other 
guidance for

[[Page 131 STAT. 2165]]

purposes of implementing the requirements of paragraph (2)(C)(i)(II) of 
section 83(i) of the Internal Revenue Code of 1986 (as added by this 
section), or the requirements of paragraph (6) of such section, a 
corporation shall be treated as being in compliance with such 
requirements (respectively) if such corporation complies with a 
reasonable good faith interpretation of such requirements.
SEC. 13604. INCREASE IN EXCISE TAX RATE FOR STOCK COMPENSATION OF 
                            INSIDERS IN EXPATRIATED CORPORATIONS.

    (a) In General.--Section 4985(a)(1) <<NOTE: 26 USC 4985.>>  is 
amended by striking ``section 1(h)(1)(C)'' and inserting ``section 
1(h)(1)(D)''.

    (b) <<NOTE: 26 USC 4985 note.>>  Effective Date.--The amendment made 
by this section shall apply to corporations first becoming expatriated 
corporations (as defined in section 4985 of the Internal Revenue Code of 
1986) after the date of enactment of this Act.

                       Subpart B--Retirement Plans

SEC. 13611. REPEAL OF SPECIAL RULE PERMITTING RECHARACTERIZATION 
                            OF ROTH CONVERSIONS.

    (a) In General.--Section 408A(d)(6)(B) is amended by adding at the 
end the following new clause:
                          ``(iii) Conversions.--Subparagraph (A) shall 
                      not apply in the case of a qualified rollover 
                      contribution to which subsection (d)(3) applies 
                      (including by reason of subparagraph (C) 
                      thereof).''.

    (b) <<NOTE: 26 USC 408A note.>>  Effective Date.--The amendments 
made by this section shall apply to taxable years beginning after 
December 31, 2017.
SEC. 13612. MODIFICATION OF RULES APPLICABLE TO LENGTH OF SERVICE 
                            AWARD PLANS.

    (a) Maximum Deferral Amount.--Clause (ii) of section 457(e)(11)(B) 
is amended by striking ``$3,000'' and inserting ``$6,000''.
    (b) Cost of Living Adjustment.--Subparagraph (B) of section 
457(e)(11) is amended by adding at the end the following:
                          ``(iii) Cost of living adjustment.--In the 
                      case of taxable years beginning after December 31, 
                      2017, the Secretary shall adjust the $6,000 amount 
                      under clause (ii) at the same time and in the same 
                      manner as under section 415(d), except that the 
                      base period shall be the calendar quarter 
                      beginning July 1, 2016, and any increase under 
                      this paragraph that is not a multiple of $500 
                      shall be rounded to the next lowest multiple of 
                      $500.''.

    (c) Application of Limitation on Accruals.--Subparagraph (B) of 
section 457(e)(11), as amended by subsection (b), is amended by adding 
at the end the following:
                          ``(iv) Special rule for application of 
                      limitation on accruals for certain plans.--In the 
                      case of a plan described in subparagraph (A)(ii) 
                      which is a defined benefit plan (as defined in 
                      section 414(j)), the limitation under clause (ii) 
                      shall apply to the actuarial present value of the 
                      aggregate amount of length of service awards 
                      accruing with respect to any year of service. Such 
                      actuarial present value with respect to any year 
                      shall be calculated using reasonable actuarial 
                      assumptions and methods, assuming payment will be

[[Page 131 STAT. 2166]]

                      made under the most valuable form of payment under 
                      the plan with payment commencing at the later of 
                      the earliest age at which unreduced benefits are 
                      payable under the plan or the participant's age at 
                      the time of the calculation.''.

    (d) <<NOTE: 26 USC 457 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 13613. EXTENDED ROLLOVER PERIOD FOR PLAN LOAN OFFSET AMOUNTS.

    (a) In General.--Paragraph (3) of section 402(c) <<NOTE: 26 USC 
402.>>  is amended by adding at the end the following new subparagraph:
                    ``(C) Rollover of certain plan loan offset 
                amounts.--
                          ``(i) In general.--In the case of a qualified 
                      plan loan offset amount, paragraph (1) shall not 
                      apply to any transfer of such amount made after 
                      the due date (including extensions) for filing the 
                      return of tax for the taxable year in which such 
                      amount is treated as distributed from a qualified 
                      employer plan.
                          ``(ii) Qualified plan loan offset amount.--For 
                      purposes of this subparagraph, the term `qualified 
                      plan loan offset amount' means a plan loan offset 
                      amount which is treated as distributed from a 
                      qualified employer plan to a participant or 
                      beneficiary solely by reason of--
                                    ``(I) the termination of the 
                                qualified employer plan, or
                                    ``(II) the failure to meet the 
                                repayment terms of the loan from such 
                                plan because of the severance from 
                                employment of the participant.
                          ``(iii) Plan loan offset amount.--For purposes 
                      of clause (ii), the term `plan loan offset amount' 
                      means the amount by which the participant's 
                      accrued benefit under the plan is reduced in order 
                      to repay a loan from the plan.
                          ``(iv) Limitation.--This subparagraph shall 
                      not apply to any plan loan offset amount unless 
                      such plan loan offset amount relates to a loan to 
                      which section 72(p)(1) does not apply by reason of 
                      section 72(p)(2).
                          ``(v) Qualified employer plan.--For purposes 
                      of this subsection, the term `qualified employer 
                      plan' has the meaning given such term by section 
                      72(p)(4).''.

    (b) Conforming Amendments.--Section 402(c)(3) is amended--
            (1) by striking ``Transfer must be made within 60 days of 
        receipt'' in the heading and inserting ``Time limit on 
        transfers'', and
            (2) by striking ``subparagraph (B)'' in subparagraph (A) and 
        inserting ``subparagraphs (B) and (C)''.

    (c) <<NOTE: 26 USC 402 note.>>  Effective Date.--The amendments made 
by this section shall apply to plan loan offset amounts which are 
treated as distributed in taxable years beginning after December 31, 
2017.

[[Page 131 STAT. 2167]]

                     PART VIII--EXEMPT ORGANIZATIONS

SEC. 13701. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE 
                            COLLEGES AND UNIVERSITIES.

    (a) In General.--Chapter 42 is amended by adding at the end the 
following new subchapter:

   ``Subchapter H--Excise Tax <<NOTE: 26 USC prec. 4968.>>  Based on 
Investment Income of Private Colleges and Universities

``Sec. 4968. Excise tax based on investment income of private colleges 
           and universities.

``SEC. 4968. <<NOTE: 26 USC 4968.>>  EXCISE TAX BASED ON 
                          INVESTMENT INCOME OF PRIVATE COLLEGES 
                          AND UNIVERSITIES.

    ``(a) Tax Imposed.--There is hereby imposed on each applicable 
educational institution for the taxable year a tax equal to 1.4 percent 
of the net investment income of such institution for the taxable year.
    ``(b) Applicable Educational Institution.--For purposes of this 
subchapter--
            ``(1) In general.--The term `applicable educational 
        institution' means an eligible educational institution (as 
        defined in section 25A(f)(2))--
                    ``(A) which had at least 500 students during the 
                preceding taxable year,
                    ``(B) more than 50 percent of the students of which 
                are located in the United States,
                    ``(C) which is not described in the first sentence 
                of section 511(a)(2)(B) (relating to State colleges and 
                universities), and
                    ``(D) the aggregate fair market value of the assets 
                of which at the end of the preceding taxable year (other 
                than those assets which are used directly in carrying 
                out the institution's exempt purpose) is at least 
                $500,000 per student of the institution.
            ``(2) Students.--For purposes of paragraph (1), the number 
        of students of an institution (including for purposes of 
        determining the number of students at a particular location) 
        shall be based on the daily average number of full-time students 
        attending such institution (with part-time students taken into 
        account on a full-time student equivalent basis).

    ``(c) Net Investment Income.--For purposes of this section, net 
investment income shall be determined under rules similar to the rules 
of section 4940(c).
    ``(d) Assets and Net Investment Income of Related Organizations.--
            ``(1) In general.--For purposes of subsections (b)(1)(C) and 
        (c), assets and net investment income of any related 
        organization with respect to an educational institution shall be 
        treated as assets and net investment income, respectively, of 
        the educational institution, except that--
                    ``(A) no such amount shall be taken into account 
                with respect to more than 1 educational institution, and
                    ``(B) unless such organization is controlled by such 
                institution or is described in section 509(a)(3) with 
                respect to such institution for the taxable year, assets 
                and net

[[Page 131 STAT. 2168]]

                investment income which are not intended or available 
                for the use or benefit of the educational institution 
                shall not be taken into account.
            ``(2) Related organization.--For purposes of this 
        subsection, the term `related organization' means, with respect 
        to an educational institution, any organization which--
                    ``(A) controls, or is controlled by, such 
                institution,
                    ``(B) is controlled by 1 or more persons which also 
                control such institution, or
                    ``(C) is a supported organization (as defined in 
                section 509(f)(3)), or an organization described in 
                section 509(a)(3), during the taxable year with respect 
                to such institution.''.

    (b) Clerical Amendment.--The table of subchapters for chapter 
42 <<NOTE: 26 USC prec. 4940.>>  is amended by adding at the end the 
following new item:

    ``subchapter h--excise tax based on investment income of private 
                      colleges and universities''.

    (c) <<NOTE: 26 USC 4968 note.>>  Effective Date.--The amendments 
made by this section shall apply to taxable years beginning after 
December 31, 2017.
SEC. 13702. UNRELATED BUSINESS TAXABLE INCOME SEPARATELY COMPUTED 
                            FOR EACH TRADE OR BUSINESS ACTIVITY.

    (a) In General.--Subsection (a) of section 512 <<NOTE: 26 USC 
512.>>  is amended by adding at the end the following new paragraph:
            ``(6) Special rule for organization with more than 1 
        unrelated trade or business.--In the case of any organization 
        with more than 1 unrelated trade or business--
                    ``(A) unrelated business taxable income, including 
                for purposes of determining any net operating loss 
                deduction, shall be computed separately with respect to 
                each such trade or business and without regard to 
                subsection (b)(12),
                    ``(B) the unrelated business taxable income of such 
                organization shall be the sum of the unrelated business 
                taxable income so computed with respect to each such 
                trade or business, less a specific deduction under 
                subsection (b)(12), and
                    ``(C) for purposes of subparagraph (B), unrelated 
                business taxable income with respect to any such trade 
                or business shall not be less than zero.''.

    (b) <<NOTE: 26 USC 512 note.>>  Effective Date.--
            (1) In general.--Except to the extent provided in paragraph 
        (2), the amendment made by this section shall apply to taxable 
        years beginning after December 31, 2017.
            (2) Carryovers of net operating losses.--If any net 
        operating loss arising in a taxable year beginning before 
        January 1, 2018, is carried over to a taxable year beginning on 
        or after such date--
                    (A) subparagraph (A) of section 512(a)(6) of the 
                Internal Revenue Code of 1986, as added by this Act, 
                shall not apply to such net operating loss, and
                    (B) the unrelated business taxable income of the 
                organization, after the application of subparagraph (B) 
                of such section, shall be reduced by the amount of such 
                net operating loss.

[[Page 131 STAT. 2169]]

SEC. 13703. UNRELATED BUSINESS TAXABLE INCOME INCREASED BY AMOUNT 
                            OF CERTAIN FRINGE BENEFIT EXPENSES FOR 
                            WHICH DEDUCTION IS DISALLOWED.

    (a) In General.--Section 512(a), <<NOTE: 26 USC 512.>>  as amended 
by this Act, is further amended by adding at the end the following new 
paragraph:
            ``(7) Increase in unrelated business taxable income by 
        disallowed fringe.--Unrelated business taxable income of an 
        organization shall be increased by any amount for which a 
        deduction is not allowable under this chapter by reason of 
        section 274 and which is paid or incurred by such organization 
        for any qualified transportation fringe (as defined in section 
        132(f)), any parking facility used in connection with qualified 
        parking (as defined in section 132(f)(5)(C)), or any on-premises 
        athletic facility (as defined in section 132(j)(4)(B)). The 
        preceding sentence shall not apply to the extent the amount paid 
        or incurred is directly connected with an unrelated trade or 
        business which is regularly carried on by the organization. The 
        Secretary shall issue such regulations or other guidance as may 
        be necessary or appropriate to carry out the purposes of this 
        paragraph, including regulations or other guidance providing for 
        the appropriate allocation of depreciation and other costs with 
        respect to facilities used for parking or for on-premises 
        athletic facilities.''.

    (b) <<NOTE: 26 USC 512 note.>>  Effective Date.--The amendment made 
by this section shall apply to amounts paid or incurred after December 
31, 2017.
SEC. 13704. REPEAL OF DEDUCTION FOR AMOUNTS PAID IN EXCHANGE FOR 
                            COLLEGE ATHLETIC EVENT SEATING RIGHTS.

    (a) In General.--Section 170(l) is amended--
            (1) by striking paragraph (1) and inserting the following:
            ``(1) In general.--No deduction shall be allowed under this 
        section for any amount described in paragraph (2).'', and
            (2) in paragraph (2)(B), by striking ``such amount would be 
        allowable as a deduction under this section but for the fact 
        that''.

    (b) <<NOTE: 26 USC 170 note.>>  Effective Date.--The amendments made 
by this section shall apply to contributions made in taxable years 
beginning after December 31, 2017.
SEC. 13705. REPEAL OF SUBSTANTIATION EXCEPTION IN CASE OF 
                            CONTRIBUTIONS REPORTED BY DONEE.

    (a) In General.--Section 170(f)(8) is amended by striking 
subparagraph (D) and by redesignating subparagraph (E) as subparagraph 
(D).
    (b) <<NOTE: 26 USC 170 note.>>  Effective Date.--The amendments made 
by this section shall apply to contributions made in taxable years 
beginning after December 31, 2016.

                        PART IX--OTHER PROVISIONS

         Subpart A--Craft Beverage Modernization and Tax Reform

SEC. 13801. PRODUCTION PERIOD FOR BEER, WINE, AND DISTILLED 
                            SPIRITS.

    (a) In General.--Section 263A(f) is amended--
            (1) by redesignating paragraph (4) as paragraph (5), and

[[Page 131 STAT. 2170]]

            (2) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) Exemption for aging process of beer, wine, and 
        distilled spirits.--
                    ``(A) In general.--For purposes of this subsection, 
                the production period shall not include the aging period 
                for--
                          ``(i) beer (as defined in section 5052(a)),
                          ``(ii) wine (as described in section 5041(a)), 
                      or
                          ``(iii) distilled spirits (as defined in 
                      section 5002(a)(8)), except such spirits that are 
                      unfit for use for beverage purposes.
                    ``(B) Termination.--This paragraph shall not apply 
                to interest costs paid or accrued after December 31, 
                2019.''.

    (b) Conforming Amendment.--Paragraph (5)(B)(ii) of section 263A(f), 
as redesignated by this section, <<NOTE: 26 USC 263A.>> is amended by 
inserting ``except as provided in paragraph (4),'' before ``ending on 
the date''.

    (c) <<NOTE: 26 USC 263A note.>>  Effective Date.--The amendments 
made by this section shall apply to interest costs paid or accrued in 
calendar years beginning after December 31, 2017.
SEC. 13802. REDUCED RATE OF EXCISE TAX ON BEER.

    (a) In General.--Paragraph (1) of section 5051(a) is amended to read 
as follows:
            ``(1) In general.--
                    ``(A) Imposition of tax.--A tax is hereby imposed on 
                all beer brewed or produced, and removed for consumption 
                or sale, within the United States, or imported into the 
                United States. Except as provided in paragraph (2), the 
                rate of such tax shall be the amount determined under 
                this paragraph.
                    ``(B) Rate.--Except as provided in subparagraph (C), 
                the rate of tax shall be $18 for per barrel.
                    ``(C) Special rule.--In the case of beer removed 
                after December 31, 2017, and before January 1, 2020, the 
                rate of tax shall be--
                          ``(i) $16 on the first 6,000,000 barrels of 
                      beer--
                                    ``(I) brewed by the brewer and 
                                removed during the calendar year for 
                                consumption or sale, or
                                    ``(II) imported by the importer into 
                                the United States during the calendar 
                                year, and
                          ``(ii) $18 on any barrels of beer to which 
                      clause (i) does not apply.
                    ``(D) Barrel.--For purposes of this section, a 
                barrel shall contain not more than 31 gallons of beer, 
                and any tax imposed under this section shall be applied 
                at a like rate for any other quantity or for fractional 
                parts of a barrel.''.

    (b) Reduced Rate for Certain Domestic Production.--Subparagraph (A) 
of section 5051(a)(2) is amended--
            (1) in the heading, by striking ``$7 a barrel'', and
            (2) by inserting ``($3.50 in the case of beer removed after 
        December 31, 2017, and before January 1, 2020)'' after ``$7''.

    (c) Application of Reduced Tax Rate for Foreign Manufacturers and 
Importers.--Subsection (a) of section 5051 is amended--
            (1) in subparagraph (C)(i)(II) of paragraph (1), as amended 
        by subsection (a), by inserting ``but only if the importer is

[[Page 131 STAT. 2171]]

        an electing importer under paragraph (4) and the barrels have 
        been assigned to the importer pursuant to such paragraph'' after 
        ``during the calendar year'', and
            (2) by adding at the end the following new paragraph:
            ``(4) Reduced tax rate for foreign manufacturers and 
        importers.--
                    ``(A) In general.--In the case of any barrels of 
                beer which have been brewed or produced outside of the 
                United States and imported into the United States, the 
                rate of tax applicable under clause (i) of paragraph 
                (1)(C) (referred to in this paragraph as the `reduced 
                tax rate') may be assigned by the brewer (provided that 
                the brewer makes an election described in subparagraph 
                (B)(ii)) to any electing importer of such barrels 
                pursuant to the requirements established by the 
                Secretary under subparagraph (B).
                    ``(B) Assignment.--The Secretary shall, through such 
                rules, regulations, and procedures as are determined 
                appropriate, establish procedures for assignment of the 
                reduced tax rate provided under this paragraph, which 
                shall include--
                          ``(i) a limitation to ensure that the number 
                      of barrels of beer for which the reduced tax rate 
                      has been assigned by a brewer--
                                    ``(I) to any importer does not 
                                exceed the number of barrels of beer 
                                brewed or produced by such brewer during 
                                the calendar year which were imported 
                                into the United States by such importer, 
                                and
                                    ``(II) to all importers does not 
                                exceed the 6,000,000 barrels to which 
                                the reduced tax rate applies,
                          ``(ii) procedures that allow the election of a 
                      brewer to assign and an importer to receive the 
                      reduced tax rate provided under this paragraph,
                          ``(iii) requirements that the brewer provide 
                      any information as the Secretary determines 
                      necessary and appropriate for purposes of carrying 
                      out this paragraph, and
                          ``(iv) procedures that allow for revocation of 
                      eligibility of the brewer and the importer for the 
                      reduced tax rate provided under this paragraph in 
                      the case of any erroneous or fraudulent 
                      information provided under clause (iii) which the 
                      Secretary deems to be material to qualifying for 
                      such reduced rate.
                    ``(C) Controlled group.--For purposes of this 
                section, any importer making an election described in 
                subparagraph (B)(ii) shall be deemed to be a member of 
                the controlled group of the brewer, as described under 
                paragraph (5).''.

    (d) Controlled Group and Single Taxpayer Rules.--Subsection (a) of 
section 5051, as amended by this section, <<NOTE: 26 USC 5051.>> is 
amended--
            (1) in paragraph (2)--
                    (A) by striking subparagraph (B), and
                    (B) by redesignating subparagraph (C) as 
                subparagraph (B), and
            (2) by adding at the end the following new paragraph:
            ``(5) Controlled group and single taxpayer rules.--

[[Page 131 STAT. 2172]]

                    ``(A) In general.--Except as provided in 
                subparagraph (B), in the case of a controlled group, the 
                6,000,000 barrel quantity specified in paragraph 
                (1)(C)(i) and the 2,000,000 barrel quantity specified in 
                paragraph (2)(A) shall be applied to the controlled 
                group, and the 6,000,000 barrel quantity specified in 
                paragraph (1)(C)(i) and the 60,000 barrel quantity 
                specified in paragraph (2)(A) shall be apportioned among 
                the brewers who are members of such group in such manner 
                as the Secretary or their delegate shall by regulations 
                prescribe. For purposes of the preceding sentence, the 
                term `controlled group' has the meaning assigned to it 
                by subsection (a) of section 1563, except that for such 
                purposes the phrase `more than 50 percent' shall be 
                substituted for the phrase `at least 80 percent' in each 
                place it appears in such subsection. Under regulations 
                prescribed by the Secretary, principles similar to the 
                principles of the preceding two sentences shall be 
                applied to a group of brewers under common control where 
                one or more of the brewers is not a corporation.
                    ``(B) Foreign manufacturers and importers.--For 
                purposes of paragraph (4), in the case of a controlled 
                group, the 6,000,000 barrel quantity specified in 
                paragraph (1)(C)(i) shall be applied to the controlled 
                group and apportioned among the members of such group in 
                such manner as the Secretary shall by regulations 
                prescribe. For purposes of the preceding sentence, the 
                term `controlled group' has the meaning given such term 
                under subparagraph (A). Under regulations prescribed by 
                the Secretary, principles similar to the principles of 
                the preceding two sentences shall be applied to a group 
                of brewers under common control where one or more of the 
                brewers is not a corporation.
                    ``(C) Single taxpayer.--Pursuant to rules issued by 
                the Secretary, two or more entities (whether or not 
                under common control) that produce beer marketed under a 
                similar brand, license, franchise, or other arrangement 
                shall be treated as a single taxpayer for purposes of 
                the application of this subsection.''.

    (e) <<NOTE: 26 USC 5051 note.>>  Effective Date.--The amendments 
made by this section shall apply to beer removed after December 31, 
2017.
SEC. 13803. TRANSFER OF BEER BETWEEN BONDED FACILITIES.

    (a) In General.--Section 5414 <<NOTE: 26 USC 5414.>>  is amended--
            (1) by striking ``Beer may be removed'' and inserting ``(a) 
        In General.--Beer may be removed'', and
            (2) by adding at the end the following:

    ``(b) Transfer of Beer Between Bonded Facilities.--
            ``(1) In general.--Beer may be removed from one bonded 
        brewery to another bonded brewery, without payment of tax, and 
        may be mingled with beer at the receiving brewery, subject to 
        such conditions, including payment of the tax, and in such 
        containers, as the Secretary by regulations shall prescribe, 
        which shall include--
                    ``(A) any removal from one brewery to another 
                brewery belonging to the same brewer,
                    ``(B) any removal from a brewery owned by one 
                corporation to a brewery owned by another corporation 
                when--

[[Page 131 STAT. 2173]]

                          ``(i) one such corporation owns the 
                      controlling interest in the other such 
                      corporation, or
                          ``(ii) the controlling interest in each such 
                      corporation is owned by the same person or 
                      persons, and
                    ``(C) any removal from one brewery to another 
                brewery when--
                          ``(i) the proprietors of transferring and 
                      receiving premises are independent of each other 
                      and neither has a proprietary interest, directly 
                      or indirectly, in the business of the other, and
                          ``(ii) the transferor has divested itself of 
                      all interest in the beer so transferred and the 
                      transferee has accepted responsibility for payment 
                      of the tax.
            ``(2) Transfer of liability for tax.--For purposes of 
        paragraph (1)(C), such relief from liability shall be effective 
        from the time of removal from the transferor's bonded premises, 
        or from the time of divestment of interest, whichever is later.
            ``(3) Termination.--This subsection shall not apply to any 
        calendar quarter beginning after December 31, 2019.''.

    (b) Removal From Brewery by Pipeline.--Section 5412 <<NOTE: 26 USC 
5412.>>  is amended by inserting ``pursuant to section 5414 or'' before 
``by pipeline''.

    (c) <<NOTE: 26 USC 5412 note.>>  Effective Date.--The amendments 
made by this section shall apply to any calendar quarters beginning 
after December 31, 2017.
SEC. 13804. REDUCED RATE OF EXCISE TAX ON CERTAIN WINE.

    (a) In General.--Section 5041(c) is amended by adding at the end the 
following new paragraph:
            ``(8) Special rule for 2018 and 2019.--
                    ``(A) In general.--In the case of wine removed after 
                December 31, 2017, and before January 1, 2020, 
                paragraphs (1) and (2) shall not apply and there shall 
                be allowed as a credit against any tax imposed by this 
                title (other than chapters 2, 21, and 22) an amount 
                equal to the sum of--
                          ``(i) $1 per wine gallon on the first 30,000 
                      wine gallons of wine, plus
                          ``(ii) 90 cents per wine gallon on the first 
                      100,000 wine gallons of wine to which clause (i) 
                      does not apply, plus
                          ``(iii) 53.5 cents per wine gallon on the 
                      first 620,000 wine gallons of wine to which 
                      clauses (i) and (ii) do not apply,
                which are produced by the producer and removed during 
                the calendar year for consumption or sale, or which are 
                imported by the importer into the United States during 
                the calendar year.
                    ``(B) Adjustment of credit for hard cider.--In the 
                case of wine described in subsection (b)(6), 
                subparagraph (A) of this paragraph shall be applied--
                          ``(i) in clause (i) of such subparagraph, by 
                      substituting `6.2 cents' for `$1',
                          ``(ii) in clause (ii) of such subparagraph, by 
                      substituting `5.6 cents' for `90 cents', and
                          ``(iii) in clause (iii) of such subparagraph, 
                      by substituting `3.3 cents' for `53.5 cents'.'',

[[Page 131 STAT. 2174]]

    (b) Controlled Group and Single Taxpayer Rules.--Paragraph (4) of 
section 5041(c) <<NOTE: 26 USC 5041.>>  is amended by striking ``section 
5051(a)(2)(B)'' and inserting ``section 5051(a)(5)''.

