Union Calendar No. 302
115th CONGRESS 1st Session |
[Report No. 115–409]
To provide for reconciliation pursuant to title II of the concurrent resolution on the budget for fiscal year 2018.
November 2, 2017
Mr. Brady of Texas (for himself, Mr. Ryan of Wisconsin, Mr. Sam Johnson of Texas, Mr. Nunes, Mr. Tiberi, Mr. Reichert, Mr. Roskam, Mr. Buchanan, Mr. Smith of Nebraska, Ms. Jenkins of Kansas, Mr. Paulsen, Mr. Marchant, Mrs. Black, Mr. Reed, Mr. Kelly of Pennsylvania, Mr. Renacci, Mr. Meehan, Mrs. Noem, Mr. Holding, Mr. Smith of Missouri, Mr. Rice of South Carolina, Mr. Schweikert, Mrs. Walorski, Mr. Curbelo of Florida, and Mr. Bishop of Michigan) introduced the following bill; which was referred to the Committee on Ways and Means
November 13, 2017
Reported with amendments, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on November 2, 2017]
To provide for reconciliation pursuant to title II of the concurrent resolution on the budget for fiscal year 2018.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
(b) Amendment of 1986 Code.—Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.
(c) Table of contents.—The table of contents for this Act is as follows:
Sec. 1001. Reduction and simplification of individual income tax rates.
Sec. 1002. Enhancement of standard deduction.
Sec. 1003. Repeal of deduction for personal exemptions.
Sec. 1004. Maximum rate on business income of individuals.
Sec. 1005. Conforming amendments related to simplification of individual income tax rates.
Sec. 1101. Enhancement of child tax credit and new family tax credit.
Sec. 1102. Repeal of nonrefundable credits.
Sec. 1103. Refundable credit program integrity.
Sec. 1104. Procedures to reduce improper claims of earned income credit.
Sec. 1105. Certain income disallowed for purposes of the earned income tax credit.
Sec. 1201. American opportunity tax credit.
Sec. 1202. Consolidation of education savings rules.
Sec. 1203. Reforms to discharge of certain student loan indebtedness.
Sec. 1204. Repeal of other provisions relating to education.
Sec. 1205. Rollovers between qualified tuition programs and qualified ABLE programs.
Sec. 1301. Repeal of overall limitation on itemized deductions.
Sec. 1302. Mortgage interest.
Sec. 1303. Repeal of deduction for certain taxes not paid or accrued in a trade or business.
Sec. 1304. Repeal of deduction for personal casualty losses.
Sec. 1305. Limitation on wagering losses.
Sec. 1306. Charitable contributions.
Sec. 1307. Repeal of deduction for tax preparation expenses.
Sec. 1308. Repeal of medical expense deduction.
Sec. 1309. Repeal of deduction for alimony payments.
Sec. 1310. Repeal of deduction for moving expenses.
Sec. 1311. Termination of deduction and exclusions for contributions to medical savings accounts.
Sec. 1312. Denial of deduction for expenses attributable to the trade or business of being an employee.
Sec. 1401. Limitation on exclusion for employer-provided housing.
Sec. 1402. Exclusion of gain from sale of a principal residence.
Sec. 1403. Repeal of exclusion, etc., for employee achievement awards.
Sec. 1404. Sunset of exclusion for dependent care assistance programs.
Sec. 1405. Repeal of exclusion for qualified moving expense reimbursement.
Sec. 1406. Repeal of exclusion for adoption assistance programs.
Sec. 1501. Repeal of special rule permitting recharacterization of Roth IRA contributions as traditional IRA contributions.
Sec. 1502. Reduction in minimum age for allowable in-service distributions.
Sec. 1503. Modification of rules governing hardship distributions.
Sec. 1504. Modification of rules relating to hardship withdrawals from cash or deferred arrangements.
Sec. 1505. Extended rollover period for the rollover of plan loan offset amounts in certain cases.
Sec. 1506. Modification of nondiscrimination rules to protect older, longer service participants.
Sec. 1601. Increase in credit against estate, gift, and generation-skipping transfer tax.
Sec. 1602. Repeal of estate and generation-skipping transfer taxes.
Sec. 2001. Repeal of alternative minimum tax.
Sec. 3001. Reduction in corporate tax rate.
Sec. 3101. Increased expensing.
Sec. 3201. Expansion of section 179 expensing.
Sec. 3202. Small business accounting method reform and simplification.
Sec. 3203. Small business exception from limitation on deduction of business interest.
Sec. 3204. Modification of treatment of S corporation conversions to C corporations.
Sec. 3301. Interest.
Sec. 3302. Modification of net operating loss deduction.
Sec. 3303. Like-kind exchanges of real property.
Sec. 3304. Revision of treatment of contributions to capital.
Sec. 3305. Repeal of deduction for local lobbying expenses.
Sec. 3306. Repeal of deduction for income attributable to domestic production activities.
Sec. 3307. Entertainment, etc. expenses.
Sec. 3308. Unrelated business taxable income increased by amount of certain fringe benefit expenses for which deduction is disallowed.
Sec. 3309. Limitation on deduction for FDIC premiums.
Sec. 3310. Repeal of rollover of publicly traded securities gain into specialized small business investment companies.
Sec. 3311. Certain self-created property not treated as a capital asset.
Sec. 3312. Repeal of special rule for sale or exchange of patents.
Sec. 3313. Repeal of technical termination of partnerships.
Sec. 3314. Recharacterization of certain gains in the case of partnership profits interests held in connection with performance of investment services.
Sec. 3315. Amortization of research and experimental expenditures.
Sec. 3316. Uniform treatment of expenses in contingency fee cases.
Sec. 3401. Repeal of credit for clinical testing expenses for certain drugs for rare diseases or conditions.
Sec. 3402. Repeal of employer-provided child care credit.
Sec. 3403. Repeal of rehabilitation credit.
Sec. 3404. Repeal of work opportunity tax credit.
Sec. 3405. Repeal of deduction for certain unused business credits.
Sec. 3406. Termination of new markets tax credit.
Sec. 3407. Repeal of credit for expenditures to provide access to disabled individuals.
Sec. 3408. Modification of credit for portion of employer social security taxes paid with respect to employee tips.
Sec. 3501. Modifications to credit for electricity produced from certain renewable resources.
Sec. 3502. Modification of the energy investment tax credit.
Sec. 3503. Extension and phaseout of residential energy efficient property.
Sec. 3504. Repeal of enhanced oil recovery credit.
Sec. 3505. Repeal of credit for producing oil and gas from marginal wells.
Sec. 3506. Modifications of credit for production from advanced nuclear power facilities.
Sec. 3601. Termination of private activity bonds.
Sec. 3602. Repeal of advance refunding bonds.
Sec. 3603. Repeal of tax credit bonds.
Sec. 3604. No tax exempt bonds for professional stadiums.
Sec. 3701. Net operating losses of life insurance companies.
Sec. 3702. Repeal of small life insurance company deduction.
Sec. 3703. Surtax on life insurance company taxable income.
Sec. 3704. Adjustment for change in computing reserves.
Sec. 3705. Repeal of special rule for distributions to shareholders from pre-1984 policyholders surplus account.
Sec. 3706. Modification of proration rules for property and casualty insurance companies.
Sec. 3707. Modification of discounting rules for property and casualty insurance companies.
Sec. 3708. Repeal of special estimated tax payments.
Sec. 3801. Modification of limitation on excessive employee remuneration.
Sec. 3802. Excise tax on excess tax-exempt organization executive compensation.
Sec. 3803. Treatment of qualified equity grants.
Sec. 4001. Deduction for foreign-source portion of dividends received by domestic corporations from specified 10-percent owned foreign corporations.
Sec. 4002. Application of participation exemption to investments in United States property.
Sec. 4003. Limitation on losses with respect to specified 10-percent owned foreign corporations.
Sec. 4004. Treatment of deferred foreign income upon transition to participation exemption system of taxation.
Sec. 4101. Repeal of section 902 indirect foreign tax credits; determination of section 960 credit on current year basis.
Sec. 4102. Source of income from sales of inventory determined solely on basis of production activities.
Sec. 4201. Repeal of inclusion based on withdrawal of previously excluded subpart F income from qualified investment.
Sec. 4202. Repeal of treatment of foreign base company oil related income as subpart F income.
Sec. 4203. Inflation adjustment of de minimis exception for foreign base company income.
Sec. 4204. Look-thru rule for related controlled foreign corporations made permanent.
Sec. 4205. Modification of stock attribution rules for determining status as a controlled foreign corporation.
Sec. 4206. Elimination of requirement that corporation must be controlled for 30 days before subpart F inclusions apply.
Sec. 4301. Current year inclusion by United States shareholders with foreign high returns.
Sec. 4302. Limitation on deduction of interest by domestic corporations which are members of an international financial reporting group.
Sec. 4303. Excise tax on certain payments from domestic corporations to related foreign corporations; election to treat such payments as effectively connected income.
Sec. 4401. Extension of deduction allowable with respect to income attributable to domestic production activities in Puerto Rico.
Sec. 4402. Extension of temporary increase in limit on cover over of rum excise taxes to Puerto Rico and the Virgin Islands.
Sec. 4403. Extension of American Samoa economic development credit.
Sec. 4501. Restriction on insurance business exception to passive foreign investment company rules.
Sec. 5001. Clarification of unrelated business income tax treatment of entities treated as exempt from taxation under section 501(a).
Sec. 5002. Exclusion of research income limited to publicly available research.
Sec. 5101. Simplification of excise tax on private foundation investment income.
Sec. 5102. Private operating foundation requirements relating to operation of art museum.
Sec. 5103. Excise tax based on investment income of private colleges and universities.
Sec. 5104. Exception from private foundation excess business holding tax for independently-operated philanthropic business holdings.
Sec. 5201. 501(c)(3) organizations permitted to make statements relating to political campaign in ordinary course of activities.
Sec. 5202. Additional reporting requirements for donor advised fund sponsoring organizations.
(a) In general.—Section 1 is amended by striking subsection (i) and by striking all that precedes subsection (h) and inserting the following:
“(a) In general.—There is hereby imposed on the income of every individual a tax equal to the sum of—
“(1) 12 PERCENT BRACKET.—12 percent of so much of the taxable income as does not exceed the 25-percent bracket threshold amount,
“(2) 25 PERCENT BRACKET.—25 percent of so much of the taxable income as exceeds the 25-percent bracket threshold amount but does not exceed the 35-percent bracket threshold amount, plus
“(b) Bracket threshold amounts.—For purposes of this section—
“(1) 25-PERCENT BRACKET THRESHOLD AMOUNT.—The term ‘25-percent bracket threshold amount’ means—
“(B) in the case of an individual who is the head of a household (as defined in section 2(b)), $67,500,
“(2) 35-PERCENT BRACKET THRESHOLD AMOUNT.—The term ‘35-percent bracket threshold amount’ means—
“(c) Inflation adjustment.—
“(1) IN GENERAL.—In the case of any taxable year beginning after 2018, each dollar amount in subsections (b) and (e)(3) (other than any amount determined by reference to such a dollar amount) shall be increased by an amount equal to—
“(B) the cost-of-living adjustment determined under this subsection for the calendar year in which the taxable year begins by substituting ‘2017’ for ‘2016’ in paragraph (2)(A)(ii).
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.
“(2) COST-OF-LIVING ADJUSTMENT.—For purposes of this subsection—
“(3) NORMALIZED CPI.—For purposes of this subsection, the normalized CPI for any calendar year is the product of—
“(4) C-CPI-U TRANSITION MULTIPLE.—For purposes of this subsection, the term ‘C-CPI-U transition multiple’ means the amount obtained by dividing—
“(5) 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.
“(6) CPI.—For purposes of this subsection—
“(A) IN GENERAL.—The term ‘Consumer Price Index’ means the last Consumer Price Index for All Urban Consumers published by the Department of Labor. For purposes of the preceding sentence, the revision of the Consumer Price Index which is most consistent with the Consumer Price Index for calendar year 1986 shall be used.
“(d) Special rules for certain children with unearned income.—
“(1) IN GENERAL.—In the case of any child to whom this subsection applies for any taxable year—
“(A) the 25-percent bracket threshold amount shall not be more than the taxable income of such child for the taxable year reduced by the net unearned income of such child, and
“(2) CHILD TO WHOM SUBSECTION APPLIES.—This subsection shall apply to any child for any taxable year if—
“(3) CERTAIN CHILDREN WHOSE EARNED INCOME DOES NOT EXCEED ONE-HALF OF INDIVIDUAL’S SUPPORT.—A child is described in this paragraph if—
“(B) such child’s earned income (as defined in section 911(d)(2)) for such taxable year does not exceed one-half of the amount of the individual’s support (within the meaning of section 7706(c)(1)(D) after the application of section 7706(f)(5) (without regard to subparagraph (A) thereof)) for such taxable year.
“(4) NET UNEARNED INCOME.—For purposes of this subsection—
“(A) IN GENERAL.—The term ‘net unearned income’ means the excess of—
“(i) the portion of the adjusted gross income for the taxable year which is not attributable to earned income (as defined in section 911(d)(2)), over
“(ii) the sum of—
“(I) the amount in effect for the taxable year under section 63(c)(2)(A) (relating to limitation on standard deduction in the case of certain dependents), plus
“(II) The greater of the amount described in subclause (I) or, if the child itemizes his deductions for the taxable year, the amount of the itemized deductions allowed by this chapter for the taxable year which are directly connected with the production of the portion of adjusted gross income referred to in clause (i).
“(e) Phaseout of 12-percent rate.—
“(1) IN GENERAL.—The amount of tax imposed by this section (determined without regard to this subsection) shall be increased by 6 percent of the excess (if any) of—
“(2) LIMITATION.—The increase determined under paragraph (1) with respect to any taxpayer for any taxable year shall not exceed 27.6 percent of the lesser of—
(b) Application of current income tax brackets to capital gains brackets.—
(1) IN GENERAL.—
(A) 0-PERCENT CAPITAL GAINS BRACKET.—Section 1(h)(1) is amended by striking “which would (without regard to this paragraph) be taxed at a rate below 25 percent” in subparagraph (B)(i) and inserting “below the 15-percent rate threshold”.
(B) 15-PERCENT CAPITAL GAINS BRACKET.—Section 1(h)(1)(C)(ii)(I) is amended by striking “which would (without regard to this paragraph) be taxed at a rate below 39.6 percent” and inserting “below the 20-percent rate threshold”.
(2) RATE THRESHOLDS DEFINED.—Section 1(h) is amended by adding at the end the following new paragraph:
“(12) RATE THRESHOLDS DEFINED.—For purposes of this subsection—
“(A) 15-PERCENT RATE THRESHOLD.—The 15-percent rate threshold shall be—
“(i) in the case of a joint return or surviving spouse, $77,200 (½ such amount in the case of a married individual filing a separate return),
“(ii) in the case of an individual who is the head of a household (as defined in section 2(b)), $51,700,
“(B) 20-PERCENT RATE THRESHOLD.—The 20-percent rate threshold 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),
(c) Application of section 15.—
(1) IN GENERAL.—Subsection (a) of section 15 is amended by striking “by this chapter” and inserting “by section 11 (or by reference to any such rates)”.
(2) CONFORMING AMENDMENTS.—
(A) Section 15 is amended by striking subsections (d) and (f) and by redesignating subsection (e) as subsection (d).
(B) Section 15(d), as redesignated by subparagraph (A), is amended by striking “section 1 or 11(b)” and inserting “section 11(b)”.
(C) Section 6013(c) is amended by striking “sections 15, 443, and 7851(a)(1)(A)” and inserting “sections 443 and 7851(a)(1)(A)”.
(3) APPLICATION TO THIS ACT.—Section 15 of the Internal Revenue Code of 1986 shall not apply to any change in a rate of tax imposed by chapter 1 of such Code which occurs by reason of any amendment made by this Act (other than the amendments made by section 3001).
(a) Increase in standard deduction.—Section 63(c) is amended to read as follows:
“(c) Standard deduction.—For purposes of this subtitle—
“(1) IN GENERAL.—Except as otherwise provided in this subsection, the term ‘standard deduction’ means—
“(2) LIMITATION ON STANDARD DEDUCTION IN THE CASE OF CERTAIN DEPENDENTS.—In the case of an individual who is a dependent of another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins, the standard deduction applicable to such individual for such individual’s taxable year shall not exceed the greater of—
“(3) CERTAIN INDIVIDUALS, ETC., NOT ELIGIBLE FOR STANDARD DEDUCTION.—In the case of—
“(C) an individual making a return under section 443(a)(1) for a period of less than 12 months on account of a change in his annual accounting period, or
the standard deduction shall be zero.
“(4) UNMARRIED INDIVIDUAL.—For purposes of this section, the term ‘unmarried individual’ means any individual who—
“(5) INFLATION ADJUSTMENTS.—
“(A) STANDARD DEDUCTION AMOUNT.—In the case of any taxable year beginning after 2019, the dollar amount in paragraph (1)(A) shall be increased by an amount equal to—
“(B) LIMITATION AMOUNT IN CASE OF CERTAIN DEPENDENTS.—In the case of any taxable year beginning after 2017, each of the dollar amounts in paragraph (2) shall be increased by an amount equal to—
If any increase determined under this paragraph is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.”.
(b) Conforming amendments.—
(1) Section 63(b) is amended by striking “, minus—” and all that follows and inserting “minus the standard deduction”.
(2) Section 63 is amended by striking subsections (f) and (g).
(3) Section 1398(c) is amended—
(4) Section 3402(m)(3) is amended by striking “(including the additional standard deduction under section 63(c)(3) for the aged and blind)”.
(5) Section 6014(b)(4) is amended by striking “section 63(c)(5)” and inserting “section 63(c)(2)”.
(b) Definition of dependent retained.—Section 152, prior to repeal by subsection (a), is hereby redesignated as section 7706 and moved to the end of chapter 79.
(c) Application to estates and trusts.—Subsection (b) of section 642 is amended—
(d) Application to nonresident aliens.—Section 873(b) is amended by striking paragraph (3).
(e) Modification of wage withholding rules.—
(1) IN GENERAL.—Section 3402(a) is amended by striking paragraph (2).
(2) CONFORMING AMENDMENT.—Section 3402(a) is amended—
(3) NUMBER OF EXEMPTIONS.—Section 3402(f)(1) is amended—
(A) in subparagraph (A), by striking “an individual described in section 151(d)(2)” and inserting “a dependent of any other taxpayer”, and
(B) in subparagraph (C), by striking “with respect to whom, on the basis of facts existing at the beginning of such day, there may reasonably be expected to be allowable an exemption under section 151(c)” and inserting “who, on the basis of facts existing at the beginning of such day, is reasonably expected to be a dependent of the employee”.
(f) Modification of return requirement.—
(1) IN GENERAL.—Paragraph (1) of section 6012(a) is amended to read as follows:
“(1) Every individual who has gross income for the taxable year, except that a return shall not be required of—
“(A) 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
“(B) an individual entitled to make a joint return if—
“(i) 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,
(2) BANKRUPTCY ESTATES.—Paragraph (8) of section 6012(a) is amended by striking “the sum of the exemption amount plus the basic standard deduction under section 63(c)(2)(D)” and inserting “the standard deduction in effect under section 63(c)(1)(B)”.
(g) Conforming amendments.—
(1) Section 2(a)(1)(B) is amended by striking “a dependent” and all that follows through “section 151” and inserting “a dependent who (within the meaning of section 7706, determined without regard to subsections (b)(1), (b)(2) and (d)(1)(B) thereof) is a son, stepson, daughter, or stepdaughter of the taxpayer”.
(2) Section 36B(b)(2)(A) is amended by striking “section 152” and inserting “section 7706”.
(3) Section 36B(b)(3)(B) is amended by striking “unless a deduction is allowed under section 151 for the taxable year with respect to a dependent” in the flush matter at the end and inserting “unless the taxpayer has a dependent for the taxable year”.
(4) Section 36B(c)(1)(D) is amended by striking “with respect to whom a deduction under section 151 is allowable to another taxpayer” and inserting “who is a dependent of another taxpayer”.
(5) Section 36B(d)(1) is amended by striking “equal to the number of individuals for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year” and inserting “the sum of 1 (2 in the case of a joint return) plus the number of the taxpayer’s dependents for the taxable year”.
(6) Section 36B(e)(1) is amended by striking “1 or more individuals for whom a taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year (including the taxpayer or his spouse)” and inserting “1 or more of the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer”.
(7) Section 42(i)(3)(D)(ii)(I) is amended—
(8) Section 72(t)(2)(D)(i)(III) is amended by striking “section 152” and inserting “section 7706”.
(9) Section 72(t)(7)(A)(iii) is amended by striking “section 152(f)(1)” and inserting “section 7706(f)(1)”.
(10) Section 105(b) is amended—
(11) Section 105(c)(1) is amended by striking “section 152” and inserting “section 7706”.
(12) Section 125(e)(1)(D) is amended by striking “section 152” and inserting “section 7706”.
(13) Section 132(h)(2)(B) is amended—
(14) Section 139D(c)(5) is amended by striking “section 152” and inserting “section 7706”.
(15) Section 162(l)(1)(D) is amended by striking “section 152(f)(1)” and inserting “section 7706(f)(1)”.
(16) Section 170(g)(1) is amended by striking “section 152” and inserting “section 7706”.
(17) Section 170(g)(3) is amended by striking “section 152(d)(2)” and inserting “section 7706(d)(2)”.
(18) Section 172(d) is amended by striking paragraph (3).
(19) Section 220(b)(6) is amended by striking “with respect to whom a deduction under section 151 is allowable to” and inserting “who is a dependent of”.
(20) Section 220(d)(2)(A) is amended by striking “section 152” and inserting “section 7706”.
(21) Section 223(b)(6) is amended by striking “with respect to whom a deduction under section 151 is allowable to” and inserting “who is a dependent of”.
(22) Section 223(d)(2)(A) is amended by striking “section 152” and inserting “section 7706”.
(23) Section 401(h) is amended by striking “section 152(f)(1)” in the last sentence and inserting “section 7706(f)(1)”.
(24) Section 402(l)(4)(D) is amended by striking “section 152” and inserting “section 7706”.
(25) Section 409A(a)(2)(B)(ii)(I) is amended by striking “section 152(a)” and inserting “section 7706(a)”.
(26) Section 501(c)(9) is amended by striking “section 152(f)(1)” and inserting “section 7706(f)(1)”.
(27) Section 529(e)(2)(B) is amended by striking “section 152(d)(2)” and inserting “section 7706(d)(2)”.
(28) Section 703(a)(2) is amended by striking subparagraph (A) and by redesignating subparagraphs (B) through (F) as subparagraphs (A) through (E), respectively.
(29) Section 874 is amended by striking subsection (b) and by redesignating subsection (c) as subsection (b).
(30) Section 891 is amended by striking “under section 151 and”.
(31) Section 904(b) is amended by striking paragraph (1).
(32) Section 931(b)(1) is amended by striking “(other than the deduction under section 151, relating to personal exemptions)”.
(33) Section 933 is amended—
(34) Section 1212(b)(2)(B)(ii) is amended to read as follows:
(35) Section 1361(c)(1)(C) is amended by striking “section 152(f)(1)(C)” and inserting “section 7706(f)(1)(C)”.
(36) Section 1402(a) is amended by striking paragraph (7).
(37) Section 2032A(c)(7)(D) is amended by striking “section 152(f)(2)” and inserting “section 7706(f)(2)”.
(38) Section 3402(m)(1) is amended by striking “other than the deductions referred to in section 151 and”.
(39) Section 3402(r)(2) is amended by striking “the sum of—” and all that follows and inserting “the standard deduction in effect under section 63(c)(1)(B).”.
(40) Section 5000A(b)(3)(A) is amended by striking “section 152” and inserting “section 7706”.
(41) Section 5000A(c)(4)(A) is amended by striking “the number of individuals for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year” and inserting “the sum of 1 (2 in the case of a joint return) plus the number of the taxpayer’s dependents for the taxable year”.
(42) Section 6013(b)(3)(A) is amended—
(A) by striking “had less than the exemption amount of gross income” in clause (ii) and inserting “had no gross income”,
(43) Section 6103(l)(21)(A)(iii) is amended to read as follows:
(44) Section 6213(g)(2) is amended by striking subparagraph (H).
(45) Section 6334(d)(2) is amended to read as follows:
“(2) EXEMPT AMOUNT.—
“(B) 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.”.
(46) Section 7702B(f)(2)(C)(iii) is amended by striking “section 152(d)(2)” and inserting “section 7706(d)(2)”.
(47) Section 7703(a) is amended by striking “part V of subchapter B of chapter 1 and”.
(48) Section 7703(b)(1) is amended by striking “section 152(f)(1)” and all that follows and inserting “section 7706(f)(1),”.
(49) Section 7706(a), as redesignated by this section, is amended by striking “this subtitle” and inserting “subtitle A”.
