In the Senate of the United States,
December 2 (legislative day, December 1), 2017.
Resolved, That the bill from the House of Representatives (H.R. 1) entitled “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.”, do pass with the following
AMENDMENT:
(b) Amendment of 1986 code.—Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.
SEC. 11001. Modification of rates.
(a) In general.—Section 1 is amended by adding at the end the following new subsection:
“(j) Modifications for taxable years 2018 through 2025.—
“(1) IN GENERAL.—In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026—
“(2) RATE TABLES.—
“(A) MARRIED INDIVIDUALS FILING JOINT RETURNS AND SURVIVING SPOUSES.—The following table shall be applied in lieu of the table contained in subsection (a):
| “If taxable income is: | The tax is: |
| Not over $19,050 | 10% of taxable income. |
| Over $19,050 but not over $77,400 | $1,905, plus 12% of the excess over $19,050. |
| Over $77,400 but not over $140,000 | $8,907, plus 22% of the excess over $77,400. |
| Over $140,000 but not over $320,000 | $22,679, plus 24% of the excess over $140,000. |
| Over $320,000 but not over $400,000 | $65,879, plus 32% of the excess over $320,000. |
| Over $400,000 but not over $1,000,000 | $91,479, plus 35% of the excess over $400,000. |
| Over $1,000,000 | $301,479, plus 38.5% of the excess over $1,000,000. |
“(B) HEADS OF HOUSEHOLDS.—The following table shall be applied in lieu of the table contained in subsection (b):
| “If taxable income is: | The tax is: |
| Not over $13,600 | 10% of taxable income. |
| Over $13,600 but not over $51,800 | $1,360, plus 12% of the excess over $13,600. |
| Over $51,800 but not over $70,000 | $5,944, plus 22% of the excess over $51,800. |
| Over $70,000 but not over $160,000 | $9,948, plus 24% of the excess over $70,000. |
| Over $160,000 but not over $200,000 | $31,548, plus 32% of the excess over $160,000. |
| Over $200,000 but not over $500,000 | $44,348, plus 35% of the excess over $200,000. |
| Over $500,000 | $149,348, plus 38.5% of the excess over $500,000. |
“(C) UNMARRIED INDIVIDUALS OTHER THAN SURVIVING SPOUSES AND HEADS OF HOUSEHOLDS.—The following table shall be applied in lieu of the table contained in subsection (c):
| “If taxable income is: | The tax is: |
| Not over $9,525 | 10% of taxable income. |
| Over $9,525 but not over $38,700 | $952.50, plus 12% of the excess over $9,525. |
| Over $38,700 but not over $70,000 | $4,453.50, plus 22% of the excess over $38,700. |
| Over $70,000 but not over $160,000 | $11,339.50, plus 24% of the excess over $70,000. |
| Over $160,000 but not over $200,000 | $32,939.50, plus 32% of the excess over $160,000. |
| Over $200,000 but not over $500,000 | $45,739.50, plus 35% of the excess over $200,000. |
| Over $500,000 | $150,739.50, plus 38.5% of the excess over $500,000. |
“(D) MARRIED INDIVIDUALS FILING SEPARATE RETURNS.—The following table shall be applied in lieu of the table contained in subsection (d):
| “If taxable income is: | The tax is: |
| Not over $9,525 | 10% of taxable income. |
| Over $9,525 but not over $38,700 | $952.50, plus 12% of the excess over $9,525. |
| Over $38,700 but not over $70,000 | $4,453.50, plus 22% of the excess over $38,700. |
| Over $70,000 but not over $160,000 | $11,339.50, plus 24% of the excess over $70,000. |
| Over $160,000 but not over $200,000 | $32,939.50, plus 32% of the excess over $160,000. |
| Over $200,000 but not over $500,000 | $45,739.50, plus 35% of the excess over $200,000. |
| Over $500,000 | $150,739.50, plus 38.5% of the excess over $500,000. |
“(E) ESTATES AND TRUSTS.—The following table shall be applied in lieu of the table contained in subsection (e):
| “If taxable income is: | The tax is: |
| Not over $2,550 | 10% of taxable income. |
| Over $2,550 but not over $9,150 | $255, plus 24% of the excess over $2,550. |
| Over $9,150 but not over $12,500 | $1,839, plus 35% of the excess over $9,150. |
| Over $12,500 | $3,011.50, plus 38.5% of the excess over $12,500. |
“(F) REFERENCES TO RATE TABLES.—Any reference in this title to a rate of tax under subsection (c) shall be treated as a reference to the corresponding rate bracket under subparagraph (C) of this paragraph, except that the reference in section 3402(q)(1) to the third lowest rate of tax applicable under subsection (c) shall be treated as a reference to the fourth lowest rate of tax under subparagraph (C).
“(3) ADJUSTMENTS.—
“(A) NO ADJUSTMENT IN 2018.—The tables contained in paragraph (2) shall apply without adjustment for taxable years beginning after December 31, 2017, and before January 1, 2019.
“(B) SUBSEQUENT YEARS.—For taxable years beginning after December 31, 2018, the Secretary shall prescribe tables which shall apply in lieu of the tables contained in paragraph (2) in the same manner as under paragraphs (1) and (2) of subsection (f), except that in prescribing such tables—
“(i) subsection (f)(3) shall be applied by substituting ‘calendar year 2017’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof,
“(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:
“(i) 24-PERCENT BRACKET.—The maximum taxable income which is taxed at a rate below 24 percent shall not be more than the earned taxable income of such child.
“(ii) 35-PERCENT BRACKET.—The maximum taxable income which is taxed at a rate below 35 percent shall not be more than the sum of—
“(5) APPLICATION OF CURRENT INCOME TAX BRACKETS TO CAPITAL GAINS BRACKETS.—
“(A) IN GENERAL.—Section 1(h)(1) shall be applied—
“(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—
“(II) in the case of an individual who is a head of household (as defined in section 2(b)), $51,700,
“(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 (½ such amount in the case of a married individual filing a separate return),
(b) Due diligence tax preparer requirement with respect to head of household filing status.—Subsection (g) of section 6695 is amended to read as follows:
“(g) Failure To be diligent in determining eligibility for certain tax benefits.—Any person who is a tax return preparer with respect to any return or claim for refund who fails to comply with due diligence requirements imposed by the Secretary by regulations with respect to determining—
shall pay a penalty of $500 for each such failure.”.
SEC. 11002. Inflation adjustments based on chained CPI.
(a) In general.—Subsection (f) of section 1 is amended by striking paragraph (3) and by inserting after paragraph (2) the following new paragraph:
“(3) COST-OF-LIVING ADJUSTMENT.—For purposes of this subsection—
“(A) IN GENERAL.—The cost-of-living adjustment for any calendar year is the percentage (if any) by which—
“(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.
(c) Application To permanent tax tables.—Section 1(f)(2)(A) is amended by inserting “, determined by substituting ‘1992’ for ‘2016’ in paragraph (3)(A)(ii)”.
(d) Application to other Internal Revenue Code of 1986 provisions.—
(1) The following sections are each amended by striking “for ‘calendar year 1992’ in subparagraph (B)” and inserting “for ‘calendar year 2016’ in subparagraph (A)(ii)”:
(2) Sections 41(e)(5)(C)(ii) and 68(b)(2)(B) are each amended—
(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—
(7) So much of clause (ii) of section 213(d)(10)(B) as precedes the last sentence is amended to read as follows:
(8) Subparagraph (B) of section 280F(d)(7) is amended to read as follows:
(9) Section 911(b)(2)(D)(ii)(II) is amended by striking “for ‘1992’ in subparagraph (B)” and inserting “for ‘2016’ in subparagraph (A)(ii)”.
(10) Paragraph (2) of section 1274A(d) is amended to read as follows:
“(2) ADJUSTMENT FOR INFLATION.—In the case of any debt instrument arising out of a sale or exchange during any calendar year after 1989, each dollar amount contained in the preceding provisions of this section shall be increased by an amount equal to—
“(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—
“(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting ‘calendar year 1985’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
Any increase under the preceding sentence shall be rounded to the nearest multiple of $100 (or, if such increase is a multiple of $50, such increase shall be increased to the nearest multiple of $100).”.
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:
“(a) In general.—In the case of a taxpayer other than a corporation, there shall be allowed as a deduction for any taxable year an amount equal to the lesser of—
“(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—
“(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—
“(3) MODIFICATIONS TO THE WAGE LIMIT BASED ON TAXABLE INCOME.—
“(A) EXCEPTION FROM WAGE LIMIT.—In the case of any taxpayer whose taxable income for the taxable year does not exceed the threshold amount, paragraph (2) shall be applied without regard to subparagraph (B).
“(B) PHASE-IN OF LIMIT FOR CERTAIN TAXPAYERS.—
“(i) IN GENERAL.—If—
“(I) the taxable income of a taxpayer for any taxable year exceeds the threshold amount, but does not exceed the sum of the threshold amount plus $50,000 ($100,000 in the case of a joint return), and
“(II) the amount determined under paragraph (2)(B) (determined without regard to this subparagraph) with respect to any qualified trade or business carried on by the taxpayer is less than the amount determined under paragraph (2)(A) with respect such trade or business,
then paragraph (2) shall be applied with respect to such trade or business without regard to subparagraph (B) thereof and by reducing the amount determined under subparagraph (A) thereof by the amount determined under clause (ii).
“(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.
“(5) ACQUISITIONS, DISPOSITIONS, AND SHORT TAXABLE YEARS.—The Secretary shall provide for the application of this subsection in cases of a short taxable year or where the taxpayer acquires, or disposes of, the major portion of a trade or business or the major portion of a separate unit of a trade or business during the taxable year.
“(c) Qualified business income.—For purposes of this section—
“(1) IN GENERAL.—The term ‘qualified business income’ means, for any taxable year, the net amount of qualified items of income, gain, deduction, and loss with respect to any qualified trade or business of the taxpayer.
“(2) CARRYOVER OF LOSSES.—If the net amount of qualified income, gain, deduction, and loss with respect to qualified trade or businesses of the taxpayer amount for any taxable year is less than zero, such amount shall be treated as a loss from a qualified trade or business in the succeeding taxable year.
“(3) QUALIFIED ITEMS OF INCOME, GAIN, DEDUCTION, AND LOSS.—For purposes of this subsection—
“(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
“(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)).
“(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,
“(d) Qualified trade or business.—For purposes of this section—
“(1) IN GENERAL.—The term ‘qualified trade or business’ means any trade or business other than a specified service trade or business or the trade or business of performing services as an employee.
“(2) SPECIFIED SERVICE TRADE OR BUSINESS.—The term ‘specified service trade or business’ means any trade or business involving the performance of services described in section 1202(e)(3)(A), including investing and investment management, trading, or dealing in securities (as defined in section 475(c)(2)), partnership interests, or commodities (as defined in section 475(e)(2)).
“(3) EXCEPTION FOR SPECIFIED SERVICE BUSINESSES BASED ON TAXPAYER'S INCOME.—
“(A) IN GENERAL.—If, for any taxable year, the taxable income of any taxpayer is less than the sum of the threshold amount plus $50,000 ($100,000 in the case of a joint return), then—
“(i) the exception under paragraph (1) shall not apply to specified service trades or businesses of the taxpayer for the taxable year, but
“(ii) only the applicable percentage of qualified items of income, gain, deduction, or loss, and the W–2 wages, of the taxpayer allocable to such specified service trades or businesses shall be taken into account in computing the qualified business income and W–2 wages of the taxpayer for the taxable year for purposes of applying this section.
“(B) APPLICABLE PERCENTAGE.—For purposes of subparagraph (A), the term ‘applicable percentage’ means, with respect to any taxable year, 100 percent reduced (not below zero) by the percentage equal to the ratio of—
“(e) Other definitions.—For purposes of this section—
“(1) TAXABLE INCOME.—Taxable income shall be computed without regard to the deduction allowable under this section.
“(2) THRESHOLD AMOUNT.—
“(A) IN GENERAL.—The term ‘threshold amount’ means $250,000 (200 percent of such amount in the case of a joint return).
“(B) INFLATION ADJUSTMENT.—In the case of any taxable year beginning after 2018, the dollar amount in paragraph (1) shall be increased by an amount equal to—
“(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2017’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the nearest multiple of $1,000.
“(3) QUALIFIED REIT DIVIDEND.—The term ‘qualified REIT dividend’ means any dividend from a real estate investment trust received during the taxable year which—
“(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—
“(f) Special rules.—
“(1) APPLICATION TO PARTNERSHIPS AND S CORPORATIONS.—
“(A) IN GENERAL.—In the case of a partnership or S corporation—
“(ii) each partner or shareholder shall take into account such person's allocable share of each qualified item of income, gain, deduction, and loss, and
“(iii) each partner or shareholder shall be treated for purposes of subsection (b) as having W–2 wages for the taxable year in an amount equal to such person's allocable share of the W–2 wages of the partnership or S corporation for the taxable year (as determined under regulations prescribed by the Secretary).
For purposes of clause (iii), a partner's or shareholder's allocable share of W–2 wages shall be determined in the same manner as the partner's or shareholder's allocable share of wage expenses. For purposes of this subparagraph, in the case of an S corporation, an allocable share shall be the shareholder's pro rata share of an item.
“(C) TREATMENT OF TRADES OR BUSINESS IN PUERTO RICO.—
“(i) IN GENERAL.—In the case of any taxpayer with qualified business income from sources within the commonwealth of Puerto Rico, if all such income is taxable under section 1 for such taxable year, then for purposes of determining the qualified business income of such taxpayer for such taxable year, the term ‘United States’ shall include the Commonwealth of Puerto Rico.
“(ii) SPECIAL RULE FOR APPLYING WAGE LIMITATION.—In the case of any taxpayer described in clause (i), the determination of W–2 wages of such taxpayer with respect to any qualified trade or business conducted in Puerto Rico shall be made without regard to any exclusion under section 3401(a)(8) for remuneration paid for services in Puerto Rico.
“(2) COORDINATION WITH MINIMUM TAX.—For purposes of determining alternative minimum taxable income under section 55, qualified business income shall be determined without regard to any adjustments under sections 56 through 59.
“(3) DEDUCTION LIMITED TO INCOME TAXES.—The deduction under subsection (a) shall only be allowed for purposes of this chapter.
“(4) REGULATIONS.—The Secretary shall prescribe such regulations as are necessary to carry out the purposes of this section, including regulations—
“(g) Deduction allowed to specified agricultural or horticultural cooperatives.—
“(1) IN GENERAL.—In the case of any taxable year of a specified agricultural or horticultural cooperative beginning after December 31, 2018, there shall be allowed a deduction in an amount equal to the lesser of—
“(2) SPECIFIED AGRICULTURAL OR HORTICULTURAL COOPERATIVE.—For purposes of this subsection, the term ‘specified agricultural or horticultural cooperative’ means an organization to which part I of subchapter T applies which is engaged in—
“(A) the manufacturing, production, growth, or extraction in whole or significant part of any agricultural or horticultural product,
(b) Application to publicly traded partnerships.—
(1) IN GENERAL.—Section 199A(b)(1)(B), as added by subsection (a), is amended by striking “and qualified cooperative dividends” and inserting “, qualified cooperative dividends, and qualified publicly traded partnership income”.
(2) QUALIFIED PUBLICLY TRADED PARTNERSHIP INCOME.—Section 199A(e), as added by subsection (a), is amended by adding at the end the following new paragraph:
“(5) QUALIFIED PUBLICLY TRADED PARTNERSHIP INCOME.—The term ‘qualified publicly traded partnership income’ means, with respect to any qualified trade or business of a taxpayer, the sum of—
“(A) the net amount of such taxpayer's allocable share of each qualified item of income, gain, deduction, and loss (as defined in subsection (c)(3) and determined after the application of subsection (c)(4)) from a publicly traded partnership (as defined in section 7704(a)) which is not treated as a corporation under section 7704(c), plus
(c) Accuracy-related penalty on determination of applicable percentage.—Section 6662(d)(1) is amended by inserting at the end the following new subparagraph:
(d) Conforming amendments.—
(1) Section 170(b)(2)(D) is amended by striking “, and” at the end of clause (iv), by redesignating clause (v) as clause (vi), and by inserting after clause (iv) the following new clause:
(2) Section 172(d) is amended by adding at the end the following new paragraph:
(3) Section 246(b)(1) is amended by inserting “199A,” before “243(a)(1)”.
(4) Section 613(a) is amended by inserting “and without the deduction under section 199A” after “and without the deduction under section 199”.
(5) Section 613A(d)(1) is amended by redesignating subparagraphs (C), (D), and (E) as subparagraphs (D), (E), and (F), respectively, and by inserting after subparagraph (B), the following new subparagraph:
(6) The table of sections for part VI of subchapter B of chapter 1 is amended by inserting at the end the following new item:
SEC. 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—
“(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—
“(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—
“(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—
“(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.
SEC. 11021. Increase in standard deduction.
(a) In general.—Subsection (c) of section 63 is amended by adding at the end the following new paragraph:
“(7) SPECIAL RULES FOR TAXABLE YEARS 2018 THROUGH 2025.—In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026—
“(B) ADJUSTMENT FOR INFLATION.—
“(i) IN GENERAL.—Paragraph (4) shall not apply to the dollar amounts contained in paragraphs (2)(B) and (2)(C).
SEC. 11022. Increase in and modification of child tax credit.
(a) In general.—Section 24 is amended by adding at the end the following new subsection:
“(h) Special rules for taxable years 2018 through 2025.—
“(1) IN GENERAL.—In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026, this section shall be applied as provided in paragraphs (2), (3), (5), (6), (7), and (8). In the case of taxable year beginning after December 31, 2017 and before January 1, 2025, this section shall be applied as provided in paragraph (4).
“(3) LIMITATION.—In lieu of the amount determined under subsection (b)(2), the threshold amount shall be $500,000.
“(4) DEFINITION OF QUALIFYING CHILD.—Paragraph (1) of subsection (c) shall be applied by substituting ‘18’ for ‘17’.
“(5) PARTIAL CREDIT ALLOWED FOR CERTAIN OTHER DEPENDENTS.—
“(6) MAXIMUM AMOUNT OF REFUNDABLE CREDIT.—
“(A) IN GENERAL.—Subsection (d)(1)(A) shall be applied without regard to paragraphs (2) and (5) of this subsection.
“(B) ADJUSTMENT FOR INFLATION.—In the case of a taxable year beginning after 2017, subsection (d)(1)(A) shall be applied as if the $1,000 amount in subsection (a) were increased (but not to exceed the amount under paragraph (2) of this subsection) by an amount equal to—
“(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins.
Any increase determined under the preceding sentence shall be rounded to the next highest multiple of $100.
“(7) EARNED INCOME THRESHOLD FOR REFUNDABLE CREDIT.—Subsection (d)(1)(B)(i) shall be applied by substituting ‘$2,500’ for ‘$3,000’.
“(8) SOCIAL SECURITY NUMBER REQUIRED.—No credit shall be allowed under subsection (d) to a taxpayer with respect to any qualifying child unless the taxpayer includes the social security number of such child on the return of tax for the taxable year. For purposes of the preceding sentence, the term ‘social security number’ means a social security number issued to an individual by the Social Security Administration, but only if the social security number is issued to a citizen of the United States or is issued pursuant to subclause (I) (or that portion of subclause (III) that relates to subclause (I)) of section 205(c)(2)(B)(i) of the Social Security Act.”.
SEC. 11023. Increased limitation for certain charitable contributions.
(a) In general.—Section 170(b)(1) is amended by redesignating subparagraph (G) as subparagraph (H) and by inserting after subparagraph (F) the following new subparagraph:
“(G) INCREASED LIMITATION FOR CASH CONTRIBUTIONS.—
“(i) IN GENERAL.—In the case of any contribution of cash to an organization described in subparagraph (A), the total amount of such contributions which may be taken into account under subsection (a) for any taxable year beginning after December 31, 2017, and before January 1, 2026, shall not exceed 60 percent of the taxpayer’s contribution base for such year.
“(ii) CARRYOVER.—If the aggregate amount of contributions described in clause (i) exceeds the applicable limitation under clause (i) for any taxable year described in such clause, such excess shall be treated (in a manner consistent with the rules of subsection (d)(1)) as a charitable contribution to which clause (i) applies in each of the 5 succeeding years in order of time.
“(iii) COORDINATION WITH SUBPARAGRAPHS (A) AND (B).—
“(I) IN GENERAL.—Contributions taken into account under this subparagraph shall not be taken into account under subparagraph (A).
“(II) LIMITATION REDUCTION.—For each taxable year described in clause (i), and each taxable year to which any contribution under this subparagraph is carried over under clause (ii), subparagraph (A) shall be applied by reducing (but not below zero) the contribution limitation allowed for the taxable year under such subparagraph by the aggregate contributions allowed under this subparagraph for such taxable year, and subparagraph (B) shall be applied by treating any reference to subparagraph (A) as a reference to both subparagraph (A) and this subparagraph.”.
SEC. 11024. Increased contributions to ABLE accounts.
(a) Increase in limitation for contributions from compensation of individuals with disabilities.—
(1) IN GENERAL.—Section 529A(b)(2)(B) is amended to read as follows:
“(B) except in the case of contributions under subsection (c)(1)(C), if such contribution to an ABLE account would result in aggregate contributions from all contributors to the ABLE account for the taxable year exceeding the sum of—
“(i) the amount in effect under section 2503(b) for the calendar year in which the taxable year begins, plus
(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,
“(B) POVERTY LINE.—The term ‘poverty line’ has the meaning given such term by section 673 of the Community Services Block Grant Act (42 U.S.C. 9902).”.
(b) Allowance of saver’s credit for ABLE contributions by account holder.—Section 25B(d)(1) is amended by striking “and” at the end of subparagraph (B)(ii), by striking the period at the end of subparagraph (C) and inserting “, and”, and by inserting at the end the following:
SEC. 11025. Rollovers to ABLE programs from 529 programs.
(a) In general.—Clause (i) of section 529(c)(3)(C) is amended by striking “or” at the end of subclause (I), by striking the period at the end of subclause (II) and inserting “, or”, and by adding at the end the following:
“(III) before January 1, 2026, to an ABLE account (as defined in section 529A(e)(6)) of the designated beneficiary or a member of the family of the designated beneficiary.
Subclause (III) shall not apply to so much of a distribution which, when added to all other contributions made to the ABLE account for the taxable year, exceeds the limitation under section 529A(b)(2)(B)(i).”.
SEC. 11026. Treatment of certain individuals performing services in the Sinai Peninsula of Egypt.
(a) In general.—For purposes of the following provisions of the Internal Revenue Code of 1986, with respect to the applicable period, a qualified hazardous duty area shall be treated in the same manner as if it were a combat zone (as determined under section 112 of such Code):
(4) Section 2201 (relating to members of the Armed Forces dying in combat zone or by reason of combat-zone-incurred wounds, etc.).
(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.
SEC. 11027. Extension of waiver of limitations with respect to excluding from gross income amounts received by wrongfully incarcerated individuals.
