G:\M\15\BRADTX\BRADTX_045.XML ..................................................................... (Original Signature of Member) 115TH CONGRESS 1ST SESSION H. R. 1 To provide for reconciliation pursuant to title II of the concurrent resolution on the budget for fiscal year 2018. IN THE HOUSE OF REPRESENTATIVES Mr. BRADY of Texas introduced the following bill; which was referred to the Committee on llllllllllllll A BILL To provide for reconciliation pursuant to title II of the concurrent resolution on the budget for fiscal year 2018. 1 Be it enacted by the Senate and House of Representa- 2 tives of the United States of America in Congress assembled, 3 SECTION 1. SHORT TITLE; ETC. 4 (a) SHORT TITLE.—This Act may be cited as the 5 ‘‘Tax Cuts and Jobs Act’’. 6 (b) AMENDMENT OF 1986 CODE.—Except as other- 7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment 9 to, or repeal of, a section or other provision, the reference g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 2 1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986. 3 (c) TABLE OF CONTENTS.—The table of contents for 4 this Act is as follows: Sec. 1. Short title; etc. TITLE I—TAX REFORM FOR INDIVIDUALS Subtitle A—Simplification and Reform of Rates, Standard Deduction, and Exemptions Sec. Sec. Sec. Sec. Sec. 1001. 1002. 1003. 1004. 1005. Reduction and simplification of individual income tax rates. Enhancement of standard deduction. Repeal of deduction for personal exemptions. Maximum rate on business income of individuals. Conforming amendments related to simplification of individual income tax rates. Subtitle B—Simplification and Reform of Family and Individual Tax Credits Sec. 1101. Enhancement of child tax credit and new family tax credit. Sec. 1102. Repeal of nonrefundable credits. Sec. 1103. Refundable credit program integrity. Subtitle C—Simplification and Reform of Education Incentives Sec. Sec. Sec. Sec. 1201. 1202. 1203. 1204. American opportunity tax credit. Consolidation of education savings rules. Reforms to discharge of certain student loan indebtedness. Repeal of other provisions relating to education. Subtitle D—Simplification and Reform of Deductions 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. Subtitle E—Simplification and Reform of Exclusions and Taxable Compensation Sec. 1401. Limitation on exclusion for employer-provided housing. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00002 Fmt 6652 Sfmt 6211 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 3 Sec. Sec. Sec. Sec. Sec. 1402. 1403. 1404. 1405. 1406. Exclusion of gain from sale of a principal residence. Repeal of exclusion, etc., for employee achievement awards. Repeal of exclusion for dependent care assistance programs. Repeal of exclusion for qualified moving expense reimbursement. Repeal of exclusion for adoption assistance programs. Subtitle F—Simplification and Reform of Savings, Pensions, Retirement 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. Subtitle G—Estate, Gift, and Generation-skipping Transfer Taxes Sec. 1601. Increase in credit against estate, gift, and generation-skipping transfer tax. Sec. 1602. Repeal of estate and generation-skipping transfer taxes. TITLE II—ALTERNATIVE MINIMUM TAX REPEAL Sec. 2001. Repeal of alternative minimum tax. TITLE III—BUSINESS TAX REFORM Subtitle A—Tax Rates Sec. 3001. Reduction in corporate tax rate. Subtitle B—Cost Recovery Sec. 3101. Increased expensing. Subtitle C—Small Business Reforms 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. Subtitle D—Reform of Business-related Exclusions, Deductions, etc. Sec. Sec. Sec. Sec. Sec. Sec. 3301. 3302. 3303. 3304. 3305. 3306. Interest. Modification of net operating loss deduction. Like-kind exchanges of real property. Revision of treatment of contributions to capital. Repeal of deduction for local lobbying expenses. 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. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00003 Fmt 6652 Sfmt 6211 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 4 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. Subtitle E—Reform of Business Credits 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. Subtitle F—Energy Credits 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. Subtitle G—Bond Reforms Sec. Sec. Sec. Sec. 3601. 3602. 3603. 3604. Termination of private activity bonds. Repeal of advance refunding bonds. Repeal of tax credit bonds. No tax exempt bonds for professional stadiums. Subtitle H—Insurance Sec. Sec. Sec. Sec. Sec. 3701. 3702. 3703. 3704. 3705. Sec. 3706. Sec. 3707. Sec. 3708. Sec. 3709. Sec. 3710. Net operating losses of life insurance companies. Repeal of small life insurance company deduction. Computation of life insurance tax reserves. Adjustment for change in computing reserves. Modification of rules for life insurance proration for purposes of determining the dividends received deduction. Repeal of special rule for distributions to shareholders from pre1984 policyholders surplus account. Modification of proration rules for property and casualty insurance companies. Modification of discounting rules for property and casualty insurance companies. Repeal of special estimated tax payments. Capitalization of certain policy acquisition expenses. Subtitle I—Compensation g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00004 Fmt 6652 Sfmt 6211 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 5 Sec. 3801. Nonqualified deferred compensation. Sec. 3802. Modification of limitation on excessive employee remuneration. Sec. 3803. Excise tax on excess tax-exempt organization executive compensation. TITLE IV—TAXATION OF FOREIGN INCOME AND FOREIGN PERSONS Subtitle A—Establishment of Participation Exemption System for Taxation of Foreign Income 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. Subtitle B—Modifications Related to Foreign Tax Credit System 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. Subtitle C—Modification of Subpart F Provisions 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. Subtitle D—Prevention of Base Erosion 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. Subtitle E—Provisions Related to Possessions of the United States Sec. 4401. Extension of deduction allowable with respect to income attributable to domestic production activities in Puerto Rico. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00005 Fmt 6652 Sfmt 6211 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 6 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. Subtitle F—Other International Reforms Sec. 4501. Restriction on insurance business exception to passive foreign investment company rules. Sec. 4502. Limitation on treaty benefits for certain deductible payments. TITLE V—EXEMPT ORGANIZATIONS Subtitle A—Unrelated Business Income Tax 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. Subtitle B—Excise Taxes 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. Subtitle C—Requirements for Organizations Exempt From Tax Sec. 5201. Churches permitted to make statements relating to political campaign in ordinary course of religious services and activities. Sec. 5202. Additional reporting requirements for donor advised fund sponsoring organizations. 5 TITLE I—TAX REFORM FOR INDIVIDUALS Subtitle A—Simplification and Reform of Rates, Standard Deduction, and Exemptions 6 SEC. 1001. REDUCTION AND SIMPLIFICATION OF INDI- 1 2 3 4 7 8 VIDUAL INCOME TAX RATES. (a) IN GENERAL.—Section 1 is amended by striking 9 subsection (i) and by striking all that precedes subsection 10 (h) and inserting the following: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 7 1 ‘‘SEC. 1. TAX IMPOSED. 2 ‘‘(a) IN GENERAL.—There is hereby imposed on the 3 income of every individual a tax equal to the sum of— 4 ‘‘(1) 12 PERCENT BRACKET.—12 percent of so 5 much of the taxable income as does not exceed the 6 25-percent bracket threshold amount, 7 ‘‘(2) 25 PERCENT BRACKET.—25 percent of so 8 much of the taxable income as exceeds the 25-per- 9 cent bracket threshold amount but does not exceed 10 the 35-percent bracket threshold amount, plus 11 ‘‘(3) 35 PERCENT BRACKET.—35 percent of so 12 much of taxable income as exceeds the 35-percent 13 bracket threshold amount but does not exceed the 14 39.6 percent bracket threshold amount. 15 ‘‘(4) 39.6 PERCENT BRACKET.—39.6 percent of 16 so much of taxable income as exceeds the 39.6-per- 17 cent bracket threshold amount. 18 ‘‘(b) BRACKET THRESHOLD AMOUNTS.—For pur- 19 poses of this section— 20 ‘‘(1) 21 AMOUNT.—The 22 amount’ means— 23 THRESHOLD term ‘25-percent bracket threshold viving spouse, $90,000, g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) 10:46 Nov 02, 2017 BRACKET ‘‘(A) in the case of a joint return or sur- 24 VerDate 0ct 09 2002 25-PERCENT Jkt 000000 (679209 10) PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 8 1 ‘‘(B) in the case of an individual who is 2 the head of a household (as defined in section 3 2(b)), $67,500, 4 ‘‘(C) in the case of any other individual 5 (other than an estate or trust), an amount 6 equal to 1⁄2 of the amount in effect for the tax- 7 able year under subparagraph (A), and 8 ‘‘(D) in the case of an estate or trust, 9 $2,550. 10 ‘‘(2) 11 AMOUNT.—The 12 amount’ means— 13 BRACKET THRESHOLD term ‘35-percent bracket threshold ‘‘(A) in the case of a joint return or sur- 14 viving spouse, $260,000, 15 ‘‘(B) in the case of a married individual fil- 16 ing a separate return, an amount equal to 1⁄2 17 of the amount in effect for the taxable year 18 under subparagraph (A), and 19 ‘‘(C) in the case of any other individual 20 (other than an estate or trust), $200,000, and 21 ‘‘(D) in the case of an estate or trust, 22 $9,150. 23 ‘‘(3) 39-PERCENT 24 AMOUNT.—The 25 amount’ means— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 35-PERCENT 10:46 Nov 02, 2017 Jkt 000000 BRACKET THRESHOLD term ‘39.6-percent bracket threshold (679209 10) PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 9 1 ‘‘(A) in the case of a joint return or sur- 2 viving spouse, $1,000,000, 3 ‘‘(B) in the case of any other individual 4 (other than an estate or trust), an amount 5 equal to 1⁄2 of the amount in effect for the tax- 6 able year under subparagraph (A), and 7 ‘‘(C) in the case of an estate or trust, 8 9 $12,500. ‘‘(c) INFLATION ADJUSTMENT.— 10 ‘‘(1) IN the case of any taxable 11 year beginning after 2018, each dollar amount in 12 subsection (b) (other than any amount determined 13 by reference to such a dollar amount) shall be in- 14 creased by an amount equal to— 15 ‘‘(A) such dollar amount, multiplied by 16 ‘‘(B) the cost-of-living adjustment deter- 17 mined under this subsection for the calendar 18 year in which the taxable year begins by sub- 19 stituting 20 (2)(A)(ii). ‘2017’ for ‘2016’ in paragraph 21 If any increase determined under the preceding sen- 22 tence is not a multiple of $100, such increase shall 23 be rounded to the next lowest multiple of $100. 24 ‘‘(2) COST-OF-LIVING 25 poses of this subsection— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—In 10:46 Nov 02, 2017 Jkt 000000 ADJUSTMENT.—For pur- (679209 10) PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 10 1 ‘‘(A) IN cost-of-living ad- 2 justment for any calendar year is the percent- 3 age (if any) by which— 4 ‘‘(i) the C-CPI-U for the preceding 5 calendar year, exceeds 6 ‘‘(ii) the normalized CPI for calendar 7 year 2016. 8 ‘‘(B) SPECIAL 9 RULE FOR ADJUSTMENTS WITH A BASE YEAR AFTER 2016.—For purposes 10 of any provision which provides for the substi- 11 tution of a year after 2016 for ‘2016’ in sub- 12 paragraph (A)(ii), subparagraph (A) shall be 13 applied by substituting ‘C-CPI-U’ for ‘normal- 14 ized CPI’ in clause (ii). 15 ‘‘(3) NORMALIZED CPI.—For purposes of this 16 subsection, the normalized CPI for any calendar 17 year is the product of— 18 ‘‘(A) the CPI for such calendar year, mul- 19 tiplied by 20 ‘‘(B) the C-CPI-U transition multiple. 21 ‘‘(4) C-CPI-U TRANSITION MULTIPLE.—For 22 purposes of this subsection, the term ‘C-CPI-U tran- 23 sition multiple’ means the amount obtained by divid- 24 ing— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 11 1 ‘‘(A) the C-CPI-U for calendar year 2016, 2 by 3 ‘‘(B) the CPI for calendar year 2016. 4 ‘‘(5) C-CPI-U.—For purposes of this sub- 5 section— 6 ‘‘(A) IN term ‘C-CPI-U’ 7 means the Chained Consumer Price Index for 8 All Urban Consumers (as published by the Bu- 9 reau of Labor Statistics of the Department of 10 Labor). The values of the Chained Consumer 11 Price Index for All Urban Consumers taken 12 into account for purposes of determining the 13 cost-of-living adjustment for any calendar year 14 under this subsection shall be the latest values 15 so published as of the date on which such Bu- 16 reau publishes the initial value of the Chained 17 Consumer Price Index for All Urban Con- 18 sumers for the month of August for the pre- 19 ceding calendar year. 20 ‘‘(B) DETERMINATION FOR CALENDAR 21 YEAR.—The 22 the average of the C-CPI-U as of the close of 23 the 12-month period ending on August 31 of 24 such calendar year. 25 ‘‘(6) CPI.—For purposes of this subsection— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 C-CPI-U for any calendar year is (679209 10) PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 12 1 GENERAL.—The ‘‘(A) IN term ‘Consumer 2 Price Index’ means the last Consumer Price 3 Index for All Urban Consumers published by 4 the Department of Labor. For purposes of the 5 preceding sentence, the revision of the Con- 6 sumer Price Index which is most consistent 7 with the Consumer Price Index for calendar 8 year 1986 shall be used. 9 ‘‘(B) DETERMINATION FOR CALENDAR 10 YEAR.—The 11 average of the Consumer Price Index as of the 12 close of the 12-month period ending on August 13 31 of such calendar year. 14 ‘‘(7) DELAY CPI for any calendar year is the OF ADJUSTMENT BASED ON C-CPI- 15 U UNTIL 2023.—Notwithstanding 16 of this title, any cost-of-living adjustment deter- 17 mined under this subsection (or by reference to this 18 subsection) shall be determined on the basis of CPI 19 rather than C-CPI-U with respect to periods before 20 January 1, 2023. Proper adjustments shall be made 21 in the application of this subsection to carry out the 22 preceding sentence. 23 ‘‘(d) SPECIAL RULES FOR CERTAIN CHILDREN WITH any other provision 24 UNEARNED INCOME.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 13 1 ‘‘(1) IN GENERAL.—In 2 whom this subsection applies for any taxable year— 3 ‘‘(A) the 25-percent bracket threshold 4 amount shall not be more than the taxable in- 5 come of such child for the taxable year reduced 6 by the net unearned income of such child, and 7 ‘‘(B) the 35-percent bracket threshold 8 amount shall not be more than the sum of— 9 ‘‘(i) the taxable income of such child 10 for the taxable year reduced by the net un- 11 earned income of such child, plus 12 ‘‘(ii) the dollar amount in effect under 13 subsection (b)(2)(D) for the taxable year. 14 ‘‘(C) the 39.6-percent bracket threshold 15 amount shall not be more than the sum of— 16 ‘‘(i) the taxable income of such child 17 for the taxable year reduced by the net un- 18 earned income of such child, plus 19 ‘‘(ii) the dollar amount in effect under 20 subsection (b)(3)(C). 21 ‘‘(2) CHILD TO WHOM SUBSECTION APPLIES.— 22 This subsection shall apply to any child for any tax- 23 able year if— 24 ‘‘(A) such child— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 the case of any child to 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 14 1 ‘‘(i) has not attained age 18 before 2 the close of the taxable year, or 3 ‘‘(ii) has attained age 18 before the 4 close of the taxable year and is described 5 in paragraph (3), 6 ‘‘(B) either parent of such child is alive at 7 the close of the taxable year, and 8 ‘‘(C) such child does not file a joint return 9 for the taxable year. 10 ‘‘(3) CERTAIN 11 COME 12 VIDUAL’S SUPPORT.—A 13 paragraph if— DOES 14 NOT EXCEED ONE-HALF OF INDI- child is described in this ‘‘(A) such child— 15 ‘‘(i) has not attained age 19 before 16 the close of the taxable year, or 17 ‘‘(ii) is a student (within the meaning 18 of section 7706(f)(2)) who has not attained 19 age 24 before the close of the taxable year, 20 and 21 ‘‘(B) such child’s earned income (as de- 22 fined in section 911(d)(2)) for such taxable 23 year does not exceed one-half of the amount of 24 the individual’s support (within the meaning of 25 section 7706(c)(1)(D) after the application of g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 CHILDREN WHOSE EARNED IN- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 15 1 section 7706(f)(5) (without regard to subpara- 2 graph (A) thereof)) for such taxable year. 3 ‘‘(4) NET 4 of this subsection— 5 ‘‘(A) IN 6 GENERAL.—The purposes term ‘net un- earned income’ means the excess of— 7 ‘‘(i) the portion of the adjusted gross 8 income for the taxable year which is not 9 attributable to earned income (as defined 10 in section 911(d)(2)), over 11 ‘‘(ii) the sum of— 12 ‘‘(I) the amount in effect for the 13 taxable year under section 63(c)(2)(A) 14 (relating to limitation on standard de- 15 duction in the case of certain depend- 16 ents), plus 17 ‘‘(II) The greater of the amount 18 described in subclause (I) or, if the 19 child itemizes his deductions for the 20 taxable year, the amount of the 21 itemized deductions allowed by this 22 chapter for the taxable year which are 23 directly connected with the production 24 of the portion of adjusted gross in- 25 come referred to in clause (i). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 UNEARNED INCOME.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 16 1 ‘‘(B) LIMITATION 2 COME.—The 3 come for any taxable year shall not exceed the 4 individual’s taxable income for such taxable 5 year. 6 amount of the net unearned in- ‘‘(e) PHASEOUT OF 12-PERCENT RATE.— 7 ‘‘(1) IN GENERAL.—The amount of tax imposed 8 by this section (determined without regard to this 9 subsection) shall be increased by 6 percent of the ex- 10 cess (if any) of— 11 ‘‘(A) adjusted gross income, over 12 ‘‘(B) the applicable dollar amount. 13 ‘‘(2) LIMITATION.—The increase determined 14 under paragraph (1) with respect to any taxpayer 15 for any taxable year shall not exceed 27.6 percent of 16 the lesser of— 17 ‘‘(A) the taxpayer’s taxable income for 18 such taxable year, or 19 ‘‘(B) the 25-percent bracket threshold 20 amount in effect with respect to the taxpayer 21 for such taxable year. 22 ‘‘(3) APPLICABLE DOLLAR AMOUNT.—For pur- 23 poses of this subsection, the term ‘applicable dollar 24 amount’ means— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 BASED ON TAXABLE IN- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 17 1 ‘‘(A) in the case of a joint return or a sur- 2 viving spouse, $1,200,000, 3 ‘‘(B) in the case of any other individual, 4 $1,000,000. 5 ‘‘(4) ESTATES (1) 6 shall not apply in the case of an estate or trust.’’. 7 (b) APPLICATION 8 ETS TO 9 OF CURRENT INCOME TAX BRACK- CAPITAL GAINS BRACKETS.— (1) IN 10 GENERAL.— (A) 0-PERCENT CAPITAL GAINS BRACK- 11 ET.—Section 12 ‘‘which would (without regard to this para- 13 graph) be taxed at a rate below 25 percent’’ in 14 subparagraph (B)(i) and inserting ‘‘below the 15 15-percent rate threshold’’. 16 (B) 15-PERCENT 1(h)(1) is amended by striking CAPITAL GAINS BRACK- 17 ET.—Section 18 striking ‘‘which would (without regard to this 19 paragraph) be taxed at a rate below 39.6 per- 20 cent’’ and inserting ‘‘below the 20-percent rate 21 threshold’’. 22 (2) RATE 1(h)(1)(C)(ii)(I) is amended by THRESHOLDS DEFINED.