(50) (A) Section 7706(d)(1)(B), as redesignated by this section, is amended by striking “the exemption amount (as defined in section 151(d))” and inserting “$4,150”.
(B) Section 7706(d), as redesignated by this section, is amended by adding at the end the following new paragraph:
“(6) INFLATION ADJUSTMENT.—In the case of any calendar year beginning after 2018, the $4,150 amount in paragraph (1)(B) shall be increased by an amount equal to—
“(B) the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 2017’ for ‘calendar year 2016’ in clause (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.”.
(51) The table of sections for chapter 79 is amended by adding at the end the following new item:
“Sec. 7706. Dependent defined.”.
(a) In general.—Part I of subchapter A of chapter 1 is amended by inserting after section 3 the following new section:
“(a) Reduction in tax to achieve 25 percent maximum rate.—The tax imposed by section 1 shall be reduced by the sum of—
“(b) Qualified business income.—For purposes of this section, the term ‘qualified business income’ means the excess (if any) of—
“(c) Determination of net business income or loss.—For purposes of this section—
“(1) IN GENERAL.—Net business income or loss shall be determined with respect to any business activity by appropriately netting items of income, gain, deduction, and loss with respect to such business activity.
“(2) WAGES, ETC.—Any wages (as defined in section 3401), payments described in subsection (a) or (c) of section 707, or directors’ fees received by the taxpayer which are properly attributable to any business activity shall be taken into account under paragraph (1) as an item of income with respect to such business activity.
“(3) EXCEPTION FOR CERTAIN INVESTMENT-RELATED ITEMS.—There shall not be taken into account under paragraph (1)—
“(A) any item of short-term capital gain, short-term capital loss, long-term capital gain, or long-term capital loss,
“(B) any dividend, income equivalent to a dividend, or payment in lieu of dividends described in section 954(c)(1)(G),
“(C) any interest income other than interest income which is properly allocable to a trade or business,
“(D) any item of gain or loss described in subparagraph (C) or (D) of section 954(c)(1) (applied by substituting ‘business activity’ for ‘controlled foreign corporation’),
“(E) 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) APPLICATION OF RESTRICTIONS APPLICABLE TO DETERMINING TAXABLE INCOME.—Net business income or loss shall be appropriately adjusted so as only to take into account any amount of income, gain, deduction, or loss to the extent such amount affects the determination of taxable income for the taxable year.
“(d) Passive and active business activity.—For purposes of this section—
“(1) PASSIVE BUSINESS ACTIVITY.—The term ‘passive business activity’ means any passive activity as defined in section 469(c) determined without regard to paragraphs (3) and (6)(B) thereof.
“(e) Capital percentage.—For purposes of this section—
“(1) IN GENERAL.—Except as otherwise provided in this section, the term ‘capital percentage’ means 30 percent.
“(2) INCREASED PERCENTAGE FOR CAPITAL-INTENSIVE BUSINESS ACTIVITIES.—In the case of a taxpayer who elects the application of this paragraph with respect to any active business activity (other than a specified service activity), the capital percentage shall be equal to the applicable percentage (as defined in subsection (f)) for each taxable year with respect to which such election applies. Any election made under this paragraph shall apply to the taxable year for which such election is made and each of the 4 subsequent taxable years. Such election shall be made not later than the due date (including extensions) for the return of tax for the taxable year for which such election is made, and, once made, may not be revoked.
“(3) TREATMENT OF SPECIFIED SERVICE ACTIVITIES.—
“(B) EXCEPTION FOR CAPITAL-INTENSIVE SPECIFIED SERVICE ACTIVITIES.—If—
“(i) the taxpayer elects the application of this subparagraph with respect to such activity for any taxable year, and
“(ii) the applicable percentage (as defined in subsection (f)) with respect to such activity for such taxable year is at least 10 percent,
then subparagraph (A) shall not apply and the capital percentage with respect to such activity shall be equal to such applicable percentage.
“(C) SPECIFIED SERVICE ACTIVITY.—The term ‘specified service activity’ means any activity involving the performance of services described in section 1202(e)(3)(A), including investing, trading, or dealing in securities (as defined in section 475(c)(2)), partnership interests, or commodities (as defined in section 475(e)(2)).
“(4) REDUCTION IN CAPITAL PERCENTAGE IN CERTAIN CASES.—The capital percentage (determined after the application of paragraphs (2) and (3)) with respect to any active business activity shall not exceed 1 minus the quotient (not greater than 1) of—
“(f) Applicable percentage.—For purposes of this section—
“(1) IN GENERAL.—The term ‘applicable percentage’ means, with respect to any active business activity for any taxable year, the quotient (not greater than 1) of—
“(2) SPECIFIED RETURN ON CAPITAL.—The term ‘specified return on capital’ means, with respect to any active business activity referred to in paragraph (1), the excess of—
“(3) DEEMED RATE OF RETURN.—The term ‘deemed rate of return’ means, with respect to any taxable year, the Federal short-term rate (determined under section 1274(d) for the month in which or with which such taxable year ends) plus 7 percentage points.
“(4) ASSET BALANCE.—
“(A) IN GENERAL.—The asset balance with respect to any active business activity referred to in paragraph (1) for any taxable year equals the taxpayer’s adjusted basis of any property described in section 1221(a)(2) which is used in connection with such activity as of the end of the taxable year (determined without regard to sections 168(k) and 179).
“(B) APPLICATION TO ACTIVITIES CARRIED ON THROUGH PARTNERSHIPS AND S CORPORATIONS.—In the case of any active business activity carried on through a partnership or S corporation, the taxpayer shall take into account such taxpayer’s distributive or pro rata share (as the case may be) of the asset balance with respect to such activity as determined with respect to such partnership or S corporation under subparagraph (A) (applied by substituting ‘the partnership’s or S corporation’s adjusted basis’ for ‘the taxpayer’s adjusted basis’).
“(g) Reduced rate for small businesses with net active business income.—
“(1) IN GENERAL.—The tax imposed by section 1 shall be reduced by 3 percent of the excess (if any) of—
“(2) PHASE-IN OF RATE REDUCTION.—In the case of any taxable year beginning before January 1, 2022, paragraph (1) shall be applied by substituting for ‘3 percent’—
“(3) QUALIFIED ACTIVE BUSINESS INCOME.—For purposes of this subsection, the term ‘qualified active business income’ means the excess (if any) of—
“(4) 9-PERCENT BRACKET THRESHOLD AMOUNT.—For purposes of this subsection, the term ‘9-percent bracket threshold amount’ means—
“(5) APPLICABLE THRESHOLD AMOUNT.—For purposes of this subsection, the term ‘applicable threshold amount’ means—
“(7) INFLATION ADJUSTMENT.—In the case of any taxable year beginning after 2018, the dollar amounts in paragraphs (4)(A) and (5)(A) shall each be increased by an amount equal to—
“(B) the cost-of-living adjustment determined under subsection (c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2017’ for ‘calendar year 2016’ in clause (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.
“(h) Regulations.—The Secretary may 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—
(b) 25 percent rate for certain dividends of real estate investment trusts and cooperatives.—Section 1(h), as amended by the preceding provisions of this Act, is amended by adding at the end the following new paragraph:
“(13) 25 PERCENT RATE FOR CERTAIN DIVIDENDS OF REAL ESTATE INVESTMENT TRUSTS AND COOPERATIVES.—
“(A) IN GENERAL.—For purposes of this subsection, net capital gain (as defined in paragraph (11)) and unrecaptured section 1250 gain (as defined in paragraph (6)) shall each be increased by specified dividend income.
(c) Clerical amendment.—The table of sections for part I of subchapter A of chapter 1 is amended by inserting after the item relating to section 3 the following new item:
“Sec. 4. 25 percent maximum rate on business income of individuals.”.
(d) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2017.
(e) Transition rule.—In the case of any taxable year which includes December 31, 2017, the amendment made by subsection (a) shall apply with respect to such taxable year adjusted—
(1) so as to apply with respect to the rates of tax in effect under section 1 of the Internal Revenue Code of 1986 with respect to such taxable year (and so as to achieve a 25 percent effective rate of tax on the business income (determined without regard to paragraph (2)) in the same manner as such amendment applies to taxable years beginning after such date with respect to the rates of tax in effect for such years), and
(2) by reducing the amount of the reduction in tax (as otherwise determined under paragraph (1)) by the amount which bears the same proportion to the amount of such reduction as the number of days in the taxable year which are before January 1, 2018, bears to the number of days in the entire taxable year.
(a) Amendments related to modification of inflation adjustment.—
(1) Section 32(b)(2)(B)(ii)(II) is amended by striking “section 1(f)(3) for the calendar year in which the taxable year begins determined by substituting ‘calendar year 2008’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins determined by substituting ‘calendar year 2008’ for ‘calendar year 2016’ in clause (ii) thereof”.
(2) Section 32(j)(1)(B) is amended—
(A) in the matter preceding clause (i), by striking “section 1(f)(3)” and inserting “section 1(c)(2)(A)”,
(3) Section 36B(b)(3)(A)(ii)(II) is amended by striking “consumer price index” and inserting “C-CPI-U (as defined in section 1(c))”.
(4) Section 41(e)(5)(C) is amended to read as follows:
(5) Section 42(e)(3)(D)(ii) is amended by striking “section 1(f)(3) for such calendar year by substituting ‘calendar year 2008’ for ‘calendar year 1992’ in subparagraph (B) thereof ” and inserting “section 1(c)(2)(A) for such calendar year by substituting ‘calendar year 2008’ for ‘calendar year 2016’ in clause (ii) thereof”.
(6) Section 42(h)(3)(H)(i)(II) is amended by striking “section 1(f)(3) for such calendar year by substituting ‘calendar year 2001’ for ‘calendar year 1992’ in subparagraph (B) thereof ” and inserting “section 1(c)(2)(A) for such calendar year by substituting ‘calendar year 2001’ for ‘calendar year 2016’ in clause (ii) thereof”.
(7) Section 45R(d)(3)(B)(ii) is amended by striking “section 1(f)(3) for the calendar year, determined by substituting ‘calendar year 2012’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “ ‘section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 2012’ for ‘calendar year 2016’ in clause (ii) thereof’”.
(8) Section 125(i)(2) is amended—
(9) Section 162(o)(3) is amended by inserting “as in effect before enactment of the Tax Cuts and Jobs Act” after “section 1(f)(5)”.
(10) Section 220(g)(2) is amended by striking “section 1(f)(3) for the calendar year in which the taxable year begins by substituting ‘calendar year 1997’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 1997’ for ‘calendar year 2016’ in clause (ii) thereof”.
(11) Section 223(g)(1) is amended by striking all that follows subparagraph (A) and inserting the following:
“(B) the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined—
The Secretary shall publish the dollar amounts as adjusted under this subsection for taxable years beginning in any calendar year no later than June 1 of the preceding calendar year.”.
(12) Section 430(c)(7)(D)(vii)(II) is amended by striking “section 1(f)(3) for the calendar year, determined by substituting ‘calendar year 2009’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year, determined by substituting ‘calendar year 2009’ for ‘calendar year 2016’ in clause (ii) thereof”.
(13) Section 512(d)(2)(B) is amended by striking “section 1(f)(3) for the calendar year in which the taxable year begins, by substituting ‘calendar year 1994’ for ‘calendar year 1992’ in subparagraph (B) thereof”and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 1994’ for ‘calendar year 2016’ in clause (ii) thereof”.
(14) Section 513(h)(2)(C)(ii) is amended by striking “section 1(f)(3) for the calendar year in which the taxable year begins by substituting ‘calendar year 1987’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 1987’ for ‘calendar year 2016’ in clause (ii) thereof”.
(15) Section 831(b)(2)(D)(ii) is amended by striking “section 1(f)(3) for such calendar year by substituting ‘calendar year 2013’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for such calendar year by substituting ‘calendar year 2013’ for ‘calendar year 2016’ in clause (ii) thereof”.
(16) Section 877A(a)(3)(B)(i)(II) is amended by striking “section 1(f)(3) for the calendar year in which the taxable year begins, by substituting ‘calendar year 2007’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2007’ for ‘calendar year 2016’ in clause (ii) thereof”.
(17) Section 911(b)(2)(D)(ii)(II) is amended by striking “section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘2004’ for ‘1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2004’ for ‘calendar year 2016’ in clause (ii) thereof”.
(18) Section 1274A(d)(2) is amended to read as follows:
“(2) INFLATION ADJUSTMENT.—
“(A) IN GENERAL.—In the case of any debt instrument arising out of a sale or exchange during any calendar year after 2018, each adjusted dollar amount shall be increased by an amount equal to—
(19) Section 2010(c)(3)(B)(ii) is amended by striking “section 1(f)(3) for such calendar year by substituting ‘calendar year 2010’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 2010’ for ‘calendar year 2016’ in clause (ii) thereof”.
(20) Section 2032A(a)(3)(B) is amended by striking “section 1(f)(3) for such calendar year by substituting ‘calendar year 1997’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 1997’ for ‘calendar year 2016’ in clause (ii) thereof”.
(21) Section 2503(b)(2)(B) is amended by striking “section 1(f)(3) for such calendar year by substituting ‘calendar year 1997’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year, determined by substituting ‘calendar year 1997’ for ‘calendar year 2016’ in clause (ii) thereof”.
(22) Section 4161(b)(2)(C)(i)(II) is amended by striking “section 1(f)(3) for such calendar year, determined by substituting ‘2004’ for ‘1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 2004’ for ‘calendar year 2016’ in clause (ii) thereof”.
(23) Section 4261(e)(4)(A)(ii) is amended by striking “section 1(f)(3) for such calendar year by substituting the year before the last nonindexed year for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for such calendar year, determined by substituting the year before the last nonindexed year for ‘calendar year 2016’ in clause (ii) thereof”.
(24) Section 4980I(b)(3)(C)(v)(II) is amended—
(25) Section 5000A(c)(3)(D)(ii) is amended—
(26) Section 6039F(d) is amended by striking “section 1(f)(3), except that subparagraph (B) thereof” and inserting “section 1(c)(2)(A), except that clause (ii) thereof ”.
(27) Section 6323(i)(4)(B) is amended by striking “section 1(f)(3) for the calendar year, determined by substituting ‘calendar year 1996’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year, determined by substituting ‘calendar year 1996’ for ‘calendar year 2016’ in clause (ii) thereof”.
(28) Section 6334(g)(1)(B) is amended by striking “section 1(f)(3) for such calendar year, by substituting ‘calendar year 1998’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 1999’ for ‘calendar year 2016’ in clause (ii) thereof”.
(29) Section 6601(j)(3)(B) is amended by striking “section 1(f)(3) for such calendar year by substituting ‘calendar year 1997’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for such calendar year by substituting ‘calendar year 1997’ for ‘calendar year 2016’ in clause (ii) thereof”.
(30) Section 6651(i)(1) is amended by striking “section 1(f)(3) determined by substituting ‘calendar year 2013’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) determined by substituting ‘calendar year 2013’ for ‘calendar year 2016’ in clause (ii) thereof”.
(31) Section 6721(f)(1) is amended—
(32) Section 6722(f)(1) is amended—
(33) Section 6652(c)(7)(A) is amended by striking “section 1(f)(3) determined by substituting ‘calendar year 2013’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) determined by substituting ‘calendar year 2013’ for ‘calendar year 2016’ in clause (ii) thereof ”.
(34) Section 6695(h)(1) is amended by striking “section 1(f)(3) determined by substituting ‘calendar year 2013’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) determined by substituting ‘calendar year 2013’ for ‘calendar year 2016’ in clause (ii) thereof”.
(35) Section 6698(e)(1) is amended by striking “section 1(f)(3) determined by substituting ‘calendar year 2013’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) determined by substituting ‘calendar year 2013’ for ‘calendar year 2016’ in clause (ii) thereof”.
(36) Section 6699(e)(1) is amended by striking “section 1(f)(3) determined by substituting ‘calendar year 2013’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) determined by substituting ‘calendar year 2013’ for ‘calendar year 2016’ in clause (ii) thereof”.
(37) Section 7345(f)(2) is amended by striking “section 1(f)(3) for the calendar year, determined by substituting ‘calendar year 2015’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year, determined by substituting ‘calendar year 2015’ for ‘calendar year 2016’ in clause (ii) thereof”.
(38) Section 7430(c)(1) is amended by striking “section 1(f)(3) for such calendar year, by substituting ‘calendar year 1995’ for ‘calendar year 1992’ in subparagraph (B) thereof” in the flush text at the end and inserting “section 1(c)(2)(A) for such calendar year, determined by substituting ‘calendar year 1995’ for ‘calendar year 2016’ in clause (ii) thereof”.
(39) Section 7872(g)(5) is amended to read as follows:
“(5) INFLATION ADJUSTMENT.—
“(A) IN GENERAL.—In the case of any loan made during any calendar year after 2018 to which paragraph (1) applies, the adjusted dollar amount shall be increased by an amount equal to—
(40) Section 219(b)(5)(C)(i)(II) is amended by striking “section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2007’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2007’ for ‘calendar year 2016’ in clause (ii) thereof”.
(41) Section 219(g)(8)(B) is amended by striking “section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2005’ for ‘calendar year 1992’ in subparagraph (B) thereof” and inserting “section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2005’ for ‘calendar year 2016’ in clause (ii) thereof”.
(b) Other conforming amendments.—
(1) Section 36B(b)(3)(B)(ii)(I)(aa) is amended to read as follows:
(2) Section 486B(b)(1) is amended—
(3) Section 511(b)(1) is amended by striking “section 1(e)” and inserting “section 1”.
(4) Section 641(a) is amended by striking “section 1(e) shall apply to the taxable income” and inserting “section 1 shall apply to the taxable income”.
(5) Section 641(c)(2)(A) is amended to read as follows:
(6) Section 646(b) is amended to read as follows:
“(b) Taxation of income of trust.—Except as provided in subsection (f)(1)(B)(ii), there is hereby imposed on the taxable income of an electing Settlement Trust a tax at the rate specified in section 1(a)(1). Such tax shall be in lieu of the income tax otherwise imposed by this chapter on such income.”.
(7) Section 685(c) is amended by striking “Section 1(e)” and inserting “Section 1”.
(8) Section 904(b)(3)(E)(ii)(I) is amended by striking “set forth in subsection (a), (b), (c), (d), or (e) of section 1 (whichever applies)” and inserting “the highest rate of tax specified in section 1”.
(9) Section 1398(c)(2) is amended by striking “subsection (d) of”.
(10) Section 3402(p)(1)(B) is amended by striking “any percentage applicable to any of the 3 lowest income brackets in the table under section 1(c),” and inserting “12 percent, 25 percent,”.
(11) Section 3402(q)(1) is amended by striking “the product of third lowest rate of tax applicable under section 1(c) and” and inserting “25 percent of”.
(12) Section 3402(r)(3) is amended by striking “the amount of tax which would be imposed by section 1(c) (determined without regard to any rate of tax in excess of the fourth lowest rate of tax applicable under section 1(c)) on an amount of taxable income equal to” and inserting “an amount equal to the product of 25 percent multiplied by”.
(13) Section 3406(a)(1) is amended by striking “the product of the fourth lowest rate of tax applicable under section 1(c) and” and inserting “25 percent of ”.
(14) Section 6103(e)(1)(A)(iii) is amended by inserting “(as in effect on the day before the date of the enactment of the Tax Cuts and Jobs Act)” after “section 1(g)”.
(a) Increase in credit amount and addition of other dependents.—
(1) In general.—Section 24(a) is amended to read as follows:
(2) Conforming amendments.—
(A) Section 24(c) is amended—
(iii) by inserting before paragraph (2) (as so redesignated) the following new paragraph:
“(1) DEPENDENT.—
“(B) CERTAIN INDIVIDUALS NOT TREATED AS DEPENDENTS.—In the case of an individual with respect to whom a credit under this section is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins, the amount applicable to such individual under subsection (a) for such individual’s taxable year shall be zero.”,
(B) The heading for section 24 is amended by inserting “and family” after “Child”.
(C) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by striking the item relating to section 24 and inserting the following new item:
“Sec. 24. Child and family tax credit.”.
(b) Elimination of marriage penalty.—Section 24(b)(2) is amended—
(c) Credit refundable up to $1,000 per child.—
(1) In general.—Section 24(d)(1)(A) is amended by striking all that follows “under this section” and inserting the following:
“determined—
(2) Inflation adjustment.—Section 24(d) is amended by inserting after paragraph (2) the following new paragraph:
“(3) INFLATION ADJUSTMENT.—In the case of any taxable year beginning in a calendar year after 2017, the $1,000 amount in paragraph (1)(A)(iii) shall be increased by an amount equal to—
Any increase determined under the preceding sentence shall be rounded to the next highest multiple of $100 and shall not exceed the amount in effect under subsection (a)(2).”.
(a) Repeal of section 22.—
(1) IN GENERAL.—Subpart A of part IV of subchapter A of chapter 1 is amended by striking section 22 (and by striking the item relating to such section in the table of sections for such subpart).
(2) CONFORMING AMENDMENT.—
(A) Section 86(f) is amended by striking paragraph (1) and by redesignating paragraphs (2), (3), and (4) as paragraphs (1), (2), and (3), respectively.
(B) (i) Subsections (c)(3)(B) and (d)(4)(A) of section 7706, as redesignated by this Act, are each amended by striking “(as defined in section 22(e)(3)”.
(ii) Section 7706(f), as redesignated by this Act, is amended by redesignating paragraph (7) as paragraph (8) and by inserting after paragraph (6) the following new paragraph:
“(7) PERMANENT AND TOTAL DISABILITY DEFINED.—An individual is permanently and totally disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An individual shall not be considered to be permanently and totally disabled unless he furnishes proof of the existence thereof in such form and manner, and at such times, as the Secretary may require.”.
(iii) Section 415(c)(3)(C)(i) is amended by striking “22(e)(3)” and inserting “7706(f)(7)”.
(iv) Section 422(c)(6) is amended by striking “22(e)(3)” and inserting “7706(f)(7)”.
(b) Termination of section 25.—Section 25, as amended by section 3601, is amended by adding at the end the following new subsection:
(c) Repeal of section 30D.—
(1) IN GENERAL.—Subpart B of part IV of subchapter A of chapter 1 is amended by striking section 30D (and by striking the item relating to such section in the table of sections for such subpart).
(2) CONFORMING AMENDMENTS.—
(A) Section 38(b) is amended by striking paragraph (35).
(B) Section 1016(a) is amended by striking paragraph (37).
(C) Section 6501(m) is amended by striking “30D(e)(4),”.
(d) Effective date.—
(1) IN GENERAL.—Except as provided in paragraphs (2) and (3), the amendments made by this section shall apply to taxable years beginning after December 31, 2017.
(a) Identification requirements for child and family tax credit.—
(1) IN GENERAL.—Section 24(e) is amended to read as follows:
“(e) Identification requirements.—
“(1) REQUIREMENTS FOR QUALIFYING CHILD.—No credit shall be allowed under this section to a taxpayer with respect to any qualifying child unless the taxpayer includes the name and social security number of such qualifying child on the return of tax for the taxable year. The preceding sentence shall not prevent a qualifying child from being treated as a dependent described in subsection (a)(2).
“(2) OTHER IDENTIFICATION REQUIREMENTS.—No credit shall be allowed under this section with respect to any individual unless the taxpayer identification number of such individual is included on the return of tax for the taxable year and such identifying number was issued before the due date for filing the return for the taxable year.
“(3) SOCIAL SECURITY NUMBER.—For purposes of this subsection, the term ‘social security number’ means a social security number issued by the Social Security Administration (but only if the social security number is issued to a citizen of the United States or pursuant to subclause (I) (or that portion of subclause (III) that relates to subclause (I)) of section 205(c)(2)(B)(i) of the Social Security Act)).”.
(2) OMISSIONS TREATED AS MATHEMATICAL OR CLERICAL ERROR.—
(A) IN GENERAL.—Section 6213(g)(2)(I) is amended to read as follows:
(b) Social security number must be provided.—
(1) IN GENERAL.—Section 25A(f)(1)(A), as amended by section 1201 of this Act, is amended by striking “taxpayer identification number” each place it appears and inserting “social security number”.
(2) OMISSION TREATED AS MATHEMATICAL OR CLERICAL ERROR.—Section 6213(g)(2)(J) is amended by striking “TIN” and inserting “social security number and employer identification number”.
(c) Individuals prohibited from engaging in employment in United States not eligible for earned income tax credit.—Section 32(m) is amended—
(2) by inserting before the period at the end the following: “, but only if, in the case of subsection (c)(1)(E), the social security number is issued to a citizen of the United States or pursuant to subclause (I) (or that portion of subclause (III) that relates to subclause (I)) of section 205(c)(2)(B)(i) of the Social Security Act”.