(a) In general.—Section 304(d) of the Protecting Americans from Tax Hikes Act of 2015 (26 U.S.C. 139F note) is amended by striking “1-year” and inserting “2-year”.
SEC. 11028. Temporary reduction in medical expense deduction floor.
(a) In general.—Subsection (f) of section 213 is amended to read as follows:
“(f) Special rules for 2013 through 2018.—In the case of any taxable year—
“(1) beginning after December 31, 2012, and ending before January 1, 2017, in the case of a taxpayer if such taxpayer or such taxpayer's spouse has attained age 65 before the close of such taxable year, and
“(2) beginning after December 31, 2016, and ending before January 1, 2019, in the case of any taxpayer,
subsection (a) shall be applied with respect to a taxpayer by substituting ‘7.5 percent’ for ‘10 percent’.”.
(b) Minimum tax preference not To apply.—Section 56(b)(1)(B) is amended by adding at the end the following new sentence:“This subparagraph shall not apply to taxable years beginning after December 31, 2016, and ending before January 1, 2019”.
SEC. 11029. Relief for 2016 disaster areas.
(a) In general.—For purposes of this section, the term “2016 disaster area” means any area with respect to which a major disaster has been declared by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act during calendar year 2016.
(b) Special rules for use of retirement funds with respect to areas damaged by 2016 disasters.—
(1) TAX-FAVORED WITHDRAWALS FROM RETIREMENT PLANS.—
(A) IN GENERAL.—Section 72(t) of the Internal Revenue Code of 1986 shall not apply to any qualified 2016 disaster distribution.
(B) AGGREGATE DOLLAR LIMITATION.—
(i) IN GENERAL.—For purposes of this subsection, the aggregate amount of distributions received by an individual which may be treated as qualified 2016 disaster distributions for any taxable year shall not exceed the excess (if any) of—
(ii) TREATMENT OF PLAN DISTRIBUTIONS.—If a distribution to an individual would (without regard to clause (i)) be a qualified 2016 disaster distribution, a plan shall not be treated as violating any requirement of this title merely because the plan treats such distribution as a qualified 2016 disaster distribution, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer) to such individual exceeds $100,000.
(iii) CONTROLLED GROUP.—For purposes of clause (ii), the term “controlled group” means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986.
(C) AMOUNT DISTRIBUTED MAY BE REPAID.—
(i) IN GENERAL.—Any individual who receives a qualified 2016 disaster distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make one or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16) of the Internal Revenue Code of 1986, as the case may be.
(ii) TREATMENT OF REPAYMENTS OF DISTRIBUTIONS FROM ELIGIBLE RETIREMENT PLANS OTHER THAN IRAS.—For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to clause (i) with respect to a qualified 2016 disaster distribution from an eligible retirement plan other than an individual retirement plan, then the taxpayer shall, to the extent of the amount of the contribution, be treated as having received the qualified 2016 disaster distribution in an eligible rollover distribution (as defined in section 402(c)(4) of the Internal Revenue Code of 1986) and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
(iii) TREATMENT OF REPAYMENTS FOR DISTRIBUTIONS FROM IRAS.—For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to clause (i) with respect to a qualified 2016 disaster distribution from an individual retirement plan (as defined by section 7701(a)(37) of the Internal Revenue Code of 1986), then, to the extent of the amount of the contribution, the qualified 2016 disaster distribution shall be treated as a distribution described in section 408(d)(3) of such Code and as having been transferred to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
(D) DEFINITIONS.—For purposes of this paragraph—
(i) QUALIFIED 2016 DISASTER DISTRIBUTION.—Except as provided in subparagraph (B), the term “qualified 2016 disaster distribution” means any distribution from an eligible retirement plan made on or after January 1, 2016, and before January 1, 2018, to an individual whose principal place of abode at any time during calendar year 2016 was located in a disaster area described in subsection (a) and who has sustained an economic loss by reason of the events giving rise to the Presidential declaration described in subsection (a) which was applicable to such area.
(ii) ELIGIBLE RETIREMENT PLAN.—The term “eligible retirement plan” shall have the meaning given such term by section 402(c)(8)(B) of the Internal Revenue Code of 1986.
(E) INCOME INCLUSION SPREAD OVER 3-YEAR PERIOD.—
(i) IN GENERAL.—In the case of any qualified 2016 disaster distribution, unless the taxpayer elects not to have this subparagraph apply for any taxable year, any amount required to be included in gross income for such taxable year shall be so included ratably over the 3-taxable-year period beginning with such taxable year.
(ii) SPECIAL RULE.—For purposes of clause (i), rules similar to the rules of subparagraph (E) of section 408A(d)(3) of the Internal Revenue Code of 1986 shall apply.
(F) SPECIAL RULES.—
(i) EXEMPTION OF DISTRIBUTIONS FROM TRUSTEE TO TRUSTEE TRANSFER AND WITHHOLDING RULES.—For purposes of sections 401(a)(31), 402(f), and 3405 of the Internal Revenue Code of 1986, qualified 2016 disaster distribution shall not be treated as eligible rollover distributions.
(ii) QUALIFIED 2016 DISASTER DISTRIBUTIONS TREATED AS MEETING PLAN DISTRIBUTION REQUIREMENTS.—For purposes of the Internal Revenue Code of 1986, a qualified 2016 disaster distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), and 457(d)(1)(A) of the Internal Revenue Code of 1986.
(2) PROVISIONS RELATING TO PLAN AMENDMENTS.—
(A) IN GENERAL.—If this paragraph applies to any amendment to any plan or annuity contract, such plan or contract shall be treated as being operated in accordance with the terms of the plan during the period described in subparagraph (B)(ii)(I).
(B) AMENDMENTS TO WHICH SUBSECTION APPLIES.—
(i) IN GENERAL.—This paragraph shall apply to any amendment to any plan or annuity contract which is made—
(I) pursuant to any provision of this section, or pursuant to any regulation under any provision of this section; and
(II) on or before the last day of the first plan year beginning on or after January 1, 2018, or such later date as the Secretary prescribes.
In the case of a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986), subclause (II) shall be applied by substituting the date which is 2 years after the date otherwise applied under subclause (II).
(ii) CONDITIONS.—This paragraph shall not apply to any amendment unless—
(I) during the period—
(aa) beginning on the date that this section or the regulation described in clause (i)(I) takes effect (or in the case of a plan or contract amendment not required by this section or such regulation, the effective date specified by the plan); and
(bb) ending on the date described in clause (i)(II) (or, if earlier, the date the plan or contract amendment is adopted),
the plan or contract is operated as if such plan or contract amendment were in effect; and
(c) Special rules for personal casualty losses related to 2016 major disaster.—
(1) IN GENERAL.—If an individual has a net disaster loss for any taxable year beginning after December 31, 2017, and before January 1, 2026—
(A) the amount determined under section 165(h)(2)(A)(ii) of the Internal Revenue Code of 1986 shall be equal to the sum of—
(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)”,
(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.
SEC. 11031. Treatment of student loans discharged on account of death or disability.
(a) In general.—Section 108(f) is amended by adding at the end the following new paragraph:
“(5) DISCHARGES ON ACCOUNT OF DEATH OR DISABILITY.—
“(A) IN GENERAL.—In the case of an individual, gross income for any taxable year beginning after December 31, 2017, and before January 1, 2026, does not include any amount which (but for this subsection) would be includible in gross income for such taxable year by reasons of the discharge (in whole or in part) of any loan described in subparagraph (B) if such discharge was—
“(B) LOANS DESCRIBED.—A loan is described in this subparagraph if such loan is—
“(ii) a private education loan (as defined in section 140(7) of the Consumer Credit Protection Act (15 U.S.C. 1650(7))).”.
SEC. 11032. Increase in deduction for teacher expenses.
(a) In general.—Subparagraph (D) of section 62(a)(2) is amended by striking “$250” and inserting “$250 ($500 in the case of taxable years beginning after December 31, 2017, and before January 1, 2026)”.
SEC. 11033. 529 account funding for elementary and secondary education.
(a) In general.—
(1) IN GENERAL.—Section 529(c) is amended by adding at the end the following new paragraph:
“(7) TREATMENT OF ELEMENTARY AND SECONDARY TUITION.—Any reference in this subsection to the term ‘qualified higher education expense’ shall include a reference to—
“(A) expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school, and
(2) LIMITATION.—Section 529(e)(3)(A) is amended by adding at the end the following: “The amount of cash distributions from all qualified tuition programs described in subsection (b)(1)(A)(ii) with respect to a beneficiary during any taxable year shall, in the aggregate, include not more than $10,000 in expenses described in subsection (c)(7) incurred during the taxable year.”.
(b) Effective date.—The amendments made by subsection (a) shall apply to contributions made after December 31, 2017.
(c) Offset.—
(1) MODIFICATION OF RULES RELATING TO HARDSHIP WITHDRAWALS FROM CASH OR DEFERRED ARRANGEMENTS.—Section 401(k) is amended by adding at the end the following:
(2) CONFORMING AMENDMENT.—Section 401(k)(2)(B)(i)(IV) is amended to read as follows:
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—
“(B) REFERENCES.—For purposes of any other provision of this title, the reduction of the exemption amount to zero under subparagraph (A) shall not be taken into account in determining whether a deduction is allowed or allowable, or whether a taxpayer is entitled to a deduction, under this section.”.
(b) Application to estates and trusts.—Section 642(b)(2)(C) is amended by adding at the end the following new clause:
“(iii) YEARS WHEN PERSONAL EXEMPTION AMOUNT IS ZERO.—
“(I) IN GENERAL.—In the case of any taxable year in which the exemption amount under section 151(d) is zero, clause (i) shall be applied by substituting ‘$4,150’ for ‘the exemption amount under section 151(d)’.
“(II) INFLATION ADJUSTMENT.—In the case of any calendar year beginning after 2018, the $4,150 amount in subparagraph (A) shall be increased by an amount equal to—
“(bb) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘2017’ for ‘2016’ in subparagraph (A)(ii) thereof.
If any increase determined under the preceding sentence is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.”.
(c) Exception for wage withholding rules.—Section 3402(a) is amended by adding at the end the following new paragraph:
“(3) YEARS WHEN PERSONAL EXEMPTION AMOUNT IS ZERO.—
“(A) IN GENERAL.—In the case of any taxable year in which the exemption amount under section 151(d) is zero, paragraph (2) shall be applied by substituting ‘$4,150’ for ‘the amount of one personal exemption provided in section 151(b)’.
“(B) INFLATION ADJUSTMENT.—In the case of any calendar year beginning after 2018, the $4,150 amount in subparagraph (A) shall be increased by an amount equal to—
“(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘2017’ for ‘2016’ in subparagraph (A)(ii) thereof.
If any increase determined under the preceding sentence is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.”.
(d) Exception for determining property exempt from levy.—Section 6334(d) is amended by adding at the end the following new paragraph:
“(4) YEARS WHEN PERSONAL EXEMPTION AMOUNT IS ZERO.—
“(A) IN GENERAL.—In the case of any taxable year in which the exemption amount under section 151(d) is zero, paragraph (2) shall not apply and for purposes of paragraph (1) the term ‘exempt amount’ means an amount equal to—
“(B) AMOUNT DETERMINED.—For purposes of subparagraph (A), the amount determined under this subparagraph is $4,150 multiplied by the number of the taxpayer’s dependents for the taxable year in which the levy occurs.
“(C) INFLATION ADJUSTMENT.—In the case of any taxable year beginning after 2018, the $4,150 amount in subparagraph (B) shall be increased by an amount equal to—
“(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘2017’ for ‘2016’ in subparagraph (A)(ii) thereof.
If any increase determined under the preceding sentence is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.
“(D) VERIFIED STATEMENT.—Unless the taxpayer submits to the Secretary a written and properly verified statement specifying the facts necessary to determine the proper amount under subparagraph (A), subparagraph (A) shall be applied as if the taxpayer were a married individual filing a separate return with no dependents.”.
(e) Persons required To make returns of income.—Section 6012 is amended by adding at the end the following new subsection:
“(f) Special rule for taxable years 2018 through 2025.—In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026, subsection (a)(1) shall not apply, and every individual who has gross income for the taxable year shall be required to make returns with respect to income taxes under subtitle A, except that a return shall not be required of—
“(1) an individual who is not married (determined by applying section 7703) and who has gross income for the taxable year which does not exceed the standard deduction applicable to such individual for such taxable year under section 63, or
“(2) an individual entitled to make a joint return if—
“(A) the gross income of such individual, when combined with the gross income of such individual’s spouse, for the taxable year does not exceed the standard deduction which would be applicable to the taxpayer for such taxable year under section 63 if such individual and such individual’s spouse made a joint return,
SEC. 11042. Suspension of deduction for State and local, etc. taxes.
(a) In general.—Subsection (b) of section 164 is amended by adding at the end the following new paragraph:
“(6) SUSPENSION OF INDIVIDUAL DEDUCTIONS FOR TAXABLE YEARS 2018 THROUGH 2025.—In the case of an individual and a taxable year beginning after December 31, 2017, and before January 1, 2026—
“(A) foreign real property taxes (other than taxes which are paid or accrued in carrying on a trade or business or an activity described in section 212) shall not be taken into account under subsection (a)(1),
“(B) the aggregate amount of taxes (other than taxes which are paid or accrued in carrying on a trade or business or an activity described in section 212) taken into account under subsection (a)(1) for any taxable year shall not exceed $10,000 ($5,000 in the case of a married individual filing a separate return),
SEC. 11043. Suspension of deduction for home equity interest.
(a) In general.—Section 163(h)(3)(A)(ii) is amended by inserting “in the case of taxable years beginning before January 1, 2018, or after December 31, 2025,” before “home equity indebtedness”.
SEC. 11044. Modification of deduction for personal casualty losses.
(a) In general.—Subsection (h) of section 165 is amended by adding at the end the following new paragraph:
“(5) LIMITATION FOR TAXABLE YEARS 2018 THROUGH 2025.—In the case of an individual, any loss described in subsection (c)(3) which (but for this paragraph) would be deductible in a taxable year beginning after December 31, 2017, and before January 1, 2026, shall be allowed only to the extent it is attributable to a Federally declared disaster (as defined in subsection (i)(5)). The preceding sentence shall not apply to any deduction under section 172 which is carried to such a taxable year from a taxable year beginning before January 1, 2018.”.
SEC. 11045. Suspension of miscellaneous itemized deductions.
(a) In general.—Section 67 is amended by adding at the end the following new subsection:
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:
SEC. 11047. Modification of exclusion of gain from sale of principal residence.
(a) In general.—Section 121 is amended by adding at the end the following new subsection:
“(h) Special rules for sales or exchanges in taxable years 2018 through 2025.—
“(1) IN GENERAL.—In applying this section with respect to sales or exchanges after December 31, 2017, and before January 1, 2026—
“(A) ‘8-year’ shall be substituted for ‘5-year’ each place it appears in subsections (a), (b)(5)(C)(ii)(I), and (c)(1)(B)(i)(I) and paragraphs (7), (9), (10), and (12) of subsection (d),
SEC. 11048. Suspension of exclusion for qualified bicycle commuting reimbursement.
(a) In general.—Section 132(f) is amended by adding at the end the following new paragraph:
SEC. 11049. Suspension of exclusion for qualified moving expense reimbursement.
(a) In general.—Section 132(g) is amended—
(1) by striking “For purposes of this section, the term” and inserting “For purposes of this section—
(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.”.
SEC. 11050. Suspension of deduction for moving expenses.
(a) In general.—Section 217 is amended by adding at the end the following new subsection:
SEC. 11051. Limitation on wagering losses.
(a) In general.—Section 165(d) is amended by adding at the end the following: “For purposes of the preceding sentence, in the case of taxable years beginning after December 31, 2017, and before January 1, 2026, the term ‘losses from wagering transactions’ includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction.”.
SEC. 11061. Increase in estate and gift tax exemption.
(a) In general.—Section 2010(c)(3) is amended by adding at the end the following new subparagraph:
(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—
“(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—
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—
(c) Effective Date.—The amendments made by this section shall apply to—
(2) levies made on or before such date if the 9-month period has not expired under section 6343(b) of the Internal Revenue Code of 1986 (without regard to this section) as of such date.
SEC. 11072. Modification of user fee requirements for installment agreements.
(a) In general.—Section 6159 is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:
“(f) Installment agreement fees.—
“(1) LIMITATION ON FEE AMOUNT.—The amount of any fee imposed on an installment agreement under this section may not exceed the amount of such fee as in effect on the date of the enactment of this subsection.
“(2) WAIVER OR REIMBURSEMENT.—In the case of any taxpayer with an adjusted gross income, as determined for the most recent year for which such information is available, which does not exceed 250 percent of the applicable poverty level (as determined by the Secretary)—
SEC. 11073. Attorneys' fees relating to awards to whistleblowers.
(a) In general.—Paragraph (21) of section 62(a) is amended to read as follows:
“(21) ATTORNEYS' FEES RELATING TO AWARDS TO WHISTLEBLOWERS.—
“(A) IN GENERAL.—Any deduction allowable under this chapter for attorney fees and court costs paid by, or on behalf of, the taxpayer in connection with any award under—
“(ii) any action brought under—
“(I) section 21F of the Securities Exchange Act of 1934 (15 U.S.C. 78u–6),
“(III) section 23 of the Commodity Exchange Act (7 U.S.C. 26).
SEC. 11074. Clarification of whistleblower awards.
(a) Definition of proceeds.—
(1) IN GENERAL.—Section 7623 is amended by adding at the end the following new subsection:
(b) Amount of proceeds determined without regard To availability.—Paragraphs (1) and (2)(A) of section 7623(b) are each amended by inserting “(determined without regard to whether such proceeds are available to the Secretary)” after “in response to such action”.
(c) Disputed amount threshold.—Section 7623(b)(5)(B) is amended by striking “tax, penalties, interest, additions to tax, and additional amounts” and inserting “proceeds”.
SEC. 11081. Elimination of shared responsibility payment for individuals failing to maintain minimum essential coverage.
(a) In general.—Section 5000A(c) is amended—
SEC. 12001. Increased exemption for individuals.
(a) Increased exemption.—Section 55(d) is amended by adding at the end the following new paragraph:
“(5) SPECIAL RULE FOR TAXABLE YEARS BEGINNING AFTER 2017 AND BEFORE 2026.—
“(A) IN GENERAL.—In the case of any taxable year beginning after December 31, 2017, and before January 1, 2026—
“(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—
SEC. 13001. 20-percent corporate tax rate.
(a) In general.—Subsection (b) of section 11 is amended to read as follows:
(b) Conforming amendments.—
(1) The following sections are each amended by striking “section 11(b)(1)” and inserting “section 11(b)”:
(2) (A) Part I of subchapter P of chapter 1 is amended by striking section 1201 (and by striking the item relating to such section in the table of sections for such part).
(B) Section 12 is amended by striking paragraphs (4) and (6), and by redesignating paragraph (5) as paragraph (4).
(C) Section 453A(c)(3) is amended by striking “or 1201 (whichever is appropriate)”.
(D) Section 527(b) is amended—
(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—
(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,
(iii) in subparagraph (E), as so redesignated, by striking “subparagraph (B) or (D)” and inserting “subparagraph (A) or (C)”, and
(L) Section 882(a)(1) is amended by striking “, 55, or 1201(a)” and inserting “or 55”.
(M) Section 904(b) is amended—
(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—
(N) Section 1374(b) is amended by striking paragraph (4).
(O) Section 1381(b) is amended by striking “taxes imposed by section 11 or 1201” and inserting “tax imposed by section 11”.
(P) Sections 6425(c)(1)(A) and 6655(g)(1)(A)(i) are each amended by striking “or 1201(a),”.
(Q) Section 7518(g)(6)(A) is amended by striking “or 1201(a)”.
(3) (A) Section 1445(e)(1) is amended—
(i) by striking “35 percent” and inserting “the highest rate of tax in effect for the taxable year under section 11(b)”, and
(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—
(D) Section 1446(b)(2)(B) is amended by striking “section 11(b)(1)” and inserting “section 11(b)”.
(4) Section 852(b)(1) is amended by striking the last sentence.
(5) (A) Part I of subchapter B of chapter 5 is amended by striking section 1551 (and by striking the item relating to such section in the table of sections for such part).
(B) Section 535(c)(5) is amended to read as follows:
(6) (A) Section 1561(a) is amended—
(i) by striking paragraph (1) and redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively,
(ii) by striking “amounts specified in paragraph (1) and the amount specified in paragraph (3)” and inserting “the amount specified in paragraph (2)”,
(iii) by striking “The amounts specified in paragraph (2)” and inserting “The amounts specified in paragraph (1)”,
(B) The first sentence of section 1561(b) is amended to read as follows: “If a corporation has a short taxable year which does not include a December 31 and is a component member of a controlled group of corporations with respect to such taxable year, then for purposes of this subtitle the amount to be used in computing the accumulated earnings credit under section 535(c)(2) and (3) of such corporation for such taxable year shall be the amount specified in subsection (a)(1) divided by the number of corporations which are component members of such group on the last day of such taxable year.”
(7) Section 7518(g)(6)(A) is amended—
(c) Effective date.—
(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2018.
(d) Normalization requirements.—
(1) IN GENERAL.—A normalization method of accounting shall not be treated as being used with respect to any public utility property for purposes of section 167 or 168 of the Internal Revenue Code of 1986 if the taxpayer, in computing its cost of service for ratemaking purposes and reflecting operating results in its regulated books of account, reduces the excess tax reserve more rapidly or to a greater extent than such reserve would be reduced under the average rate assumption method.
(2) ALTERNATIVE METHOD FOR CERTAIN TAXPAYERS.—If, as of the first day of the taxable year that includes the date of enactment of this Act—
(A) the taxpayer was required by a regulatory agency to compute depreciation for public utility property on the basis of an average life or composite rate method, and
(B) the taxpayer’s books and underlying records did not contain the vintage account data necessary to apply the average rate assumption method,
the taxpayer will be treated as using a normalization method of accounting if, with respect to such jurisdiction, the taxpayer uses the alternative method for public utility property that is subject to the regulatory authority of that jurisdiction.
(3) DEFINITIONS.—For purposes of this subsection—
(A) EXCESS TAX RESERVE.—The term “excess tax reserve” means the excess of—
(i) the reserve for deferred taxes (as described in section 168(i)(9)(A)(ii) of the Internal Revenue Code of 1986) as determined under the Internal Revenue Code of 1986 as in effect on the day before the date of the enactment of this Act, over
(B) AVERAGE RATE ASSUMPTION METHOD.—The average rate assumption method is the method under which the excess in the reserve for deferred taxes is reduced over the remaining lives of the property as used in its regulated books of account which gave rise to the reserve for deferred taxes. Under such method, if timing differences for the property reverse, the amount of the adjustment to the reserve for the deferred taxes is calculated by multiplying—
(C) ALTERNATIVE METHOD.—The “alternative method” is the method in which the taxpayer—
(4) TAX INCREASED FOR NORMALIZATION VIOLATION.—If, for any taxable year ending after the date of the enactment of this Act, the taxpayer does not use a normalization method of accounting, the taxpayer’s tax for the taxable year shall be increased by the amount by which it reduces its excess tax reserve more rapidly than permitted under a normalization method of accounting.