—Section 23 1(h) is amended by adding at the end the following 24 new paragraph: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AND TRUSTS.—Paragraph 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 18 1 2 ‘‘(12) RATE pur- poses of this subsection— 3 ‘‘(A) 15-PERCENT 4 RATE THRESHOLD.— The 15-percent rate threshold shall be— 5 ‘‘(i) in the case of a joint return or 6 surviving spouse, $77,200 (1⁄2 such amount 7 in the case of a married individual filing a 8 separate return), 9 ‘‘(ii) in the case of an individual who 10 is the head of a household (as defined in 11 section 2(b)), $51,700, 12 ‘‘(iii) in the case of any other indi- 13 vidual (other than an estate or trust), an 14 amount equal to 1⁄2 of the amount in effect 15 for the taxable year under clause (i), and 16 ‘‘(iv) in the case of an estate or trust, 17 $2,600. 18 ‘‘(B) 20-PERCENT 19 RATE THRESHOLD.— The 20-percent rate threshold shall be— 20 ‘‘(i) in the case of a joint return or 21 surviving 22 amount in the case of a married individual 23 filing a separate return), g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 THRESHOLDS DEFINED.—For 10:46 Nov 02, 2017 Jkt 000000 spouse, $479,000 (1⁄2 such (679209 10) PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 19 1 ‘‘(ii) in the case of an individual who 2 is the head of a household (as defined in 3 section 2(b)), $452,400, 4 ‘‘(iii) in the case of any other indi- 5 vidual (other than an estate or trust), 6 $425,800, and 7 ‘‘(iv) in the case of an estate or trust, 8 $12,700. 9 ‘‘(C) INFLATION the 10 case of any taxable year beginning after 2018, 11 each of the dollar amounts in subparagraphs 12 (A) and (B) shall be increased by an amount 13 equal to— 14 ‘‘(i) such dollar amount, multiplied by 15 ‘‘(ii) the cost-of-living adjustment de- 16 termined under subsection (c)(2)(A) for 17 the calendar year in which the taxable year 18 begins, determined by substituting ‘cal- 19 endar year 2017’ for ‘calendar year 2016’ 20 in clause (ii) thereof.’’. 21 (c) APPLICATION OF SECTION 15.— 22 (1) IN GENERAL.—Subsection (a) of section 15 23 is amended by striking ‘‘by this chapter’’ and insert- 24 ing ‘‘by section 11 (or by reference to any such 25 rates)’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ADJUSTMENT.—In 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 20 1 (2) CONFORMING 2 (A) Section 15 is amended by striking sub- 3 sections (d) and (f) and by redesignating sub- 4 section (e) as subsection (d). 5 (B) Section 15(d), as redesignated by sub- 6 paragraph (A), is amended by striking ‘‘section 7 1 or 11(b)’’ and inserting ‘‘section 11(b)’’. 8 (C) Section 6013(c) is amended by striking 9 ‘‘sections 15, 443, and 7851(a)(1)(A)’’ and in- 10 serting ‘‘sections 443 and 7851(a)(1)(A)’’. 11 (3) APPLICATION TO THIS ACT.—Section 15 of 12 the Internal Revenue Code of 1986 shall not apply 13 to any change in a rate of tax imposed by chapter 14 1 of such Code which occurs by reason of any 15 amendment made by this Act (other than the 16 amendments made by section 3001). 17 (d) EFFECTIVE DATE.— 18 (1) IN GENERAL.—The amendments made by 19 this section shall apply to taxable years beginning 20 after December 31, 2017. 21 (2) SUBSECTION (c).—The amendments made 22 by subsection (c) shall take effect on the date of the 23 enactment of this Act. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AMENDMENTS.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00020 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 21 1 SEC. 1002. ENHANCEMENT OF STANDARD DEDUCTION. 2 (a) INCREASE IN STANDARD DEDUCTION.—Section 3 63(c) is amended to read as follows: 4 ‘‘(c) STANDARD DEDUCTION.—For purposes of this 5 subtitle— 6 ‘‘(1) IN as otherwise pro- 7 vided in this subsection, the term ‘standard deduc- 8 tion’ means— 9 ‘‘(A) $24,400, in the case of a joint return 10 (or a surviving spouse (as defined in section 11 2(a)), 12 ‘‘(B) three-quarters of the amount in effect 13 under subparagraph (A) for the taxable year, in 14 the case of an unmarried individual with at 15 least one qualifying child (within the meaning 16 of section 7706), and 17 ‘‘(C) one-half of the amount in effect 18 under subparagraph (A) for the taxable year, in 19 any other case. 20 ‘‘(2) LIMITATION ON STANDARD DEDUCTION IN 21 THE CASE OF CERTAIN DEPENDENTS.—In 22 of an individual who is a dependent of another tax- 23 payer for a taxable year beginning in the calendar 24 year in which the individual’s taxable year begins, 25 the standard deduction applicable to such individual g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Except 10:46 Nov 02, 2017 Jkt 000000 the case (679209 10) PO 00000 Frm 00021 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 22 1 for such individual’s taxable year shall not exceed 2 the greater of— 3 ‘‘(A) $500, or 4 ‘‘(B) the sum of $250 and such individ- 5 ual’s earned income (within the means of sec- 6 tion 32). 7 ‘‘(3) CERTAIN 8 BLE FOR STANDARD DEDUCTION.—In the case of— 9 ‘‘(A) a married individual filing a separate 10 return where either spouse itemizes deductions, 11 ‘‘(B) a nonresident alien individual, 12 ‘‘(C) an individual making a return under 13 section 443(a)(1) for a period of less than 12 14 months on account of a change in his annual 15 accounting period, or 16 ‘‘(D) an estate or trust, common trust 17 18 fund, or partnership, the standard deduction shall be zero. 19 ‘‘(4) UNMARRIED INDIVIDUAL.—For purposes 20 of this section, the term ‘unmarried individual’ 21 means any individual who— 22 ‘‘(A) is not married as of the close of the 23 taxable year (as determined by applying section 24 7703), g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 INDIVIDUALS, ETC., NOT ELIGI- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00022 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 23 1 ‘‘(B) is not a surviving spouse (as defined 2 in section 2(a)) for the taxable year, and 3 ‘‘(C) is not a dependent of another tax- 4 payer for a taxable year beginning in the cal- 5 endar year in which the individual’s taxable 6 year begins. 7 ‘‘(5) INFLATION 8 ‘‘(A) STANDARD DEDUCTION AMOUNT.—In 9 the case of any taxable year beginning after 10 2019, the dollar amount in paragraph (1)(A) 11 shall be increased by an amount equal to— 12 ‘‘(i) such dollar amount, multiplied by 13 ‘‘(ii) the cost-of-living adjustment de- 14 termined under section 1(c)(2)(A) for the 15 calendar year in which the taxable year be- 16 gins, determined by substituting ‘calendar 17 year 2018’ for ‘calendar year 2016’ in 18 clause (ii) thereof. 19 ‘‘(B) LIMITATION 20 CERTAIN DEPENDENTS.—In 21 taxable year beginning after 2017, each of the 22 dollar amounts in paragraph (2) shall be in- 23 creased by an amount equal to— 24 10:46 Nov 02, 2017 AMOUNT IN CASE OF the case of any ‘‘(i) such dollar amount, multiplied by g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ADJUSTMENTS.— Jkt 000000 (679209 10) PO 00000 Frm 00023 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 24 1 ‘‘(ii)(I) in the case of the dollar 2 amount in paragraph (2)(A), under section 3 1(c)(2)(A) for the calendar year in which 4 the taxable year begins determined by sub- 5 stituting ‘calendar year 1987’ for ‘calendar 6 year 2016’ in clause (ii) thereof, and 7 ‘‘(II) in the case of the dollar amount 8 in 9 1(c)(2)(A) for the calendar year in which 10 the taxable year begins determined by sub- 11 stituting ‘calendar year 1997’ for ‘calendar 12 year 2016’ in clause (ii) thereof. (2)(B), under section 13 If any increase determined under this paragraph is 14 not a multiple of $100, such increase shall be round- 15 ed to the next lowest multiple of $100.’’. 16 (b) CONFORMING AMENDMENTS.— 17 (1) Section 63(b) is amended by striking ‘‘, 18 minus—’’ and all that follows and inserting ‘‘minus 19 the standard deduction’’. 20 21 (2) Section 63 is amended by striking subsections (f) and (g). 22 (3) Section 1398(c) is amended— 23 (A) by striking ‘‘BASIC’’ in the heading 24 thereof, g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 paragraph 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00024 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 25 1 (B) by striking ‘‘BASIC 2 heading 3 ‘‘STANDARD’’, and of paragraph STANDARD’’ (3) and in the inserting 4 (C) by striking ‘‘basic’’ in paragraph (3). 5 (4) Section 3402(m)(3) is amended by striking 6 ‘‘(including the additional standard deduction under 7 section 63(c)(3) for the aged and blind)’’. 8 (5) Section 6014(b)(4) is amended by striking 9 ‘‘section 63(c)(5)’’ and inserting ‘‘section 63(c)(2)’’. 10 (c) EFFECTIVE DATE.—The amendment made by 11 this section shall apply to taxable years beginning after 12 December 31, 2017. 13 SEC. 1003. REPEAL OF DEDUCTION FOR PERSONAL EXEMP- 14 TIONS. 15 (a) IN GENERAL.—Part V of subchapter B of chapter 16 1 is hereby repealed. 17 (b) DEFINITION OF DEPENDENT RETAINED.—Sec- 18 tion 152, prior to repeal by subsection (a), is hereby redes19 ignated as section 7706 and moved to the end of chapter 20 79. 21 (c) APPLICATION TO ESTATES AND TRUSTS.—Sub- 22 section (b) of section 642 is amended— 23 (1) by striking paragraph (2)(C), 24 (2) by striking paragraph (3), and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00025 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 26 1 (3) by striking ‘‘DEDUCTION FOR PERSONAL 2 EXEMPTION’’ in the heading thereof and inserting 3 ‘‘BASIC DEDUCTION’’. 4 (d) APPLICATION NONRESIDENT ALIENS.—Sec- TO 5 tion 873(b) is amended by striking paragraph (3). 6 (e) MODIFICATION OF WAGE WITHHOLDING 7 RULES.— 8 9 (1) IN (2) CONFORMING AMENDMENT.—Section 3402(a) is amended— 12 (A) by redesignating subparagraph (A) 13 and (B) of paragraph (1) as paragraphs (1) 14 and (2) and moving such redesignated para- 15 graphs 2 ems to the left, and 16 (B) by striking all that precedes ‘‘other- 17 wise provided in this section’’ and inserting the 18 following: 19 ‘‘(a) REQUIREMENT OF WITHHOLDING.—Except as’’. 20 21 (3) NUMBER OF EXEMPTIONS.—Section 3402(f)(1) is amended— 22 (A) in subparagraph (A), by striking ‘‘an 23 individual described in section 151(d)(2)’’ and 24 inserting ‘‘a dependent of any other taxpayer’’, 25 and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 3402(a) is amended by striking paragraph (2) 10 11 GENERAL.—Section 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 27 1 (B) in subparagraph (C), by striking ‘‘with 2 respect to whom, on the basis of facts existing 3 at the beginning of such day, there may reason- 4 ably be expected to be allowable an exemption 5 under section 151(c)’’ and inserting ‘‘who, on 6 the basis of facts existing at the beginning of 7 such day, is reasonably expected to be a de- 8 pendent of the employee’’. 9 (f) MODIFICATION OF RETURN REQUIREMENT.— 10 11 (1) IN (1) of section 6012(a) is amended to read as follows: 12 ‘‘(1) Every individual who has gross income for 13 the taxable year, except that a return shall not be 14 required of— 15 ‘‘(A) an individual who is not married (de- 16 termined by applying section 7703) and who 17 has gross income for the taxable year which 18 does not exceed the standard deduction applica- 19 ble to such individual for such taxable year 20 under section 63, or 21 ‘‘(B) an individual entitled to make a joint 22 return if— 23 ‘‘(i) the gross income of such indi- 24 vidual, when combined with the gross in- 25 come of such individual’s spouse, for the g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Paragraph 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 28 1 taxable year does not exceed the standard 2 deduction which would be applicable to the 3 taxpayer for such taxable year under sec- 4 tion 63 if such individual and such individ- 5 ual’s spouse made a joint return, 6 ‘‘(ii) such individual and such individ- 7 ual’s spouse have the same household as 8 their home at the close of the taxable year, 9 ‘‘(iii) such individual’s spouse does not 10 make a separate return, and 11 ‘‘(iv) neither such individual nor such 12 individual’s spouse is an individual de- 13 scribed in section 63(c)(2) who has income 14 (other than earned income) in excess of the 15 amount 16 63(c)(2)(A).’’. 17 (2) BANKRUPTCY effect under ESTATES.—Paragraph section (8) of 18 section 6012(a) is amended by striking ‘‘the sum of 19 the exemption amount plus the basic standard de- 20 duction under section 63(c)(2)(D)’’ and inserting 21 ‘‘the standard deduction in effect under section 22 63(c)(1)(B)’’. 23 (g) CONFORMING AMENDMENTS.— 24 (1) Section 2(a)(1)(B) is amended by striking 25 ‘‘a dependent’’ and all that follows through ‘‘section g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 in 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00028 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 29 1 151’’ and inserting ‘‘a dependent who (within the 2 meaning of section 7706, determined without regard 3 to subsections (b)(1), (b)(2) and (d)(1)(B) thereof) 4 is a son, stepson, daughter, or stepdaughter of the 5 taxpayer’’. 6 7 (2) Section 36B(b)(2)(A) is amended by striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 8 (3) Section 36B(b)(3)(B) is amended by strik- 9 ing ‘‘unless a deduction is allowed under section 151 10 for the taxable year with respect to a dependent’’ in 11 the flush matter at the end and inserting ‘‘unless 12 the taxpayer has a dependent for the taxable year’’. 13 (4) Section 36B(c)(1)(D) is amended by strik- 14 ing ‘‘with respect to whom a deduction under section 15 151 is allowable to another taxpayer’’ and inserting 16 ‘‘who is a dependent of another taxpayer’’. 17 (5) Section 36B(d)(1) is amended by striking 18 ‘‘equal to the number of individuals for whom the 19 taxpayer is allowed a deduction under section 151 20 (relating to allowance of deduction for personal ex- 21 emptions) for the taxable year’’ and inserting ‘‘the 22 sum of 1 (2 in the case of a joint return) plus the 23 number of the taxpayer’s dependents for the taxable 24 year’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00029 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 30 1 (6) Section 36B(e)(1) is amended by striking 2 ‘‘1 or more individuals for whom a taxpayer is al- 3 lowed a deduction under section 151 (relating to al- 4 lowance of deduction for personal exemptions) for 5 the taxable year (including the taxpayer or his 6 spouse)’’ and inserting ‘‘1 or more of the taxpayer, 7 the taxpayer’s spouse, or any dependent of the tax- 8 payer’’. 9 (7) Section 42(i)(3)(D)(ii)(I) is amended— 10 (A) by striking ‘‘section 152’’ and insert- 11 ing ‘‘section 7706’’, and 12 (B) by striking the period at the end and 13 inserting a comma. 14 (8) Section 72(t)(2)(D)(i)(III) is amended by 15 striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 16 (9) Section 72(t)(7)(A)(iii) is amended by strik- 17 ing ‘‘section 152(f)(1)’’ and inserting ‘‘section 18 7706(f)(1)’’. 19 (10) Section 105(b) is amended— 20 (A) by striking ‘‘as defined in section 152’’ 21 and inserting ‘‘as defined in section 7706’’, 22 (B) by striking ‘‘section 152(f)(1)’’ and in- 23 serting ‘‘section 7706(f)(1)’’ and 24 (C) by striking ‘‘section 152(e)’’ and in- 25 serting ‘‘section 7706(e)’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00030 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 31 1 2 (11) Section 105(c)(1) is amended by striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 3 4 (12) Section 125(e)(1)(D) is amended by striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 5 (13) Section 132(h)(2)(B) is amended— 6 (A) by striking ‘‘section 152(f)(1)’’ and in- 7 serting ‘‘section 7706(f)(1)’’, and 8 (B) by striking ‘‘section 152(e)’’ and in- 9 serting ‘‘section 7706(e)’’. 10 11 (14) Section 139D(c)(5) is amended by striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 12 (15) Section 162(l)(1)(D) is amended by strik- 13 ing ‘‘section 152(f)(1)’’ and inserting ‘‘section 14 7706(f)(1)’’. 15 16 (16) Section 170(g)(1) is amended by striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 17 (17) Section 170(g)(3) is amended by striking 18 ‘‘section 19 7706(d)(2)’’. 20 21 and inserting ‘‘section (18) Section 172(d) is amended by striking paragraph (3). 22 (19) Section 220(b)(6) is amended by striking 23 ‘‘with respect to whom a deduction under section 24 151 is allowable to’’ and inserting ‘‘who is a depend- 25 ent of’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 152(d)(2)’’ 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00031 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 32 1 2 (20) Section 220(d)(2)(A) is amended by striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 3 (21) Section 223(b)(6) is amended by striking 4 ‘‘with respect to whom a deduction under section 5 151 is allowable to’’ and inserting ‘‘who is a depend- 6 ent of’’. 7 8 (22) Section 223(d)(2)(A) is amended by striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 9 (23) Section 401(h) is amended by striking 10 ‘‘section 152(f)(1)’’ in the last sentence and insert- 11 ing ‘‘section 7706(f)(1)’’. 12 13 (24) Section 402(l)(4)(D) is amended by striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 14 (25) Section 409A(a)(2)(B)(ii)(I) is amended 15 by striking ‘‘section 152(a)’’ and inserting ‘‘section 16 7706(a)’’. 17 (26) Section 501(c)(9) is amended by striking 18 ‘‘section 19 7706(f)(1)’’. and inserting ‘‘section 20 (27) Section 529(e)(2)(B) is amended by strik- 21 ing ‘‘section 152(d)(2)’’ and inserting ‘‘section 22 7706(d)(2)’’. 23 (28) Section 703(a)(2) is amended by striking 24 subparagraph (A) and by redesignating subpara- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 152(f)(1)’’ 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00032 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 33 1 graphs (B) through (F) as subparagraphs (A) 2 through (E), respectively. 3 (29) Section 874 is amended by striking sub- 4 section (b) and by redesignating subsection (c) as 5 subsection (b). 6 7 (30) Section 891 is amended by striking ‘‘under section 151 and’’. 8 9 (31) Section 904(b) is amended by striking paragraph (1). 10 (32) Section 931(b)(1) is amended by striking 11 ‘‘(other than the deduction under section 151, relat- 12 ing to personal exemptions)’’. 13 (33) Section 933 is amended— 14 (A) by striking ‘‘(other than the deduction 15 under section 151, relating to personal exemp- 16 tions)’’ in paragraph (1), and 17 (B) by striking ‘‘(other than the deduction 18 for personal exemptions under section 151)’’ in 19 paragraph (2). 20 (34) Section 1212(b)(2)(B)(ii) is amended to 21 read as follows: 22 ‘‘(ii) in the case of an estate or trust, 23 the deduction allowed for such year under 24 section 642(b).’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00033 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 34 1 (35) Section 1361(c)(1)(C) is amended by strik- 2 ing ‘‘section 152(f)(1)(C)’’ and inserting ‘‘section 3 7706(f)(1)(C)’’. 4 5 (36) Section 1402(a) is amended by striking paragraph (7). 6 (37) Section 2032A(c)(7)(D) is amended by 7 striking ‘‘section 152(f)(2)’’ and inserting ‘‘section 8 7706(f)(2)’’. 9 (38) Section 3402(m)(1) is amended by striking 10 ‘‘other than the deductions referred to in section 11 151 and’’. 12 (39) Section 3402(r)(2) is amended by striking 13 ‘‘the sum of—’’ and all that follows and inserting 14 ‘‘the standard deduction in effect under section 15 63(c)(1)(B).’’. 