(a) Clarification regarding determination of self-employment income which is treated as earned income.—Section 32(c)(2)(B) is amended by striking “and” at the end of clause (v), by striking the period at the end of clause (vi) and inserting “, and”, and by adding at the end the following new clause:
(b) Required quarterly reporting of wages of employees.—Section 6011 is amended by adding at the end the following new subsection:
“(i) Employer reporting of wages.—Every person required to deduct and withhold from an employee a tax under section 3101 or 3402 shall include on each return or statement submitted with respect to such tax, the name and address of such employee and the amount of wages for such employee on which such tax was withheld.”.
(c) Effective date.—
(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.
(2) REPORTING.—The Secretary of the Treasury, or his designee, may delay the application of the amendment made by subsection (b) for such period as such Secretary (or designee) determines to be reasonable to allow persons adequate time to modify electronic (or other) systems to permit such person to comply with the requirements of such amendment.
(a) Substantiation requirement.—Section 32 is amended by adding at the end the following new subsection:
“(n) Inconsistent income reporting.—If the earned income of a taxpayer claimed on a return for purposes of this section is not substantiated by statements or returns under sections 6051, 6052, 6041(a), or 6050W with respect to such taxpayer, the Secretary may require such taxpayer to provide books and records to substantiate such income, including for the purpose of preventing fraud.”.
(b) Exclusion of unsubstantiated amount from earned income.—Section 32(c)(2) is amended by adding at the end the following new subparagraph:
(a) In general.—Section 25A is amended to read as follows:
“(a) In general.—In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of—
“(1) 100 percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year (for education furnished to any eligible student for whom an election is in effect under this section for such taxable year during any academic period beginning in such taxable year) as does not exceed $2,000, plus
“(b) Portion of credit refundable.—40 percent of the credit allowable under subsection (a)(1) (determined without regard to this subsection and section 26(a) and after application of all other provisions of this section) shall be treated as a credit allowable under subpart C (and not under this part). The preceding sentence shall not apply to any taxpayer for any taxable year if such taxpayer is a child to whom section 1(d) applies for such taxable year.
“(c) Limitation based on modified adjusted gross income.—
“(1) IN GENERAL.—The amount allowable as a credit under subsection (a) for any taxable year shall be reduced (but not below zero) by an amount which bears the same ratio to the amount so allowable (determined without regard to this subsection and subsection (b) but after application of all other provisions of this section) as—
“(d) Other limitations.—
“(1) CREDIT ALLOWED ONLY FOR 5 TAXABLE YEARS.—An election to have this section apply may not be made for any taxable year if such an election (by the taxpayer or any other individual) is in effect with respect to such student for any 5 prior taxable years.
“(2) CREDIT ALLOWED ONLY FOR FIRST 5 YEARS OF POSTSECONDARY EDUCATION.—
“(A) IN GENERAL.—No credit shall be allowed under subsection (a) for a taxable year with respect to the qualified tuition and related expenses of an eligible student if the student has completed (before the beginning of such taxable year) the first 5 years of postsecondary education at an eligible educational institution.
“(B) FIFTH YEAR LIMITATIONS.—In the case of an eligible student with respect to whom an election has been in effect for 4 preceding taxable years for purposes of the fifth taxable year—
“(e) Definitions.—For purposes of this section—
“(1) ELIGIBLE STUDENT.—The term ‘eligible student’ means, with respect to any academic period, a student who—
“(A) meets the requirements of section 484(a)(1) of the Higher Education Act of 1965 (20 U.S.C. 1091(a)(1)), as in effect on August 5, 1997, and
“(2) QUALIFIED TUITION AND RELATED EXPENSES.—
“(A) IN GENERAL.—The term ‘qualified tuition and related expenses’ means tuition, fees, and course materials, required for enrollment or attendance of—
at an eligible educational institution for courses of instruction of such individual at such institution.
“(3) ELIGIBLE EDUCATIONAL INSTITUTION.—The term ‘eligible educational institution’ means an institution—
“(A) which is described in section 481 of the Higher Education Act of 1965 (20 U.S.C. 1088), as in effect on August 5, 1997, and
“(f) Special rules.—
“(1) IDENTIFICATION REQUIREMENTS.—
“(A) STUDENT.—No credit shall be allowed under subsection (a) to a taxpayer with respect to the qualified tuition and related expenses of an individual unless the taxpayer includes the name and taxpayer identification number of such individual on the return of tax for the taxable year, and such taxpayer identification number was issued on or before the due date for filing such return.
“(2) ADJUSTMENT FOR CERTAIN SCHOLARSHIPS, ETC.—The amount of qualified tuition and related expenses otherwise taken into account under subsection (a) with respect to an individual for an academic period shall be reduced (before the application of subsection (c)) by the sum of any amounts paid for the benefit of such individual which are allocable to such period as—
“(B) an educational assistance allowance under chapter 30, 31, 32, 34, or 35 of title 38, United States Code, or under chapter 1606 of title 10, United States Code, and
“(C) a payment (other than a gift, bequest, devise, or inheritance within the meaning of section 102(a)) for such individual's educational expenses, or attributable to such individual's enrollment at an eligible educational institution, which is excludable from gross income under any law of the United States.
“(3) TREATMENT OF EXPENSES PAID BY DEPENDENT.—If an individual is a dependent of another taxpayer for a taxable year beginning in the calendar year in which such individuals taxable year begins—
“(4) TREATMENT OF CERTAIN PREPAYMENTS.—If qualified tuition and related expenses are paid by the taxpayer during a taxable year for an academic period which begins during the first 3 months following such taxable year, such academic period shall be treated for purposes of this section as beginning during such taxable year.
“(5) DENIAL OF DOUBLE BENEFIT.—No credit shall be allowed under this section for any amount for which a deduction is allowed under any other provision of this chapter.
“(6) NO CREDIT FOR MARRIED INDIVIDUALS FILING SEPARATE RETURNS.—If the taxpayer is a married individual (within the meaning of section 7703), this section shall apply only if the taxpayer and the taxpayer’s spouse file a joint return for the taxable year.
“(7) NONRESIDENT ALIENS.—If the taxpayer is a nonresident alien individual for any portion of the taxable year, this section shall apply only if such individual is treated as a resident alien of the United States for purposes of this chapter by reason of an election under subsection (g) or (h) of section 6013.
“(8) RESTRICTIONS ON TAXPAYERS WHO IMPROPERLY CLAIMED CREDIT IN PRIOR YEAR.—
“(A) TAXPAYERS MAKING PRIOR FRAUDULENT OR RECKLESS CLAIMS.—
“(i) IN GENERAL.—No credit shall be allowed under this section for any taxable year in the disallowance period.
“(B) TAXPAYERS MAKING IMPROPER PRIOR CLAIMS.—In the case of a taxpayer who is denied credit under this section for any taxable year as a result of the deficiency procedures under subchapter B of chapter 63, no credit shall be allowed under this section for any subsequent taxable year unless the taxpayer provides such information as the Secretary may require to demonstrate eligibility for such credit.
“(g) Inflation adjustment.—
“(h) Regulations.—The Secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out this section, including regulations providing for a recapture of the credit allowed under this section in cases where there is a refund in a subsequent taxable year of any amount which was taken into account in determining the amount of such credit.”.
(b) Conforming amendments.—
(1) Section 72(t)(7)(B) is amended by striking “section 25A(g)(2)” and inserting “section 25A(f)(2)”.
(2) Section 529(c)(3)(B)(v)(I) is amended by striking “section 25A(g)(2)” and inserting “section 25A(f)(2)”.
(3) Section 529(e)(3)(B)(i) is amended by striking “section 25A(b)(3)” and inserting “section 25A(d)”.
(4) Section 530(d)(2)(C) is amended—
(5) Section 530(d)(4)(B)(iii) is amended by striking “section 25A(g)(2)” and inserting “section 25A(d)(4)(B)”.
(6) Section 6050S(e) is amended by striking “subsection (g)(2)” and inserting “subsection (f)(2)”.
(7) Section 6211(b)(4)(A) is amended by striking “subsection (i)(6)” and inserting “subsection (b)”.
(8) Section 6213(g)(2)(J) is amended by striking “TIN required under section 25A(g)(1)” and inserting “TIN, and employer identification number, required under section 25A(f)(1)”.
(9) Section 6213(g)(2)(Q) is amended to read as follows:
(10) Section 1004(c) of division B of the American Recovery and Reinvestment Tax Act of 2009 is amended—
(11) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by striking the item relating to section 25A and inserting the following new item:
(a) No new contributions to Coverdell education savings account.—Section 530(b)(1)(A) is amended to read as follows:
(b) Limited distribution allowed for elementary and secondary tuition.—
(1) IN GENERAL.—Section 529(c) is amended by adding at the end the following new paragraph:
(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 for tuition incurred during the taxable year in connection with the enrollment or attendance of the beneficiary as an elementary or secondary school student at a public, private, or religious school.”.
(c) Rollovers to qualified tuition programs permitted.—Section 530(d)(5) is amended by inserting “, or into (by purchase or contribution) a qualified tuition program (as defined in section 529),” after “into another Coverdell education savings account”.
(d) Distributions from qualified tuition programs for certain expenses associated with registered apprenticeship programs.—Section 529(e)(3) is amended by adding at the end the following new subparagraph:
“(C) CERTAIN EXPENSES ASSOCIATED WITH REGISTERED APPRENTICESHIP PROGRAMS.—The term ‘qualified higher education expenses’ shall include books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary in an apprenticeship program registered and certified with the Secretary of Labor under section 1 of the National Apprenticeship Act (29 U.S.C. 50).”.
(e) Unborn children allowed as account beneficiaries.—Section 529(e) is amended by adding at the end the following new paragraph:
(a) Treatment of student loans discharged on account of death or disability.—Section 108(f) is amended by adding at the end the following new paragraph:
“(5) DISCHARGES ON ACCOUNT OF DEATH OR DISABILITY.—
“(A) IN GENERAL.—In the case of an individual, gross income does not include any amount which (but for this subsection) would be includible in gross income 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))).”.
(b) Exclusion from gross income for payments made under indian health service loan repayment program.—
(1) IN GENERAL.—Section 108(f)(4) is amended by inserting “under section 108 of the Indian Health Care Improvement Act,” after “338I of such Act,”.
(2) CLERICAL AMENDMENT.—The heading for section 108(f)(4) is amended by striking “and certain” and inserting “, indian health service loan repayment program, and certain”.
(a) In general.—Subchapter B of chapter 1 is amended—
(1) in part VII by striking sections 221 and 222 (and by striking the items relating to such sections in the table of sections for such part),
(b) Conforming amendment relating to section 221.—
(1) Section 62(a) is amended by striking paragraph (17).
(2) Section 74(d) is amended by striking “221,”.
(3) Section 86(b)(2)(A) is amended by striking “221,”.
(4) Section 219(g)(3)(A)(ii) is amended by striking “221,”.
(5) Section 163(h)(2) is amended by striking subparagraph (F).
(6) Section 6050S(a) is amended—
(7) Section 6050S(e) is amended by striking all that follows “thereof)” and inserting a period.
(c) Conforming amendments related to section 222.—
(1) Section 62(a) is amended by striking paragraph (18).
(2) Section 74(d)(2)(B) is amended by striking “222,”.
(3) Section 86(b)(2)(A) is amended by striking “222,”.
(4) Section 219(g)(3)(A)(ii) is amended by striking “222,”.
(d) Conforming amendments relating to section 127.—
(1) Section 125(f)(1) is amended by striking “127,”.
(2) Section 132(j)(8) is amended by striking “which are not excludable from gross income under section 127”.
(3) Section 414(n)(3)(C) is amended by striking “127,”.
(4) Section 414(t)(2) is amended by striking “127,”.
(5) Section 3121(a)(18) is amended by striking “127,”.
(6) Section 3231(e) is amended by striking paragraph (6).
(7) Section 3306(b)(13) is amended by “127,”.
(8) Section 3401(a)(18) is amended by striking “127,”.
(9) Section 6039D(d)(1) is amended by striking “, 127”.
(e) Conforming amendments relating to section 117(d).—
(1) Section 117(c)(1) is amended—
(2) Section 414(n)(3)(C) is amended by striking “117(d),”.
(3) Section 414(t)(2) is amended by striking “117(d),”.
(f) Conforming amendments related to section 135.—
(1) Section 74(d)(2)(B) is amended by striking “135,”.
(2) Section 86(b)(2)(A) is amended by striking “135,”.
(3) Section 219(g)(3)(A)(ii) is amended by striking “135,”.
(a) Rollovers from qualified tuition programs to qualified ABLE programs.—Section 529(c)(3)(C)(i) 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 new subclause:
“(III) 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).”.
(a) In general.—Part 1 of subchapter B of chapter 1 is amended by striking section 68 (and the item relating to such section in the table of sections for such part).
(a) Modification of limitations.—
(1) IN GENERAL.—Section 163(h)(3) is amended to read as follows:
“(3) QUALIFIED RESIDENCE INTEREST.—For purposes of this subsection—
“(A) IN GENERAL.—The term ‘qualified residence interest’ means any interest which is paid or accrued during the taxable year on indebtedness which—
“(i) is incurred in acquiring, constructing, or substantially improving any qualified residence (determined as of the time the interest is accrued) of the taxpayer, and
Such term also includes interest on any indebtedness secured by such residence resulting from the refinancing of indebtedness meeting the requirements of the preceding sentence (or this sentence); but only to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness.
“(B) LIMITATION.—The aggregate amount of indebtedness taken into account under subparagraph (A) for any period shall not exceed $500,000 (half of such amount in the case of a married individual filing a separate return).
“(C) TREATMENT OF INDEBTEDNESS INCURRED ON OR BEFORE NOVEMBER 2, 2017.—
“(i) IN GENERAL.—In the case of any pre-November 2, 2017, indebtedness, this paragraph shall apply as in effect immediately before the enactment of the Tax Cuts and Jobs Act.
“(ii) PRE-NOVEMBER 2, 2017, INDEBTEDNESS.—For purposes of this subparagraph, the term ‘pre-November 2, 2017, indebtedness’ means—
“(I) any principal residence acquisition indebtedness which was incurred on or before November 2, 2017, or
“(II) any principal residence acquisition indebtedness which is incurred after November 2, 2017, to refinance indebtedness described in clause (i) (or refinanced indebtedness meeting the requirements of this clause) to the extent (immediately after the refinancing) the principal amount of the indebtedness resulting from the refinancing does not exceed the principal amount of the refinanced indebtedness (immediately before the refinancing).
“(iii) LIMITATION ON PERIOD OF REFINANCING.—clause (ii)(II) shall not apply to any indebtedness after—
“(iv) BINDING CONTRACT EXCEPTION.—In the case of a taxpayer who enters into a written binding contract before November 2, 2017, to close on the purchase of a principal residence before January 1, 2018, and who purchases such residence before April 1, 2018, subparagraphs (A) and (B) shall be applied by substituting ‘April 1, 2018’ for ‘November 2, 2017’.”.
(2) CONFORMING AMENDMENTS.—
(A) Section 108(h)(2) is by striking “for ‘$1,000,000 ($500,000’ in clause (ii) thereof” and inserting “for ‘$500,000 ($250,000’ in paragraph (2)(A), and ‘$1,000,000’ for ‘$500,000’ in paragraph (2)(B), thereof”.
(B) Section 163(h) is amended by striking subparagraphs (E) and (F) in paragraph (4).
(b) Taxpayers limited to 1 qualified residence.—Section 163(h)(4)(A)(i) is amended to read as follows:
(c) Effective dates.—
(1) IN GENERAL.—The amendments made by this section shall apply to interest paid or accrued in taxable years beginning after December 31, 2017, with respect to indebtedness incurred before, on, or after such date.
(2) TREATMENT OF GRANDFATHERED INDEBTEDNESS.—For application of the amendments made by this section to grandfathered indebtedness, see paragraph (3)(C) of section 163(h) of the Internal Revenue Code of 1986, as amended by this section.
(a) In general.—Section 164(b)(5) is amended to read as follows:
“(5) LIMITATION IN CASE OF INDIVIDUALS.—In the case of a taxpayer other than a corporation—
“(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),
(a) In general.—Section 165(c) is amended by inserting “and” at the end of paragraph (1), by striking “; and” at the end of paragraph (2) and inserting a period, and by striking paragraph (3).
(b) Conforming amendments.—
(1) Section 165(h) is amended to read as follows:
“(h) Special rule where personal casualty gains exceed personal casualty losses.—
“(1) IN GENERAL.—If the personal casualty gains for any taxable year exceed the personal casualty losses for such taxable year—
“(2) DEFINITIONS OF PERSONAL CASUALTY GAIN AND PERSONAL CASUALTY LOSS.—For purposes of this subsection—
(2) Section 165 is amended by striking subsection (k).
(3) (A) Section 165(l)(1) is amended by striking “a loss described in subsection (c)(3)” and inserting “an ordinary loss described in subsection (c)(2)”.
(B) Section 165(l) is amended—
(ii) by redesignating paragraphs (2), (3), and (4) as paragraphs (3), (4), and (5), respectively, and
(iii) by inserting after paragraph (1) the following new paragraph:
“(2) LIMITATIONS.—
“(A) DEPOSIT MAY NOT BE FEDERALLY INSURED.—No election may be made under paragraph (1) with respect to any loss on a deposit in a qualified financial institution if part or all of such deposit is insured under Federal law.
“(B) DOLLAR LIMITATION.—With respect to each financial institution, the aggregate amount of losses attributable to deposits in such financial institution to which an election under paragraph (1) may be made by the taxpayer for any taxable year shall not exceed $20,000 ($10,000 in the case of a separate return by a married individual). The limitation of the preceding sentence shall be reduced by the amount of any insurance proceeds under any State law which can reasonably be expected to be received with respect to losses on deposits in such institution.”.
(4) Section 172(b)(1)(E)(ii), prior to amendment under title III, is amended by striking subclause (I) and by redesignating subclauses (II) and (III) as subclauses (I) and (II), respectively.
(5) Section 172(d)(4)(C) is amended by striking “paragraph (2) or (3) of section 165(c)” and inserting “section 165(c)(2)”.
(6) Section 274(f) is amended by striking “casualty losses,” in the heading thereof.
(7) Section 280A(b) is amended by striking “casualty losses,” in the heading thereof.
(8) Section 873(b), as amended by the preceding provisions of this Act, is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively.
(a) In general.—Section 165(d) is amended by adding at the end the following: “For purposes of the preceding sentence, the term ‘losses from wagering transactions’ includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction.”.
(a) Increased limitation for cash contributions.—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 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), 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.
(b) Denial of deduction for college athletic event seating rights.—Section 170(l)(1) is amended to read as follows:
(c) Charitable mileage rate adjusted for inflation.—Section 170(i) is amended by striking “shall be 14 cents per mile” and inserting “shall be a rate which takes into account the variable cost of operating an automobile”.
(d) Repeal of substantiation exception in case of contributions reported by donee.—Section 170(f)(8) is amended by striking subparagraph (D) and by redesignating subparagraph (E) as subparagraph (D).
(a) In general.—Section 212 is amended by adding “or” at the end of paragraph (1), by striking “; or” at the end of paragraph (2) and inserting a period, and by striking paragraph (3).
(a) In general.—Part VII of subchapter B is amended by striking by striking section 213 (and by striking the item relating to such section in the table of sections for such subpart).
(b) Conforming amendments.—
(1) (A) Section 105(f) is amended to read as follows:
“(f) Medical care.—For purposes of this section—
“(1) IN GENERAL.—The term ‘medical care’ means amounts paid—
“(A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,
“(B) for transportation primarily for and essential to medical care referred to in subparagraph (A),
“(D) for insurance (including amounts paid as premiums under part B of title XVIII of the Social Security Act, relating to supplementary medical insurance for the aged) covering medical care referred to in subparagraphs (A) and (B) or for any qualified long-term care insurance contract (as defined in section 7702B(b)).
In the case of a qualified long-term care insurance contract (as defined in section 7702B(b)), only eligible long-term care premiums (as defined in paragraph (7)) shall be taken into account under subparagraph (D).
“(2) AMOUNTS PAID FOR CERTAIN LODGING AWAY FROM HOME TREATED AS PAID FOR MEDICAL CARE.—Amounts paid for lodging (not lavish or extravagant under the circumstances) while away from home primarily for and essential to medical care referred to in paragraph (1)(A) shall be treated as amounts paid for medical care if—
“(A) the medical care referred to in paragraph (1)(A) is provided by a physician in a licensed hospital (or in a medical care facility which is related to, or the equivalent of, a licensed hospital), and
“(B) there is no significant element of personal pleasure, recreation, or vacation in the travel away from home.
The amount taken into account under the preceding sentence shall not exceed $50 for each night for each individual.
“(3) PHYSICIAN.—The term ‘physician’ has the meaning given to such term by section 1861(r) of the Social Security Act (42 U.S.C. 1395x(r)).
“(4) CONTRACTS COVERING OTHER THAN MEDICAL CARE.—In the case of an insurance contract under which amounts are payable for other than medical care referred to in subparagraphs (A), (B) and (C) of paragraph (1)—
“(A) no amount shall be treated as paid for insurance to which paragraph (1)(D) applies unless the charge for such insurance is either separately stated in the contract, or furnished to the policyholder by the insurance company in a separate statement,
“(5) CERTAIN PRE-PAID CONTRACTS.—Subject to the limitations of paragraph (4), premiums paid during the taxable year by a taxpayer before he attains the age of 65 for insurance covering medical care (within the meaning of subparagraphs (A), (B), and (C) of paragraph (1)) for the taxpayer, his spouse, or a dependent after the taxpayer attains the age of 65 shall be treated as expenses paid during the taxable year for insurance which constitutes medical care if premiums for such insurance are payable (on a level payment basis) under the contract for a period of 10 years or more or until the year in which the taxpayer attains the age of 65 (but in no case for a period of less than 5 years).
“(6) COSMETIC SURGERY.—
“(A) IN GENERAL.—The term ‘medical care’ does not include cosmetic surgery or other similar procedures, unless the surgery or procedure is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease.
“(7) ELIGIBLE LONG-TERM CARE PREMIUMS.—
“(A) IN GENERAL.—For purposes of this section, the term ‘eligible long-term care premiums’ means the amount paid during a taxable year for any qualified long-term care insurance contract (as defined in section 7702B(b)) covering an individual, to the extent such amount does not exceed the limitation determined under the following table:
“In the case of an individual with an attained age before the close of the taxable year of: | The limitation is: |
40 or less | $200 |
More than 40 but not more than 50 | $375 |
More than 50 but not more than 60 | $750 |
More than 60 but not more than 70 | $2,000 |
More than 70 | $2,500 |
“(B) INDEXING.—
“(i) IN GENERAL.—In the case of any taxable year beginning after 1997, each dollar amount in subparagraph (A) shall be increased by the medical care cost adjustment of such amount for such calendar year. Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $10.
“(ii) MEDICAL CARE COST ADJUSTMENT.—For purposes of clause (i), the medical care cost adjustment for any calendar year is the adjustment prescribed by the Secretary, in consultation with the Secretary of Health and Human Services, for purposes of such clause. To the extent that CPI (as defined section 1(c)), or any component thereof, is taken into account in determining such adjustment, such adjustment shall be determined by taking into account C-CPI-U (as so defined), or the corresponding component thereof, in lieu of such CPI (or component thereof), but only with respect to the portion of such adjustment which relates to periods after December 31, 2017.
“(8) CERTAIN PAYMENTS TO RELATIVES TREATED AS NOT PAID FOR MEDICAL CARE.—An amount paid for a qualified long-term care service (as defined in section 7702B(c)) provided to an individual shall be treated as not paid for medical care if such service is provided—
“(A) by the spouse of the individual or by a relative (directly or through a partnership, corporation, or other entity) unless the service is provided by a licensed professional with respect to such service, or
“(B) by a corporation or partnership which is related (within the meaning of section 267(b) or 707(b)) to the individual.
For purposes of this paragraph, the term ‘relative’ means an individual bearing a relationship to the individual which is described in any of subparagraphs (A) through (G) of section 7706(d)(2). This paragraph shall not apply for purposes of subsection (b) with respect to reimbursements through insurance.”.
(B) Section 72(t)(2)(D)(i)(III) is amended by striking “section 213(d)(1)(D)” and inserting “section 105(f)(1)(D)”.
(C) Section 104(a) is amended by striking “section 213(d)(1)” in the last sentence and inserting “section 105(f)(1)”.
(D) Section 105(b) is amended by striking “section 213(d)” and inserting “section 105(f)”.
(E) Section 139D is amended by striking “section 213” and inserting “section 223”.
(F) Section 162(l)(2) is amended by striking “section 213(d)(10)” and inserting “section 105(f)(7)”.
(G) Section 220(d)(2)(A) is amended by striking “section 213(d)” and inserting “section 105(f)”.
(H) Section 223(d)(2)(A) is amended by striking “section 213(d)” and inserting “section 105(f)”.
(I) Section 419A(f)(2) is amended by striking “section 213(d)” and inserting “section 105(f)”.
(J) Section 501(c)(26)(A) is amended by striking “section 213(d)” and inserting “section 105(f)”.