SEC. 13002. Reduction in dividend received deductions to reflect lower corporate income tax rates.
(a) Dividends received by corporations.—
(1) IN GENERAL.—Section 243(a)(1) is amended by striking “70 percent” and inserting “50 percent”.
(2) DIVIDENDS FROM 20-PERCENT OWNED CORPORATIONS.—Section 243(c)(1) is amended—
(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—
(c) Limitation on aggregate amount of deductions.—Section 246(b)(3) is amended—
(d) Reduction in deduction where portfolio stock is debt-financed.—Section 246A(a)(1) is amended—
(e) Income from sources within the United States.—Section 861(a)(2) is amended—
SEC. 13101. Modifications of rules for expensing depreciable business assets.
(a) Increase in limitation.—
(1) DOLLAR LIMITATION.—Section 179(b)(1) is amended by striking “$500,000” and inserting “$1,000,000”.
(2) REDUCTION IN LIMITATION.—Section 179(b)(2) is amended by striking “$2,000,000” and inserting “$2,500,000”.
(3) INFLATION ADJUSTMENTS.—
(A) IN GENERAL.—Subparagraph (A) of section 179(b)(6), as amended by section 11002(d), is amended—
(B) SPORT UTILITY VEHICLES.—Section 179(b)(6) is amended—
(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:
(2) QUALIFIED REAL PROPERTY DEFINED.—Subsection (f) of section 179 is amended to read as follows:
(c) Repeal of exclusion for certain property.—The last sentence of section 179(d)(1) is amended by inserting “(other than paragraph (2) thereof)” after “section 50(b)”.
SEC. 13102. Modifications of gross receipts test for use of cash method of accounting by corporations and partnerships.
(a) Modifications of gross receipts test.—
(1) IN GENERAL.—So much of section 448(c) as precedes paragraph (2) is amended to read as follows:
“(c) Gross receipts test.—
“(1) IN GENERAL.—A corporation or partnership meets the gross receipts test of this subsection for any taxable year if the average annual gross receipts of such entity for the 3-taxable-year period ending with the taxable year which precedes such taxable year does not exceed the applicable dollar limit.”.
(2) APPLICABLE DOLLAR LIMIT.—Subsection (c) of section 448 is amended by adding at the end the following new paragraph:
“(4) APPLICABLE DOLLAR LIMIT.—
“(B) ADJUSTMENT FOR INFLATION.—In the case of any taxable year beginning after December 31, 2018, the $15,000,000 amount under subparagraph (A) shall be increased by an amount equal to—
“(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting ‘calendar year 2017’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the next lowest multiple of $1,000.”.
(3) CHANGE IN METHOD OF ACCOUNTING.—Paragraph (7) of section 448(d) is amended—
(A) by striking “In the case of” and all that follows up to subparagraph (A) and inserting: “If a taxpayer changes its method of accounting because the taxpayer is prohibited from using the cash receipts and disbursement method of accounting by reason of subsection (a) or is no longer prohibited from using such method by reason of such subsection—”, and
(4) CONFORMING AMENDMENT.—Paragraph (3) of section 448(b) is amended to read as follows:
(b) Application of modifications To farming corporations.—
(1) IN GENERAL.—Paragraph (1) of section 447(d) is amended to read as follows:
(2) FAMILY CORPORATIONS.—Paragraph (2) of section 447(d) is amended—
(A) by striking subparagraph (A) and inserting the following:
(B) in subparagraph (B)(i), by striking “the last sentence of paragraph (1)” and inserting “paragraph (2) of section 448(c)”, and
(C) by adding at the end the following new subparagraph:
“(D) APPLICABLE FAMILY CORPORATION LIMIT.—
“(ii) ADJUSTMENT FOR INFLATION.—In the case of any taxable year beginning after December 31, 2018, the $25,000,000 amount under clause (i) shall be increased by an amount equal to—
“(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting ‘calendar year 2017’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the next lowest multiple of $1,000.”.
(3) EXCEPTION FOR CERTAIN CORPORATIONS.—Subsection (c) of section 447 is amended by inserting “for any taxable year” after “not being a corporation”.
(4) CHANGE IN METHOD OF ACCOUNTING.—Section 447(f) is amended—
(A) by striking “In the case of” and all that follows up to paragraph (1) and inserting the following: “If a taxpayer changes its method of accounting because the taxpayer is required to use an accrual method of accounting by reason of subsection (a) or is no longer required to use such method by reason of such subsection—”, and
SEC. 13103. Clarification of inventory accounting rules for small businesses.
(a) Clarification of inventory rules.—
(1) IN GENERAL.—Section 471 is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:
“(c) Small business taxpayers not required To use inventories.—
“(1) IN GENERAL.—A qualified taxpayer shall not be required to use inventories under this section for a taxable year.
“(2) TREATMENT OF TAXPAYERS NOT USING INVENTORIES.—A qualified taxpayer who is not required under this subsection to use inventories with respect to any property for a taxable year beginning after December 31, 2017, may treat such property—
“(3) QUALIFIED TAXPAYER.—For purposes of this subsection, the term ‘qualified taxpayer’ means, with respect to any taxable year, a taxpayer who meets the gross receipts test of section 448(c) for the taxable year (or, in the case of a sole proprietorship, who would meet such test if such proprietorship were a corporation). Such term shall not include a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3).
(2) CONFORMING AMENDMENT.—Subsection (c) of section 263A is amended by adding at the end the following new paragraph:
SEC. 13104. Modification of rules for uniform capitalization of certain expenses.
(a) In general.—Section 263A(b) is amended by striking all that follows paragraph (1) and inserting the following new paragraphs:
“(2) PROPERTY ACQUIRED FOR RESALE.—Real or personal property described in section 1221(a)(1) which is acquired by the taxpayer for resale.
“(3) EXCEPTION FOR SMALL BUSINESSES.—This section shall not apply to any taxpayer who meets the gross receipts test under section 448(c) for the taxable year (or, in the case of a sole proprietorship, who would meet such test if such proprietorship were a corporation), other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3).
“(4) FILMS, SOUND RECORDINGS, BOOKS, ETC.—For purposes of this subsection, the term ‘tangible personal property’ shall include a film, sound recording, video tape, book, or similar property.
SEC. 13105. Increase in gross receipts test for construction contract exception to percentage of completion method.
(a) Increase.—
(1) IN GENERAL.—Section 460(e)(1)(B) is amended—
(2) CONFORMING AMENDMENTS.—
(A) Section 460(e) is amended by striking paragraphs (2) and (3) and by redesignating paragraphs (4) through (6) as paragraphs (2) through (4), respectively.
(B) The last sentence of section 56(a)(3) is amended by striking “section 460(e)(6)” and inserting “section 460(e)(4)”.
(b) Coordination with section 481.—Section 460(e), as amended by subsection (a), is amended by adding at the end the following:
SEC. 13201. Temporary 100-percent expensing for certain business assets.
(a) Increased expensing.—
(1) IN GENERAL.—Section 168(k) is amended—
(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,
“(B) RULE FOR PROPERTY WITH LONGER PRODUCTION PERIODS.—In the case of property described in paragraph (2)(B) or (C), the term ‘applicable percentage’ means—
“(i) in the case of property placed in service after September 27, 2017, and before January 1, 2024, 100 percent,
“(ii) in the case of property placed in service after December 31, 2023, and before January 1, 2025, 80 percent,
“(iii) in the case of property placed in service after December 31, 2024, and before January 1, 2026, 60 percent,
“(C) RULE FOR PLANTS BEARING FRUITS AND NUTS.—In the case of a specified plant described in paragraph (5), the term ‘applicable percentage’ means—
“(i) in the case of a plant which is planted or grafted after September 27, 2017, and before January 1, 2023, 100 percent,
“(ii) in the case of a plant which is planted or grafted after December 31, 2022, and before January 1, 2024, 80 percent,
“(iii) in the case of a plant which is planted or grafted after December 31, 2023, and before January 1, 2025, 60 percent,
(3) CONFORMING AMENDMENT.—Paragraph (5) of section 168(k) is amended by striking subparagraph (F).
(b) Extension.—
(1) IN GENERAL.—Section 168(k) is amended—
(2) CONFORMING AMENDMENTS.—
(A) Clause (ii) of section 460(c)(6)(B) is amended by striking “January 1, 2020 (January 1, 2021” and inserting “January 1, 2027 (January 1, 2028”.
(B) The heading of section 168(k) is amended by striking “acquired after December 31, 2007, and before January 1, 2020”.
(c) Exception for public utilities.—Section 168(k) is amended by adding at the end the following new paragraph:
(d) Special rule.—Section 168(k), as amended by subsection (c), is amended by adding at the end the following new paragraph:
“(9) SPECIAL RULE FOR PROPERTY PLACED IN SERVICE DURING CERTAIN PERIODS.—
“(A) IN GENERAL.—In the case of qualified property placed in service by the taxpayer during the first taxable year ending after September 27, 2017, if the taxpayer elects to have this paragraph apply for such taxable year, paragraphs (1)(A) and (5)(A)(i) shall be applied by substituting ‘50 percent’ for ‘the applicable percentage’.
(e) Coordination with section 280F.—Section 168(k)(2)(F) is amended by striking clause (iii).
(f) Qualified film and television and live theatrical productions.—
(1) IN GENERAL.—Clause (i) of section 168(k)(2)(A), as amended by section 13204, is amended—
(2) PRODUCTION PLACED IN SERVICE.—Paragraph (2) of section 168(k) is amended by adding at the end the following:
SEC. 13202. Modifications to depreciation limitations on luxury automobiles and personal use property.
(a) Luxury automobiles.—
(2) CONFORMING AMENDMENTS.—
(A) Clause (ii) of section 280F(a)(1)(B) is amended by striking “$1,475” in the text and heading and inserting “$5,760”.
(B) Paragraph (7) of section 280F(d) is amended—
(b) Removal of computer equipment from listed property.—
(1) IN GENERAL.—Section 280F(d)(4)(A) is amended—
(2) CONFORMING AMENDMENT.—Section 280F(d)(4) is amended by striking subparagraph (B) and by redesignating subparagraph (C) as subparagraph (B).
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.
SEC. 13204. Applicable recovery period for real property.
(a) Residential rental property and nonresidential real property.—
(1) REDUCTION OF RECOVERY PERIOD.—The table contained in section 168(c) is amended—
(2) STATUTORY RECOVERY PERIOD.—The table contained in section 467(e)(3)(A) is amended—
(3) CONFORMING AMENDMENT.—Clause (ii) of section 168(e)(2)(B) is amended by striking “27.5 years” and inserting “25 years”.
(b) Improvements to real property.—
(1) CLASSIFICATION OF QUALIFIED IMPROVEMENT PROPERTY AS 10-YEAR PROPERTY.—Subparagraph (D) of section 168(e)(3) is amended—
(2) ELIMINATION OF QUALIFIED LEASEHOLD IMPROVEMENT, QUALIFIED RESTAURANT, AND QUALIFIED RETAIL IMPROVEMENT PROPERTY.—Subsection (e) of section 168 is amended—
(3) APPLICATION OF STRAIGHT LINE METHOD TO QUALIFIED IMPROVEMENT PROPERTY.—Paragraph (3) of section 168(b) is amended—
(4) ALTERNATIVE DEPRECIATION SYSTEM.—
(A) ELECTING REAL PROPERTY TRADE OR BUSINESS.—Subsection (g) of section 168 is amended—
(B) QUALIFIED IMPROVEMENT PROPERTY.—The table contained in subparagraph (B) of section 168(g)(3) is amended—
(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”. |
(5) CONFORMING AMENDMENTS.—
(A) Clause (i) of section 168(k)(2)(A) is amended—
(B) Section 168 is amended—
(i) in subsection (e), as amended by paragraph (2)(B), by adding at the end the following:
SEC. 13205. Use of alternative depreciation system for electing farming businesses.
(a) In general.—Section 168(g)(1), as amended by section 13204, is amended by striking “and” at the end of subparagraph (E), by inserting “and” at the end of subparagraph (F), and by inserting after subparagraph (F) the following new subparagraph:
SEC. 13206. Amortization of research and experimental expenditures.
(a) In general.—Section 174 is amended to read as follows:
“(a) In general.—In the case of a taxpayer’s specified research or experimental expenditures for any taxable year—
“(2) the taxpayer shall—
“(B) be allowed an amortization deduction of such expenditures ratably over the 5-year period (15-year period in the case of any specified research or experimental expenditures which are attributable to foreign research (within the meaning of section 41(d)(4)(F))) beginning with the midpoint of the taxable year in which such expenditures are paid or incurred.
“(b) Specified research or experimental expenditures.—For purposes of this section, the term ‘specified research or experimental expenditures’ means, with respect to any taxable year, research or experimental expenditures which are paid or incurred by the taxpayer during such taxable year in connection with the taxpayer’s trade or business.
“(c) Special rules.—
“(1) LAND AND OTHER PROPERTY.—This section shall not apply to any expenditure for the acquisition or improvement of land, or for the acquisition or improvement of property to be used in connection with the research or experimentation and of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc.) or section 611 (relating to allowance for depletion); but for purposes of this section allowances under section 167, and allowances under section 611, shall be considered as expenditures.
“(d) Treatment upon disposition, retirement, or abandonment.—If any property with respect to which specified research or experimental expenditures are paid or incurred is disposed, retired, or abandoned during the period during which such expenditures are allowed as an amortization deduction under this section, no deduction shall be allowed with respect to such expenditures on account of such disposition, retirement, or abandonment and such amortization deduction shall continue with respect to such expenditures.”.
(b) Change in method of accounting.—The amendments made by subsection (a) shall be treated as a change in method of accounting for purposes of section 481 of the Internal Revenue Code of 1986 and—
(c) Clerical amendment.—The table of sections for part VI of subchapter B of chapter 1 is amended by striking the item relating to section 174 and inserting the following new item:
“Sec. 174. Amortization of research and experimental expenditures.”.
(d) Conforming amendments.—
(1) Section 41(d)(1)(A) is amended by striking “expenses under section 174” and inserting “specified research or experimental expenditures under section 174”.
(2) Subsection (c) of section 280C is amended—
(A) by striking paragraph (1) and inserting the following:
SEC. 13207. Expensing of certain costs of replanting citrus plants lost by reason of casualty.
(a) In general.—Section 263A(d)(2) is amended by adding at the end the following new subparagraph:
“(C) SPECIAL TEMPORARY RULE FOR CITRUS PLANTS LOST BY REASON OF CASUALTY.—
“(i) IN GENERAL.—In the case of the replanting of citrus plants, subparagraph (A) shall apply to amounts paid or incurred by a person (other than the taxpayer described in subparagraph (A)) if—
SEC. 13221. Certain special rules for taxable year of inclusion.
(a) Inclusion not later than for financial accounting purposes.—Section 451 is amended by redesignating subsections (b) through (i) as subsections (c) through (j), respectively, and by inserting after subsection (a) the following new subsection:
“(b) Inclusion not later than for financial accounting purposes.—
“(1) INCOME TAKEN INTO ACCOUNT IN FINANCIAL STATEMENT.—
“(A) IN GENERAL.—In the case of a taxpayer the taxable income of which is computed under an accrual method of accounting, the all events test with respect to any item of gross income (or portion thereof) shall not be treated as met any later than when such item (or portion thereof) is taken into account as revenue in—
“(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,
“(B) a financial statement which is made on the basis of international financial reporting standards and is filed by the taxpayer with an agency of a foreign government which is equivalent to the United States Securities and Exchange Commission and which has reporting standards not less stringent than the standards required by such Commission, but only if there is no statement of the taxpayer described in subparagraph (A), or
“(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.
(b) Treatment of advance payments.—Section 451, as amended by subsection (a), is amended by redesignating subsections (c) through (j) as subsections (d) through (k), respectively, and by inserting after subsection (b) the following new subsection:
“(c) Treatment of advance payments.—
“(1) IN GENERAL.—A taxpayer which computes taxable income under the accrual method of accounting, and receives any advance payment during the taxable year, shall—
“(A) except as provided in subparagraph (B), include such advance payment in gross income for such taxable year, or
“(B) if the taxpayer elects the application of this subparagraph with respect to the category of advance payments to which such advance payment belongs, the taxpayer shall—
“(2) ELECTION.—
“(A) IN GENERAL.—Except as otherwise provided in this paragraph, the election under paragraph (1)(B) shall be made at such time, in such form and manner, and with respect to such categories of advance payments, as the Secretary may provide.
“(B) PERIOD TO WHICH ELECTION APPLIES.—An election under paragraph (1)(B) shall be effective for the taxable year with respect to which it is first made and for all subsequent taxable years, unless the taxpayer secures the consent of the Secretary to revoke such election. For purposes of this title, the computation of taxable income under an election made under paragraph (1)(B) shall be treated as a method of accounting.
“(3) TAXPAYERS CEASING TO EXIST.—Except as otherwise provided by the Secretary, the election under paragraph (1)(B) shall not apply with respect to advance payments received by the taxpayer during a taxable year if such taxpayer ceases to exist during (or with the close of) such taxable year.
“(4) ADVANCE PAYMENT.—For purposes of this subsection—
“(A) IN GENERAL.—The term ‘advance payment’ means any payment—
“(i) the full inclusion of which in the gross income of the taxpayer for the taxable year of receipt is a permissible method of accounting under this section (determined without regard to this subsection),
“(B) EXCLUSIONS.—Except as otherwise provided by the Secretary, such term shall not include—
(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2017.
(d) Coordination with section 481.—
(1) IN GENERAL.—In the case of any qualified change in method of accounting for the taxpayer’s first taxable year beginning after December 31, 2017—
SEC. 13301. Limitation on deduction for interest.
(a) In general.—Section 163(j) is amended to read as follows:
“(j) Limitation on business interest.—
“(1) IN GENERAL.—The amount allowed as a deduction under this chapter for any taxable year for business interest shall not exceed the sum of—
The amount determined under subparagraph (B) shall not be less than zero.
“(2) CARRYFORWARD OF DISALLOWED BUSINESS INTEREST.—The amount of any business interest not allowed as a deduction for any taxable year by reason of paragraph (1) shall be treated as business interest paid or accrued in the succeeding taxable year.
“(3) EXEMPTION FOR CERTAIN SMALL BUSINESSES.—In the case of any taxpayer (other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3)) which meets the gross receipts test of section 448(c) for any taxable year, paragraph (1) shall not apply to such taxpayer for such taxable year. In the case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be applied in the same manner as if such taxpayer were a corporation or partnership.
“(4) APPLICATION TO PARTNERSHIPS, ETC.—
“(A) IN GENERAL.—In the case of any partnership—
“(i) this subsection shall be applied at the partnership level and any deduction for business interest shall be taken into account in determining the non-separately stated taxable income or loss of the partnership, and
“(ii) the adjusted taxable income of each partner of such partnership—
“(I) shall be determined without regard to such partner’s distributive share of any items of income, gain, deduction, or loss of such partnership, and
“(II) shall be increased by such partner’s distributive share of such partnership’s excess taxable income.
For purposes of clause (ii)(II), a partner's distributive share of partnership excess taxable income shall be determined in the same manner as the partner's distributive share of nonseparately stated taxable income or loss of the partnership.
“(B) SPECIAL RULES FOR CARRYFORWARDS.—
“(i) IN GENERAL.—The amount of any business interest not allowed as a deduction to a partnership for any taxable year by reason of paragraph (1) for any taxable year—
“(ii) TREATMENT OF EXCESS BUSINESS INTEREST ALLOCATED TO PARTNERS.—If a partner is allocated any excess business interest from a partnership under clause (i) for any taxable year—
“(I) such excess business interest shall be treated as business interest paid or accrued by the partner in the next succeeding taxable year in which the partner is allocated excess taxable income from such partnership, but only to the extent of such excess taxable income, and
“(II) any portion of such excess business interest remaining after the application of subclause (I) shall, subject to the limitations of subclause (I), be treated as business interest paid or accrued in succeeding taxable years.
For purposes of applying this paragraph, excess taxable income allocated to a partner from a partnership for any taxable year shall not be taken into account under paragraph (1)(A) with respect to any business interest other than excess business interest from the partnership until all such excess business interest for such taxable year and all preceding taxable years has been treated as paid or accrued under clause (ii).
“(iii) BASIS ADJUSTMENTS.—
“(I) IN GENERAL.—The adjusted basis of a partner in a partnership interest shall be reduced (but not below zero) by the amount of excess business interest allocated to the partner under clause (i)(II).
“(II) SPECIAL RULE FOR DISPOSITIONS.—If a partner disposes of a partnership interest, the adjusted basis of the partner in the partnership interest shall be increased immediately before the disposition by the amount of the excess (if any) of the amount of the basis reduction under subclause (I) over the portion of any excess business interest allocated to the partner under clause (i)(II) which has previously been treated under clause (ii) as business interest paid or accrued by the partner. The preceding sentence shall also apply to transfers of the partnership interest (including by reason of death) in a transaction in which gain is not recognized in whole or in part. No deduction shall be allowed to the transferor or transferee under this chapter for any excess business interest resulting in a basis increase under this subclause.
“(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—
“(iv) the trade or business of the furnishing or sale of—
if the rates for such furnishing or sale, as the case may be, have been established or approved by a State or political subdivision thereof, by any agency or instrumentality of the United States, by a public service or public utility commission or other similar body of any State or political subdivision thereof, or by the governing or ratemaking body of an electric cooperative.
“(B) ELECTING REAL PROPERTY TRADE OR BUSINESS.—For purposes of this paragraph, the term ‘electing real property trade or business’ means any trade or business which is described in section 469(c)(7)(C) and which makes an election under this subparagraph. Any such election shall be made at such time and in such manner as the Secretary shall prescribe, and, once made, shall be irrevocable.
“(C) ELECTING FARMING BUSINESS.—For purposes of this paragraph, the term ‘electing farming business’ means—
“(i) a farming business (as defined in section 263A(e)(4)) which makes an election under this subparagraph, or
“(ii) any trade or business of a specified agricultural or horticultural cooperative (as defined in section 199A(g)(2)) with respect to which the cooperative makes an election under this subparagraph.
Any such election shall be made at such time and in such manner as the Secretary shall prescribe, and, once made, shall be irrevocable.
(b) Treatment of carryforward of disallowed business interest in certain corporate acquisitions.—
(1) IN GENERAL.—Section 381(c) is amended by inserting after paragraph (19) the following new paragraph:
(2) APPLICATION OF LIMITATION.—Section 382(d) is amended by adding at the end the following new paragraph:
(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).”.
SEC. 13302. Modification of net operating loss deduction.