    (c) Allowance of Credit for Foreign Manufacturers and Importers.--
Subsection (c) of section 5041, as amended by subsection (a), is 
amended--
            (1) in subparagraph (A) of paragraph (8), by inserting ``but 
        only if the importer is an electing importer under paragraph (9) 
        and the wine gallons of wine have been assigned to the importer 
        pursuant to such paragraph'' after ``into the United States 
        during the calendar year'', and
            (2) by adding at the end the following new paragraph:
            ``(9) Allowance of credit for foreign manufacturers and 
        importers.--
                    ``(A) In general.--In the case of any wine gallons 
                of wine which have been produced outside of the United 
                States and imported into the United States, the credit 
                allowable under paragraph (8) (referred to in this 
                paragraph as the `tax credit') may be assigned by the 
                person who produced such wine (referred to in this 
                paragraph as the `foreign producer'), provided that such 
                person makes an election described in subparagraph 
                (B)(ii), to any electing importer of such wine gallons 
                pursuant to the requirements established by the 
                Secretary under subparagraph (B).
                    ``(B) Assignment.--The Secretary shall, through such 
                rules, regulations, and procedures as are determined 
                appropriate, establish procedures for assignment of the 
                tax credit provided under this paragraph, which shall 
                include--
                          ``(i) a limitation to ensure that the number 
                      of wine gallons of wine for which the tax credit 
                      has been assigned by a foreign producer--
                                    ``(I) to any importer does not 
                                exceed the number of wine gallons of 
                                wine produced by such foreign producer 
                                during the calendar year which were 
                                imported into the United States by such 
                                importer, and
                                    ``(II) to all importers does not 
                                exceed the 750,000 wine gallons of wine 
                                to which the tax credit applies,
                          ``(ii) procedures that allow the election of a 
                      foreign producer to assign and an importer to 
                      receive the tax credit provided under this 
                      paragraph,
                          ``(iii) requirements that the foreign producer 
                      provide any information as the Secretary 
                      determines necessary and appropriate for purposes 
                      of carrying out this paragraph, and
                          ``(iv) procedures that allow for revocation of 
                      eligibility of the foreign producer and the 
                      importer for the tax credit provided under this 
                      paragraph in the case of any erroneous or 
                      fraudulent information provided under clause (iii) 
                      which the Secretary deems to be material to 
                      qualifying for such credit.
                    ``(C) Controlled group.--For purposes of this 
                section, any importer making an election described in 
                subparagraph (B)(ii) shall be deemed to be a member of 
                the controlled

[[Page 131 STAT. 2175]]

                group of the foreign producer, as described under 
                paragraph (4).''.

    (d) <<NOTE: 26 USC 5401 note.>>  Effective Date.--The amendments 
made by this section shall apply to wine removed after December 31, 
2017.
SEC. 13805. ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR APPLICATION OF 
                            EXCISE TAX RATES.

    (a) In General.--Paragraphs (1) and (2) of section <<NOTE: 26 USC 
5041.>>  5041(b) are each amended by inserting ``(16 percent in the case 
of wine removed after December 31, 2017, and before January 1, 2020'' 
after ``14 percent''.

    (b) <<NOTE: 26 USC 5401 note.>>  Effective Date.--The amendments 
made by this section shall apply to wine removed after December 31, 
2017.
SEC. 13806. DEFINITION OF MEAD AND LOW ALCOHOL BY VOLUME WINE.

    (a) In General.--Section 5041 is amended--
            (1) in subsection (a), by striking ``Still wines'' and 
        inserting ``Subject to subsection (h), still wines'', and
            (2) by adding at the end the following new subsection:

    ``(h) Mead and Low Alcohol by Volume Wine.--
            ``(1) In general.--For purposes of subsections (a) and 
        (b)(1), mead and low alcohol by volume wine shall be deemed to 
        be still wines containing not more than 16 percent of alcohol by 
        volume.
            ``(2) Definitions.--
                    ``(A) Mead.--For purposes of this section, the term 
                `mead' means a wine--
                          ``(i) containing not more than 0.64 gram of 
                      carbon dioxide per hundred milliliters of wine, 
                      except that the Secretary shall by regulations 
                      prescribe such tolerances to this limitation as 
                      may be reasonably necessary in good commercial 
                      practice,
                          ``(ii) which is derived solely from honey and 
                      water,
                          ``(iii) which contains no fruit product or 
                      fruit flavoring, and
                          ``(iv) which contains less than 8.5 percent 
                      alcohol by volume.
                    ``(B) Low alcohol by volume wine.--For purposes of 
                this section, the term `low alcohol by volume wine' 
                means a wine--
                          ``(i) containing not more than 0.64 gram of 
                      carbon dioxide per hundred milliliters of wine, 
                      except that the Secretary shall by regulations 
                      prescribe such tolerances to this limitation as 
                      may be reasonably necessary in good commercial 
                      practice,
                          ``(ii) which is derived--
                                    ``(I) primarily from grapes, or
                                    ``(II) from grape juice concentrate 
                                and water,
                          ``(iii) which contains no fruit product or 
                      fruit flavoring other than grape, and
                          ``(iv) which contains less than 8.5 percent 
                      alcohol by volume.
            ``(3) Termination.--This subsection shall not apply to wine 
        removed after December 31, 2019.''.

    (b) <<NOTE: 26 USC 5401 note.>>  Effective Date.--The amendments 
made by this section shall apply to wine removed after December 31, 
2017.

[[Page 131 STAT. 2176]]

SEC. 13807. REDUCED RATE OF EXCISE TAX ON CERTAIN DISTILLED 
                            SPIRITS.

    (a) In General.--Section 5001 <<NOTE: 26 USC 5001.>>  is amended by 
redesignating subsection (c) as subsection (d) and by inserting after 
subsection (b) the following new subsection:

    ``(c) Reduced Rate for 2018 and 2019.--
            ``(1) In general.--In the case of a distilled spirits 
        operation, the otherwise applicable tax rate under subsection 
        (a)(1) shall be--
                    ``(A) $2.70 per proof gallon on the first 100,000 
                proof gallons of distilled spirits, and
                    ``(B) $13.34 per proof gallon on the first 
                22,130,000 of proof gallons of distilled spirits to 
                which subparagraph (A) does not apply,
        which have been distilled or processed by such operation and 
        removed during the calendar year for consumption or sale, or 
        which have been imported by the importer into the United States 
        during the calendar year.
            ``(2) Controlled groups.--
                    ``(A) In general.--In the case of a controlled 
                group, the proof gallon quantities specified under 
                subparagraphs (A) and (B) of paragraph (1) shall be 
                applied to such group and apportioned among the members 
                of such group in such manner as the Secretary or their 
                delegate shall by regulations prescribe.
                    ``(B) Definition.--For purposes of subparagraph (A), 
                the term `controlled group' shall have the meaning given 
                such term by subsection (a) of section 1563, except that 
                `more than 50 percent' shall be substituted for `at 
                least 80 percent' each place it appears in such 
                subsection.
                    ``(C) Rules for non-corporations.--Under regulations 
                prescribed by the Secretary, principles similar to the 
                principles of subparagraphs (A) and (B) shall be applied 
                to a group under common control where one or more of the 
                persons is not a corporation.
                    ``(D) Single taxpayer.--Pursuant to rules issued by 
                the Secretary, two or more entities (whether or not 
                under common control) that produce distilled spirits 
                marketed under a similar brand, license, franchise, or 
                other arrangement shall be treated as a single taxpayer 
                for purposes of the application of this subsection.
            ``(3) Termination.--This subsection shall not apply to 
        distilled spirits removed after December 31, 2019.''.

    (b) Conforming Amendment.--Section 7652(f)(2) is amended by striking 
``section 5001(a)(1)'' and inserting ``subsection (a)(1) of section 
5001, determined as if subsection (c)(1) of such section did not 
apply''.
    (c) Application of Reduced Tax Rate for Foreign Manufacturers and 
Importers.--Subsection (c) of section 5001, as added by subsection (a), 
is amended--
            (1) in paragraph (1), by inserting ``but only if the 
        importer is an electing importer under paragraph (3) and the 
        proof gallons of distilled spirits have been assigned to the 
        importer pursuant to such paragraph'' after ``into the United 
        States during the calendar year'', and
            (2) by redesignating paragraph (3) as paragraph (4) and by 
        inserting after paragraph (2) the following new paragraph:

[[Page 131 STAT. 2177]]

            ``(3) Reduced tax rate for foreign manufacturers and 
        importers.--
                    ``(A) In general.--In the case of any proof gallons 
                of distilled spirits which have been produced outside of 
                the United States and imported into the United States, 
                the rate of tax applicable under paragraph (1) (referred 
                to in this paragraph as the `reduced tax rate') may be 
                assigned by the distilled spirits operation (provided 
                that such operation makes an election described in 
                subparagraph (B)(ii)) to any electing importer of such 
                proof gallons pursuant to the requirements established 
                by the Secretary under subparagraph (B).
                    ``(B) Assignment.--The Secretary shall, through such 
                rules, regulations, and procedures as are determined 
                appropriate, establish procedures for assignment of the 
                reduced tax rate provided under this paragraph, which 
                shall include--
                          ``(i) a limitation to ensure that the number 
                      of proof gallons of distilled spirits for which 
                      the reduced tax rate has been assigned by a 
                      distilled spirits operation--
                                    ``(I) to any importer does not 
                                exceed the number of proof gallons 
                                produced by such operation during the 
                                calendar year which were imported into 
                                the United States by such importer, and
                                    ``(II) to all importers does not 
                                exceed the 22,230,000 proof gallons of 
                                distilled spirits to which the reduced 
                                tax rate applies,
                          ``(ii) procedures that allow the election of a 
                      distilled spirits operation to assign and an 
                      importer to receive the reduced tax rate provided 
                      under this paragraph,
                          ``(iii) requirements that the distilled 
                      spirits operation provide any information as the 
                      Secretary determines necessary and appropriate for 
                      purposes of carrying out this paragraph, and
                          ``(iv) procedures that allow for revocation of 
                      eligibility of the distilled spirits operation and 
                      the importer for the reduced tax rate provided 
                      under this paragraph in the case of any erroneous 
                      or fraudulent information provided under clause 
                      (iii) which the Secretary deems to be material to 
                      qualifying for such reduced rate.
                    ``(C) Controlled group.--
                          ``(i) In general.--For purposes of this 
                      section, any importer making an election described 
                      in subparagraph (B)(ii) shall be deemed to be a 
                      member of the controlled group of the distilled 
                      spirits operation, as described under paragraph 
                      (2).
                          ``(ii) Apportionment.--For purposes of this 
                      paragraph, in the case of a controlled group, 
                      rules similar to section 5051(a)(5)(B) shall 
                      apply.''.

    (d) <<NOTE: 26 USC 5001 note.>>  Effective Date.--The amendments 
made by this section shall apply to distilled spirits removed after 
December 31, 2017.
SEC. 13808. BULK DISTILLED SPIRITS.

    (a) In General.--Section 5212 <<NOTE: 26 USC 5212.>>  is amended by 
adding at the end the following sentence: ``In the case of distilled 
spirits transferred in bond after December 31, 2017, and before January 
1,

[[Page 131 STAT. 2178]]

2020, this section shall be applied without regard to whether distilled 
spirits are bulk distilled spirits.''.

    (b) <<NOTE: 26 USC 5212 note.>>  Effective Date.--The amendments 
made by this section shall apply distilled spirits transferred in bond 
after December 31, 2017.

                   Subpart B--Miscellaneous Provisions

SEC. 13821. MODIFICATION OF TAX TREATMENT OF ALASKA NATIVE 
                            CORPORATIONS AND SETTLEMENT TRUSTS.

    (a) Exclusion for ANCSA Payments Assigned to Alaska Native 
Settlement Trusts.--
            (1) In general.--Part III of subchapter B of chapter 1 is 
        amended by inserting before section 140 the following new 
        section:
``SEC. 139G. <<NOTE: 26 USC 139G.>>  ASSIGNMENTS TO ALASKA NATIVE 
                          SETTLEMENT TRUSTS.

    ``(a) In General.--In the case of a Native Corporation, gross income 
shall not include the value of any payments that would otherwise be 
made, or treated as being made, to such Native Corporation pursuant to, 
or as required by, any provision of the Alaska Native Claims Settlement 
Act (43 U.S.C. 1601 et seq.), including any payment that would otherwise 
be made to a Village Corporation pursuant to section 7(j) of the Alaska 
Native Claims Settlement Act (43 U.S.C. 1606(j)), provided that any such 
payments--
            ``(1) are assigned in writing to a Settlement Trust, and
            ``(2) were not received by such Native Corporation prior to 
        the assignment described in paragraph (1).

    ``(b) Inclusion in Gross Income.--In the case of a Settlement Trust 
which has been assigned payments described in subsection (a), gross 
income shall include such payments when received by such Settlement 
Trust pursuant to the assignment and shall have the same character as if 
such payments were received by the Native Corporation.
    ``(c) Amount and Scope of Assignment.--The amount and scope of any 
assignment under subsection (a) shall be described with reasonable 
particularity and may either be in a percentage of one or more such 
payments or in a fixed dollar amount.
    ``(d) Duration of Assignment; Revocability.--Any assignment under 
subsection (a) shall specify--
            ``(1) a duration either in perpetuity or for a period of 
        time, and
            ``(2) whether such assignment is revocable.

    ``(e) Prohibition on Deduction.--Notwithstanding section 247, no 
deduction shall be allowed to a Native Corporation for purposes of any 
amounts described in subsection (a).
    ``(f) Definitions.--For purposes of this section, the terms `Native 
Corporation' and `Settlement Trust' have the same meaning given such 
terms under section 646(h).''.
            (2) Conforming amendment.--The table of sections for part 
        III of subchapter B of chapter 1 <<NOTE: 26 USC prec. 101.>>  is 
        amended by inserting before the item relating to section 140 the 
        following new item:

``Sec. 139G. Assignments to Alaska Native Settlement Trusts.''.

            (3) <<NOTE: 26 USC 139G note.>>  Effective date.--The 
        amendments made by this subsection shall apply to taxable years 
        beginning after December 31, 2016.

[[Page 131 STAT. 2179]]

    (b) Deduction of Contributions to Alaska Native Settlement Trusts.--
            (1) In general.--Part VIII of subchapter B of chapter 1 is 
        amended by inserting before section 248 the following new 
        section:
``SEC. 247. <<NOTE: 26 USC 247.>>  CONTRIBUTIONS TO ALASKA NATIVE 
                        SETTLEMENT TRUSTS.

    ``(a) In General.--In the case of a Native Corporation, there shall 
be allowed a deduction for any contributions made by such Native 
Corporation to a Settlement Trust (regardless of whether an election 
under section 646 is in effect for such Settlement Trust) for which the 
Native Corporation has made an annual election under subsection (e).
    ``(b) Amount of Deduction.--The amount of the deduction under 
subsection (a) shall be equal to--
            ``(1) in the case of a cash contribution (regardless of the 
        method of payment, including currency, coins, money order, or 
        check), the amount of such contribution, or
            ``(2) in the case of a contribution not described in 
        paragraph (1), the lesser of--
                    ``(A) the Native Corporation's adjusted basis in the 
                property contributed, or
                    ``(B) the fair market value of the property 
                contributed.

    ``(c) Limitation and Carryover.--
            ``(1) In general.--Subject to paragraph (2), the deduction 
        allowed under subsection (a) for any taxable year shall not 
        exceed the taxable income (as determined without regard to such 
        deduction) of the Native Corporation for the taxable year in 
        which the contribution was made.
            ``(2) Carryover.--If the aggregate amount of contributions 
        described in subsection (a) for any taxable year exceeds the 
        limitation under paragraph (1), such excess shall be treated as 
        a contribution described in subsection (a) in each of the 15 
        succeeding years in order of time.

    ``(d) Definitions.--For purposes of this section, the terms `Native 
Corporation' and `Settlement Trust' have the same meaning given such 
terms under section 646(h).
    ``(e) Manner of Making Election.--
            ``(1) In general.--For each taxable year, a Native 
        Corporation may elect to have this section apply for such 
        taxable year on the income tax return or an amendment or 
        supplement to the return of the Native Corporation, with such 
        election to have effect solely for such taxable year.
            ``(2) Revocation.--Any election made by a Native Corporation 
        pursuant to this subsection may be revoked pursuant to a timely 
        filed amendment or supplement to the income tax return of such 
        Native Corporation.

    ``(f) Additional Rules.--
            ``(1) Earnings and profits.--Notwithstanding section 
        646(d)(2), in the case of a Native Corporation which claims a 
        deduction under this section for any taxable year, the earnings 
        and profits of such Native Corporation for such taxable year 
        shall be reduced by the amount of such deduction.
            ``(2) Gain or loss.--No gain or loss shall be recognized by 
        the Native Corporation with respect to a contribution of 
        property for which a deduction is allowed under this section.

[[Page 131 STAT. 2180]]

            ``(3) Income.--Subject to subsection (g), a Settlement Trust 
        shall include in income the amount of any deduction allowed 
        under this section in the taxable year in which the Settlement 
        Trust actually receives such contribution.
            ``(4) Period.--The holding period under section 1223 of the 
        Settlement Trust shall include the period the property was held 
        by the Native Corporation.
            ``(5) Basis.--The basis that a Settlement Trust has for 
        which a deduction is allowed under this section shall be equal 
        to the lesser of--
                    ``(A) the adjusted basis of the Native Corporation 
                in such property immediately before such contribution, 
                or
                    ``(B) the fair market value of the property 
                immediately before such contribution.
            ``(6) Prohibition.--No deduction shall be allowed under this 
        section with respect to any contributions made to a Settlement 
        Trust which are in violation of subsection (a)(2) or (c)(2) of 
        section 39 of the Alaska Native Claims Settlement Act (43 U.S.C. 
        1629e).

    ``(g) Election by Settlement Trust to Defer Income Recognition.--
            ``(1) In general.--In the case of a contribution which 
        consists of property other than cash, a Settlement Trust may 
        elect to defer recognition of any income related to such 
        property until the sale or exchange of such property, in whole 
        or in part, by the Settlement Trust.
            ``(2) Treatment.--In the case of property described in 
        paragraph (1), any income or gain realized on the sale or 
        exchange of such property shall be treated as--
                    ``(A) for such amount of the income or gain as is 
                equal to or less than the amount of income which would 
                be included in income at the time of contribution under 
                subsection (f)(3) but for the taxpayer's election under 
                this subsection, ordinary income, and
                    ``(B) for any amounts of the income or gain which 
                are in excess of the amount of income which would be 
                included in income at the time of contribution under 
                subsection (f)(3) but for the taxpayer's election under 
                this subsection, having the same character as if this 
                subsection did not apply.
            ``(3) Election.--
                    ``(A) In general.--For each taxable year, a 
                Settlement Trust may elect to apply this subsection for 
                any property described in paragraph (1) which was 
                contributed during such year. Any property to which the 
                election applies shall be identified and described with 
                reasonable particularity on the income tax return or an 
                amendment or supplement to the return of the Settlement 
                Trust, with such election to have effect solely for such 
                taxable year.
                    ``(B) Revocation.--Any election made by a Settlement 
                Trust pursuant to this subsection may be revoked 
                pursuant to a timely filed amendment or supplement to 
                the income tax return of such Settlement Trust.
                    ``(C) Certain dispositions.--
                          ``(i) In general.--In the case of any property 
                      for which an election is in effect under this 
                      subsection and which is disposed of within the 
                      first taxable year

[[Page 131 STAT. 2181]]

                      subsequent to the taxable year in which such 
                      property was contributed to the Settlement Trust--
                                    ``(I) this section shall be applied 
                                as if the election under this subsection 
                                had not been made,
                                    ``(II) any income or gain which 
                                would have been included in the year of 
                                contribution under subsection (f)(3) but 
                                for the taxpayer's election under this 
                                subsection shall be included in income 
                                for the taxable year of such 
                                contribution, and
                                    ``(III) the Settlement Trust shall 
                                pay any increase in tax resulting from 
                                such inclusion, including any applicable 
                                interest, and increased by 10 percent of 
                                the amount of such increase with 
                                interest.
                          ``(ii) Assessment.--Notwithstanding section 
                      6501(a), any amount described in subclause (III) 
                      of clause (i) may be assessed, or a proceeding in 
                      court with respect to such amount may be initiated 
                      without assessment, within 4 years after the date 
                      on which the return making the election under this 
                      subsection for such property was filed.''.
            (2) Conforming amendment.--The table of sections for part 
        VIII of subchapter B of chapter 1 <<NOTE: 26 USC prec. 241.>>  
        is amended by inserting before the item relating to section 248 
        the following new item:

``Sec. 247. Contributions to Alaska Native Settlement Trusts.''.

            (3) <<NOTE: 26 USC 247 note.>>  Effective date.--
                    (A) In general.--The amendments made by this 
                subsection shall apply to taxable years for which the 
                period of limitation on refund or credit under section 
                6511 of the Internal Revenue Code of 1986 has not 
                expired.
                    (B) One-year waiver of statute of limitations.--If 
                the period of limitation on a credit or refund resulting 
                from the amendments made by paragraph (1) expires before 
                the end of the 1-year period beginning on the date of 
                the enactment of this Act, refund or credit of such 
                overpayment (to the extent attributable to such 
                amendments) may, nevertheless, be made or allowed if 
                claim therefor is filed before the close of such 1-year 
                period.

    (c) Information Reporting for Deductible Contributions to Alaska 
Native Settlement Trusts.--
            (1) In general.--Section 6039H <<NOTE: 26 USC 6039H.>>  is 
        amended--
                    (A) in the heading, by striking ``sponsoring'', and
                    (B) by adding at the end the following new 
                subsection:

    ``(e) Deductible Contributions by Native Corporations to Alaska 
Native Settlement Trusts.--
            ``(1) In general.--Any Native Corporation (as defined in 
        subsection (m) of section 3 of the Alaska Native Claims 
        Settlement Act (43 U.S.C. 1602(m))) which has made a 
        contribution to a Settlement Trust (as defined in subsection (t) 
        of such section) to which an election under subsection (e) of 
        section 247 applies shall provide such Settlement Trust with a 
        statement regarding such election not later than January 31 of 
        the calendar year subsequent to the calendar year in which the 
        contribution was made.
            ``(2) Content of statement.--The statement described in 
        paragraph (1) shall include--

[[Page 131 STAT. 2182]]

                    ``(A) the total amount of contributions to which the 
                election under subsection (e) of section 247 applies,
                    ``(B) for each contribution, whether such 
                contribution was in cash,
                    ``(C) for each contribution which consists of 
                property other than cash, the date that such property 
                was acquired by the Native Corporation and the adjusted 
                basis and fair market value of such property on the date 
                such property was contributed to the Settlement Trust,
                    ``(D) the date on which each contribution was made 
                to the Settlement Trust, and
                    ``(E) such information as the Secretary determines 
                to be necessary or appropriate for the identification of 
                each contribution and the accurate inclusion of income 
                relating to such contributions by the Settlement 
                Trust.''.
            (2) Conforming amendment.--The item relating to section 
        6039H in the table of sections for subpart A of part III of 
        subchapter A of chapter 61 <<NOTE: 26 USC prec. 6031.>>  is 
        amended to read as follows:

``Sec. 6039H. Information With Respect to Alaska Native Settlement 
           Trusts and Native Corporations.''.

            (3) <<NOTE: 26 USC 6039H note.>>  Effective date.--The 
        amendments made by this subsection shall apply to taxable years 
        beginning after December 31, 2016.
SEC. 13822. AMOUNTS PAID FOR AIRCRAFT MANAGEMENT SERVICES.