16 (40) Section 5000A(b)(3)(A) is amended by 17 striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 18 (41) Section 5000A(c)(4)(A) is amended by 19 striking ‘‘the number of individuals for whom the 20 taxpayer is allowed a deduction under section 151 21 (relating to allowance of deduction for personal ex- 22 emptions) for the taxable year’’ and inserting ‘‘the 23 sum of 1 (2 in the case of a joint return) plus the 24 number of the taxpayer’s dependents for the taxable 25 year’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00034 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 35 1 (42) Section 6013(b)(3)(A) is amended— 2 (A) by striking ‘‘had less than the exemp- 3 tion amount of gross income’’ in clause (ii) and 4 inserting ‘‘had no gross income’’, 5 (B) by striking ‘‘had gross income of the 6 exemption amount or more’’ in clause (iii) and 7 inserting ‘‘had any gross income’’, and 8 (C) by striking the flush language fol- 9 lowing clause (iii). 10 (43) Section 6014(b)(4), as amended by the 11 preceding provisions of this Act, is amended by 12 striking ‘‘where the taxpayer itemizes his deductions 13 or’’. 14 15 (44) Section 6103(l)(21)(A)(iii) is amended to read as follows: 16 ‘‘(iii) the number of the taxpayer’s de- 17 pendents,’’. 18 19 (45) Section 6213(g)(2) is amended by striking subparagraph (H). 20 21 (46) Section 6334(d)(2) is amended to read as follows: 22 ‘‘(2) EXEMPT 23 ‘‘(A) IN GENERAL.—For purposes of para- 24 graph (1), the term ‘exempt amount’ means an 25 amount equal to— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AMOUNT.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00035 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 36 1 ‘‘(i) the standard deduction, divided 2 by 3 ‘‘(ii) 52. 4 ‘‘(B) VERIFIED the 5 taxpayer submits to the Secretary a written and 6 properly verified statement specifying the facts 7 necessary to determine the proper amount 8 under subparagraph (A), subparagraph (A) 9 shall be applied as if the taxpayer were a mar- 10 ried individual filing a separate return with no 11 dependents.’’. 12 (47) Section 7702B(f)(2)(C)(iii) is amended by 13 striking ‘‘section 152(d)(2)’’ and inserting ‘‘section 14 7706(d)(2)’’. 15 16 (48) Section 7703(a) is amended by striking ‘‘part V of subchapter B of chapter 1 and’’. 17 (49) Section 7703(b)(1) is amended by striking 18 ‘‘section 152(f)(1)’’ and all that follows and insert- 19 ing ‘‘section 7706(f)(1),’’. 20 (50) Section 7706(a), as redesignated by this 21 section, is amended by striking ‘‘this subtitle’’ and 22 inserting ‘‘subtitle A’’. 23 (51)(A) Section 7706(d)(1)(B), as redesignated 24 by this section, is amended by striking ‘‘the exemp- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 STATEMENT.—Unless 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00036 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 37 1 tion amount (as defined in section 151(d))’’ and in- 2 serting ‘‘$4,150’’. 3 (B) Section 7706(d), as redesignated by this 4 section, is amended by adding at the end the fol- 5 lowing new paragraph: 6 ‘‘(6) INFLATION ADJUSTMENT.—In the case of 7 any calendar year beginning after 2018, the $4,150 8 amount in paragraph (1)(B) shall be increased by an 9 amount equal to— 10 ‘‘(A) such dollar amount, multiplied by 11 ‘‘(B) the cost-of-living adjustment deter- 12 mined under section 1(c)(2)(A) for such cal- 13 endar year, determined by substituting ‘cal- 14 endar year 2017’ for ‘calendar year 2016’ in 15 clause (ii) thereof. 16 If any increase determined under the preceding sen- 17 tence is not a multiple of $100, such increase shall 18 be rounded to the next lowest multiple of $100.’’. 19 (52) The table of sections for chapter 79 is 20 amended by adding at the end the following new 21 item: ‘‘Sec. 7706. Dependent defined.’’. 22 (h) EFFECTIVE DATE.—The amendments made by 23 this section shall apply to taxable years beginning after 24 December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00037 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 38 1 SEC. 1004. MAXIMUM RATE ON BUSINESS INCOME OF INDI- 2 VIDUALS. 3 (a) IN GENERAL.—Part I of subchapter A of chapter 4 1 is amended by inserting after section 3 the following 5 new section: 6 ‘‘SEC. 4. 25 PERCENT MAXIMUM RATE ON BUSINESS IN- 7 8 COME OF INDIVIDUALS. ‘‘(a) REDUCTION IN TAX TO ACHIEVE 25 PERCENT 9 MAXIMUM RATE.—The tax imposed by section 1 shall be 10 reduced by the sum of— 11 ‘‘(1) 10 percent of the lesser of— 12 ‘‘(A) qualified business income, or 13 ‘‘(B) the excess (if any) of— 14 ‘‘(i) taxable income reduced by net 15 capital 16 1(h)(11)(A)), over (as defined in section 17 ‘‘(ii) the maximum dollar amount for 18 the 25-percent rate bracket which applies 19 to the taxpayer under section 1 for the 20 taxable year, and 21 ‘‘(2) 4.6 percent of the excess (if any) of— 22 ‘‘(A) the lesser of— 23 ‘‘(i) qualified business income, or 24 ‘‘(ii) the excess (if any) determined 25 under paragraph (1)(B), over 26 ‘‘(B) the excess of— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 gain 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00038 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 39 1 ‘‘(i) the maximum dollar amount for 2 the 35-percent rate bracket which applies 3 to the taxpayer under section 1 for the 4 taxable year, over 5 ‘‘(ii) the maximum dollar amount for 6 the 25-percent rate bracket which applies 7 to the taxpayer under section 1 for the 8 taxable year. 9 ‘‘(b) QUALIFIED BUSINESS INCOME.—For purposes 10 of this section, the term ‘qualified business income’ means 11 the excess (if any) of— 12 ‘‘(1) the sum of— 13 ‘‘(A) 100 percent of any net business in- 14 come derived from any passive business activity, 15 plus 16 ‘‘(B) the capital percentage of any net 17 business income derived from any active busi- 18 ness activity, over 19 ‘‘(2) the sum of— 20 ‘‘(A) 100 percent of any net business loss 21 derived from any passive business activity, 22 ‘‘(B) except as provided in subsection 23 (e)(3)(A), 30 percent of any net business loss 24 derived from any active business activity, plus g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00039 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 40 1 ‘‘(C) any carryover business loss deter- 2 3 mined for the preceding taxable year. ‘‘(c) DETERMINATION OF NET BUSINESS INCOME OR 4 LOSS.—For purposes of this section— 5 ‘‘(1) IN business income or loss 6 shall be determined with respect to any business ac- 7 tivity by appropriately netting items of income, gain, 8 deduction, and loss with respect to such business ac- 9 tivity. 10 ‘‘(2) WAGES, ETC.—Any wages (as defined in 11 section 3401), payments described in subsection (a) 12 or (c) of section 707, or directors’ fees received by 13 the taxpayer which are properly attributable to any 14 business activity shall be taken into account under 15 paragraph (1) as an item of income with respect to 16 such business activity. 17 ‘‘(3) EXCEPTION FOR CERTAIN INVESTMENT- 18 RELATED ITEMS.—There 19 count under paragraph (1)— shall not be taken into ac- 20 ‘‘(A) any item of short-term capital gain, 21 short-term capital loss, long-term capital gain, 22 or long-term capital loss, 23 ‘‘(B) any dividend, income equivalent to a 24 dividend, or payment in lieu of dividends de- 25 scribed in section 954(c)(1)(G), g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Net 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00040 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 41 1 ‘‘(C) any interest income other than inter- 2 est income which is properly allocable to a trade 3 or business, 4 ‘‘(D) any item of gain or loss described in 5 subparagraph (C) or (D) of section 954(c)(1) 6 (applied by substituting ‘business activity’ for 7 ‘controlled foreign corporation’), 8 ‘‘(E) any item of income, gain, deduction, 9 or loss taken into account under section 10 954(c)(1)(F) (determined without regard to 11 clause (ii) thereof and other than items attrib- 12 utable to notional principal contracts entered 13 into in transactions qualifying under section 14 1221(a)(7)), 15 ‘‘(F) any amount received from an annuity 16 which is not received in connection with the 17 trade or business of the business activity, and 18 ‘‘(G) any item of deduction or loss properly 19 allocable to an amount described in any of the 20 preceding subparagraphs. 21 ‘‘(4) APPLICATION 22 BLE TO DETERMINING TAXABLE INCOME.—Net 23 ness income or loss shall be appropriately adjusted 24 so as only to take into account any amount of in- 25 come, gain, deduction, or loss to the extent such g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF RESTRICTIONS APPLICA- 10:46 Nov 02, 2017 Jkt 000000 busi- (679209 10) PO 00000 Frm 00041 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 42 1 amount affects the determination of taxable income 2 for the taxable year. 3 ‘‘(5) CARRYOVER BUSINESS LOSS.—For pur- 4 poses of subsection (b)(2)(C), the carryover business 5 loss determined for any taxable year is the excess (if 6 any) of the sum described in subsection (b)(2) over 7 the sum described in subsection (b)(1) for such tax- 8 able year. 9 ‘‘(d) PASSIVE ACTIVE BUSINESS ACTIVITY.— AND 10 For purposes of this section— 11 ‘‘(1) PASSIVE BUSINESS ACTIVITY.—The term 12 ‘passive business activity’ means any passive activity 13 as defined in section 469(c) determined without re- 14 gard to paragraphs (3) and (6)(B) thereof. 15 ‘‘(2) ACTIVE BUSINESS ACTIVITY.—The term 16 ‘active business activity’ means any business activity 17 which is not a passive business activity. 18 ‘‘(3) BUSINESS ACTIVITY.—The term ‘business 19 activity’ means any activity (within the meaning of 20 section 469) which involves the conduct of any trade 21 or business. 22 ‘‘(e) CAPITAL PERCENTAGE.—For purposes of this 23 section— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00042 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 43 1 ‘‘(1) IN as otherwise pro- 2 vided in this section, the term ‘capital percentage’ 3 means 30 percent. 4 ‘‘(2) INCREASED PERCENTAGE FOR CAPITAL-IN- 5 TENSIVE BUSINESS ACTIVITIES.—In 6 taxpayer who elects the application of this paragraph 7 with respect to any active business activity (other 8 than a specified service activity), the capital percent- 9 age shall be equal to the applicable percentage (as 10 defined in subsection (f)) for each taxable year with 11 respect to which such election applies. Any election 12 made under this paragraph shall apply to the tax- 13 able year for which such election is made and each 14 of the 4 subsequent taxable years. Such election 15 shall be made not later than the due date (including 16 extensions) for the return of tax for the taxable year 17 for which such election is made, and, once made, 18 may not be revoked. 19 20 ‘‘(3) TREATMENT the case of a OF SPECIFIED SERVICE AC- TIVITIES.— 21 ‘‘(A) IN GENERAL.—In the case of any ac- 22 tive business activity which is a specified service 23 activity— 24 ‘‘(i) the capital percentage shall be 0 25 percent, and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Except 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00043 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 44 1 ‘‘(ii) subsection (b)(2)(B) shall be ap- 2 plied by substituting ‘0 percent’ for ‘30 3 percent’. 4 ‘‘(B) EXCEPTION 5 SPECIFIED SERVICE ACTIVITIES.—If— 6 ‘‘(i) the taxpayer elects the application 7 of this subparagraph with respect to such 8 activity for any taxable year, and 9 ‘‘(ii) the applicable percentage (as de- 10 fined in subsection (f)) with respect to 11 such activity for such taxable year is at 12 least 10 percent, 13 then subparagraph (A) shall not apply and the 14 capital percentage with respect to such activity 15 shall be equal to such applicable percentage. 16 ‘‘(C) SPECIFIED SERVICE ACTIVITY.—The 17 term ‘specified service activity’ means any activ- 18 ity involving the performance of services de- 19 scribed in section 1202(e)(3)(A), including in- 20 vesting, trading, or dealing in securities (as de- 21 fined in section 475(c)(2)), partnership inter- 22 ests, or commodities (as defined in section 23 475(e)(2)). 24 ‘‘(4) REDUCTION 25 CERTAIN g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FOR CAPITAL-INTENSIVE 10:46 Nov 02, 2017 Jkt 000000 IN CAPITAL PERCENTAGE IN CASES.—The capital percentage (deter- (679209 10) PO 00000 Frm 00044 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 45 1 mined after the application of paragraphs (2) and 2 (3)) with respect to any active business activity shall 3 not exceed 1 minus the quotient (not greater than 4 1) of— 5 ‘‘(A) any amounts described in subsection 6 (c)(2) which are taken into account in deter- 7 mining the net business income derived from 8 such activity, divided by 9 10 ‘‘(B) such net business income. ‘‘(f) APPLICABLE PERCENTAGE.—For purposes of 11 this section— 12 ‘‘(1) IN term ‘applicable per- 13 centage’ means, with respect to any active business 14 activity for any taxable year, the quotient (not great- 15 er than 1) of— 16 ‘‘(A) the specified return on capital with 17 respect to such activity for such taxable year, 18 divided by 19 ‘‘(B) the taxpayer’s net business income 20 derived from such activity for such taxable year. 21 ‘‘(2) SPECIFIED RETURN ON CAPITAL.—The 22 term ‘specified return on capital’ means, with re- 23 spect to any active business activity referred to in 24 paragraph (1), the excess of— 25 ‘‘(A) the product of— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00045 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 46 1 ‘‘(i) the deemed rate of return for the 2 taxable year, multiplied by 3 ‘‘(ii) the asset balance with respect to 4 such activity for such taxable year, over 5 ‘‘(B) an amount equal to the interest 6 which is paid or accrued, and for which a de- 7 duction is allowed under this chapter, with re- 8 spect to such activity for such taxable year. 9 ‘‘(3) DEEMED term 10 ‘deemed rate of return’ means, with respect to any 11 taxable year, the Federal short-term rate (deter- 12 mined under section 1274(d) for the month in which 13 or with which such taxable year ends) plus 7 per- 14 centage points. 15 ‘‘(4) ASSET 16 BALANCE.— ‘‘(A) IN GENERAL.—The asset balance 17 with respect to any active business activity re- 18 ferred to in paragraph (1) for any taxable year 19 equals the taxpayer’s adjusted basis of the 20 property used in connection with such activity 21 as of the end of the taxable year (determined 22 without regard to sections 168(k) and 179). 23 ‘‘(B) APPLICATION TO ACTIVITIES CAR- 24 RIED ON THROUGH PARTNERSHIPS AND S COR- 25 PORATIONS.—In g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 RATE OF RETURN.—The 10:46 Nov 02, 2017 Jkt 000000 the case of any active business (679209 10) PO 00000 Frm 00046 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 47 1 activity carried on through a partnership or S 2 corporation, the taxpayer shall take into ac- 3 count such taxpayer’s distributive or pro rata 4 share (as the case may be) of the asset balance 5 with respect to such activity as determined 6 under this paragraph with respect to the part- 7 nership’s or S corporation’s adjusted basis of 8 the property used in connection with such activ- 9 ity by the partnership or S corporation. 10 ‘‘(g) REGULATIONS.—The Secretary may issue such 11 regulations or other guidance as may be necessary or ap12 propriate to carry out the purposes of this section, includ13 ing regulations or other guidance— 14 ‘‘(1) which ensures that no amount is taken 15 into account under subsection (f)(4) with respect to 16 more than one activity, and 17 ‘‘(2) which treats all specified service activities 18 of the taxpayer as a single business activity for pur- 19 poses of this section to the extent that such activi- 20 ties would be treated as a single employer under 21 subsection (a) or (b) of section 52 or subsection (m) 22 or (o) of section 414. 23 ‘‘(h) REFERENCES.—Any reference in this title to 24 section 1 shall be treated as including a reference to this g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00047 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 48 1 section unless the context of such reference clearly indi2 cates otherwise.’’. 3 (b) 25 PERCENT RATE FOR CERTAIN DIVIDENDS 4 REAL ESTATE INVESTMENT TRUSTS 5 TIVES.—Section AND OF COOPERA- 1(h) is amended by adding at the end the 6 following new paragraph: 7 ‘‘(12) 25 PERCENT RATE FOR CERTAIN DIVI- 8 DENDS OF REAL ESTATE INVESTMENT TRUSTS AND 9 COOPERATIVES.— 10 ‘‘(A) IN purposes of this 11 subsection, net capital gain (as defined in para- 12 graph (11)) and unrecaptured section 1250 13 gain (as defined in paragraph (6)) shall each be 14 increased by specified dividend income. 15 ‘‘(B) SPECIFIED DIVIDEND INCOME.—For 16 purposes of this paragraph, the term ‘specified 17 dividend income’ means— 18 ‘‘(i) in the case of any dividend re- 19 ceived from a real estate investment trust, 20 the portion of such dividend which is nei- 21 ther— 22 ‘‘(I) a capital gain dividend (as 23 defined in section 852(b)(3)), nor g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00048 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 49 1 ‘‘(II) taken into account in deter- 2 mining qualified dividend income (as 3 defined in paragraph (11)), and 4 ‘‘(ii) any dividend which is includible 5 in gross income and which is received from 6 an organization or corporation described in 7 section 501(c)(12) or 1381(a).’’. 8 (b) NET EARNINGS FROM SELF-EMPLOYMENT.— 9 (1) APPLICATION 10 DISTRIBUTIVE 11 1402(a) is amended— PRO RATA SHARES.—Section 12 (A) by striking ‘‘the gross income derived 13 by an individual from any trade or business car- 14 ried on by such individual, less the deductions 15 allowed by this subtitle which are attributable 16 to such trade or business, plus his distributive 17 share (whether or not distributed) of income or 18 loss described in section 702(a)(8) from any 19 trade or business carried on by a partnership of 20 which he is a member’’ and inserting ‘‘the labor 21 percentage of the gross income derived by an 22 individual from any trade or business carried on 23 by such individual, less the labor percentage of 24 the deductions allowed by this subtitle which 25 are attributable to such trade or business, plus g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AND TO LABOR PERCENTAGE OF 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00049 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 50 1 the labor percentage of such individual’s dis- 2 tributive share (whether or not distributed) of 3 income or loss described in section 702(a)(8) 4 from any trade or business carried on by a 5 partnership of which such individual is a mem- 6 ber, plus the labor percentage of such individ- 7 ual’s pro rata share (whether or not distrib- 8 uted) of nonseparately computed income or loss 9 (as defined in section 1366(a)(2)) from any 10 trade or business carried on by an S corpora- 11 tion in which such individual is a shareholder’’, 12 and 13 (B) by striking ‘‘and such distributive 14 share of partnership ordinary income or loss’’ 15 and inserting ‘‘, such distributive share of part- 16 nership ordinary income or loss, and such pro 17 rata share of S corporation nonseparately com- 18 puted income or loss’’. 19 (2) LABOR 1402 is 20 amended by adding at the end the following new 21 subsection: 22 ‘‘(m) LABOR PERCENTAGE.— 23 ‘‘(1) IN GENERAL.—For purposes of this sec- 24 tion, the term ‘labor percentage’ means, with respect 25 to any income or loss, the excess (expressed as a g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 PERCENTAGE.