(K) Section 2503(e) is amended by striking “section 213(d)” and inserting “section 105(f)”.
(L) Section 4980B(c)(4)(B)(i)(I) is amended by striking “section 213(d)” and inserting “section 105(f)”.
(M) Section 6041(f) is amended by striking “section 213(d)” and inserting “section 105(f)”.
(N) Section 7702B(a)(2) is amended by striking “section 213(d)” and inserting “section 105(f)”.
(O) Section 7702B(a)(4) is amended by striking “section 213(d)(1)(D)” and inserting “section 105(f)(1)(D)”.
(P) Section 7702B(d)(5) is amended by striking “section 213(d)(10)” and inserting “section 105(f)(7)”.
(Q) Section 9832(d)(3) is amended by striking “section 213(d)” and inserting “section 105(f)”.
(2) Section 72(t)(2)(B) is amended to read as follows:
“(B) MEDICAL EXPENSES.—Distributions made to an individual (other than distributions described in subparagraph (A), (C), or (D) to the extent such distributions do not exceed the excess of—
“(i) the expenses paid by the taxpayer during the taxable year, not compensated for by insurance or otherwise, for medical care (as defined in 105(f)) of the taxpayer, his spouse, or a dependent (as defined in section 7706, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), over
(3) Section 162(l) is amended by striking paragraph (3).
(4) Section 402(l) is amended by striking paragraph (7) and redesignating paragraph (8) as paragraph (7).
(5) Section 220(f) is amended by striking paragraph (6).
(6) Section 223(f) is amended by striking paragraph (6).
(7) Section 7702B(e) is amended by striking paragraph (2).
(a) In general.—Part VII of subchapter B is amended by striking by striking section 215 (and by striking the item relating to such section in the table of sections for such subpart).
(b) Conforming amendments.—
(1) CORRESPONDING REPEAL OF PROVISIONS PROVIDING FOR INCLUSION OF ALIMONY IN GROSS INCOME.—
(A) Subsection (a) of section 61 is amended by striking paragraph (8) and by redesignating paragraphs (9) through (15) as paragraphs (8) through (14), respectively.
(B) Part II of subchapter B of chapter 1 is amended by striking section 71 (and by striking the item relating to such section in the table of sections for such part).
(C) Subpart F of part I of subchapter J of chapter 1 is amended by striking section 682 (and by striking the item relating to such section in the table of sections for such subpart).
(2) RELATED TO REPEAL OF SECTION 215.—
(A) Section 62(a) is amended by striking paragraph (10).
(B) Section 3402(m)(1) is amended by striking “(other than paragraph (10) thereof)”.
(3) RELATED TO REPEAL OF SECTION 71.—
(A) Section 121(d)(3) is amended—
(B) Section 220(f)(7) is amended by striking “subparagraph (A) of section 71(b)(2)” and inserting “clause (i) of section 121(d)(3)(C)”.
(C) Section 223(f)(7) is amended by striking “subparagraph (A) of section 71(b)(2)” and inserting “clause (i) of section 121(d)(3)(C)”.
(D) Section 382(l)(3)(B)(iii) is amended by striking “section 71(b)(2)” and inserting “section 121(d)(3)(C)”.
(E) Section 408(d)(6) is amended by striking “subparagraph (A) of section 71(b)(2)” and inserting “clause (i) of section 121(d)(3)(C)”.
(c) Effective date.—The amendments made by this section shall apply to—
(1) any divorce or separation instrument (as defined in section 71(b)(2) of the Internal Revenue Code of 1986 as in effect before the date of the enactment of this Act) executed after December 31, 2017, and
(a) In general.—Part VII of subchapter B is amended by striking by striking section 217 (and by striking the item relating to such section in the table of sections for such subpart).
(b) Retention of moving expenses for members of Armed Forces.—Section 134(b) is amended by adding at the end the following new paragraph:
(c) Conforming amendments.—
(1) Section 62(a) is amended by striking paragraph (15).
(2) Section 274(m)(3) is amended by striking “(other than section 217)”.
(3) Section 3121(a) is amended by striking paragraph (11).
(4) Section 3306(b) is amended by striking paragraph (9).
(5) Section 3401(a) is amended by striking paragraph (15).
(6) Section 7872(f) is amended by striking paragraph (11).
(a) Termination of income tax deduction.—Section 220 is amended by adding at the end the following new subsection:
(b) Termination of exclusion for employer-Provided contributions.—Section 106 is amended by striking subsection (b).
(c) Conforming amendments.—
(1) Section 62(a) is amended by striking paragraph (16).
(2) Section 106(d) is amended by striking paragraph (2), by redesignating paragraph (3) as paragraph (6), and by inserting after paragraph (1) the following new paragraphs:
“(2) NO CONSTRUCTIVE RECEIPT.—No amount shall be included in the gross income of any employee solely because the employee may choose between the contributions referred to in paragraph (1) and employer contributions to another health plan of the employer.
“(3) SPECIAL RULE FOR DEDUCTION OF EMPLOYER CONTRIBUTIONS.—Any employer contribution to a health savings account (as so defined), if otherwise allowable as a deduction under this chapter, shall be allowed only for the taxable year in which paid.
“(4) EMPLOYER HEALTH SAVINGS ACCOUNT CONTRIBUTION REQUIRED TO BE SHOWN ON RETURN.—Every individual required to file a return under section 6012 for the taxable year shall include on such return the aggregate amount contributed by employers to the health savings accounts (as so defined) of such individual or such individual’s spouse for such taxable year.
(3) Section 223(b)(4) is amended by striking subparagraph (A), by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively, and by striking the second sentence thereof.
(4) Section 223(b)(5) is amended by striking “under paragraph (3))” and all that follows through “shall be divided equally between them” and inserting the following: “under paragraph (3)) shall be divided equally between the spouses”.
(5) Section 223(c) is amended by striking paragraph (5).
(6) Section 3231(e) is amended by striking paragraph (10).
(7) Section 3306(b) is amended by striking paragraph (17).
(8) Section 3401(a) is amended by striking paragraph (21).
(9) Chapter 43 is amended by striking section 4980E (and by striking the item relating to such section in the table of sections for such chapter).
(10) Section 4980G is amended to read as follows:
“SEC. 4980G. Failure of employer to make comparable health savings account contributions.
“(a) In general.—In the case of an employer who makes a contribution to the health savings account of any employee during a calendar year, there is hereby imposed a tax on the failure of such employer to meet the requirements of subsection (d) for such calendar year.
“(b) Amount of tax.—The amount of the tax imposed by subsection (a) on any failure for any calendar year is the amount equal to 35 percent of the aggregate amount contributed by the employer to health savings accounts of employees for taxable years of such employees ending with or within such calendar year.
“(c) Waiver by Secretary.—In the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive relative to the failure involved.
“(d) Employer required To make comparable health savings account contributions for all participating employees.—
“(1) IN GENERAL.—An employer meets the requirements of this subsection for any calendar year if the employer makes available comparable contributions to the health savings accounts of all comparable participating employees for each coverage period during such calendar year.
“(2) COMPARABLE CONTRIBUTIONS.—
“(A) IN GENERAL.—For purposes of paragraph (1), the term ‘comparable contributions’ means contributions—
“(B) PART-YEAR EMPLOYEES.—In the case of an employee who is employed by the employer for only a portion of the calendar year, a contribution to the health savings account of such employee shall be treated as comparable if it is an amount which bears the same ratio to the comparable amount (determined without regard to this subparagraph) as such portion bears to the entire calendar year.
“(3) COMPARABLE PARTICIPATING EMPLOYEES.—
“(4) PART-TIME EMPLOYEES.—
“(5) SPECIAL RULE FOR NON-HIGHLY COMPENSATED EMPLOYEES.—For purposes of applying this section to a contribution to a health savings account of an employee who is not a highly compensated employee (as defined in section 414(q)), highly compensated employees shall not be treated as comparable participating employees.
“(e) Controlled groups.—For purposes of this section, all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as 1 employer.
(11) Section 6051(a) is amended by striking paragraph (11).
(12) Section 6051(a)(14)(A) is amended by striking “paragraphs (11) and (12)” and inserting “paragraph (12)”.
(a) In general.—Part IX of subchapter B of chapter 1 is amended by inserting after the item relating to section 262 the following new item:
(b) Repeal of certain above-the-line trade and business deductions of employees.—
(1) IN GENERAL.—Section 62(a)(2) is amended—
(2) CONFORMING AMENDMENTS.—
(A) Section 62 is amended by striking subsections (b) and (d) and by redesignating subsections (c) and (e) as subsections (b) and (c), respectively.
(B) Section 62(a)(20) is amended by striking “subsection (e)” and inserting “subsection (c)”.
(c) Continued exclusion of working condition fringe benefits.—Section 132(d) is amended by inserting “(determined without regard to section 262A)” after “section 162”.
(a) In general.—Section 119 is amended by adding at the end the following new subsection:
“(e) Limitation on exclusion of lodging.—
“(1) IN GENERAL.—The aggregate amount excluded from gross income of the taxpayer under subsections (a) and (d) with respect to lodging for any taxable year shall not exceed $50,000 (half such amount in the case of a married individual filing a separate return).
“(2) LIMITATION TO 1 HOME.—Subsections (a) and (d) (separately and in combination) shall not apply with respect to more than 1 residence of the taxpayer at any given time. In the case of a joint return, the preceding sentence shall apply separately to each spouse for any period during which each spouse resides separate from the other spouse in a residence which is provided in connection with the employment of each spouse, respectively.
“(3) LIMITATION FOR HIGHLY COMPENSATED EMPLOYEES.—
“(A) REDUCED FOR EXCESS COMPENSATION.—In the case of an individual whose compensation for the taxable year exceeds the amount in effect under section 414(q)(1)(B)(i) for the calendar in which such taxable year begins, the $50,000 amount under paragraph (1) shall be reduced (but not below zero) by an amount equal to 50 percent of such excess. For purposes of the preceding sentence, the term ‘compensation’ means wages (as defined in section 3121(a) (without regard to the contribution and benefit base limitation in section 3121(a)(1)).
(a) Requirement that residence be principal residence for 5 years during 8-year period.—Subsection (a) of section 121 is amended—
(b) Application to only 1 sale or exchange every 5 years.—Paragraph (3) of section 121(b) is amended to read as follows:
(c) Phaseout based on modified adjusted gross income.—Section 121 is amended by adding at the end the following new subsection:
“(h) Phaseout based on modified adjusted gross income.—
“(1) IN GENERAL.—If the average modified adjusted gross income of the taxpayer for the taxable year and the 2 preceding taxable years exceeds $250,000 (twice such amount in the case of a joint return), the amount which would (but for this subsection) be excluded from gross income under subsection (a) for such taxable year shall be reduced (but not below zero) by the amount of such excess.
(d) Conforming amendments.—
(1) The following provisions of section 121 are each amended by striking “5-year period” each place it appears therein and inserting “8-year period”:
(2) Section 121(c)(1)(B)(ii) is amended by striking “2 years” and inserting “5 years”:
(a) In general.—Section 74 is amended by striking subsection (c).
(b) Repeal of limitation on deduction.—Section 274 is amended by striking subsection (j).
(c) Conforming amendments.—
(1) Section 102(c)(2) is amended by striking the first sentence.
(2) Section 414(n)(3)(C) is amended by striking “274(j),”.
(3) Section 414(t)(2) is amended by striking “274(j),”.
(4) Section 3121(a)(20) is amended by striking “74(c)”.
(5) Section 3231(e)(5) is amended by striking “74(c),”.
(6) Section 3306(b)(16) is amended by striking “74(c),”.
(7) Section 3401(a)(19) is amended by striking “74(c),”.
(a) In general.—Section 129 is amended by adding at the end the following new subsection:
(a) In general.—Section 132(a) is amended by striking paragraph (6).
(b) Conforming amendments.—
(1) Section 82 is amended by striking “Except as provided in section 132(a)(6), there” and inserting “There”.
(2) Section 132 is amended by striking subsection (g).
(3) Section 132(l) is amended by striking by striking “subsections (e) and (g)” and inserting “subsection (e)”.
(a) In general.—Part III of subchapter B of chapter 1 is amended by striking section 137 (and by striking the item relating to such section in the table of sections for such part).
(a) In general.—Section 408A(d) is amended by striking paragraph (6) and by redesignating paragraph (7) as paragraph (6).
(a) In general.—Section 401(a)(36) is amended by striking “age 62” and inserting “age 59 ½”.
(b) Application to governmental section 457(b) plans.—Clause (i) of section 457(d)(1)(A) is amended by inserting “(in the case of a plan maintained by an employer described in subsection (e)(1)(A), age 59 ½)” before the comma at the end.
(a) In general.—Not later than 1 year after the date of the enactment of this Act, the Secretary of the Treasury shall modify Treasury Regulation section 1.401(k)–1(d)(3)(iv)(E) to—
(2) make any other modifications necessary to carry out the purposes of section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986.
(a) In general.—Section 401(k) is amended by adding at the end the following:
(b) Conforming amendment.—Section 401(k)(2)(B)(i)(IV) is amended to read as follows:
(a) In general.—Paragraph (3) of section 402(c) is amended by adding at the end the following new subparagraph:
“(C) ROLLOVER OF CERTAIN PLAN LOAN OFFSET AMOUNTS.—
“(i) IN GENERAL.—In the case of a qualified plan loan offset amount, paragraph (1) shall not apply to any transfer of such amount made after the due date (including extensions) for filing the return of tax for the taxable year in which such amount is treated as distributed from a qualified employer plan.
“(ii) QUALIFIED PLAN LOAN OFFSET AMOUNT.—For purposes of this subparagraph, the term ‘qualified plan loan offset amount’ means a plan loan offset amount which is treated as distributed from a qualified employer plan to a participant or beneficiary solely by reason of—
“(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)”.
(a) In general.—Section 401 is amended—
(2) by inserting after subsection (n) the following new subsection:
“(o) Special rules for applying nondiscrimination rules to protect older, longer service and grandfathered participants.—
“(1) TESTING OF DEFINED BENEFIT PLANS WITH CLOSED CLASSES OF PARTICIPANTS.—
“(A) BENEFITS, RIGHTS, OR FEATURES PROVIDED TO CLOSED CLASSES.—A defined benefit plan which provides benefits, rights, or features to a closed class of participants shall not fail to satisfy the requirements of subsection (a)(4) by reason of the composition of such closed class or the benefits, rights, or features provided to such closed class, if—
“(i) for the plan year as of which the class closes and the 2 succeeding plan years, such benefits, rights, and features satisfy the requirements of subsection (a)(4) (without regard to this subparagraph but taking into account the rules of subparagraph (I)),
“(B) AGGREGATE TESTING WITH DEFINED CONTRIBUTION PLANS PERMITTED ON A BENEFITS BASIS.—
“(i) IN GENERAL.—For purposes of determining compliance with subsection (a)(4) and section 410(b), a defined benefit plan described in clause (iii) may be aggregated and tested on a benefits basis with 1 or more defined contribution plans, including with the portion of 1 or more defined contribution plans which—
“(ii) SPECIAL RULES FOR MATCHING CONTRIBUTIONS.—For purposes of clause (i), if a defined benefit plan is aggregated with a portion of a defined contribution plan providing matching contributions—
“(iii) PLANS DESCRIBED.—A defined benefit plan is described in this clause if—
“(II) for the plan year as of which the class closes and the 2 succeeding plan years, the plan satisfies the requirements of section 410(b) and subsection (a)(4) (without regard to this subparagraph but taking into account the rules of subparagraph (I)),
“(C) PLANS DESCRIBED.—A plan is described in this subparagraph if, taking into account any predecessor plan—
“(ii) during the 5-year period preceding the date the class is closed, there has not been a substantial increase in the coverage or value of the benefits, rights, or features described in subparagraph (A) or in the coverage or benefits under the plan described in subparagraph (B)(iii) (whichever is applicable).
“(D) DETERMINATION OF SUBSTANTIAL INCREASE FOR BENEFITS, RIGHTS, AND FEATURES.—In applying subparagraph (C)(ii) for purposes of subparagraph (A)(iii), a plan shall be treated as having had a substantial increase in coverage or value of the benefits, rights, or features described in subparagraph (A) during the applicable 5-year period only if, during such period—
“(i) the number of participants covered by such benefits, rights, or features on the date such period ends is more than 50 percent greater than the number of such participants on the first day of the plan year in which such period began, or
“(ii) such benefits, rights, and features have been modified by 1 or more plan amendments in such a way that, as of the date the class is closed, the value of such benefits, rights, and features to the closed class as a whole is substantially greater than the value as of the first day of such 5-year period, solely as a result of such amendments.
“(E) DETERMINATION OF SUBSTANTIAL INCREASE FOR AGGREGATE TESTING ON BENEFITS BASIS.—In applying subparagraph (C)(ii) for purposes of subparagraph (B)(iii)(IV), a plan shall be treated as having had a substantial increase in coverage or benefits during the applicable 5-year period only if, during such period—
“(F) CERTAIN EMPLOYEES DISREGARDED.—For purposes of subparagraphs (D) and (E), any increase in coverage or value or in coverage or benefits, whichever is applicable, which is attributable to such coverage and value or coverage and benefits provided to employees—
“(i) who became participants as a result of a merger, acquisition, or similar event which occurred during the 7-year period preceding the date the class is closed, or
“(ii) who became participants by reason of a merger of the plan with another plan which had been in effect for at least 5 years as of the date of the merger,
shall be disregarded, except that clause (ii) shall apply for purposes of subparagraph (D) only if, under the merger, the benefits, rights, or features under 1 plan are conformed to the benefits, rights, or features of the other plan prospectively.
“(G) RULES RELATING TO AVERAGE BENEFIT.—For purposes of subparagraph (E)—
“(i) the average benefit provided to participants under the plan will be treated as having remained the same between the 2 dates described in subparagraph (E)(ii) if the benefit formula applicable to such participants has not changed between such dates, and
“(ii) if the benefit formula applicable to 1 or more participants under the plan has changed between such 2 dates, then the average benefit under the plan shall be considered to have increased by more than 50 percent only if—
“(I) the total amount determined under section 430(b)(1)(A)(i) for all participants benefitting under the plan for the plan year in which the 5-year period described in subparagraph (E) ends, exceeds
“(II) the total amount determined under section 430(b)(1)(A)(i) for all such participants for such plan year, by using the benefit formula in effect for each such participant for the first plan year in such 5-year period, by more than 50 percent.
In the case of a CSEC plan (as defined in section 414(y)), the normal cost of the plan (as determined under section 433(j)(1)(B)) shall be used in lieu of the amount determined under section 430(b)(1)(A)(i).
“(H) TREATMENT AS SINGLE PLAN.—For purposes of subparagraphs (E) and (G), a plan described in section 413(c) shall be treated as a single plan rather than as separate plans maintained by each participating employer.
“(I) SPECIAL RULES.—For purposes of subparagraphs (A)(i) and (B)(iii)(II), the following rules shall apply:
“(i) In applying section 410(b)(6)(C), the closing of the class of participants shall not be treated as a significant change in coverage under section 410(b)(6)(C)(i)(II).
“(ii) 2 or more plans shall not fail to be eligible to be aggregated and treated as a single plan solely by reason of having different plan years.
“(iii) Changes in the employee population shall be disregarded to the extent attributable to individuals who become employees or cease to be employees, after the date the class is closed, by reason of a merger, acquisition, divestiture, or similar event.
“(iv) Aggregation and all other testing methodologies otherwise applicable under subsection (a)(4) and section 410(b) may be taken into account.
The rule of clause (ii) shall also apply for purposes of determining whether plans to which subparagraph (B)(i) applies may be aggregated and treated as 1 plan for purposes of determining whether such plans meet the requirements of subsection (a)(4) and section 410(b).
“(J) SPUN-OFF PLANS.—For purposes of this paragraph, if a portion of a defined benefit plan described in subparagraph (A) or (B)(iii) is spun off to another employer and the spun-off plan continues to satisfy the requirements of—
“(i) subparagraph (A)(i) or (B)(iii)(II), whichever is applicable, if the original plan was still within the 3-year period described in such subparagraph at the time of the spin off, and
the treatment under subparagraph (A) or (B) of the spun-off plan shall continue with respect to such other employer.
“(2) TESTING OF DEFINED CONTRIBUTION PLANS.—
“(A) TESTING ON A BENEFITS BASIS.—A defined contribution plan shall be permitted to be tested on a benefits basis if—
“(i) such defined contribution plan provides make-whole contributions to a closed class of participants whose accruals under a defined benefit plan have been reduced or eliminated,
“(ii) for the plan year of the defined contribution plan as of which the class eligible to receive such make-whole contributions closes and the 2 succeeding plan years, such closed class of participants satisfies the requirements of section 410(b)(2)(A)(i) (determined by applying the rules of paragraph (1)(I)),
“(iii) after the date as of which the class was closed, any plan amendment to the defined contribution plan which modifies the closed class or the allocations, benefits, rights, and features provided to such closed class does not discriminate significantly in favor of highly compensated employees, and
“(B) AGGREGATION WITH PLANS INCLUDING MATCHING CONTRIBUTIONS.—
“(i) IN GENERAL.—With respect to 1 or more defined contribution plans described in subparagraph (A), for purposes of determining compliance with subsection (a)(4) and section 410(b), the portion of such plans which provides make-whole contributions or other nonelective contributions may be aggregated and tested on a benefits basis with the portion of 1 or more other defined contribution plans which—
“(C) SPECIAL RULES FOR TESTING DEFINED CONTRIBUTION PLAN FEATURES PROVIDING MATCHING CONTRIBUTIONS TO CERTAIN OLDER, LONGER SERVICE PARTICIPANTS.—In the case of a defined contribution plan which provides benefits, rights, or features to a closed class of participants whose accruals under a defined benefit plan have been reduced or eliminated, the plan shall not fail to satisfy the requirements of subsection (a)(4) solely by reason of the composition of the closed class or the benefits, rights, or features provided to such closed class if the defined contribution plan and defined benefit plan otherwise meet the requirements of subparagraph (A) but for the fact that the make-whole contributions under the defined contribution plan are made in whole or in part through matching contributions.
“(D) SPUN-OFF PLANS.—For purposes of this paragraph, if a portion of a defined contribution plan described in subparagraph (A) or (C) is spun off to another employer, the treatment under subparagraph (A) or (C) of the spun-off plan shall continue with respect to the other employer if such plan continues to comply with the requirements of clauses (ii) (if the original plan was still within the 3-year period described in such clause at the time of the spin off) and (iii) of subparagraph (A), as determined for purposes of subparagraph (A) or (C), whichever is applicable.
“(3) DEFINITIONS.—For purposes of this subsection—
“(A) MAKE-WHOLE CONTRIBUTIONS.—Except as otherwise provided in paragraph (2)(C), the term ‘make-whole contributions’ means nonelective allocations for each employee in the class which are reasonably calculated, in a consistent manner, to replace some or all of the retirement benefits which the employee would have received under the defined benefit plan and any other plan or qualified cash or deferred arrangement under subsection (k)(2) if no change had been made to such defined benefit plan and such other plan or arrangement. For purposes of the preceding sentence, consistency shall not be required with respect to employees who were subject to different benefit formulas under the defined benefit plan.
“(B) REFERENCES TO CLOSED CLASS OF PARTICIPANTS.—References to a closed class of participants and similar references to a closed class shall include arrangements under which 1 or more classes of participants are closed, except that 1 or more classes of participants closed on different dates shall not be aggregated for purposes of determining the date any such class was closed.
(b) Participation requirements.—Paragraph (26) of section 401(a) is amended by adding at the end the following new subparagraph:
“(I) PROTECTED PARTICIPANTS.—
“(i) IN GENERAL.—A plan shall be deemed to satisfy the requirements of subparagraph (A) if—
“(ii) PLANS DESCRIBED.—A plan is described in this clause if the plan would be described in subsection (o)(1)(C), as applied for purposes of subsection (o)(1)(B)(iii)(IV) and by treating the effective date of the amendment as the date the class was closed for purposes of subsection (o)(1)(C).
(c) Effective date.—
(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section shall take effect on the date of the enactment of this Act, without regard to whether any plan modifications referred to in such amendments are adopted or effective before, on, or after such date of enactment.
(2) SPECIAL RULES.—
(A) ELECTION OF EARLIER APPLICATION.—At the election of the plan sponsor, the amendments made by this section shall apply to plan years beginning after December 31, 2013.
(B) CLOSED CLASSES OF PARTICIPANTS.—For purposes of paragraphs (1)(A)(iii), (1)(B)(iii)(IV), and (2)(A)(iv) of section 401(o) of the Internal Revenue Code of 1986 (as added by this section), a closed class of participants shall be treated as being closed before April 5, 2017, if the plan sponsor’s intention to create such closed class is reflected in formal written documents and communicated to participants before such date.