    (a) In General.--Subsection (e) of section 4261 <<NOTE: 26 USC 
4261.>>  is amended by adding at the end the following new paragraph:
            ``(5) Amounts paid for aircraft management services.--
                    ``(A) In general.--No tax shall be imposed by this 
                section or section 4271 on any amounts paid by an 
                aircraft owner for aircraft management services related 
                to--
                          ``(i) maintenance and support of the aircraft 
                      owner's aircraft, or
                          ``(ii) flights on the aircraft owner's 
                      aircraft.
                    ``(B) Aircraft management services.--For purposes of 
                subparagraph (A), the term `aircraft management 
                services' includes--
                          ``(i) assisting an aircraft owner with 
                      administrative and support services, such as 
                      scheduling, flight planning, and weather 
                      forecasting,
                          ``(ii) obtaining insurance,
                          ``(iii) maintenance, storage and fueling of 
                      aircraft,
                          ``(iv) hiring, training, and provision of 
                      pilots and crew,
                          ``(v) establishing and complying with safety 
                      standards, and
                          ``(vi) such other services as are necessary to 
                      support flights operated by an aircraft owner.
                    ``(C) Lessee treated as aircraft owner.--
                          ``(i) In general.--For purposes of this 
                      paragraph, the term `aircraft owner' includes a 
                      person who leases the aircraft other than under a 
                      disqualified lease.
                          ``(ii) Disqualified lease.--For purposes of 
                      clause (i), the term `disqualified lease' means a 
                      lease from a person providing aircraft management 
                      services with respect to such aircraft (or a 
                      related person (within

[[Page 131 STAT. 2183]]

                      the meaning of section 465(b)(3)(C)) to the person 
                      providing such services), if such lease is for a 
                      term of 31 days or less.
                    ``(D) Pro rata allocation.--In the case of amounts 
                paid to any person which (but for this subsection) are 
                subject to the tax imposed by subsection (a), a portion 
                of which consists of amounts described in subparagraph 
                (A), this paragraph shall apply on a pro rata basis only 
                to the portion which consists of amounts described in 
                such subparagraph.''.

    (b) <<NOTE: 26 USC 4261 note.>>  Effective Date.--The amendment made 
by this section shall apply to amounts paid after the date of the 
enactment of this Act.
SEC. 13823. OPPORTUNITY ZONES.

    (a) In General.--Chapter 1 is amended by adding at the end the 
following:

``Subchapter <<NOTE: 26 USC prec. 1400Z-1.>>  Z--Opportunity Zones

``Sec. 1400Z-1. Designation.
``Sec. 1400Z-2. Special rules for capital gains invested in opportunity 
           zones.

``SEC. 1400Z-1. <<NOTE: 26 USC 1400Z-1.>>  DESIGNATION.

    ``(a) Qualified Opportunity Zone Defined.--For the purposes of this 
subchapter, the term `qualified opportunity zone' means a population 
census tract that is a low-income community that is designated as a 
qualified opportunity zone.
    ``(b) Designation.--
            ``(1) In general.--For purposes of subsection (a), a 
        population census tract that is a low-income community is 
        designated as a qualified opportunity zone if--
                    ``(A) not later than the end of the determination 
                period, the chief executive officer of the State in 
                which the tract is located--
                          ``(i) nominates the tract for designation as a 
                      qualified opportunity zone, and
                          ``(ii) notifies the Secretary in writing of 
                      such nomination, and
                    ``(B) the Secretary certifies such nomination and 
                designates such tract as a qualified opportunity zone 
                before the end of the consideration period.
            ``(2) Extension of periods.--A chief executive officer of a 
        State may request that the Secretary extend either the 
        determination or consideration period, or both (determined 
        without regard to this subparagraph), for an additional 30 days.

    ``(c) Other Definitions.--For purposes of this subsection--
            ``(1) Low-income communities.--The term `low-income 
        community' has the same meaning as when used in section 45D(e).
            ``(2) Definition of periods.--
                    ``(A) Consideration period.--The term `consideration 
                period' means the 30-day period beginning on the date on 
                which the Secretary receives notice under subsection 
                (b)(1)(A)(ii), as extended under subsection (b)(2).
                    ``(B) Determination period.--The term `determination 
                period' means the 90-day period beginning on the date

[[Page 131 STAT. 2184]]

                of the enactment of the Tax Cuts and Jobs Act, as 
                extended under subsection (b)(2).
            ``(3) State.--For purposes of this section, the term `State' 
        includes any possession of the United States.

    ``(d) Number of Designations.--
            ``(1) In general.--Except as provided by paragraph (2), the 
        number of population census tracts in a State that may be 
        designated as qualified opportunity zones under this section may 
        not exceed 25 percent of the number of low-income communities in 
        the State.
            ``(2) Exception.--If the number of low-income communities in 
        a State is less than 100, then a total of 25 of such tracts may 
        be designated as qualified opportunity zones.

    ``(e) Designation of Tracts Contiguous With Low-income 
Communities.--
            ``(1) In general.--A population census tract that is not a 
        low-income community may be designated as a qualified 
        opportunity zone under this section if--
                    ``(A) the tract is contiguous with the low-income 
                community that is designated as a qualified opportunity 
                zone, and
                    ``(B) the median family income of the tract does not 
                exceed 125 percent of the median family income of the 
                low-income community with which the tract is contiguous.
            ``(2) Limitation.--Not more than 5 percent of the population 
        census tracts designated in a State as a qualified opportunity 
        zone may be designated under paragraph (1).

    ``(f) Period for Which Designation Is in Effect.--A designation as a 
qualified opportunity zone shall remain in effect for the period 
beginning on the date of the designation and ending at the close of the 
10th calendar year beginning on or after such date of designation.
``SEC. 1400Z-2. <<NOTE: 26 USC 1400Z-2.>>  SPECIAL RULES FOR 
                              CAPITAL GAINS INVESTED IN 
                              OPPORTUNITY ZONES.

    ``(a) In General.--
            ``(1) Treatment of gains.--In the case of gain from the sale 
        to, or exchange with, an unrelated person of any property held 
        by the taxpayer, at the election of the taxpayer--
                    ``(A) gross income for the taxable year shall not 
                include so much of such gain as does not exceed the 
                aggregate amount invested by the taxpayer in a qualified 
                opportunity fund during the 180-day period beginning on 
                the date of such sale or exchange,
                    ``(B) the amount of gain excluded by subparagraph 
                (A) shall be included in gross income as provided by 
                subsection (b), and
                    ``(C) subsection (c) shall apply.
            ``(2) Election.--No election may be made under paragraph 
        (1)--
                    ``(A) with respect to a sale or exchange if an 
                election previously made with respect to such sale or 
                exchange is in effect, or
                    ``(B) with respect to any sale or exchange after 
                December 31, 2026.

    ``(b) Deferral of Gain Invested in Opportunity Zone Property.--

[[Page 131 STAT. 2185]]

            ``(1) Year of inclusion.--Gain to which subsection (a)(1)(B) 
        applies shall be included in income in the taxable year which 
        includes the earlier of--
                    ``(A) the date on which such investment is sold or 
                exchanged, or
                    ``(B) December 31, 2026.
            ``(2) Amount includible.--
                    ``(A) In general.--The amount of gain included in 
                gross income under subsection (a)(1)(A) shall be the 
                excess of--
                          ``(i) the lesser of the amount of gain 
                      excluded under paragraph (1) or the fair market 
                      value of the investment as determined as of the 
                      date described in paragraph (1), over
                          ``(ii) the taxpayer's basis in the investment.
                    ``(B) Determination of basis.--
                          ``(i) In general.--Except as otherwise 
                      provided in this clause or subsection (c), the 
                      taxpayer's basis in the investment shall be zero.
                          ``(ii) Increase for gain recognized under 
                      subsection (a)(1)(B).--The basis in the investment 
                      shall be increased by the amount of gain 
                      recognized by reason of subsection (a)(1)(B) with 
                      respect to such property.
                          ``(iii) Investments held for 5 years.--In the 
                      case of any investment held for at least 5 years, 
                      the basis of such investment shall be increased by 
                      an amount equal to 10 percent of the amount of 
                      gain deferred by reason of subsection (a)(1)(A).
                          ``(iv) Investments held for 7 years.--In the 
                      case of any investment held by the taxpayer for at 
                      least 7 years, in addition to any adjustment made 
                      under clause (iii), the basis of such property 
                      shall be increased by an amount equal to 5 percent 
                      of the amount of gain deferred by reason of 
                      subsection (a)(1)(A).

    ``(c) Special Rule for Investments Held for at Least 10 Years.--In 
the case of any investment held by the taxpayer for at least 10 years 
and with respect to which the taxpayer makes an election under this 
clause, the basis of such property shall be equal to the fair market 
value of such investment on the date that the investment is sold or 
exchanged.
    ``(d) Qualified Opportunity Fund.--For purposes of this section--
            ``(1) In general.--The term `qualified opportunity fund' 
        means any investment vehicle which is organized as a corporation 
        or a partnership for the purpose of investing in qualified 
        opportunity zone property (other than another qualified 
        opportunity fund) that holds at least 90 percent of its assets 
        in qualified opportunity zone property, determined by the 
        average of the percentage of qualified opportunity zone property 
        held in the fund as measured--
                    ``(A) on the last day of the first 6-month period of 
                the taxable year of the fund, and
                    ``(B) on the last day of the taxable year of the 
                fund.
            ``(2) Qualified opportunity zone property.--
                    ``(A) In general.--The term `qualified opportunity 
                zone property' means property which is--

[[Page 131 STAT. 2186]]

                          ``(i) qualified opportunity zone stock,
                          ``(ii) qualified opportunity zone partnership 
                      interest, or
                          ``(iii) qualified opportunity zone business 
                      property.
                    ``(B) Qualified opportunity zone stock.--
                          ``(i) In general.--Except as provided in 
                      clause (ii), the term `qualified opportunity zone 
                      stock' means any stock in a domestic corporation 
                      if--
                                    ``(I) such stock is acquired by the 
                                qualified opportunity fund after 
                                December 31, 2017, at its original issue 
                                (directly or through an underwriter) 
                                from the corporation solely in exchange 
                                for cash,
                                    ``(II) as of the time such stock was 
                                issued, such corporation was a qualified 
                                opportunity zone business (or, in the 
                                case of a new corporation, such 
                                corporation was being organized for 
                                purposes of being a qualified 
                                opportunity zone business), and
                                    ``(III) during substantially all of 
                                the qualified opportunity fund's holding 
                                period for such stock, such corporation 
                                qualified as a qualified opportunity 
                                zone business.
                          ``(ii) Redemptions.--A rule similar to the 
                      rule of section 1202(c)(3) shall apply for 
                      purposes of this paragraph.
                    ``(C) Qualified opportunity zone partnership 
                interest.--The term `qualified opportunity zone 
                partnership interest' means any capital or profits 
                interest in a domestic partnership if--
                          ``(i) such interest is acquired by the 
                      qualified opportunity fund after December 31, 
                      2017, from the partnership solely in exchange for 
                      cash,
                          ``(ii) as of the time such interest was 
                      acquired, such partnership was a qualified 
                      opportunity zone business (or, in the case of a 
                      new partnership, such partnership was being 
                      organized for purposes of being a qualified 
                      opportunity zone business), and
                          ``(iii) during substantially all of the 
                      qualified opportunity fund's holding period for 
                      such interest, such partnership qualified as a 
                      qualified opportunity zone business.
                    ``(D) Qualified opportunity zone business 
                property.--
                          ``(i) In general.--The term `qualified 
                      opportunity zone business property' means tangible 
                      property used in a trade or business of the 
                      qualified opportunity fund if--
                                    ``(I) such property was acquired by 
                                the qualified opportunity fund by 
                                purchase (as defined in section 
                                179(d)(2)) after December 31, 2017,
                                    ``(II) the original use of such 
                                property in the qualified opportunity 
                                zone commences with the qualified 
                                opportunity fund or the qualified 
                                opportunity fund substantially improves 
                                the property, and

[[Page 131 STAT. 2187]]

                                    ``(III) during substantially all of 
                                the qualified opportunity fund's holding 
                                period for such property, substantially 
                                all of the use of such property was in a 
                                qualified opportunity zone.
                          ``(ii) Substantial improvement.--For purposes 
                      of subparagraph (A)(ii), property shall be treated 
                      as substantially improved by the qualified 
                      opportunity fund only if, during any 30-month 
                      period beginning after the date of acquisition of 
                      such property, additions to basis with respect to 
                      such property in the hands of the qualified 
                      opportunity fund exceed an amount equal to the 
                      adjusted basis of such property at the beginning 
                      of such 30-month period in the hands of the 
                      qualified opportunity fund.
                          ``(iii) Related party.--For purposes of 
                      subparagraph (A)(i), the related person rule of 
                      section 179(d)(2) shall be applied pursuant to 
                      paragraph (8) of this subsection in lieu of the 
                      application of such rule in section 179(d)(2)(A).
            ``(3) Qualified opportunity zone business.--
                    ``(A) In general.--The term `qualified opportunity 
                zone business' means a trade or business--
                          ``(i) in which substantially all of the 
                      tangible property owned or leased by the taxpayer 
                      is qualified opportunity zone business property 
                      (determined by substituting `qualified opportunity 
                      zone business' for `qualified opportunity fund' 
                      each place it appears in paragraph (2)(D)),
                          ``(ii) which satisfies the requirements of 
                      paragraphs (2), (4), and (8) of section 1397C(b), 
                      and
                          ``(iii) which is not described in section 
                      144(c)(6)(B).
                    ``(B) Special rule.--For purposes of subparagraph 
                (A), tangible property that ceases to be a qualified 
                opportunity zone business property shall continue to be 
                treated as a qualified opportunity zone business 
                property for the lesser of--
                          ``(i) 5 years after the date on which such 
                      tangible property ceases to be so qualified, or
                          ``(ii) the date on which such tangible 
                      property is no longer held by the qualified 
                      opportunity zone business.

    ``(e) Applicable Rules.--
            ``(1) Treatment of investments with mixed funds.--In the 
        case of any investment in a qualified opportunity fund only a 
        portion of which consists of investments of gain to which an 
        election under subsection (a) is in effect--
                    ``(A) such investment shall be treated as 2 separate 
                investments, consisting of--
                          ``(i) one investment that only includes 
                      amounts to which the election under subsection (a) 
                      applies, and
                          ``(ii) a separate investment consisting of 
                      other amounts, and
                    ``(B) subsections (a), (b), and (c) shall only apply 
                to the investment described in subparagraph (A)(i).
            ``(2) Related persons.--For purposes of this section, 
        persons are related to each other if such persons are described

[[Page 131 STAT. 2188]]

        in section 267(b) or 707(b)(1), determined by substituting `20 
        percent' for `50 percent' each place it occurs in such sections.
            ``(3) Decedents.--In the case of a decedent, amounts 
        recognized under this section shall, if not properly includible 
        in the gross income of the decedent, be includible in gross 
        income as provided by section 691.
            ``(4) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this section, including--
                    ``(A) rules for the certification of qualified 
                opportunity funds for the purposes of this section,
                    ``(B) rules to ensure a qualified opportunity fund 
                has a reasonable period of time to reinvest the return 
                of capital from investments in qualified opportunity 
                zone stock and qualified opportunity zone partnership 
                interests, and to reinvest proceeds received from the 
                sale or disposition of qualified opportunity zone 
                property, and
                    ``(C) rules to prevent abuse.

    ``(f) Failure of Qualified Opportunity Fund to Maintain Investment 
Standard.--
            ``(1) In general.--If a qualified opportunity fund fails to 
        meet the 90-percent requirement of subsection (c)(1), the 
        qualified opportunity fund shall pay a penalty for each month it 
        fails to meet the requirement in an amount equal to the product 
        of--
                    ``(A) the excess of--
                          ``(i) the amount equal to 90 percent of its 
                      aggregate assets, over
                          ``(ii) the aggregate amount of qualified 
                      opportunity zone property held by the fund, 
                      multiplied by
                    ``(B) the underpayment rate established under 
                section 6621(a)(2) for such month.
            ``(2) Special rule for partnerships.--In the case that the 
        qualified opportunity fund is a partnership, the penalty imposed 
        by paragraph (1) shall be taken into account proportionately as 
        part of the distributive share of each partner of the 
        partnership.
            ``(3) Reasonable cause exception.--No penalty shall be 
        imposed under this subsection with respect to any failure if it 
        is shown that such failure is due to reasonable cause.''.

    (b) Basis Adjustments.--Section 1016(a) is amended by striking 
``and'' at the end of paragraph (36), by striking the period at the end 
of paragraph (37) and inserting ``, and'', and by inserting after 
paragraph (37) the following:
            ``(38) to the extent provided in subsections (b)(2) and (c) 
        of section 1400Z-2.''.

    (c) Clerical Amendment.--The table of subchapters for chapter 
1 <<NOTE: 26 USC prec. 1.>>  is amended by adding at the end the 
following new item:

                  ``subchapter z. opportunity zones''.

    (d) <<NOTE: 26 USC 1016 note.>>  Effective Date.--The amendments 
made by this section shall take effect on the date of the enactment of 
this Act.

[[Page 131 STAT. 2189]]

                Subtitle D--International Tax Provisions

                      PART I--OUTBOUND TRANSACTIONS

Subpart A--Establishment of Participation Exemption System for Taxation 
                            of Foreign Income

SEC. 14101. DEDUCTION FOR FOREIGN-SOURCE PORTION OF DIVIDENDS 
                            RECEIVED BY DOMESTIC CORPORATIONS FROM 
                            SPECIFIED 10-PERCENT OWNED FOREIGN 
                            CORPORATIONS.

    (a) In General.--Part VIII of subchapter B of chapter 1 is amended 
by inserting after section 245 the following new section:
``SEC. 245A. <<NOTE: 26 USC 245A.>>  DEDUCTION FOR FOREIGN SOURCE-
                          PORTION OF DIVIDENDS RECEIVED BY 
                          DOMESTIC CORPORATIONS FROM SPECIFIED 10-
                          PERCENT OWNED FOREIGN CORPORATIONS.

    ``(a) In General.--In the case of any dividend received from a 
specified 10-percent owned foreign corporation by a domestic corporation 
which is a United States shareholder with respect to such foreign 
corporation, there shall be allowed as a deduction an amount equal to 
the foreign-source portion of such dividend.
    ``(b) Specified 10-percent Owned Foreign Corporation.--For purposes 
of this section--
            ``(1) In general.--The term `specified 10-percent owned 
        foreign corporation' means any foreign corporation with respect 
        to which any domestic corporation is a United States shareholder 
        with respect to such corporation.
            ``(2) Exclusion of passive foreign investment companies.--
        Such term shall not include any corporation which is a passive 
        foreign investment company (as defined in section 1297) with 
        respect to the shareholder and which is not a controlled foreign 
        corporation.

    ``(c) Foreign-source Portion.--For purposes of this section--
            ``(1) In general.--The foreign-source portion of any 
        dividend from a specified 10-percent owned foreign corporation 
        is an amount which bears the same ratio to such dividend as--
                    ``(A) the undistributed foreign earnings of the 
                specified 10-percent owned foreign corporation, bears to
                    ``(B) the total undistributed earnings of such 
                foreign corporation.
            ``(2) Undistributed earnings.--The term `undistributed 
        earnings' means the amount of the earnings and profits of the 
        specified 10-percent owned foreign corporation (computed in 
        accordance with sections 964(a) and 986)--
                    ``(A) as of the close of the taxable year of the 
                specified 10-percent owned foreign corporation in which 
                the dividend is distributed, and
                    ``(B) without diminution by reason of dividends 
                distributed during such taxable year.
            ``(3) Undistributed foreign earnings.--The term 
        `undistributed foreign earnings' means the portion of the 
        undistributed earnings which is attributable to neither--

[[Page 131 STAT. 2190]]

                    ``(A) income described in subparagraph (A) of 
                section 245(a)(5), nor
                    ``(B) dividends described in subparagraph (B) of 
                such section (determined without regard to section 
                245(a)(12)).

    ``(d) Disallowance of Foreign Tax Credit, etc.--
            ``(1) In general.--No credit shall be allowed under section 
        901 for any taxes paid or accrued (or treated as paid or 
        accrued) with respect to any dividend for which a deduction is 
        allowed under this section.
            ``(2) Denial of deduction.--No deduction shall be allowed 
        under this chapter for any tax for which credit is not allowable 
        under section 901 by reason of paragraph (1) (determined by 
        treating the taxpayer as having elected the benefits of subpart 
        A of part III of subchapter N).

    ``(e) Special Rules for Hybrid Dividends.--
            ``(1) In general.--Subsection (a) shall not apply to any 
        dividend received by a United States shareholder from a 
        controlled foreign corporation if the dividend is a hybrid 
        dividend.
            ``(2) Hybrid dividends of tiered corporations.--If a 
        controlled foreign corporation with respect to which a domestic 
        corporation is a United States shareholder receives a hybrid 
        dividend from any other controlled foreign corporation with 
        respect to which such domestic corporation is also a United 
        States shareholder, then, notwithstanding any other provision of 
        this title--
                    ``(A) the hybrid dividend shall be treated for 
                purposes of section 951(a)(1)(A) as subpart F income of 
                the receiving controlled foreign corporation for the 
                taxable year of the controlled foreign corporation in 
                which the dividend was received, and
                    ``(B) the United States shareholder shall include in 
                gross income an amount equal to the shareholder's pro 
                rata share (determined in the same manner as under 
                section 951(a)(2)) of the subpart F income described in 
                subparagraph (A).
            ``(3) Denial of foreign tax credit, etc.--The rules of 
        subsection (d) shall apply to any hybrid dividend received by, 
        or any amount included under paragraph (2) in the gross income 
        of, a United States shareholder.
            ``(4) Hybrid dividend.--The term `hybrid dividend' means an 
        amount received from a controlled foreign corporation--
                    ``(A) for which a deduction would be allowed under 
                subsection (a) but for this subsection, and
                    ``(B) for which the controlled foreign corporation 
                received a deduction (or other tax benefit) with respect 
                to any income, war profits, or excess profits taxes 
                imposed by any foreign country or possession of the 
                United States.

    ``(f) Special Rule for Purging Distributions of Passive Foreign 
Investment Companies.--Any amount which is treated as a dividend under 
section 1291(d)(2)(B) shall not be treated as a dividend for purposes of 
this section.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
provisions of this section, including regulations for the treatment of 
United States shareholders owning stock of a specified 10 percent owned 
foreign corporation through a partnership.''.

[[Page 131 STAT. 2191]]

    (b) Application of Holding Period Requirement.--Subsection (c) of 
section 246 <<NOTE: 26 USC 246.>>  is amended--
            (1) by striking ``or 245'' in paragraph (1) and inserting 
        ``245, or 245A'', and
            (2) by adding at the end the following new paragraph:
            ``(5) Special rules for foreign source portion of dividends 
        received from specified 10-percent owned foreign corporations.--
                    ``(A) 1-year holding period requirement.--For 
                purposes of section 245A--
                          ``(i) paragraph (1)(A) shall be applied--
                                    ``(I) by substituting `365 days' for 
                                `45 days' each place it appears, and
                                    ``(II) by substituting `731-day 
                                period' for `91-day period', and
                          ``(ii) paragraph (2) shall not apply.
                    ``(B) Status must be maintained during holding 
                period.--For purposes of applying paragraph (1) with 
                respect to section 245A, the taxpayer shall be treated 
                as holding the stock referred to in paragraph (1) for 
                any period only if--
                          ``(i) the specified 10-percent owned foreign 
                      corporation referred to in section 245A(a) is a 
                      specified 10-percent owned foreign corporation at 
                      all times during such period, and
                          ``(ii) the taxpayer is a United States 
                      shareholder with respect to such specified 10-
                      percent owned foreign corporation at all times 
                      during such period.''.

    (c) Application of Rules Generally Applicable to Deductions for 
Dividends Received.--
            (1) Treatment of dividends from certain corporations.--
        Paragraph (1) of section 246(a) is amended by striking ``and 
        245'' and inserting ``245, and 245A''.
            (2) Coordination with section 1059.--Subparagraph (B) of 
        section 1059(b)(2) is amended by striking ``or 245'' and 
        inserting ``245, or 245A''.

    (d) Coordination With Foreign Tax Credit Limitation.--Subsection (b) 
of section 904 is amended by adding at the end the following new 
paragraph:
            ``(5) Treatment of dividends for which deduction is allowed 
        under section 245a.--For purposes of subsection (a), in the case 
        of a domestic corporation which is a United States shareholder 
        with respect to a specified 10-percent owned foreign 
        corporation, such shareholder's taxable income from sources 
        without the United States (and entire taxable income) shall be 
        determined without regard to--
                    ``(A) the foreign-source portion of any dividend 
                received from such foreign corporation, and
                    ``(B) any deductions properly allocable or 
                apportioned to--
                          ``(i) income (other than amounts includible 
                      under section 951(a)(1) or 951A(a)) with respect 
                      to stock of such specified 10-percent owned 
                      foreign corporation, or
                          ``(ii) such stock to the extent income with 
                      respect to such stock is other than amounts 
                      includible under section 951(a)(1) or 951A(a).

[[Page 131 STAT. 2192]]

        Any term which is used in section 245A and in this paragraph 
        shall have the same meaning for purposes of this paragraph as 
        when used in such section.''.