—Section 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00050 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 51 1 percentage) of 1 minus the capital percentage (ex- 2 pressed as a decimal) with respect to such income or 3 loss. 4 ‘‘(2) CAPITAL PERCENTAGE.—For purposes of 5 paragraph (1), the term ‘capital percentage’ means 6 the percentage which applied with respect to such 7 income or loss under section 4(b)(1)(B). 8 ‘‘(3) 9 WAGES.—For ADJUSTMENT FOR S CORPORATION purposes of this subsection, proper ad- 10 justment shall be made for wages paid to the tax- 11 payer with respect to any trade or business carried 12 on by an S corporation in which the taxpayer is a 13 shareholder.’’. 14 (3) APPLICATION 15 TO RENTAL INCOME.—Section 1402(a) is amended by striking paragraph (1). 16 (4) APPLICATION TO LIMITED PARTNERS.—Sec- 17 tion 1402(a) is amended by striking paragraph (13). 18 (c) CLERICAL AMENDMENT.—The table of sections 19 for part I of subchapter A of chapter 1 is amended by 20 inserting after the item relating to section 3 the following 21 new item: ‘‘Sec. 4. 25 percent maximum rate on business income of individuals.’’. 22 (d) EFFECTIVE DATE.—The amendments made by 23 this section shall apply to taxable years beginning after 24 December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00051 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 52 1 (e) TRANSITION RULE.—In the case of any taxable 2 year which includes December 31, 2017, the amendment 3 made by subsection (a) shall apply with respect to such 4 taxable year adjusted— 5 (1) so as to apply with respect to the rates of 6 tax in effect under section 1 of the Internal Revenue 7 Code of 1986 with respect to such taxable year (and 8 so as to achieve a 25 percent effective rate of tax 9 on the business income (determined without regard 10 to paragraph (2)) in the same manner as such 11 amendment applies to taxable years beginning after 12 such date with respect to the rates of tax in effect 13 for such years), and 14 (2) by reducing the amount of the reduction in 15 tax (as otherwise determined under paragraph (1)) 16 by the amount which bears the same proportion to 17 the amount of such reduction as the number of days 18 in the taxable year which are before January 1, 19 2018, bears to the number of days in the entire tax- 20 able year. 21 SEC. 1005. CONFORMING AMENDMENTS RELATED TO SIM- 22 PLIFICATION OF INDIVIDUAL INCOME TAX 23 RATES. 24 (a) AMENDMENTS RELATED TO MODIFICATION OF 25 INFLATION ADJUSTMENT.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00052 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 53 1 (1) Section 36B(b)(3)(A)(ii)(II) is amended by 2 striking ‘‘consumer price index’’ and inserting ‘‘C- 3 CPI-U (as defined in section 1(c))’’. 4 5 (2) Section 41(e)(5)(C) is amended to read as follows: 6 ‘‘(C) COST-OF-LIVING 7 DE- FINED.— 8 ‘‘(i) IN GENERAL.—The cost-of-living 9 adjustment for any calendar year is the 10 cost-of-living adjustment for such calendar 11 year determined under section 1(c)(2)(A), 12 by substituting ‘calendar year 1987’ for 13 ‘calendar year 2016’ in clause (ii) thereof. 14 ‘‘(ii) SPECIAL RULE WHERE BASE PE- 15 RIOD ENDS IN A CALENDAR YEAR OTHER 16 THAN 1983 OR 1984.—If 17 any taxpayer does not end in 1983 or 18 1984, clause (i) shall be applied by sub- 19 stituting the calendar year in which such 20 base period ends for 1987.’’. the base period of 21 (3) Section 42(e)(3)(D)(ii) is amended by strik- 22 ing ‘‘section 1(f)(3) for such calendar year by sub- 23 stituting ‘calendar year 2008’ for ‘calendar year 24 1992’ in subparagraph (B) thereof’’ and inserting 25 ‘‘section 1(c)(2)(A) for such calendar year by sub- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ADJUSTMENT 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00053 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 54 1 stituting ‘calendar year 2008’ for ‘calendar year 2 2016’ in clause (ii) thereof’’. 3 (4) Section 42(h)(3)(H)(i)(II) is amended by 4 striking ‘‘section 1(f)(3) for such calendar year by 5 substituting ‘calendar year 2001’ for ‘calendar year 6 1992’ in subparagraph (B) thereof’’ and inserting 7 ‘‘section 1(c)(2)(A) for such calendar year by sub- 8 stituting ‘calendar year 2001’ for ‘calendar year 9 2016’ in clause (ii) thereof’’. 10 (5) Section 45R(d)(3)(B)(ii) is amended by 11 striking ‘‘section 1(f)(3) for the calendar year, deter- 12 mined by substituting ‘calendar year 2012’ for ‘cal- 13 endar year 1992’ in subparagraph (B) thereof’’ and 14 inserting ‘‘ ‘section 1(c)(2)(A) for such calendar 15 year, determined by substituting ‘‘calendar year 16 2012’’ for ‘‘calendar year 2016’’ in clause (ii) there- 17 of’ ’’. 18 (6) Section 125(i)(2) is amended— 19 (A) by striking ‘‘section 1(f)(3) for the cal- 20 endar year in which the taxable year begins by 21 substituting ‘calendar year 2012’ for ‘calendar 22 year 1992’ in subparagraph (B) thereof’’ in 23 subparagraph 24 1(c)(2)(A) for the calendar year in which the 25 taxable year begins’’, and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (B) and inserting ‘‘section (679209 10) PO 00000 Frm 00054 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 55 1 (B) by striking ‘‘$50’’ both places it ap- 2 pears in the last sentence and inserting 3 ‘‘$100’’. 4 (7) Section 162(o)(3) is amended by inserting 5 ‘‘as in effect before enactment of the Tax Cuts and 6 Jobs Act’’ after ‘‘section 1(f)(5)’’. 7 (8) Section 220(g)(2) is amended by striking 8 ‘‘section 1(f)(3) for the calendar year in which the 9 taxable year begins by substituting ‘calendar year 10 1997’ for ‘calendar year 1992’ in subparagraph (B) 11 thereof’’ and inserting ‘‘section 1(c)(2)(A) for the 12 calendar year in which the taxable year begins, de- 13 termined by substituting ‘calendar year 1997’ for 14 ‘calendar year 2016’ in clause (ii) thereof’’. 15 (9) Section 223(g)(1) is amended by striking all 16 that follows subparagraph (A) and inserting the fol- 17 lowing: 18 ‘‘(B) the cost-of-living adjustment deter- 19 mined under section 1(c)(2)(A) for the calendar 20 year in which the taxable year begins, deter- 21 mined— 22 ‘‘(i) by substituting for ‘calendar year 23 2016’ in clause (ii) thereof— 24 ‘‘(I) except as provided in clause 25 (ii), ‘calendar year 1997’, and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00055 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 56 1 ‘‘(II) in the case of each dollar 2 amount in subsection (c)(2)(A), ‘cal- 3 endar year 2003’, and 4 ‘‘(ii) by substituting ‘March 31’ for 5 ‘August 31’ in paragraphs (5)(B) and 6 (6)(B) of section 1(c). 7 The Secretary shall publish the dollar amounts 8 as adjusted under this subsection for taxable 9 years beginning in any calendar year no later 10 than June 1 of the preceding calendar year.’’. 11 (10) Section 430(c)(7)(D)(vii)(II) is amended 12 by striking ‘‘section 1(f)(3) for the calendar year, 13 determined by substituting ‘calendar year 2009’ for 14 ‘calendar year 1992’ in subparagraph (B) thereof’’ 15 and inserting ‘‘section 1(c)(2)(A) for the calendar 16 year, determined by substituting ‘calendar year 17 2009’ for ‘calendar year 2016’ in clause (ii) there- 18 of’’. 19 (11) Section 512(d)(2)(B) is amended by strik- 20 ing ‘‘section 1(f)(3) for the calendar year in which 21 the taxable year begins, by substituting ‘calendar 22 year 1994’ for ‘calendar year 1992’ in subparagraph 23 (B) thereof’’and inserting ‘‘section 1(c)(2)(A) for the 24 calendar year in which the taxable year begins, de- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00056 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 57 1 termined by substituting ‘calendar year 1994’ for 2 ‘calendar year 2016’ in clause (ii) thereof’’. 3 (12) Section 513(h)(2)(C)(ii) is amended by 4 striking ‘‘section 1(f)(3) for the calendar year in 5 which the taxable year begins by substituting ‘cal- 6 endar year 1987’ for ‘calendar year 1992’ in sub- 7 paragraph (B) thereof’’ and inserting ‘‘section 8 1(c)(2)(A) for the calendar year in which the taxable 9 year begins, determined by substituting ‘calendar 10 year 1987’ for ‘calendar year 2016’ in clause (ii) 11 thereof’’. 12 (13) Section 831(b)(2)(D)(ii) is amended by 13 striking ‘‘section 1(f)(3) for such calendar year by 14 substituting ‘calendar year 2013’ for ‘calendar year 15 1992’ in subparagraph (B) thereof’’ and inserting 16 ‘‘section 1(c)(2)(A) for such calendar year by sub- 17 stituting ‘calendar year 2013’ for ‘calendar year 18 2016’ in clause (ii) thereof’’. 19 (14) Section 877A(a)(3)(B)(i)(II) is amended 20 by striking ‘‘section 1(f)(3) for the calendar year in 21 which the taxable year begins, by substituting ‘cal- 22 endar year 2007’ for ‘calendar year 1992’ in sub- 23 paragraph (B) thereof’’ and inserting ‘‘section 24 1(c)(2)(A) for the calendar year in which the taxable 25 year begins, determined by substituting ‘calendar g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00057 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 58 1 year 2007’ for ‘calendar year 2016’ in clause (ii) 2 thereof’’. 3 (15) Section 911(b)(2)(D)(ii)(II) is amended by 4 striking ‘‘section 1(f)(3) for the calendar year in 5 which the taxable year begins, determined by sub- 6 stituting ‘2004’ for ‘1992’ in subparagraph (B) 7 thereof’’ and inserting ‘‘section 1(c)(2)(A) for the 8 calendar year in which the taxable year begins, de- 9 termined by substituting ‘calendar year 2004’ for 10 ‘calendar year 2016’ in clause (ii) thereof’’. 11 12 (16) Section 1274A(d)(2) is amended to read as follows: 13 ‘‘(2) INFLATION 14 ‘‘(A) IN GENERAL.—In the case of any 15 debt instrument arising out of a sale or ex- 16 change during any calendar year after 2018, 17 each adjusted dollar amount shall be increased 18 by an amount equal to— 19 ‘‘(i) such adjusted dollar amount, 20 multiplied by 21 ‘‘(ii) the cost-of-living adjustment de- 22 termined under section 1(c)(2)(A) for such 23 calendar year, determined by substituting 24 ‘calendar year 2017’ for ‘calendar year 25 2016’ in clause (ii) thereof. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ADJUSTMENT.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00058 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 59 1 ‘‘(B) ADJUSTED 2 purposes of this paragraph, the term ‘adjusted 3 dollar amount’ means the dollar amounts in 4 subsections (b) and (c), in each case as in effect 5 for calendar year 2018. 6 ‘‘(C) ROUNDING.—Any increase under sub- 7 paragraph (A) shall be rounded to the nearest 8 multiple of $100.’’. 9 (17) Section 2010(c)(3)(B)(ii) is amended by 10 striking ‘‘section 1(f)(3) for such calendar year by 11 substituting ‘calendar year 2010’ for ‘calendar year 12 1992’ in subparagraph (B) thereof’’ and inserting 13 ‘‘section 1(c)(2)(A) for such calendar year, deter- 14 mined by substituting ‘calendar year 2010’ for ‘cal- 15 endar year 2016’ in clause (ii) thereof’’. 16 (18) Section 2032A(a)(3)(B) is amended by 17 striking ‘‘section 1(f)(3) for such calendar year by 18 substituting ‘calendar year 1997’ for ‘calendar year 19 1992’ in subparagraph (B) thereof’’ and inserting 20 ‘‘section 1(c)(2)(A) for such calendar year, deter- 21 mined by substituting ‘calendar year 1997’ for ‘cal- 22 endar year 2016’ in clause (ii) thereof’’. 23 (19) Section 2503(b)(2)(B) is amended by 24 striking ‘‘section 1(f)(3) for such calendar year by 25 substituting ‘calendar year 1997’ for ‘calendar year g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 DOLLAR AMOUNTS.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00059 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 60 1 1992’ in subparagraph (B) thereof’’ and inserting 2 ‘‘section 1(c)(2)(A) for the calendar year, deter- 3 mined by substituting ‘calendar year 1997’ for ‘cal- 4 endar year 2016’ in clause (ii) thereof’’. 5 (20) Section 4161(b)(2)(C)(i)(II) is amended by 6 striking ‘‘section 1(f)(3) for such calendar year, de- 7 termined by substituting ‘2004’ for ‘1992’ in sub- 8 paragraph (B) thereof’’ and inserting ‘‘section 9 1(c)(2)(A) for such calendar year, determined by 10 substituting ‘calendar year 2004’ for ‘calendar year 11 2016’ in clause (ii) thereof’’. 12 (21) Section 4261(e)(4)(A)(ii) is amended by 13 striking ‘‘section 1(f)(3) for such calendar year by 14 substituting the year before the last nonindexed year 15 for ‘calendar year 1992’ in subparagraph (B) there- 16 of’’ and inserting ‘‘section 1(c)(2)(A) for such cal- 17 endar year, determined by substituting the year be- 18 fore the last nonindexed year for ‘calendar year 19 2016’ in clause (ii) thereof’’. 20 (22) Section 4980I(b)(3)(C)(v)(II) is amended 21 (A) by striking ‘‘section 1(f)(3)’’ and in- 22 serting ‘‘section 1(c)(2)(A)’’, 23 (B) by striking ‘‘subparagraph (B)’’ and 24 inserting ‘‘clause (ii)’’, and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00060 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 61 1 (C) by striking ‘‘1992’’ and inserting 2 ‘‘2016’’. 3 (23) Section 5000A(c)(3)(D)(ii) is amended— 4 (A) by striking ‘‘section 1(f)(3)’’ and in- 5 serting ‘‘section 1(c)(2)(A)’’, 6 (B) by striking ‘‘subparagraph (B)’’ and 7 inserting ‘‘clause (ii)’’, and 8 (C) by striking ‘‘1992’’ and inserting 9 ‘‘2016’’. 10 (24) Section 6039F(d) is amended by striking 11 ‘‘section 1(f)(3), except that subparagraph (B) 12 thereof’’ and inserting ‘‘section 1(c)(2)(A), except 13 that clause (ii) thereof’’. 14 (25) Section 6323(i)(4)(B) is amended by strik- 15 ing ‘‘section 1(f)(3) for the calendar year, deter- 16 mined by substituting ‘calendar year 1996’ for ‘cal- 17 endar year 1992’ in subparagraph (B) thereof’’ and 18 inserting ‘‘section 1(c)(2)(A) for the calendar year, 19 determined by substituting ‘calendar year 1996’ for 20 ‘calendar year 2016’ in clause (ii) thereof’’. 21 (26) Section 6334(g)(1)(B) is amended by 22 striking ‘‘section 1(f)(3) for such calendar year, by 23 substituting ‘calendar year 1998’ for ‘calendar year 24 1992’ in subparagraph (B) thereof’’ and inserting 25 ‘‘section 1(c)(2)(A) for such calendar year, deter- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00061 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 62 1 mined by substituting ‘calendar year 1999’ for ‘cal- 2 endar year 2016’ in clause (ii) thereof’’. 3 (27) Section 6601(j)(3)(B) is amended by strik- 4 ing ‘‘section 1(f)(3) for such calendar year by sub- 5 stituting ‘calendar year 1997’ for ‘calendar year 6 1992’ in subparagraph (B) thereof’’ and inserting 7 ‘‘section 1(c)(2)(A) for such calendar year by sub- 8 stituting ‘calendar year 1997’ for ‘calendar year 9 2016’ in clause (ii) thereof’’. 10 (28) Section 6651(i)(1) is amended by striking 11 ‘‘section 1(f)(3) determined by substituting ‘calendar 12 year 2013’ for ‘calendar year 1992’ in subparagraph 13 (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter- 14 mined by substituting ‘calendar year 2013’ for ‘cal- 15 endar year 2016’ in clause (ii) thereof’’. 16 (29) Section 6721(f)(1) is amended— 17 (A) by striking ‘‘section 1(f)(3)’’ and in- 18 serting ‘‘section 1(c)(2)(A)’’, 19 (B) by striking ‘‘subparagraph (B)’’ and 20 inserting ‘‘clause (ii)’’, and 21 (C) by striking ‘‘1992’’ and inserting 22 ‘‘2016’’. 23 (30) Section 6722(f)(1) is amended— 24 (A) by striking ‘‘section 1(f)(3)’’ and in- 25 serting ‘‘section 1(c)(2)(A)’’, g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00062 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 63 1 (B) by striking ‘‘subparagraph (B)’’ and 2 inserting ‘‘clause (ii)’’, and 3 (C) by striking ‘‘1992’’ and inserting 4 ‘‘2016’’. 5 (31) Section 6652(c)(7)(A) is amended by strik- 6 ing ‘‘section 1(f)(3) determined by substituting ‘cal- 7 endar year 2013’ for ‘calendar year 1992’ in sub- 8 paragraph (B) thereof’’ and inserting ‘‘section 9 1(c)(2)(A) determined by substituting ‘calendar year 10 2013’ for ‘calendar year 2016’ in clause (ii) there- 11 of’’. 12 (32) Section 6695(h)(1) is amended by striking 13 ‘‘section 1(f)(3) determined by substituting ‘calendar 14 year 2013’ for ‘calendar year 1992’ in subparagraph 15 (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter- 16 mined by substituting ‘calendar year 2013’ for ‘cal- 17 endar year 2016’ in clause (ii) thereof’’. 18 (33) Section 6698(e)(1) is amended by striking 19 ‘‘ section 1(f)(3) determined by substituting ‘cal- 20 endar year 2013’ for ‘calendar year 1992’ in sub- 21 paragraph (B) thereof’’ and inserting ‘‘section 22 1(c)(2)(A) determined by substituting ‘calendar year 23 2013’ for ‘calendar year 2016’ in clause (ii) there- 24 of’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00063 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 64 1 (34) Section 6699(e)(1) is amended by striking 2 ‘‘section 1(f)(3) determined by substituting ‘calendar 3 year 2013’ for ‘calendar year 1992’ in subparagraph 4 (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter- 5 mined by substituting ‘calendar year 2013’ for ‘cal- 6 endar year 2016’ in clause (ii) thereof’’. 7 (35) Section 7345(f)(2) is amended by striking 8 ‘‘section 1(f)(3) for the calendar year, determined by 9 substituting ‘calendar year 2015’ for ‘calendar year 10 1992’ in subparagraph (B) thereof’’ and inserting 11 ‘‘section 1(c)(2)(A) for the calendar year, deter- 12 mined by substituting ‘calendar year 2015’ for ‘cal- 13 endar year 2016’ in clause (ii) thereof’’. 14 (36) Section 7430(c)(1) is amended by striking 15 ‘‘section 1(f)(3) for such calendar year, by sub- 16 stituting ‘calendar year 1995’ for ‘calendar year 17 1992’ in subparagraph (B) thereof’’ in the flush text 18 at the end and inserting ‘‘section 1(c)(2)(A) for such 19 calendar year, determined by substituting ‘calendar 20 year 1995’ for ‘calendar year 2016’ in clause (ii) 21 thereof’’. 22 23 (37) Section 7872(g)(5) is amended to read as follows: 24 ‘‘(5) INFLATION g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 ADJUSTMENT.— (679209 10) PO 00000 Frm 00064 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 65 1 ‘‘(A) IN the case of any 2 loan made during any calendar year after 2018 3 to which paragraph (1) applies, the adjusted 4 dollar amount shall be increased by an amount 5 equal to— 6 ‘‘(i) such adjusted dollar amount, 7 multiplied by 8 ‘‘(ii) the cost-of-living adjustment de- 9 termined under section 1(c)(2)(A) for such 10 calendar year, determined by substituting 11 ‘calendar year 2017’ for ‘calendar year 12 2016’ in clause (ii) thereof. 13 ‘‘(B) ADJUSTED DOLLAR AMOUNT.—For 14 purposes of this paragraph, the term ‘adjusted 15 dollar amount’ means the dollar amount in 16 paragraph (2) as in effect for calendar year 17 2018. 18 ‘‘(C) ROUNDING.—Any increase under sub- 19 paragraph (A) shall be rounded to the nearest 20 multiple of $100.’’. 21 (b) OTHER CONFORMING AMENDMENTS.— 22 23 (1) Section 36B(b)(3)(B)(ii)(I)(aa) is amended to read as follows: 24 ‘‘(aa) who is described in 25 section 1(b)(1)(B) and who does g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—In 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00065 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 66 1 not have any dependents for the 2 taxable year,’’. 3 (2) Section 486B(b)(1) is amended— 4 (A) by striking ‘‘maximum rate in effect’’ 5 and inserting ‘‘highest rate specified’’, and 6 (B) by striking ‘‘section 1(e)’’ and insert- 7 ing ‘‘section 1’’. 8 (3) Section 511(b)(1) is amended by striking 9 ‘‘section 1(e)’’ and inserting ‘‘section 1’’. 10 (4) Section 641(a) is amended by striking ‘‘sec- 11 tion 1(e) shall apply to the taxable income’’ and in- 12 serting ‘‘section 1 shall apply to the taxable in- 13 come’’. 14 15 (5) Section 641(c)(2)(A) is amended to read as follows: 16 ‘‘(A) Except to the extent provided in sec- 17 tion 1(h), the rate of tax shall be treated as 18 being the highest rate of tax set forth in section 19 1(a).’’