(a) Limitation on deduction.—
(1) IN GENERAL.—Section 172(a) is amended to read as follows:
“(a) Deduction allowed.—There shall be allowed as a deduction for the taxable year an amount equal to the lesser of—
“(1) the aggregate of the net operating loss carryovers to such year, plus the net operating loss carrybacks to such year, or
“(2) 90 percent (80 percent in the case of taxable years beginning after December 31, 2022) of taxable income computed without regard to the deduction allowable under this section.
For purposes of this subtitle, the term ‘net operating loss deduction’ means the deduction allowed by this subsection.”.
(2) COORDINATION OF LIMITATION WITH CARRYBACKS AND CARRYOVERS.—Section 172(b)(2) is amended by striking “shall be computed—” and all that follows and inserting “shall—
(3) CONFORMING AMENDMENT.—Section 172(d)(6) is amended by striking “and” at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting “; and”, and by adding at the end the following new subparagraph:
(b) Repeal of net operating loss carryback; indefinite carryforward.—
(1) IN GENERAL.—Section 172(b)(1)(A) is amended—
(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—
“(iii) COORDINATION WITH PARAGRAPH (2).—For purposes of applying paragraph (2), a farming loss for any taxable year shall be treated as a separate net operating loss for such taxable year to be taken into account after the remaining portion of the net operating loss for such taxable year.
“(iv) ELECTION.—Any taxpayer entitled to a 2-year carryback under clause (i) from any loss year may elect not to have such clause apply to such loss year. Such election shall be made in such manner as prescribed by the Secretary and shall be made by the due date (including extensions of time) for filing the taxpayer's return for the taxable year of the net operating loss. Such election, once made for any taxable year, shall be irrevocable for such taxable year.”.
(2) CONFORMING AMENDMENTS.—
(A) Section 172 is amended by striking subsections (f), (g), and (h), and by redesignating subsection (i) as subsection (f).
(B) Section 537(b)(4) is amended by inserting “(as in effect before the date of enactment of the Tax Cuts and Jobs Act)” after “as defined in section 172(f)”.
(d) Treatment of certain insurance losses.—
(1) TREATMENT OF CARRYFORWARDS AND CARRYBACKS.—Section 172(b)(1), as amended by subsections (b)(2) and (c)(1), is amended by adding at the end the following new subparagraph:
(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—
SEC. 13303. Like-kind exchanges of real property.
(a) In general.—Section 1031(a)(1) is amended by striking “property” each place it appears and inserting “real property”.
(b) Conforming amendments.—
(1) (A) Paragraph (2) of section 1031(a) is amended to read as follows:
“(2) EXCEPTION FOR REAL PROPERTY HELD FOR SALE.—This subsection shall not apply to any exchange of real property held primarily for sale.”.
(B) Section 1031 is amended by striking subsection (i).
(2) Section 1031 is amended by striking subsection (e).
(3) Section 1031, as amended by paragraph (2), is amended by inserting after subsection (d) the following new subsection:
“(e) Application to certain partnerships.—For purposes of this section, an interest in a partnership which has in effect a valid election under section 761(a) to be excluded from the application of all of subchapter K shall be treated as an interest in each of the assets of such partnership and not as an interest in a partnership.”.
(4) Section 1031(h) is amended to read as follows:
(5) The heading of section 1031 is amended by striking “property” and inserting “real property”.
(6) The table of sections for part III of subchapter O of chapter 1 is amended by striking the item relating to section 1031 and inserting the following new item:
“Sec. 1031. Exchange of real property held for productive use or investment.”.
(c) Effective date.—
(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to exchanges completed after December 31, 2017.
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—
(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
(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:
(E) Section 274(n)(2) is amended—
(F) Clause (iv) of section 7701(b)(5)(A) is amended to read as follows:
(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—
(c) Treatment of transportation benefits.—Section 274, as amended by subsection (a), is amended—
(1) in subsection (a)—
(2) by inserting after subsection (k) the following new subsection:
“(l) Transportation and commuting benefits.—No deduction shall be allowed under this chapter for any expense incurred for providing any transportation, or any payment or reimbursement, to an employee of the taxpayer in connection with travel between the employee's residence and place of employment, except as necessary for ensuring the safety of the employee.”.
(d) Elimination of deduction for meals provided at convenience of employer.—Section 274, as amended by subsection (c), is amended—
(2) by inserting after subsection (n) the following new subsection:
SEC. 13305. Repeal of deduction for income attributable to domestic production activities.
(a) Repeal.—
(1) TAXPAYERS OTHER THAN CORPORATIONS.—Section 199 is amended by adding at the end the following new subsection:
(2) CERTAIN SPECIAL RULES FOR COOPERATIVES.—Section 199(d)(3) is amended by adding at the end the following new subparagraph:
(b) Conforming amendments.—
(1) Sections 74(d)(2)(B), 86(b)(2)(A), 135(c)(4)(A), 137(b)(3)(A), 219(g)(3)(A)(ii), 221(b)(2)(C), 222(b)(2)(C), 246(b)(1), and 469(i)(3)(F)(iii) are each amended by striking “199,”.
(2) Section 170(b)(2)(D), as amended by section 11011, is amended by striking clause (iv) and by redesignating clauses (v) and (vi) as redesignating clauses (iv) as clause (v), respectively.
(3) Section 172(d) is amended by striking paragraph (7).
(4) Section 613(a) is amended by striking “and without the deduction under section 199”.
(5) Section 613A(d)(1) is amended by striking subparagraph (B) and by redesignating subparagraphs (C), (D), and (E) as subparagraphs (B), (C), and (D).
SEC. 13306. Denial of deduction for certain fines, penalties, and other amounts.
(a) Denial of deduction.—
(1) IN GENERAL.—Subsection (f) of section 162 is amended to read as follows:
“(f) Fines, Penalties, and Other Amounts.—
“(1) IN GENERAL.—Except as provided in the following paragraphs of this subsection, no deduction otherwise allowable shall be allowed under this chapter for any amount paid or incurred (whether by suit, agreement, or otherwise) to, or at the direction of, a government or governmental entity in relation to the violation of any law or the investigation or inquiry by such government or entity into the potential violation of any law.
“(2) EXCEPTION FOR AMOUNTS CONSTITUTING RESTITUTION OR PAID TO COME INTO COMPLIANCE WITH LAW.—
“(A) IN GENERAL.—Paragraph (1) shall not apply to any amount that—
“(i) the taxpayer establishes—
“(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).
“(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:
(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to amounts paid or incurred on or after the date of the enactment of this Act, except that such amendments shall not apply to amounts paid or incurred under any binding order or agreement entered into before such date. Such exception shall not apply to an order or agreement requiring court approval unless the approval was obtained before such date.
(b) Reporting of deductible amounts.—
(1) IN GENERAL.—Subpart B of part III of subchapter A of chapter 61 is amended by inserting after section 6050W the following new section:
“SEC. 6050X. Information with respect to certain fines, penalties, and other amounts.
“(a) Requirement of reporting.—
“(1) IN GENERAL.—The appropriate official of any government or any entity described in section 162(f)(5) which is involved in a suit or agreement described in paragraph (2) shall make a return in such form as determined by the Secretary setting forth—
“(A) the amount required to be paid as a result of the suit or agreement to which paragraph (1) of section 162(f) applies,
“(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
“(b) Statements To be furnished to individuals involved in the settlement.—Every person required to make a return under subsection (a) shall furnish to each person who is a party to the suit or agreement a written statement showing—
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).
(2) CONFORMING AMENDMENT.—The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by inserting after the item relating to section 6050W the following new item:
“Sec. 6050X. Information with respect to certain fines, penalties, and other amounts.”.
(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to amounts paid or incurred on or after the date of the enactment of this Act, except that such amendments shall not apply to amounts paid or incurred under any binding order or agreement entered into before such date. Such exception shall not apply to an order or agreement requiring court approval unless the approval was obtained before such date.
SEC. 13307. Denial of deduction for settlements subject to nondisclosure agreements paid in connection with sexual harassment or sexual abuse.
(a) Denial of deduction.—Section 162 is amended by redesignating subsection (q) as subsection (r) and by inserting after subsection (p) the following new subsection:
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)”.
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—
(2) by inserting after section 1060 the following new section:
“(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—
“(3) SPECIFIED ASSET.—The term ‘specified asset’ means securities (as defined in section 475(c)(2) without regard to the last sentence thereof), commodities (as defined in section 475(e)(2)), real estate held for rental or investment, cash or cash equivalents, options or derivative contracts with respect to any of the foregoing, and an interest in a partnership to the extent of the partnership’s proportionate interest in any of the foregoing.
“(4) EXCEPTIONS.—The term ‘applicable partnership interest’ shall not include—
“(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—
(b) Clerical amendment.—The table of sections for part IV of subchapter O of chapter 1 is amended by striking the item relating to 1061 and inserting the following new items:
“Sec. 1061. Partnership interests held in connection with performance of services.
“Sec. 1062. Cross references.”.
SEC. 13310. Prohibition on cash, gift cards, and other non-tangible personal property as employee achievement awards.
(a) In general.—Subparagraph (A) of section 274(j)(3) is amended—
(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—
SEC. 13311. Floor plan financing.
(a) Application of interest limitation.—
(1) IN GENERAL.—Section 163(j), as amended by section 13301, is amended—
(A) in paragraph (1), by striking “plus” at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting “, plus”, and by inserting after subparagraph (B) the following new subparagraph:
(B) in paragraph (4)(C)(i)(II), by inserting “, reduced by the floor plan financing interest,” after “business interest of the partnership”, and
(C) by redesignating paragraph (9) as paragraph (10) and inserting after paragraph (8) the following new paragraph:
“(9) FLOOR PLAN FINANCING INTEREST DEFINED.—For purposes of this subsection—
“(A) IN GENERAL.—The term ‘floor plan financing interest’ means interest paid or accrued on floor plan financing indebtedness.
“(B) FLOOR PLAN FINANCING INDEBTEDNESS.—The term ‘floor plan financing indebtedness’ means indebtedness—
(b) Exception from 100 percent expensing.—
(1) IN GENERAL.—Paragraph (6) of section 168(k), as added by section 13201(a)(4), is amended—
SEC. 13312. 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”.
SEC. 13401. Modification of orphan drug credit.
(a) Credit rate.—Subsection (a) of section 45C is amended by striking “50 percent” and inserting “27.5 percent”.
(b) Election of reduced credit.—Subsection (b) of section 280C is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph:
“(3) ELECTION OF REDUCED CREDIT.—
“(A) IN GENERAL.—In the case of any taxable year for which an election is made under this paragraph—
“(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—
“(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.”.
SEC. 13402. Rehabilitation credit limited to certified historic structures.
(a) In general.—Subsection (a) of section 47 is amended to read as follows:
“(a) General rule.—
“(1) IN GENERAL.—For purposes of section 46, for any taxable year during the 5-year period beginning in the taxable year in which a qualified rehabilitated building is placed in service, the rehabilitation credit for such year is an amount equal to the ratable share for such year.
“(2) RATABLE SHARE.—For purposes of paragraph (1), the ratable share for any taxable year during the period described in such paragraph is the amount equal to 20 percent of the qualified rehabilitation expenditures with respect to the qualified rehabilitated building, as allocated ratably to each year during such period.”.
(b) Conforming amendments.—
(1) Section 47(c) is amended—
(2) Paragraph (4) of section 145(d) is amended—
(c) Effective date.—
(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section shall apply to amounts paid or incurred after December 31, 2017.
(2) TRANSITION RULE.—In the case of qualified rehabilitation expenditures with respect to any building—
(B) with respect to which the 24-month period selected by the taxpayer under section 47(c)(1)(B) of the Internal Revenue Code of 1986 (as amended by subsection (b)) begins not later than 180 days after the date of the enactment of this Act,
the amendments made by this section shall apply to such expenditures paid or incurred after the end of the taxable year in which the 24-month period referred to in subparagraph (B) ends.
SEC. 13403. Employer credit for paid family and medical leave.
(a) In general.—
(1) ALLOWANCE OF CREDIT.—Subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new section:
“(a) Establishment of credit.—
“(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.
“(c) Eligible employer.—For purposes of this section—
“(1) IN GENERAL.—The term ‘eligible employer’ means any employer who has in place a policy that meets the following requirements:
“(A) The policy provides—
“(i) in the case of a qualifying employee who is not a part-time employee (as defined in section 4980E(d)(4)(B)), not less than 2 weeks of annual paid family and medical leave, and
“(ii) in the case of a qualifying employee who is a part-time employee, an amount of annual paid family and medical leave that is not less than an amount which bears the same ratio to the amount of annual paid family and medical leave that is provided to a qualifying employee described in clause (i) as—
“(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 policy which ensures that the employer—
“(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—
“(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.
“(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.
(b) Credit part of general business credit.—Section 38(b) is amended by striking “plus” at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting “, plus”, and by adding at the end the following new paragraph:
(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:
(d) Conforming amendments.—
(1) DENIAL OF DOUBLE BENEFIT.—Section 280C(a) is amended by inserting “45S(a),” after “45P(a),”.
(2) ELECTION TO HAVE CREDIT NOT APPLY.—Section 6501(m) is amended by inserting “45S(h),” after “45H(g),”.
(3) CLERICAL AMENDMENT.—The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:
“Sec. 45S. Employer credit for paid family and medical leave.”.
SEC. 13411. Treatment of veterans' preference as not violating general public use requirements.
(a) In general.—Subparagraph (C) of section 42(g)(9) is amended to read as follows:
SEC. 13412. Increase in credit for certain rural housing.
(a) In general.—Section 42(d)(5)(B) is amended by adding at the end the following new clause:
“(vi) CERTAIN NEW BUILDINGS IN RURAL AREAS.—For purposes of clause (i), a building described in subsection (b)(1)(B)(i) which is located in a rural area (as defined in section 520 of the Housing Act of 1949) shall be treated in the same manner as a new building located in a difficult development area which is designated for purposes of this subparagraph.”.
(b) Offset.—Section 42(d)(5)(B)(i) is amended by striking “130 percent” both places it appears in subclauses (I) and (II) and inserting “125 percent”.
SEC. 13501. Treatment of gain or loss of foreign persons from sale or exchange of interests in partnerships engaged in trade or business within the United States.
(a) In general.—Section 864(c) is amended by adding at the end the following:
“(8) GAIN OR LOSS OF FOREIGN PERSONS FROM SALE OR EXCHANGE OF CERTAIN PARTNERSHIP INTERESTS.—
“(A) IN GENERAL.—Notwithstanding any other provision of this subtitle, if a nonresident alien individual or foreign corporation owns, directly or indirectly, an interest in a partnership which is engaged in any trade or business within the United States, gain or loss on the sale or exchange of all (or any portion of) such interest shall be treated as effectively connected with the conduct of such trade or business to the extent such gain or loss does not exceed the amount determined under subparagraph (B).
“(B) AMOUNT TREATED AS EFFECTIVELY CONNECTED.—The amount determined under this subparagraph with respect to any partnership interest sold or exchanged—
“(i) in the case of any gain on the sale or exchange of the partnership interest, is—
“(I) the portion of the partner's distributive share of the amount of gain which would have been effectively connected with the conduct of a trade or business within the United States if the partnership had sold all of its assets at their fair market value as of the date of the sale or exchange of such interest, or
“(ii) 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
For purposes of this subparagraph, a partner's distributive share of gain or loss on the deemed sale shall be determined in the same manner as such partner’s distributive share of the non-separately stated taxable income or loss of such partnership.
“(C) COORDINATION WITH UNITED STATES REAL PROPERTY INTERESTS.—If a partnership described in subparagraph (A) holds any United States real property interest (as defined in section 897(c)) at the time of the sale or exchange of the partnership interest, then the gain or loss treated as effectively connected income under subparagraph (A) shall be reduced by the amount so treated with respect to such United States real property interest under section 897.
“(D) SALE OR EXCHANGE.—For purposes of this paragraph, an individual or corporation shall be treated as having sold or exchanged any interest in a partnership if, under any provision of this subtitle, gain or loss is realized from the sale or exchange of such interest.
“(E) SECRETARIAL AUTHORITY.—The Secretary shall prescribe such regulations as the Secretary determines appropriate for the application of this paragraph, including regulations which provide that, notwithstanding subparagraph (D), this paragraph applies in a case even if gain or loss from a sale or exchange would not be realized under any other provision of this subtitle.”.
(b) Withholding requirements.—Section 1446 is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following:
“(f) Special rules for withholding on sales of partnership interests.—
“(1) IN GENERAL.—Except as provided in this subsection, if any portion of the gain (if any) on any disposition of an interest in a partnership would be treated under section 864(c)(8) as effectively connected with the conduct of a trade or business within the United States, the transferee shall be required to deduct and withhold a tax equal to 10 percent of the amount realized on the disposition.
“(2) EXCEPTION IF NONFOREIGN AFFIDAVIT FURNISHED.—
“(A) IN GENERAL.—No person shall be required to deduct and withhold any amount under paragraph (1) with respect to any disposition if the transferor furnishes to the transferee an affidavit by the transferor stating, under penalty of perjury, the transferor’s United States taxpayer identification number and that the transferor is not a foreign person.
“(B) FALSE AFFIDAVIT.—Subparagraph (A) shall not apply to any disposition if—
“(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).
SEC. 13502. Modify definition of substantial built-in loss in the case of transfer of partnership interest.
(a) In general.—Paragraph (1) of section 743(d) is to read as follows:
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—
SEC. 13511. Net operating losses of life insurance companies.
(a) In general.—Section 805(b) is amended by striking paragraph (4) and by redesignating paragraph (5) as paragraph (4).
(b) Conforming amendments.—
(1) Part I of subchapter L of chapter 1 is amended by striking section 810 (and by striking the item relating to such section in the table of sections for such part).
(2) (A) Part III of subchapter L of chapter 1 is amended by striking section 844 (and by striking the item relating to such section in the table of sections for such part).
(B) Section 831(b)(3) is amended by striking “except as provided in section 844,”
(3) Section 381 is amended by striking subsection (d).
(4) Section 805(a)(4)(B)(ii) is amended to read as follows:
(5) Section 805(a) is amended by striking paragraph (5).
(6) Section 805(b)(2)(A)(iv) is amended to read as follows:
(7) Section 953(b)(1)(B) is amended to read as follows:
(8) Section 1351(i)(3) is amended by striking “or the operations loss deduction under section 810,”.
SEC. 13512. Repeal of small life insurance company deduction.
(a) In general.—Part I of subchapter L of chapter 1 is amended by striking section 806 (and by striking the item relating to such section in the table of sections for such part).
(b) Conforming amendments.—
(1) Section 453B(e) is amended—
(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—
(2) Section 465(c)(7)(D)(v)(II) is amended by striking “section 806(b)(3)” and inserting “section 453B(e)(3)”.
(3) Section 801(a)(2) is amended by striking subparagraph (C).
(4) Section 804 is amended by striking “means—” and all that follows and inserting “means the general deductions provided in section 805.”.
(5) Section 805(a)(4)(B), as amended by this Act, is amended by striking clause (i) and by redesignating clauses (ii), (iii), and (iv) as clauses (i), (ii), and (iii), respectively.
(6) Section 805(b)(2)(A), as amended by this Act, is amended by striking clause (iii) and by redesignating clauses (iv) and (v) as clauses (iii) and (iv), respectively.
(7) Section 842(c) is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively.
(8) Section 953(b)(1), as amended by section 13511, is amended by striking subparagraph (A) and by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively.
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—
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.”.
SEC. 13514. Repeal of special rule for distributions to shareholders from pre-1984 policyholders surplus account.
(a) In general.—Subpart D of part I of subchapter L is amended by striking section 815 (and by striking the item relating to such section in the table of sections for such subpart).
(b) Conforming amendment.—Section 801 is amended by striking subsection (c).
(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2017.
(d) Phased inclusion of remaining balance of policyholders surplus accounts.—In the case of any stock life insurance company which has a balance (determined as of the close of such company’s last taxable year beginning before January 1, 2018) in an existing policyholders surplus account (as defined in section 815 of the Internal Revenue Code of 1986, as in effect before its repeal), the tax imposed by section 801 of such Code for the first 8 taxable years beginning after December 31, 2017, shall be the amount which would be imposed by such section for such year on the sum of—
SEC. 13515. Modification of proration rules for property and casualty insurance companies.
(a) In general.—Section 832(b)(5)(B) is amended—
SEC. 13516. Repeal of special estimated tax payments.
(a) In general.—Part III of subchapter L of chapter 1 is amended by striking section 847 (and by striking the item relating to such section in the table of sections for such part).
SEC. 13517. Computation of life insurance tax reserves.
(a) In general.—
(1) COMPUTATION OF RESERVES.—Section 807(c) is amended to read as follows:
“(c) Items taken into account.—The items referred to in subsections (a) and (b) are as follows—
“(3) The amounts (discounted at the appropriate rate of interest) necessary to satisfy the obligations under insurance and annuity contracts, but only if such obligations do not involve (at the time with respect to which the computation is made under this paragraph) life, accident, or health contingencies.
“(4) Dividend accumulations, and other amounts, held at interest in connection with insurance and annuity contracts.
“(6) Reasonable special contingency reserves under contracts of group term life insurance or group accident and health insurance which are established and maintained for the provision of insurance on retired lives, for premium stabilization, or a combination thereof.
For purposes of paragraph (3), the appropriate rate of interest is the highest rate or rates permitted to be used to discount the obligations by the National Association of Insurance Commissioners as of the date the reserve is determined. In no case shall the amount determined under paragraph (3) for any contract be less than the net surrender value of such contract. For purposes of paragraph (2) and section 805(a)(1), the amount of the unpaid losses (other than losses on life insurance contracts) shall be the amount of the discounted unpaid losses as defined in section 846.”.
(2) Section 807(d) is amended—
(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—
(D) by striking “(as of the date of issuance)” in paragraph (3)(A)(iv)(I) and inserting “(as of the date the reserve is determined)”,
(E) by striking “as of the date of the issuance of” in paragraph (3)(A)(iv)(II) and inserting “as of the date the reserve is determined for”,
(3) Section 807(e) is amended—
(B) by redesignating paragraphs (3), (4), (6), and (7) as paragraphs (2), (3), (4), and (5), respectively,
(C) by amending paragraph (2) (as so redesignated) to read as follows:
“(2) QUALIFIED SUPPLEMENTAL BENEFITS.—
“(A) QUALIFIED SUPPLEMENTAL BENEFITS TREATED SEPARATELY.—For purposes of this part, the amount of the life insurance reserve for any qualified supplemental benefit shall be computed separately as though such benefit were under a separate contract.