    (e) Conforming Amendments.--
            (1) Subsection (b) of section 951 <<NOTE: 26 USC 951.>>  is 
        amended by striking ``subpart'' and inserting ``title''.
            (2) Subsection (a) of section 957 is amended by striking 
        ``subpart'' in the matter preceding paragraph (1) and inserting 
        ``title''.
            (3) The table of sections for part VIII of subchapter B of 
        chapter 1 <<NOTE: 26 USC 241 prec.>>  is amended by inserting 
        after the item relating to section 245 the following new item:

``Sec. 245A. Deduction for foreign source-portion of dividends received 
           by domestic corporations from certain 10-percent owned 
           foreign corporations.''.

    (f) <<NOTE: 26 USC 245A note.>>  Effective Date.--The amendments 
made by this section shall apply to distributions made after (and, in 
the case of the amendments made by subsection (d), deductions with 
respect to taxable years ending after) December 31, 2017.
SEC. 14102. SPECIAL RULES RELATING TO SALES OR TRANSFERS INVOLVING 
                            SPECIFIED 10-PERCENT OWNED FOREIGN 
                            CORPORATIONS.

    (a) Sales by United States Persons of Stock.--
            (1) In general.--Section 1248 is amended by redesignating 
        subsection (j) as subsection (k) and by inserting after 
        subsection (i) the following new subsection:

    ``(j) Coordination With Dividends Received Deduction.--In the case 
of the sale or exchange by a domestic corporation of stock in a foreign 
corporation held for 1 year or more, any amount received by the domestic 
corporation which is treated as a dividend by reason of this section 
shall be treated as a dividend for purposes of applying section 245A.''.
            (2) <<NOTE: 26 USC 1248 note.>>  Effective date.--The 
        amendments made by this subsection shall apply to sales or 
        exchanges after December 31, 2017.

    (b) Basis in Specified 10-percent Owned Foreign Corporation Reduced 
by Nontaxed Portion of Dividend for Purposes of Determining Loss.--
            (1) In general.--Section 961 is amended by adding at the end 
        the following new subsection:

    ``(d) Basis in Specified 10-percent Owned Foreign Corporation 
Reduced by Nontaxed Portion of Dividend for Purposes of Determining 
Loss.--If a domestic corporation received a dividend from a specified 
10-percent owned foreign corporation (as defined in section 245A) in any 
taxable year, solely for purposes of determining loss on any disposition 
of stock of such foreign corporation in such taxable year or any 
subsequent taxable year, the basis of such domestic corporation in such 
stock shall be reduced (but not below zero) by the amount of any 
deduction allowable to such domestic corporation under section 245A with 
respect to such stock except to the extent such basis was reduced under 
section 1059 by reason of a dividend for which such a deduction was 
allowable.''.
            (2) <<NOTE: 26 USC 961 note.>>  Effective date.--The 
        amendments made by this subsection shall apply to distributions 
        made after December 31, 2017.

    (c) Sale by a CFC of a Lower Tier CFC.--

[[Page 131 STAT. 2193]]

            (1) In general.--Section 964(e) <<NOTE: 26 USC 964.>>  is 
        amended by adding at the end the following new paragraph:
            ``(4) Coordination with dividends received deduction.--
                    ``(A) In general.--If, for any taxable year of a 
                controlled foreign corporation beginning after December 
                31, 2017, any amount is treated as a dividend under 
                paragraph (1) by reason of a sale or exchange by the 
                controlled foreign corporation of stock in another 
                foreign corporation held for 1 year or more, then, 
                notwithstanding any other provision of this title--
                          ``(i) the foreign-source portion of such 
                      dividend shall be treated for purposes of section 
                      951(a)(1)(A) as subpart F income of the selling 
                      controlled foreign corporation for such taxable 
                      year,
                          ``(ii) a United States shareholder with 
                      respect to the selling controlled foreign 
                      corporation shall include in gross income for the 
                      taxable year of the shareholder with or within 
                      which such taxable year of the controlled foreign 
                      corporation ends an amount equal to the 
                      shareholder's pro rata share (determined in the 
                      same manner as under section 951(a)(2)) of the 
                      amount treated as subpart F income under clause 
                      (i), and
                          ``(iii) the deduction under section 245A(a) 
                      shall be allowable to the United States 
                      shareholder with respect to the subpart F income 
                      included in gross income under clause (ii) in the 
                      same manner as if such subpart F income were a 
                      dividend received by the shareholder from the 
                      selling controlled foreign corporation.
                    ``(B) Application of basis or similar adjustment.--
                For purposes of this title, in the case of a sale or 
                exchange by a controlled foreign corporation of stock in 
                another foreign corporation in a taxable year of the 
                selling controlled foreign corporation beginning after 
                December 31, 2017, rules similar to the rules of section 
                961(d) shall apply.
                    ``(C) Foreign-source portion.--For purposes of this 
                paragraph, the foreign-source portion of any amount 
                treated as a dividend under paragraph (1) shall be 
                determined in the same manner as under section 
                245A(c).''.
            (2) <<NOTE: 26 USC 964 note.>>  Effective date.--The 
        amendments made by this subsection shall apply to sales or 
        exchanges after December 31, 2017.

    (d) Treatment of Foreign Branch Losses Transferred to Specified 10-
percent Owned Foreign Corporations.--
            (1) In general.--Part II of subchapter B of chapter 1 is 
        amended by adding at the end the following new section:
``SEC. 91. <<NOTE: 26 USC 91.>>  CERTAIN FOREIGN BRANCH LOSSES 
                      TRANSFERRED TO SPECIFIED 10-PERCENT OWNED 
                      FOREIGN CORPORATIONS.

    ``(a) In General.--If a domestic corporation transfers substantially 
all of the assets of a foreign branch (within the meaning of section 
367(a)(3)(C), as in effect before the date of the enactment of the Tax 
Cuts and Jobs Act) to a specified 10-percent owned foreign corporation 
(as defined in section 245A) with respect to which it is a United States 
shareholder after such transfer, such domestic corporation shall include 
in gross income for the taxable

[[Page 131 STAT. 2194]]

year which includes such transfer an amount equal to the transferred 
loss amount with respect to such transfer.
    ``(b) Transferred Loss Amount.--For purposes of this section, the 
term `transferred loss amount' means, with respect to any transfer of 
substantially all of the assets of a foreign branch, the excess (if any) 
of--
            ``(1) the sum of losses--
                    ``(A) which were incurred by the foreign branch 
                after December 31, 2017, and before the transfer, and
                    ``(B) with respect to which a deduction was allowed 
                to the taxpayer, over
            ``(2) the sum of--
                    ``(A) any taxable income of such branch for a 
                taxable year after the taxable year in which the loss 
                was incurred and through the close of the taxable year 
                of the transfer, and
                    ``(B) any amount which is recognized under section 
                904(f)(3) on account of the transfer.

    ``(c) Reduction for Recognized Gains.--The transferred loss amount 
shall be reduced (but not below zero) by the amount of gain recognized 
by the taxpayer on account of the transfer (other than amounts taken 
into account under subsection (b)(2)(B)).
    ``(d) Source of Income.--Amounts included in gross income under this 
section shall be treated as derived from sources within the United 
States.
    ``(e) Basis Adjustments.--Consistent with such regulations or other 
guidance as the Secretary shall prescribe, proper adjustments shall be 
made in the adjusted basis of the taxpayer's stock in the specified 10-
percent owned foreign corporation to which the transfer is made, and in 
the transferee's adjusted basis in the property transferred, to reflect 
amounts included in gross income under this section.''.
            (2) Clerical amendment.--The table of sections for part II 
        of subchapter B of chapter 1 <<NOTE: 26 USC 71 prec.>>  is 
        amended by adding at the end the following new item:

``Sec. 91. Certain foreign branch losses transferred to specified 10-
           percent owned foreign corporations.''.

            (3) <<NOTE: 26 USC 91 note.>>  Effective date.--The 
        amendments made by this subsection shall apply to transfers 
        after December 31, 2017.
            (4) <<NOTE: 26 USC 91 note.>>  Transition rule.--The amount 
        of gain taken into account under section 91(c) of the Internal 
        Revenue Code of 1986, as added by this subsection, shall be 
        reduced by the amount of gain which would be recognized under 
        section 367(a)(3)(C) (determined without regard to the 
        amendments made by subsection (e)) with respect to losses 
        incurred before January 1, 2018.

    (e) Repeal of Active Trade or Business Exception Under Section 
367.--
            (1) In general.--Section 367(a) <<NOTE: 26 USC 367.>>  is 
        amended by striking paragraph (3) and redesignating paragraphs 
        (4), (5), and (6) as paragraphs (3), (4), and (5), respectively.
            (2) Conforming amendments.--Section 367(a)(4), as 
        redesignated by paragraph (1), is amended--
                    (A) by striking ``Paragraphs (2) and (3)'' and 
                inserting ``Paragraph (2)'', and

[[Page 131 STAT. 2195]]

                    (B) by striking ``Paragraphs (2) and (3)'' in the 
                heading and inserting ``Paragraph (2)''.
            (3) <<NOTE: 26 USC 367 note.>>  Effective date.--The 
        amendments made by this subsection shall apply to transfers 
        after December 31, 2017.
SEC. 14103. TREATMENT OF DEFERRED FOREIGN INCOME UPON TRANSITION 
                            TO PARTICIPATION EXEMPTION SYSTEM OF 
                            TAXATION.

    (a) In General.--Section 965 <<NOTE: 26 USC 965.>>  is amended to 
read as follows:
``SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME UPON TRANSITION 
                        TO PARTICIPATION EXEMPTION SYSTEM OF 
                        TAXATION.

    ``(a) Treatment of Deferred Foreign Income as Subpart F Income.--In 
the case of the last taxable year of a deferred foreign income 
corporation which begins before January 1, 2018, the subpart F income of 
such foreign corporation (as otherwise determined for such taxable year 
under section 952) shall be increased by the greater of--
            ``(1) the accumulated post-1986 deferred foreign income of 
        such corporation determined as of November 2, 2017, or
            ``(2) the accumulated post-1986 deferred foreign income of 
        such corporation determined as of December 31, 2017.

    ``(b) Reduction in Amounts Included in Gross Income of United States 
Shareholders of Specified Foreign Corporations With Deficits in Earnings 
and Profits.--
            ``(1) In general.--In the case of a taxpayer which is a 
        United States shareholder with respect to at least one deferred 
        foreign income corporation and at least one E&P deficit foreign 
        corporation, the amount which would (but for this subsection) be 
        taken into account under section 951(a)(1) by reason of 
        subsection (a) as such United States shareholder's pro rata 
        share of the subpart F income of each deferred foreign income 
        corporation shall be reduced by the amount of such United States 
        shareholder's aggregate foreign E&P deficit which is allocated 
        under paragraph (2) to such deferred foreign income corporation.
            ``(2) Allocation of aggregate foreign e&p deficit.--The 
        aggregate foreign E&P deficit of any United States shareholder 
        shall be allocated among the deferred foreign income 
        corporations of such United States shareholder in an amount 
        which bears the same proportion to such aggregate as--
                    ``(A) such United States shareholder's pro rata 
                share of the accumulated post-1986 deferred foreign 
                income of each such deferred foreign income corporation, 
                bears to
                    ``(B) the aggregate of such United States 
                shareholder's pro rata share of the accumulated post-
                1986 deferred foreign income of all deferred foreign 
                income corporations of such United States shareholder.
            ``(3) Definitions related to e&p deficits.--For purposes of 
        this subsection--
                    ``(A) Aggregate foreign e&p deficit.--
                          ``(i) In general.--The term `aggregate foreign 
                      E&P deficit' means, with respect to any United 
                      States shareholder, the lesser of--
                                    ``(I) the aggregate of such 
                                shareholder's pro rata shares of the 
                                specified E&P deficits of the

[[Page 131 STAT. 2196]]

                                E&P deficit foreign corporations of such 
                                shareholder, or
                                    ``(II) the amount determined under 
                                paragraph (2)(B).
                          ``(ii) Allocation of deficit.--If the amount 
                      described in clause (i)(II) is less than the 
                      amount described in clause (i)(I), then the 
                      shareholder shall designate, in such form and 
                      manner as the Secretary determines--
                                    ``(I) the amount of the specified 
                                E&P deficit which is to be taken into 
                                account for each E&P deficit corporation 
                                with respect to the taxpayer, and
                                    ``(II) in the case of an E&P deficit 
                                corporation which has a qualified 
                                deficit (as defined in section 952), the 
                                portion (if any) of the deficit taken 
                                into account under subclause (I) which 
                                is attributable to a qualified deficit, 
                                including the qualified activities to 
                                which such portion is attributable.
                    ``(B) E&P deficit foreign corporation.--The term 
                `E&P deficit foreign corporation' means, with respect to 
                any taxpayer, any specified foreign corporation with 
                respect to which such taxpayer is a United States 
                shareholder, if, as of November 2, 2017--
                          ``(i) such specified foreign corporation has a 
                      deficit in post-1986 earnings and profits,
                          ``(ii) such corporation was a specified 
                      foreign corporation, and
                          ``(iii) such taxpayer was a United States 
                      shareholder of such corporation.
                    ``(C) Specified e&p deficit.--The term `specified 
                E&P deficit' means, with respect to any E&P deficit 
                foreign corporation, the amount of the deficit referred 
                to in subparagraph (B).
            ``(4) Treatment of earnings and profits in future years.--
                    ``(A) Reduced earnings and profits treated as 
                previously taxed income when distributed.--For purposes 
                of applying section 959 in any taxable year beginning 
                with the taxable year described in subsection (a), with 
                respect to any United States shareholder of a deferred 
                foreign income corporation, an amount equal to such 
                shareholder's reduction under paragraph (1) which is 
                allocated to such deferred foreign income corporation 
                under this subsection shall be treated as an amount 
                which was included in the gross income of such United 
                States shareholder under section 951(a).
                    ``(B) E&P deficits.--For purposes of this title, 
                with respect to any taxable year beginning with the 
                taxable year described in subsection (a), a United 
                States shareholder's pro rata share of the earnings and 
                profits of any E&P deficit foreign corporation under 
                this subsection shall be increased by the amount of the 
                specified E&P deficit of such corporation taken into 
                account by such shareholder under paragraph (1), and, 
                for purposes of section 952, such increase shall be 
                attributable to the same activity to which the deficit 
                so taken into account was attributable.

[[Page 131 STAT. 2197]]

            ``(5) Netting among united states shareholders in same 
        affiliated group.--
                    ``(A) In general.--In the case of any affiliated 
                group which includes at least one E&P net surplus 
                shareholder and one E&P net deficit shareholder, the 
                amount which would (but for this paragraph) be taken 
                into account under section 951(a)(1) by reason of 
                subsection (a) by each such E&P net surplus shareholder 
                shall be reduced (but not below zero) by such 
                shareholder's applicable share of the affiliated group's 
                aggregate unused E&P deficit.
                    ``(B) E&P net surplus shareholder.--For purposes of 
                this paragraph, the term `E&P net surplus shareholder' 
                means any United States shareholder which would 
                (determined without regard to this paragraph) take into 
                account an amount greater than zero under section 
                951(a)(1) by reason of subsection (a).
                    ``(C) E&P net deficit shareholder.--For purposes of 
                this paragraph, the term `E&P net deficit shareholder' 
                means any United States shareholder if--
                          ``(i) the aggregate foreign E&P deficit with 
                      respect to such shareholder (as defined in 
                      paragraph (3)(A) without regard to clause (i)(II) 
                      thereof), exceeds
                          ``(ii) the amount which would (but for this 
                      subsection) be taken into account by such 
                      shareholder under section 951(a)(1) by reason of 
                      subsection (a).
                    ``(D) Aggregate unused e&p deficit.--For purposes of 
                this paragraph--
                          ``(i) In general.--The term `aggregate unused 
                      E&P deficit' means, with respect to any affiliated 
                      group, the lesser of--
                                    ``(I) the sum of the excesses 
                                described in subparagraph (C), 
                                determined with respect to each E&P net 
                                deficit shareholder in such group, or
                                    ``(II) the amount determined under 
                                subparagraph (E)(ii).
                          ``(ii) Reduction with respect to e&p net 
                      deficit shareholders which are not wholly owned by 
                      the affiliated group.--If the group ownership 
                      percentage of any E&P net deficit shareholder is 
                      less than 100 percent, the amount of the excess 
                      described in subparagraph (C) which is taken into 
                      account under clause (i)(I) with respect to such 
                      E&P net deficit shareholder shall be such group 
                      ownership percentage of such amount.
                    ``(E) Applicable share.--For purposes of this 
                paragraph, the term `applicable share' means, with 
                respect to any E&P net surplus shareholder in any 
                affiliated group, the amount which bears the same 
                proportion to such group's aggregate unused E&P deficit 
                as--
                          ``(i) the product of--
                                    ``(I) such shareholder's group 
                                ownership percentage, multiplied by
                                    ``(II) the amount which would (but 
                                for this paragraph) be taken into 
                                account under section 951(a)(1) by 
                                reason of subsection (a) by such 
                                shareholder, bears to

[[Page 131 STAT. 2198]]

                          ``(ii) the aggregate amount determined under 
                      clause (i) with respect to all E&P net surplus 
                      shareholders in such group.
                    ``(F) Group ownership percentage.--For purposes of 
                this paragraph, the term `group ownership percentage' 
                means, with respect to any United States shareholder in 
                any affiliated group, the percentage of the value of the 
                stock of such United States shareholder which is held by 
                other includible corporations in such affiliated group. 
                Notwithstanding the preceding sentence, the group 
                ownership percentage of the common parent of the 
                affiliated group is 100 percent. Any term used in this 
                subparagraph which is also used in section 1504 shall 
                have the same meaning as when used in such section.

    ``(c) Application of Participation Exemption to Included Income.--
            ``(1) In general.--In the case of a United States 
        shareholder of a deferred foreign income corporation, there 
        shall be allowed as a deduction for the taxable year in which an 
        amount is included in the gross income of such United States 
        shareholder under section 951(a)(1) by reason of this section an 
        amount equal to the sum of--
                    ``(A) the United States shareholder's 8 percent rate 
                equivalent percentage of the excess (if any) of--
                          ``(i) the amount so included as gross income, 
                      over
                          ``(ii) the amount of such United States 
                      shareholder's aggregate foreign cash position, 
                      plus
                    ``(B) the United States shareholder's 15.5 percent 
                rate equivalent percentage of so much of the amount 
                described in subparagraph (A)(ii) as does not exceed the 
                amount described in subparagraph (A)(i).
            ``(2) 8 and 15.5 percent rate equivalent percentages.--For 
        purposes of this subsection--
                    ``(A) 8 percent rate equivalent percentage.--The 
                term `8 percent rate equivalent percentage' means, with 
                respect to any United States shareholder for any taxable 
                year, the percentage which would result in the amount to 
                which such percentage applies being subject to a 8 
                percent rate of tax determined by only taking into 
                account a deduction equal to such percentage of such 
                amount and the highest rate of tax specified in section 
                11 for such taxable year. In the case of any taxable 
                year of a United States shareholder to which section 15 
                applies, the highest rate of tax under section 11 before 
                the effective date of the change in rates and the 
                highest rate of tax under section 11 after the effective 
                date of such change shall each be taken into account 
                under the preceding sentence in the same proportions as 
                the portion of such taxable year which is before and 
                after such effective date, respectively.
                    ``(B) 15.5 percent rate equivalent percentage.--The 
                term `15.5 percent rate equivalent percentage' means, 
                with respect to any United States shareholder for any 
                taxable year, the percentage determined under 
                subparagraph (A) applied by substituting `15.5 percent 
                rate of tax' for `8 percent rate of tax'.

[[Page 131 STAT. 2199]]

            ``(3) Aggregate foreign cash position.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `aggregate foreign cash 
                position' means, with respect to any United States 
                shareholder, the greater of--
                          ``(i) the aggregate of such United States 
                      shareholder's pro rata share of the cash position 
                      of each specified foreign corporation of such 
                      United States shareholder determined as of the 
                      close of the last taxable year of such specified 
                      foreign corporation which begins before January 1, 
                      2018, or
                          ``(ii) one half of the sum of--
                                    ``(I) the aggregate described in 
                                clause (i) determined as of the close of 
                                the last taxable year of each such 
                                specified foreign corporation which ends 
                                before November 2, 2017, plus
                                    ``(II) the aggregate described in 
                                clause (i) determined as of the close of 
                                the taxable year of each such specified 
                                foreign corporation which precedes the 
                                taxable year referred to in subclause 
                                (I).
                    ``(B) Cash position.--For purposes of this 
                paragraph, the cash position of any specified foreign 
                corporation is the sum of--
                          ``(i) cash held by such foreign corporation,
                          ``(ii) the net accounts receivable of such 
                      foreign corporation, plus
                          ``(iii) the fair market value of the following 
                      assets held by such corporation:
                                    ``(I) Personal property which is of 
                                a type that is actively traded and for 
                                which there is an established financial 
                                market.
                                    ``(II) Commercial paper, 
                                certificates of deposit, the securities 
                                of the Federal government and of any 
                                State or foreign government.
                                    ``(III) Any foreign currency.
                                    ``(IV) Any obligation with a term of 
                                less than one year.
                                    ``(V) Any asset which the Secretary 
                                identifies as being economically 
                                equivalent to any asset described in 
                                this subparagraph.
                    ``(C) Net accounts receivable.--For purposes of this 
                paragraph, the term `net accounts receivable' means, 
                with respect to any specified foreign corporation, the 
                excess (if any) of--
                          ``(i) such corporation's accounts receivable, 
                      over
                          ``(ii) such corporation's accounts payable 
                      (determined consistent with the rules of section 
                      461).
                    ``(D) Prevention of double counting.--Cash positions 
                of a specified foreign corporation described in clause 
                (ii), (iii)(I), or (iii)(IV) of subparagraph (B) shall 
                not be taken into account by a United States shareholder 
                under subparagraph (A) to the extent that such United 
                States shareholder demonstrates to the satisfaction of 
                the Secretary that such amount is so taken into account 
                by such United States shareholder with respect to 
                another specified foreign corporation.

[[Page 131 STAT. 2200]]

                    ``(E) Cash positions of certain non-corporate 
                entities taken into account.--An entity (other than a 
                corporation) shall be treated as a specified foreign 
                corporation of a United States shareholder for purposes 
                of determining such United States shareholder's 
                aggregate foreign cash position if any interest in such 
                entity is held by a specified foreign corporation of 
                such United States shareholder (determined after 
                application of this subparagraph) and such entity would 
                be a specified foreign corporation of such United States 
                shareholder if such entity were a foreign corporation.
                    ``(F) Anti-abuse.--If the Secretary determines that 
                a principal purpose of any transaction was to reduce the 
                aggregate foreign cash position taken into account under 
                this subsection, such transaction shall be disregarded 
                for purposes of this subsection.

    ``(d) Deferred Foreign Income Corporation; Accumulated Post-1986 
Deferred Foreign Income.--For purposes of this section--
            ``(1) Deferred foreign income corporation.--The term 
        `deferred foreign income corporation' means, with respect to any 
        United States shareholder, any specified foreign corporation of 
        such United States shareholder which has accumulated post-1986 
        deferred foreign income (as of the date referred to in paragraph 
        (1) or (2) of subsection (a)) greater than zero.
            ``(2) Accumulated post-1986 deferred foreign income.--The 
        term `accumulated post-1986 deferred foreign income' means the 
        post-1986 earnings and profits except to the extent such 
        earnings--
                    ``(A) are attributable to income of the specified 
                foreign corporation which is effectively connected with 
                the conduct of a trade or business within the United 
                States and subject to tax under this chapter, or
                    ``(B) in the case of a controlled foreign 
                corporation, if distributed, would be excluded from the 
                gross income of a United States shareholder under 
                section 959.
        To the extent provided in regulations or other guidance 
        prescribed by the Secretary, in the case of any controlled 
        foreign corporation which has shareholders which are not United 
        States shareholders, accumulated post-1986 deferred foreign 
        income shall be appropriately reduced by amounts which would be 
        described in subparagraph (B) if such shareholders were United 
        States shareholders.
            ``(3) Post-1986 earnings and profits.--The term `post-1986 
        earnings and profits' means the earnings and profits of the 
        foreign corporation (computed in accordance with sections 964(a) 
        and 986, and by only taking into account periods when the 
        foreign corporation was a specified foreign corporation) 
        accumulated in taxable years beginning after December 31, 1986, 
        and determined--
                    ``(A) as of the date referred to in paragraph (1) or 
                (2) of subsection (a), whichever is applicable with 
                respect to such foreign corporation, and
                    ``(B) without diminution by reason of dividends 
                distributed during the taxable year described in 
                subsection (a) other than dividends distributed to 
                another specified foreign corporation.

[[Page 131 STAT. 2201]]

    ``(e) Specified Foreign Corporation.--
            ``(1) In general.--For purposes of this section, the term 
        `specified foreign corporation' means--
                    ``(A) any controlled foreign corporation, and
                    ``(B) any foreign corporation with respect to which 
                one or more domestic corporations is a United States 
                shareholder.
            ``(2) Application to certain foreign corporations.--For 
        purposes of sections 951 and 961, a foreign corporation 
        described in paragraph (1)(B) shall be treated as a controlled 
        foreign corporation solely for purposes of taking into account 
        the subpart F income of such corporation under subsection (a) 
        (and for purposes of applying subsection (f)).
            ``(3) Exclusion of passive foreign investment companies.--
        Such term shall not include any corporation which is a passive 
        foreign investment company (as defined in section 1297) with 
        respect to the shareholder and which is not a controlled foreign 
        corporation.