. 20 (6) Section 646(b) is amended to read as fol- 21 lows: 22 ‘‘(b) TAXATION OF INCOME OF TRUST.—Except as 23 provided in subsection (f)(1)(B)(ii), there is hereby im24 posed on the taxable income of an electing Settlement 25 Trust a tax at the rate specified in section 1(a)(1). Such g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00066 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 67 1 tax shall be in lieu of the income tax otherwise imposed 2 by this chapter on such income.’’. 3 4 (7) Section 685(c) is amended by striking ‘‘Section 1(e)’’ and inserting ‘‘Section 1’’. 5 (8) Section 904(b)(3)(E)(ii)(I) is amended by 6 striking ‘‘set forth in subsection (a), (b), (c), (d), or 7 (e) of section 1 (whichever applies)’’ and inserting 8 ‘‘the highest rate of tax specified in section 1’’. 9 10 (9) Section 1398(c)(2) is amended by striking ‘‘subsection (d) of’’. 11 (10) Section 3402(p)(1)(B) is amended by 12 striking ‘‘any percentage applicable to any of the 3 13 lowest income brackets in the table under section 14 1(c),’’ and inserting ‘‘12 percent, 25 percent,’’. 15 (11) Section 3402(q)(1) is amended by striking 16 ‘‘the product of third lowest rate of tax applicable 17 under section 1(c) and’’ and inserting ‘‘25 percent 18 of’’. 19 (12) Section 3402(r)(3) is amended by striking 20 ‘‘the amount of tax which would be imposed by sec- 21 tion 1(c) (determined without regard to any rate of 22 tax in excess of the fourth lowest rate of tax applica- 23 ble under section 1(c)) on an amount of taxable in- 24 come equal to’’ and inserting ‘‘an amount equal to 25 the product of 25 percent multiplied by’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00067 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 68 1 (13) Section 3406(a)(1) is amended by striking 2 ‘‘the product of the fourth lowest rate of tax applica- 3 ble under section 1(c) and’’ and inserting ‘‘25 per- 4 cent of’’. 5 (14) Section 6103(e)(1)(A)(iii) is amended by 6 striking ‘‘section 1(g) (as in effect on the day before 7 the enactment of theTax Cuts and Jobs Act)’’. 8 (c) EFFECTIVE DATE.—The amendments made by 9 this section shall apply to taxable years beginning after 10 December 31, 2017. 13 Subtitle B—Simplification and Reform of Family and Individual Tax Credits 14 SEC. 1101. ENHANCEMENT OF CHILD TAX CREDIT AND NEW 11 12 15 16 FAMILY TAX CREDIT. (a) INCREASE IN CREDIT AMOUNT AND ADDITION OF 17 OTHER DEPENDENTS.— 18 (1) IN GENERAL.—Section 24(a) is amended— 19 20 (A) by striking ‘‘qualifying child’’ and inserting ‘‘dependent’’, 21 22 (B) by striking ‘‘for which the taxpayer is allowed a deduction under section 151’’, and 23 (C) by striking ‘‘an amount equal to $1,000.’’ 24 and inserting the following: ‘‘an amount equal to— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00068 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 69 1 2 ‘‘(1) in the case of a qualifying child, $1,600, and 3 ‘‘(2) for taxable years beginning before January 4 1, 2023, in the case of the taxpayer (each spouse in 5 the case of a joint return) and any dependent to 6 whom paragraph (1) does not apply, $300.’’. 7 (2) CONFORMING AMENDMENTS.— 8 (A) Section 24(c) is amended— 9 (i) by redesignating paragraphs (1) and 10 (2) as paragraphs (2) and (3), respectively, 11 (ii) by striking ‘‘152(c)’’ in paragraph (2) 12 (as so redesignated) and inserting ‘‘7706(c)’’, 13 (iii) by inserting before paragraph (2) (as 14 so redesignated) the following new paragraph: 15 ‘‘(1) DEPENDENT.— 16 ‘‘(A) IN term ‘dependent’ 17 shall have the meaning given such term by sec- 18 tion 7706. 19 ‘‘(B) CERTAIN INDIVIDUALS NOT TREATED 20 AS DEPENDENTS.—In 21 with respect to whom a credit under this section 22 is allowable to another taxpayer for a taxable 23 year beginning in the calendar year in which 24 the individual’s taxable year begins, the amount 25 applicable to such individual under subsection g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 the case of an individual (679209 10) PO 00000 Frm 00069 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 70 1 (a) for such individual’s taxable year shall be 2 zero.’’, 3 (iv) in paragraph (3) (as so redesig- 4 nated)— 5 (I) by striking ‘‘term ‘qualifying 6 child’ ’’ and inserting ‘‘terms ‘qualifying 7 child’ and ‘dependent’ ’’, and 8 (II) by striking ‘‘152(b)(3)’’ and in- 9 serting ‘‘7706(b)(3)’’, and 10 (v) in the heading by striking ‘‘QUALI- 11 FYING’’ 12 FYING’’ 13 (B) The heading for section 24 is amended by 14 and inserting ‘‘DEPENDENT; QUALI- inserting ‘‘AND FAMILY’’ after ‘‘CHILD’’. 15 (C) The table of sections for subpart A of part 16 IV of subchapter A of chapter 1 is amended by 17 striking the item relating to section 24 and inserting 18 the following new item: ‘‘Sec. 24. Child and dependent tax credit.’’. 19 (b) ELIMINATION OF MARRIAGE PENALTY.—Section 20 24(b)(2) is amended— 21 (1) by striking ‘‘$110,000’’ in subparagraph (A) and 22 inserting ‘‘$230,000’’, 23 (2) by inserting ‘‘and’’ at the end of subparagraph 24 (A), g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00070 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 71 1 (3) by striking ‘‘$75,000 in the case of an individual 2 who is not married’’ and all that follows through the pe3 riod at the end and inserting ‘‘one-half of the amount in 4 effect under subparagraph (A) for the taxable year in the 5 case of any other individual.’’. 6 (c) CREDIT REFUNDABLE UP TO $1,000 PER 7 CHILD.— 8 (1) IN GENERAL.—Section 24(d)(1)(A) is amended 9 by striking all that follows ‘‘under this section’’ and insert10 ing the following: ‘‘determined— 11 ‘‘(i) without regard to this subsection 12 and the limitation under section 26(a), 13 ‘‘(ii) without regard to subsection 14 (a)(2), and 15 ‘‘(iii) by substituting ‘$1,000’ for 16 ‘$1,600’ in subsection (a)(1), or’’. 17 (2) INFLATION ADJUSTMENT.—Section 24(d) is 18 amended by inserting after paragraph (2) the following 19 new paragraph: 20 ‘‘(3) INFLATION the case of 21 any taxable year beginning in a calendar year after 22 2017, the $1,000 amount in paragraph (1)(A)(iii) 23 shall be increased by an amount equal to— 24 ‘‘(A) such dollar amount, multiplied by g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ADJUSTMENT.—In 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00071 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 72 1 ‘‘(B) the cost-of-living adjustment under 2 section 1(c)(2)(A) for such calendar year. 3 Any increase determined under the preceding sen- 4 tence shall be rounded to the next highest multiple 5 of $100 and shall not exceed the amount in effect 6 under subsection (a)(2).’’. 7 (d) EFFECTIVE DATE.—The amendments made by 8 this section shall apply to taxable years beginning after 9 December 31, 2017. 10 SEC. 1102. REPEAL OF NONREFUNDABLE CREDITS. 11 (a) REPEAL OF SECTION 22.— 12 (1) IN A of part IV of sub- 13 chapter A of chapter 1 is amended by striking sec- 14 tion 22 (and by striking the item relating to such 15 section in the table of sections for such subpart). 16 (2) CONFORMING AMENDMENT.— 17 (A) Section 86(f) is amended by striking 18 paragraph (1) and by redesignating paragraphs 19 (2), (3), and (4) as paragraphs (1), (2), and 20 (3), respectively. 21 (B)(i) Subsections (c)(3)(B) and (d)(4)(A) 22 of section 7706, as redesignated by this Act, 23 are each amended by striking ‘‘(as defined in 24 section 22(e)(3)’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Subpart 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00072 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 73 1 (ii) Section 7706(f), as redesignated by 2 this Act, is amended by redesignating para- 3 graph (7) as paragraph (8) and by inserting 4 after paragraph (6) the following new para- 5 graph: 6 ‘‘(7) PERMANENT AND TOTAL DISABILITY DE- 7 FINED.—An 8 disabled if he is unable to engage in any substantial 9 gainful activity by reason of any medically deter- 10 minable physical or mental impairment which can be 11 expected to result in death or which has lasted or 12 can be expected to last for a continuous period of 13 not less than 12 months. An individual shall not be 14 considered to be permanently and totally disabled 15 unless he furnishes proof of the existence thereof in 16 such form and manner, and at such times, as the 17 Secretary may require.’’. individual is permanently and totally 18 (iii) Section 415(c)(3)(C)(i) is amended by 19 striking ‘‘22(e)(3)’’ and inserting ‘‘7706(f)(7)’’. 20 (iv) Section 422(c)(6) is amended by strik- 21 22 ing ‘‘22(e)(3)’’ and inserting ‘‘7706(f)(7)’’. (b) REPEAL OF SECTION 23.—Subpart A of part IV 23 of subchapter A of chapter 1 is amended by striking sec24 tion 23 (and by striking the item relating to such section 25 in the table of sections for such subpart). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00073 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 74 1 (c) TERMINATION SECTION 25.—Section 25, as OF 2 amended by section 3601, is amended by adding at the 3 end the following new subsection: 4 ‘‘(k) TERMINATION.—No credit shall be allowed 5 under this section with respect to any mortgage credit cer6 tificate issued after December 31, 2017.’’. 7 (d) REPEAL OF SECTION 30D.— 8 (1) IN B of part IV of 9 subchapter A of chapter 1 is amended by striking 10 section 30D (and by striking the item relating to 11 such section in the table of sections for such sub- 12 part). 13 (2) CONFORMING 14 paragraph (35). 16 (B) Section 1016(a) is amended by strik- 17 ing paragraph (37). 18 (C) Section 6501(m) is amended by strik- 19 20 AMENDMENTS.— (A) Section 38(b) is amended by striking 15 ing ‘‘30D(e)(4),’’. (e) EFFECTIVE DATE.— 21 (1) IN GENERAL.—Except as provided in para- 22 graphs (2) and (3), the amendments made by this 23 section shall apply to taxable years beginning after 24 December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Subpart 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00074 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 75 1 (2) SUBSECTION (c).—The amendment made 2 by subsection (c) shall apply to taxable years ending 3 after December 31, 2017. 4 (3) SUBSECTION (d).—The amendments made 5 by subsection (d) shall apply to vehicles placed in 6 service in taxable years beginning after December 7 31, 2017. 8 SEC. 1103. REFUNDABLE CREDIT PROGRAM INTEGRITY. 9 (a) SOCIAL SECURITY NUMBER REQUIRED 10 THE 11 IT.— REFUNDABLE PORTION 12 (1) IN GENERAL.—Section CLAIM CHILD TAX CRED- 24(d), as amended 13 by the preceding provisions of this Act, is amended 14 by redesignating paragraph (5) as paragraph (4) 15 and by adding at the end the following new para- 16 graph: 17 ‘‘(5) IDENTIFICATION 18 ‘‘(A) IN REQUIREMENT.— GENERAL.—Paragraph (1) shall 19 not apply to any taxpayer for any taxable year 20 unless the taxpayer includes the taxpayer’s so- 21 cial security number on the return of tax for 22 such taxable year. 23 ‘‘(B) JOINT RETURNS.—In the case of a 24 joint return, the requirement of subparagraph 25 (A) shall be treated as met if the social security g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF THE TO 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00075 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 76 1 number of either spouse is included on such re- 2 turn. 3 ‘‘(C) SOCIAL NUMBER.—For 4 purposes of this paragraph, the term ‘social se- 5 curity number’ means a social security number 6 issued to an individual by the Social Security 7 Administration (but only if the social security 8 number is issued to a citizen of the United 9 States or pursuant to subclause (I) (or that 10 portion of subclause (III) that relates to sub- 11 clause (I)) of section 205(c)(2)(B)(i) of the So- 12 cial Security Act).’’. 13 (2) OMISSIONS 14 TREATED AS MATHEMATICAL OR CLERICAL ERROR.— 15 (A) IN 16 GENERAL.—Section 6213(g)(2)(I) is amended to read as follows: 17 ‘‘(I) an omission of a correct social secu- 18 rity number required under section 24(d)(5) 19 (relating to refundable portion of child tax cred- 20 it), or a correct TIN required under section 21 24(e) (relating to child tax credit), to be in- 22 cluded on a return,’’. 23 (3) CLERICAL 24 10:46 Nov 02, 2017 AMENDMENT.—The heading for section 24(e) is amended by striking ‘‘IDENTIFICA- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 SECURITY Jkt 000000 (679209 10) PO 00000 Frm 00076 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 77 1 TION 2 IDENTIFICATION REQUIREMENTS’’. 3 (b) SOCIAL SECURITY NUMBER MUST BE PRO- 4 REQUIREMENTS’’ and inserting ‘‘GENERAL VIDED.— 5 (1) IN GENERAL.—Section 25A(f)(1)(A), as 6 amended by section 1201 of this Act, is amended by 7 striking ‘‘taxpayer identification number’’ each place 8 it appears and inserting ‘‘social security number’’. 9 (2) OMISSION TREATED AS MATHEMATICAL OR 10 CLERICAL ERROR.—Section 11 ed by striking ‘‘TIN’’ and inserting ‘‘social security 12 number and employer identification number’’. 13 (c) INDIVIDUALS PROHIBITED FROM ENGAGING 14 EMPLOYMENT IN 6213(g)(2)(J) is amend- UNITED STATES NOT ELIGIBLE IN FOR 15 EARNED INCOME TAX CREDIT.—Section 32(m) is amend16 ed— 17 18 (1) by striking ‘‘(other than:’’ and all that follows through ‘‘of the Social Security Act)’’, and 19 (2) by inserting before the period at the end the 20 following: ‘‘, but only if, in the case of subsection 21 (c)(1)(E), the social security number is issued to a 22 citizen of the United States or pursuant to subclause 23 (I) (or that portion of subclause (III) that relates to 24 subclause (I)) of section 205(c)(2)(B)(i) of the So- 25 cial Security Act’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00077 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 78 1 (d) EFFECTIVE DATE.—The amendments made by 2 this section shall apply to taxable years beginning after 3 December 31, 2017. Subtitle C—Simplification and Reform of Education Incentives 4 5 6 SEC. 1201. AMERICAN OPPORTUNITY TAX CREDIT. 7 (a) IN GENERAL.—Section 25A is amended to read 8 as follows: 9 ‘‘SEC. 25A. AMERICAN OPPORTUNITY TAX CREDIT. 10 ‘‘(a) IN GENERAL.—In the case of an individual, 11 there shall be allowed as a credit against the tax imposed 12 by this chapter for the taxable year an amount equal to 13 the sum of— 14 ‘‘(1) 100 percent of so much of the qualified 15 tuition and related expenses paid by the taxpayer 16 during the taxable year (for education furnished to 17 any eligible student for whom an election is in effect 18 under this section for such taxable year during any 19 academic period beginning in such taxable year) as 20 does not exceed $2,000, plus 21 ‘‘(2) 25 percent of so much of such expenses so 22 paid as exceeds the dollar amount in effect under 23 paragraph (1) but does not exceed twice such dollar 24 amount. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00078 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 79 1 ‘‘(b) PORTION OF CREDIT REFUNDABLE.—40 per- 2 cent of the credit allowable under subsection (a)(1) (deter3 mined without regard to this subsection and section 26(a) 4 and after application of all other provisions of this section) 5 shall be treated as a credit allowable under subpart C (and 6 not under this part). The preceding sentence shall not 7 apply to any taxpayer for any taxable year if such tax8 payer is a child to whom section 1(d) applies for such tax9 able year. 10 ‘‘(c) LIMITATION BASED ON MODIFIED ADJUSTED GENERAL.—The amount allowable as a 11 GROSS INCOME.— 12 ‘‘(1) IN 13 credit under subsection (a) for any taxable year shall 14 be reduced (but not below zero) by an amount which 15 bears the same ratio to the amount so allowable (de- 16 termined without regard to this subsection and sub- 17 section (b) but after application of all other provi- 18 sions of this section) as— 19 ‘‘(A) the excess of— 20 ‘‘(i) the taxpayer’s modified adjusted 21 gross income for such taxable year, over 22 ‘‘(ii) $80,000 (twice such amount in 23 the case of a joint return), bears to 24 ‘‘(B) $10,000 (twice such amount in the 25 case of a joint return). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00079 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 80 1 2 For purposes of this subsection, the term ‘modified 3 adjusted gross income’ means the adjusted gross in- 4 come of the taxpayer for the taxable year increased 5 by any amount excluded from gross income under 6 section 911, 931, or 933. 7 ‘‘(d) OTHER LIMITATIONS.— 8 9 ‘‘(1) CREDIT YEARS.—An ALLOWED ONLY FOR 5 TAXABLE election to have this section apply may 10 not be made for any taxable year if such an election 11 (by the taxpayer or any other individual) is in effect 12 with respect to such student for any 5 prior taxable 13 years. 14 15 ‘‘(2) CREDIT ALLOWED ONLY FOR FIRST 5 YEARS OF POSTSECONDARY EDUCATION.— 16 ‘‘(A) IN GENERAL.—No credit shall be al- 17 lowed under subsection (a) for a taxable year 18 with respect to the qualified tuition and related 19 expenses of an eligible student if the student 20 has completed (before the beginning of such 21 taxable year) the first 5 years of postsecondary 22 education at an eligible educational institution. 23 ‘‘(B) FIFTH YEAR LIMITATIONS.—In the 24 case of an eligible student with respect to whom 25 an election has been in effect for 4 preceding g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ADJUSTED GROSS INCOME.— ‘‘(2) MODIFIED 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00080 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 81 1 taxable years for purposes of the fifth taxable 2 year— 3 ‘‘(i) the amount of the credit allowed 4 under this section for the taxable year 5 shall not exceed an amount equal to 50 6 percent of the credit otherwise determined 7 with respect to such student under this 8 section (without regard to this subpara- 9 graph), and 10 ‘‘(ii) the amount of the credit deter- 11 mined under subsection (b) and allowable 12 under subpart C shall not exceed an 13 amount equal to 40 percent of the amount 14 determined with respect to such student 15 under clause (i). 16 ‘‘(e) DEFINITIONS.—For purposes of this section— 17 ‘‘(1) ELIGIBLE The term ‘eligible 18 student’ means, with respect to any academic period, 19 a student who— 20 ‘‘(A) meets the requirements of section 21 484(a)(1) of the Higher Education Act of 1965 22 (20 U.S.C. 1091(a)(1)), as in effect on August 23 5, 1997, and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 STUDENT.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00081 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 82 1 ‘‘(B) is carrying at least 1⁄2 the normal 2 full-time work load for the course of study the 3 student is pursuing. 4 ‘‘(2) QUALIFIED 5 PENSES.— 6 ‘‘(A) IN GENERAL.—The term ‘qualified 7 tuition and related expenses’ means tuition, 8 fees, and course materials, required for enroll- 9 ment or attendance of— 10 ‘‘(i) the taxpayer, 11 ‘‘(ii) the taxpayer’s spouse, or 12 ‘‘(iii) any dependent of the taxpayer, 13 at an eligible educational institution for courses 14 of instruction of such individual at such institu- 15 tion. 16 ‘‘(B) EXCEPTION FOR EDUCATION INVOLV- 17 ING SPORTS, ETC.—Such 18 expenses with respect to any course or other 19 education involving sports, games, or hobbies, 20 unless such course or other education is part of 21 the individual’s degree program. 22 ‘‘(C) EXCEPTION term does not include FOR NONACADEMIC 23 FEES.