“(B) QUALIFIED SUPPLEMENTAL BENEFIT.—For purposes of this paragraph, the term ‘qualified supplemental benefit’ means any supplemental benefit described in subparagraph (C) if—
(4) Section 7702 is amended—
(B) by adding at the end of subsection (f) the following new paragraph:
“(10) PREVAILING COMMISSIONERS’ STANDARD TABLES.—For purposes of subsection (c)(3)(B)(i), the term ‘prevailing commissioners' standard tables’ means the most recent commissioners’ standard tables prescribed by the National Association of Insurance Commissioners which are permitted to be used in computing reserves for that type of contract under the insurance laws of at least 26 States when the contract was issued. If the prevailing commissioners’ standard tables as of the beginning of any calendar year (hereinafter in this paragraph referred to as the ‘year of change’) are different from the prevailing commissioners’ standard tables as of the beginning of the preceding calendar year, the issuer may use the prevailing commissioners’ standard tables as of the beginning of the preceding calendar year with respect to any contract issued after the change and before the close of the 3-year period beginning on the first day of the year of change.”.
(b) Conforming amendments.—
(1) Section 808 is amended by adding at the end the following new subsection:
“(g) Prevailing State assumed interest rate.—For purposes of this subchapter—
“(1) IN GENERAL.—The term ‘prevailing State assumed interest rate’ means, with respect to any contract, the highest assumed interest rate permitted to be used in computing life insurance reserves for insurance contracts or annuity contracts (as the case may be) under the insurance laws of at least 26 States. For purposes of the preceding sentence, the effect of nonforfeiture laws of a State on interest rates for reserves shall not be taken into account.
(2) Paragraph (1) of section 811(d) is amended by striking “the greater of the prevailing State assumed interest rate or applicable Federal interest rate in effect under section 807” and inserting “the interest rate in effect under section 808(g)”.
(3) Subparagraph (A) of section 846(f)(6) is amended by striking “except that” and all that follows and inserting “except that the limitation of subsection (a)(3) shall apply, and”.
(4) Subparagraph (B) of section 954(i)(5) is amended by striking “shall apply, and”.
(c) Effective date.—
(1) IN GENERAL.—The amendments made by this section shall apply to taxable years beginning after December 31, 2017.
(2) TRANSITION RULE.—For the first taxable year beginning after December 31, 2017, the reserve with respect to any contract (as determined under section 807(d)(2) of the Internal Revenue Code of 1986) at the end of the preceding taxable year shall be determined as if the amendments made by this section had applied to such reserve in such preceding taxable year.
(3) TRANSITION RELIEF.—
(A) IN GENERAL.—If—
(i) the reserve determined under section 807(d)(2) of the Internal Revenue Code of 1986 (determined without regard to the amendments made by this section) with respect to any contract as of the close of the year preceding the first taxable year beginning after December 31, 2017, differs from
(ii) the reserve which would have been determined with respect to such contract as of the close of such taxable year under such section determined without regard to paragraph (2),
then the difference between the amount of the reserve described in clause (i) and the amount of the reserve described in clause (ii) shall be taken into account under the method provided in subparagraph (B).
(B) METHOD.—The method provided in this subparagraph is as follows:
SEC. 13518. Modification of rules for life insurance proration for purposes of determining the dividends received deduction.
(a) In general.—Section 812 is amended to read as follows:
(b) Conforming amendment.—Section 817A(e)(2) is amended by striking “, 807(d)(2)(B), and 812” and inserting “and 807(d)(2)(B)”.
SEC. 13519. Capitalization of certain policy acquisition expenses.
(a) In general.—
(1) Section 848(a)(2) is amended by striking “120-month” and inserting “180-month”.
(2) Section 848(c)(1) is amended by striking “1.75 percent” and inserting “2.1 percent”.
(3) Section 848(c)(2) is amended by striking “2.05 percent” and inserting “2.46 percent”.
(4) Section 848(c)(3) is amended by striking “7.7 percent” and inserting “9.24 percent”.
(b) Conforming amendments.—Section 848(b)(1) is amended by striking “120-month” and inserting “180-month”.
SEC. 13520. Tax reporting for life settlement transactions.
(a) In general.—Subpart B of part III of subchapter A of chapter 61, as amended by section 13306, is amended by adding at the end the following new section:
“SEC. 6050Y. Returns relating to certain life insurance contract transactions.
“(a) Requirement of reporting of certain payments.—
“(1) IN GENERAL.—Every person who acquires a life insurance contract or any interest in a life insurance contract in a reportable policy sale during any taxable year shall make a return for such taxable year (at such time and in such manner as the Secretary shall prescribe) setting forth—
“(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—
“(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,
“(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—
“(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—
“(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—
“(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).
(b) Clerical amendment.—The table of sections for subpart B of part III of subchapter A of chapter 61, as amended by section 13306, is amended by inserting after the item relating to section 6050X the following new item:
“Sec. 6050Y. Returns relating to certain life insurance contract transactions.”.
(c) Conforming amendments.—
(1) Subsection (d) of section 6724 is amended—
(A) by striking “or” at the end of clause (xxiv) of paragraph (1)(B), by striking “and” at the end of clause (xxv) of such paragraph and inserting “or”, and by inserting after such clause (xxv) the following new clause:
(d) Effective date.—The amendments made by this section shall apply to—
(1) reportable policy sales (as defined in section 6050Y(d)(2) of the Internal Revenue Code of 1986 (as added by subsection (a)) after December 31, 2017, and
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:
SEC. 13522. Exception to transfer for valuable consideration rules.
(a) In general.—Subsection (a) of section 101 is amended by inserting after paragraph (2) the following new paragraph:
“(3) EXCEPTION TO VALUABLE CONSIDERATION RULES FOR COMMERCIAL TRANSFERS.—
“(A) IN GENERAL.—The second sentence of paragraph (2) shall not apply in the case of a transfer of a life insurance contract, or any interest therein, which is a reportable policy sale.
“(B) REPORTABLE POLICY SALE.—For purposes of this paragraph, the term ‘reportable policy sale’ means the acquisition of an interest in a life insurance contract, directly or indirectly, if the acquirer has no substantial family, business, or financial relationship with the insured apart from the acquirer's interest in such life insurance contract. For purposes of the preceding sentence, the term ‘indirectly’ applies to the acquisition of an interest in a partnership, trust, or other entity that holds an interest in the life insurance contract.”.
(b) Conforming amendment.—Paragraph (1) of section 101(a) is amended by striking “paragraph (2)” and inserting “paragraphs (2) and (3)”.
SEC. 13531. Limitation on deduction for FDIC premiums.
(a) In general.—Section 162, as amended by sections 13307 and 13308, is amended by redesignating subsection (s) as subsection (t) and by inserting after subsection (r) the following new subsection:
“(s) Disallowance of FDIC premiums paid by certain large financial institutions.—
“(1) IN GENERAL.—No deduction shall be allowed for the applicable percentage of any FDIC premium paid or incurred by the taxpayer.
“(2) EXCEPTION FOR SMALL INSTITUTIONS.—Paragraph (1) shall not apply to any taxpayer for any taxable year if the total consolidated assets of such taxpayer (determined as of the close of such taxable year) do not exceed $10,000,000,000.
“(3) APPLICABLE PERCENTAGE.—For purposes of this subsection, the term ‘applicable percentage’ means, with respect to any taxpayer for any taxable year, the ratio (expressed as a percentage but not greater than 100 percent) which—
“(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—
“(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).”.
SEC. 13532. Repeal of advance refunding bonds.
(a) In general.—Paragraph (1) of section 149(d) is amended by striking “as part of an issue described in paragraph (2), (3), or (4).” and inserting “to advance refund another bond.”.
(b) Conforming amendments.—
(1) Section 149(d) is amended by striking paragraphs (2), (3), (4), and (6) and by redesignating paragraphs (5) and (7) as paragraphs (2) and (3).
(2) Section 148(f)(4)(C) is amended by striking clause (xiv) and by redesignating clauses (xv) to (xvii) as clauses (xiv) to (xvi).
SEC. 13533. Cost basis of specified securities determined without regard to identification.
(a) In general.—Section 1012 is amended by adding at the end the following new subsection:
“(e) Cost basis of specified securities determined without regard to identification.—
“(1) IN GENERAL.—Unless the Secretary permits the use of an average basis method for determining cost, in the case of the sale, exchange, or other disposition of a specified security (within the meaning of section 6045(g)(3)(B)), the basis (and holding period) of such security shall be determined on a first-in first-out basis.
(b) Conforming amendments.—
(1) Section 1012(c)(1) is amended by striking “the conventions prescribed by regulations under this section” and inserting “the method applicable for determining the cost of such security”.
(2) Section 1012(c)(2)(A) is amended by inserting “(as in effect prior to the enactment of the Tax Cuts and Jobs Act)” after “this section”.
(3) Section 6045(g)(2)(B)(i)(I) is amended by striking “unless the customer notifies the broker by means of making an adequate identification of the stock sold or transferred”.
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).”.
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.”.
SEC. 13543. Modification of treatment of S corporation conversions to C corporations.
(a) Adjustments attributable to conversion from s corporation to c corporation.—Section 481 is amended by adding at the end the following new sub-section:
“(d) Adjustments attributable to conversion from s corporation to c corporation.— (1) IN GENERAL.—In the case of an eligible terminated S corporation, any increase in tax under this chapter by reason of an adjustment required by subsection (a)(2), and which is attributable to such corporation’s revocation described in paragraph (2)(A)(ii), shall be taken into account ratably during the 6-taxable year period beginning with the year of change.”.
(b) In general.—Section 1371 is amended by adding at the end the following new subsection:
“(f) Cash distributions following post-termination transition period.—
“(1) IN GENERAL.—In the case of a distribution of money by an eligible terminated S corporation after the post-termination transition period, the accumulated adjustments account shall be allocated to such distribution, and the distribution shall be chargeable to accumulated earnings and profits, in the same ratio as the amount of such accumulated adjustments account bears to the amount of such accumulated earnings and profits.
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.
(b) Modification of definition of covered employees.—Paragraph (3) of section 162(m) is amended—
(1) in subparagraph (A), by striking “as of the close of the taxable year, such employee is the chief executive officer of the taxpayer or is” and inserting “such employee is the principal executive officer or principal financial officer of the taxpayer at any time during the taxable year, or was”,
(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)).”.
(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:
SEC. 13602. Excise tax on excess tax-exempt organization executive compensation.
(a) In general.—Subchapter D of chapter 42 is amended by adding at the end the following new section:
“SEC. 4960. Tax on excess tax-exempt organization executive compensation.
“(a) Tax imposed.—There is hereby imposed a tax equal to 20 percent of the sum of—
“(1) so much of the remuneration paid (other than any excess parachute payment) by an applicable tax-exempt organization for the taxable year with respect to employment of any covered employee in excess of $1,000,000, plus
For purposes of the preceding sentence, remuneration shall be treated as paid when there is no substantial risk of forfeiture of the rights to such remuneration.
“(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—
“(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—
“(3) REMUNERATION.—For purposes of this section, the term ‘remuneration’ means wages (as defined in section 3401(a)), except that such term shall not include any designated Roth contribution (as defined in section 402A(c)) and shall include amounts required to be included in gross income under section 457(f).
“(4) REMUNERATION FROM RELATED ORGANIZATIONS.—
“(A) IN GENERAL.—Remuneration of a covered employee by an applicable tax-exempt organization shall include any remuneration paid with respect to employment of such employee by any related person or governmental entity.
“(B) RELATED ORGANIZATIONS.—A person or governmental entity shall be treated as related to an applicable tax-exempt organization if such person or governmental entity—
“(iii) is a supported organization (as defined in section 509(f)(3)) during the taxable year with respect to the organization,
“(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—
“(5) EXCESS PARACHUTE PAYMENT.—For purposes of determining the tax imposed by subsection (a)(2)—
“(A) IN GENERAL.—The term ‘excess parachute payment’ means an amount equal to the excess of any parachute payment over the portion of the base amount allocated to such payment.
“(B) PARACHUTE PAYMENT.—The term ‘parachute payment’ means any payment in the nature of compensation to (or for the benefit of) a covered employee if—
“(i) such payment is contingent on such employee’s separation from employment with the employer, and
“(ii) the aggregate present value of the payments in the nature of compensation to (or for the benefit of) such individual which are contingent on such separation equals or exceeds an amount equal to 3 times the base amount.
Such term does not include any payment described in section 280G(b)(6) (relating to exemption for payments under qualified plans) or any payment made under or to an annuity contract described in section 403(b) or a plan described in section 457(b).
“(d) Regulations.—The Secretary shall prescribe such regulations as may be necessary to prevent avoidance of the tax under this section, including regulations preventing employees from being misclassified as contractors or from being compensated through a pass-through or other entity to avoid such tax.”.
(b) Clerical amendment.—The table of sections for subchapter D of chapter 42 is amended by adding at the end the following new item:
“Sec. 4960. Tax on excess tax-exempt organization executive compensation.”.
SEC. 13603. Treatment of qualified equity grants.
(a) In general.—Section 83 is amended by adding at the end the following new subsection:
“(i) Qualified equity grants.—
“(1) IN GENERAL.—For purposes of this subtitle—
“(A) TIMING OF INCLUSION.—If qualified stock is transferred to a qualified employee who makes an election with respect to such stock under this subsection, subsection (a) shall be applied by including the amount determined under such subsection with respect to such stock in income of the employee in the taxable year determined under subparagraph (B) in lieu of the taxable year described in subsection (a).
“(B) TAXABLE YEAR DETERMINED.—The taxable year determined under this subparagraph is the taxable year of the employee which includes the earliest of—
“(i) the first date such qualified stock becomes transferable (including, solely for purposes of this clause, becoming transferable to the employer),
“(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),
“(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—
“(B) LIMITATION.—The term ‘qualified stock’ shall not include any stock if the employee may sell such stock to, or otherwise receive cash in lieu of stock from, the corporation at the time that the rights of the employee in such stock first become transferable or not subject to a substantial risk of forfeiture.
“(C) ELIGIBLE CORPORATION.—For purposes of subparagraph (A)(ii)(II)—
“(i) IN GENERAL.—The term ‘eligible corporation’ means, with respect to any calendar year, any corporation if—
“(I) no stock of such corporation (or any predecessor of such corporation) is readily tradable on an established securities market (as determined under paragraph (1)(B)(iii)) during any preceding calendar year, and
“(II) such corporation has a written plan under which, in such calendar year, not less than 80 percent of all employees who provide services to such corporation in the United States (or any possession of the United States) are granted stock options, or restricted stock units, with the same rights and privileges to receive qualified stock.
“(ii) SAME RIGHTS AND PRIVILEGES.—For purposes of clause (i)(II)—
“(I) except as provided in subclauses (II) and (III), the determination of rights and privileges with respect to stock shall be made in a similar manner as under section 423(b)(5),
“(3) QUALIFIED EMPLOYEE; EXCLUDED EMPLOYEE.—For purposes of this subsection—
“(B) EXCLUDED EMPLOYEE.—The term ‘excluded employee’ means, with respect to any corporation, any individual—
“(i) who was a 1-percent owner (within the meaning of section 416(i)(1)(B)(ii)) at any time during the 10 preceding calendar years,
“(iii) who bears a relationship described in section 318(a)(1) to any individual described in subclause (I) or (II) of clause (ii), or
“(iv) who was for any of the 10 preceding taxable years one of the 4 highest compensated officers of such corporation, determined with respect to each such taxable year on the basis of the shareholder disclosure rules for compensation under the Securities Exchange Act of 1934 (as if such rules applied to such corporation).
“(4) ELECTION.—
“(A) TIME FOR MAKING ELECTION.—An election with respect to qualified stock shall be made under this subsection no later than 30 days after the first date the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, and shall be made in a manner similar to the manner in which an election is made under subsection (b).
“(B) LIMITATIONS.—No election may be made under this section with respect to any qualified stock if—
“(i) the qualified employee has made an election under subsection (b) with respect to such qualified stock,
“(ii) any stock of the corporation which issued the qualified stock is readily tradable on an established securities market (as determined under paragraph (1)(B)(iii)) at any time before the election is made, or
“(iii) such corporation purchased any of its outstanding stock in the calendar year preceding the calendar year which includes the first date the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, unless—
“(C) DEFINITIONS AND SPECIAL RULES RELATED TO LIMITATION ON STOCK REDEMPTIONS.—
“(i) DEFERRAL STOCK.—For purposes of this paragraph, the term ‘deferral stock’ means stock with respect to which an election is in effect under this subsection.
“(ii) DEFERRAL STOCK WITH RESPECT TO ANY INDIVIDUAL NOT TAKEN INTO ACCOUNT IF INDIVIDUAL HOLDS DEFERRAL STOCK WITH LONGER DEFERRAL PERIOD.—Stock purchased by a corporation from any individual shall not be treated as deferral stock for purposes of subparagraph (B)(iii) if such individual (immediately after such purchase) holds any deferral stock with respect to which an election has been in effect under this subsection for a longer period than the election with respect to the stock so purchased.
“(iii) PURCHASE OF ALL OUTSTANDING DEFERRAL STOCK.—The requirements of subclauses (I) and (II) of subparagraph (B)(iii) shall be treated as met if the stock so purchased includes all of the corporation’s outstanding deferral stock.
“(iv) REPORTING.—Any corporation which has outstanding deferral stock as of the beginning of any calendar year and which purchases any of its outstanding stock during such calendar year shall include on its return of tax for the taxable year in which, or with which, such calendar year ends the total dollar amount of its outstanding stock so purchased during such calendar year and such other information as the Secretary requires for purposes of administering this paragraph.
“(5) CONTROLLED GROUPS.—For purposes of this subsection, all persons treated as a single employer under section 414(b) shall be treated as 1 corporation.
“(6) NOTICE REQUIREMENT.—Any corporation which transfers qualified stock to a qualified employee shall, at the time that (or a reasonable period before) an amount attributable to such stock would (but for this subsection) first be includible in the gross income of such employee—
“(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,
(b) Withholding.—
(1) TIME OF WITHHOLDING.—Section 3401 is amended by adding at the end the following new subsection:
(2) AMOUNT OF WITHHOLDING.—Section 3402 is amended by adding at the end the following new subsection:
(c) Coordination with other deferred compensation rules.—
(1) ELECTION TO APPLY DEFERRAL TO STATUTORY OPTIONS.—
(A) INCENTIVE STOCK OPTIONS.—Section 422(b) is amended by adding at the end the following: “Such term shall not include any option if an election is made under section 83(i) with respect to the stock received in connection with the exercise of such option.”.
(B) EMPLOYEE STOCK PURCHASE PLANS.—Section 423 is amended—
(2) EXCLUSION FROM DEFINITION OF NONQUALIFIED DEFERRED COMPENSATION PLAN.—Subsection (d) of section 409A is amended by adding at the end the following new paragraph:
“(7) TREATMENT OF QUALIFIED STOCK.—An arrangement under which an employee may receive qualified stock (as defined in section 83(i)(2)) shall not be treated as a nonqualified deferred compensation plan solely because of an employee’s election, or ability to make an election, to defer recognition of income under section 83(i).”.
(d) Information reporting.—Section 6051(a) is amended by striking “and” at the end of paragraph (14)(B), by striking the period at the end of paragraph (15) and inserting a comma, and by inserting after paragraph (15) the following new paragraphs:
(e) Penalty for failure of employer To provide notice of tax consequences.—Section 6652 is amended by adding at the end the following new subsection:
“(p) Failure To provide notice under section 83(i).—In the case of each failure to provide a notice as required by section 83(i)(6), at the time prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall be paid, on notice and demand of the Secretary and in the same manner as tax, by the person failing to provide such notice, an amount equal to $100 for each such failure, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $50,000.”.
(f) Effective dates.—
(g) Transition rule.—Until such time as the Secretary (or the Secretary’s delegate) issues regulations or other guidance for purposes of implementing the requirements of paragraph (2)(C)(i)(II) of section 83(i) of the Internal Revenue Code of 1986 (as added by this section), or the requirements of paragraph (6) of such section, a corporation shall be treated as being in compliance with such requirements (respectively) if such corporation complies with a reasonable good faith interpretation of such requirements.
SEC. 13604. Increase in excise tax rate for stock compensation of insiders in expatriated corporations.
(a) In general.—Section 4985(a)(1) is amended by striking “section 1(h)(1)(C)” and inserting “section 1(h)(1)(D)”.
(b) Effective date.—The amendment made by this section shall apply to corporations first becoming expatriated corporations (as defined in section 4985 of the Internal Revenue Code of 1986) after the date of enactment of this Act.
SEC. 13611. Repeal of special rule permitting recharacterization of Roth IRA contributions as traditional IRA contributions.
(a) In general.—Section 408A(d) is amended by striking paragraph (6) and by redesignating paragraph (7) as paragraph (6).
SEC. 13612. Modification of rules applicable to length of service award plans.
(a) Maximum deferral amount.—Clause (ii) of section 457(e)(11)(B) is amended by striking “$3,000” and inserting “$6,000”.
(b) Cost of living adjustment.—Subparagraph (B) of section 457(e)(11) is amended by adding at the end the following:
“(iii) COST OF LIVING ADJUSTMENT.—In the case of taxable years beginning after December 31, 2017, the Secretary shall adjust the $6,000 amount under clause (ii) at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2016, and any increase under this paragraph that is not a multiple of $500 shall be rounded to the next lowest multiple of $500.”.
(c) Application of limitation on accruals.—Subparagraph (B) of section 457(e)(11), as amended by subsection (b), is amended by adding at the end the following:
“(iv) SPECIAL RULE FOR APPLICATION OF LIMITATION ON ACCRUALS FOR CERTAIN PLANS.—In the case of a plan described in subparagraph (A)(ii) which is a defined benefit plan (as defined in section 414(j)), the limitation under clause (ii) shall apply to the actuarial present value of the aggregate amount of length of service awards accruing with respect to any year of service. Such actuarial present value with respect to any year shall be calculated using reasonable actuarial assumptions and methods, assuming payment will be made under the most valuable form of payment under the plan with payment commencing at the later of the earliest age at which unreduced benefits are payable under the plan or the participant’s age at the time of the calculation.”.
SEC. 13613. Extended rollover period for plan loan offset amounts.
(a) In general.—Paragraph (3) of section 402(c) is amended by redesignating subparagraph (B) as subparagraph (C) and by inserting after subparagraph (A) the following new subparagraph:
“(B) ROLLOVER OF CERTAIN PLAN LOAN OFFSET AMOUNTS.—
“(i) IN GENERAL.—In the case of an eligible rollover distribution of a qualified plan loan offset amount, the requirements of subparagraph (A) shall be treated as met if such transfer occurs on or before the due date (including extensions) for filing the return of tax for the taxable year in which such amount is treated as distributed from a qualified employer plan.
“(ii) QUALIFIED PLAN LOAN OFFSET AMOUNT.—For purposes of this subparagraph, the term ‘qualified plan loan offset amount’ means a plan loan offset amount which is treated as distributed from a qualified employer plan to a participant or beneficiary solely by reason of—
“(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.
(b) Conforming amendment.—Subparagraph (A) of section 402(c)(3) is amended by striking “subparagraph (B)” and inserting “subparagraphs (B) and (C)”.
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:
“Sec. 4968. Excise tax based on investment income of private colleges and universities.