    ``(f) Determinations of Pro Rata Share.--
            ``(1) In general.--For purposes of this section, the 
        determination of any United States shareholder's pro rata share 
        of any amount with respect to any specified foreign corporation 
        shall be determined under rules similar to the rules of section 
        951(a)(2) by treating such amount in the same manner as subpart 
        F income (and by treating such specified foreign corporation as 
        a controlled foreign corporation).
            ``(2) Special rules.--The portion which is included in the 
        income of a United States shareholder under section 951(a)(1) by 
        reason of subsection (a) which is equal to the deduction allowed 
        under subsection (c) by reason of such inclusion--
                    ``(A) shall be treated as income exempt from tax for 
                purposes of sections 705(a)(1)(B) and 1367(a)(1)(A), and
                    ``(B) shall not be treated as income exempt from tax 
                for purposes of determining whether an adjustment shall 
                be made to an accumulated adjustment account under 
                section 1368(e)(1)(A).

    ``(g) Disallowance of Foreign Tax Credit, etc.--
            ``(1) In general.--No credit shall be allowed under section 
        901 for the applicable percentage of any taxes paid or accrued 
        (or treated as paid or accrued) with respect to any amount for 
        which a deduction is allowed under this section.
            ``(2) Applicable percentage.--For purposes of this 
        subsection, the term `applicable percentage' means the amount 
        (expressed as a percentage) equal to the sum of--
                    ``(A) 0.771 multiplied by the ratio of--
                          ``(i) the excess to which subsection (c)(1)(A) 
                      applies, divided by
                          ``(ii) the sum of such excess plus the amount 
                      to which subsection (c)(1)(B) applies, plus
                    ``(B) 0.557 multiplied by the ratio of--
                          ``(i) the amount to which subsection (c)(1)(B) 
                      applies, divided by
                          ``(ii) the sum described in subparagraph 
                      (A)(ii).
            ``(3) Denial of deduction.--No deduction shall be allowed 
        under this chapter for any tax for which credit is not allowable 
        under section 901 by reason of paragraph (1) (determined by

[[Page 131 STAT. 2202]]

        treating the taxpayer as having elected the benefits of subpart 
        A of part III of subchapter N).
            ``(4) Coordination with section 78.--With respect to the 
        taxes treated as paid or accrued by a domestic corporation with 
        respect to amounts which are includible in gross income of such 
        domestic corporation by reason of this section, section 78 shall 
        apply only to so much of such taxes as bears the same proportion 
        to the amount of such taxes as--
                    ``(A) the excess of--
                          ``(i) the amounts which are includible in 
                      gross income of such domestic corporation by 
                      reason of this section, over
                          ``(ii) the deduction allowable under 
                      subsection (c) with respect to such amounts, bears 
                      to
                    ``(B) such amounts.

    ``(h) Election To Pay Liability in Installments.--
            ``(1) In general.--In the case of a United States 
        shareholder of a deferred foreign income corporation, such 
        United States shareholder may elect to pay the net tax liability 
        under this section in 8 installments of the following amounts:
                    ``(A) 8 percent of the net tax liability in the case 
                of each of the first 5 of such installments,
                    ``(B) 15 percent of the net tax liability in the 
                case of the 6th such installment,
                    ``(C) 20 percent of the net tax liability in the 
                case of the 7th such installment, and
                    ``(D) 25 percent of the net tax liability in the 
                case of the 8th such installment.
            ``(2) Date for payment of installments.--If an election is 
        made under paragraph (1), the first installment shall be paid on 
        the due date (determined without regard to any extension of time 
        for filing the return) for the return of tax for the taxable 
        year described in subsection (a) and each succeeding installment 
        shall be paid on the due date (as so determined) for the return 
        of tax for the taxable year following the taxable year with 
        respect to which the preceding installment was made.
            ``(3) Acceleration of payment.--If there is an addition to 
        tax for failure to timely pay any installment required under 
        this subsection, a liquidation or sale of substantially all the 
        assets of the taxpayer (including in a title 11 or similar 
        case), a cessation of business by the taxpayer, or any similar 
        circumstance, then the unpaid portion of all remaining 
        installments shall be due on the date of such event (or in the 
        case of a title 11 or similar case, the day before the petition 
        is filed). The preceding sentence shall not apply to the sale of 
        substantially all the assets of a taxpayer to a buyer if such 
        buyer enters into an agreement with the Secretary under which 
        such buyer is liable for the remaining installments due under 
        this subsection in the same manner as if such buyer were the 
        taxpayer.
            ``(4) Proration of deficiency to installments.--If an 
        election is made under paragraph (1) to pay the net tax 
        liability under this section in installments and a deficiency 
        has been assessed with respect to such net tax liability, the 
        deficiency shall be prorated to the installments payable under 
        paragraph (1). The part of the deficiency so prorated to any 
        installment the date for payment of which has not arrived shall 
        be collected

[[Page 131 STAT. 2203]]

        at the same time as, and as a part of, such installment. The 
        part of the deficiency so prorated to any installment the date 
        for payment of which has arrived shall be paid upon notice and 
        demand from the Secretary. This subsection shall not apply if 
        the deficiency is due to negligence, to intentional disregard of 
        rules and regulations, or to fraud with intent to evade tax.
            ``(5) Election.--Any election under paragraph (1) shall be 
        made not later than the due date for the return of tax for the 
        taxable year described in subsection (a) and shall be made in 
        such manner as the Secretary shall provide.
            ``(6) Net tax liability under this section.--For purposes of 
        this subsection--
                    ``(A) In general.--The net tax liability under this 
                section with respect to any United States shareholder is 
                the excess (if any) of--
                          ``(i) such taxpayer's net income tax for the 
                      taxable year in which an amount is included in the 
                      gross income of such United States shareholder 
                      under section 951(a)(1) by reason of this section, 
                      over
                          ``(ii) such taxpayer's net income tax for such 
                      taxable year determined--
                                    ``(I) without regard to this 
                                section, and
                                    ``(II) without regard to any income 
                                or deduction properly attributable to a 
                                dividend received by such United States 
                                shareholder from any deferred foreign 
                                income corporation.
                    ``(B) Net income tax.--The term `net income tax' 
                means the regular tax liability reduced by the credits 
                allowed under subparts A, B, and D of part IV of 
                subchapter A.

    ``(i) Special Rules for S Corporation Shareholders.--
            ``(1) In general.--In the case of any S corporation which is 
        a United States shareholder of a deferred foreign income 
        corporation, each shareholder of such S corporation may elect to 
        defer payment of such shareholder's net tax liability under this 
        section with respect to such S corporation until the 
        shareholder's taxable year which includes the triggering event 
        with respect to such liability. Any net tax liability payment of 
        which is deferred under the preceding sentence shall be assessed 
        on the return of tax as an addition to tax in the shareholder's 
        taxable year which includes such triggering event.
            ``(2) Triggering event.--
                    ``(A) In general.--In the case of any shareholder's 
                net tax liability under this section with respect to any 
                S corporation, the triggering event with respect to such 
                liability is whichever of the following occurs first:
                          ``(i) Such corporation ceases to be an S 
                      corporation (determined as of the first day of the 
                      first taxable year that such corporation is not an 
                      S corporation).
                          ``(ii) A liquidation or sale of substantially 
                      all the assets of such S corporation (including in 
                      a title 11 or similar case), a cessation of 
                      business by such S corporation, such S corporation 
                      ceases to exist, or any similar circumstance.

[[Page 131 STAT. 2204]]

                          ``(iii) A transfer of any share of stock in 
                      such S corporation by the taxpayer (including by 
                      reason of death, or otherwise).
                    ``(B) Partial transfers of stock.--In the case of a 
                transfer of less than all of the taxpayer's shares of 
                stock in the S corporation, such transfer shall only be 
                a triggering event with respect to so much of the 
                taxpayer's net tax liability under this section with 
                respect to such S corporation as is properly allocable 
                to such stock.
                    ``(C) Transfer of liability.--A transfer described 
                in clause (iii) of subparagraph (A) shall not be treated 
                as a triggering event if the transferee enters into an 
                agreement with the Secretary under which such transferee 
                is liable for net tax liability with respect to such 
                stock in the same manner as if such transferee were the 
                taxpayer.
            ``(3) Net tax liability.--A shareholder's net tax liability 
        under this section with respect to any S corporation is the net 
        tax liability under this section which would be determined under 
        subsection (h)(6) if the only subpart F income taken into 
        account by such shareholder by reason of this section were 
        allocations from such S corporation.
            ``(4) Election to pay deferred liability in installments.--
        In the case of a taxpayer which elects to defer payment under 
        paragraph (1)--
                    ``(A) subsection (h) shall be applied separately 
                with respect to the liability to which such election 
                applies,
                    ``(B) an election under subsection (h) with respect 
                to such liability shall be treated as timely made if 
                made not later than the due date for the return of tax 
                for the taxable year in which the triggering event with 
                respect to such liability occurs,
                    ``(C) the first installment under subsection (h) 
                with respect to such liability shall be paid not later 
                than such due date (but determined without regard to any 
                extension of time for filing the return), and
                    ``(D) if the triggering event with respect to any 
                net tax liability is described in paragraph (2)(A)(ii), 
                an election under subsection (h) with respect to such 
                liability may be made only with the consent of the 
                Secretary.
            ``(5) Joint and several liability of s corporation.--If any 
        shareholder of an S corporation elects to defer payment under 
        paragraph (1), such S corporation shall be jointly and severally 
        liable for such payment and any penalty, addition to tax, or 
        additional amount attributable thereto.
            ``(6) Extension of limitation on collection.--Any limitation 
        on the time period for the collection of a liability deferred 
        under this subsection shall not be treated as beginning before 
        the date of the triggering event with respect to such liability.
            ``(7) Annual reporting of net tax liability.--
                    ``(A) In general.--Any shareholder of an S 
                corporation which makes an election under paragraph (1) 
                shall report the amount of such shareholder's deferred 
                net tax liability on such shareholder's return of tax 
                for the taxable year for which such election is made and 
                on the return of tax for each taxable year thereafter 
                until such amount has been fully assessed on such 
                returns.

[[Page 131 STAT. 2205]]

                    ``(B) Deferred net tax liability.--For purposes of 
                this paragraph, the term `deferred net tax liability' 
                means, with respect to any taxable year, the amount of 
                net tax liability payment of which has been deferred 
                under paragraph (1) and which has not been assessed on a 
                return of tax for any prior taxable year.
                    ``(C) Failure to report.--In the case of any failure 
                to report any amount required to be reported under 
                subparagraph (A) with respect to any taxable year before 
                the due date for the return of tax for such taxable 
                year, there shall be assessed on such return as an 
                addition to tax 5 percent of such amount.
            ``(8) Election.--Any election under paragraph (1)--
                    ``(A) shall be made by the shareholder of the S 
                corporation not later than the due date for such 
                shareholder's return of tax for the taxable year which 
                includes the close of the taxable year of such S 
                corporation in which the amount described in subsection 
                (a) is taken into account, and
                    ``(B) shall be made in such manner as the Secretary 
                shall provide.

    ``(j) Reporting by S Corporation.--Each S corporation which is a 
United States shareholder of a specified foreign corporation shall 
report in its return of tax under section 6037(a) the amount includible 
in its gross income for such taxable year by reason of this section and 
the amount of the deduction allowable by subsection (c). Any copy 
provided to a shareholder under section 6037(b) shall include a 
statement of such shareholder's pro rata share of such amounts.
    ``(k) Extension of Limitation on Assessment.--Notwithstanding 
section 6501, the limitation on the time period for the assessment of 
the net tax liability under this section (as defined in subsection 
(h)(6)) shall not expire before the date that is 6 years after the 
return for the taxable year described in such subsection was filed.
    ``(l) Recapture for Expatriated Entities.--
            ``(1) In general.--If a deduction is allowed under 
        subsection (c) to a United States shareholder and such 
        shareholder first becomes an expatriated entity at any time 
        during the 10-year period beginning on the date of the enactment 
        of the Tax Cuts and Jobs Act (with respect to a surrogate 
        foreign corporation which first becomes a surrogate foreign 
        corporation during such period), then--
                    ``(A) the tax imposed by this chapter shall be 
                increased for the first taxable year in which such 
                taxpayer becomes an expatriated entity by an amount 
                equal to 35 percent of the amount of the deduction 
                allowed under subsection (c), and
                    ``(B) no credits shall be allowed against the 
                increase in tax under subparagraph (A).
            ``(2) Expatriated entity.--For purposes of this subsection, 
        the term `expatriated entity' has the same meaning given such 
        term under section 7874(a)(2), except that such term shall not 
        include an entity if the surrogate foreign corporation with 
        respect to the entity is treated as a domestic corporation under 
        section 7874(b).

[[Page 131 STAT. 2206]]

            ``(3) Surrogate foreign corporation.--For purposes of this 
        subsection, the term `surrogate foreign corporation' has the 
        meaning given such term in section 7874(a)(2)(B).

    ``(m) Special Rules for United States Shareholders Which Are Real 
Estate Investment Trusts.--
            ``(1) In general.--If a real estate investment trust is a 
        United States shareholder in 1 or more deferred foreign income 
        corporations--
                    ``(A) any amount required to be taken into account 
                under section 951(a)(1) by reason of this section shall 
                not be taken into account as gross income of the real 
                estate investment trust for purposes of applying 
                paragraphs (2) and (3) of section 856(c) to any taxable 
                year for which such amount is taken into account under 
                section 951(a)(1), and
                    ``(B) if the real estate investment trust elects the 
                application of this subparagraph, notwithstanding 
                subsection (a), any amount required to be taken into 
                account under section 951(a)(1) by reason of this 
                section shall, in lieu of the taxable year in which it 
                would otherwise be included in gross income (for 
                purposes of the computation of real estate investment 
                trust taxable income under section 857(b)), be included 
                in gross income as follows:
                          ``(i) 8 percent of such amount in the case of 
                      each of the taxable years in the 5-taxable year 
                      period beginning with the taxable year in which 
                      such amount would otherwise be included.
                          ``(ii) 15 percent of such amount in the case 
                      of the 1st taxable year following such period.
                          ``(iii) 20 percent of such amount in the case 
                      of the 2nd taxable year following such period.
                          ``(iv) 25 percent of such amount in the case 
                      of the 3rd taxable year following such period.
            ``(2) Rules for trusts electing deferred inclusion.--
                    ``(A) Election.--Any election under paragraph (1)(B) 
                shall be made not later than the due date for the first 
                taxable year in the 5-taxable year period described in 
                clause (i) of paragraph (1)(B) and shall be made in such 
                manner as the Secretary shall provide.
                    ``(B) Special rules.--If an election under paragraph 
                (1)(B) is in effect with respect to any real estate 
                investment trust, the following rules shall apply:
                          ``(i) Application of participation 
                      exemption.--For purposes of subsection (c)(1)--
                                    ``(I) the aggregate amount to which 
                                subparagraph (A) or (B) of subsection 
                                (c)(1) applies shall be determined 
                                without regard to the election,
                                    ``(II) each such aggregate amount 
                                shall be allocated to each taxable year 
                                described in paragraph (1)(B) in the 
                                same proportion as the amount included 
                                in the gross income of such United 
                                States shareholder under section 
                                951(a)(1) by reason of this section is 
                                allocated to each such taxable year.
                                    ``(III) No installment payments.--
                                The real estate investment trust may not 
                                make an election under subsection (g) 
                                for any taxable year described in 
                                paragraph (1)(B).

[[Page 131 STAT. 2207]]

                          ``(ii) Acceleration of inclusion.--If there is 
                      a liquidation or sale of substantially all the 
                      assets of the real estate investment trust 
                      (including in a title 11 or similar case), a 
                      cessation of business by such trust, or any 
                      similar circumstance, then any amount not yet 
                      included in gross income under paragraph (1)(B) 
                      shall be included in gross income as of the day 
                      before the date of the event and the unpaid 
                      portion of any tax liability with respect to such 
                      inclusion shall be due on the date of such event 
                      (or in the case of a title 11 or similar case, the 
                      day before the petition is filed).

    ``(n) Election Not To Apply Net Operating Loss Deduction.--
            ``(1) In general.--If a United States shareholder of a 
        deferred foreign income corporation elects the application of 
        this subsection for the taxable year described in subsection 
        (a), then the amount described in paragraph (2) shall not be 
        taken into account--
                    ``(A) in determining the amount of the net operating 
                loss deduction under section 172 of such shareholder for 
                such taxable year, or
                    ``(B) in determining the amount of taxable income 
                for such taxable year which may be reduced by net 
                operating loss carryovers or carrybacks to such taxable 
                year under section 172.
            ``(2) Amount described.--The amount described in this 
        paragraph is the sum of--
                    ``(A) the amount required to be taken into account 
                under section 951(a)(1) by reason of this section 
                (determined after the application of subsection (c)), 
                plus
                    ``(B) in the case of a domestic corporation which 
                chooses to have the benefits of subpart A of part III of 
                subchapter N for the taxable year, the taxes deemed to 
                be paid by such corporation under subsections (a) and 
                (b) of section 960 for such taxable year with respect to 
                the amount described in subparagraph (A) which are 
                treated as a dividends under section 78.
            ``(3) Election.--Any election under this subsection shall be 
        made not later than the due date (including extensions) for 
        filing the return of tax for the taxable year and shall be made 
        in such manner as the Secretary shall prescribe.

    ``(o) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
provisions of this section, including--
            ``(1) regulations or other guidance to provide appropriate 
        basis adjustments, and
            ``(2) regulations or other guidance to prevent the avoidance 
        of the purposes of this section, including through a reduction 
        in earnings and profits, through changes in entity 
        classification or accounting methods, or otherwise.''.

[[Page 131 STAT. 2208]]

    (b) Clerical Amendment.--The table of sections for subpart F of part 
III of subchapter N of chapter 1 <<NOTE: 26 USC 951 prec.>>  is amended 
by striking the item relating to section 965 and inserting the 
following:

``Sec. 965. Treatment of deferred foreign income upon transition to 
           participation exemption system of taxation.''.

          Subpart B--Rules Related to Passive and Mobile Income

  CHAPTER 1--TAXATION OF FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL 
                       INTANGIBLE LOW-TAXED INCOME

SEC. 14201. CURRENT YEAR INCLUSION OF GLOBAL INTANGIBLE LOW-TAXED 
                            INCOME BY UNITED STATES SHAREHOLDERS.

    (a) In General.--Subpart F of part III of subchapter N of chapter 1 
is amended by inserting after section 951 the following new section:
``SEC. 951A. <<NOTE: 26 USC 951A.>>  GLOBAL INTANGIBLE LOW-TAXED 
                          INCOME INCLUDED IN GROSS INCOME OF 
                          UNITED STATES SHAREHOLDERS.

    ``(a) In General.--Each person who is a United States shareholder of 
any controlled foreign corporation for any taxable year of such United 
States shareholder shall include in gross income such shareholder's 
global intangible low-taxed income for such taxable year.
    ``(b) Global Intangible Low-taxed Income.--For purposes of this 
section--
            ``(1) In general.--The term `global intangible low-taxed 
        income' means, with respect to any United States shareholder for 
        any taxable year of such United States shareholder, the excess 
        (if any) of--
                    ``(A) such shareholder's net CFC tested income for 
                such taxable year, over
                    ``(B) such shareholder's net deemed tangible income 
                return for such taxable year.
            ``(2) Net deemed tangible income return.--The term `net 
        deemed tangible income return' means, with respect to any United 
        States shareholder for any taxable year, the excess of--
                    ``(A) 10 percent of the aggregate of such 
                shareholder's pro rata share of the qualified business 
                asset investment of each controlled foreign corporation 
                with respect to which such shareholder is a United 
                States shareholder for such taxable year (determined for 
                each taxable year of each such controlled foreign 
                corporation which ends in or with such taxable year of 
                such United States shareholder), over
                    ``(B) the amount of interest expense taken into 
                account under subsection (c)(2)(A)(ii) in determining 
                the shareholder's net CFC tested income for the taxable 
                year to the extent the interest income attributable to 
                such expense is not taken into account in determining 
                such shareholder's net CFC tested income.

    ``(c) Net CFC Tested Income.--For purposes of this section--
            ``(1) In general.--The term `net CFC tested income' means, 
        with respect to any United States shareholder for any taxable

[[Page 131 STAT. 2209]]

        year of such United States shareholder, the excess (if any) of--
                    ``(A) the aggregate of such shareholder's pro rata 
                share of the tested income of each controlled foreign 
                corporation with respect to which such shareholder is a 
                United States shareholder for such taxable year of such 
                United States shareholder (determined for each taxable 
                year of such controlled foreign corporation which ends 
                in or with such taxable year of such United States 
                shareholder), over
                    ``(B) the aggregate of such shareholder's pro rata 
                share of the tested loss of each controlled foreign 
                corporation with respect to which such shareholder is a 
                United States shareholder for such taxable year of such 
                United States shareholder (determined for each taxable 
                year of such controlled foreign corporation which ends 
                in or with such taxable year of such United States 
                shareholder).
            ``(2) Tested income; tested loss.--For purposes of this 
        section--
                    ``(A) Tested income.--The term `tested income' 
                means, with respect to any controlled foreign 
                corporation for any taxable year of such controlled 
                foreign corporation, the excess (if any) of--
                          ``(i) the gross income of such corporation 
                      determined without regard to--
                                    ``(I) any item of income described 
                                in section 952(b),
                                    ``(II) any gross income taken into 
                                account in determining the subpart F 
                                income of such corporation,
                                    ``(III) any gross income excluded 
                                from the foreign base company income (as 
                                defined in section 954) and the 
                                insurance income (as defined in section 
                                953) of such corporation by reason of 
                                section 954(b)(4),
                                    ``(IV) any dividend received from a 
                                related person (as defined in section 
                                954(d)(3)), and
                                    ``(V) any foreign oil and gas 
                                extraction income (as defined in section 
                                907(c)(1)) of such corporation, over
                          ``(ii) the deductions (including taxes) 
                      properly allocable to such gross income under 
                      rules similar to the rules of section 954(b)(5) 
                      (or to which such deductions would be allocable if 
                      there were such gross income).
                    ``(B) Tested loss.--
                          ``(i) In general.--The term `tested loss' 
                      means, with respect to any controlled foreign 
                      corporation for any taxable year of such 
                      controlled foreign corporation, the excess (if 
                      any) of the amount described in subparagraph 
                      (A)(ii) over the amount described in subparagraph 
                      (A)(i).
                          ``(ii) Coordination with subpart f to deny 
                      double benefit of losses.--Section 952(c)(1)(A) 
                      shall be applied by increasing the earnings and 
                      profits of the controlled foreign corporation by 
                      the tested loss of such corporation.

    ``(d) Qualified Business Asset Investment.--For purposes of this 
section--

[[Page 131 STAT. 2210]]

            ``(1) In general.--The term `qualified business asset 
        investment' means, with respect to any controlled foreign 
        corporation for any taxable year, the average of such 
        corporation's aggregate adjusted bases as of the close of each 
        quarter of such taxable year in specified tangible property--
                    ``(A) used in a trade or business of the 
                corporation, and
                    ``(B) of a type with respect to which a deduction is 
                allowable under section 167.
            ``(2) Specified tangible property.--
                    ``(A) In general.--The term `specified tangible 
                property' means, except as provided in subparagraph (B), 
                any tangible property used in the production of tested 
                income.
                    ``(B) Dual use property.--In the case of property 
                used both in the production of tested income and income 
                which is not tested income, such property shall be 
                treated as specified tangible property in the same 
                proportion that the gross income described in subsection 
                (c)(1)(A) produced with respect to such property bears 
                to the total gross income produced with respect to such 
                property.
            ``(3) Determination of adjusted basis.--For purposes of this 
        subsection, notwithstanding any provision of this title (or any 
        other provision of law) which is enacted after the date of the 
        enactment of this section, the adjusted basis in any property 
        shall be determined--
                    ``(A) by using the alternative depreciation system 
                under section 168(g), and
                    ``(B) by allocating the depreciation deduction with 
                respect to such property ratably to each day during the 
                period in the taxable year to which such depreciation 
                relates.
            ``(3) Partnership property.--For purposes of this 
        subsection, if a controlled foreign corporation holds an 
        interest in a partnership at the close of such taxable year of 
        the controlled foreign corporation, such controlled foreign 
        corporation shall take into account under paragraph (1) the 
        controlled foreign corporation's distributive share of the 
        aggregate of the partnership's adjusted bases (determined as of 
        such date in the hands of the partnership) in tangible property 
        held by such partnership to the extent such property--
                    ``(A) is used in the trade or business of the 
                partnership,
                    ``(B) is of a type with respect to which a deduction 
                is allowable under section 167, and
                    ``(C) is used in the production of tested income 
                (determined with respect to such controlled foreign 
                corporation's distributive share of income with respect 
                to such property).
        For purposes of this paragraph, the controlled foreign 
        corporation's distributive share of the adjusted basis of any 
        property shall be the controlled foreign corporation's 
        distributive share of income with respect to such property.
            ``(4) Regulations.--The Secretary shall issue such 
        regulations or other guidance as the Secretary determines 
        appropriate to prevent the avoidance of the purposes of this 
        subsection, including regulations or other guidance which 
        provide for the treatment of property if--
                    ``(A) such property is transferred, or held, 
                temporarily, or

[[Page 131 STAT. 2211]]

                    ``(B) the avoidance of the purposes of this 
                paragraph is a factor in the transfer or holding of such 
                property.