—Such 24 tivity fees, athletic fees, insurance expenses, or g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 TUITION AND RELATED EX- 10:46 Nov 02, 2017 Jkt 000000 term does not include student ac- (679209 10) PO 00000 Frm 00082 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 83 1 other expenses unrelated to an individual’s aca- 2 demic course of instruction. 3 ‘‘(3) ELIGIBLE 4 The term ‘eligible educational institution’ means an 5 institution— 6 ‘‘(A) which is described in section 481 of 7 the Higher Education Act of 1965 (20 U.S.C. 8 1088), as in effect on August 5, 1997, and 9 ‘‘(B) which is eligible to participate in a 10 11 program under title IV of such Act. ‘‘(f) SPECIAL RULES.— 12 ‘‘(1) IDENTIFICATION REQUIREMENTS.— 13 ‘‘(A) STUDENT.—No credit shall be al- 14 lowed under subsection (a) to a taxpayer with 15 respect to the qualified tuition and related ex- 16 penses of an individual unless the taxpayer in- 17 cludes the name and taxpayer identification 18 number of such individual on the return of tax 19 for the taxable year, and such taxpayer identi- 20 fication number was issued on or before the due 21 date for filing such return. 22 ‘‘(B) TAXPAYER.—No credit shall be al- 23 lowed under this section if the identifying num- 24 ber of the taxpayer was issued after the due 25 date for filing the return for the taxable year. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 EDUCATIONAL INSTITUTION.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00083 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 84 1 ‘‘(C) INSTITUTION.—No credit shall be al- 2 lowed under this section unless the taxpayer in- 3 cludes the employer identification number of 4 any institution to which qualified tuition and 5 related expenses were paid with respect to the 6 individual. 7 ‘‘(2) ADJUSTMENT CERTAIN SCHOLAR- 8 SHIPS, ETC.—The 9 related expenses otherwise taken into account under 10 subsection (a) with respect to an individual for an 11 academic period shall be reduced (before the applica- 12 tion of subsection (c)) by the sum of any amounts 13 paid for the benefit of such individual which are allo- 14 cable to such period as— amount of qualified tuition and 15 ‘‘(A) a qualified scholarship which is ex- 16 cludable from gross income under section 117, 17 ‘‘(B) an educational assistance allowance 18 under chapter 30, 31, 32, 34, or 35 of title 38, 19 United States Code, or under chapter 1606 of 20 title 10, United States Code, and 21 ‘‘(C) a payment (other than a gift, be- 22 quest, devise, or inheritance within the meaning 23 of section 102(a)) for such individual’s edu- 24 cational expenses, or attributable to such indi- 25 vidual’s enrollment at an eligible educational in- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FOR 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00084 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 85 1 stitution, which is excludable from gross income 2 under any law of the United States. 3 ‘‘(3) TREATMENT 4 PENDENT.—If 5 other taxpayer for a taxable year beginning in the 6 calendar year in which such individuals taxable year 7 begins— an individual is a dependent of an- 8 ‘‘(A) no credit shall be allowed under sub- 9 section (a) to such individual for such individ- 10 ual’s taxable year, and 11 ‘‘(B) qualified tuition and related expenses 12 paid by such individual during such individual’s 13 taxable year shall be treated for purposes of 14 this section as paid by such other taxpayer. 15 ‘‘(4) TREATMENT OF CERTAIN PREPAY- 16 MENTS.—If 17 are paid by the taxpayer during a taxable year for 18 an academic period which begins during the first 3 19 months following such taxable year, such academic 20 period shall be treated for purposes of this section 21 as beginning during such taxable year. 22 qualified tuition and related expenses ‘‘(5) DENIAL OF DOUBLE BENEFIT.—No credit 23 shall be allowed under this section for any amount 24 for which a deduction is allowed under any other 25 provision of this chapter. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF EXPENSES PAID BY DE- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00085 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 86 1 ‘‘(6) NO 2 FILING SEPARATE RETURNS.—If 3 married individual (within the meaning of section 4 7703), this section shall apply only if the taxpayer 5 and the taxpayer’s spouse file a joint return for the 6 taxable year. 7 ‘‘(7) NONRESIDENT the taxpayer is a ALIENS.—If the taxpayer is 8 a nonresident alien individual for any portion of the 9 taxable year, this section shall apply only if such in- 10 dividual is treated as a resident alien of the United 11 States for purposes of this chapter by reason of an 12 election under subsection (g) or (h) of section 6013. 13 14 ‘‘(8) RESTRICTIONS ON TAXPAYERS WHO IM- PROPERLY CLAIMED CREDIT IN PRIOR YEAR.— 15 ‘‘(A) TAXPAYERS 16 MAKING PRIOR FRAUDU- LENT OR RECKLESS CLAIMS.— 17 ‘‘(i) IN GENERAL.—No credit shall be 18 allowed under this section for any taxable 19 year in the disallowance period. 20 ‘‘(ii) DISALLOWANCE PERIOD.—For 21 purposes of clause (i), the disallowance pe- 22 riod is— 23 ‘‘(I) the period of 10 taxable 24 years after the most recent taxable 25 year for which there was a final deter- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 CREDIT FOR MARRIED INDIVIDUALS 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00086 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 87 1 mination that the taxpayer’s claim of 2 credit under this section was due to 3 fraud, and 4 ‘‘(II) the period of 2 taxable 5 years after the most recent taxable 6 year for which there was a final deter- 7 mination that the taxpayer’s claim of 8 credit under this section was due to 9 reckless or intentional disregard of 10 rules and regulations (but not due to 11 fraud). 12 ‘‘(B) MAKING IMPROPER 13 PRIOR CLAIMS.—In 14 is denied credit under this section for any tax- 15 able year as a result of the deficiency proce- 16 dures under subchapter B of chapter 63, no 17 credit shall be allowed under this section for 18 any subsequent taxable year unless the taxpayer 19 provides such information as the Secretary may 20 require to demonstrate eligibility for such cred- 21 it. 22 24 ‘‘(1) IN GENERAL.—In the case of a taxable year beginning after 2018, the $80,000 amount in g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) 10:46 Nov 02, 2017 the case of a taxpayer who ‘‘(g) INFLATION ADJUSTMENT.— 23 VerDate 0ct 09 2002 TAXPAYERS Jkt 000000 (679209 10) PO 00000 Frm 00087 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 88 1 subsection (c)(1)(A)(ii) shall each be increased by an 2 amount equal to— 3 ‘‘(A) such dollar amount, multiplied by 4 ‘‘(B) the cost-of-living adjustment deter- 5 mined under section 1(c)(2)(A) for the calendar 6 year in which the taxable year begins, deter- 7 mined by substituting ‘calendar year 2017’ for 8 ‘calendar year 2016’ in clause (ii) thereof. 9 ‘‘(2) ROUNDING.—If any amount as adjusted 10 under paragraph (1) is not a multiple of $1,000, 11 such amount shall be rounded to the next lowest 12 multiple of $1,000. 13 ‘‘(h) REGULATIONS.—The Secretary may prescribe 14 such regulations or other guidance as may be necessary 15 or appropriate to carry out this section, including regula16 tions providing for a recapture of the credit allowed under 17 this section in cases where there is a refund in a subse18 quent taxable year of any amount which was taken into 19 account in determining the amount of such credit.’’. 20 (b) CONFORMING AMENDMENTS.— 21 (1) Section 72(t)(7)(B) is amended by striking 22 ‘‘section 23 25A(f)(2)’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 25A(g)(2)’’ and inserting ‘‘section (679209 10) PO 00000 Frm 00088 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 89 1 (2) Section 529(c)(3)(B)(v)(I) is amended by 2 striking ‘‘section 25A(g)(2)’’ and inserting ‘‘section 3 25A(f)(2)’’. 4 (3) Section 529(e)(3)(B)(i) is amended by strik- 5 ing ‘‘section 25A(b)(3)’’ and inserting ‘‘section 6 25A(d)’’. 7 (4) Section 530(d)(2)(C) is amended— 8 (A) by striking ‘‘section 25A(g)(2)’’ in 9 clause (i)(I) and inserting ‘‘section 25A(f)(2)’’, 10 and 11 (B) by striking ‘‘HOPE LIFETIME 12 LEARNING CREDITS’’ 13 ing ‘‘AMERICAN 14 (5) Section 530(d)(4)(B)(iii) is amended by 15 striking ‘‘section 25A(g)(2)’’ and inserting ‘‘section 16 25A(d)(4)(B)’’. 17 in the heading and insert- OPPORTUNITY TAX CREDIT’’. (6) Section 6050S(e) is amended by striking 18 ‘‘subsection 19 (f)(2)’’. (g)(2)’’ and inserting ‘‘subsection 20 (7) Section 6211(b)(4)(A) is amended by strik- 21 ing ‘‘subsection (i)(6)’’ and inserting ‘‘subsection 22 (b)’’. 23 (8) Section 6213(g)(2)(J) is amended by strik- 24 ing ‘‘TIN required under section 25A(g)(1)’’ and in- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AND 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00089 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 90 1 serting ‘‘TIN, and employer identification number, 2 required under section 25A(f)(1)’’. 3 4 (9) Section 6213(g)(2)(Q) is amended to read as follows: 5 ‘‘(Q) an omission of information required 6 by section 25A(f)(8)(B) or an entry on the re- 7 turn claiming the credit determined under sec- 8 tion 25A(a) for a taxable year for which the 9 credit disallowed under section 10 25A(f)(8)(A).’’. 11 (10) Section 1004(c) of division B of the Amer- 12 ican Recovery and Reinvestment Tax Act of 2009 is 13 amended— 14 (A) in paragraph (1)— 15 (i) by striking ‘‘section 25A(i)(6)’’ 16 each place it appears and inserting ‘‘sec- 17 tion 25A(b)’’, and 18 (ii) by striking ‘‘with respect to tax- 19 able years beginning after 2008 and before 20 2018’’ each place it appears and inserting 21 ‘‘with respect to each taxable year’’, 22 (B) in paragraph (2), by striking ‘‘Section 23 25A(i)(6)’’ and inserting ‘‘Section 25A(b)’’, and 24 (C) in paragraph (3)(C), by striking ‘‘sub- 25 section (i)(6)’’ and inserting ‘‘subsection (b)’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 is 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00090 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 91 1 (11) The table of sections for subpart A of part 2 IV of subchapter A of chapter 1 is amended by 3 striking the item relating to section 25A and insert- 4 ing the following new item: ‘‘Sec. 25A. American opportunity tax credit.’’. 5 (c) EFFECTIVE DATE.—The amendments made by 6 this section shall apply to taxable years beginning after 7 December 31, 2017. 8 SEC. 1202. CONSOLIDATION 9 EDUCATION SAVINGS RULES. 10 11 OF (a) NO NEW CONTRIBUTIONS CATION TO COVERDELL EDU- SAVINGS ACCOUNT.—Section 530(b)(1)(A) is 12 amended to read as follows: 13 ‘‘(A) Except in the case of rollover con- 14 tributions, no contribution will be accepted after 15 December 31, 2017.’’. 16 17 (b) LIMITED DISTRIBUTION ALLOWED FOR ELEMENTARY AND 18 19 (1) IN GENERAL.—Section 529(c) is amended by adding at the end the following new paragraph: 20 ‘‘(7) TREATMENT OF ELEMENTARY AND SEC- 21 ONDARY TUITION.—Any 22 to the term ‘qualified higher education expense’ shall 23 include a reference to expenses for tuition in connec- 24 tion with enrollment at an elementary or secondary 25 school.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 SECONDARY TUITION.— 10:46 Nov 02, 2017 Jkt 000000 reference in this subsection (679209 10) PO 00000 Frm 00091 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 92 1 LIMITATION.—Section (2) 529(e)(3)(A) is 2 amended by adding at the end the following: ‘‘The 3 amount of cash distributions from all qualified tui- 4 tion programs described in subsection (b)(1)(A)(ii) 5 with respect to a beneficiary during any taxable 6 year, shall, in the aggregate, include not more than 7 $10,000 in expenses for tuition incurred during the 8 taxable year in connection with the enrollment or at- 9 tendance of the beneficiary as an elementary or sec- 10 ondary school student at a public, private, or reli- 11 gious school.’’. 12 (c) ROLLOVERS TO QUALIFIED TUITION PROGRAMS 13 PERMITTED.—Section 530(d)(5) is amended by inserting 14 ‘‘, or into (by purchase or contribution) a qualified tuition 15 program (as defined in section 529),’’ after ‘‘into another 16 Coverdell education savings account’’. 17 (d) DISTRIBUTIONS FROM QUALIFIED TUITION PRO- 18 GRAMS FOR 19 ISTERED CERTAIN EXPENSES ASSOCIATED WITH REGAPPRENTICESHIP PROGRAMS.—Section 20 529(e)(3) is amended by adding at the end the following 21 new subparagraph: 22 ‘‘(C) EXPENSES ASSOCIATED 23 WITH 24 GRAMS.—The 25 expenses’ shall include books, supplies, and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 CERTAIN 10:46 Nov 02, 2017 Jkt 000000 REGISTERED APPRENTICESHIP PRO- term ‘qualified higher education (679209 10) PO 00000 Frm 00092 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 93 1 equipment required for the enrollment or at- 2 tendance of a designated beneficiary in an ap- 3 prenticeship program registered and certified 4 with the Secretary of Labor under section 1 of 5 the National Apprenticeship Act (29 U.S.C. 6 50).’’. 7 (e) UNBORN CHILDREN ALLOWED AS ACCOUNT 8 BENEFICIARIES.—Section 529(e) is amended by adding at 9 the end the following new paragraph: 10 ‘‘(6) TREATMENT 11 ‘‘(A) IN GENERAL.—Nothing shall prevent 12 an unborn child from being treated as a des- 13 ignated beneficiary or an individual under this 14 section. 15 ‘‘(B) UNBORN 16 this paragraph— 17 ‘‘(i) IN 18 CHILD.—For purposes of GENERAL.—The term ‘unborn child’ means a child in utero. 19 ‘‘(ii) CHILD IN UTERO.—The term 20 ‘child in utero’ means a member of the 21 species homo sapiens, at any stage of de- 22 velopment, who is carried in the womb.’’. 23 (f) EFFECTIVE DATES.— 24 25 (1) IN 10:46 Nov 02, 2017 GENERAL.—Except as otherwise pro- vided in this subsection, the amendments made by g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF UNBORN CHILDREN.— Jkt 000000 (679209 10) PO 00000 Frm 00093 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 94 1 this section shall apply to contributions made after 2 December 31, 2017. 3 (2) ROLLOVERS TO QUALIFIED TUITION PRO- 4 GRAMS.—The 5 shall apply to distributions after December 31, 6 2017. 7 SEC. 1203. REFORMS TO DISCHARGE OF CERTAIN STUDENT 8 LOAN INDEBTEDNESS. 9 10 amendments made by subsection (b) (a) TREATMENT ON ACCOUNT OF STUDENT LOANS DISCHARGED OF DEATH OR DISABILITY.—Section 108(f) 11 is amended by adding at the end the following new para12 graph: 13 14 ‘‘(5) DISCHARGES DISABILITY.— 15 ‘‘(A) IN GENERAL.—In the case of an indi- 16 vidual, gross income does not include any 17 amount which (but for this subsection) would 18 be includible in gross income by reasons of the 19 discharge (in whole or in part) of any loan de- 20 scribed in subparagraph (B) if such discharge 21 was— 22 ‘‘(i) pursuant to subsection (a) or (d) 23 of section 437 of the Higher Education 24 Act of 1965 or the parallel benefit under g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ON ACCOUNT OF DEATH OR 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00094 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 95 1 part D of title IV of such Act (relating to 2 the repayment of loan liability), 3 ‘‘(ii) pursuant to section 464(c)(1)(F) 4 of such Act, or 5 ‘‘(iii) otherwise discharged on account 6 of the death or total and permanent dis- 7 ability of the student. 8 ‘‘(B) LOANS DESCRIBED.—A loan is de- 9 scribed in this subparagraph if such loan is— 10 ‘‘(i) a student loan (as defined in 11 paragraph (2)), or 12 ‘‘(ii) a private education loan (as de- 13 fined in section 140(7) of the Consumer 14 Credit 15 1650(7))).’’. 16 17 Protection Act (15 (b) EXCLUSION FROM GROSS INCOME MENTS U.S.C. FOR PAY- MADE UNDER INDIAN HEALTH SERVICE LOAN 18 REPAYMENT PROGRAM.— 19 (1) IN 108(f)(4) is amend- 20 ed by inserting ‘‘under section 108 of the Indian 21 Health Care Improvement Act,’’ after ‘‘338I of such 22 Act,’’. 23 24 (2) CLERICAL 10:46 Nov 02, 2017 AMENDMENT.—The heading for section 108(f)(4) is amended by striking ‘‘AND g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Section Jkt 000000 CER- (679209 10) PO 00000 Frm 00095 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 96 1 TAIN’’ 2 LOAN REPAYMENT PROGRAM, AND CERTAIN’’. 3 (c) EFFECTIVE DATES.— and inserting ‘‘, INDIAN HEALTH SERVICE 4 (1) SUBSECTION (a).—The amendment made 5 by subsection (a)(1) shall apply to discharges of in- 6 debtedness after December 31, 2017. 7 (2) SUBSECTION (b).—The amendments made 8 by subsection (b) shall apply to amounts received in 9 taxable years beginning after December 31, 2017. 10 SEC. 1204. REPEAL OF OTHER PROVISIONS RELATING TO 11 EDUCATION. 12 (a) IN GENERAL.—Subchapter B of chapter 1 is 13 amended— 14 (1) in part VII by striking sections 221 and 15 222 (and by striking the items relating to such sec- 16 tions in the table of sections for such part), 17 (2) in part VII by striking sections 135 and 18 127 (and by striking the items relating to such sec- 19 tions in the table of sections for such part), and 20 (3) by striking subsection (d) of section 117. 21 22 (b) CONFORMING AMENDMENT RELATING 23 (1) Section 62(a) is amended by striking paragraph (17). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 SEC- 221.— TION 24 TO Jkt 000000 (679209 10) PO 00000 Frm 00096 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 97 1 (2) Section 163(h)(2) is amended by striking 2 subparagraph (F). 3 (3) Section 6050S(a) is amended— 4 (A) by inserting ‘‘or’’ at the end of para- 5 graph (1), 6 (B) by striking ‘‘or’’ at the end of para- 7 graph (2), and 8 (C) by striking paragraph (3). 9 (4) Section 6050S(e) is amended by striking all 10 that follows ‘‘thereof)’’ and inserting a period. 11 (c) CONFORMING AMENDMENT RELATING 12 TO SEC- 222.—Section 62(a) is amended by striking para- TION 13 graph (18). 14 15 (d) CONFORMING AMENDMENTS RELATING 16 (1) Section 125(f)(1) is amended by striking ‘‘127,’’. 18 (2) Section 132(j)(8) is amended by striking 19 ‘‘which are not excludable from gross income under 20 section 127’’. 21 22 (3) Section 414(n)(3)(C) is amended by striking ‘‘127,’’. 23 24 (4) Section 414(t)(2) is amended by striking ‘‘127,’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 SEC- 127.— TION 17 TO 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00097 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 98 1 (5) Section 3121(a)(18) is amended by striking 2 ‘‘127,’’. 3 (6) Section 3231(e) is amended by striking 4 paragraph (6). 5 (7) Section 3306(b)(13) is amended by ‘‘127,’’. 6 (8) Section 3401(a)(18) is amended by striking 7 ‘‘127,’’. 8 (9) Section 6039D(d)(1) is amended by striking 9 ‘‘, 127’’. 10 11 (e) CONFORMING AMENDMENTS RELATING SEC- 117(d).— TION 12 (1) Section 117(c)(1) is amended— 13 (A) by striking ‘‘subsections (a) and (d)’’ 14 and inserting ‘‘subsection (a)’’, and 15 (B) by striking ‘‘or qualified tuition reduc- 16 tion’’. 17 (2) Section 414(n)(3)(C) is amended by strik- 18 ing ‘‘117(d),’’. 19 (3) Section 414(t)(2) is amended by striking 20 ‘‘117(d),’’. 21 (f) EFFECTIVE DATES.— 22 (1) IN GENERAL.—Except as otherwise pro- 23 vided in this subsection, the amendments made by 24 this section shall apply to taxable years beginning 25 after December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 TO 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00098 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 99 1 (2) AMENDMENTS RELATING TO SECTION 2 117(d).—The amendments made by subsections 3 (a)(3) and (e) shall apply to amounts paid or in- 4 curred after December 31, 2017. 5 6 Subtitle D—Simplification and Reform of Deductions 7 SEC. 1301. REPEAL OF OVERALL LIMITATION ON ITEMIZED 8 DEDUCTIONS. 9 (a) IN GENERAL.