“(a) Tax imposed.—There is hereby imposed on each applicable educational institution for the taxable year a tax equal to 1.4 percent of the net investment income of such institution for the taxable year.
“(b) Applicable educational institution.—For purposes of this subchapter—
“(c) Net investment income.—For purposes of this section, net investment income shall be determined under rules similar to the rules of section 4940(c).
“(d) Assets and net investment income of related organizations.—
“(1) IN GENERAL.—For purposes of subsections (b)(1)(C) and (c), assets and net investment income of any related organization with respect to an educational institution shall be treated as assets and net investment income, respectively, of the educational institution, except that—
“(A) no such amount shall be taken into account with respect to more than 1 educational institution, and
“(B) unless such organization is controlled by such institution or is described in section 509(a)(3) with respect to such institution for the taxable year, assets and net investment income which are not intended or available for the use or benefit of the educational institution shall not be taken into account.
(b) Clerical amendment.—The table of subchapters for chapter 42 is amended by adding at the end the following new item:
“SUBCHAPTER H—EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES AND UNIVERSITIES”.
SEC. 13702. Unrelated business taxable income separately computed for each trade or business activity.
(a) In general.—Subsection (a) of section 512 is amended by adding at the end the following new paragraph:
“(6) SPECIAL RULE FOR ORGANIZATION WITH MORE THAN 1 UNRELATED TRADE OR BUSINESS.—In the case of any organization with more than 1 unrelated trade or business—
“(A) unrelated business taxable income, including for purposes of determining any net operating loss deduction, shall be computed separately with respect to each such trade or business and without regard to subsection (b)(12),
(b) 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
SEC. 13703. Repeal of deduction for amounts paid in exchange for college athletic event seating rights.
(a) In general.—Section 170(l) is amended—
SEC. 13704. Repeal of substantiation exception in case of contributions reported by donee.
(a) In general.—Section 170(f)(8) is amended by striking subparagraph (D) and by redesignating subparagraph (E) as subparagraph (D).
SEC. 13801. Production period for beer, wine, and distilled spirits.
(a) In general.—Section 263A(f) is amended—
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) Reduced rate for certain domestic production.—Subparagraph (A) of section 5051(a)(2) is amended—
(c) Application of reduced tax rate for foreign manufacturers and importers.—Subsection (a) of section 5051 is amended—
(1) in subparagraph (C)(i)(II) of paragraph (1), as amended by subsection (a), by inserting “but only if the importer is an electing importer under paragraph (4) and the barrels have been assigned to the importer pursuant to such paragraph” after “during the calendar year”, and
(2) by adding at the end the following new paragraph:
“(4) REDUCED TAX RATE FOR FOREIGN MANUFACTURERS AND IMPORTERS.—
“(A) IN GENERAL.—In the case of any barrels of beer which have been brewed or produced outside of the United States and imported into the United States, the rate of tax applicable under clause (i) of paragraph (1)(C) (referred to in this paragraph as the ‘reduced tax rate’) may be assigned by the brewer (provided that the brewer makes an election described in subparagraph (B)(ii)) to any electing importer of such barrels pursuant to the requirements established by the Secretary under subparagraph (B).
“(B) ASSIGNMENT.—The Secretary shall, through such rules, regulations, and procedures as are determined appropriate, establish procedures for assignment of the reduced tax rate provided under this paragraph, which shall include—
“(i) a limitation to ensure that the number of barrels of beer for which the reduced tax rate has been assigned by a brewer—
“(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.
(d) Controlled group and single taxpayer rules.—Subsection (a) of section 5051, as amended by this section, is amended—
(2) by adding at the end the following new paragraph:
“(5) CONTROLLED GROUP AND SINGLE TAXPAYER RULES.—
“(A) IN GENERAL.—Except as provided in subparagraph (B), in the case of a controlled group, the 6,000,000 barrel quantity specified in paragraph (1)(C)(i) and the 2,000,000 barrel quantity specified in paragraph (2)(A) shall be applied to the controlled group, and the 6,000,000 barrel quantity specified in paragraph (1)(C)(i) and the 60,000 barrel quantity specified in paragraph (2)(A) shall be apportioned among the brewers who are members of such group in such manner as the Secretary or their delegate shall by regulations prescribe. For purposes of the preceding sentence, the term ‘controlled group’ has the meaning assigned to it by subsection (a) of section 1563, except that for such purposes the phrase ‘more than 50 percent’ shall be substituted for the phrase ‘at least 80 percent’ in each place it appears in such subsection. Under regulations prescribed by the Secretary, principles similar to the principles of the preceding two sentences shall be applied to a group of brewers under common control where one or more of the brewers is not a corporation.
“(B) FOREIGN MANUFACTURERS AND IMPORTERS.—For purposes of paragraph (4), in the case of a controlled group, the 6,000,000 barrel quantity specified in paragraph (1)(C)(i) shall be applied to the controlled group and apportioned among the members of such group in such manner as the Secretary shall by regulations prescribe. For purposes of the preceding sentence, the term ‘controlled group’ has the meaning given such term under subparagraph (A). Under regulations prescribed by the Secretary, principles similar to the principles of the preceding two sentences shall be applied to a group of brewers under common control where one or more of the brewers is not a corporation.
“(C) SINGLE TAXPAYER.—Pursuant to rules issued by the Secretary, two or more entities (whether or not under common control) that produce beer marketed under a similar brand, license, franchise, or other arrangement shall be treated as a single taxpayer for purposes of the application of this subsection.”.
SEC. 13803. Transfer of beer between bonded facilities.
(a) In general.—Section 5414 is amended—
(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—
“(B) any removal from a brewery owned by one corporation to a brewery owned by another corporation when—
(b) Removal from brewery by pipeline.—Section 5412 is amended by inserting “pursuant to section 5414 or” before “by pipeline”.
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—
“(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) Controlled group and single taxpayer rules.—Paragraph (4) of section 5041(c) is amended by striking “section 5051(a)(2)(B)” and inserting “section 5051(a)(5)”.
(c) Allowance of credit for foreign manufacturers and importers.—Subsection (c) of section 5041, as amended by subsection (a), is amended—
(1) in subparagraph (A) of paragraph (8), by inserting “but only if the importer is an electing importer under paragraph (9) and the wine gallons of wine have been assigned to the importer pursuant to such paragraph” after “into the United States during the calendar year”, and
(2) by adding at the end the following new paragraph:
“(9) ALLOWANCE OF CREDIT FOR FOREIGN MANUFACTURERS AND IMPORTERS.—
“(A) IN GENERAL.—In the case of any wine gallons of wine which have been produced outside of the United States and imported into the United States, the credit allowable under paragraph (8) (referred to in this paragraph as the ‘tax credit’) may be assigned by the person who produced such wine (referred to in this paragraph as the ‘foreign producer’), provided that such person makes an election described in subparagraph (B)(ii), to any electing importer of such wine gallons pursuant to the requirements established by the Secretary under subparagraph (B).
“(B) ASSIGNMENT.—The Secretary shall, through such rules, regulations, and procedures as are determined appropriate, establish procedures for assignment of the tax credit provided under this paragraph, which shall include—
“(i) a limitation to ensure that the number of wine gallons of wine for which the tax credit has been assigned by a foreign producer—
“(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.
SEC. 13805. Adjustment of alcohol content level for application of excise tax rates.
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—
“(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,
SEC. 13807. Reduced rate of excise tax on certain distilled spirits.
(a) In general.—Section 5001 is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:
“(c) Reduced rate for 2018 and 2019.—
“(1) IN GENERAL.—In the case of a distilled spirits operation, the otherwise applicable tax rate under subsection (a)(1) shall be—
“(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.
(b) Conforming amendment.—Section 7652(f)(2) is amended by striking “section 5001(a)(1)” and inserting “subsection (a)(1) of section 5001, determined as if subsection (c)(1) of such section did not apply”.
(c) Application of reduced tax rate for foreign manufacturers and importers.—Subsection (c) of section 5001, as added by subsection (a), is amended—
(1) in paragraph (1), by inserting “but only if the importer is an electing importer under paragraph (3) and the proof gallons of distilled spirits have been assigned to the importer pursuant to such paragraph” after “into the United States during the calendar year”, and
(2) by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph:
“(3) REDUCED TAX RATE FOR FOREIGN MANUFACTURERS AND IMPORTERS.—
“(A) IN GENERAL.—In the case of any proof gallons of distilled spirits which have been produced outside of the United States and imported into the United States, the rate of tax applicable under paragraph (1) (referred to in this paragraph as the ‘reduced tax rate’) may be assigned by the distilled sprits operation (provided that such operation makes an election described in subparagraph (B)(ii)) to any electing importer of such proof gallons pursuant to the requirements established by the Secretary under subparagraph (B).
“(B) ASSIGNMENT.—The Secretary shall, through such rules, regulations, and procedures as are determined appropriate, establish procedures for assignment of the reduced tax rate provided under this paragraph, which shall include—
“(i) a limitation to ensure that the number of proof gallons of distilled spirits for which the reduced tax rate has been assigned by a distilled spirits operation—
“(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.
SEC. 13808. Bulk distilled spirits.
(a) In general.—Section 5212 is amended by adding at the end the following sentence: “In the case of distilled spirits transferred in bond after December 31, 2017, and before January 1, 2020, this section shall be applied without regard to whether distilled spirits are bulk distilled spirits.”.
SEC. 13821. Modification of tax treatment of Alaska Native Corporations and settlement trusts.
(a) Exclusion for ANCSA payments assigned to Alaska Native Settlement Trusts.—
(1) IN GENERAL.—Part III of subchapter B of chapter 1 is amended by inserting before section 140 the following new section:
“SEC. 139G. Assignments to Alaska Native Settlement Trusts.
“(a) In general.—In the case of a Native Corporation, gross income shall not include the value of any payments that would otherwise be made, or treated as being made, to such Native Corporation pursuant to, or as required by, any provision of the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.), including any payment that would otherwise be made to a Village Corporation pursuant to section 7(j) of the Alaska Native Claims Settlement Act (43 U.S.C. 1606(j)), provided that any such payments—
“(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.
(2) CONFORMING AMENDMENT.—The table of sections for part III of subchapter B of chapter 1 is amended by inserting before the item relating to section 140 the following new item:
“Sec. 139G. Assignments to Alaska Native Settlement Trusts.”.
(b) Deduction of contributions to Alaska Native Settlement Trusts.—
(1) IN GENERAL.—Part VIII of subchapter B of chapter 1 is amended by inserting before section 248 the following new section:
“SEC. 247. Contributions to Alaska Native Settlement Trusts.
“(a) In general.—In the case of a Native Corporation, there shall be allowed a deduction for any contributions made by such Native Corporation to a Settlement Trust (regardless of whether an election under section 646 is in effect for such Settlement Trust) for which the Native Corporation has made an annual election under subsection (e).
“(b) Amount of deduction.—The amount of the deduction under subsection (a) shall be equal to—
“(c) Limitation and carryover.—
“(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.—
“(f) Additional rules.—
“(1) EARNINGS AND PROFITS.—Notwithstanding section 646(d)(2), in the case of a Native Corporation which claims a deduction under this section for any taxable year, the earnings and profits of such Native Corporation for such taxable year shall be reduced by the amount of such deduction.
“(2) GAIN OR LOSS.—No gain or loss shall be recognized by the Native Corporation with respect to a contribution of property for which a deduction is allowed under this section.
“(3) INCOME.—Subject to subsection (g), a Settlement Trust shall include in income the amount of any deduction allowed under this section in the taxable year in which the Settlement Trust actually receives such contribution.
“(4) PERIOD.—The holding period under section 1223 of the Settlement Trust shall include the period the property was held by the Native Corporation.
“(5) BASIS.—The basis that a Settlement Trust has for which a deduction is allowed under this section shall be equal to the lesser of—
“(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—
“(3) ELECTION.—
“(A) IN GENERAL.—For each taxable year, a Settlement Trust may elect to apply this subsection for any property described in paragraph (1) which was contributed during such year. Any property to which the election applies shall be identified and described with reasonable particularity on the income tax return or an amendment or supplement to the return of the Settlement Trust, with such election to have effect solely for such taxable year.
“(B) REVOCATION.—Any election made by a Settlement Trust pursuant to this subsection may be revoked pursuant to a timely filed amendment or supplement to the income tax return of such Settlement Trust.
“(C) CERTAIN DISPOSITIONS.—
“(i) IN GENERAL.—In the case of any property for which an election is in effect under this subsection and which is disposed of within the first taxable year subsequent to the taxable year in which such property was contributed to the Settlement Trust—
“(ii) ASSESSMENT.—Notwithstanding section 6501(a), any amount described in subclause (III) of clause (i) may be assessed, or a proceeding in court with respect to such amount may be initiated without assessment, within 4 years after the date on which the return making the election under this subsection for such property was filed.”.
(2) CONFORMING AMENDMENT.—The table of sections for part VIII of subchapter B of chapter 1 is amended by inserting before the item relating to section 248 the following new item:
“Sec. 247. Contributions to Alaska Native Settlement Trusts.”.
(3) EFFECTIVE DATE.—
(A) IN GENERAL.—The amendments made by this subsection shall apply to taxable years for which the period of limitation on refund or credit under section 6511 of the Internal Revenue Code of 1986 has not expired.
(B) ONE-YEAR WAIVER OF STATUTE OF LIMITATIONS.—If the period of limitation on a credit or refund resulting from the amendments made by paragraph (1) expires before the end of the 1-year period beginning on the date of the enactment of this Act, refund or credit of such overpayment (to the extent attributable to such amendments) may, nevertheless, be made or allowed if claim therefor is filed before the close of such 1-year period.
(c) Information reporting for deductible contributions to Alaska Native Settlement Trusts.—
(1) IN GENERAL.—Section 6039H is amended—
(B) by adding at the end the following new subsection:
“(e) Deductible contributions by Native Corporations to Alaska Native Settlement Trusts.—
“(1) IN GENERAL.—Any Native Corporation (as defined in subsection (m) of section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m))) which has made a contribution to a Settlement Trust (as defined in subsection (t) of such section) to which an election under subsection (e) of section 247 applies shall provide such Settlement Trust with a statement regarding such election not later than January 31 of the calendar year subsequent to the calendar year in which the contribution was made.
“(2) CONTENT OF STATEMENT.—The statement described in paragraph (1) shall include—
“(A) the total amount of contributions to which the election under subsection (e) of section 247 applies,
(2) CONFORMING AMENDMENT.—The item relating to section 6039H in the table of sections for subpart A of part III of subchapter A of chapter 61 is amended to read as follows:
“Sec. 6039H. Information With Respect to Alaska Native Settlement Trusts and Native Corporations.”.
SEC. 13822. Amounts paid for aircraft management services.
(a) In general.—Subsection (e) of section 4261 is amended by adding at the end the following new paragraph:
“(5) AMOUNTS PAID FOR AIRCRAFT MANAGEMENT SERVICES.—
“(A) IN GENERAL.—No tax shall be imposed by this section or section 4271 on any amounts paid by an aircraft owner for aircraft management services related to—
“(B) AIRCRAFT MANAGEMENT SERVICES.—For purposes of subparagraph (A), the term ‘aircraft management services’ includes—
“(C) LESSEE TREATED AS AIRCRAFT OWNER.—
“(i) IN GENERAL.—For purposes of this paragraph, the term ‘aircraft owner’ includes a person who leases the aircraft other than under a disqualified lease.
“(ii) DISQUALIFIED LEASE.—For purposes of clause (i), the term ‘disqualified lease’ means a lease from a person providing aircraft management services with respect to such aircraft (or a related person (within the meaning of section 465(b)(3)(C)) to the person providing such services), if such lease is for a term of 31 days or less.
“(D) PRO RATA ALLOCATION.—In the case of amounts paid to any person which (but for this subsection) are subject to the tax imposed by subsection (a), a portion of which consists of amounts described in subparagraph (A), this paragraph shall apply on a pro rata basis only to the portion which consists of amounts described in such subparagraph.”.
SEC. 13823. Opportunity zones.
(a) In general.—Chapter 1 is amended by adding at the end the following:
“Sec. 1400Z–1. Designation.
“Sec. 1400Z–2. Special rules for capital gains invested in opportunity zones.
“(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.—
“(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).
“(d) Number of designations.—
“(e) Designation of tracts contiguous with low-Income communities.—
“(a) In general.—In the case of gain from the sale to, or exchange with, an unrelated person of any property held by the taxpayer, at the election of the taxpayer—
“(1) gross income for the taxable year shall not include so much of such gain as does not exceed the aggregate amount invested by the taxpayer in a qualified opportunity fund during the 180-day period beginning on the date of such sale or exchange,
“(2) the amount of gain excluded by paragraph (1) shall be included in gross income as provided by subsection (b), and
No election may be made under the preceding sentence with respect to a sale or exchange if an election previously made with respect to such sale or exchange is in effect.
“(b) Deferral of gain invested in opportunity zone property.—
“(1) YEAR OF INCLUSION.—Gain to which subsection (a)(2) applies shall be included in income in the taxable year which includes the earlier of—
“(2) AMOUNT INCLUDIBLE.—
“(A) IN GENERAL.—The amount of gain included in gross income under subsection (a)(1) shall be the excess of—
“(B) DETERMINATION OF BASIS.—
“(i) IN GENERAL.—Except as otherwise provided in this clause or subsection (c), the taxpayer's basis in the investment shall be zero.
“(ii) INCREASE FOR GAIN RECOGNIZED UNDER SUBSECTION (a)(2).—The basis in the investment shall be increased by the amount of gain recognized by reason of subsection (a)(2) with respect to such property.
“(iii) INVESTMENTS HELD FOR 5 YEARS.—In the case of any investment held for at least 5 years, the basis of such investment shall be increased by an amount equal to 10 percent of the amount of gain deferred by reason of subsection (a)(1).
“(iv) INVESTMENTS HELD FOR 7 YEARS.—In the case of any investment held by the taxpayer for at least 7 years, in addition to any adjustment made under clause (iii), the basis of such property shall be increased by an amount equal to 5 percent of the amount of gain deferred by reason of subsection (a)(1).
“(c) Special rule for investments held for at least 10 years.—In the case of any investment held by the taxpayer for at least 10 years and with respect to which the taxpayer makes an election under this clause, the basis of such property shall be equal to the fair market value of such investment on the date that the investment is sold or exchanged.
“(d) Qualified opportunity fund.—For purposes of this section—
“(1) QUALIFIED OPPORTUNITY FUND.—The term ‘qualified opportunity fund’ means any investment vehicle which is organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property (other than another qualified opportunity fund) that holds at least 90 percent of its assets in qualified opportunity zone property, determined—
“(2) QUALIFIED OPPORTUNITY ZONE PROPERTY.—
“(B) QUALIFIED OPPORTUNITY ZONE STOCK.—
“(i) IN GENERAL.—Except as provided in clause (ii), the term ‘qualified opportunity zone stock’ means any stock in a domestic corporation if—
“(I) such stock is acquired by the taxpayer after December 31, 2017, at its original issue (directly or through an underwriter) from the corporation solely in exchange for cash,
“(C) QUALIFIED OPPORTUNITY ZONE PARTNERSHIP INTEREST.—The term ‘qualified opportunity zone partnership interest’ means any capital or profits interest in a domestic partnership if—
“(i) such interest is acquired by the taxpayer after December 31, 2017, from the partnership solely in exchange for cash,
“(D) QUALIFIED OPPORTUNITY ZONE BUSINESS PROPERTY.—
“(i) IN GENERAL.—The term ‘qualified opportunity zone business property’ means tangible property used in a trade or business of the taxpayer if—
“(I) such property was acquired by the taxpayer by purchase (as defined in section 179(d)(2)) after December 31, 2017,
“(ii) SUBSTANTIAL IMPROVEMENT.—For purposes of subparagraph (A)(ii), property shall be treated as substantially improved by the taxpayer only if, during any 30-month period beginning after the date of acquisition of such property, additions to basis with respect to such property in the hands of the taxpayer exceed an amount equal to the adjusted basis of such property at the beginning of such 30-month period in the hands of the taxpayer.
“(3) QUALIFIED OPPORTUNITY ZONE BUSINESS.—
“(A) IN GENERAL.—The term ‘qualified opportunity zone business’ means a trade or business—
“(e) Applicable rules.—
“(1) TREATMENT OF INVESTMENTS WITH MIXED FUNDS.—In the case of any investment in a qualified opportunity fund only a portion of which consists of investments of gain to which an election under subsection (a)(1) is in effect—
“(2) RELATED PERSONS.—For purposes of this section, persons are related to each other if such persons are described in section 267(b) or 707(b)(1), determined by substituting ‘20 percent’ for ‘50 percent’ each place it occurs in such sections.
“(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—
(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:
(c) Clerical amendment.—The table of subchapters for chapter 1 is amended by adding at the end the following new item:
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:
“(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—
“(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—
“(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)—
“(d) Disallowance of foreign tax credit, etc.—
“(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—
“(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.
“(f) Special rule for purging distributions of passive foreign investment companies.—Any amount which is treated as a dividend under section 1291(d)(2)(B) shall not be treated as a dividend for purposes of this section.
“(g) Regulations.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section, including regulations for the treatment of United States shareholders owning stock of a specified 10 percent owned foreign corporation through a partnership.”.
(b) Application of holding period requirement.—Subsection (c) of section 246 is amended—
(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—
“(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—
(c) Application of rules generally applicable to deductions for dividends received.—
(1) TREATMENT OF DIVIDENDS FROM CERTAIN CORPORATIONS.—Paragraph (1) of section 246(a) is amended by striking “and 245” and inserting “245, and 245A”.
(2) ASSETS GENERATING TAX-EXEMPT PORTION OF DIVIDEND NOT TAKEN INTO ACCOUNT IN ALLOCATING AND APPORTIONING DEDUCTIBLE EXPENSES.—Paragraph (3) of section 864(e) is amended by striking “or 245(a)” and inserting “, 245(a), or 245A”.
(3) COORDINATION WITH SECTION 1059.—Subparagraph (B) of section 1059(b)(2) is amended by striking “or 245” and inserting “245, or 245A”.
(d) Coordination with foreign tax credit limitation.—Subsection (b) of section 904 is amended by adding at the end the following new paragraph:
“(5) TREATMENT OF DIVIDENDS FOR WHICH DEDUCTION IS ALLOWED UNDER SECTION 245A.—For purposes of subsection (a), in the case of a domestic corporation which is a United States shareholder with respect to a specified 10-percent owned foreign corporation, such domestic corporation’s taxable income from sources without the United States shall be determined without regard to—
Any term which is used in section 245A and in this paragraph shall have the same meaning for purposes of this paragraph as when used in such section.”.
(e) Conforming amendments.—
(1) Subsection (b) of section 951 is amended by striking “subpart” and inserting “title”.
(2) Subsection (a) of section 957 is amended by striking “subpart” in the matter preceding paragraph (1) and inserting “title”.