(C) CERTAIN POST-ENACTMENT PLAN AMENDMENTS.—A plan shall not be treated as failing to be eligible for the application of section 401(o)(1)(A), 401(o)(1)(B)(iii), or 401(a)(26) of such Code (as added by this section) to such plan solely because in the case of—
(i) such section 401(o)(1)(A), the plan was amended before the date of the enactment of this Act to eliminate 1 or more benefits, rights, or features, and is further amended after such date of enactment to provide such previously eliminated benefits, rights, or features to a closed class of participants, or
(ii) such section 401(o)(1)(B)(iii) or section 401(a)(26), the plan was amended before the date of the enactment of this Act to cease all benefit accruals, and is further amended after such date of enactment to provide benefit accruals to a closed class of participants. Any such section shall only apply if the plan otherwise meets the requirements of such section and in applying such section, the date the class of participants is closed shall be the effective date of the later amendment.
(a) In general.—Section 2010(c)(3) is amended by striking “$5,000,000” and inserting “$10,000,000”.
(a) Estate tax repeal.—
(1) IN GENERAL.—Subchapter C of chapter 11 is amended by adding at the end the following new section:
“(a) In general.—Except as provided in subsection (b), this chapter shall not apply to the estates of decedents dying after December 31, 2024.
(2) CONFORMING AMENDMENTS.—Section 1014(b) is amended—
(A) in paragraph (6), by striking “was includible in determining” and all that follows through the end and inserting “was includible (or would have been includible without regard to section 2210) in determining the value of the decedent’s gross estate under chapter 11 of subtitle B” ,
(3) CLERICAL AMENDMENT.—The table of sections for subchapter C of chapter 11 is amended by adding at the end the following new item:
“Sec. 2210. Termination.”.
(b) Generation-skipping transfer tax repeal.—
(c) Conforming amendments related to gift tax.—
(1) COMPUTATION OF GIFT TAX.—Section 2502 is amended by adding at the end the following new subsection:
“(d) Gifts made after 2024.—
“(1) IN GENERAL.—In the case of a gift made after December 31, 2024, subsection (a) shall be applied by substituting ‘subsection (d)(2)’ for ‘section 2001(c)’ and ‘such subsection’ for ‘such section’.
“(2) RATE SCHEDULE.—
“If the amount with respect to which the tentative tax to be computed is: | The tentative tax is: |
Not over $10,000 | 18% of such amount. |
Over $10,000 but not over $20,000 | $1,800, plus 20% of the excess over $10,000. |
Over $20,000 but not over $40,000 | $3,800, plus 22% of the excess over $20,000. |
Over $40,000 but not over $60,000 | $8,200, plus 24% of the excess over $40,000. |
Over $60,000 but not over $80,000 | $13,000, plus 26% of the excess over $60,000. |
Over $80,000 but not over $100,000 | $18,200, plus 28% of the excess over $80,000. |
Over $100,000 but not over $150,000 | $23,800, plus 30% of the excess over $100,000. |
Over $150,000 but not over $250,000 | $38,800, plus 32% of the excess of $150,000. |
Over $250,000 but not over $500,000 | $70,800, plus 34% of the excess over $250,000. |
Over $500,000 | $155,800, plus 35% of the excess of $500,000.”. |
(2) LIFETIME GIFT EXEMPTION.—Section 2505 is amended by adding at the end the following new subsection:
“(d) Gifts made after 2024.—
“(1) IN GENERAL.—In the case of a gift made after December 31, 2024, subsection (a)(1) shall be applied by substituting ‘the amount of the tentative tax which would be determined under the rate schedule set forth in section 2502(a)(2) if the amount with respect to which such tentative tax is to be computed were $10,000,000’ for ‘the applicable credit amount in effect under section 2010(c) which would apply if the donor died as of the end of the calendar year’.
(3) OTHER CONFORMING AMENDMENTS RELATED TO GIFT TAX.—Section 2801 is amended by adding at the end the following new subsection:
(a) In general.—Subchapter A of chapter 1 is amended by striking part VI (and by striking the item relating to such part in the table of parts for subchapter A).
(b) Credit for prior year minimum tax liability.—
(1) LIMITATION.—Subsection (c) of section 53 is amended to read as follows:
(2) CREDITS TREATED AS REFUNDABLE.—Section 53 is amended by adding at the end the following new subsection:
“(e) Portion of credit treated as refundable.—
“(1) IN GENERAL.—In the case of any taxable year beginning in 2019, 2020, 2021, or 2022, the limitation under subsection (c) shall be increased by the AMT refundable credit amount for such year.
“(2) AMT REFUNDABLE CREDIT AMOUNT.—For purposes of paragraph (1), the AMT refundable credit amount is an amount equal to 50 percent (100 percent in the case of a taxable year beginning in 2022) of the excess (if any) of—
“(3) CREDIT REFUNDABLE.—For purposes of this title (other than this section), the credit allowed by reason of this subsection shall be treated as a credit allowed under subpart C (and not this subpart).
“(4) SHORT TAXABLE YEARS.—In the case of any taxable year of less than 365 days, the AMT refundable credit amount determined under paragraph (2) with respect to such taxable year shall be the amount which bears the same ratio to such amount determined without regard to this paragraph as the number of days in such taxable year bears to 365.”.
(3) TREATMENT OF REFERENCES.—Section 53(d) is amended by adding at the end the following new paragraph:
(c) Conforming amendments related to AMT repeal.—
(1) Section 2(d) is amended by striking “sections 1 and 55” and inserting “section 1”.
(2) Section 5(a) is amended by striking paragraph (4).
(3) Section 11(d) is amended by striking “the taxes imposed by subsection (a) and section 55” and inserting “the tax imposed by subsection (a)”.
(4) Section 12 is amended by striking paragraph (7).
(5) Section 26(a) is amended to read as follows:
(6) Section 26(b)(2) is amended by striking subparagraph (A).
(7) Section 26 is amended by striking subsection (c).
(8) Section 38(c) is amended—
(9) Section 39(a) is amended—
(10) Section 45D(g)(4)(B) is amended by striking “or for purposes of section 55”.
(11) Section 54(c)(1) is amended to read as follows:
(12) Section 54A(c)(1)(A) is amended to read as follows:
(13) Section 148(b)(3) is amended to read as follows:
(14) Section 168(k)(2) is amended by striking subparagraph (G).
(15) Section 168(k) is amended by striking paragraph (4).
(16) Section 168(k)(5) is amended by striking subparagraph (E).
(17) Section 168(m)(2)(B)(i) is amended by striking “(determined without regard to paragraph (4) thereof)”.
(18) Section 168(m)(2) is amended by striking subparagraph (D).
(19) Section 173 is amended by striking subsection (b).
(20) Section 263(c) is amended by striking “section 59(e) or 291” and inserting “section 291”.
(21) Section 263A(c) is amended by striking paragraph (6) and by redesignating paragraph (7) (as amended) as paragraph (6).
(22) Section 382(l) is amended by striking paragraph (7) and by redesignating paragraph (8) as paragraph (7).
(23) Section 443 is amended by striking subsection (d) and by redesignating subsection (e) as subsection (d).
(24) Section 616 is amended by striking subsection (e).
(25) Section 617 is amended by striking subsection (i).
(26) Section 641(c) is amended—
(27) Subsections (b) and (c) of section 666 are each amended by striking “(other than the tax imposed by section 55)”.
(28) Section 848 is amended by striking subsection (i).
(29) Section 860E(a) is amended by striking paragraph (4).
(30) Section 871(b)(1) is amended by striking “or 55”.
(31) Section 882(a)(1) is amended by striking “55,”.
(32) Section 897(a) is amended to read as follows:
“(a) Treatment as effectively connected with united states trade or business.—For purposes of this title, gain or loss of a nonresident alien individual or a foreign corporation from the disposition of a United States real property interest shall be taken into account—
as if the taxpayer were engaged in a trade or business within the United States during the taxable year and as if such gain or loss were effectively connected with such trade or business.”.
(33) Section 904(k) is amended to read as follows:
“(k) Cross reference.—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(b).”.
(34) Section 911(f) is amended to read as follows:
“(f) Determination of tax liability.—
“(1) IN GENERAL.—If, for any taxable year, any amount is excluded from gross income of a taxpayer under subsection (a), then, notwithstanding section 1, if such taxpayer has taxable income for such taxable year, the tax imposed by section 1 for such taxable year shall be equal to the excess (if any) of—
“(A) the tax which would be imposed by section 1 for such taxable year if the taxpayer’s taxable income were increased by the amount excluded under subsection (a) for such taxable year, over
“(B) the tax which would be imposed by section 1 for such taxable year if the taxpayer’s taxable income were equal to the amount excluded under subsection (a) for such taxable year.
For purposes of this paragraph, the amount excluded under subsection (a) shall be reduced by the aggregate amount of any deductions or exclusions disallowed under subsection (d)(6) with respect to such excluded amount.
“(2) TREATMENT OF CAPITAL GAIN EXCESS.—
“(A) IN GENERAL.—In applying section 1(h) for purposes of determining the tax under paragraph (1)(A) for any taxable year in which, without regard to this subsection, the taxpayer’s net capital gain exceeds taxable income (hereafter in this subparagraph referred to as the capital gain excess)—
“(i) the taxpayer’s net capital gain (determined without regard to section 1(h)(11)) shall be reduced (but not below zero) by such capital gain excess,
(35) Section 962(a)(1) is amended—
(36) Section 1016(a) is amended by striking paragraph (20).
(37) Section 1202(a)(4) is amended by inserting “and” at the end of subparagraph (A), by striking “, and” and inserting a period at the end of subparagraph (B), and by striking subparagraph (C).
(38) Section 1374(b)(3)(B) is amended by striking the last sentence thereof.
(39) Section 1561(a) is amended—
(40) Section 6015(d)(2)(B) is amended by striking “or 55”.
(41) Section 6211(b)(4)(A) is amended by striking“, 168(k)(4)”.
(42) Section 6425(c)(1)(A) is amended to read as follows:
(43) Section 6654(d)(2) is amended—
(44) Section 6655(e)(2)(B)(i) is amended by striking “The taxable income and alternative minimum taxable income shall” and inserting “Taxable income shall”.
(45) Section 6655(g)(1)(A) is amended by adding “plus” at the end of clause (i), by striking clause (ii), and by redesignating clause (iii) as clause (ii).
(46) Section 6662(e)(3)(C) is amended by striking “the regular tax (as defined in section 55(c))” and inserting “the regular tax liability (as defined in section 26(b))”.
(d) Effective dates.—
(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2017.
(2) PRIOR ELECTIONS WITH RESPECT TO CERTAIN TAX PREFERENCES.—So much of the amendment made by subsection (a) as relates to the repeal of section 59(e) of the Internal Revenue Code of 1986 shall apply to amounts paid or incurred after December 31, 2017.
(3) TREATMENT OF NET OPERATING LOSS CARRYBACKS.—For purposes of section 56(d) of the Internal Revenue Code of 1986 (as in effect before its repeal), the amount of any net operating loss which may be carried back from a taxable year beginning after December 31, 2017, to taxable years beginning before January 1, 2018, shall be determined without regard to any adjustments under section 56(d)(2)(A) of such Code (as so in effect).
(a) In general.—Section 11(b) is amended to read as follows:
“(b) Amount of tax.—
“(1) IN GENERAL.—Except as otherwise provided in this subsection, the amount of the tax imposed by subsection (a) shall be 20 percent of taxable income.
(b) Conforming amendments.—
(1) (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 paragraph (4).
(C) Section 527(b) is amended—
(D) Section 594(a) is amended by striking “taxes imposed by section 11 or 1201(a)” and inserting “tax imposed by section 11”.
(E) Section 691(c)(4) is amended by striking “1201,”.
(F) Section 801(a) is amended—
(G) Section 831(e) is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively.
(H) Sections 832(c)(5) and 834(b)(1)(D) are each amended by striking “sec. 1201 and following,”.
(I) Section 852(b)(3)(A) is amended by striking “section 1201(a)” and inserting “section 11(b)(1)”.
(J) 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
(K) Section 882(a)(1) is amended by striking “, or 1201(a)”.
(L) Section 1374(b) is amended by striking paragraph (4).
(M) Section 1381(b) is amended by striking “taxes imposed by section 11 or 1201” and inserting “tax imposed by section 11”.
(N) Section 6655(g)(1)(A)(i) is amended by striking “or 1201(a),”.
(O) Section 7518(g)(6)(A) is amended by striking “or 1201(a)”.
(2) Section 1445(e)(1) is amended by striking “35 percent (or, to the extent provided in regulations, 20 percent)” and inserting “20 percent”.
(3) Section 1445(e)(2) is amended by striking “35 percent” and inserting “20 percent”.
(4) Section 1445(e)(6) is amended by striking “35 percent (or, to the extent provided in regulations, 20 percent)” and inserting “20 percent”.
(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 12 is amended by striking paragraph (6).
(C) Section 535(c)(5) is amended to read as follows:
(6) (A) Section 1561, as amended by the preceding provisions of this Act, is amended to read as follows:
“(a) In general.—The component members of a controlled group of corporations on a December 31 shall, for their taxable years which include such December 31, be limited for purposes of this subtitle to one $250,000 ($150,000 if any component member is a corporation described in section 535(c)(2)(B)) amount for purposes of computing the accumulated earnings credit under section 535(c)(2) and (3). Such amount shall be divided equally among the component members of such group on such December 31 unless the Secretary prescribes regulations permitting an unequal allocation of such amount.
“(b) Certain short taxable years.—If a corporation has a short taxable year which does not include a December 31 and is a component member of a controlled group of corporations with respect to such taxable year, then for purposes of this subtitle, the amount to be used in computing the accumulated earnings credit under section 535(c)(2) and (3) of such corporation for such taxable year shall be the amount specified in subsection (a) with respect to such group, divided by the number of corporations which are component members of such group on the last day of such taxable year. For purposes of the preceding sentence, section 1563(b) shall be applied as if such last day were substituted for December 31.”.
(B) The table of sections for part II of subchapter B of chapter 5 is amended by striking the item relating to section 1561 and inserting the following new item:
(7) Section 7518(g)(6)(A) is amended—
(c) Reduction in dividend received deductions to reflect lower corporate income tax rates.—
(1) DIVIDENDS RECEIVED BY CORPORATIONS.—
(A) IN GENERAL.—Section 243(a)(1) is amended by striking “70 percent” and inserting “50 percent”.
(B) DIVIDENDS FROM 20-PERCENT OWNED CORPORATIONS.—Section 243(c)(1) is amended—
(C) CONFORMING AMENDMENT.—The heading for section 243(c) is amended by striking “Retention of 80-percent dividend received deduction” and inserting “Increased percentage”.
(2) DIVIDENDS RECEIVED FROM FSC.—Section 245(c)(1)(B) is amended—
(3) LIMITATION ON AGGREGATE AMOUNT OF DEDUCTIONS.—Section 246(b)(3) is amended—
(4) REDUCTION IN DEDUCTION WHERE PORTFOLIO STOCK IS DEBT-FINANCED.—Section 246A(a)(1) is amended—
(5) INCOME FROM SOURCES WITHIN THE UNITED STATES.—Section 861(a)(2) is amended—
(d) Effective date.—
(e) 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 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.
(a) 100 percent expensing.—Section 168(k)(1)(A) is amended by striking “50 percent” and inserting “100 percent”.
(b) Extension through January 1, 2023.—Section 168(k)(2) is amended—
(c) Application to used property.—
(1) IN GENERAL.—Section 168(k)(2)(A)(ii) is amended to read as follows:
(2) ACQUISITION REQUIREMENTS.—Section 168(k)(2)(E)(ii) is amended to read as follows:
(d) Exception for certain trades and businesses not subject to limitation on interest expense.—Section 168(k)(2), as amended by section 2001, is amended by inserting after subparagraph (F) the following new subparagraph:
(e) Coordination with section 280F.—Section 168(k)(2)(F) is amended—
(f) Conforming amendments.—
(2) Section 168(k)(5) is amended by—
(3) Section 168(k)(6) is amended to read as follows:
“(6) PHASE DOWN.—In the case of qualified property acquired by the taxpayer before September 28, 2017, and placed in service by the taxpayer after September 27, 2017, paragraph (1)(A) shall be applied by substituting for ‘100 percent’—
(4) The heading of section 168(k) is amended by striking “Special allowance for certain property acquired after December 31, 2007, and before January 1, 2020” and inserting “Full expensing of certain property”.
(5) Section 460(c)(6)(B)(ii) is amended by striking “January 1, 2020 (January 1, 2021 in the case of property described in section 168(k)(2)(B))” and inserting “January 1, 2023 (January 1, 2024 in the case of property described in section 168(k)(2)(B))”.
(g) Effective date.—
(1) IN GENERAL.—Except at provided by paragraph (2), the amendments made by this section shall apply to property which—
For purposes of the preceding sentence, property shall not be treated as acquired after the date on which a written binding contract is entered into for such acquisition.
(2) SPECIFIED PLANTS.—The amendments made by subsection (f)(2) shall apply to specified plants planted or grafted after September 27, 2017.
(3) TRANSITION RULE.—In the case of any taxpayer’s first taxable year ending after September 27, 2017, the taxpayer may elect (at such time and in such form and manner as the Secretary of the Treasury, or his designee, may provide) to apply section 168 of the Internal Revenue Code of 1986 without regard to the amendments made by this section.
(4) LIMITATION ON NET OPERATING LOSS CARRYBACKS ATTRIBUTABLE TO FULL EXPENSING.—In the case of any taxable year which includes any portion of the period beginning on September 28, 2017, and ending on December 31, 2017, the amount of any net operating loss for such taxable year which may be treated as a net operating loss carryback (including any such carryback attributable to any specified liability loss under section 172(b)(1)(C), any corporate equity reduction interest loss under section 172(b)(1)(D), any eligible loss under section 172(b)(1)(E), and any farming loss under section 172(b)(1)(F)) shall be determined without regard to the amendments made by this section. For purposes of this paragraph, terms which are used in section 172 of the Internal Revenue Code of 1986 (determined without regard to the amendments made by section 3302) shall have the same meaning as when used in such section.
(a) Increased dollar limitations.—
(1) IN GENERAL.—Section 179(b) is amended—
(2) INFLATION ADJUSTMENT.—Section 179(b)(6) is amended to read as follows:
“(6) INFLATION ADJUSTMENT.—
“(A) IN GENERAL.—In the case of a taxable year beginning after 2015 (2018 in the case of the $5,000,000 and $20,000,000 amounts in subsection (b)), each dollar amount in subsection (b) shall be increased by an amount equal to such dollar amount multiplied by—
“(i) in the case of the $500,000 and $2,000,000 amounts in subsection (b), the cost-of-living adjustment determined under section 1(c)(2) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2014’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof, and
“(ii) in the case of the $5,000,000 and $20,000,000 amounts in subsection (b), the cost-of-living adjustment determined under section 1(c)(2) 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.
(b) Application to qualified energy efficient heating and air-conditioning property.—
(1) IN GENERAL.—Section 179(f)(2) is amended by striking “and” at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting “, and”, and by adding at the end the following new subparagraph:
(2) QUALIFIED ENERGY EFFICIENT HEATING AND AIR-CONDITIONING PROPERTY.—Section 179(f) is amended by adding at the end the following new paragraph:
“(3) QUALIFIED ENERGY EFFICIENT HEATING AND AIR-CONDITIONING PROPERTY.—For purposes of this subsection—
“(A) IN GENERAL.—The term ‘qualified energy efficient heating and air-conditioning property’ means any section 1250 property—
“(B) STANDARD 90.1–2007.—The term ‘Standard 90.1–2007’ means Standard 90.1–2007 of the American Society of Heating, Refrigerating and Air-Conditioning Engineers and the Illuminating Engineering Society of North America (as in effect on the day before the date of the adoption of Standard 90.1–2010 of such Societies).”.
(c) Effective date.—
(1) INCREASED DOLLAR LIMITATIONS.—The amendments made by subsection (a) shall apply to taxable years beginning after December 31, 2017.
(2) APPLICATION TO QUALIFIED ENERGY EFFICIENT HEATING AND AIR-CONDITIONING PROPERTY.—The amendments made by subsection (b) shall apply to property acquired and placed in service after November 2, 2017. For purposes of the preceding sentence, property shall not be treated as acquired after the date on which a written binding contract is entered into for such acquisition.
(a) Modification of limitation on cash method of accounting.—
(1) INCREASED LIMITATION.—So much of section 448(c) as precedes paragraph (2) is amended to read as follows:
(2) APPLICATION OF EXCEPTION ON ANNUAL BASIS.—Section 448(b)(3) is amended to read as follows:
(3) INFLATION ADJUSTMENT.—Section 448(c) is amended by adding at the end the following new paragraph:
“(4) ADJUSTMENT FOR INFLATION.—In the case of any taxable year beginning after December 31, 2018, the dollar amount in paragraph (1) shall be increased by an amount equal to—
“(B) the cost-of-living adjustment determined under section 1(c)(2) for the calendar year in which the taxable year begins, by substituting ‘calendar year 2017’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a multiple of $1,000,000, such amount shall be rounded to the nearest multiple of $1,000,000.”.
(4) COORDINATION WITH SECTION 481.—Section 448(d)(7) is amended to read as follows:
(5) APPLICATION OF EXCEPTION TO CORPORATIONS ENGAGED IN FARMING.—
(A) IN GENERAL.—Section 447(c) is amended—
(B) COORDINATION WITH SECTION 481.—Section 447(f) is amended to read as follows:
(C) CONFORMING AMENDMENTS.—Section 447 is amended—
(b) Exemption from UNICAP requirements.—
(1) IN GENERAL.—Section 263A is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection:
“(i) Exemption for certain small businesses.—
“(1) IN GENERAL.—In the case of any taxpayer (other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3)) which meets the gross receipts test of section 448(c) for any taxable year, this section shall not apply with respect to such taxpayer for such taxable year.
(2) CONFORMING AMENDMENT.—Section 263A(b)(2) is amended to read as follows:
(c) Exemption from inventories.—Section 471 is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:
“(c) Exemption for certain small businesses.—
“(1) IN GENERAL.—In the case of any taxpayer (other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3)) which meets the gross receipts test of section 448(c) for any taxable year—
“(B) the taxpayer’s method of accounting for inventory for such taxable year shall not be treated as failing to clearly reflect income if such method either—
“(ii) conforms to such taxpayer’s method of accounting reflected in an applicable financial statement of the taxpayer with respect to such taxable year or, if the taxpayer does not have any applicable financial statement with respect to such taxable year, the books and records of the taxpayer prepared in accordance with the taxpayer’s accounting procedures.
“(2) APPLICABLE FINANCIAL STATEMENT.—For purposes of this subsection, the term ‘applicable financial statement’ 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,
(d) Exemption from percentage completion for long-term contracts.—
(1) IN GENERAL.—Section 460(e)(1)(B) is amended—
(2) CONFORMING AMENDMENTS.—Section 460(e) is amended by striking paragraphs (2) and (3), by redesignating paragraphs (4), (5), and (6) as paragraphs (3), (4), and (5), respectively, and by inserting after paragraph (1) the following new paragraph:
“(2) RULES RELATED TO GROSS RECEIPTS TEST.—
“(A) APPLICATION OF GROSS RECEIPTS TEST TO INDIVIDUALS, ETC.—For purposes of paragraph (1)(B)(ii), in the case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be applied in the same manner as if each trade or business of such taxpayer were a corporation or partnership.
“(B) COORDINATION WITH SECTION 481.—Any change in method of accounting made pursuant to paragraph (1)(B)(ii) shall be treated as initiated by the taxpayer and made with the consent of the Secretary. Such change shall be effected on a cut-off basis for all similarly classified contracts entered into on or after the year of change.”.
(e) Effective date.—
(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2017.
(2) PRESERVATION OF SUSPENSE ACCOUNT RULES WITH RESPECT TO ANY EXISTING SUSPENSE ACCOUNTS.—So much of the amendments made by subsection (a)(5)(C) as relate to section 447(i) of the Internal Revenue Code of 1986 shall not apply with respect to any suspense account established under such section before the date of the enactment of this Act.
(a) In general.—Section 163(j)(2), as amended by section 3301, is amended to read as follows:
“(2) 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.”.
(a) Adjustments attributable to conversion from S corporation to C corporation.—Section 481 is amended by adding at the end the following new subsection:
“(d) Adjustments attributable to conversion from S corporation to C corporation.—
“(1) IN GENERAL.—In the case of an eligible terminated S corporation, any adjustment required by subsection (a)(2) which is attributable to such corporation’s revocation described in paragraph (2)(A)(ii) shall be taken into account ratably during the 6-taxable year period beginning with the year of change.
(b) Cash distributions following post-termination transition period from S corporation status.—Section 1371 is amended by adding at the end the following new subsection:
“(f) Cash distributions following post-termination transition period.—In the case of a distribution of money by an eligible terminated S corporation (as defined in section 481(d)) after the post-termination transition period, the accumulated adjustments account shall be allocated to such distribution, and the distribution shall be chargeable to accumulated earnings and profits, in the same ratio as the amount of such accumulated adjustments account bears to the amount of such accumulated earnings and profits.”.