—Part 1 of subchapter B of chapter 10 1 is amended by striking section 68 (and the item relating 11 to such section in the table of sections for such part). 12 (b) EFFECTIVE DATE.—The amendments made by 13 this section shall apply to taxable years beginning after 14 December 31, 2017. 15 SEC. 1302. MORTGAGE INTEREST. 16 (a) MODIFICATION OF LIMITATIONS.— 17 18 (1) IN 163(h)(3) is amend- ed to read as follows: 19 ‘‘(3) QUALIFIED RESIDENCE INTEREST.—For 20 purposes of this subsection— 21 ‘‘(A) IN GENERAL.—The term ‘qualified 22 residence interest’ means any interest which is 23 paid or accrued during the taxable year on in- 24 debtedness which— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Section 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00099 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 100 1 ‘‘(i) is incurred in acquiring, con- 2 structing, or substantially improving any 3 qualified residence (determined as of the 4 time the interest is accrued) of the tax- 5 payer, and 6 ‘‘(ii) is secured by such residence. 7 Such term also includes interest on any indebt- 8 edness secured by such residence resulting from 9 the refinancing of indebtedness meeting the re- 10 quirements of the preceding sentence (or this 11 sentence); but only to the extent the amount of 12 the indebtedness resulting from such refi- 13 nancing does not exceed the amount of the refi- 14 nanced indebtedness. 15 ‘‘(B) LIMITATION.— 16 ‘‘(i) IN aggregate 17 amount of indebtedness taken into account 18 under subparagraph (A) for any period 19 shall not exceed $500,000 (half of such 20 amount in the case of a married individual 21 filing a separate return). 22 ‘‘(C) TREATMENT 23 ‘‘(i) IN 25 GENERAL.—In the case of any pre-November 2, 2017, indebtedness, this g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) 10:46 Nov 02, 2017 OF INDEBTEDNESS IN- CURRED ON OR BEFORE NOVEMBER 2, 2017.— 24 VerDate 0ct 09 2002 GENERAL.—The Jkt 000000 (679209 10) PO 00000 Frm 00100 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 101 1 paragraph shall apply as in effect imme- 2 diately before the enactment of the Tax 3 Cuts and Jobs Act. 4 ‘‘(ii) PRE-NOVEMBER 2, 5 EDNESS.—For 6 graph, the term ‘pre-November 2, 2017, 7 indebtedness’ means— purposes of this subpara- 8 ‘‘(I) any principal residence ac- 9 quisition indebtedness which was in- 10 curred on or before November 2, 11 2017, or 12 ‘‘(II) any principal residence ac- 13 quisition indebtedness which is in- 14 curred after November 2, 2017, to re- 15 finance 16 clause (i) (or refinanced indebtedness 17 meeting the requirements of this 18 clause) to the extent (immediately 19 after the refinancing) the principal 20 amount of the indebtedness resulting 21 from the refinancing does not exceed 22 the principal amount of the refinanced 23 indebtedness (immediately before the 24 refinancing). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 2017, INDEBT- 10:46 Nov 02, 2017 Jkt 000000 indebtedness described in (679209 10) PO 00000 Frm 00101 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 102 1 ‘‘(iii) LIMITATION 2 FINANCING.—clause 3 to any indebtedness after— 4 (ii)(II) shall not apply ‘‘(I) the expiration of the term of 5 the original indebtedness, or 6 ‘‘(II) if the principal of such 7 original indebtedness is not amortized 8 over its term, the expiration of the 9 term of the 1st refinancing of such in- 10 debtedness (or if earlier, the date 11 which is 30 years after the date of 12 such 1st refinancing). 13 ‘‘(iv) BINDING CONTRACT EXCEP- 14 TION.—In 15 ters into a written binding contract before 16 November 2, 2017, to close on the pur- 17 chase of a principal residence before Janu- 18 ary 1, 2018, and who purchases such resi- 19 dence before April 1, 2018, subparagraphs 20 (A) and (B) shall be applied by sub- 21 stituting ‘April 1, 2018’ for ‘November 2, 22 2017’.’’. 23 (2) CONFORMING the case of a taxpayer who en- AMENDMENTS.— 24 (A) Section 108(h)(2) is by striking ‘‘for 25 ‘$1,000,000 ($500,000’ in clause (ii) thereof’’ g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ON PERIOD OF RE- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00102 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 103 1 and inserting ‘‘for ‘$500,000 ($250,000’ in 2 paragraph 3 ‘$500,000’ in paragraph (2)(B), thereof’’ 4 and ‘$1,000,000’ for (B) Section 163(h) is amended— 5 (i) by striking subparagraphs (E) and 6 (F) in paragraph (4), and 7 (ii) by striking paragraph (5). 8 9 (2)(A), (b) TAXPAYERS LIMITED DENCE.—Section TO 1 QUALIFIED RESI- 163(h)(4)(A)(i) is amended to read as 10 follows: 11 ‘‘(i) IN term ‘quali- 12 fied residence’ means the principal resi- 13 dence (within the meaning of section 121) 14 of the taxpayer. Rules similar to the rules 15 of paragraph (3)(C) shall apply for pur- 16 poses of the preceding sentence.’’. 17 (c) EFFECTIVE DATES.— 18 (1) IN GENERAL.—The amendments made by 19 this section shall apply to interest paid or accrued 20 in taxable years beginning after December 31, 2017, 21 with respect to indebtedness incurred before, on, or 22 after such date. 23 (2) TREATMENT OF GRANDFATHERED INDEBT- 24 EDNESS.—For 25 by this section to grandfathered indebtedness, see g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 application of the amendments made (679209 10) PO 00000 Frm 00103 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 104 1 paragraph (3)(C), and the second sentence of para- 2 graph (4)(A)(i), of section 163(h) of the Internal 3 Revenue Code of 1986, as amended by this section. 4 SEC. 1303. REPEAL OF DEDUCTION FOR CERTAIN TAXES 5 NOT PAID OR ACCRUED IN A TRADE OR BUSI- 6 NESS. 7 (a) IN GENERAL.—Section 164(b)(5) is amended to 8 read as follows: 9 10 ‘‘(5) LIMITATION the case of a taxpayer other than a corporation— 11 ‘‘(A) foreign real property taxes (other 12 than taxes which are paid or accrued in car- 13 rying on a trade or business or an activity de- 14 scribed in section 212) shall not be taken into 15 account under subsection (a)(1), 16 ‘‘(B) the aggregate amount of taxes (other 17 than taxes which are paid or accrued in car- 18 rying on a trade or business or an activity de- 19 scribed in section 212) taken into account 20 under subsection (a)(1) and for any taxable 21 year shall not exceed $10,000 ($5,000 in the 22 case of a married individual filing a separate re- 23 turn), 24 ‘‘(C) subsection (a)(2) shall only apply to 25 taxes which are paid or accrued in carrying on g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 IN CASE OF INDIVIDUALS.—In 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00104 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 105 1 a trade or business or an activity described in 2 section 212, and 3 ‘‘(D) subsection (a)(3) shall not apply to 4 State and local taxes.’’. 5 (b) EFFECTIVE DATE.—The amendments made by 6 this section shall apply to taxable years beginning after 7 December 31, 2017. 8 SEC. 1304. REPEAL OF DEDUCTION FOR PERSONAL CAS- 9 10 UALTY LOSSES. (a) IN GENERAL.—Section 165(c) is amended by in- 11 serting ‘‘and’’ at the end of paragraph (1), by striking 12 ‘‘; and’’ at the end of paragraph (2) and inserting a pe13 riod, and by striking paragraph (3). 14 (b) CONFORMING AMENDMENTS.— 15 (1) Section 165(h) is amended to read as fol- 16 lows: 17 ‘‘(h) SPECIAL RULE WHERE PERSONAL CASUALTY 18 GAINS EXCEED PERSONAL CASUALTY LOSSES.— 19 ‘‘(1) IN the personal casualty 20 gains for any taxable year exceed the personal cas- 21 ualty losses for such taxable year— 22 ‘‘(A) all such gains shall be treated as 23 gains from sales or exchanges of capital assets, 24 and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—If 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00105 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 106 1 ‘‘(B) all such losses shall be treated as 2 losses from sales or exchanges of capital assets. 3 ‘‘(2) DEFINITIONS PERSONAL CASUALTY 4 GAIN AND PERSONAL CASUALTY LOSS.—For 5 poses of this subsection— 6 ‘‘(A) PERSONAL CASUALTY pur- LOSS.—The 7 term ‘personal casualty loss’ means any loss of 8 property not connected with a trade or business 9 or a transaction entered into for profit, if such 10 loss arises from fire, storm, shipwreck, or other 11 casualty, or from theft. 12 ‘‘(B) PERSONAL CASUALTY GAIN.—The 13 term ‘personal casualty gain’ means the recog- 14 nized gain from any involuntary conversion of 15 property which is described in subparagraph 16 (A) arising from fire, storm, shipwreck, or other 17 casualty, or from theft.’’. 18 (2) Subsection (i) of section 165 is amended— 19 (A) in paragraph (1)— 20 (i) by striking ‘‘(as defined by clause 21 (ii) of subsection (h)(3)(C))’’, and 22 (ii) by striking ‘‘(as defined by clause 23 (i) of such subsection)’’, 24 (B) by striking ‘‘(as defined by subsection 25 (h)(3)(C)(i)’’ in paragraph (4), and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00106 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 107 1 (C) by adding at the end the following new 2 paragraph: 3 ‘‘(5) FEDERALLY 4 purposes of this subsection— 5 ‘‘(A) FEDERALLY DECLARED DISASTER.— 6 The term ‘federally declared disaster’ means 7 any disaster subsequently determined by the 8 President of the United States to warrant as- 9 sistance by the Federal Government under the 10 Robert T. Stafford Disaster Relief and Emer- 11 gency Assistance Act. 12 ‘‘(B) DISASTER AREA.—The term ‘disaster 13 area’ means the area so determined to warrant 14 such assistance.’’. 15 (3) Section 165 is amended by striking sub- 16 section (k). 17 (4)(A) Section 165(l)(1) is amended by striking 18 ‘‘a loss described in subsection (c)(3)’’ and inserting 19 ‘‘an ordinary loss described in subsection (c)(2)’’. 20 (B) Section 165(l) is amended— 21 (i) by striking paragraph (5), 22 (ii) by redesignating paragraphs (2), (3), 23 and (4) as paragraphs (3), (4), and (5), respec- 24 tively, and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 DECLARED DISASTER.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00107 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 108 1 (iii) by inserting after paragraph (1) the 2 following new paragraph: 3 ‘‘(2) LIMITATIONS.— 4 ‘‘(A) DEPOSIT 5 INSURED.—No 6 paragraph (1) with respect to any loss on a de- 7 posit in a qualified financial institution if part 8 or all of such deposit is insured under Federal 9 law. 10 election may be made under ‘‘(B) DOLLAR LIMITATION.—With respect 11 to each financial institution, the aggregate 12 amount of losses attributable to deposits in 13 such financial institution to which an election 14 under paragraph (1) may be made by the tax- 15 payer for any taxable year shall not exceed 16 $20,000 ($10,000 in the case of a separate re- 17 turn by a married individual). The limitation of 18 the preceding sentence shall be reduced by the 19 amount of any insurance proceeds under any 20 State law which can reasonably be expected to 21 be received with respect to losses on deposits in 22 such institution.’’. 23 (5) Section 172(b)(1)(E)(ii), prior to amend- 24 ment under title III, is amended by striking sub- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 MAY NOT BE FEDERALLY 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00108 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 109 1 clause (I) and by redesignating subclauses (II) and 2 (III) as subclauses (I) and (II), respectively 3 (6) Section 172(d)(4)(C) is amended by strik- 4 ing ‘‘paragraph (2) or (3) of section 165(c)’’ and in- 5 serting ‘‘section 165(c)(2)’’. 6 7 (7) Section 274(f) is amended by striking ‘‘CASUALTY LOSSES,’’ in the heading thereof. 8 9 (8) Section 280A(b) is amended by striking ‘‘CASUALTY LOSSES,’’ in the heading thereof. 10 (9) Section 873(b), as amended by the pre- 11 ceding provisions of this Act, is amended by striking 12 paragraph (1) and by redesignating paragraphs (2) 13 and (3) as paragraphs (1) and (2), respectively. 14 (10) Section 504(b) of the Disaster Tax Relief 15 and Airport and Airway Extension Act of 2017 is 16 amended by adding at the end the following new 17 paragraph: 18 ‘‘(4) COORDINATION WITH TAX REFORM.—This 19 subsection shall be applied without regard to the 20 amendments made by section 1306 of the Tax Cuts 21 and Jobs Act.’’. 22 (c) EFFECTIVE DATE.—The amendments made by 23 this section shall apply to taxable years beginning after 24 December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00109 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 110 1 SEC. 1305. LIMITATION ON WAGERING LOSSES. 2 (a) IN GENERAL.—Section 165(d) is amended by 3 adding at the end the following: ‘‘For purposes of the pre4 ceding sentence, the term ‘losses from wagering trans5 actions’ includes any deduction otherwise allowable under 6 this chapter incurred in carrying on any wagering trans7 action.’’. 8 (b) EFFECTIVE DATE.—The amendments made by 9 this section shall apply to taxable years beginning after 10 December 31, 2017. 11 SEC. 1306. CHARITABLE CONTRIBUTIONS. 12 13 (a) INCREASED LIMITATION CASH CONTRIBU- TIONS.— 14 (1) IN GENERAL.—Section 170(b)(1) is amend- 15 ed by redesignating subparagraph (G) as subpara- 16 graph (H) and by inserting after subparagraph (F) 17 the following new subparagraph: 18 ‘‘(G) INCREASED 19 LIMITATION FOR CASH CONTRIBUTIONS.— 20 ‘‘(i) IN GENERAL.—In the case of any 21 contribution of cash to an organization de- 22 scribed in subparagraph (A), the total 23 amount of such contributions which may 24 be taken into account under subsection (a) 25 for any taxable year shall not exceed 60 g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FOR 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00110 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 111 1 percent of the taxpayer’s contribution base 2 for such year. 3 ‘‘(ii) CARRYOVER.—If the aggregate 4 amount of contributions described in clause 5 (i) exceeds the applicable limitation under 6 clause (i), such excess shall be treated (in 7 a manner consistent with the rules of sub- 8 section (d)(1)) as a charitable contribution 9 to which clause (i) applies in each of the 10 5 succeeding years in order of time. 11 ‘‘(iii) COORDINATION 12 GRAPHS 13 AND ‘‘(I) (B).— IN GENERAL.—Contribu- 14 tions taken into account under this 15 subparagraph shall not be taken into 16 account under subparagraph (A). 17 ‘‘(II) LIMITATION REDUCTION.— 18 Subparagraphs (A) and (B) shall be 19 applied by reducing (but not below 20 zero) the aggregate contribution limi- 21 tation allowed for the taxable year 22 under each such subparagraph by the 23 aggregate contributions allowed under 24 this subparagraph for such taxable 25 year.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 (A) WITH SUBPARA- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00111 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 112 1 2 (b) DENIAL OF DEDUCTION FOR COLLEGE ATH- EVENT SEATING RIGHTS.—Section 170(l)(1) is LETIC 3 amended to read as follows: 4 ‘‘(1) IN GENERAL.—No deduction shall be al- 5 lowed under this section for any amount described in 6 paragraph (2).’’. 7 (c) CHARITABLE MILEAGE RATE ADJUSTED 8 FLATION.—Section FOR IN- 170(i) is amended by striking ‘‘shall 9 be 14 cents per mile’’ and inserting ‘‘shall be a rate which 10 takes into account the variable cost of operating an auto11 mobile’’. 12 (d) REPEAL 13 CASE OF OF SUBSTANTIATION EXCEPTION CONTRIBUTIONS REPORTED BY IN DONEE.—Sec- 14 tion 170(f)(8) is amended by striking subparagraph (D) 15 and by redesignating subparagraph (E) as subparagraph 16 (D). 17 (e) EFFECTIVE DATE.—The amendments made by 18 this section shall apply to contributions made in taxable 19 years beginning after December 31, 2017. 20 SEC. 1307. REPEAL OF DEDUCTION FOR TAX PREPARATION 21 22 EXPENSES. (a) IN GENERAL.—Section 212 is amended by adding 23 ‘‘or’’ at the end of paragraph (1), by striking ‘‘; or’’ at 24 the end of paragraph (2) and inserting a period, and by 25 striking paragraph (3). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00112 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 113 1 (b) EFFECTIVE DATE.—The amendments made by 2 this section shall apply to taxable years beginning after 3 December 31, 2017. 4 SEC. 1308. REPEAL OF MEDICAL EXPENSE DEDUCTION. 5 (a) IN GENERAL.—Part VII of subchapter B is 6 amended by striking by striking section 213 (and by strik7 ing the item relating to such section in the table of section 8 for such subpart). 9 (b) CONFORMING AMENDMENTS.— 10 (1)(A) Section 105(f) is amended to read as fol- 11 lows: 12 ‘‘(f) MEDICAL CARE.—For purposes of this section— 13 14 ‘‘(1) IN term ‘medical care’ means amounts paid— 15 ‘‘(A) for the diagnosis, cure, mitigation, 16 treatment, or prevention of disease, or for the 17 purpose of affecting any structure or function 18 of the body, 19 ‘‘(B) for transportation primarily for and 20 essential to medical care referred to in subpara- 21 graph (A), 22 ‘‘(C) for qualified long-term care services 23 (as defined in section 7702B(c)), or 24 ‘‘(D) for insurance (including amounts 25 paid as premiums under part B of title XVIII g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00113 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 114 1 of the Social Security Act, relating to supple- 2 mentary medical insurance for the aged) cov- 3 ering medical care referred to in subparagraphs 4 (A) and (B) or for any qualified long-term care 5 insurance contract (as defined in section 6 7702B(b)). 7 In the case of a qualified long-term care insurance 8 contract (as defined in section 7702B(b)), only eligi- 9 ble long-term care premiums (as defined in para- 10 graph (7)) shall be taken into account under sub- 11 paragraph (D). 12 ‘‘(2) AMOUNTS 13 AWAY FROM HOME TREATED AS PAID FOR MEDICAL 14 CARE.—Amounts 15 travagant under the circumstances) while away from 16 home primarily for and essential to medical care re- 17 ferred to in paragraph (1)(A) shall be treated as 18 amounts paid for medical care if— paid for lodging (not lavish or ex- 19 ‘‘(A) the medical care referred to in para- 20 graph (1)(A) is provided by a physician in a li- 21 censed hospital (or in a medical care facility 22 which is related to, or the equivalent of, a li- 23 censed hospital), and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 PAID FOR CERTAIN LODGING 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00114 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 115 1 ‘‘(B) there is no significant element of per- 2 sonal pleasure, recreation, or vacation in the 3 travel away from home. 4 The amount taken into account under the preceding 5 sentence shall not exceed $50 for each night for each 6 individual. 7 ‘‘(3) PHYSICIAN.—The term ‘physician’ has the 8 meaning given to such term by section 1861(r) of 9 the Social Security Act (42 U.S.C. 1395x(r)). 10 ‘‘(4) CONTRACTS 11 ICAL CARE.—In 12 under which amounts are payable for other than 13 medical care referred to in subparagraphs (A), (B) 14 and (C) of paragraph (1)— the case of an insurance contract 15 ‘‘(A) no amount shall be treated as paid 16 for insurance to which paragraph (1)(D) applies 17 unless the charge for such insurance is either 18 separately stated in the contract, or furnished 19 to the policyholder by the insurance company in 20 a separate statement, 21 ‘‘(B) the amount taken into account as the 22 amount paid for such insurance shall not exceed 23 such charge, and 24 ‘‘(C) no amount shall be treated as paid 25 for such insurance if the amount specified in g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 COVERING OTHER THAN MED- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00115 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 116 1 the contract (or furnished to the policyholder by 2 the insurance company in a separate statement) 3 as the charge for such insurance is unreason- 4 ably large in relation to the total charges under 5 the contract. 