    ``(e) Determination of Pro Rata Share, etc.--For purposes of this 
section--
            ``(1) In general.--The pro rata shares referred to in 
        subsections (b), (c)(1)(A), and (c)(1)(B), respectively, shall 
        be determined under the rules of section 951(a)(2) in the same 
        manner as such section applies to subpart F income and shall be 
        taken into account in the taxable year of the United States 
        shareholder in which or with which the taxable year of the 
        controlled foreign corporation ends.
            ``(2) Treatment as united states shareholder.--A person 
        shall be treated as a United States shareholder of a controlled 
        foreign corporation for any taxable year of such person only if 
        such person owns (within the meaning of section 958(a)) stock in 
        such foreign corporation on the last day in the taxable year of 
        such foreign corporation on which such foreign corporation is a 
        controlled foreign corporation.
            ``(3) Treatment as controlled foreign corporation.--A 
        foreign corporation shall be treated as a controlled foreign 
        corporation for any taxable year if such foreign corporation is 
        a controlled foreign corporation at any time during such taxable 
        year.

    ``(f) Treatment as Subpart F Income for Certain Purposes.--
            ``(1) In general.--
                    ``(A) Application.--Except as provided in 
                subparagraph (B), any global intangible low-taxed income 
                included in gross income under subsection (a) shall be 
                treated in the same manner as an amount included under 
                section 951(a)(1)(A) for purposes of applying sections 
                168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 961, 
                962, 993(a)(1)(E), 996(f)(1), 1248(b)(1), 1248(d)(1), 
                6501(e)(1)(C), 6654(d)(2)(D), and 6655(e)(4).
                    ``(B) Exception.--The Secretary shall provide rules 
                for the application of subparagraph (A) to other 
                provisions of this title in any case in which the 
                determination of subpart F income is required to be made 
                at the level of the controlled foreign corporation.
            ``(2) Allocation of global intangible low-taxed income to 
        controlled foreign corporations.--For purposes of the sections 
        referred to in paragraph (1), with respect to any controlled 
        foreign corporation any pro rata amount from which is taken into 
        account in determining the global intangible low-taxed income 
        included in gross income of a United States shareholder under 
        subsection (a), the portion of such global intangible low-taxed 
        income which is treated as being with respect to such controlled 
        foreign corporation is--
                    ``(A) in the case of a controlled foreign 
                corporation with no tested income, zero, and
                    ``(B) in the case of a controlled foreign 
                corporation with tested income, the portion of such 
                global intangible low-taxed income which bears the same 
                ratio to such global intangible low-taxed income as--
                          ``(i) such United States shareholder's pro 
                      rata amount of the tested income of such 
                      controlled foreign corporation, bears to

[[Page 131 STAT. 2212]]

                          ``(ii) the aggregate amount described in 
                      subsection (c)(1)(A) with respect to such United 
                      States shareholder.''.

    (b) Foreign Tax Credit.--
            (1) Application of deemed paid foreign tax credit.--Section 
        960 <<NOTE: 26 USC 960.>>  is amended adding at the end the 
        following new subsection:

    ``(d) Deemed Paid Credit for Taxes Properly Attributable to Tested 
Income.--
            ``(1) In general.--For purposes of subpart A of this part, 
        if any amount is includible in the gross income of a domestic 
        corporation under section 951A, such domestic corporation shall 
        be deemed to have paid foreign income taxes equal to 80 percent 
        of the product of--
                    ``(A) such domestic corporation's inclusion 
                percentage, multiplied by
                    ``(B) the aggregate tested foreign income taxes paid 
                or accrued by controlled foreign corporations.
            ``(2) Inclusion percentage.--For purposes of paragraph (1), 
        the term `inclusion percentage' means, with respect to any 
        domestic corporation, the ratio (expressed as a percentage) of--
                    ``(A) such corporation's global intangible low-taxed 
                income (as defined in section 951A(b)), divided by
                    ``(B) the aggregate amount described in section 
                951A(c)(1)(A) with respect to such corporation.
            ``(3) Tested foreign income taxes.--For purposes of 
        paragraph (1), the term `tested foreign income taxes' means, 
        with respect to any domestic corporation which is a United 
        States shareholder of a controlled foreign corporation, the 
        foreign income taxes paid or accrued by such foreign corporation 
        which are properly attributable to the tested income of such 
        foreign corporation taken into account by such domestic 
        corporation under section 951A.''.
            (2) Application of foreign tax credit limitation.--
                    (A) Separate basket for global intangible low-taxed 
                income.--Section 904(d)(1) is amended by redesignating 
                subparagraphs (A) and (B) as subparagraphs (B) and (C), 
                respectively, and by inserting before subparagraph (B) 
                (as so redesignated) the following new subparagraph:
                    ``(A) any amount includible in gross income under 
                section 951A (other than passive category income),''.
                    (B) Exclusion from general category income.--Section 
                904(d)(2)(A)(ii) is amended by inserting ``income 
                described in paragraph (1)(A) and'' before ``passive 
                category income''.
                    (C) No carryover or carryback of excess taxes.--
                Section 904(c) is amended by adding at the end the 
                following: ``This subsection shall not apply to taxes 
                paid or accrued with respect to amounts described in 
                subsection (d)(1)(A).''.

[[Page 131 STAT. 2213]]

    (c) Clerical Amendment.--The table of sections for subpart F of part 
III of subchapter N of chapter 1 <<NOTE: 26 USC 951 prec.>>  is amended 
by inserting after the item relating to section 951 the following new 
item:

``Sec. 951A. Global intangible low-taxed income included in gross income 
           of United States shareholders.''.

    (d) <<NOTE: 26 USC 904 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years of foreign corporations 
beginning after December 31, 2017, and to taxable years of United States 
shareholders in which or with which such taxable years of foreign 
corporations end.
SEC. 14202. DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME AND 
                            GLOBAL INTANGIBLE LOW-TAXED INCOME.

    (a) In General.--Part VIII of subchapter B of chapter 1 is amended 
by adding at the end the following new section:
``SEC. 250. <<NOTE: 26 USC 250.>>  FOREIGN-DERIVED INTANGIBLE 
                        INCOME AND GLOBAL INTANGIBLE LOW-TAXED 
                        INCOME.

    ``(a) Allowance of Deduction.--
            ``(1) In general.--In the case of a domestic corporation for 
        any taxable year, there shall be allowed as a deduction an 
        amount equal to the sum of--
                    ``(A) 37.5 percent of the foreign-derived intangible 
                income of such domestic corporation for such taxable 
                year, plus
                    ``(B) 50 percent of--
                          ``(i) the global intangible low-taxed income 
                      amount (if any) which is included in the gross 
                      income of such domestic corporation under section 
                      951A for such taxable year, and
                          ``(ii) the amount treated as a dividend 
                      received by such corporation under section 78 
                      which is attributable to the amount described in 
                      clause (i).
            ``(2) Limitation based on taxable income.--
                    ``(A) In general.--If, for any taxable year--
                          ``(i) the sum of the foreign-derived 
                      intangible income and the global intangible low-
                      taxed income amount otherwise taken into account 
                      by the domestic corporation under paragraph (1), 
                      exceeds
                          ``(ii) the taxable income of the domestic 
                      corporation (determined without regard to this 
                      section),
                then the amount of the foreign-derived intangible income 
                and the global intangible low-taxed income amount so 
                taken into account shall be reduced as provided in 
                subparagraph (B).
                    ``(B) Reduction.--For purposes of subparagraph (A)--
                          ``(i) foreign-derived intangible income shall 
                      be reduced by an amount which bears the same ratio 
                      to the excess described in subparagraph (A) as 
                      such foreign-derived intangible income bears to 
                      the sum described in subparagraph (A)(i), and
                          ``(ii) the global intangible low-taxed income 
                      amount shall be reduced by the remainder of such 
                      excess.
            ``(3) Reduction in deduction for taxable years after 2025.--
        In the case of any taxable year beginning after December 31, 
        2025, paragraph (1) shall be applied by substituting--

[[Page 131 STAT. 2214]]

                    ``(A) `21.875 percent' for `37.5 percent' in 
                subparagraph (A), and
                    ``(B) `37.5 percent' for `50 percent' in 
                subparagraph (B).

    ``(b) Foreign-derived Intangible Income.--For purposes of this 
section--
            ``(1) In general.--The foreign-derived intangible income of 
        any domestic corporation is the amount which bears the same 
        ratio to the deemed intangible income of such corporation as--
                    ``(A) the foreign-derived deduction eligible income 
                of such corporation, bears to
                    ``(B) the deduction eligible income of such 
                corporation.
            ``(2) Deemed intangible income.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `deemed intangible 
                income' means the excess (if any) of--
                          ``(i) the deduction eligible income of the 
                      domestic corporation, over
                          ``(ii) the deemed tangible income return of 
                      the corporation.
                    ``(B) Deemed tangible income return.--The term 
                `deemed tangible income return' means, with respect to 
                any corporation, an amount equal to 10 percent of the 
                corporation's qualified business asset investment (as 
                defined in section 951A(d), determined by substituting 
                `deduction eligible income' for `tested income' in 
                paragraph (2) thereof and without regard to whether the 
                corporation is a controlled foreign corporation).
            ``(3) Deduction eligible income.--
                    ``(A) In general.--The term `deduction eligible 
                income' means, with respect to any domestic corporation, 
                the excess (if any) of--
                          ``(i) gross income of such corporation 
                      determined without regard to--
                                    ``(I) any amount included in the 
                                gross income of such corporation under 
                                section 951(a)(1),
                                    ``(II) the global intangible low-
                                taxed income included in the gross 
                                income of such corporation under section 
                                951A,
                                    ``(III) any financial services 
                                income (as defined in section 
                                904(d)(2)(D)) of such corporation,
                                    ``(IV) any dividend received from a 
                                corporation which is a controlled 
                                foreign corporation of such domestic 
                                corporation,
                                    ``(V) any domestic oil and gas 
                                extraction income of such corporation, 
                                and
                                    ``(VI) any foreign branch income (as 
                                defined in section 904(d)(2)(J)), over
                          ``(ii) the deductions (including taxes) 
                      properly allocable to such gross income.
                    ``(B) Domestic oil and gas extraction income.--For 
                purposes of subparagraph (A), the term `domestic oil and 
                gas extraction income' means income described in section 
                907(c)(1), determined by substituting `within the United 
                States' for `without the United States'.

[[Page 131 STAT. 2215]]

            ``(4) Foreign-derived deduction eligible income.--The term 
        `foreign-derived deduction eligible income' means, with respect 
        to any taxpayer for any taxable year, any deduction eligible 
        income of such taxpayer which is derived in connection with--
                    ``(A) property--
                          ``(i) which is sold by the taxpayer to any 
                      person who is not a United States person, and
                          ``(ii) which the taxpayer establishes to the 
                      satisfaction of the Secretary is for a foreign 
                      use, or
                    ``(B) services provided by the taxpayer which the 
                taxpayer establishes to the satisfaction of the 
                Secretary are provided to any person, or with respect to 
                property, not located within the United States.
            ``(5) Rules relating to foreign use property or services.--
        For purposes of this subsection--
                    ``(A) Foreign use.--The term `foreign use' means any 
                use, consumption, or disposition which is not within the 
                United States.
                    ``(B) Property or services provided to domestic 
                intermediaries.--
                          ``(i) Property.--If a taxpayer sells property 
                      to another person (other than a related party) for 
                      further manufacture or other modification within 
                      the United States, such property shall not be 
                      treated as sold for a foreign use even if such 
                      other person subsequently uses such property for a 
                      foreign use.
                          ``(ii) Services.--If a taxpayer provides 
                      services to another person (other than a related 
                      party) located within the United States, such 
                      services shall not be treated as described in 
                      paragraph (4)(B) even if such other person uses 
                      such services in providing services which are so 
                      described.
                    ``(C) Special rules with respect to related party 
                transactions.--
                          ``(i) Sales to related parties.--If property 
                      is sold to a related party who is not a United 
                      States person, such sale shall not be treated as 
                      for a foreign use unless--
                                    ``(I) such property is ultimately 
                                sold by a related party, or used by a 
                                related party in connection with 
                                property which is sold or the provision 
                                of services, to another person who is an 
                                unrelated party who is not a United 
                                States person, and
                                    ``(II) the taxpayer establishes to 
                                the satisfaction of the Secretary that 
                                such property is for a foreign use.
                      For purposes of this clause, a sale of property 
                      shall be treated as a sale of each of the 
                      components thereof.
                          ``(ii) Service provided to related parties.--
                      If a service is provided to a related party who is 
                      not located in the United States, such service 
                      shall not be treated described in subparagraph 
                      (A)(ii) unless the taxpayer established to the 
                      satisfaction of the Secretary that such service is 
                      not substantially similar to services provided by 
                      such related party to persons located within the 
                      United States.

[[Page 131 STAT. 2216]]

                    ``(D) Related party.--For purposes of this 
                paragraph, the term `related party' means any member of 
                an affiliated group as defined in section 1504(a), 
                determined--
                          ``(i) by substituting `more than 50 percent' 
                      for `at least 80 percent' each place it appears, 
                      and
                          ``(ii) without regard to paragraphs (2) and 
                      (3) of section 1504(b).
                Any person (other than a corporation) shall be treated 
                as a member of such group if such person is controlled 
                by members of such group (including any entity treated 
                as a member of such group by reason of this sentence) or 
                controls any such member. For purposes of the preceding 
                sentence, control shall be determined under the rules of 
                section 954(d)(3).
                    ``(E) Sold.--For purposes of this subsection, the 
                terms `sold', `sells', and `sale' shall include any 
                lease, license, exchange, or other disposition.

    ``(c) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
provisions of this section.''.
    (b) Conforming Amendments.--
            (1) Section 172(d), as amended by this Act, <<NOTE: 26 USC 
        172.>>  is amended by adding at the end the following new 
        paragraph:
            ``(9) Deduction for foreign-derived intangible income.--The 
        deduction under section 250 shall not be allowed.''.
            (2) Section 246(b)(1) is amended--
                    (A) by striking ``and subsection (a) and (b) of 
                section 245'' the first place it appears and inserting 
                ``, subsection (a) and (b) of section 245, and section 
                250'',
                    (B) by striking ``and subsection (a) and (b) of 
                section 245'' the second place it appears and inserting 
                ``subsection (a) and (b) of section 245, and 250''.
            (3) Section 469(i)(3)(F)(iii) is amended by striking ``and 
        222'' and inserting ``222, and 250''.
            (4) The table of sections for part VIII of subchapter B of 
        chapter 1 <<NOTE: 26 USC 241 prec.>>  is amended by adding at 
        the end the following new item:

``Sec. 250. Foreign-derived intangible income and global intangible low-
           taxed income.''.

    (c) <<NOTE: 26 USC 172 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.

         CHAPTER 2--OTHER MODIFICATIONS OF SUBPART F PROVISIONS

SEC. 14211. ELIMINATION OF INCLUSION OF FOREIGN BASE COMPANY OIL 
                            RELATED INCOME.

    (a) Repeal.--Subsection (a) of section 954 is amended--
            (1) by inserting ``and'' at the end of paragraph (2),
            (2) by striking the comma at the end of paragraph (3) and 
        inserting a period, and
            (3) by striking paragraph (5).

    (b) Conforming Amendments.--

[[Page 131 STAT. 2217]]

            (1) Section 952(c)(1)(B)(iii) <<NOTE: 26 USC 952.>>  is 
        amended by striking subclause (I) and redesignating subclauses 
        (II) through (V) as subclauses (I) through (IV), respectively.
            (2) Section 954(b) is amended--
                    (A) by striking the second sentence of paragraph 
                (4),
                    (B) by striking ``the foreign base company services 
                income, and the foreign base company oil related 
                income'' in paragraph (5) and inserting ``and the 
                foreign base company services income'', and
                    (C) by striking paragraph (6).
            (3) Section 954 is amended by striking subsection (g).

    (c) <<NOTE: 26 USC 952 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years of foreign corporations 
beginning after December 31, 2017, and to taxable years of United States 
shareholders with or within which such taxable years of foreign 
corporations end.
SEC. 14212. REPEAL OF INCLUSION BASED ON WITHDRAWAL OF PREVIOUSLY 
                            EXCLUDED SUBPART F INCOME FROM 
                            QUALIFIED INVESTMENT.

    (a) In General.--Subpart F of part III of subchapter N of chapter 1 
is amended by striking section 955.
    (b) Conforming Amendments.--
            (1)(A) Section 951(a)(1)(A) is amended to read as follows:
                    ``(A) his pro rata share (determined under paragraph 
                (2)) of the corporation's subpart F income for such 
                year, and''.
            (B) Section 851(b) is amended by striking ``section 
        951(a)(1)(A)(i)'' in the flush language at the end and inserting 
        ``section 951(a)(1)(A)''.
            (C) Section 952(c)(1)(B)(i) is amended by striking ``section 
        951(a)(1)(A)(i)'' and inserting ``section 951(a)(1)(A)''.
            (D) Section 953(c)(1)(C) is amended by striking ``section 
        951(a)(1)(A)(i)'' and inserting ``section 951(a)(1)(A)''.
            (2) Section 951(a) is amended by striking paragraph (3).
            (3) Section 953(d)(4)(B)(iv)(II) is amended by striking ``or 
        amounts referred to in clause (ii) or (iii) of section 
        951(a)(1)(A)''.
            (4) Section 964(b) is amended by striking ``, 955,''.
            (5) Section 970 is amended by striking subsection (b).
            (6) The table of sections for subpart F of part III of 
        subchapter N of chapter 1 <<NOTE: 26 USC 951 prec.>>  is amended 
        by striking the item relating to section 955.

    (c) <<NOTE: 26 USC 851 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years of foreign corporations 
beginning after December 31, 2017, and to taxable years of United States 
shareholders in which or with which such taxable years of foreign 
corporations end.
SEC. 14213. MODIFICATION OF STOCK ATTRIBUTION RULES FOR 
                            DETERMINING STATUS AS A CONTROLLED 
                            FOREIGN CORPORATION.

    (a) In General.--Section 958(b) is amended--
            (1) by striking paragraph (4), and
            (2) by striking ``Paragraphs (1) and (4)'' in the last 
        sentence and inserting ``Paragraph (1)''.

    (b) <<NOTE: 26 USC 958 note.>>  Effective Date.--The amendments made 
by this section shall apply to--

[[Page 131 STAT. 2218]]

            (1) the last taxable year of foreign corporations beginning 
        before January 1, 2018, and each subsequent taxable year of such 
        foreign corporations, and
            (2) taxable years of United States shareholders in which or 
        with which such taxable years of foreign corporations end.
SEC. 14214. MODIFICATION OF DEFINITION OF UNITED STATES 
                            SHAREHOLDER.

    (a) In General.--Section 951(b) <<NOTE: 26 USC 951.>>  is amended by 
inserting ``, or 10 percent or more of the total value of shares of all 
classes of stock of such foreign corporation'' after ``such foreign 
corporation''.

    (b) <<NOTE: 26 USC 951 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years of foreign corporations 
beginning after December 31, 2017, and to taxable years of United States 
shareholders with or within which such taxable years of foreign 
corporations end.
SEC. 14215. ELIMINATION OF REQUIREMENT THAT CORPORATION MUST BE 
                            CONTROLLED FOR 30 DAYS BEFORE SUBPART 
                            F INCLUSIONS APPLY.

    (a) In General.--Section 951(a)(1) is amended by striking ``for an 
uninterrupted period of 30 days or more'' and inserting ``at any time''.
    (b) <<NOTE: 26 USC 951 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years of foreign corporations 
beginning after December 31, 2017, and to taxable years of United States 
shareholders with or within which such taxable years of foreign 
corporations end.

                  CHAPTER 3--PREVENTION OF BASE EROSION

SEC. 14221. LIMITATIONS ON INCOME SHIFTING THROUGH INTANGIBLE 
                            PROPERTY TRANSFERS.

    (a) Definition of Intangible Asset.--Section 936(h)(3)(B) is 
amended--
            (1) by striking ``or'' at the end of clause (v),
            (2) by striking clause (vi) and inserting the following:
                          ``(vi) any goodwill, going concern value, or 
                      workforce in place (including its composition and 
                      terms and conditions (contractual or otherwise) of 
                      its employment); or
                          ``(vii) any other item the value or potential 
                      value of which is not attributable to tangible 
                      property or the services of any individual.'', and
            (3) by striking the flush language after clause (vii), as 
        added by paragraph (2).

    (b) Clarification of Allowable Valuation Methods.--
            (1) Foreign corporations.--Section 367(d)(2) is amended by 
        adding at the end the following new subparagraph:
                    ``(D) Regulatory authority.--For purposes of the 
                last sentence of subparagraph (A), the Secretary shall 
                require--
                          ``(i) the valuation of transfers of intangible 
                      property, including intangible property 
                      transferred with other property or services, on an 
                      aggregate basis, or
                          ``(ii) the valuation of such a transfer on the 
                      basis of the realistic alternatives to such a 
                      transfer,
                if the Secretary determines that such basis is the most 
                reliable means of valuation of such transfers.''.

[[Page 131 STAT. 2219]]

            (2) Allocation among taxpayers.--Section 482 <<NOTE: 26 USC 
        482.>>  is amended by adding at the end the following: ``For 
        purposes of this section, the Secretary shall require the 
        valuation of transfers of intangible property (including 
        intangible property transferred with other property or services) 
        on an aggregate basis or the valuation of such a transfer on the 
        basis of the realistic alternatives to such a transfer, if the 
        Secretary determines that such basis is the most reliable means 
        of valuation of such transfers.''.

    (c) Effective Date.--
            (1) <<NOTE: 26 USC 367 note.>>  In general.--The amendments 
        made by this section shall apply to transfers in taxable years 
        beginning after December 31, 2017.
            (2) <<NOTE: 26 USC 963 note.>>  No inference.--Nothing in 
        the amendment made by subsection (a) shall be construed to 
        create any inference with respect to the application of section 
        936(h)(3) of the Internal Revenue Code of 1986, or the authority 
        of the Secretary of the Treasury to provide regulations for such 
        application, with respect to taxable years beginning before 
        January 1, 2018.
SEC. 14222. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED IN 
                            HYBRID TRANSACTIONS OR WITH HYBRID 
                            ENTITIES.

    (a) In General.--Part IX of subchapter B of chapter 1 is amended by 
inserting after section 267 the following:
``SEC. 267A. <<NOTE: 26 USC 267A.>>  CERTAIN RELATED PARTY AMOUNTS 
                          PAID OR ACCRUED IN HYBRID TRANSACTIONS 
                          OR WITH HYBRID ENTITIES.

    ``(a) In General.--No deduction shall be allowed under this chapter 
for any disqualified related party amount paid or accrued pursuant to a 
hybrid transaction or by, or to, a hybrid entity.
    ``(b) Disqualified Related Party Amount.--For purposes of this 
section--
            ``(1) Disqualified related party amount.--The term 
        `disqualified related party amount' means any interest or 
        royalty paid or accrued to a related party to the extent that--
                    ``(A) such amount is not included in the income of 
                such related party under the tax law of the country of 
                which such related party is a resident for tax purposes 
                or is subject to tax, or
                    ``(B) such related party is allowed a deduction with 
                respect to such amount under the tax law of such 
                country.
        Such term shall not include any payment to the extent such 
        payment is included in the gross income of a United States 
        shareholder under section 951(a).
            ``(2) Related party.--The term `related party' means a 
        related person as defined in section 954(d)(3), except that such 
        section shall be applied with respect to the person making the 
        payment described in paragraph (1) in lieu of the controlled 
        foreign corporation otherwise referred to in such section.

    ``(c) Hybrid Transaction.--For purposes of this section, the term 
`hybrid transaction' means any transaction, series of transactions, 
agreement, or instrument one or more payments with respect to which are 
treated as interest or royalties for purposes of this chapter and which 
are not so treated for purposes the tax law of the foreign country of 
which the recipient of such payment is resident for tax purposes or is 
subject to tax.
    ``(d) Hybrid Entity.--For purposes of this section, the term `hybrid 
entity' means any entity which is either--

[[Page 131 STAT. 2220]]

            ``(1) treated as fiscally transparent for purposes of this 
        chapter but not so treated for purposes of the tax law of the 
        foreign country of which the entity is resident for tax purposes 
        or is subject to tax, or
            ``(2) treated as fiscally transparent for purposes of such 
        tax law but not so treated for purposes of this chapter.