(3) The table of sections for part VIII of subchapter B of chapter 1 is amended by inserting after the item relating to section 245 the following new item:
“Sec. 245A. Dividends received by domestic corporations from certain foreign corporations.”.
SEC. 14102. Special rules relating to sales or transfers involving specified 10-percent owned foreign corporations.
(a) Sales by United States persons of stock.—Section 1248 is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (i) the following new subsection:
“(j) Coordination with dividends received deduction.—In the case of the sale or exchange by a domestic corporation of stock in a foreign corporation held for 1 year or more, any amount received by the domestic corporation which is treated as a dividend by reason of this section shall be treated as a dividend for purposes of applying section 245A.”.
(b) Basis in specified 10-percent owned foreign corporation reduced by nontaxed portion of dividend for purposes of determining loss.—
(1) IN GENERAL.—Section 961 is amended by adding at the end the following new subsection:
“(d) Basis in specified 10-percent owned foreign corporation reduced by nontaxed portion of dividend for purposes of determining loss.—If a domestic corporation receives a dividend from a specified 10-percent owned foreign corporation (as defined in section 245A) in any taxable year, solely for purposes of determining loss on any disposition of stock of such foreign corporation in such taxable year or any subsequent taxable year, the basis of such domestic corporation in such stock shall be reduced (but not below zero) by the amount of any deduction allowable to such domestic corporation under section 245A with respect to such stock.”.
(c) Sale by a CFC of a lower tier CFC.—Section 964(e) is amended by adding at the end the following new paragraph:
“(4) COORDINATION WITH DIVIDENDS RECEIVED DEDUCTION.—
“(A) IN GENERAL.—If, for any taxable year of a controlled foreign corporation beginning after December 31, 2017, any amount is treated as a dividend under paragraph (1) by reason of a sale or exchange by the controlled foreign corporation of stock in another foreign corporation held for 1 year or more, then, notwithstanding any other provision of this title—
“(i) the foreign-source portion of such dividend shall be treated for purposes of section 951(a)(1)(A) as subpart F income of the selling controlled foreign corporation for such taxable year,
“(ii) a United States shareholder with respect to the selling controlled foreign corporation shall include in gross income for the taxable year of the shareholder with or within which such taxable year of the controlled foreign corporation ends an amount equal to the shareholder's pro rata share (determined in the same manner as under section 951(a)(2)) of the amount treated as subpart F income under clause (i), and
“(iii) the deduction under section 245A(a) shall be allowable to the United States shareholder with respect to the subpart F income included in gross income under clause (ii) in the same manner as if such subpart F income were a dividend received by the shareholder from the selling controlled foreign corporation.
“(B) EFFECT OF LOSS ON EARNINGS AND PROFITS.—For purposes of this title, in the case of a sale or exchange by a controlled foreign corporation of stock in another foreign corporation in a taxable year of the selling controlled foreign corporation beginning after December 31, 2017, to which this paragraph would apply if gain were recognized, the earnings and profits of the selling controlled foreign corporation shall not be reduced by reason of any loss from such sale or exchange.
(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:
“(a) In general.—If a domestic corporation transfers substantially all of the assets of a foreign branch (within the meaning of section 367(a)(3)(C), as in effect before the date of the enactment of the Tax Cuts and Jobs Act) to a specified 10-percent owned foreign corporation (as defined in section 245A) with respect to which it is a United States shareholder after such transfer, such domestic corporation shall include in gross income for the taxable year which includes such transfer an amount equal to the transferred loss amount with respect to such transfer.
“(b) Limitation and carryforward based on foreign-source dividends received.—
“(1) IN GENERAL.—The amount included in the gross income of the taxpayer under subsection (a) for any taxable year shall not exceed the amount allowed as a deduction under section 245A for such taxable year (taking into account dividends received from all specified 10-percent owned foreign corporations with respect to which the taxpayer is a United States shareholder).
“(c) Transferred loss amount.—For purposes of this section, the term ‘transferred loss amount’ means, with respect to any transfer of substantially all of the assets of a foreign branch, the excess (if any) of—
“(d) Reduction for recognized gains.—The transferred loss amount shall be reduced (but not below zero) by the amount of gain recognized by the taxpayer on account of the transfer (other than amounts taken into account under subsection (c)(2)(B)).
“(e) Source of income.—Amounts included in gross income under this section shall be treated as derived from sources within the United States.
“(f) Basis adjustments.—Consistent with such regulations or other guidance as the Secretary shall prescribe, proper adjustments shall be made in the adjusted basis of the taxpayer’s stock in the specified 10-percent owned foreign corporation to which the transfer is made, and in the transferee’s adjusted basis in the property transferred, to reflect amounts included in gross income under this section.”.
(2) CLERICAL AMENDMENT.—The table of sections for part II of subchapter B of chapter 1 is amended by adding at the end the following new item:
(e) Repeal of active trade or business exception under section 367.—
(1) IN GENERAL.—Section 367(a) is amended by striking paragraph (3) and redesignating paragraphs (4), (5), and (6) as paragraphs (3), (4), and (5), respectively.
SEC. 14103. Treatment of deferred foreign income upon transition to participation exemption system of taxation.
(a) In general.—Section 965 is amended to read as follows:
“(a) Treatment of deferred foreign income as subpart F income.—In the case of the last taxable year of a deferred income corporation which begins before January 1, 2018, the subpart F income of such foreign corporation (as otherwise determined for such taxable year under section 952) shall be increased by the greater of—
“(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—
“(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—
“(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.
“(4) TREATMENT OF EARNINGS AND PROFITS IN FUTURE YEARS.—
“(A) REDUCED EARNINGS AND PROFITS TREATED AS PREVIOUSLY TAXED INCOME WHEN DISTRIBUTED.—For purposes of applying section 959 in any taxable year beginning after December 31, 2017, with respect to any United States shareholder of a deferred foreign income corporation, an amount equal to such shareholder's reduction under paragraph (1) which is allocated to such deferred foreign income corporation under this subsection shall be treated as an amount which was included in the gross income of such United States shareholder under section 951(a).
“(B) E&P DEFICITS.—For purposes of this title, a United States shareholder's pro rata share of the earnings and profits of any specified E&P deficit foreign corporation under this subsection shall be increased by the amount of the specified E&P deficit of such corporation taken into account by such shareholder under paragraph (1), and, for purposes of section 952, such increase shall be attributable to the same activity to which the deficit so taken into account was attributable.
“(c) Application of participation exemption To included income.—
“(1) IN GENERAL.—In the case of a United States shareholder of a deferred foreign income corporation, there shall be allowed as a deduction for the taxable year in which an amount is included in the gross income of such United States shareholder under section 951(a)(1) by reason of this section an amount equal to the sum of—
“(2) 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
“(B) CASH POSITION.—For purposes of this paragraph, the cash position of any specified foreign corporation is the sum of—
“(iii) the fair market value of the following assets held by such corporation:
“(I) Personal property which is of a type that is actively traded and for which there is an established financial market (other than stock in the specified foreign corporation).
“(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—
“(D) PREVENTION OF DOUBLE COUNTING.—Cash positions of a specified foreign corporation described in clause (ii) or (iii)(III) of subparagraph (B) shall not be taken into account by a United States shareholder under subparagraph (A) to the extent that such United States shareholder demonstrates to the satisfaction of the Secretary that such amount is so taken into account by such United States shareholder with respect to another specified foreign corporation.
“(E) CASH POSITIONS OF CERTAIN NON-CORPORATE ENTITIES TAKEN INTO ACCOUNT.—An entity shall be treated as a specified foreign corporation of a United States shareholder for purposes of determining such United States shareholder’s aggregate foreign cash position if—
“(d) Deferred foreign income corporation; accumulated post-1986 deferred foreign income.—For purposes of this section—
“(1) DEFERRED FOREIGN INCOME CORPORATION.—The term ‘deferred foreign income corporation’ means, with respect to any United States shareholder, any specified foreign corporation of such United States shareholder which has accumulated post-1986 deferred foreign income (as of the close of the taxable year referred to in subsection (a)) greater than zero.
“(2) ACCUMULATED POST-1986 DEFERRED FOREIGN INCOME.—The term ‘accumulated post-1986 deferred foreign income’ means the post-1986 earnings and profits except to the extent such earnings—
“(A) are attributable to income of the specified foreign corporation which is effectively connected with the conduct of a trade or business within the United States and subject to tax under this chapter, or
“(B) in the case of a controlled foreign corporation, if distributed, would be excluded from the gross income of a United States shareholder under section 959.
To the extent provided in regulations or other guidance prescribed by the Secretary, in the case of any controlled foreign corporation which has shareholders which are not United States shareholders, accumulated post-1986 deferred foreign income shall be appropriately reduced by amounts which would be described in subparagraph (B) if such shareholders were United States shareholders.
“(3) POST-1986 EARNINGS AND PROFITS.—The term ‘post-1986 earnings and profits’ means the earnings and profits of the foreign corporation (computed in accordance with sections 964(a) and 986, and by only taking into account periods when the foreign corporation was a specified foreign corporation) accumulated in taxable years beginning after December 31, 1986, and determined—
“(e) Specified foreign corporation.—
“(2) APPLICATION TO SECTION 902 CORPORATIONS.—For purposes of sections 951 and 961, a section 902 corporation (as so defined) shall be treated as a controlled foreign corporation solely for purposes of taking into account the subpart F income of such corporation under subsection (a) (and for purposes of applying subsection (e)).
“(f) Determinations of pro rata share.—For purposes of this section, the determination of any United States shareholder’s pro rata share of any amount with respect to any specified foreign corporation shall be determined under rules similar to the rules of section 951(a)(2) by treating such amount in the same manner as subpart F income (and by treating such specified foreign corporation as a controlled foreign corporation).
“(g) Disallowance of foreign tax credit, etc.—
“(1) IN GENERAL.—No credit shall be allowed under section 901 for the applicable percentage of any taxes paid or accrued (or treated as paid or accrued) with respect to any amount for which a deduction is allowed under this section.
“(2) APPLICABLE PERCENTAGE.—For purposes of this subsection, the term ‘applicable percentage’ means the amount (expressed as a percentage) equal to the sum of—
“(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:
“(2) DATE FOR PAYMENT OF INSTALLMENTS.—If an election is made under paragraph (1), the first installment shall be paid on the due date (determined without regard to any extension of time for filing the return) for the return of tax for the taxable year described in subsection (a) and each succeeding installment shall be paid on the due date (as so determined) for the return of tax for the taxable year following the taxable year with respect to which the preceding installment was made.
“(3) ACCELERATION OF PAYMENT.—If there is an addition to tax for failure to timely pay any installment required under this subsection, a liquidation or sale of substantially all the assets of the taxpayer (including in a title 11 or similar case), a cessation of business by the taxpayer, or any similar circumstance, then the unpaid portion of all remaining installments shall be due on the date of such event (or in the case of a title 11 or similar case, the day before the petition is filed). The preceding sentence shall not apply to the sale of substantially all the assets of a taxpayer to a buyer if such buyer enters into an agreement with the Secretary under which such buyer is liable for the remaining installments due under this subsection in the same manner as if such buyer were the taxpayer.
“(4) PRORATION OF DEFICIENCY TO INSTALLMENTS.—If an election is made under paragraph (1) to pay the net tax liability under this section in installments and a deficiency has been assessed with respect to such net tax liability, the deficiency shall be prorated to the installments payable under paragraph (1). The part of the deficiency so prorated to any installment the date for payment of which has not arrived shall be collected at the same time as, and as a part of, such installment. The part of the deficiency so prorated to any installment the date for payment of which has arrived shall be paid upon notice and demand from the Secretary. This subsection shall not apply if the deficiency is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax.
“(5) ELECTION.—Any election under paragraph (1) shall be made not later than the due date for the return of tax for the taxable year described in subsection (a) and shall be made in such manner as the Secretary shall provide.
“(6) NET TAX LIABILITY UNDER THIS SECTION.—For purposes of this subsection—
“(A) IN GENERAL.—The net tax liability under this section with respect to any United States shareholder is the excess (if any) of—
“(i) 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).
“(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,
“(5) JOINT AND SEVERAL LIABILITY OF S CORPORATION.—If any shareholder of an S corporation elects to defer payment under paragraph (1), such S corporation shall be jointly and severally liable for such payment and any penalty, addition to tax, or additional amount attributable thereto.
“(6) EXTENSION OF LIMITATION ON COLLECTION.—Any limitation on the time period for the collection of a liability deferred under this subsection shall not be treated as beginning before the date of the triggering event with respect to such liability.
“(7) ANNUAL REPORTING OF NET TAX LIABILITY.—
“(A) IN GENERAL.—Any shareholder of an S corporation which makes an election under paragraph (1) shall report the amount of such shareholder’s deferred net tax liability on such shareholder’s return of tax for the taxable year for which such election is made and on the return of tax for each taxable year thereafter until such amount has been fully assessed on such returns.
“(B) DEFERRED NET TAX LIABILITY.—For purposes of this paragraph, the term ‘deferred net tax liability’ means, with respect to any taxable year, the amount of net tax liability payment of which has been deferred under paragraph (1) and which has not been assessed on a return of tax for any prior taxable year.
“(C) FAILURE TO REPORT.—In the case of any failure to report any amount required to be reported under subparagraph (A) with respect to any taxable year before the due date for the return of tax for such taxable year, there shall be assessed on such return as an addition to tax 5 percent of such amount.
“(8) ELECTION.—Any election under paragraph (1)—
“(j) Reporting by S corporation.—Each S corporation which is a United States shareholder of a specified foreign corporation shall report in its return of tax under section 6037(a) the amount includible in its gross income for such taxable year by reason of this section and the amount of the deduction allowable by subsection (b). Any copy provided to a shareholder under section 6037(b) shall include a statement of such shareholder’s pro rata share of such amounts.
“(k) Extension of limitation on assessment.—Notwithstanding section 6501, the limitation on the time period for the assessment of the net tax liability under this section (as defined in subsection (h)(6)) shall not expire before the date that is 6 years after the return for the taxable year described in such subsection was filed.
“(l) Recapture for expatriated entities.—
“(1) IN GENERAL.—If a deduction is allowed under subsection (c) to a United States shareholder and such shareholder first becomes an expatriated entity at any time during the 10-year period beginning on the date of the enactment of the Tax Cuts and Jobs Act, then—
“(2) EXPATRIATED ENTITY.—For purposes of this subsection, the term ‘expatriated entity’ has the same meaning given such term under section 7874(a)(2), except that such term shall not include an entity if the surrogate foreign corporation with respect to the entity is treated as a domestic corporation under section 7874(b).
“(m) Special rules for United States shareholders which are real estate investment trusts.—
“(1) IN GENERAL.—If a real estate investment trust is a United States shareholder in 1 or more deferred foreign income corporations—
“(A) any amount required to be taken into account under section 951(a)(1) by reason of this section shall not be taken into account as gross income of the real estate investment trust for purposes of applying paragraphs (2) and (3) of section 856(c) to any taxable year for which such amount is taken into account under section 951(a)(1), and
“(B) if the real estate investment trust elects the application of this subparagraph, notwithstanding subsection (a), any amount required to be taken into account under section 951(a)(1) by reason of this section shall, in lieu of the taxable year in which it would otherwise be included in gross income ((for purposes of the computation of real estate investment trust taxable income under section 857(b)), be included in gross income as follows:
“(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) 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—
“(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.
“(o) Regulations.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section or to prevent the avoidance of the purposes of this section, including through a reduction in earnings and profits through changes in entity classification, changes in accounting methods, or otherwise.”.
(b) Clerical amendment.—The table of sections for subpart F of part III of subchapter N of chapter 1 is amended by striking the item relating to section 965 and inserting the following:
SEC. 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:
“(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—
“(2) NET DEEMED TANGIBLE INCOME RETURN.—The term ‘net deemed tangible income return’ means, with respect to any United States shareholder for any taxable year, an amount equal to 10 percent of the aggregate of such shareholder’s pro rata share of the qualified business asset investment of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year (determined for each taxable year of each such controlled foreign corporation which ends in or with such taxable year of such United States shareholder).
“(c) Net CFC tested income.—For purposes of this section—
“(1) IN GENERAL.—The term ‘net CFC tested income’ means, with respect to any United States shareholder for any taxable year of such United States shareholder, the excess (if any) of—
“(A) the aggregate of such shareholder’s pro rata share of the tested income of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year of such United States shareholder (determined for each taxable year of such controlled foreign corporation which ends in or with such taxable year of such United States shareholder), over
“(B) the aggregate of such shareholder’s pro rata share of the tested loss of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year of such United States shareholder (determined for each taxable year of such controlled foreign corporation which ends in or with such taxable year of such United States shareholder).
“(2) TESTED INCOME; TESTED LOSS.—For purposes of this section—
“(A) TESTED INCOME.—The term ‘tested income’ means, with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation, the excess (if any) of—
“(d) Qualified business asset investment.—For purposes of this section—
“(1) IN GENERAL.—The term ‘qualified business asset investment’ means, with respect to any corporation for any taxable year of such controlled foreign corporation, the average of the aggregate of the corporation’s adjusted bases as of the close of each quarter of such taxable year in specified tangible property—
“(2) SPECIFIED TANGIBLE PROPERTY.—
“(A) IN GENERAL.—The term ‘specified tangible property’ means, except as provided in subparagraph (B), any tangible property used in the production of tested income.
“(B) DUAL USE PROPERTY.—In the case of property used both in the production of tested income and income which is not tested income, such property shall be treated as specified tangible property in the same proportion that the gross income described in subsection (c)(1)(A) produced with respect to such property bears to the total gross income produced with respect to such property.
“(3) DETERMINATION OF ADJUSTED BASIS.—For purposes of this subsection, notwithstanding any provision of this title (or any other provision of law) which is enacted after the date of the enactment of this section, the adjusted basis in any property shall be determined using the alternative depreciation system under section 168(g).
“(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.—For purposes of paragraph (1), a person shall be treated as a United States shareholder of a controlled foreign corporation for any taxable year only if such person owns (within the meaning of section 958(a)) stock in such foreign corporation on the last day, in such year, on which such foreign corporation is a controlled foreign corporation.
“(f) Treatment as subpart F income for certain purposes.—
“(1) IN GENERAL.—
“(A) APPLICATION.—Except as provided in subparagraph (B), any global intangible low-taxed income included in gross income under subsection (a) shall be treated in the same manner as an amount included under section 951(a)(1)(A) for purposes of applying sections 168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 961, 962(c), 962(d), 993(a)(1)(E), 996(f)(1), 1248(b)(1), 1248(d)(1), 6501(e)(1)(C), 6654(d)(2)(D), and 6655(e)(4).
“(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—
“(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—
(b) Foreign tax credit.—
(1) APPLICATION OF DEEMED PAID FOREIGN TAX CREDIT.—Section 960 is amended adding at the end the following new subsection:
“(d) Deemed paid credit for taxes properly attributable To tested income.—
“(1) IN GENERAL.—For purposes of this subpart, if any amount is includible in the gross income of a domestic corporation under section 951A, such domestic corporation shall be deemed to have paid foreign income taxes equal to 80 percent of the product of—
“(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—
“(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:
(B) EXCLUSION FROM GENERAL CATEGORY INCOME.—Section 904(d)(2)(A)(ii) is amended by inserting “income described in paragraph (1)(A) and” before “passive category income”.
(C) NO CARRYOVER OR CARRYBACK OF EXCESS TAXES.—Section 904(c) is amended by adding at the end the following: “This subsection shall not apply to taxes paid or accrued with respect to amounts described in subsection (d)(1)(A).”.
(c) Clerical amendment.—The table of sections for subpart F of part III of subchapter N of chapter 1 is amended by inserting after the item relating to section 951 the following new item:
SEC. 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:
“(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—
“(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
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) 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—
“(2) DEEMED INTANGIBLE INCOME.—For purposes of this subsection—
“(B) DEEMED TANGIBLE INCOME RETURN.—The term ‘deemed tangible income return’ means, with respect to any corporation, an amount equal to 10 percent of the corporation’s qualified business asset investment (as defined in section 951A(d), determined by substituting ‘deduction eligible income’ for ‘tested income’ in paragraph (2) thereof).
“(3) DEDUCTION ELIGIBLE INCOME.—
“(A) IN GENERAL.—The term ‘deduction eligible income’ means, with respect to any domestic corporation, the excess (if any) of—
“(i) gross income of such corporation determined without regard to—
“(III) any financial services income (as defined in section 904(d)(2)(D)) of such corporation which is not described in clause (ii),
“(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—
“(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.
“(C) SPECIAL RULES WITH RESPECT TO RELATED PARTY TRANSACTIONS.—
“(i) SALES TO RELATED PARTIES.—If property is sold to a related party who is not a United States person, such sale shall not be treated as for a foreign use unless—
“(I) such property is ultimately sold by a related party, or used by a related party in connection with property which is sold or the provision of services, to another person who is an unrelated party who is not a United States person, and
“(II) the taxpayer establishes to the satisfaction of the Secretary that such property is for a foreign use.
For purposes of this clause, a sale of property shall be treated as a sale of each of the components thereof.
“(ii) SERVICE PROVIDED TO RELATED PARTIES.—If a service is provided to a related party who is not located in the United States, such service shall not be treated described in subparagraph (A)(ii) unless the taxpayer established to the satisfaction of the Secretary that such service is not substantially similar to services provided by such related party to persons located within the United States.
“(D) RELATED PARTY.—For purposes of this paragraph, the term ‘related party’ means any member of an affiliated group as defined in section 1504(a), determined—
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).
(b) Conforming amendments.—
(1) Section 172(d), as amended by section 13011, is amended by adding at the end the following new paragraph:
(2) Section 246(b)(1) is amended—
(3) Section 469(i)(3)(F)(iii) is amended by striking “and 222” and inserting “222, and 250”.
(4) The table of sections for part VIII of subchapter B of chapter 1 is amended by adding at the end the following new item:
“Sec. 250. Foreign-derived intangible income and global intangible low-taxed income.”.
SEC. 14203. Special rules for transfers of intangible property from controlled foreign corporations to United States shareholders.
(a) In general.—Subpart F of part III of subchapter N of chapter 1 is amended by adding at the end the following new section:
“(a) In general.—In the case of any distribution of intangible property which is held by a controlled foreign corporation on the date of enactment of this section and which is described in subsection (b)—
“(1) for purposes of part I of subchapter C and any other provision of this title specified by the Secretary, the fair market value of such property on the date of such distribution shall be treated as not exceeding the adjusted basis of such property immediately before such distribution, and
“(2) if the distribution is to a United States shareholder and is not a dividend—
(b) Conforming amendments.—
(1) Section 197(f)(2)(B)(i) is amended by inserting “966(a),” after “731,”.
(2) The table of sections for subpart F of part III of subchapter N of chapter 1 is amended by adding at the end the following new item:
“Sec. 966. Transfers of intangible property to United States shareholders.”.
SEC. 14211. Elimination of inclusion of foreign base company oil related income.