(a) In general.—Section 163(j) is amended to read as follows:
“(j) Limitation on business interest.—
“(1) IN GENERAL.—In the case of any taxpayer for any taxable year, the amount allowed as a deduction under this chapter for business interest shall not exceed the sum of—
The amount determined under subparagraph (B) (after any increases in such amount under paragraph (3)(A)(iii)) shall not be less than zero.
“(2) EXEMPTION FOR CERTAIN SMALL BUSINESSES.—For exemption for certain small businesses, see the amendment made by section 3203 of the Tax Cuts and Jobs Act.
“(3) 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,
“(4) 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)).
“(5) 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)).
“(6) ADJUSTED TAXABLE INCOME.—For purposes of this subsection, the term ‘adjusted taxable income’ means the taxable income of the taxpayer—
“(7) TRADE OR BUSINESS.—For purposes of this subsection, the term ‘trade or business’ shall not include—
“(C) 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, or by a public service or public utility commission or other similar body of any State or political subdivision thereof.
“(8) CARRYFORWARD OF DISALLOWED INTEREST.—For carryforward of interest disallowed under paragraph (1), see subsection (o).
“(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) Carryforward of disallowed business interest.—Section 163, after amendment by section 4302(a) and before amendment by section 4302(b), is amended by inserting after subsection (n) the following new subsection:
“(o) Carryforward of disallowed business interest.—The amount of any business interest not allowed as a deduction for any taxable year by reason of subsection (j) shall be treated as business interest paid or accrued in the succeeding taxable year. Business interest paid or accrued in any taxable year (determined without regard to the preceding sentence) shall not be carried past the 5th taxable year following such taxable year, determined by treating business interest as allowed as a deduction on a first-in, first-out basis.”.
(c) 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).”
(a) Indefinite carryforward of net operating losses.—Section 172(b)(1)(A)(ii) is amended by striking “to each of the 20 taxable years” and inserting “to each taxable year”.
(b) Repeal of net operating loss carrybacks other than 1-year carryback of eligible disaster losses.—
(1) IN GENERAL.—Section 172(b)(1)(A)(i) is amended to read as follows:
(2) CONFORMING AMENDMENTS.—
(A) Section 172(b)(1) is amended by striking subparagraphs (B) through (F) and inserting the following:
“(B) ELIGIBLE DISASTER LOSS.—
“(i) IN GENERAL.—For purposes of subparagraph (A)(i), the term ‘eligible disaster loss’ means—
“(ii) SMALL BUSINESS.—For purposes of this subparagraph, the term ‘small business’ means a corporation or partnership which meets the gross receipts test of section 448(c) (determined by substituting ‘$5,000,000’ for ‘$25,000,000’ each place it appears therein) for the taxable year in which the loss arose (or, in the case of a sole proprietorship, which would meet such test if such proprietorship were a corporation).
“(iii) TRADE OR BUSINESS OF FARMING.—For purposes of this subparagraph, the trade or business of farming shall include the trade or business of—
For purposes of subclause (II), an evergreen tree which is more than 6 years old at the time severed from the roots shall not be treated as an ornamental tree.”.
(B) Section 172 is amended by striking subsections (f), (g), and (h).
(c) Limitation of net operating loss to 90 percent of taxable income.—
(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 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:
(d) Annual increase of indefinite carryover amounts.—Section 172(b) is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph:
“(3) ANNUAL INCREASE OF INDEFINITE CARRYOVER AMOUNTS.—For purposes of paragraph (2)—
“(A) the amount of any indefinite net operating loss which is carried to the next succeeding taxable year after the loss year (within the meaning of paragraph (2)) shall be increased by an amount equal to—
“(B) the amount of any indefinite net operating loss which is carried to any succeeding taxable year (after such next succeeding taxable year) shall be an amount equal to—
“(i) the excess of—
“(ii) a percentage equal to 100 percent plus the percentage determined under subparagraph (A)(ii) with respect to such succeeding taxable year.
For purposes of the preceding sentence, the term ‘indefinite net operating loss’ means any net operating loss arising in a taxable year beginning after December 31, 2017.”.
(e) Effective date.—
(1) CARRYFORWARDS AND CARRYBACKS.—The amendments made by subsections (a) and (b) shall apply to net operating losses arising in taxable years beginning after December 31, 2017.
(2) NET OPERATING LOSS LIMITED TO 90 PERCENT OF TAXABLE INCOME.—The amendments made by subsection (c) shall apply to taxable years beginning after December 31, 2017.
(3) ANNUAL INCREASE IN CARRYOVER AMOUNTS.—The amendments made by subsection (d) shall apply to amounts carried to taxable years beginning after December 31, 2017.
(4) SPECIAL RULE FOR NET DISASTER LOSSES.—Notwithstanding paragraph (1), the amendments made by subsection (b) shall not apply to the portion of the net operating loss for any taxable year which is a net disaster loss to which section 504(b) of the Disaster Tax Relief and Airport and Airway Extension Act of 2017 applies.
(a) In general.—Section 1031(a)(1) is amended by striking “property” each place it appears and inserting “real property”.
(b) Conforming amendments.—
(1) Paragraph (2) of section 1031(a) is amended to read as follows:
(2) Section 1031 is amended by striking subsections (e) and (i).
(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.
(a) Inclusion of contributions to capital.—Part II of subchapter B of chapter 1 is amended by inserting after section 75 the following new section:
“(b) Treatment of contributions in exchange for stock, etc.—
“(1) IN GENERAL.—In the case of any contribution of money or other property to a corporation in exchange for stock of such corporation—
“(2) TREATMENT LIMITED TO VALUE OF STOCK.—For purposes of this subsection, a contribution of money or other property to a corporation shall be treated as being in exchange for stock of such corporation only to the extent that the fair market value of such money and other property does not exceed the fair market value of such stock.
(b) Basis of corporation in contributed property.—
(1) CONTRIBUTIONS TO CAPITAL.—Subsection (c) of section 362 is amended to read as follows:
“(c) Contributions to capital.—If property other than money is transferred to a corporation as a contribution to the capital of such corporation (within the meaning of section 76) then the basis of such property shall be the greater of—
(2) CONTRIBUTIONS IN EXCHANGE FOR STOCK.—Paragraph (2) of section 362(a) is amended by striking “contribution to capital” and inserting “contribution in exchange for stock of such corporation (determined under rules similar to the rules of paragraphs (2) and (3) of section 76(b))”.
(c) Conforming amendments.—
(1) Section 108(e) is amended by striking paragraph (6).
(2) Part III of subchapter B of chapter 1 is amended by striking section 118 (and by striking the item relating to such section in the table of sections for such part).
(3) The table of sections for part II of subchapter B of chapter 1 is amended by inserting after the item relating to section 75 the following new item:
(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)”.
(a) In general.—Part VI of subchapter B of chapter 1 is amended by striking section 199 (and by striking the item relating to such section in the table of sections for such part).
(b) Conforming amendments.—
(1) Sections 74(d)(2)(B), 86(b)(2)(A), 137(b)(3)(A), 219(g)(3)(A)(ii), and 246(b)(1) are each amended by striking “199,”.
(2) Section 170(b)(2)(D), as amended by the preceding provisions of this Act, is amended by striking clause (iv), by redesignating clause (v) as clause (iv), and by inserting “and” at the end of clause (iii).
(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), respectively.
(6) Section 1402(a) is amended by adding “and” at the end of paragraph (15) and by striking paragraph (16).
(a) Denial of deduction.—Subsection (a) of section 274 is amended to read as follows:
“(a) Entertainment, amusement, recreation, and other fringe benefits .—
“(1) IN GENERAL.—No deduction otherwise allowable under this chapter shall be allowed for amounts paid or incurred for any of the following items:
“(A) ACTIVITY.—With respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation.
“(B) MEMBERSHIP DUES.—With respect to membership in any club organized for business, pleasure, recreation or other social purposes.
“(C) AMENITY.—With respect to a de minimis fringe (as defined in section 132(e)(1)) that is primarily personal in nature and involving property or services that are not directly related to the taxpayer’s trade or business.
“(D) FACILITY.—With respect to a facility or portion thereof used in connection with an activity referred to in subparagraph (A), membership dues or similar amounts referred to in subparagraph (B), or an amenity referred to in subparagraph (C).
“(2) SPECIAL RULES.—For purposes of applying paragraph (1), an activity described in section 212 shall be treated as a trade or business.
“(3) REGULATIONS.—Under the regulations prescribed to carry out this section, the Secretary shall include regulations—
“(A) defining entertainment, amenities, recreation, amusement, and facilities for purposes of this subsection,
(b) Exception for certain expenses includible in income of recipient.—
(1) EXPENSES TREATED AS COMPENSATION.—Paragraph (2) of section 274(e) is amended to read as follows:
“(2) EXPENSES TREATED AS COMPENSATION.—Expenses for goods, services, and facilities, to the extent that the expenses do not exceed the amount of the expenses which are treated by the taxpayer, with respect to the recipient of the entertainment, amusement, or recreation, as compensation to an employee on the taxpayer’s return of tax under this chapter and as wages to such employee for purposes of chapter 24 (relating to withholding of income tax at source on wages).”.
(2) EXPENSES INCLUDIBLE IN INCOME OF PERSONS WHO ARE NOT EMPLOYEES.—Paragraph (9) of section 274(e) is amended by striking “to the extent that the expenses” and inserting “to the extent that the expenses do not exceed the amount of the expenses that”.
(c) Exceptions for reimbursed expenses.—Paragraph (3) of section 274(e) is amended to read as follows:
“(3) REIMBURSED EXPENSES.—
“(A) IN GENERAL.—Expenses paid or incurred by the taxpayer, in connection with the performance by him of services for another person (whether or not such other person is the taxpayer’s employer), under a reimbursement or other expense allowance arrangement with such other person, but this paragraph shall apply—
(d) 50 percent limitation on meals and entertainment expenses.—Subsection (n) of section 274 is amended to read as follows:
“(n) Limitation on certain expenses.—
“(1) IN GENERAL.—The amount allowable as a deduction under this chapter for any expense for food or beverages (pursuant to subsection (e)(1)) or business meals (pursuant to subsection (k)(1)) shall not exceed 50 percent of the amount of such expense or item which would (but for this paragraph) be allowable as a deduction under this chapter.
“(2) EXCEPTIONS.—Paragraph (1) shall not apply to any expense if—
“(B) in the case of an expense for food or beverages, such expense is excludable from the gross income of the recipient under section 132 by reason of subsection (e) thereof (relating to de minimis fringes) or under section 119 (relating to meals and lodging furnished for convenience of employer), or
“(3) SPECIAL RULE FOR INDIVIDUALS SUBJECT TO FEDERAL HOURS OF SERVICE.—In the case of any expenses for food or beverages consumed while away from home (within the meaning of section 162(a)(2)) by an individual during, or incident to, the period of duty subject to the hours of service limitations of the Department of Transportation, paragraph (1) shall be applied by substituting ‘80 percent’ for ‘50 percent’.”.
(e) Conforming amendments.—
(1) Section 274(d) is amended—
(A) by striking paragraph (2) and redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively, and
(2) Section 274(e) is amended by striking paragraph (4) and redesignating paragraphs (5), (6), (7), (8), and (9) as paragraphs (4), (5), (6), (7), and (8), respectively.
(3) Section 274(k)(2)(A) is amended by striking “(4), (7), (8), or (9)” and inserting “(6), (7), or (8)”.
(4) Section 274 is amended by striking subsection (l).
(5) Section 274(m)(1)(B)(ii) is amended by striking “(4), (7), (8), or (9)” and inserting “(6), (7), or (8)”.
(a) In general.—Section 512(a) is amended by adding at the end the following new paragraph:
“(6) INCREASE IN UNRELATED BUSINESS TAXABLE INCOME BY DISALLOWED FRINGE.—Unrelated business taxable income of an organization shall be increased by any amount for which a deduction is not allowable under this chapter by reason of section 274 and which is paid or incurred by such organization for any qualified transportation fringe (as defined in section 132(f)), any parking facility used in connection with qualified parking (as defined in section 132(f)(5)(C)), or any on-premises athletic facility (as defined in section 132(j)(4)(B)). The preceding sentence shall not apply to the extent the amount paid or incurred is directly connected with an unrelated trade or business which is regularly carried on by the organization. The Secretary may issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this paragraph, including regulations or other guidance providing for the appropriate allocation of depreciation and other costs with respect to facilities used for parking or for on-premises athletic facilities.
(a) In general.—Section 162 is amended by redesignating subsection (q) as subsection (r) and by inserting after subsection (p) the following new subsection:
“(q) 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.—For purposes of this paragraph, the term ‘expanded affiliated group’ means an affiliated group as defined in section 1504(a), determined—
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 sentence).”.
(a) In general.—Part III of subchapter O of chapter 1 is amended by striking section 1044 (and by striking the item relating to such section in the table of sections of such part).
(b) Conforming amendments.—Section 1016(a)(23) is amended—
(a) Patents, etc.—Section 1221(a)(3) is amended by inserting “a patent, invention, model or design (whether or not patented), a secret formula or process,” before “a copyright”.
(b) Conforming amendment.—Section 1231(b)(1)(C) is amended by inserting “a patent, invention, model or design (whether or not patented), a secret formula or process,” before “a copyright”.
(a) In general.—Part IV of subchapter P of chapter 1 is amended by striking section 1235 (and by striking the item relating to such section in the table of sections of such part).
(b) Conforming amendments.—
(1) Section 483(d) is amended by striking paragraph (4).
(2) Section 901(l)(5) is amended by striking “without regard to section 1235 or any similar rule” and inserting “without regard to any provision which treats a disposition as a sale or exchange of a capital asset held for more than 1 year or any similar provision”.
(3) Section 1274(c)(3) is amended by striking subparagraph (E) and redesignating subparagraph (F) as subparagraph (E).
(a) In general.—Paragraph (1) of section 708(b) is amended—
(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.
“(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) Coordination with section 83.—Subsection (e) of section 83 is amended by striking “or” at the end of paragraph (4), by striking the period at the end of paragraph (5) and inserting “, or”, and by adding at the end the following new paragraph:
(c) 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.”.
(a) In general.—Section 174 is amended to read as follows:
“SEC. 174. Amortization of research and experimental expenditures.
“(a) In general.—In the case of a taxpayer’s specified research or experimental expenditures for any taxable year—
“(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) 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.”.
(a) In general.—Section 162, as amended by the preceding provisions of this Act, is amended by redesignating subsection (r) as subsection (s) and by inserting after subsection (q) the following new subsection:
(a) In general.—Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45C (and by striking the item relating to such section in the table of sections for such subpart).
(b) Conforming amendments.—
(1) Section 38(b) is amended by striking paragraph (12).
(2) Section 280C is amended by striking subsection (b).
(3) Section 6501(m) is amended by striking “45C(d)(4),”.
(a) In general.—Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45F (and by striking the item relating to such section in the table of sections for such subpart).
(b) Conforming amendments.—
(1) Section 38(b) is amended by striking paragraph (15).
(2) Section 1016(a) is amended by striking paragraph (28).
(a) In general.—Subpart E of part IV of subchapter A of chapter 1 is amended by striking section 47 (and by striking the item relating to such section in the table of sections for such subpart).
(b) Conforming amendments.—
(1) Section 170(f)(14)(A) is amended by inserting “(as in effect before its repeal by the Tax Cuts and Jobs Act)” after “section 47”.
(2) Section 170(h)(4) is amended—
(B) by adding at the end the following new subparagraph:
“(D) REGISTERED HISTORIC DISTRICT.—The term ‘registered historic district’ means—
“(ii) any district—
“(I) which is designated under a statute of the appropriate State or local government, if such statute is certified by the Secretary of the Interior to the Secretary as containing criteria which will substantially achieve the purpose of preserving and rehabilitating buildings of historic significance to the district, and
(3) Section 469(i)(3) is amended by striking subparagraph (B).
(4) Section 469(i)(6)(B) is amended—
(5) Section 469(k)(1) is amended by striking “, or any rehabilitation credit determined under section 47,”.
(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 (within the meaning of section 47 of the Internal Revenue Code of 1986 as in effect before its repeal) with respect to any building—
(A) owned or leased (as permitted by section 47 of the Internal Revenue Code of 1986 as in effect before its repeal) by the taxpayer at all times after December 31, 2017, and
(B) with respect to which the 24-month period selected by the taxpayer under section 47(c)(1)(C) of such Code begins not later than the end of the 180-day period beginning on 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.
(a) In general.—Subpart F of part IV of subchapter A of chapter 1 is amended by striking section 51 (and by striking the item relating to such section in the table of sections for such subpart).
(a) In general.—Part VI of subchapter B of chapter 1 is amended by striking section 196 (and by striking the item relating to such section in the table of sections for such part).
(a) In general.—Section 45D(f) is amended—
(a) In general.—Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 44 (and by striking the item relating to such section in the table of sections for such subpart).
(b) Conforming amendment.—Section 38(b) is amended by striking paragraph (7).
(a) Credit determined with respect to minimum wage as in effect.—Section 45B(b)(1)(B) is amended by striking “as in effect on January 1, 2007, and”.
(b) Information return requirement.—Section 45B is amended by redesignating subsections (c) and (d) as subsections (d) and (e), respectively, and by inserting after subsection (b) the following new subsection:
“(c) Information return requirement.—
“(1) IN GENERAL.—No credit shall be determined under subsection (a) with respect to any food or beverage establishment of any taxpayer for any taxable year unless such taxpayer has, with respect to the calendar year which ends in or with such taxable year—
“(2) ALLOCATION OF 10 PERCENT OF GROSS RECEIPTS.—For purposes of determining the information referred to in subparagraphs (A) and (B), section 6053(c)(3)(A)(i) shall be applied by substituting ‘10 percent’ for ‘8 percent’. For purposes of section 6053(c)(5), any reference to section 6053(c)(3)(B) contained therein shall be treated as including a reference to this paragraph.
“(3) FOOD OR BEVERAGE ESTABLISHMENT.—For purposes of this subsection, the term ‘food or beverage establishment’ means any trade or business (or portion thereof) which would be a large food or beverage establishment (as defined in section 6053(c)(4)) if such section were applied without regard to subparagraph (C) thereof.”.
(a) Termination of inflation adjustment.—Section 45(b)(2) is amended—
(b) Special rule for determination of beginning of construction.—Section 45(e) is amended by adding at the end the following new paragraph:
“(12) SPECIAL RULE FOR DETERMINING BEGINNING OF CONSTRUCTION.—For purposes of subsection (d), the construction of any facility, modification, improvement, addition, or other property shall not be treated as beginning before any date unless there is a continuous program of construction which begins before such date and ends on the date that such property is placed in service.”.
(a) Extension of solar energy property.—Section 48(a)(3)(A)(ii) is amended by striking “periods ending before January 1, 2017” and inserting “property the construction of which begins before January 1, 2022”.
(b) Extension of qualified fuel cell property.—Section 48(c)(1)(D) is amended by striking “for any period after December 31, 2016” and inserting “the construction of which does not begin before January 1, 2022”.
(c) Extension of qualified microturbine property.—Section 48(c)(2)(D) is amended by striking “for any period after December 31, 2016” and inserting “the construction of which does not begin before January 1, 2022”.
(d) Extension of combined heat and power system property.—Section 48(c)(3)(A)(iv) is amended by striking “which is placed in service before January 1, 2017” and inserting “the construction of which begins before January 1, 2022”.
(e) Extension of qualified small wind energy property.—Section 48(c)(4)(C) is amended by striking “for any period after December 31, 2016” and inserting “the construction of which does not begin before January 1, 2022”.
(f) Extension of thermal energy property.—Section 48(a)(3)(A)(vii) is amended by striking “periods ending before January 1, 2017” and inserting “property the construction of which begins before January 1, 2022”.
(g) Phaseout of 30 percent credit rate for fuel cell and small wind energy property.—Section 48(a) is amended by adding at the end the following new paragraph:
“(7) PHASEOUT FOR QUALIFIED FUEL CELL PROPERTY AND QUALIFIED SMALL WIND ENERGY PROPERTY.—
“(A) IN GENERAL.—In the case of qualified fuel cell property or qualified small wind energy property, the construction of which begins before January 1, 2022, the energy percentage determined under paragraph (2) shall be equal to—
“(B) PLACED IN SERVICE DEADLINE.—In the case of any qualified fuel cell property or qualified small wind energy property, the construction of which begins before January 1, 2022, and which is not placed in service before January 1, 2024, the energy percentage determined under paragraph (2) shall be equal to 10 percent.”.
(h) Phaseout for fiber-optic solar energy property.—Subparagraphs (A) and (B) of section 48(a)(6) are each amended by inserting “or (3)(A)(ii)” after “paragraph (3)(A)(i)”.
(i) Termination of solar energy property.—Section 48(a)(3)(A)(i) is amended by inserting “, the construction of which begins before January 1, 2028, and” after “equipment”.
(j) Termination of geothermal energy property.—Section 48(a)(3)(A)(iii) is amended by inserting “, the construction of which begins before January 1, 2028, and” after “equipment”.
(k) Special rule for determination of beginning of construction.—Section 48(c) is amended by adding at the end the following new paragraph:
“(5) SPECIAL RULE FOR DETERMINING BEGINNING OF CONSTRUCTION.—The construction of any facility, modification, improvement, addition, or other property shall not be treated as beginning before any date unless there is a continuous program of construction which begins before such date and ends on the date that such property is placed in service.”.
(l) Effective date.—
(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to periods after December 31, 2016, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).
(2) EXTENSION OF COMBINED HEAT AND POWER SYSTEM PROPERTY.—The amendment made by subsection (d) shall apply to property placed in service after December 31, 2016.
(a) Extension.—Section 25D(h) is amended by striking “December 31, 2016 (December 31, 2021, in the case of any qualified solar electric property expenditures and qualified solar water heating property expenditures)” and inserting “December 31, 2021”.
(a) In general.—Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 43 (and by striking the item relating to such section in the table of sections for such subpart).
(b) Conforming amendments.—
(1) Section 38(b) is amended by striking paragraph (6).
(2) Section 6501(m) is amended by striking “43,”.
(a) In general.—Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45I (and by striking the item relating to such section in the table of sections for such subpart).
(b) Conforming amendment.—Section 38(b) is amended by striking paragraph (19).
(a) Treatment of unutilized limitation amounts.—Section 45J(b) is amended—
(2) by adding at the end the following new paragraph:
“(5) ALLOCATION OF UNUTILIZED LIMITATION.—
“(A) IN GENERAL.—Any unutilized national megawatt capacity limitation shall be allocated by the Secretary under paragraph (3) as rapidly as is practicable after December 31, 2020—
“(B) UNUTILIZED NATIONAL MEGAWATT CAPACITY LIMITATION.—The term ‘unutilized national megawatt capacity limitation’ means the excess (if any) of—
“(C) COORDINATION WITH OTHER PROVISIONS.—In the case of any unutilized national megawatt capacity limitation allocated by the Secretary pursuant to this paragraph—
(b) Transfer of credit by certain public entities.—
(1) IN GENERAL.—Section 45J is amended—
(B) by inserting after subsection (d) the following new subsection:
“(e) Transfer of credit by certain public entities.—
“(1) IN GENERAL.—If, with respect to a credit under subsection (a) for any taxable year—
“(B) such entity elects the application of this paragraph for such taxable year with respect to all (or any portion specified in such election) of such credit,
the eligible project partner specified in such election (and not the qualified public entity) shall be treated as the taxpayer for purposes of this title with respect to such credit (or such portion thereof).
“(2) DEFINITIONS.—For purposes of this subsection—
“(A) QUALIFIED PUBLIC ENTITY.—The term ‘qualified public entity’ means—
“(i) a Federal, State, or local government entity, or any political subdivision, agency, or instrumentality thereof;
“(B) ELIGIBLE PROJECT PARTNER.—The term ‘eligible project partner’ means—
“(i) any person responsible for, or participating in, the design or construction of the advanced nuclear power facility to which the credit under subsection (a) relates;
“(ii) any person who participates in the provision of the nuclear steam supply system to the advanced nuclear power facility to which the credit under subsection (a) relates;
“(3) SPECIAL RULES.—
“(A) APPLICATION TO PARTNERSHIPS.—In the case of a credit under subsection (a) which is determined at the partnership level—
“(B) TAXABLE YEAR IN WHICH CREDIT TAKEN INTO ACCOUNT.—In the case of any credit (or portion thereof) with respect to which an election is made under paragraph (1), such credit shall be taken into account in the first taxable year of the eligible project partner ending with, or after, the qualified public entity’s taxable year with respect to which the credit was determined.