    ``(e) Regulations.--The Secretary shall issue such regulations or 
other guidance as may be necessary or appropriate to carry out the 
purposes of this section, including regulations or other guidance 
providing for--
            ``(1) rules for treating certain conduit arrangements which 
        involve a hybrid transaction or a hybrid entity as subject to 
        subsection (a),
            ``(2) rules for the application of this section to branches 
        or domestic entities,
            ``(3) rules for treating certain structured transactions as 
        subject to subsection (a),
            ``(4) rules for treating a tax preference as an exclusion 
        from income for purposes of applying subsection (b)(1) if such 
        tax preference has the effect of reducing the generally 
        applicable statutory rate by 25 percent or more,
            ``(5) rules for treating the entire amount of interest or 
        royalty paid or accrued to a related party as a disqualified 
        related party amount if such amount is subject to a 
        participation exemption system or other system which provides 
        for the exclusion or deduction of a substantial portion of such 
        amount,
            ``(6) rules for determining the tax residence of a foreign 
        entity if the entity is otherwise considered a resident of more 
        than one country or of no country,
            ``(7) exceptions from subsection (a) with respect to--
                    ``(A) cases in which the disqualified related party 
                amount is taxed under the laws of a foreign country 
                other than the country of which the related party is a 
                resident for tax purposes, and
                    ``(B) other cases which the Secretary determines do 
                not present a risk of eroding the Federal tax base,
            ``(8) requirements for record keeping and information 
        reporting in addition to any requirements imposed by section 
        6038A.''.

    (b) Conforming Amendment.--The table of sections for part IX of 
subchapter B of chapter 1 <<NOTE: 26 USC 261 prec.>>  is amended by 
inserting after the item relating to section 267 the following new item:

``Sec. 267A. Certain related party amounts paid or accrued in hybrid 
           transactions or with hybrid entities.''.

    (c) <<NOTE: 26 USC 267A note.>>  Effective Date.--The amendments 
made by this section shall apply to taxable years beginning after 
December 31, 2017.
SEC. 14223. SHAREHOLDERS OF SURROGATE FOREIGN CORPORATIONS NOT 
                            ELIGIBLE FOR REDUCED RATE ON 
                            DIVIDENDS.

    (a) In General.--Section 1(h)(11)(C)(iii) <<NOTE: 26 USC 1.>>  is 
amended--
            (1) by striking ``shall not include any foreign 
        corporation'' and inserting ``shall not include--
                                    ``(I) any foreign corporation'',
            (2) by striking the period at the end and inserting ``, 
        and'', and
            (3) by adding at the end the following new subclause:

[[Page 131 STAT. 2221]]

                                    ``(II) any corporation which first 
                                becomes a surrogate foreign corporation 
                                (as defined in section 7874(a)(2)(B)) 
                                after the date of the enactment of this 
                                subclause, other than a foreign 
                                corporation which is treated as a 
                                domestic corporation under section 
                                7874(b).''.

    (b) <<NOTE: 26 USC 1 note.>>  Effective Date.--The amendments made 
by this section shall apply to dividends received after the date of the 
enactment of this Act.

      Subpart C--Modifications Related to Foreign Tax Credit System

SEC. 14301. REPEAL OF SECTION 902 INDIRECT FOREIGN TAX CREDITS; 
                            DETERMINATION OF SECTION 960 CREDIT ON 
                            CURRENT YEAR BASIS.

    (a) Repeal of Section 902 Indirect Foreign Tax Credits.--Subpart A 
of part III of subchapter N of chapter 1 <<NOTE: 26 USC 902.>>  is 
amended by striking section 902.

    (b) Determination of Section 960 Credit on Current Year Basis.--
Section 960, as amended by section 14201, is amended--
            (1) by striking subsection (c), by redesignating subsection 
        (b) as subsection (c), by striking all that precedes subsection 
        (c) (as so redesignated) and inserting the following:
``SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLUSIONS.

    ``(a) In General.--For purposes of subpart A of this part, if there 
is included in the gross income of a domestic corporation any item of 
income under section 951(a)(1) with respect to any controlled foreign 
corporation with respect to which such domestic corporation is a United 
States shareholder, such domestic corporation shall be deemed to have 
paid so much of such foreign corporation's foreign income taxes as are 
properly attributable to such item of income.
    ``(b) Special Rules for Distributions From Previously Taxed Earnings 
and Profits.--For purposes of subpart A of this part--
            ``(1) In general.--If any portion of a distribution from a 
        controlled foreign corporation to a domestic corporation which 
        is a United States shareholder with respect to such controlled 
        foreign corporation is excluded from gross income under section 
        959(a), such domestic corporation shall be deemed to have paid 
        so much of such foreign corporation's foreign income taxes as--
                    ``(A) are properly attributable to such portion, and
                    ``(B) have not been deemed to have to been paid by 
                such domestic corporation under this section for the 
                taxable year or any prior taxable year.
            ``(2) Tiered controlled foreign corporations.--If section 
        959(b) applies to any portion of a distribution from a 
        controlled foreign corporation to another controlled foreign 
        corporation, such controlled foreign corporation shall be deemed 
        to have paid so much of such other controlled foreign 
        corporation's foreign income taxes as--
                    ``(A) are properly attributable to such portion, and

[[Page 131 STAT. 2222]]

                    ``(B) have not been deemed to have been paid by a 
                domestic corporation under this section for the taxable 
                year or any prior taxable year.'',
            (2) and by adding after subsection (d) (as added by section 
        14201) the following new subsections:

    ``(e) Foreign Income Taxes.--The term `foreign income taxes' means 
any income, war profits, or excess profits taxes paid or accrued to any 
foreign country or possession of the United States.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
provisions of this section.''.
    (c) Conforming Amendments.--
            (1) Section 78 <<NOTE: 26 USC 78.>>  is amended to read as 
        follows:
``SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX CREDIT.

    ``If a domestic corporation chooses to have the benefits of subpart 
A of part III of subchapter N (relating to foreign tax credit) for any 
taxable year, an amount equal to the taxes deemed to be paid by such 
corporation under subsections (a), (b), and (d) of section 960 
(determined without regard to the phrase `80 percent of' in subsection 
(d)(1) thereof) for such taxable year shall be treated for purposes of 
this title (other than sections 245 and 245A) as a dividend received by 
such domestic corporation from the foreign corporation.''.
            (2) Paragraph (4) of section 245(a) is amended to read as 
        follows:
            ``(4) Post-1986 undistributed earnings.--The term `post-1986 
        undistributed earnings' means the amount of the earnings and 
        profits of the foreign corporation (computed in accordance with 
        sections 964(a) and 986) accumulated in taxable years beginning 
        after December 31, 1986--
                    ``(A) as of the close of the taxable year of the 
                foreign corporation in which the dividend is 
                distributed, and
                    ``(B) without diminution by reason of dividends 
                distributed during such taxable year.''.
            (3) Section 245(a)(10)(C) is amended by striking ``902, 907, 
        and 960'' and inserting ``907 and 960''.
            (4) Sections 535(b)(1) and 545(b)(1) are each amended by 
        striking ``section 902(a) or 960(a)(1)'' and inserting ``section 
        960''.
            (5) Section 814(f)(1) is amended--
                    (A) by striking subparagraph (B), and
                    (B) by striking all that precedes ``No income'' and 
                inserting the following:
            ``(1) Treatment of foreign taxes.--''.
            (6) Section 865(h)(1)(B) is amended by striking ``902, 
        907,'' and inserting ``907''.
            (7) Section 901(a) is amended by striking ``sections 902 and 
        960'' and inserting ``section 960''.
            (8) Section 901(e)(2) is amended by striking ``but is not 
        limited to--'' and all that follows through ``that portion'' and 
        inserting ``but is not limited to that portion''.
            (9) Section 901(f) is amended by striking ``sections 902 and 
        960'' and inserting ``section 960''.
            (10) Section 901(j)(1)(A) is amended by striking ``902 or''.
            (11) Section 901(j)(1)(B) is amended by striking ``sections 
        902 and 960'' and inserting ``section 960''.

[[Page 131 STAT. 2223]]

            (12) Section 901(k)(2) <<NOTE: 26 USC 901.>>  is amended by 
        striking ``, 902,''.
            (13) Section 901(k)(6) is amended by striking ``902 or''.
            (14) Section 901(m)(1)(B) is amended to read as follows:
                    ``(B) in the case of a foreign income tax paid by a 
                foreign corporation, shall not be taken into account for 
                purposes of section 960.''.
            (15) Section 904(d)(2)(E) is amended--
                    (A) by amending clause (i) to read as follows:
                          ``(i) Noncontrolled 10-percent owned foreign 
                      corporation.--The term `noncontrolled 10-percent 
                      owned foreign corporation' means any foreign 
                      corporation which is--
                                    ``(I) a specified 10-percent owned 
                                foreign corporation (as defined in 
                                section 245A(b)), or
                                    ``(II) a passive foreign investment 
                                company (as defined in section 1297(a)) 
                                with respect to which the taxpayer meets 
                                the stock ownership requirements of 
                                section 902(a) (or, for purposes of 
                                applying paragraphs (3) and (4), the 
                                requirements of section 902(b)).
                      A controlled foreign corporation shall not be 
                      treated as a noncontrolled 10-percent owned 
                      foreign corporation with respect to any 
                      distribution out of its earnings and profits for 
                      periods during which it was a controlled foreign 
                      corporation. Any reference to section 902 in this 
                      clause shall be treated as a reference to such 
                      section as in effect before its repeal.'', and
                    (B) by striking ``non-controlled section 902 
                corporation'' in clause (ii) and inserting 
                ``noncontrolled 10-percent owned foreign corporation''.
            (16) Section 904(d)(4) is amended--
                    (A) by striking ``noncontrolled section 902 
                corporation'' each place it appears and inserting 
                ``noncontrolled 10-percent owned foreign corporation'',
                    (B) by striking ``noncontrolled section 902 
                corporations'' in the heading thereof and inserting 
                ``noncontrolled 10-percent owned foreign corporations''.
            (17) Section 904(d)(6)(A) is amended by striking ``902, 
        907,'' and inserting ``907''.
            (18) Section 904(h)(10)(A) is amended by striking ``sections 
        902, 907, and 960'' and inserting ``sections 907 and 960''.
            (19) Section 904(k) is amended to read as follows:

    ``(k) Cross References.--For increase of limitation under subsection 
(a) for taxes paid with respect to amounts received which were included 
in the gross income of the taxpayer for a prior taxable year as a United 
States shareholder with respect to a controlled foreign corporation, see 
section 960(c).''.
            (20) Section 905(c)(1) is amended by striking the last 
        sentence.
            (21) Section 905(c)(2)(B)(i) is amended to read as follows:
                          ``(i) shall be taken into account for the 
                      taxable year to which such taxes relate, and''.
            (22) Section 906(a) is amended by striking ``(or deemed, 
        under section 902, paid or accrued during the taxable year)''.
            (23) Section 906(b) is amended by striking paragraphs (4) 
        and (5).
            (24) Section 907(b)(2)(B) is amended by striking ``902 or''.

[[Page 131 STAT. 2224]]

            (25) Section 907(c)(3)(A) <<NOTE: 26 USC 907.>>  is 
        amended--
                    (A) by striking subparagraph (A) and inserting the 
                following:
                    ``(A) interest, to the extent the category of income 
                of such interest is determined under section 
                904(d)(3),'', and
                    (B) by striking ``section 960(a)'' in subparagraph 
                (B) and inserting ``section 960''.
            (26) Section 907(c)(5) is amended by striking ``902 or''.
            (27) Section 907(f)(2)(B)(i) is amended by striking ``902 
        or''.
            (28) Section 908(a) is amended by striking ``902 or''.
            (29) Section 909(b) is amended--
                    (A) by striking ``section 902 corporation'' in the 
                matter preceding paragraph (1) and inserting ``specified 
                10-percent owned foreign corporation (as defined in 
                section 245A(b) without regard to paragraph (2) 
                thereof)'',
                    (B) by striking ``902 or'' in paragraph (1),
                    (C) by striking ``by such section 902 corporation'' 
                and all that follows in the matter following paragraph 
                (2) and inserting ``by such specified 10-percent owned 
                foreign corporation or a domestic corporation which is a 
                United States shareholder with respect to such specified 
                10-percent owned foreign corporation.'', and
                    (D) by striking ``Section 902 Corporations'' in the 
                heading thereof and inserting ``Specified 10-percent 
                Owned Foreign Corporations''.
            (30) Section 909(d) is amended by striking paragraph (5).
            (31) Section 958(a)(1) is amended by striking ``960(a)(1)'' 
        and inserting ``960''.
            (32) Section 959(d) is amended by striking ``Except as 
        provided in section 960(a)(3), any'' and inserting ``Any''.
            (33) Section 959(e) is amended by striking ``section 
        960(b)'' and inserting ``section 960(c)''.
            (34) Section 1291(g)(2)(A) is amended by striking ``any 
        distribution--'' and all that follows through ``but only if'' 
        and inserting ``any distribution, any withholding tax imposed 
        with respect to such distribution, but only if''.
            (35) Section 1293(f) is amended by striking ``and'' at the 
        end of paragraph (1), by striking the period at the end of 
        paragraph (2) and inserting ``, and'', and by adding at the end 
        the following new paragraph:
            ``(3) a domestic corporation which owns (or is treated under 
        section 1298(a) as owning) stock of a qualified electing fund 
        shall be treated in the same manner as a United States 
        shareholder of a controlled foreign corporation (and such 
        qualified electing fund shall be treated in the same manner as 
        such controlled foreign corporation) if such domestic 
        corporation meets the stock ownership requirements of subsection 
        (a) or (b) of section 902 (as in effect before its repeal) with 
        respect to such qualified electing fund.''.
            (36) Section 6038(c)(1)(B) is amended by striking ``sections 
        902 (relating to foreign tax credit for corporate stockholder in 
        foreign corporation) and 960 (relating to special rules for 
        foreign tax credit)'' and inserting ``section 960''.
            (37) Section 6038(c)(4) is amended by striking subparagraph 
        (C).

[[Page 131 STAT. 2225]]

            (38) The table of sections for subpart A of part III of 
        subchapter N of chapter 1 <<NOTE: 26 USC 901 prec.>>  is amended 
        by striking the item relating to section 902.
            (39) The table of sections for subpart F of part III of 
        subchapter N of chapter 1 <<NOTE: 26 USC 951 prec.>>  is amended 
        by striking the item relating to section 960 and inserting the 
        following:

``Sec. 960. Deemed paid credit for subpart F inclusions.''.

    (d) <<NOTE: 26 USC 78 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years of foreign corporations 
beginning after December 31, 2017, and to taxable years of United States 
shareholders in which or with which such taxable years of foreign 
corporations end.
SEC. 14302. SEPARATE FOREIGN TAX CREDIT LIMITATION BASKET FOR 
                            FOREIGN BRANCH INCOME.

    (a) In General.--Section 904(d)(1), as amended by section 14201, 
is <<NOTE: 26 USC 904.>>  amended by redesignating subparagraphs (B) and 
(C) as subparagraphs (C) and (D), respectively, and by inserting after 
subparagraph (A) the following new subparagraph:
                    ``(B) foreign branch income,''.

    (b) Foreign Branch Income.--
            (1) In general.--Section 904(d)(2) is amended by inserting 
        after subparagraph (I) the following new subparagraph:
                    ``(J) Foreign branch income.--
                          ``(i) In general.--The term `foreign branch 
                      income' means the business profits of such United 
                      States person which are attributable to 1 or more 
                      qualified business units (as defined in section 
                      989(a)) in 1 or more foreign countries. For 
                      purposes of the preceding sentence, the amount of 
                      business profits attributable to a qualified 
                      business unit shall be determined under rules 
                      established by the Secretary.
                          ``(ii) Exception.--Such term shall not include 
                      any income which is passive category income.''.
            (2) Conforming amendment.--Section 904(d)(2)(A)(ii), as 
        amended by section 14201, is amended by striking ``income 
        described in paragraph (1)(A) and'' and inserting ``income 
        described in paragraph (1)(A), foreign branch income, and''.

    (c) <<NOTE: 26 USC 904 note.>>  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 14303. SOURCE OF INCOME FROM SALES OF INVENTORY DETERMINED 
                            SOLELY ON BASIS OF PRODUCTION 
                            ACTIVITIES.

    (a) In General.--Section 863(b) is amended by adding at the end the 
following: ``Gains, profits, and income from the sale or exchange of 
inventory property described in paragraph (2) shall be allocated and 
apportioned between sources within and without the United States solely 
on the basis of the production activities with respect to the 
property.''.
    (b) <<NOTE: 26 USC 863 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2017.
SEC. 14304. ELECTION TO INCREASE PERCENTAGE OF DOMESTIC TAXABLE 
                            INCOME OFFSET BY OVERALL DOMESTIC LOSS 
                            TREATED AS FOREIGN SOURCE.

    (a) In General.--Section 904(g) is amended by adding at the end the 
following new paragraph:

[[Page 131 STAT. 2226]]

            ``(5) Election to increase percentage of taxable income 
        treated as foreign source.--
                    ``(A) In general.--If any pre-2018 unused overall 
                domestic loss is taken into account under paragraph (1) 
                for any applicable taxable year, the taxpayer may elect 
                to have such paragraph applied to such loss by 
                substituting a percentage greater than 50 percent (but 
                not greater than 100 percent) for 50 percent in 
                subparagraph (B) thereof.
                    ``(B) Pre-2018 unused overall domestic loss.--For 
                purposes of this paragraph, the term `pre-2018 unused 
                overall domestic loss' means any overall domestic loss 
                which--
                          ``(i) arises in a qualified taxable year 
                      beginning before January 1, 2018, and
                          ``(ii) has not been used under paragraph (1) 
                      for any taxable year beginning before such date.
                    ``(C) Applicable taxable year.--For purposes of this 
                paragraph, the term `applicable taxable year' means any 
                taxable year of the taxpayer beginning after December 
                31, 2017, and before January 1, 2028.''.

    (b) <<NOTE: 26 USC 904 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2017.

                      PART II--INBOUND TRANSACTIONS

SEC. 14401. BASE EROSION AND ANTI-ABUSE TAX.

    (a) Imposition of Tax.--Subchapter A of chapter 1 <<NOTE: 26 USC 59A 
prec.>>  is amended by adding at the end the following new part:

               ``PART VII--BASE EROSION AND ANTI-ABUSE TAX

``Sec. 59A. Tax on base erosion payments of taxpayers with substantial 
           gross receipts.

``SEC. 59A. <<NOTE: 26 USC 59A.>>  TAX ON BASE EROSION PAYMENTS OF 
                        TAXPAYERS WITH SUBSTANTIAL GROSS RECEIPTS.

    ``(a) Imposition of Tax.--There is hereby imposed on each applicable 
taxpayer for any taxable year a tax equal to the base erosion minimum 
tax amount for the taxable year. Such tax shall be in addition to any 
other tax imposed by this subtitle.
    ``(b) Base Erosion Minimum Tax Amount.--For purposes of this 
section--
            ``(1) In general.--Except as provided in paragraphs (2) and 
        (3), the term `base erosion minimum tax amount' means, with 
        respect to any applicable taxpayer for any taxable year, the 
        excess (if any) of--
                    ``(A) an amount equal to 10 percent (5 percent in 
                the case of taxable years beginning in calendar year 
                2018) of the modified taxable income of such taxpayer 
                for the taxable year, over
                    ``(B) an amount equal to the regular tax liability 
                (as defined in section 26(b)) of the taxpayer for the 
                taxable year, reduced (but not below zero) by the excess 
                (if any) of--
                          ``(i) the credits allowed under this chapter 
                      against such regular tax liability, over

[[Page 131 STAT. 2227]]

                          ``(ii) the sum of--
                                    ``(I) the credit allowed under 
                                section 38 for the taxable year which is 
                                properly allocable to the research 
                                credit determined under section 41(a), 
                                plus
                                    ``(II) the portion of the applicable 
                                section 38 credits not in excess of 80 
                                percent of the lesser of the amount of 
                                such credits or the base erosion minimum 
                                tax amount (determined without regard to 
                                this subclause).
            ``(2) Modifications for taxable years beginning after 
        2025.--In the case of any taxable year beginning after December 
        31, 2025, paragraph (1) shall be applied--
                    ``(A) by substituting `12.5 percent' for `10 
                percent' in subparagraph (A) thereof, and
                    ``(B) by reducing (but not below zero) the regular 
                tax liability (as defined in section 26(b)) for purposes 
                of subparagraph (B) thereof by the aggregate amount of 
                the credits allowed under this chapter against such 
                regular tax liability rather than the excess described 
                in such subparagraph.
            ``(3) Increased rate for certain banks and securities 
        dealers.--
                    ``(A) In general.--In the case of a taxpayer 
                described in subparagraph (B) who is an applicable 
                taxpayer for any taxable year, the percentage otherwise 
                in effect under paragraphs (1)(A) and (2)(A) shall each 
                be increased by one percentage point.
                    ``(B) Taxpayer described.--A taxpayer is described 
                in this subparagraph if such taxpayer is a member of an 
                affiliated group (as defined in section 1504(a)(1)) 
                which includes--
                          ``(i) a bank (as defined in section 581), or
                          ``(ii) a registered securities dealer under 
                      section 15(a) of the Securities Exchange Act of 
                      1934.
            ``(4) Applicable section 38 credits.--For purposes of 
        paragraph (1)(B)(ii)(II), the term `applicable section 38 
        credits' means the credit allowed under section 38 for the 
        taxable year which is properly allocable to--
                    ``(A) the low-income housing credit determined under 
                section 42(a),
                    ``(B) the renewable electricity production credit 
                determined under section 45(a), and
                    ``(C) the investment credit determined under section 
                46, but only to the extent properly allocable to the 
                energy credit determined under section 48.

    ``(c) Modified Taxable Income.--For purposes of this section--
            ``(1) In general.--The term `modified taxable income' means 
        the taxable income of the taxpayer computed under this chapter 
        for the taxable year, determined without regard to--
                    ``(A) any base erosion tax benefit with respect to 
                any base erosion payment, or
                    ``(B) the base erosion percentage of any net 
                operating loss deduction allowed under section 172 for 
                the taxable year.
            ``(2) Base erosion tax benefit.--

[[Page 131 STAT. 2228]]

                    ``(A) In general.--The term `base erosion tax 
                benefit' means--
                          ``(i) any deduction described in subsection 
                      (d)(1) which is allowed under this chapter for the 
                      taxable year with respect to any base erosion 
                      payment,
                          ``(ii) in the case of a base erosion payment 
                      described in subsection (d)(2), any deduction 
                      allowed under this chapter for the taxable year 
                      for depreciation (or amortization in lieu of 
                      depreciation) with respect to the property 
                      acquired with such payment,
                          ``(iii) in the case of a base erosion payment 
                      described in subsection (d)(3)--
                                    ``(I) any reduction under section 
                                803(a)(1)(B) in the gross amount of 
                                premiums and other consideration on 
                                insurance and annuity contracts for 
                                premiums and other consideration arising 
                                out of indemnity insurance, and
                                    ``(II) any deduction under section 
                                832(b)(4)(A) from the amount of gross 
                                premiums written on insurance contracts 
                                during the taxable year for premiums 
                                paid for reinsurance, and
                          ``(iv) in the case of a base erosion payment 
                      described in subsection (d)(4), any reduction in 
                      gross receipts with respect to such payment in 
                      computing gross income of the taxpayer for the 
                      taxable year for purposes of this chapter.
                    ``(B) Tax benefits disregarded if tax withheld on 
                base erosion payment.--
                          ``(i) In general.--Except as provided in 
                      clause (ii), any base erosion tax benefit 
                      attributable to any base erosion payment--
                                    ``(I) on which tax is imposed by 
                                section 871 or 881, and
                                    ``(II) with respect to which tax has 
                                been deducted and withheld under section 
                                1441 or 1442,
                      shall not be taken into account in computing 
                      modified taxable income under paragraph (1)(A) or 
                      the base erosion percentage under paragraph (4).
                          ``(ii) Exception.--The amount not taken into 
                      account in computing modified taxable income by 
                      reason of clause (i) shall be reduced under rules 
                      similar to the rules under section 163(j)(5)(B) 
                      (as in effect before the date of the enactment of 
                      the Tax Cuts and Jobs Act).
            ``(3) Special rules for determining interest for which 
        deduction allowed.--For purposes of applying paragraph (1), in 
        the case of a taxpayer to which section 163(j) applies for the 
        taxable year, the reduction in the amount of interest for which 
        a deduction is allowed by reason of such subsection shall be 
        treated as allocable first to interest paid or accrued to 
        persons who are not related parties with respect to the taxpayer 
        and then to such related parties.
            ``(4) Base erosion percentage.--For purposes of paragraph 
        (1)(B)--
                    ``(A) In general.--The term `base erosion 
                percentage' means, for any taxable year, the percentage 
                determined by dividing--

[[Page 131 STAT. 2229]]

                          ``(i) the aggregate amount of base erosion tax 
                      benefits of the taxpayer for the taxable year, by
                          ``(ii) the sum of--
                                    ``(I) the aggregate amount of the 
                                deductions (including deductions 
                                described in clauses (i) and (ii) of 
                                paragraph (2)(A)) allowable to the 
                                taxpayer under this chapter for the 
                                taxable year, plus
                                    ``(II) the base erosion tax benefits 
                                described in clauses (iii) and (iv) of 
                                paragraph (2)(A) allowable to the 
                                taxpayer for the taxable year.
                    ``(B) Certain items not taken into account.--The 
                amount under subparagraph (A)(ii) shall be determined by 
                not taking into account--
                          ``(i) any deduction allowed under section 172, 
                      245A, or 250 for the taxable year,
                          ``(ii) any deduction for amounts paid or 
                      accrued for services to which the exception under 
                      subsection (d)(5) applies, and
                          ``(iii) any deduction for qualified derivative 
                      payments which are not treated as a base erosion 
                      payment by reason of subsection (h).