(a) Repeal.—Subsection (a) of section 954 is amended—
(b) Conforming amendments.—
(1) Section 952(c)(1)(B)(iii) is amended by striking subclause (I) and redesignating subclauses (II) through (V) as subclauses (I) through (IV), respectively.
(2) Section 954(b) is amended—
(3) Section 954 is amended by striking subsection (g).
SEC. 14212. Inflation adjustment of de minimis exception for foreign base company income.
(a) In general.—Section 954(b)(3) is amended by adding at the end the following new subparagraph:
“(D) INFLATION ADJUSTMENT.—In the case of any taxable year beginning after 2017, the dollar amount in subparagraph (A)(ii) shall be increased by an amount equal to—
“(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins.
Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $50,000.”.
SEC. 14213. Repeal of inclusion based on withdrawal of previously excluded subpart F income from qualified investment.
(a) In general.—Subpart F of part III of subchapter N of chapter 1 is amended by striking section 955.
(b) Conforming amendments.—
(1) (A) Section 951(a)(1)(A) is amended to read as follows:
“(A) his pro rata share (determined under paragraph (2)) of the corporation’s subpart F income for such year, and”.
(B) Section 851(b) is amended by striking “section 951(a)(1)(A)(i)” in the flush language at the end and inserting “section 951(a)(1)(A)”.
(C) Section 952(c)(1)(B)(i) is amended by striking “section 951(a)(1)(A)(i)” and inserting “section 951(a)(1)(A)”.
(D) Section 953(c)(1)(C) is amended by striking “section 951(a)(1)(A)(i)” and inserting “section 951(a)(1)(A)”.
(2) Section 951(a) is amended by striking paragraph (3).
(3) Section 953(d)(4)(B)(iv)(II) is amended by striking “or amounts referred to in clause (ii) or (iii) of section 951(a)(1)(A)”.
(4) Section 964(b) is amended by striking “, 955,”.
(5) Section 970 is amended by striking subsection (b).
(6) The table of sections for subpart F of part III of subchapter N of chapter 1 is amended by striking the item relating to section 955.
SEC. 14214. Modification of stock attribution rules for determining status as a controlled foreign corporation.
(a) In general.—Section 958(b) is amended—
SEC. 14215. Modification of definition of United States shareholder.
(a) In general.—Section 951(b) is amended by inserting “, or 10 percent or more of the total value of shares of all classes of stock of such foreign corporation” after “such foreign corporation”.
SEC. 14216. Elimination of requirement that corporation must be controlled for 30 days before subpart F inclusions apply.
(a) In general.—Section 951(a)(1) is amended by striking “for an uninterrupted period of 30 days or more” and inserting “at any time”.
SEC. 14217. Look-thru rule for related controlled foreign corporations made permanent.
(a) In general.—Paragraph (6) of section 954(c) is amended by striking subparagraph (C).
SEC. 14218. Corporations eligible for deduction for dividends from controlled foreign corporations exempt from subpart F inclusion for investment in United States property.
(a) In general.—Section 956(a) is amended by inserting “(other than a corporation)” after “United States shareholder” in the matter preceding paragraph (1).
SEC. 14221. Denial of deduction for interest expense of United States shareholders which are members of worldwide affiliated groups with excess domestic indebtedness.
(a) In general.—Section 163 is amended by redesignating subsection (n) as subsection (o) and by inserting after subsection (m) the following new subsection:
“(n) Disallowance of deduction for interest expense of United States shareholders which are members of worldwide affiliated groups with excess domestic indebtedness.—
“(1) IN GENERAL.—In the case of any domestic corporation which is a member of a worldwide affiliated group, the deduction allowed under this chapter for interest paid or accrued by such domestic corporation during the taxable year shall be reduced by the product of—
“(2) CARRYFORWARD.—Any amount disallowed under paragraph (1) for any taxable year shall be treated as interest paid or accrued in the succeeding taxable year.
“(3) DEBT-TO-EQUITY DIFFERENTIAL PERCENTAGE.—
“(A) IN GENERAL.—For purposes of this subsection, the term ‘debt-to-equity differential percentage’ means, with respect to any worldwide affiliated group, the percentage which the excess domestic indebtedness of such group bears to the total indebtedness of the domestic corporations which are members of such group.
“(B) EXCESS DOMESTIC INDEBTEDNESS.—For purposes of subparagraph (A), the term ‘excess domestic indebtedness’ means, with respect to any worldwide affiliated group, the excess (if any) of—
“(C) TOTAL EQUITY.—For purposes of subparagraph (B), the term ‘total equity’ means, with respect to one or more corporations, an amount equal to—
“(D) SPECIAL RULES FOR DETERMINING DEBT AND EQUITY.—
“(i) IN GENERAL.—For purposes of this paragraph—
“(I) the amount taken into account with respect to any asset shall be the adjusted basis thereof for purposes of determining gain,
“(II) the amount taken into account with respect to any indebtedness with original issue discount shall be its issue price plus the portion of the original issue discount previously accrued as determined under the rules of section 1272 (determined without regard to subsection (a)(7) or (b)(4) thereof), and
“(ii) INTRAGROUP DEBT AND EQUITY INTERESTS DISREGARDED.—For purposes of this paragraph, the total indebtedness, and the assets, of any group of corporations shall be determined by treating all members of such group as one corporation.
“(iii) DETERMINATION OF ASSETS OF DOMESTIC GROUP.—For purposes of this paragraph, the assets of the domestic corporations which are members of any worldwide affiliated group shall be determined by disregarding any interest held by any such domestic corporation in any foreign corporation which is a member of such group.
“(E) PHASE IN OF PERCENTAGE USED IN DETERMINING EXCESS INDEBTEDNESS.—In the case of any taxable year beginning in a calendar year before 2022, the following percentages shall be substituted for ‘110 percent’ in applying subparagraph (B)(ii):
| “In the case of a taxable year beginning in: | The percentage is: |
| 2018 | 130 |
| 2019 | 125 |
| 2020 | 120 |
| 2021 | 115 |
“(4) OTHER DEFINITIONS.—For purposes of this subsection—
“(A) WORLDWIDE AFFILIATED GROUP.—The term ‘worldwide affiliated group’ means a group consisting of the includible members of an affiliated group, as defined in section 1504(a), determined—
“(5) TREATMENT OF AFFILIATED GROUP.—For purposes of this subsection, all members of the same affiliated group (within the meaning of section 1504(a) applied by substituting ‘more than 50 percent’ for ‘at least 80 percent’ each place it appears) shall be treated as one taxpayer.
“(6) REGULATIONS.—The Secretary shall prescribe such regulations or other guidance as may be appropriate to carry out the purposes of this subsection, including regulations or other guidance—
“(B) providing such adjustments in the case of corporations which are members of an affiliated group as may be appropriate to carry out the purposes of this subsection,
SEC. 14222. Limitations on income shifting through intangible property transfers.
(a) Definition of intangible asset.—Section 936(h)(3)(B) is amended—
(b) Clarification of allowable valuation methods.—
(1) FOREIGN CORPORATIONS.—Section 367(d)(2) is amended by adding at the end the following new subparagraph:
“(D) REGULATORY AUTHORITY.—For purposes of the last sentence of subparagraph (A), the Secretary shall require—
“(i) the valuation of transfers of intangible property, including intangible property transferred with other property or services, on an aggregate basis, or
“(ii) the valuation of such a transfer on the basis of the realistic alternatives to such a transfer,
if the Secretary determines that such basis is the most reliable means of valuation of such transfers.”.
(2) ALLOCATION AMONG TAXPAYERS.—Section 482 is amended by adding at the end the following: “For purposes of this section, the Secretary shall require the valuation of transfers of intangible property (including intangible property transferred with other property or services) on an aggregate basis or the valuation of such a transfer on the basis of the realistic alternatives to such a transfer, if the Secretary determines that such basis is the most reliable means of valuation of such transfers.”.
(c) Effective date.—
(1) IN GENERAL.—The amendments made by this section shall apply to transfers in taxable years beginning after December 31, 2017.
(2) NO INFERENCE.—Nothing in the amendment made by subsection (a) shall be construed to create any inference with respect to the application of section 936(h)(3) of the Internal Revenue Code of 1986, or the authority of the Secretary of the Treasury to provide regulations for such application, with respect to taxable years beginning before January 1, 2018.
SEC. 14223. Certain related party amounts paid or accrued in hybrid transactions or with hybrid entities.
(a) In general.—Part IX of subchapter B of chapter 1 is amended by inserting after section 267 the following:
“(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—
“(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),
“(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,
(b) Conforming amendment.—The table of sections for part IX of subchapter B of chapter 1 is amended by inserting after the item relating to section 267 the following new item:
SEC. 14224. Shareholders of surrogate foreign corporations not eligible for reduced rate on dividends.
(a) In general.—Section 1(h)(11)(C)(iii) is amended—
SEC. 14301. Repeal of section 902 indirect foreign tax credits; determination of section 960 credit on current year basis.
(a) Repeal of section 902 indirect foreign tax credits.—Subpart A of part III of subchapter N of chapter 1 is amended by striking section 902.
(b) Determination of section 960 credit on current year basis.—Section 960, as amended by section 14201, is amended—
(1) by striking subsection (c), by redesignating subsection (b) as subsection (c), by striking all that precedes subsection (c) (as so redesignated) and inserting the following:
“(a) In general.—For purposes of this subpart, if there is included in the gross income of a domestic corporation any item of income under section 951(a)(1) with respect to any controlled foreign corporation with respect to which such domestic corporation is a United States shareholder, such domestic corporation shall be deemed to have paid so much of such foreign corporation’s foreign income taxes as are properly attributable to such item of income.
“(b) Special rules for distributions from previously taxed earnings and profits.—For purposes of this subpart—
“(1) IN GENERAL.—If any portion of a distribution from a controlled foreign corporation to a domestic corporation which is a United States shareholder with respect to such controlled foreign corporation is excluded from gross income under section 959(a), such domestic corporation shall be deemed to have paid so much of such foreign corporation’s foreign income taxes as—
“(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—
(c) Conforming amendments.—
(1) Section 78 is amended to read as follows:
“SEC. 78. Gross up for deemed paid foreign tax credit.
“If a domestic corporation chooses to have the benefits of subpart A of part III of subchapter N (relating to foreign tax credit) for any taxable year—
“(1) an amount equal to the taxes deemed to be paid by such corporation under subsections (a) and (b) of section 960 for such taxable year shall be treated for purposes of this title (other than section 960) as an item of income required to be included in the gross income of such domestic corporation under section 951(a), and
“(2) an amount equal to the aggregate tested foreign income taxes deemed paid by such corporation under section 960(d) (determined without regard to the phrase ‘80 percent of’ in paragraph (1) thereof) shall be treated for purposes of this title (other than section 960) as an addition to the global intangible low-taxed income of such domestic corporation under section 951A(a) for such taxable year.”.
(2) Paragraph (4) of section 245(a) is amended to read as follows:
“(4) POST-1986 UNDISTRIBUTED EARNINGS.—The term ‘post-1986 undistributed earnings’ means the amount of the earnings and profits of the foreign corporation (computed in accordance with sections 964(a) and 986) accumulated in taxable years beginning after December 31, 1986—
(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—
(6) Section 865(h)(1)(B) is amended by striking “902, 907,” and inserting “907”.
(7) Section 901(a) is amended by striking “sections 902 and 960” and inserting “section 960”.
(8) Section 901(e)(2) is amended by striking “but is not limited to—” and all that follows through “that portion” and inserting “but is not limited to that portion”.
(9) Section 901(f) is amended by striking “sections 902 and 960” and inserting “section 960”.
(10) Section 901(j)(1)(A) is amended by striking “902 or”.
(11) Section 901(j)(1)(B) is amended by striking “sections 902 and 960” and inserting “section 960”.
(12) Section 901(k)(2) is amended by striking “, 902,”.
(13) Section 901(k)(6) is amended by striking “902 or”.
(14) Section 901(m)(1) is amended by striking “relevant foreign assets—” and all that follows and inserting “relevant foreign assets shall not be taken into account in determining the credit allowed under subsection (a).”.
(15) Section 904(d)(6)(A) is amended by striking “902, 907,” and inserting “907”.
(16) Section 904(h)(10)(A) is amended by striking “sections 902, 907, and 960” and inserting “sections 907 and 960”.
(17) Section 904(k) is amended to read as follows:
“(k) Cross references.—For increase of limitation under subsection (a) for taxes paid with respect to amounts received which were included in the gross income of the taxpayer for a prior taxable year as a United States shareholder with respect to a controlled foreign corporation, see section 960(c).”.
(18) Section 905(c)(1) is amended by striking the last sentence.
(19) Section 905(c)(2)(B)(i) is amended to read as follows:
(20) Section 906(a) is amended by striking “(or deemed, under section 902, paid or accrued during the taxable year)”.
(21) Section 906(b) is amended by striking paragraphs (4) and (5).
(22) Section 907(b)(2)(B) is amended by striking “902 or”.
(23) Section 907(c)(3) is amended—
(24) Section 907(c)(5) is amended by striking “902 or”.
(25) Section 907(f)(2)(B)(i) is amended by striking “902 or”.
(26) Section 908(a) is amended by striking “902 or”.
(27) Section 909(b) is amended—
(A) by striking “section 902 corporation” in the matter preceding paragraph (1) and inserting “specified 10-percent owned foreign corporation (as defined in section 245A(b))”,
(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
(28) Section 909(d) is amended by striking paragraph (5).
(29) Section 958(a)(1) is amended by striking “960(a)(1)” and inserting “960”.
(30) Section 959(d) is amended by striking “Except as provided in section 960(a)(3), any” and inserting “Any”.
(31) Section 959(e) is amended by striking “section 960(b)” and inserting “section 960(c)”.
(32) Section 1291(g)(2)(A) is amended by striking “any distribution—” and all that follows through “but only if” and inserting “any distribution, any withholding tax imposed with respect to such distribution, but only if”.
(33) Section 6038(c)(1)(B) is amended by striking “sections 902 (relating to foreign tax credit for corporate stockholder in foreign corporation) and 960 (relating to special rules for foreign tax credit)” and inserting “section 960”.
(34) Section 6038(c)(4) is amended by striking subparagraph (C).
(35) The table of sections for subpart A of part III of subchapter N of chapter 1 is amended by striking the item relating to section 902.
(36) The table of sections for subpart F of part III of subchapter N of chapter 1 is amended by striking the item relating to section 960 and inserting the following:
SEC. 14302. Separate foreign tax credit limitation basket for foreign branch income.
(a) In general.—Section 904(d)(1), as amended by section 14201, is amended by redesignating subparagraphs (B) and (C) as subparagraphs (C) and (D), respectively, and by inserting after subparagraph (A) the following new subparagraph:
(b) Foreign branch income.—
(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.
(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”.
SEC. 14303. Acceleration of election to allocate interest, etc., on a worldwide basis.
(a) In general.—Section 864(f)(6) is amended by striking “December 31, 2020” and inserting “December 31, 2017”.
SEC. 14304. Source of income from sales of inventory determined solely on basis of production activities.
(a) In general.—Section 863(b) is amended by adding at the end the following: “Gains, profits, and income from the sale or exchange of inventory property described in paragraph (2) shall be allocated and apportioned between sources within and without the United States solely on the basis of the production activities with respect to the property.”.
SEC. 14305. Election to increase percentage of domestic taxable income offset by overall domestic loss treated as foreign source.
(a) In general.—Section 904(g) is amended by adding at the end the following new paragraph:
“(5) ELECTION TO INCREASE PERCENTAGE OF TAXABLE INCOME TREATED AS FOREIGN SOURCE.—
“(A) IN GENERAL.—If any pre-2018 unused overall domestic loss is taken into account under paragraph (1) for any applicable taxable year, the taxpayer may elect to have such paragraph applied to such loss by substituting a percentage greater than 50 percent (but not greater than 100 percent) for 50 percent in subparagraph (B) thereof.
SEC. 14401. Base erosion and anti-abuse tax.
(a) Imposition of tax.—Subchapter A of chapter 1 is amended by adding at the end the following new part:
“Sec. 59A. Tax on base erosion payments of taxpayers with substantial gross receipts.
“SEC. 59A. Tax on base erosion payments of taxpayers with substantial gross receipts.
“(a) Imposition of tax.—There is hereby imposed on each applicable taxpayer for any taxable year a tax equal to the base erosion minimum tax amount for the taxable year. Such tax shall be in addition to any other tax imposed by this subtitle.
“(b) Base erosion minimum tax amount.—For purposes of this section—
“(1) IN GENERAL.—Except as provided in paragraphs (2) and (3), the term ‘base erosion minimum tax amount’ means, with respect to any applicable taxpayer for any taxable year, the excess (if any) of—
“(A) an amount equal to 10 percent of the modified taxable income of such taxpayer for the taxable year, over
“(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—
“(3) INCREASED RATE FOR CERTAIN BANKS AND SECURITIES DEALERS.—
“(A) IN GENERAL.—In the case of an applicable taxpayer described in subparagraph (B) for any taxable year—
“(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—
“(2) BASE EROSION TAX BENEFIT.—
“(A) IN GENERAL.—The term ‘base erosion tax benefit’ means—
“(i) any deduction described in subsection (d)(1) which is allowed under this chapter for the taxable year with respect to any base erosion payment,
“(B) TAX BENEFITS DISREGARDED IF TAX WITHHELD ON BASE EROSION PAYMENT.—
“(3) SPECIAL RULES FOR DETERMINING INTEREST FOR WHICH DEDUCTION ALLOWED.—For purposes of applying paragraph (1), in the case of a taxpayer to which subsection (j) or (n) of section 163 applies for the taxable year, the reduction in the amount of interest for which a deduction is allowed by reason of such subsection shall be treated as allocable first to interest paid or accrued to persons who are not related parties with respect to the taxpayer and then to such related parties.
“(4) BASE EROSION PERCENTAGE.—For purposes of paragraph (1)(B)—
“(A) IN GENERAL.—The term ‘base erosion percentage’ means, for any taxable year, the percentage determined by dividing—
“(d) Base erosion payment.—For purposes of this section—
“(1) IN GENERAL.—The term ‘base erosion payment’ means any amount paid or accrued by the taxpayer to a foreign person which is a related party of the taxpayer and with respect to which a deduction is allowable under this chapter.
“(2) PURCHASE OF DEPRECIABLE PROPERTY.—Such term shall also include any amount paid or accrued by the taxpayer to a foreign person which is a related party of the taxpayer in connection with the acquisition by the taxpayer from such person of property of a character subject to the allowance of depreciation (or amortization in lieu of depreciation).
“(3) CERTAIN PAYMENTS TO EXPATRIATED ENTITIES.—
“(A) IN GENERAL.—Such term shall also include any amount paid or accrued by the taxpayer with respect to a person described in subparagraph (B) which results in a reduction of the gross receipts of the taxpayer.
“(B) PERSON DESCRIBED.—A person is described in this subparagraph if such person is a—
“(4) EXCEPTION FOR CERTAIN AMOUNTS WITH RESPECT TO SERVICES.—Paragraph (1) shall not apply to any amount paid or accrued by a taxpayer for services if—
“(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,
“(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).
“(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—
“(2) 25-PERCENT OWNER.—The term ‘25-percent owner’ means, with respect to any corporation, any person who owns at least 25 percent of—
“(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—
“(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—
“(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:
“(B) TREATMENT OF AMERICAN DEPOSITORY RECEIPTS AND SIMILAR INSTRUMENTS.—Except as otherwise provided by the Secretary, for purposes of this part, American depository receipts (and similar instruments) with respect to shares of stock in foreign corporations shall be treated as shares of stock in such foreign corporations.
“(i) Regulations.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section, including regulations—
(b) Reporting requirements and penalties.—
(1) IN GENERAL.—Subsection (b) of section 6038A is amended to read as follows:
“(b) Required information.—
“(1) IN GENERAL.—For purposes of subsection (a), the information described in this subsection is such information as the Secretary prescribes by regulations relating to—
“(A) the name, principal place of business, nature of business, and country or countries in which organized or resident, of each person which—
“(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
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.”.
(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:
(d) Conforming amendments.—
(1) The table of parts for subchapter A of chapter 1 is amended by adding after the item relating to part VI the following new item:
“Part VII. Base erosion and anti-abuse tax”.
(2) Paragraph (1) of section 882(a), as amended by this Act, is amended by inserting “ or 59A,” after “section 11,”.
(3) Subparagraph (A) of section 6425(c)(1), as amended by section 13001, is amended to read as follows:
(4) (A) Subparagraph (A) of section 6655(g)(1), as amended by section 13001, is amended by striking “plus” at the end of clause (i), by redesignating clause (ii) as clause (iii), and by inserting after clause (i) the following new clause:
(B) Subparagraphs (A)(i) and (B)(i) of section 6655(e)(2), as amended by section 13001, are each amended by inserting “and modified taxable income” after “taxable income”.
(C) Subparagraph (B) of section 6655(e)(2) is amended by adding at the end the following new clause:
(e) Effective date.—The amendments made by this section shall apply to base erosion payments (as defined in section 59A(d) of the Internal Revenue Code of 1986, as added by this section) paid or accrued in taxable years beginning after December 31, 2017.
SEC. 14501. Restriction on insurance business exception to passive foreign investment company rules.
(a) In general.—Section 1297(b)(2)(B) is amended to read as follows:
(b) 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—
“(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—
“(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—
“(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—
“(4) OTHER DEFINITIONS AND RULES.—For purposes of this subsection—
SEC. 14502. Repeal of fair market value method of interest expense apportionment.
(a) In general.—Paragraph (2) of section 864(e) is amended to read as follows:
SEC. 14503. Modification to source rules involving possessions.
(a) In general.—Subsection (b)(2) of Section 937 of the Internal Revenue Code of 1986 is amended by inserting “, but only to the extent such income is attributable to an office or fixed place of business within the United States (determined under the rules of Section 864(c)(5))” before the period at the end.
(b) Source rules for personal property sales.—Subsection (j)(3) of section 865 of the Internal Revenue Code of 1986 is amended by inserting “932,” after “931,”.
SEC. 20001. Oil and gas program.
(a) Definitions.—In this section:
(1) COASTAL PLAIN.—The term “Coastal Plain” means the area identified as the 1002 Area on the plates prepared by the United States Geological Survey entitled “ANWR Map – Plate 1” and “ANWR Map – Plate 2”, dated October 24, 2017, and on file with the United States Geological Survey and the Office of the Solicitor of the Department of the Interior.
(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.
(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—
(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.—
(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—
SEC. 20003. Strategic Petroleum Reserve drawdown and sale.
(a) Drawdown and sale.—
(1) IN GENERAL.—Notwithstanding section 161 of the Energy Policy and Conservation Act (42 U.S.C. 6241), except as provided in subsections (b) and (c), the Secretary of Energy shall draw down and sell from the Strategic Petroleum Reserve 7,000,000 barrels of crude oil during the period of fiscal years 2026 through 2027.
(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.
Attest:
Secretary
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