(2) SPECIAL RULE FOR PROCEEDS OF TRANSFERS FOR MUTUAL OR COOPERATIVE ELECTRIC COMPANIES.—Section 501(c)(12) of such Code is amended by adding at the end the following new subparagraph:
“(I) In the case of a mutual or cooperative electric company described in this paragraph or an organization described in section 1381(a)(2), income received or accrued in connection with an election under section 45J(e)(1) shall be treated as an amount collected from members for the sole purpose of meeting losses and expenses.”.
(a) In general.—Paragraph (1) of section 103(b) is amended—
(b) Conforming amendments.—
(1) Subpart A of part IV of subchapter B of chapter 1 is amended by striking sections 142, 143, 144, 145, 146, and 147 (and by striking each of the items relating to such sections in the table of sections for such subpart).
(2) Section 25 is amended by adding at the end the following new subsection:
(3) Section 26(b)(2) is amended by striking subparagraph (D).
(4) Section 141(b) is amended by striking paragraphs (5) and (9).
(5) Section 141(d) is amended by striking paragraph (5).
(6) Section 141 is amended by striking subsection (e).
(7) Section 148(f)(4) is amended—
(8) Clause (iv) of section 148(f)(4)(C) is amended to read as follows:
(9) Section 149(b)(3) is amended by striking subparagraph (C).
(10) Section 149(e)(2) is amended—
(11) Section 149(f)(6) is amended—
(12) Section 150(e)(3) is amended to read as follows:
(13) Section 269A(b)(3) is amended by striking “144(a)(3)” and inserting “414(n)(6)(A)”.
(14) Section 414(m)(5) is amended by striking “section 144(a)(3)” and inserting “subsection (n)(6)(A)”.
(15) Section 414(n)(6)(A) is amended to read as follows:
(16) Section 6045(e)(4)(B) is amended by inserting “(as in effect before its repeal by the Tax Cuts and Jobs Act)” after “section 143(m)(3)”.
(17) Section 6654(f)(1) is amended by inserting “(as in effect before its repeal by the Tax Cuts and Jobs Act)” after “section 143(m)”.
(18) Section 7871(c) is amended—
(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).
(a) In general.—Part IV of subchapter A of chapter 1 is amended by striking subparts H, I, and J (and by striking the items relating to such subparts in the table of subparts for such part).
(b) Payments to issuers.—Subchapter B of chapter 65 is amended by striking section 6431 (and by striking the item relating to such section in the table of sections for such subchapter).
(c) Conforming amendments.—
(1) Part IV of subchapter U of chapter 1 is amended by striking section 1397E (and by striking the item relating to such section in the table of sections for such part).
(2) Section 54(l)(3)(B) is amended by inserting “(as in effect before its repeal by the Tax Cuts and Jobs Act)” after “section 1397E(I)”.
(3) Section 6211(b)(4)(A) is amended by striking “, and 6431” and inserting “and” before “36B”.
(4) Section 6401(b)(1) is amended by striking “G, H, I, and J” and inserting “and G”.
(a) In general.—Section 103(b), as amended by this Act, is further amended by adding at the end the following new paragraph:
(b) Professional stadium bond defined.—Subsection (c) of section 103 is amended by adding at the end the following new paragraph:
“(3) PROFESSIONAL STADIUM BOND.—The term ‘professional stadium bond’ means any bond issued as part of an issue any proceeds of which are used to finance or refinance capital expenditures allocable to a facility (or appurtenant real property) which, during at least 5 days during any calendar year, is used as a stadium or arena for professional sports exhibitions, games, or training.”.
(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) 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).
(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 953(b)(1)(B) is amended to read as follows:
(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 section 3701, 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) 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 3701, is amended by striking subparagraph (A) and by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively.
(a) In general.—Section 801(a)(1) is amended—
(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.”.
(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—
(a) In general.—Section 832(b)(5)(B) is amended by striking “15 percent” and inserting “26.25 percent”.
(a) Modification of rate of interest used to discount unpaid losses.—Paragraph (2) of section 846(c) is amended to read as follows:
(b) Modification of computational rules for loss payment patterns.—Section 846(d)(3) is amended by striking subparagraphs (B) through (G) and inserting the following new subparagraphs:
“(B) TREATMENT OF CERTAIN LOSSES.—Losses which would have been treated as paid in the last year of the period applicable under subparagraph (A)(i) or (A)(ii) shall be treated as paid in the following manner:
“(i) 3-YEAR LOSS PAYMENT PATTERN.—
“(I) IN GENERAL.—The period taken into account under subparagraph (A)(i) shall be extended to the extent required under subclause (II).
“(II) COMPUTATION OF EXTENSION.—The amount of losses which would have been treated as paid in the 3d year after the accident year shall be treated as paid in such 3d year and each subsequent year in an amount equal to the average of the losses treated as paid in the 1st and 2d years after the accident year (or, if lesser, the portion of the unpaid losses not theretofore taken into account). To the extent such unpaid losses have not been treated as paid before the 18th year after the accident year, they shall be treated as paid in such 18th year.
“(ii) 10-YEAR LOSS PAYMENT PATTERN.—
“(I) IN GENERAL.—The period taken into account under subparagraph (A)(ii) shall be extended to the extent required under subclause (II).
“(II) COMPUTATION OF EXTENSION.—The amount of losses which would have been treated as paid in the 10th year after the accident year shall be treated as paid in such 10th year and each subsequent year in an amount equal to the amount of the average of the losses treated as paid in the 7th, 8th, and 9th years after the accident year (or, if lesser, the portion of the unpaid losses not theretofore taken into account). To the extent such unpaid losses have not been treated as paid before the 25th year after the accident year, they shall be treated as paid in such 25th year.”.
(c) Repeal of historical payment pattern election.—Section 846 is amended by striking subsection (e) and by redesignating subsections (f) and (g) as subsections (e) and (f), respectively.
(d) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2017.
(e) Transitional rule.—For the first taxable year beginning after December 31, 2017—
(1) the unpaid losses and the expenses unpaid (as defined in paragraphs (5)(B) and (6) of section 832(b) of the Internal Revenue Code of 1986) at the end of the preceding taxable year, and
(2) the unpaid losses as defined in sections 807(c)(2) and 805(a)(1) of such Code at the end of the preceding taxable year,
shall be determined as if the amendments made by this section had applied to such unpaid losses and expenses unpaid in the preceding taxable year and by using the interest rate and loss payment patterns applicable to accident years ending with calendar year 2018, and any adjustment shall be taken into account ratably in such first taxable year and the 7 succeeding taxable years. For subsequent taxable years, such amendments shall be applied with respect to such unpaid losses and expenses unpaid by using the interest rate and loss payment patterns applicable to accident years ending with calendar year 2018.
(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).
(a) Repeal of performance-based compensation and commission exceptions for limitation on excessive employee remuneration.—
(1) IN GENERAL.—Section 162(m)(4) 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) Expansion of applicable employer.—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)).”.
(c) Modification of definition of covered employees.—Section 162(m)(3) 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”,
(3) by striking “or” at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting “, or”, and by adding at the end the following:
“(C) was a covered employee of the taxpayer (or any predecessor) for any preceding taxable year beginning after December 31, 2016.
Such term shall include any employee who would be described in subparagraph (B) if the reporting described in such subparagraph were required as so described.”.
(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—
“(c) Definitions and special rules.—For purposes of this section—
“(1) APPLICABLE TAX-EXEMPT ORGANIZATION.—The term ‘applicable tax-exempt organization’ means any organization that 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)).
“(4) REMUNERATION FROM RELATED ORGANIZATIONS.—
“(A) IN GENERAL.—Remuneration of a covered employee paid 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)(2)) 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 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).
(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 exempt organization executive compensation.”.
(a) In general.—
(1) ELECTION TO DEFER INCOME.—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, if qualified stock is transferred to a qualified employee who makes an election with respect to such stock under this subsection—
“(A) except as provided in subparagraph (B), no amount shall be included in income under subsection (a) for the first taxable year in which the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, whichever is applicable, and
“(B) an amount equal to the amount which would be included in income of the employee under subsection (a) (determined without regard to this subsection) shall be included in income for the taxable year of the employee which includes the earliest of—
“(i) the first date such qualified stock becomes transferable (including 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 determined in a similar manner as provided 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 has been 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 time 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 time 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 clause (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 may require for purposes of administering this paragraph.
“(5) CONTROLLED GROUPS.—For purposes of this subsection, all corporations which are members of the same controlled group of corporations (as defined in section 1563(a)) shall be treated as one corporation.
“(6) NOTICE REQUIREMENT.—Any corporation that 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—
“(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,
(2) DEDUCTION BY EMPLOYER.—Subsection (h) of section 83 is amended by striking “or (d)(2)” and inserting “(d)(2), or (i)”.
(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(a) is amended by adding at the end the following flush sentence:
“The preceding sentence shall not apply to any share of stock with respect to which an election is made under section 83(i).”.
(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 (13), by striking the period at the end of paragraph (14) and inserting a comma, and by inserting after paragraph (14) 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:
“(o) 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) issue 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.
(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, the term ‘specified 10-percent owned foreign corporation’ means any foreign corporation with respect to which any domestic corporation is a United States shareholder. Such term shall not include any passive foreign investment company (within the meaning of subpart D of part VI of subchapter P) that is not a controlled foreign corporation.
“(c) Foreign-source portion.—For purposes of this section—
“(1) IN GENERAL.—The foreign-source portion of any dividend is an amount which bears the same ratio to such dividend as—
“(2) POST-1986 UNDISTRIBUTED EARNINGS.—The term ‘post-1986 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) accumulated in taxable years beginning after December 31, 1986—
“(3) POST-1986 UNDISTRIBUTED FOREIGN EARNINGS.—The term ‘post-1986 undistributed foreign earnings’ means the portion of the post-1986 undistributed earnings which is attributable to neither—
“(4) TREATMENT OF DISTRIBUTIONS FROM EARNINGS BEFORE 1987.—
“(A) IN GENERAL.—In the case of any dividend paid out of earnings and profits of the specified 10-percent owned foreign corporation (computed in accordance with sections 964(a) and 986) accumulated in taxable years beginning before January 1, 1987—
“(5) TREATMENT OF CERTAIN DIVIDENDS IN EXCESS OF UNDISTRIBUTED EARNINGS.—In the case of any dividend from the specified 10-percent owned foreign corporation which is in excess of undistributed earnings (as determined under paragraph (2) after taking into account the modifications described in clauses (i) and (ii) of paragraph (4)(A)), the foreign-source portion of such dividend is an amount which bears the same ratio to such dividend as—
(b) Application of holding period requirement.—Section 246(c) 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) 6-MONTH 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.—Section 246(a)(1) is amended by striking “and 245” and inserting “245, and 245A”.
(2) COORDINATION WITH SECTION 1059.—Section 1059(b)(2)(B) is amended by striking “or 245” and inserting “245, or 245A”.
(d) Coordination with foreign tax credit limitation.—Section 904(b) 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 United States shareholder with respect to a specified 10-percent owned foreign corporation, such shareholder’s taxable income from sources without the United States (and entire taxable income) shall be determined without regard to—
“(B) any deductions properly allocable or apportioned 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) Section 245(a)(4) is amended by striking “section 902(c)(1)” and inserting “section 245A(c)(2) applied by substituting ‘qualified 10-percent owned foreign corporation’ for ‘specified 10-percent owned foreign corporation’ each place it appears”.
(2) Section 951(b) is amended by striking “subpart” and inserting “title”.
(3) Section 957(a) is amended by striking “subpart” in the matter preceding paragraph (1) and inserting “title”.
(4) The table of sections for part VIII of subchapter B of chapter 1 is amended by inserting after section 245 the following new item:
(a) In general.—Section 956(a) is amended in the matter preceding paragraph (1) by inserting “(other than a corporation)” after “United States shareholder”.
(b) Regulatory authority to prevent abuse.—Section 956(e) is amended by striking “including regulations to prevent” and inserting“including regulations—
(a) Basis in specified 10-percent owned foreign corporation reduced by nontaxed portion of dividend for purposes of determining loss.—
(1) IN GENERAL.—Section 961 is amended by adding at the end the following new subsection:
“(d) Basis in specified 10-percent owned foreign corporation reduced by nontaxed portion of dividend for purposes of determining loss.—If a domestic corporation received a dividend from a specified 10-percent owned foreign corporation (as defined in section 245A) in any taxable year, solely for purposes of determining loss on any disposition of stock of such foreign corporation in such taxable year or any subsequent taxable year, the basis of such domestic corporation in such stock shall be reduced (but not below zero) by the amount of any deduction allowable to such domestic corporation under section 245A with respect to such stock except to the extent such basis was reduced under section 1059 by reason of a dividend for which such a deduction was allowable.”.
(b) 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)) to a specified 10-percent owned foreign corporation (as defined in section 245A) with respect to which it is a United States shareholder after such transfer, such domestic corporation shall include in gross income for the taxable year which includes such transfer an amount equal to the transferred loss amount with respect to such transfer.
“(b) Transferred loss amount.—For purposes of this section, the term ‘transferred loss amount’ means, with respect to any transfer of substantially all of the assets of a foreign branch, the excess (if any) of—
“(c) Reduction for recognized gains.—
“(1) IN GENERAL.—In the case of a transfer not described in section 367(a)(3)(C), 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)).
“(2) COORDINATION WITH RECOGNITION UNDER SECTION 367.—In the case of a transfer described in section 367(a)(3)(C), the transferred loss amount shall not exceed the excess (if any) of—
“(d) Source of income.—Amounts included in gross income under this section shall be treated as derived from sources within the United States.
“(e) Basis adjustments.—Consistent with such regulations or other guidance as the Secretary may 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) AMOUNTS RECOGNIZED UNDER SECTION 367 ON TRANSFER OF FOREIGN BRANCH WITH PREVIOUSLY DEDUCTED LOSSES TREATED AS UNITED STATES SOURCE.—Section 367(a)(3)(C) is amended by striking “outside” in the last sentence and inserting “within”.
(3) 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:
(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 foreign income corporation which begins before January 1, 2018, the subpart F income of such foreign corporation (as otherwise determined for such taxable year under section 952) shall be increased by the greater of—
“(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 (but not below zero) 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.—The term ‘aggregate foreign E&P deficit’ means, with respect to any United States shareholder, the aggregate of such shareholder’s pro rata shares of the specified E&P deficits of the E&P deficit foreign corporations of such shareholder.
“(4) NETTING AMONG UNITED STATES SHAREHOLDERS IN SAME AFFILIATED GROUP.—
“(A) IN GENERAL.—In the case of any affiliated group which includes at least one E&P net surplus shareholder and one E&P net deficit shareholder, the amount which would (but for this paragraph) be taken into account under section 951(a)(1) by reason of subsection (a) by each such E&P net surplus shareholder shall be reduced (but not below zero) by such shareholder’s applicable share of the affiliated group’s aggregate unused E&P deficit.
“(B) E&P NET SURPLUS SHAREHOLDER.—For purposes of this paragraph, the term ‘E&P net surplus shareholder’ means any United States shareholder which would (determined without regard to this paragraph) take into account an amount greater than zero under section 951(a)(1) by reason of subsection (a).
“(C) E&P NET DEFICIT SHAREHOLDER.—For purposes of this paragraph, the term ‘E&P net deficit shareholder’ means any United States shareholder if—
“(D) AGGREGATE UNUSED E&P DEFICIT.—For purposes of this paragraph—
“(i) IN GENERAL.—The term ‘aggregate unused E&P deficit’ means, with respect to any affiliated group, the lesser of—
“(ii) REDUCTION WITH RESPECT TO E&P NET DEFICIT SHAREHOLDERS WHICH ARE NOT WHOLLY OWNED BY THE AFFILIATED GROUP.—If the group ownership percentage of any E&P net deficit shareholder is less than 100 percent, the amount of the excess described in subparagraph (C) which is taken into account under clause (i)(I) with respect to such E&P net deficit shareholder shall be such group ownership percentage of such amount.
“(E) APPLICABLE SHARE.—For purposes of this paragraph, the term ‘applicable share’ means, with respect to any E&P net surplus shareholder in any affiliated group, the amount which bears the same proportion to such group’s aggregate unused E&P deficit as—
“(F) GROUP OWNERSHIP PERCENTAGE.—For purposes of this paragraph, the term ‘group ownership percentage’ means, with respect to any United States shareholder in any affiliated group, the percentage of the value of the stock of such United States shareholder which is held by other includible corporations in such affiliated group. Notwithstanding the preceding sentence, the group ownership percentage of the common parent of the affiliated group is 100 percent. Any term used in this subparagraph which is also used in section 1504 shall have the same meaning as when used in such section.
“(c) Application of participation exemption to included income.—
“(1) IN GENERAL.—In the case of a United States shareholder of a deferred foreign income corporation, there shall be allowed as a deduction for the taxable year in which an amount is included in the gross income of such United States shareholder under section 951(a)(1) by reason of this section an amount equal to the sum of—
“(2) 7 AND 14 PERCENT RATE EQUIVALENT PERCENTAGES.—For purposes of this subsection—
“(A) 7 PERCENT RATE EQUIVALENT PERCENTAGE.—The term ‘7 percent rate equivalent percentage’ means, with respect to any United States shareholder for any taxable year, the percentage which would result in the amount to which such percentage applies being subject to a 7 percent rate of tax determined by only taking into account a deduction equal to such percentage of such amount and the highest rate of tax specified in section 11 for such taxable year. In the case of any taxable year of a United States shareholder to which section 15 applies, the highest rate of tax under section 11 before the effective date of the change in rates and the highest rate of tax under section 11 after the effective date of such change shall each be taken into account under the preceding sentence in the same proportions as the portion of such taxable year which is before and after such effective date, respectively.
“(3) AGGREGATE FOREIGN CASH POSITION.—For purposes of this subsection—
“(A) IN GENERAL.—The term ‘aggregate foreign cash position’ means, with respect to any United States shareholder, one-third of the sum 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 November 2, 2017,
“(ii) the aggregate described in clause (i) determined as of the close of the last taxable year of each such specified foreign corporation which ends before November 2, 2017, and
“(iii) the aggregate described in clause (i) determined as of the close of the taxable year of each such specified foreign corporation which precedes the taxable year referred to in clause (ii).
In the case of any foreign corporation which did not exist as of the determination date described in clause (ii) or (iii), this subparagraph shall be applied separately to such foreign corporation by not taking into account such clause and by substituting ‘one-half (100 percent in the case that both clauses (ii) and (iii) are disregarded)’ for ‘one-third’.
“(B) CASH POSITION.—For purposes of this paragraph, the cash position of any specified foreign corporation is the sum of—
“(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.—
“(i) IN GENERAL.—The applicable percentage of each specified cash position of a specified foreign corporation shall not be taken into account by—
“(ii) SPECIFIED CASH POSITION.—For purposes of this subparagraph, the term ‘specified cash position’ means—
“(I) amounts described in subparagraph (B)(ii) to the extent such amounts are receivable from another specified foreign corporation with respect to any United States shareholder,
“(iii) APPLICABLE PERCENTAGE.—For purposes of this subparagraph, the term ‘applicable percentage’ means—
“(I) with respect to each specified cash position described in subclause (I) or (III) of clause (ii), the pro rata share of the United States shareholder referred to in clause (ii) with respect to the specified foreign corporation referred to in such clause, and
“(II) with respect to each specified cash position described in clause (ii)(II), the ratio (expressed as a percentage and not in excess of 100 percent) of the United States shareholder’s pro rata share of the cash position of the specified foreign corporation referred to in such clause divided by the amount of such specified cash position.
For purposes of this subparagraph, a separate applicable percentage shall be determined under each of subclauses (I) and (II) with respect to each specified foreign corporation referred to in clause (ii) with respect to which a specified cash position is determined for the specified foreign corporation referred to in clause (i).
“(iv) REDUCTION WITH RESPECT TO AFFILIATED GROUP MEMBERS NOT WHOLLY OWNED BY THE AFFILIATED GROUP.—For purposes of clause (i)(II), in the case of an includible corporation the group ownership percentage of which is less than 100 percent (as determined under subsection (b)(4)(F)), the amount not take into account by reason of such clause shall be the group ownership percentage of such amount (determined without regard to this clause).
“(E) CERTAIN BLOCKED ASSETS NOT TAKEN INTO ACCOUNT.—A cash position of a specified foreign corporation shall not be taken into account under subparagraph (A) if such position could not (as of the date that it would otherwise have been taken into account under clause (i), (ii), or (iii) of subparagraph (A)) have been distributed by such specified foreign corporation to United States shareholders of such specified foreign corporation because of currency or other restrictions or limitations imposed under the laws of any foreign country (within the meaning of section 964(b)).
“(F) CASH POSITIONS OF CERTAIN NON-CORPORATE ENTITIES TAKEN INTO ACCOUNT.—An entity (other than a domestic corporation) shall be treated as a specified foreign corporation of a United States shareholder for purposes of determining such United States shareholder’s aggregate foreign cash position if any interest in such entity is held by a specified foreign corporation of such United States shareholder (determined after application of this subparagraph) and such entity would be a specified foreign corporation of such United States shareholder if such entity were a foreign corporation.
“(G) TIME OF CERTAIN DETERMINATIONS.—For purposes of this paragraph, the determination of whether a person is a United States shareholder, whether a person is a specified foreign corporation, and the pro rata share of a United States shareholder with respect to a specified foreign corporation, shall be determined as of the end of the taxable year described in subsection (a).
“(d) Deferred foreign income corporation; accumulated post-1986 deferred foreign income.—For purposes of this section—
“(1) DEFERRED FOREIGN INCOME CORPORATION.—The term ‘deferred foreign income corporation’ means, with respect to any United States shareholder, any specified foreign corporation of such United States shareholder which has accumulated post-1986 deferred foreign income (as of the date referred to in paragraph (1) or (2) of subsection (a), whichever is applicable with respect to such foreign corporation) 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) 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) accumulated in taxable years beginning after December 31, 1986, and determined—
“(A) as of the date referred to in paragraph (1) or (2) of subsection (a), whichever is applicable with respect to such foreign corporation,
“(B) without diminution by reason of dividends distributed during the taxable year ending with or including such date, and
“(C) increased by the amount of any qualified deficit (within the meaning of section 952(c)(1)(B)(ii)) arising before January 1, 2018, which is treated as a qualified deficit (within the meaning of such section as amended by the Tax Cuts and Jobs Act) for purposes of such foreign corporation’s first taxable year beginning after December 31, 2017.
“(e) Specified foreign corporation.—
“(2) APPLICATION TO CERTAIN FOREIGN CORPORATIONS.—For purposes of sections 951 and 961, a foreign corporation described in paragraph (1)(B) shall be treated as a controlled foreign corporation solely for purposes of taking into account the subpart F income of such corporation under subsection (a) (and for purposes of applying subsection (f)).
“(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—
“(3) DENIAL OF DEDUCTION.—No deduction shall be allowed under this chapter for any tax for which credit is not allowable under section 901 by reason of paragraph (1) (determined by treating the taxpayer as having elected the benefits of subpart A of part III of subchapter N).
“(4) COORDINATION WITH SECTION 78.—With respect to the taxes treated as paid or accrued by a domestic corporation with respect to amounts which are includible in gross income of such domestic corporation by reason of this section, section 78 shall apply only to so much of such taxes as bears the same proportion to the amount of such taxes as—
“(5) EXTENSION OF FOREIGN TAX CREDIT CARRYOVER PERIOD.—With respect to 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, section 904(c) shall be applied by substituting ‘first 20 succeeding taxable years’ for ‘first 10 succeeding taxable years’.
“(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 equal installments.
“(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 may 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 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) 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.—Notwithstanding any other provision of law, 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 deferred foreign income corporation shall report in its return of tax under section 6037(a) the amount includible in its gross income for such taxable year by reason of this section and the amount of the deduction allowable by subsection (c). Any copy provided to a shareholder under section 6037(b) shall include a statement of such shareholder’s pro rata share of such amounts.
“(k) Inclusion of deferred foreign income under this section not to trigger recapture of overall foreign loss, etc.—For purposes of sections 904(f)(1) and 907(c)(4), in the case of a United States shareholder of a deferred foreign income corporation, such United States shareholder’s taxable income from sources without the United States and combined foreign oil and gas income shall be determined without regard to this section.
(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:
(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 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, 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 sections 959, 960, and 961) as an item of income required to be included in the gross income of such domestic corporation under section 951(a) for such taxable year.”.
(2) Section 245(a)(10)(C) is amended by striking “sections 902, 907, and 960” and inserting “sections 907 and 960”.
(3) Sections 535(b)(1) and 545(b)(1) are each amended by striking “section 902(a) or 960(a)(1)” and inserting “section 960”.
(4) Section 814(f)(1) is amended—
(5) Section 865(h)(1)(B) is amended by striking “sections 902, 907, and 960” and inserting “sections 907 and 960”.
(6) Section 901(a) is amended by striking “sections 902 and 960” and inserting “section 960”.
(7) 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”.
(8) Section 901(f) is amended by striking “sections 902 and 960” and inserting “section 960”.