    ``(d) Base Erosion Payment.--For purposes of this section--
            ``(1) In general.--The term `base erosion payment' means any 
        amount paid or accrued by the taxpayer to a foreign person which 
        is a related party of the taxpayer and with respect to which a 
        deduction is allowable under this chapter.
            ``(2) Purchase of depreciable property.--Such term shall 
        also include any amount paid or accrued by the taxpayer to a 
        foreign person which is a related party of the taxpayer in 
        connection with the acquisition by the taxpayer from such person 
        of property of a character subject to the allowance for 
        depreciation (or amortization in lieu of depreciation).
            ``(3) Reinsurance payments.--Such term shall also include 
        any premium or other consideration paid or accrued by the 
        taxpayer to a foreign person which is a related party of the 
        taxpayer for any reinsurance payments which are taken into 
        account under sections 803(a)(1)(B) or 832(b)(4)(A).
            ``(4) Certain payments to expatriated entities.--
                    ``(A) In general.--Such term shall also include any 
                amount paid or accrued by the taxpayer with respect to a 
                person described in subparagraph (B) which results in a 
                reduction of the gross receipts of the taxpayer.
                    ``(B) Person described.--A person is described in 
                this subparagraph if such person is a--
                          ``(i) surrogate foreign corporation which is a 
                      related party of the taxpayer, but only if such 
                      person first became a surrogate foreign 
                      corporation after November 9, 2017, or
                          ``(ii) foreign person which is a member of the 
                      same expanded affiliated group as the surrogate 
                      foreign corporation.
                    ``(C) Definitions.--For purposes of this paragraph--
                          ``(i) Surrogate foreign corporation.--The term 
                      `surrogate foreign corporation' has the meaning 
                      given such term by section 7874(a)(2)(B) but does 
                      not include a foreign corporation treated as a 
                      domestic corporation under section 7874(b).

[[Page 131 STAT. 2230]]

                          ``(ii) Expanded affiliated group.--The term 
                      `expanded affiliated group' has the meaning given 
                      such term by section 7874(c)(1).
            ``(5) Exception for certain amounts with respect to 
        services.--Paragraph (1) shall not apply to any amount paid or 
        accrued by a taxpayer for services if--
                    ``(A) such services are services which meet the 
                requirements for eligibility for use of the services 
                cost method under section 482 (determined without regard 
                to the requirement that the services not contribute 
                significantly to fundamental risks of business success 
                or failure), and
                    ``(B) such amount constitutes the total services 
                cost with no markup component.

    ``(e) Applicable Taxpayer.--For purposes of this section--
            ``(1) In general.--The term `applicable taxpayer' means, 
        with respect to any taxable year, a taxpayer--
                    ``(A) which is a corporation other than a regulated 
                investment company, a real estate investment trust, or 
                an S corporation,
                    ``(B) the average annual gross receipts of which for 
                the 3-taxable-year period ending with the preceding 
                taxable year are at least $500,000,000, and
                    ``(C) the base erosion percentage (as determined 
                under subsection (c)(4)) of which for the taxable year 
                is 3 percent (2 percent in the case of a taxpayer 
                described in subsection (b)(3)(B)) or higher.
            ``(2) Gross receipts.--
                    ``(A) Special rule for foreign persons.--In the case 
                of a foreign person the gross receipts of which are 
                taken into account for purposes of paragraph (1)(B), 
                only gross receipts which are taken into account in 
                determining income which is effectively connected with 
                the conduct of a trade or business within the United 
                States shall be taken into account. In the case of a 
                taxpayer which is a foreign person, the preceding 
                sentence shall not apply to the gross receipts of any 
                United States person which are aggregated with the 
                taxpayer's gross receipts by reason of paragraph (3).
                    ``(B) Other rules made applicable.--Rules similar to 
                the rules of subparagraphs (B), (C), and (D) of section 
                448(c)(3) shall apply in determining gross receipts for 
                purposes of this section.
            ``(3) Aggregation rules.--All persons treated as a single 
        employer under subsection (a) of section 52 shall be treated as 
        1 person for purposes of this subsection and subsection (c)(4), 
        except that in applying section 1563 for purposes of section 52, 
        the exception for foreign corporations under section 
        1563(b)(2)(C) shall be disregarded.

    ``(f) Foreign Person.--For purposes of this section, the term 
`foreign person' has the meaning given such term by section 6038A(c)(3).
    ``(g) Related Party.--For purposes of this section--
            ``(1) In general.--The term `related party' means, with 
        respect to any applicable taxpayer--
                    ``(A) any 25-percent owner of the taxpayer,

[[Page 131 STAT. 2231]]

                    ``(B) any person who is related (within the meaning 
                of section 267(b) or 707(b)(1)) to the taxpayer or any 
                25-percent owner of the taxpayer, and
                    ``(C) any other person who is related (within the 
                meaning of section 482) to the taxpayer.
            ``(2) 25-percent owner.--The term `25-percent owner' means, 
        with respect to any corporation, any person who owns at least 25 
        percent of--
                    ``(A) the total voting power of all classes of stock 
                of a corporation entitled to vote, or
                    ``(B) the total value of all classes of stock of 
                such corporation.
            ``(3) Section 318 to apply.--Section 318 shall apply for 
        purposes of paragraphs (1) and (2), except that--
                    ``(A) `10 percent' shall be substituted for `50 
                percent' in section 318(a)(2)(C), and
                    ``(B) subparagraphs (A), (B), and (C) of section 
                318(a)(3) shall not be applied so as to consider a 
                United States person as owning stock which is owned by a 
                person who is not a United States person.

    ``(h) Exception for Certain Payments Made in the Ordinary Course of 
Trade or Business.--For purposes of this section--
            ``(1) In general.--Except as provided in paragraph (3), any 
        qualified derivative payment shall not be treated as a base 
        erosion payment.
            ``(2) Qualified derivative payment.--
                    ``(A) In general.--The term `qualified derivative 
                payment' means any payment made by a taxpayer pursuant 
                to a derivative with respect to which the taxpayer--
                          ``(i) recognizes gain or loss as if such 
                      derivative were sold for its fair market value on 
                      the last business day of the taxable year (and 
                      such additional times as required by this title or 
                      the taxpayer's method of accounting),
                          ``(ii) treats any gain or loss so recognized 
                      as ordinary, and
                          ``(iii) treats the character of all items of 
                      income, deduction, gain, or loss with respect to a 
                      payment pursuant to the derivative as ordinary.
                    ``(B) Reporting requirement.--No payments shall be 
                treated as qualified derivative payments under 
                subparagraph (A) for any taxable year unless the 
                taxpayer includes in the information required to be 
                reported under section 6038B(b)(2) with respect to such 
                taxable year such information as is necessary to 
                identify the payments to be so treated and such other 
                information as the Secretary determines necessary to 
                carry out the provisions of this subsection.
            ``(3) Exceptions for payments otherwise treated as base 
        erosion payments.--This subsection shall not apply to any 
        qualified derivative payment if--
                    ``(A) the payment would be treated as a base erosion 
                payment if it were not made pursuant to a derivative, 
                including any interest, royalty, or service payment, or
                    ``(B) in the case of a contract which has derivative 
                and nonderivative components, the payment is properly 
                allocable to the nonderivative component.

[[Page 131 STAT. 2232]]

            ``(4) Derivative defined.--For purposes of this subsection--
                    ``(A) In general.--The term `derivative' means any 
                contract (including any option, forward contract, 
                futures contract, short position, swap, or similar 
                contract) the value of which, or any payment or other 
                transfer with respect to which, is (directly or 
                indirectly) determined by reference to one or more of 
                the following:
                          ``(i) Any share of stock in a corporation.
                          ``(ii) Any evidence of indebtedness.
                          ``(iii) Any commodity which is actively 
                      traded.
                          ``(iv) Any currency.
                          ``(v) Any rate, price, amount, index, formula, 
                      or algorithm.
                Such term shall not include any item described in 
                clauses (i) through (v).
                    ``(B) Treatment of american depository receipts and 
                similar instruments.--Except as otherwise provided by 
                the Secretary, for purposes of this part, American 
                depository receipts (and similar instruments) with 
                respect to shares of stock in foreign corporations shall 
                be treated as shares of stock in such foreign 
                corporations.
                    ``(C) Exception for certain contracts.--Such term 
                shall not include any insurance, annuity, or endowment 
                contract issued by an insurance company to which 
                subchapter L applies (or issued by any foreign 
                corporation to which such subchapter would apply if such 
                foreign corporation were a domestic corporation).

    ``(i) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
provisions of this section, including regulations--
            ``(1) providing for such adjustments to the application of 
        this section as are necessary to prevent the avoidance of the 
        purposes of this section, including through--
                    ``(A) the use of unrelated persons, conduit 
                transactions, or other intermediaries, or
                    ``(B) transactions or arrangements designed, in 
                whole or in part--
                          ``(i) to characterize payments otherwise 
                      subject to this section as payments not subject to 
                      this section, or
                          ``(ii) to substitute payments not subject to 
                      this section for payments otherwise subject to 
                      this section and
            ``(2) for the application of subsection (g), including rules 
        to prevent the avoidance of the exceptions under subsection 
        (g)(3).''.

    (b) Reporting Requirements and Penalties.--
            (1) In general.--Subsection (b) of section 6038A <<NOTE: 26 
        USC 6038A.>>  is amended to read as follows:

    ``(b) Required Information.--
            ``(1) In general.--For purposes of subsection (a), the 
        information described in this subsection is such information as 
        the Secretary prescribes by regulations relating to--
                    ``(A) the name, principal place of business, nature 
                of business, and country or countries in which organized 
                or resident, of each person which--

[[Page 131 STAT. 2233]]

                          ``(i) is a related party to the reporting 
                      corporation, and
                          ``(ii) had any transaction with the reporting 
                      corporation during its taxable year,
                    ``(B) the manner in which the reporting corporation 
                is related to each person referred to in subparagraph 
                (A), and
                    ``(C) transactions between the reporting corporation 
                and each foreign person which is a related party to the 
                reporting corporation.
            ``(2) Additional information regarding base erosion 
        payments.--For purposes of subsection (a) and section 6038C, if 
        the reporting corporation or the foreign corporation to whom 
        section 6038C applies is an applicable taxpayer, the information 
        described in this subsection shall include--
                    ``(A) such information as the Secretary determines 
                necessary to determine the base erosion minimum tax 
                amount, base erosion payments, and base erosion tax 
                benefits of the taxpayer for purposes of section 59A for 
                the taxable year, and
                    ``(B) such other information as the Secretary 
                determines necessary to carry out such section.
        For purposes of this paragraph, any term used in this paragraph 
        which is also used in section 59A shall have the same meaning as 
        when used in such section.''.
            (2) Increase in penalty.--Paragraphs (1) and (2) of section 
        6038A(d) are <<NOTE: 26 USC 6038A.>>  each amended by striking 
        ``$10,000'' and inserting ``$25,000''.

    (c) Disallowance of Credits Against Base Erosion Tax.--Paragraph (2) 
of section 26(b) is amended by inserting after subparagraph (A) the 
following new subparagraph:
                    ``(B) section 59A (relating to base erosion and 
                anti-abuse tax),''.

    (d) Conforming Amendments.--
            (1) The table of parts for subchapter A of chapter 
        1 <<NOTE: 26 USC 1 prec.>>  is amended by adding after the item 
        relating to part VI the following new item:

             ``Part VII. Base Erosion and Anti-abuse Tax''.

            (2) Paragraph (1) of section 882(a), as amended by this Act, 
        is amended by inserting ``or 59A,'' after ``section 11,''.
            (3) Subparagraph (A) of section 6425(c)(1), as amended by 
        section 13001, is amended to read as follows:
                    ``(A) the sum of--
                          ``(i) the tax imposed by section 11, or 
                      subchapter L of chapter 1, whichever is 
                      applicable, plus
                          ``(ii) the tax imposed by section 59A, over''.
            (4)(A) Subparagraph (A) of section 6655(g)(1), as amended by 
        sections 12001 and 13001, is amended by striking ``plus'' at the 
        end of clause (i), by redesignating clause (ii) as clause (iii), 
        and by inserting after clause (i) the following new clause:
                          ``(ii) the tax imposed by section 59A, plus''.
            (B) Subparagraphs (A)(i) and (B)(i) of section 6655(e)(2), 
        as amended by sections 12001 and 13001, are each amended by 
        inserting ``and modified taxable income'' after ``taxable 
        income''.

[[Page 131 STAT. 2234]]

            (C) Subparagraph (B) of section 6655(e)(2) is amended by 
        adding at the end the following new clause:
                          ``(iii) Modified taxable income.--The term 
                      `modified taxable income' has the meaning given 
                      such term by section 59A(c)(1).''.

    (e) <<NOTE: 26 USC 26 note.>>  Effective Date.--The amendments made 
by this section shall apply to base erosion payments (as defined in 
section 59A(d) of the Internal Revenue Code of 1986, as added by this 
section) paid or accrued in taxable years beginning after December 31, 
2017.

                       PART III--OTHER PROVISIONS

SEC. 14501. RESTRICTION ON INSURANCE BUSINESS EXCEPTION TO PASSIVE 
                            FOREIGN INVESTMENT COMPANY RULES.

    (a) In General.--Section 1297(b)(2)(B) <<NOTE: 26 USC 1297.>>  is 
amended to read as follows:
                    ``(B) derived in the active conduct of an insurance 
                business by a qualifying insurance corporation (as 
                defined in subsection (f)),''.

    (b) Qualifying Insurance Corporation Defined.--Section 1297 is 
amended by adding at the end the following new subsection:
    ``(f) Qualifying Insurance Corporation.--For purposes of subsection 
(b)(2)(B)--
            ``(1) In general.--The term `qualifying insurance 
        corporation' means, with respect to any taxable year, a foreign 
        corporation--
                    ``(A) which would be subject to tax under subchapter 
                L if such corporation were a domestic corporation, and
                    ``(B) the applicable insurance liabilities of which 
                constitute more than 25 percent of its total assets, 
                determined on the basis of such liabilities and assets 
                as reported on the corporation's applicable financial 
                statement for the last year ending with or within the 
                taxable year.
            ``(2) Alternative facts and circumstances test for certain 
        corporations.--If a corporation fails to qualify as a qualified 
        insurance corporation under paragraph (1) solely because the 
        percentage determined under paragraph (1)(B) is 25 percent or 
        less, a United States person that owns stock in such corporation 
        may elect to treat such stock as stock of a qualifying insurance 
        corporation if--
                    ``(A) the percentage so determined for the 
                corporation is at least 10 percent, and
                    ``(B) under regulations provided by the Secretary, 
                based on the applicable facts and circumstances--
                          ``(i) the corporation is predominantly engaged 
                      in an insurance business, and
                          ``(ii) such failure is due solely to runoff-
                      related or rating-related circumstances involving 
                      such insurance business.
            ``(3) Applicable insurance liabilities.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `applicable insurance 
                liabilities' means, with respect to any life or property 
                and casualty insurance business--
                          ``(i) loss and loss adjustment expenses, and

[[Page 131 STAT. 2235]]

                          ``(ii) reserves (other than deficiency, 
                      contingency, or unearned premium reserves) for 
                      life and health insurance risks and life and 
                      health insurance claims with respect to contracts 
                      providing coverage for mortality or morbidity 
                      risks.
                    ``(B) Limitations on amount of liabilities.--Any 
                amount determined under clause (i) or (ii) of 
                subparagraph (A) shall not exceed the lesser of such 
                amount--
                          ``(i) as reported to the applicable insurance 
                      regulatory body in the applicable financial 
                      statement described in paragraph (4)(A) (or, if 
                      less, the amount required by applicable law or 
                      regulation), or
                          ``(ii) as determined under regulations 
                      prescribed by the Secretary.
            ``(4) Other definitions and rules.--For purposes of this 
        subsection--
                    ``(A) Applicable financial statement.--The term 
                `applicable financial statement' means a statement for 
                financial reporting purposes which--
                          ``(i) is made on the basis of generally 
                      accepted accounting principles,
                          ``(ii) is made on the basis of international 
                      financial reporting standards, but only if there 
                      is no statement that meets the requirement of 
                      clause (i), or
                          ``(iii) except as otherwise provided by the 
                      Secretary in regulations, is the annual statement 
                      which is required to be filed with the applicable 
                      insurance regulatory body, but only if there is no 
                      statement which meets the requirements of clause 
                      (i) or (ii).
                    ``(B) Applicable insurance regulatory body.--The 
                term `applicable insurance regulatory body' means, with 
                respect to any insurance business, the entity 
                established by law to license, authorize, or regulate 
                such business and to which the statement described in 
                subparagraph (A) is provided.''.

    (c) <<NOTE: 26 USC 1297 note.>>  Effective Date.--The amendments 
made by this section shall apply to taxable years beginning after 
December 31, 2017.
SEC. 14502. REPEAL OF FAIR MARKET VALUE METHOD OF INTEREST EXPENSE 
                            APPORTIONMENT.

    (a) In General.--Paragraph (2) of section 864(e) <<NOTE: 26 USC 
864.>>  is amended to read as follows:
            ``(2) Gross income and fair market value methods may not be 
        used for interest.--All allocations and apportionments of 
        interest expense shall be determined using the adjusted bases of 
        assets rather than on the basis of the fair market value of the 
        assets or gross income.''.

    (b) <<NOTE: 26 USC 864 note.>>  Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2017.

                                TITLE II

SEC. 20001. <<NOTE: 26 USC 3143 note.>>  OIL AND GAS PROGRAM.

    (a) Definitions.--In this section:
            (1) Coastal plain.--The term ``Coastal Plain'' means the 
        area identified as the 1002 Area on the plates prepared by

[[Page 131 STAT. 2236]]

        the United States Geological Survey entitled ``ANWR Map - Plate 
        1'' and ``ANWR Map - Plate 2'', dated October 24, 2017, and on 
        file with the United States Geological Survey and the Office of 
        the Solicitor of the Department of the Interior.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of the Interior, acting through the Bureau of Land Management.

    (b) Oil and Gas Program.--
            (1) In general.--Section 1003 of the Alaska National 
        Interest Lands Conservation Act (16 U.S.C. 3143) shall not apply 
        to the Coastal Plain.
            (2) Establishment.--
                    (A) In general.--The Secretary shall establish and 
                administer a competitive oil and gas program for the 
                leasing, development, production, and transportation of 
                oil and gas in and from the Coastal Plain.
                    (B) Purposes.--Section 303(2)(B) of the Alaska 
                National Interest Lands Conservation Act (Public Law 96-
                487; 94 Stat. 2390) <<NOTE: 16 USC 668dd note.>>  is 
                amended--
                          (i) in clause (iii), by striking ``and'' at 
                      the end;
                          (ii) in clause (iv), by striking the period at 
                      the end and inserting ``; and''; and
                          (iii) by adding at the end the following:
                          ``(v) to provide for an oil and gas program on 
                      the Coastal Plain.''.
            (3) Management.--Except as otherwise provided in this 
        section, the Secretary shall manage the oil and gas program on 
        the Coastal Plain in a manner similar to the administration of 
        lease sales under the Naval Petroleum Reserves Production Act of 
        1976 (42 U.S.C. 6501 et seq.) (including regulations).
            (4) Royalties.--Notwithstanding the Mineral Leasing Act (30 
        U.S.C. 181 et seq.), the royalty rate for leases issued pursuant 
        to this section shall be 16.67 percent.
            (5) Receipts.--Notwithstanding the Mineral Leasing Act (30 
        U.S.C. 181 et seq.), of the amount of adjusted bonus, rental, 
        and royalty receipts derived from the oil and gas program and 
        operations on Federal land authorized under this section--
                    (A) 50 percent shall be paid to the State of Alaska; 
                and
                    (B) the balance shall be deposited into the Treasury 
                as miscellaneous receipts.

    (c) 2 Lease Sales Within 10 Years.--
            (1) Requirement.--
                    (A) In general.--Subject to subparagraph (B), the 
                Secretary shall conduct not fewer than 2 lease sales 
                area-wide under the oil and gas program under this 
                section by not later than 10 years after the date of 
                enactment of this Act.
                    (B) Sale acreages; schedule.--
                          (i) Acreages.--The Secretary shall offer for 
                      lease under the oil and gas program under this 
                      section--
                                    (I) not fewer than 400,000 acres 
                                area-wide in each lease sale; and
                                    (II) those areas that have the 
                                highest potential for the discovery of 
                                hydrocarbons.
                          (ii) Schedule.--The Secretary shall offer--

[[Page 131 STAT. 2237]]

                                    (I) the initial lease sale under the 
                                oil and gas program under this section 
                                not later than 4 years after the date of 
                                enactment of this Act; and
                                    (II) a second lease sale under the 
                                oil and gas program under this section 
                                not later than 7 years after the date of 
                                enactment of this Act.
            (2) Rights-of-way.--The Secretary shall issue any rights-of-
        way or easements across the Coastal Plain for the exploration, 
        development, production, or transportation necessary to carry 
        out this section.
            (3) Surface development.--In administering this section, the 
        Secretary shall authorize up to 2,000 surface acres of Federal 
        land on the Coastal Plain to be covered by production and 
        support facilities (including airstrips and any area covered by 
        gravel berms or piers for support of pipelines) during the term 
        of the leases under the oil and gas program under this section.
SEC. 20002. LIMITATIONS ON AMOUNT OF DISTRIBUTED QUALIFIED OUTER 
                            CONTINENTAL SHELF REVENUES.

    Section 105(f)(1) of the Gulf of Mexico Energy Security Act of 2006 
(43 U.S.C. 1331 note; Public Law 109-432) is amended by striking 
``exceed $500,000,000 for each of fiscal years 2016 through 2055.'' and 
inserting the following: ``exceed--
                    ``(A) $500,000,000 for each of fiscal years 2016 
                through 2019;
                    ``(B) $650,000,000 for each of fiscal years 2020 and 
                2021; and
                    ``(C) $500,000,000 for each of fiscal years 2022 
                through 2055.''.
SEC. 20003. <<NOTE: 42 USC 6241 note.>>  STRATEGIC PETROLEUM 
                            RESERVE DRAWDOWN AND SALE.

    (a) Drawdown and Sale.--
            (1) In general.--Notwithstanding section 161 of the Energy 
        Policy and Conservation Act (42 U.S.C. 6241), except as provided 
        in subsections (b) and (c), the Secretary of Energy shall draw 
        down and sell from the Strategic Petroleum Reserve 7,000,000 
        barrels of crude oil during the period of fiscal years 2026 
        through 2027.
            (2) Deposit of amounts received from sale.--Amounts received 
        from a sale under paragraph (1) shall be deposited in the 
        general fund of the Treasury during the fiscal year in which the 
        sale occurs.

    (b) Emergency Protection.--The Secretary of Energy shall not draw 
down and sell crude oil under subsection (a) in a quantity that would 
limit the authority to sell petroleum products under subsection (h) of 
section 161 of the Energy Policy and Conservation Act (42 U.S.C. 6241) 
in the full quantity authorized by that subsection.

[[Page 131 STAT. 2238]]

    (c) Limitation.--The Secretary of Energy shall not drawdown or 
conduct sales of crude oil under subsection (a) after the date on which 
a total of $600,000,000 has been deposited in the general fund of the 
Treasury from sales authorized under that subsection.

    Approved December 22, 2017.

LEGISLATIVE HISTORY--H.R. 1 (S. 1):
---------------------------------------------------------------------------

HOUSE REPORTS: Nos. 115-409 (Comm. on Ways and Means) and 115-466 (Comm. 
of Conference).
CONGRESSIONAL RECORD, Vol. 163 (2017):
            Nov. 15, 16, considered and passed House.
            Nov. 29-Dec. 1, considered and passed Senate, amended.
            Dec. 19, House agreed to conference report. Senate sustained 
                point of order against conference report; receded from 
                its amendment and concurred with an amendment.
            Dec. 20, House concurred in Senate amendment.
DAILY COMPILATION OF PRESIDENTIAL DOCUMENTS (2017):
            Dec. 22, Presidential remarks.

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