(9) Section 901(j)(1)(A) is amended by striking “902 or”.
(10) Section 901(j)(1)(B) is amended by striking “sections 902 and 960” and inserting “section 960”.
(11) Section 901(k)(2) is amended by striking “section 853, 902, or 960” and inserting “section 853 or 960”.
(12) Section 901(k)(6) is amended by striking “902 or”.
(13) 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).”.
(14) Section 904(d)(1) is amended by striking “sections 902, 907, and 960” and inserting “sections 907 and 960”.
(15) Section 904(d)(6)(A) is amended by striking “sections 902, 907, and 960” and inserting “sections 907 and 960”.
(16) Section 904(h)(10)(A) is amended by striking “sections 902, 907, and 960” and inserting “sections 907 and 960”.
(17) Section 904 is amended by striking subsection (k).
(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 “10/50 corporation”,
(28) Section 909(d)(5) is amended to read as follows:
(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:
(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.”.
(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)(3) 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.
(a) In general.—Section 954(a) is amended by striking paragraph (5), by striking the comma at the end of paragraph (3) and inserting a period, and by inserting “and” at the end of paragraph (2).
(b) Conforming amendments.—
(1) Section 952(c)(1)(B)(iii) is amended by striking subclause (I) and by redesignating subclauses (II) through (V) as subclauses (I) through (IV), respectively.
(2) Section 954(b)(4) is amended by striking the last sentence.
(3) Section 954(b)(5) is amended by striking “the foreign base company services income, and the foreign base company oil related income” and inserting “and the foreign base company services income”.
(4) Section 954(b) is amended by striking paragraph (6).
(5) Section 954 is amended by striking subsection (g).
(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(c)(2)(A) 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.”.
(a) In general.—Paragraph (6) of section 954(c) is amended by striking subparagraph (C).
(a) In general.—Section 958(b) is amended—
(b) Application of certain reporting requirements.—Section 6038(e)(2) is amended by striking “except that—” and all that follows through “in applying subparagraph (C)” and inserting “except that in applying subparagraph (C)”.
(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”.
(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 for such taxable year 50 percent of such shareholder’s foreign high return amount for such taxable year.
“(b) Foreign high return amount.—For purposes of this section—
“(1) IN GENERAL.—The term ‘foreign high return amount’ means, with respect to any United States shareholder for any taxable year of such United States shareholder, the excess (if any) of—
“(B) the excess (if any) of—
“(i) the applicable percentage of the aggregate of such shareholder’s pro rata share of the qualified business asset investment of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year (determined for each taxable year of each such controlled foreign corporation which ends in or with such taxable year of such United States shareholder), over
“(c) Net CFC tested income.—For purposes of this section—
“(1) IN GENERAL.—The term ‘net CFC tested income’ means, with respect to any United States shareholder for any taxable year of such United States shareholder, the excess (if any) of—
“(A) the aggregate of such shareholder’s pro rata share of the tested income of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year of such United States shareholder (determined for each taxable year of such controlled foreign corporation which ends in or with such taxable year of such United States shareholder), over
“(B) the aggregate of such shareholder’s pro rata share of the tested loss of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year of such United States shareholder (determined for each taxable year of such controlled foreign corporation which ends in or with such taxable year of such United States shareholder).
“(2) TESTED INCOME; TESTED LOSS.—For purposes of this section—
“(A) TESTED INCOME.—The term ‘tested income’ means, with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation, the excess (if any) of—
“(i) the gross income of such corporation determined without regard to—
“(I) any item of income which is effectively connected with the conduct by such corporation of a trade or business within the United States if subject to tax under this chapter,
“(III) except as otherwise provided by the Secretary, any amount excluded from the foreign personal holding company income (as defined in section 954) of such corporation by reason of section 954(c)(6) but only to the extent that any deduction allowable for the payment or accrual of such amount does not result in a reduction in the foreign high return amount of any United States shareholder (determined without regard to this subclause),
“(IV) any gross income excluded from the foreign personal holding company income (as defined in section 954) of such corporation by reason of subsection (c)(2)(C), (h), or (i) of section 954,
“(V) any gross income excluded from the insurance income (as defined in section 953) of such corporation by reason of section 953(a)(2),
“(d) Qualified business asset investment.—For purposes of this section—
“(1) IN GENERAL.—The term ‘qualified business asset investment’ means, with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation, the aggregate of the corporation’s adjusted bases (determined as of the close of such taxable year and after any adjustments with respect to such taxable year) in specified tangible property—
“(2) SPECIFIED TANGIBLE PROPERTY.—The term ‘specified tangible property’ means any tangible property to the extent such property is used in the production of tested income or tested loss.
“(3) PARTNERSHIP PROPERTY.—For purposes of this subsection, if a controlled foreign corporation holds an interest in a partnership at the close of such taxable year of the controlled foreign corporation, such controlled foreign corporation shall take into account under paragraph (1) the controlled foreign corporation’s distributive share of the aggregate of the partnership’s adjusted bases (determined as of such date in the hands of the partnership) in tangible property held by such partnership to the extent such property—
“(C) is used in the production of tested income or tested loss (determined with respect to such controlled foreign corporation’s distributive share of income or loss with respect to such property).
For purposes of this paragraph, the controlled foreign corporation’s distributive share of the adjusted basis of any property shall be the controlled foreign corporation’s distributive share of income and loss with respect to such property.
“(4) DETERMINATION OF ADJUSTED BASIS.—For purposes of this subsection, the adjusted basis in any property shall be determined without regard to any provision of this title (or any other provision of law) which is enacted after the date of the enactment of this section.
“(e) Commodities gross income.—For purposes of this section—
“(f) Taxable years for which persons are treated as United States shareholders of controlled foreign corporations.—For purposes of this section—
“(1) IN GENERAL.—A United States shareholder of a controlled foreign corporation shall be treated as a United States shareholder of such controlled foreign corporation for any taxable year of such United States shareholder if—
“(2) TREATMENT AS A CONTROLLED FOREIGN CORPORATION.—Except for purposes of paragraph (1)(B) and the application of section 951(a)(2) to this section pursuant to subsection (g), a foreign corporation shall be treated as a controlled foreign corporation for any taxable year of such foreign corporation if such foreign corporation is a controlled foreign corporation at any time during such taxable year.
“(g) Determination of pro rata share.—For purposes of this section, pro rata shares shall be determined under the rules of section 951(a)(2) in the same manner as such section applies to subpart F income.
“(h) Coordination with subpart F.—
“(1) TREATMENT AS SUBPART F INCOME FOR CERTAIN PURPOSES.—Except as otherwise provided by the Secretary any foreign high return amount included in gross income under subsection (a) shall be treated in the same manner as an amount included under section 951(a)(1)(A) for purposes of applying sections 168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 961, 962, 993(a)(1)(E), 996(f)(1), 1248(b)(1), 1248(d)(1), 6501(e)(1)(C), 6654(d)(2)(D), and 6655(e)(4).
“(2) ENTIRE FOREIGN HIGH RETURN AMOUNT TAKEN INTO ACCOUNT FOR PURPOSES OF CERTAIN SECTIONS.—For purposes of applying paragraph (1) with respect to sections 168(h)(2)(B), 851(b), 959, 961, 962, 1248(b)(1), and 1248(d)(1), the foreign high return amount included in gross income under subsection (a) shall be determined by substituting ‘100 percent’ for ‘50 percent’ in such subsection.
“(3) ALLOCATION OF FOREIGN HIGH RETURN AMOUNT 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 foreign high return amount included in gross income of a United States shareholder under subsection (a), the portion of such foreign high return amount 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 foreign high return amount which bears the same ratio to such foreign high return amount as—
“(4) COORDINATION WITH SUBPART F TO DENY DOUBLE BENEFIT OF LOSSES.—In the case of any United States shareholder of any controlled foreign corporation, the amount included in gross income under section 951(a)(1)(A) shall be determined by increasing the earnings and profits of such controlled foreign corporation (solely for purposes of determining such amount) by an amount that bears the same ratio (not greater than 1) to such shareholder’s pro rata share of the tested loss of such controlled foreign corporation as—
(b) Foreign tax credit.—
(1) APPLICATION OF DEEMED PAID FOREIGN TAX CREDIT.—Section 960, as amended by the preceding provisions of this Act, is amended by redesignating subsections (d) and (e) as subsections (e) and (f), respectively, and by inserting after subsection (c) 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—
“(2) FOREIGN HIGH RETURN PERCENTAGE.—For purposes of paragraph (1), the term ‘foreign high return 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 gross income described in section 951A(c)(2)(A)(i).”.
(2) APPLICATION OF FOREIGN TAX CREDIT LIMITATION.—
(A) SEPARATE BASKET FOR FOREIGN HIGH RETURN AMOUNT.—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) NO CARRYOVER 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).”
(3) GROSS UP FOR DEEMED PAID FOREIGN TAX CREDIT.—Section 78, as amended by the preceding provisions of this Act, is amended—
(B) by striking the period at the end and inserting “, and
“(2) an amount equal to the taxes deemed to be paid by such corporation under section 960(d) for such taxable year (determined by substituting ‘100 percent’ for ‘80 percent’ in such section) shall be treated for purposes of this title (other than sections 959, 960, and 961) as an increase in the foreign high return amount of such domestic corporation under section 951A for such taxable year.”.
(c) Conforming amendments.—
(1) Section 170(b)(2)(D) is amended by striking “computed without regard to” and all that follows and inserting “computed—
(2) Section 246(b)(1) is amended by—
(3) Section 469(i)(3)(F) is amended by striking “determined without regard to” and all that follows and inserting “determined—
(4) Section 856(c)(2) is amended by striking “and” at the end of subparagraph (H), by adding “and” at the end of subparagraph (I), and by inserting after subparagraph (I) the following new subparagraph:
(5) Section 856(c)(3)(D) is amended by striking “dividends or other distributions on, and gain” and inserting “dividends, other distributions on, amounts includible in gross income under section 951A(a) with respect to, and gain”.
(6) The table of sections for subpart F of part III of subchapter N of chapter 1 is amended by inserting after the item relating to section 951 the following new item:
“Sec. 951A. Foreign high return amount included in gross income of United States shareholders.”.
(a) In general.—Section 163 is amended by redesignating subsection (n) as subsection (p) and by inserting after subsection (m) the following new subsection:
“(n) Limitation on deduction of interest by domestic corporations in international financial reporting groups.—
“(1) IN GENERAL.—In the case of any domestic corporation which is a member of any international financial reporting group, the deduction under this chapter for interest paid or accrued during the taxable year shall not exceed the sum of—
“(2) INTERNATIONAL FINANCIAL REPORTING GROUP.—
“(3) ALLOWABLE PERCENTAGE.—For purposes of this subsection—
“(A) IN GENERAL.—The term ‘allowable percentage’ means, with respect to any domestic corporation for any taxable year, the ratio (expressed as a percentage and not greater than 100 percent) of—
“(B) REPORTED NET INTEREST EXPENSE.—The term ‘reported net interest expense’ means—
“(i) with respect to any international financial reporting group for any reporting year, the excess of—
“(ii) with respect to any domestic corporation for any reporting year, the excess of—
“(C) ALLOCABLE SHARE OF REPORTED NET INTEREST EXPENSE.—With respect to any domestic corporation which is a member of any international financial reporting group, such corporation’s allocable share of such group’s reported net interest expense for any reporting year is the portion of such expense which bears the same ratio to such expense as—
“(D) EBITDA.—
“(i) IN GENERAL.—The term ‘EBITDA’ means, with respect to any reporting year, earnings before interest, taxes, depreciation, and amortization—
“(4) CONSOLIDATED FINANCIAL STATEMENT.—For purposes of this subsection, the term ‘consolidated financial statement’ means any consolidated financial statement described in paragraph (2)(A)(ii) if such statement is—
“(A) a financial statement which is certified as being prepared in accordance with generally accepted accounting principles, international financial reporting standards, or any other comparable method of accounting identified by the Secretary, and which is—
“(i) a 10-K (or successor form), or annual statement to shareholders, required to be filed with the United States Securities and Exchange Commission,
“(5) REPORTING YEAR.—For purposes of this subsection, the term ‘reporting year’ means, with respect to any international financial reporting group, the year with respect to which the consolidated financial statements are prepared.
“(6) APPLICATION TO CERTAIN ENTITIES.—
“(A) PARTNERSHIPS.—Except as otherwise provided by the Secretary in paragraph (7), this subsection shall apply to any partnership which is a member of any international financial reporting group under rules similar to the rules of section 163(j)(3).
“(B) FOREIGN CORPORATIONS ENGAGED IN TRADE OR BUSINESS WITHIN THE UNITED STATES.—Except as otherwise provided by the Secretary in paragraph (8), any deduction for interest paid or accrued by a foreign corporation engaged in a trade or business within the United States shall be limited in a manner consistent with the principles of this subsection.
(b) Carryforward of disallowed interest.—
(1) IN GENERAL.—Section 163(o) is amended to read as follows:
“(o) Carryforward of certain disallowed interest.—The amount of any interest not allowed as a deduction for any taxable year by reason of subsection (j)(1) or (n)(1) (whichever imposes the lower limitation with respect to such taxable year) shall be treated as interest (and as business interest for purposes of subsection (j)(1)) paid or accrued in the succeeding taxable year. Interest paid or accrued in any taxable year (determined without regard to the preceding sentence) shall not be carried past the 5th taxable year following such taxable year, determined by treating interest as allowed as a deduction on a first-in, first-out basis.”.
(a) Excise tax on certain amounts from domestic corporations to foreign affiliates.—
(1) IN GENERAL.—Chapter 36 is amended by adding at the end the following new subchapter:
“Sec. 4491. Imposition of tax on certain amounts from domestic corporations to foreign affiliates.
“(a) In general.—There is hereby imposed on each specified amount paid or incurred by a domestic corporation to a foreign corporation which is a member of the same international financial reporting group as such domestic corporation a tax equal to the highest rate of tax in effect under section 11 multiplied by such amount.
“(b) By whom paid.—The tax imposed by subsection (a) shall be paid by the domestic corporation described in such subsection.
“(c) Exception for effectively connected income.—Subsection (a) shall not apply to so much of any specified amount as is effectively connected with the conduct of a trade or business within the United States if such amount is subject to tax under chapter 1. In the case of any amount which is treated as effectively connected with the conduct of a trade or business within the United States by reason of section 882(g), the preceding sentence shall apply to such amount only if the domestic corporation provides to the Secretary (at such time and in such form and manner as the Secretary may provide) a copy of the election made under section 882(g) by the foreign corporation referred to in subsection (a).
(2) DENIAL OF DEDUCTION FOR TAX IMPOSED.—Section 275(a) is amended by inserting after paragraph (6) the following new paragraph:
(3) CLERICAL AMENDMENT.—The table of subchapters for chapter 36 is amended by adding at the end the following new item:
“SUBCHAPTER E. TAX ON CERTAIN AMOUNTS TO FOREIGN AFFILIATES.”.
(b) Election to treat certain payments from domestic corporations to related foreign corporations as effectively connected income.—Section 882 is amended by adding at the end the following new subsection:
“(g) Election to treat certain payments from domestic corporations to related foreign corporations as effectively connected income.—
“(1) IN GENERAL.—In the case of any specified amount paid or incurred by a domestic corporation to a foreign corporation which is a member of the same international financial reporting group as such domestic corporation and which has elected to be subject to the provisions of this subsection—
“(A) such amount shall be taken into account (other than for purposes of sections 245, 245A, and 881) in the taxable year of such foreign corporation during which such amount is paid or incurred as if—
“(2) SPECIFIED AMOUNT.—For purposes of this subsection—
“(A) IN GENERAL.—The term ‘specified amount’ means any amount which is, with respect to the payor, allowable as a deduction or includible in costs of goods sold, inventory, or the basis of a depreciable or amortizable asset.
“(B) EXCEPTIONS.—The term ‘specified amount’ shall not include—
“(ii) any amount paid or incurred for the acquisition of any security described in section 475(c)(2) (determined without regard to the last sentence thereof) or any commodity described in section 475(e)(2),
“(3) DEEMED EXPENSES.—
“(A) IN GENERAL.—The deemed expenses with respect to any specified amount received by a foreign corporation during any reporting year is the amount of expenses such that the net income ratio of such foreign corporation with respect to such amount (taking into account only such specified amount and such deemed expenses) is equal to the net income ratio of the international financial reporting group determined for such reporting year with respect to the product line to which the specified amount relates.
“(B) NET INCOME RATIO.—For purposes of this paragraph, the term ‘net income ratio’ means the ratio of—
“(C) METHOD OF DETERMINATION.—Amounts described in subparagraph (B) shall be determined with respect to the international financial reporting group on the basis of the consolidated financial statements referred to in paragraph (4)(A)(i) and the books and records of the members of the international financial reporting group which are used in preparing such statements, taking into account only revenues and expenses of the members of such group (other than the members of such group which are (or are treated as) a domestic corporation for purposes of this subsection) derived from, or incurred with respect to—
“(4) INTERNATIONAL FINANCIAL REPORTING GROUP.—For purposes of this subsection—
“(A) IN GENERAL.—The term ‘international financial reporting group’ means any group of entities, with respect to any specified amount, if such amount is paid or incurred during a reporting year of such group with respect to which—
“(B) ANNUAL AGGREGATE PAYMENT AMOUNT.—The term ‘annual aggregate payment amount’ means, with respect to any reporting year of the group referred to in subparagraph (A)(i), the aggregate specified amounts to which paragraph (1) applies (or would apply if such group were an international financial reporting group).
“(5) TREATMENT OF PARTNERSHIPS.—Any specified amount paid, incurred, or received by a partnership which is a member of any international financial reporting group (and any amount treated as paid, incurred, or received by a partnership under this paragraph) shall be treated for purposes of this subsection as amounts paid, incurred, or received, respectively, by each partner of such partnership in an amount equal to such partner’s distributive share of the items of income, gain, deduction, or loss to which such amounts relate.
“(6) TREATMENT OF AMOUNTS IN CONNECTION WITH UNITED STATES TRADE OR BUSINESS.—Any specified amount paid, incurred, or received by a foreign corporation in connection with the conduct of a trade or business within the United States (other than a trade or business it is deemed to conduct pursuant to this subsection) shall be treated for purposes of this subsection as an amount paid, incurred, or received, respectively, by a domestic corporation. For purposes of the preceding sentence, a foreign corporation shall be deemed to pay, incur, and receive amounts with respect to a trade or business it conducts within the United States (other than a trade or business it is deemed to conduct pursuant to this subsection) to the extent such foreign corporation would be treated as paying, incurring, or receiving such amounts from such trade or business if such trade or business were a domestic corporation.
“(7) JOINT AND SEVERAL LIABILITY OF MEMBERS OF INTERNAL FINANCIAL REPORTING GROUP.—In the case of any underpayment with respect to any taxable year of a foreign corporation which is a member of an international financial accounting group, each domestic corporation which is a member of such group at any time during such taxable year shall be jointly and severally liable for—
“(8) FOREIGN TAX CREDIT ALLOWED.—The credit allowed under section 906(a) with respect to amounts taken into account in income under paragraph (1)(A) shall be limited to 80 percent of the amount of taxes paid or accrued and determined without regard to section 906(b)(1).
(c) Reporting requirements.—
(1) REPORTING BY FOREIGN CORPORATION.—Section 6038C(b) is amended to read as follows:
“(b) Required information.—
“(2) CERTAIN PAYMENTS FROM RELATED DOMESTIC CORPORATIONS.—
“(A) IN GENERAL.—In the case of any reporting corporation that receives during the taxable year any amount to which section 882(g)(1) applies, the information described in this subsection shall include, with respect to each member of the international financial reporting group from which any such amount is received—
(2) REPORTING BY DOMESTIC GROUP MEMBERS.—
(A) IN GENERAL .—Subpart A of part III of subchapter A of chapter 61 is amended by inserting after section 6038D the following new section:
“(a) In general.—In the case of any domestic corporation which pays or incurs any amount to which section 882(g)(1) applies, such person shall—
“(b) Required information.—The information described in this subsection is—
“(1) the name and taxpayer identification number of the common parent of the international financial reporting group in which such domestic corporation is a member, and
“(2) with respect to any person who receives an amount described in subsection (a) from such domestic corporation—
(B) CLERICAL AMENDMENT.—The table of sections for subpart A of part III of subchapter A of chapter 61 is amended by inserting after the item relating to section 6038D the following new item:
(a) In general.—Section 7652(f)(1) is amended by striking “January 1, 2017” and inserting “January 1, 2023”.
(a) In general.—Section 119(d) of division A of the Tax Relief and Health Care Act of 2006 is amended—
(b) Treatment of certain references.—Section 119(e) of division A of the Tax Relief and Health Care Act of 2006 is amended by adding at the end the following: “References in this subsection to section 199 of the Internal Revenue Code of 1986 shall be treated as references to such section as in effect before its repeal by the Tax Cuts and Jobs Act.”.
(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—
(a) In general.—Section 511 is amended by adding at the end the following new subsection:
“(d) Organizations and trusts exempt from taxation not solely by reason of section 501(a).—For purposes of subsections (a)(2) and (b)(2), an organization or trust shall not fail to be treated as exempt from taxation under this subtitle by reason of section 501(a) solely because such organization is also so exempt, or excludes amounts from gross income, by reason of any other provision of this title.”.
(a) In general.—Section 512(b)(9) is amended by striking “from research” and inserting “from such research”.
(a) Rate reduction.—Section 4940(a) is amended by striking “2 percent” and inserting “1.4 percent”.
(b) Repeal of special rules for certain private foundations.—Section 4940 is amended by striking subsection (e).
(a) In general.—Section 4942(j) is amended by adding at the end the following new paragraph:
“(6) ORGANIZATION OPERATING ART MUSEUM.—For purposes of this section, the term ‘operating foundation’ shall not include an organization which operates an art museum as a substantial activity unless such museum is open during normal business hours to the public for at least 1,000 hours during the taxable year.”.
(a) In general.—Chapter 42 is amended by adding at the end the following new subchapter:
“Sec. 4969. 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), the assets and net investment income of any related organization shall be treated as the assets and net investment income of the eligible educational institution.
(b) Clerical amendment.—The table of subchapters for chapter 42 is amended by adding at the end the following new item:
“SUBCHAPTER H—EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES AND UNIVERSITIES”.
(a) In general.—Section 4943 is amended by adding at the end the following new subsection:
“(g) Exception for certain holdings limited to independently-operated philanthropic business.—
“(1) IN GENERAL.—Subsection (a) shall not apply with respect to the holdings of a private foundation in any business enterprise which for the taxable year meets—
“(2) OWNERSHIP.—The ownership requirements of this paragraph are met if—
“(3) ALL PROFITS TO CHARITY.—
“(A) IN GENERAL.—The all profits to charity distribution requirement of this paragraph is met if the business enterprise, not later than 120 days after the close of the taxable year, distributes an amount equal to its net operating income for such taxable year to the private foundation.
“(B) NET OPERATING INCOME.—For purposes of this paragraph, the net operating income of any business enterprise for any taxable year is an amount equal to the gross income of the business enterprise for the taxable year, reduced by the sum of—
“(4) INDEPENDENT OPERATION.—The independent operation requirements of this paragraph are met if, at all times during the taxable year—
“(A) no substantial contributor (as defined in section 4958(c)(3)(C)) to the private foundation, or family member of such a contributor (determined under section 4958(f)(4)) is a director, officer, trustee, manager, employee, or contractor of the business enterprise (or an individual having powers or responsibilities similar to any of the foregoing),
(a) In general.—Section 501 is amended by adding at the end the following new subsection:
“(s) Special rule relating to political campaign statements of organizations described in subsection (c)(3).—
“(1) IN GENERAL.—For purposes of subsection (c)(3) and sections 170(c)(2), 2055, 2106, 2522, and 4955, an organization shall not fail to be treated as organized and operated exclusively for a purpose described in subsection (c)(3), nor shall it be deemed to have participated in, or intervened in any political campaign on behalf of (or in opposition to) any candidate for public office, solely because of the content of any statement which—
(a) In general.—Section 6033(k) is amended by striking “and” at the end of paragraph (2), by striking the period at the end of paragraph (3), and by adding at the end the following new paragraphs:
“(4) indicate the average amount of grants made from such funds during such taxable year (expressed as a percentage of the value of assets held in such funds at the beginning of such taxable year), and
“(5) indicate whether the organization has a policy with respect to donor advised funds (as so defined) for frequency and minimum level of distributions.
Such organization shall include with such return a copy of any policy described in paragraph (5).”.
Amend the title so as to read: “A bill to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.”.
Union Calendar No. 302 | |||||
| |||||
[Report No. 115–409] | |||||
A BILL | |||||
To provide for reconciliation pursuant to title II of the concurrent resolution on the budget for
fiscal year 2018. | |||||
November 13, 2017 | |||||
Reported with amendments, committed to the Committee of the Whole House on the State of the Union,
and ordered to be printed |