6 ‘‘(5) CERTAIN 7 to the limitations of paragraph (4), premiums paid 8 during the taxable year by a taxpayer before he at- 9 tains the age of 65 for insurance covering medical 10 care (within the meaning of subparagraphs (A), (B), 11 and (C) of paragraph (1)) for the taxpayer, his 12 spouse, or a dependent after the taxpayer attains the 13 age of 65 shall be treated as expenses paid during 14 the taxable year for insurance which constitutes 15 medical care if premiums for such insurance are 16 payable (on a level payment basis) under the con- 17 tract for a period of 10 years or more or until the 18 year in which the taxpayer attains the age of 65 19 (but in no case for a period of less than 5 years). 20 ‘‘(6) COSMETIC 21 ‘‘(A) IN SURGERY.— GENERAL.—The term ‘medical 22 care’ does not include cosmetic surgery or other 23 similar procedures, unless the surgery or proce- 24 dure is necessary to ameliorate a deformity 25 arising from, or directly related to, a congenital g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 PRE-PAID CONTRACTS.—Subject 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00116 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 117 1 abnormality, a personal injury resulting from 2 an accident or trauma, or disfiguring disease. 3 ‘‘(B) COSMETIC SURGERY DEFINED 4 purposes of this paragraph, the term ‘cosmetic 5 surgery’ means any procedure which is directed 6 at improving the patient’s appearance and does 7 not meaningfully promote the proper function 8 of the body or prevent or treat illness or dis- 9 ease. 10 ‘‘(7) ELIGIBLE 11 ‘‘(A) IN LONG-TERM CARE PREMIUMS.— GENERAL.—For purposes of this 12 section, the term ‘eligible long-term care pre- 13 miums’ means the amount paid during a tax- 14 able year for any qualified long-term care insur- 15 ance contract (as defined in section 7702B(b)) 16 covering an individual, to the extent such 17 amount does not exceed the limitation deter- 18 mined under the following table: ‘‘In the case of an individual with an attained age before the close of the taxable year of: 40 or less More than More than More than More than 40 but not more than 50 50 but not more than 60 60 but not more than 70 70 19 ‘‘(i) IN 21 $200 $375 $750 $2,000 $2,500 GENERAL.—In the case of any taxable year beginning after 1997, each g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) 10:46 Nov 02, 2017 The limitation is: ‘‘(B) INDEXING.— 20 VerDate 0ct 09 2002 .—For Jkt 000000 (679209 10) PO 00000 Frm 00117 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 118 1 dollar amount in subparagraph (A) shall 2 be increased by the medical care cost ad- 3 justment of such amount for such calendar 4 year. Any increase determined under the 5 preceding sentence shall be rounded to the 6 nearest multiple of $10. 7 ‘‘(ii) MEDICAL 8 MENT.—For 9 medical care cost adjustment for any cal- 10 endar year is the adjustment prescribed by 11 the Secretary, in consultation with the Sec- 12 retary of Health and Human Services, for 13 purposes of such clause. To the extent that 14 CPI (as defined section 1(c)), or any com- 15 ponent thereof, is taken into account in de- 16 termining such adjustment, such adjust- 17 ment shall be determined by taking into 18 account C-CPI-U (as so defined), or the 19 corresponding component thereof, in lieu of 20 such CPI (or component thereof), but only 21 with respect to the portion of such adjust- 22 ment which relates to periods after Decem- 23 ber 31, 2017. 24 25 ‘‘(8) 10:46 Nov 02, 2017 CERTAIN purposes of clause (i), the PAYMENTS TO RELATIVES TREATED AS NOT PAID FOR MEDICAL CARE.—An g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 CARE COST ADJUST- Jkt 000000 (679209 10) PO 00000 Frm 00118 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 119 1 amount paid for a qualified long-term care service 2 (as defined in section 7702B(c)) provided to an indi- 3 vidual shall be treated as not paid for medical care 4 if such service is provided— 5 ‘‘(A) by the spouse of the individual or by 6 a relative (directly or through a partnership, 7 corporation, or other entity) unless the service 8 is provided by a licensed professional with re- 9 spect to such service, or 10 ‘‘(B) by a corporation or partnership which 11 is related (within the meaning of section 267(b) 12 or 707(b)) to the individual. 13 For purposes of this paragraph, the term ‘relative’ 14 means an individual bearing a relationship to the in- 15 dividual which is described in any of subparagraphs 16 (A) through (G) of section 7706(d)(2). This para- 17 graph shall not apply for purposes of subsection (b) 18 with respect to reimbursements through insurance.’’. 19 (B) Section 72(t)(2)(D)(i)(III) is amended by 20 striking ‘‘section 213(d)(1)(D)’’ and inserting ‘‘sec- 21 tion 105(f)(1)(D)’’. 22 (C) Section 104(a) is amended by striking ‘‘sec- 23 tion 213(d)(1)’’ in the last sentence and inserting 24 ‘‘section 105(f)(1)’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00119 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 120 1 2 (D) Section 105(b) is amended by striking ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 3 4 (E) Section 139D is amended by striking ‘‘section 213’’ and inserting ‘‘section 223’’. 5 (F) Section 162(l)(2) is amended by striking 6 ‘‘section 7 105(f)(7)’’. and inserting ‘‘section 8 (G) Section 220(d)(2)(A) is amended by strik- 9 ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 10 (H) Section 223(d)(2)(A) is amended by strik- 11 ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 12 (I) Section 419A(f)(2) is amended by striking 13 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 14 (J) Section 501(c)(26)(A) is amended by strik- 15 ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 16 (K) Section 2503(e) is amended by striking 17 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 18 (L) Section 4980B(c)(4)(B)(i)(I) is amended by 19 striking ‘‘section 213(d)’’ and inserting ‘‘section 20 105(f)’’. 21 22 (M) Section 6041(f) is amended by striking ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 23 (N) Section 7702B(a)(2) is amended by strik- 24 ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 213(d)(10)’’ 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00120 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 121 1 (O) Section 7702B(a)(4) is amended by strik- 2 ing ‘‘section 213(d)(1)(D)’’ and inserting ‘‘section 3 105(f)(1)(D)’’. 4 (P) Section 7702B(d)(5) is amended by striking 5 ‘‘section 6 105(f)(7)’’. 7 8 inserting ‘‘section ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. (2) Section 72(t)(2)(B) is amended to read as follows: 11 ‘‘(B) MEDICAL EXPENSES.—Distributions 12 made to an individual (other than distributions 13 described in subparagraph (A), (C), or (D) to 14 the extent such distributions do not exceed the 15 excess of— 16 ‘‘(i) the expenses paid by the taxpayer 17 during the taxable year, not compensated 18 for by insurance or otherwise, for medical 19 care (as defined in 105(f)) of the taxpayer, 20 his spouse, or a dependent (as defined in 21 section 7706, determined without regard to 22 subsections (b)(1), (b)(2), and (d)(1)(B) 23 thereof), over 24 ‘‘(ii) 10 percent of the taxpayer’s ad- 25 justed gross income.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 and (Q) Section 9832(d)(3) is amended by striking 9 10 213(d)(10)’’ 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00121 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 122 1 (3) Section 162(l) is amended by striking para- 2 graph (3). 3 (4) Section 402(l) is amended by striking para- 4 graph (7) and redesignating paragraph (8) as para- 5 graph (7). 6 (5) Section 220(f) is amended by striking para- 7 graph (6). 8 (6) Section 223(f) is amended by striking para- 9 graph (6). 10 (7) Section 7702B(e) is amended by striking 11 paragraph (2). 12 (8) Section 7706(f)(7), as redesignated by this 13 Act, is amended by striking ‘‘sections 105(b), 14 132(h)(2)(B), and 213(d)(5)’’ and inserting ‘‘sec- 15 tions 105(b) and 132(h)(2)(B)’’. 16 (c) EFFECTIVE DATE.—The amendments made by 17 this section shall apply to taxable years beginning after 18 December 31, 2017. 19 SEC. 1309. REPEAL OF DEDUCTION FOR ALIMONY PAY- 20 21 MENTS. (a) IN GENERAL.—Part VII of subchapter B is 22 amended by striking by striking section 215 (and by strik23 ing the item relating to such section in the table of section 24 for such subpart). 25 (b) CONFORMING AMENDMENTS.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00122 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 123 1 2 (1) AMENDMENTS TO SECTION 215.— 3 (A) CORRESPONDING REPEAL OF PROVI- 4 SIONS PROVIDING FOR INCLUSION OF ALIMONY 5 IN GROSS INCOME.— 6 (i) Subsection (a) of section 61 is 7 amended by striking paragraph (8) and by 8 redesignating paragraphs (9) through (15) 9 as paragraphs (8) through (14), respec- 10 tively. 11 (ii) Part II of subchapter B of chapter 12 1 is amended by striking section 71 (and 13 by striking the item relating to such sec- 14 tion in the table of sections for such part). 15 (iii) Subpart F of part I of subchapter 16 J of chapter 1 is amended by striking sec- 17 tion 682 (and by striking the item relating 18 to such section in the table of sections for 19 such subpart). 20 (B) RELATED 21 (i) Section 62(a) is amended by strik- 23 ing paragraph (10). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) 10:46 Nov 02, 2017 TO REPEAL OF SECTION 215.— 22 VerDate 0ct 09 2002 RELATING Jkt 000000 (679209 10) PO 00000 Frm 00123 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 124 1 (ii) Section 3402(m)(1) is amended by 2 striking ‘‘(other than paragraph (10) 3 thereof)’’. 4 (C) RELATED 5 71.— 6 (i) Section 121(d)(3) is amended— 7 (I) by striking ‘‘(as defined in 8 section 71(b)(2))’’ in subparagraph 9 (B), and 10 (II) by adding at the end the fol- 11 lowing new subparagraph: 12 ‘‘(C) DIVORCE 13 MENT.—For 14 term 15 means— OR SEPARATION INSTRU- purposes of this paragraph, the ‘divorce or separation instrument’ 16 ‘‘(i) a decree of divorce or separate 17 maintenance or a written instrument inci- 18 dent to such a decree, 19 ‘‘(ii) a written separation agreement, 20 or 21 ‘‘(iii) a decree (not described in clause 22 (i)) requiring a spouse to make payments 23 for the support or maintenance of the 24 other spouse.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 TO REPEAL OF SECTION 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00124 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 125 1 (ii) Section 220(f)(7) is amended by 2 striking ‘‘subparagraph (A) of section 3 71(b)(2)’’ and inserting ‘‘clause (i) of sec- 4 tion 121(d)(3)(C)’’. 5 (iii) Section 223(f)(7) is amended by 6 striking ‘‘subparagraph (A) of section 7 71(b)(2)’’ and inserting ‘‘clause (i) of sec- 8 tion 121(d)(3)(C)’’. 9 (iv) Section 382(l)(3)(B)(iii) is 10 amended by striking ‘‘section 71(b)(2)’’ 11 and inserting ‘‘section 121(d)(3)(C)’’. 12 (v) Section 408(d)(6) is amended by 13 striking ‘‘subparagraph (A) of section 14 71(b)(2)’’ and inserting ‘‘clause (i) of sec- 15 tion 121(d)(3)(C)’’. 16 (c) EFFECTIVE DATE.—The amendments made by 17 this section shall apply to— 18 (1) any divorce or separation instrument (as de- 19 fined in section 71(b)(2) of the Internal Revenue 20 Code of 1986 as in effect before the date of the en- 21 actment of this Act) executed after December 31, 22 2017, and 23 (2) any divorce or separation instrument (as so 24 defined) executed on or before such date and modi- 25 fied after such date if the modification expressly g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00125 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 126 1 provides that the amendments made by this section 2 apply to such modification. 3 SEC. 1310. REPEAL OF DEDUCTION FOR MOVING EX- 4 5 PENSES. (a) IN GENERAL.—Part VII of subchapter B is 6 amended by striking by striking section 217 (and by strik7 ing the item relating to such section in the table of section 8 for such subpart). 9 (b) CONFORMING AMENDMENTS.— 10 11 (1) Section 62(a) is amended by striking paragraph (15). 12 13 (2) Section 274(m)(3) is amended by striking ‘‘(other than section 217)’’. 14 15 (3) Section 3121(a) is amended by striking paragraph (11). 16 17 (4) Section 3306(b) is amended by striking paragraph (9). 18 19 (5) Section 3401(a) is amended by striking paragraph (15). 20 (6) Section 7872(f) is amended by striking 21 paragraph (11). 22 (c) EFFECTIVE DATE.—The amendments made by 23 this section shall apply to taxable years beginning after 24 December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00126 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 127 1 SEC. 1311. TERMINATION OF DEDUCTION AND EXCLUSIONS 2 FOR CONTRIBUTIONS TO MEDICAL SAVINGS 3 ACCOUNTS. 4 (a) TERMINATION OF INCOME TAX DEDUCTION.— 5 Section 220 is amended by adding at the end the following 6 new subsection: 7 ‘‘(k) TERMINATION.—No deduction shall be allowed 8 under subsection (a) with respect to any taxable year be9 ginning after December 31, 2017.’’. 10 (b) TERMINATION OF EXCLUSION FOR EMPLOYER- 11 PROVIDED CONTRIBUTIONS.—Section 106 is amended by 12 striking subsection (b). 13 (c) CONFORMING AMENDMENTS.— 14 15 (1) Section 62(a) is amended by striking paragraph (16). 16 (2) Section 106(d) is amended by striking para- 17 graph (2), by redesignating paragraph (3) as para- 18 graph (6), and by inserting after paragraph (1) the 19 following new paragraphs: 20 ‘‘(2) NO amount 21 shall be included in the gross income of any em- 22 ployee solely because the employee may choose be- 23 tween the contributions referred to in paragraph (1) 24 and employer contributions to another health plan of 25 the employer. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 CONSTRUCTIVE RECEIPT.—No 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00127 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 128 1 ‘‘(3) SPECIAL 2 PLOYER CONTRIBUTIONS.—Any 3 tion to a health savings account (as so defined), if 4 otherwise allowable as a deduction under this chap- 5 ter, shall be allowed only for the taxable year in 6 which paid. 7 ‘‘(4) EMPLOYER employer contribu- HEALTH SAVINGS ACCOUNT 8 CONTRIBUTION REQUIRED TO BE SHOWN ON RE- 9 TURN.—Every individual required to file a return 10 under section 6012 for the taxable year shall include 11 on such return the aggregate amount contributed by 12 employers to the health savings accounts (as so de- 13 fined) of such individual or such individual’s spouse 14 for such taxable year. 15 ‘‘(5) HEALTH SAVINGS ACCOUNT CONTRIBU- 16 TIONS NOT PART OF COBRA COVERAGE.—Paragraph 17 (1) shall not apply for purposes of section 4980B.’’. 18 (3) Section 223(b)(4) is amended by striking 19 subparagraph (A), by redesignating subparagraphs 20 (B) and (C) as subparagraphs (A) and (B), respec- 21 tively, and by striking the second sentence thereof. 22 (4) Section 223(b)(5) is amended by striking 23 ‘‘under paragraph (3))’’ and all that follows through 24 ‘‘shall be divided equally between them’’ and insert- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 RULE FOR DEDUCTION OF EM- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00128 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 129 1 ing the following: ‘‘under paragraph (3)) shall be di- 2 vided equally between the spouses’’. 3 (5) Section 223(c) is amended by striking para- 4 graph (5). 5 (6) Section 3231(e) is amended by striking 6 paragraph (10). 7 (7) Section 3306(b) is amended by striking 8 paragraph (17). 9 (8) Section 3401(a) is amended by striking 10 paragraph (21). 11 (9) Chapter 43 is amended by striking section 12 4980E (and by striking the item relating to such 13 section in the table of sections for such chapter). 14 (10) Section 4980G is amended to read as fol- 15 lows: 16 ‘‘SEC. 4980G. FAILURE OF EMPLOYER TO MAKE COM- 17 PARABLE HEALTH SAVINGS ACCOUNT CON- 18 TRIBUTIONS. 19 ‘‘(a) IN GENERAL.—In the case of an employer who 20 makes a contribution to the health savings account of any 21 employee during a calendar year, there is hereby imposed 22 a tax on the failure of such employer to meet the require23 ments of subsection (d) for such calendar year. 24 ‘‘(b) AMOUNT OF TAX.—The amount of the tax im- 25 posed by subsection (a) on any failure for any calendar g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00129 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 130 1 year is the amount equal to 35 percent of the aggregate 2 amount contributed by the employer to health savings ac3 counts of employees for taxable years of such employees 4 ending with or within such calendar year. 5 ‘‘(c) WAIVER BY SECRETARY.—In the case of a fail- 6 ure which is due to reasonable cause and not to willful 7 neglect, the Secretary may waive part or all of the tax 8 imposed by subsection (a) to the extent that the payment 9 of such tax would be excessive relative to the failure in10 volved. 11 ‘‘(d) EMPLOYER REQUIRED TO MAKE COMPARABLE 12 HEALTH SAVINGS ACCOUNT CONTRIBUTIONS FOR ALL 13 PARTICIPATING EMPLOYEES.— 14 ‘‘(1) IN employer meets the re- 15 quirements of this subsection for any calendar year 16 if the employer makes available comparable con- 17 tributions to the health savings accounts of all com- 18 parable participating employees for each coverage 19 period during such calendar year. 20 ‘‘(2) COMPARABLE 21 ‘‘(A) IN CONTRIBUTIONS.— GENERAL.—For purposes of para- 22 graph (1), the term ‘comparable contributions’ 23 means contributions— 24 ‘‘(i) which are the same amount, or g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—An 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00130 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 131 1 ‘‘(ii) which are the same percentage of 2 the annual deductible limit under the high 3 deductible health plan covering the employ- 4 ees. 5 ‘‘(B) PART-YEAR the 6 case of an employee who is employed by the em- 7 ployer for only a portion of the calendar year, 8 a contribution to the health savings account of 9 such employee shall be treated as comparable if 10 it is an amount which bears the same ratio to 11 the comparable amount (determined without re- 12 gard to this subparagraph) as such portion 13 bears to the entire calendar year. 14 ‘‘(3) COMPARABLE 15 PARTICIPATING EMPLOY- EES.— 16 ‘‘(A) IN GENERAL.—For purposes of para- 17 graph (1), the term ‘comparable participating 18 employees’ means all employees— 19 ‘‘(i) who are eligible individuals cov- 20 ered under any high deductible health plan 21 of the employer, and 22 ‘‘(ii) who have the same category of 23 coverage. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 EMPLOYEES.—In 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00131 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 132 1 ‘‘(B) CATEGORIES OF COVERAGE.—For 2 purposes of subparagraph (B), the categories of 3 coverage are self-only and family coverage. 4 ‘‘(4) PART-TIME 5 ‘‘(A) IN EMPLOYEES.— GENERAL .—Paragraph (3) shall 6 be applied separately with respect to part-time 7 employees and other employees. 8 ‘‘(B) PART-TIME EMPLOYEE.—For pur- 9 poses of subparagraph (A), the term ‘part-time 10 employee’ means any employee who is custom- 11 arily employed for fewer than 30 hours per 12 week. 13 ‘‘(5) SPECIAL RULE FOR NON-HIGHLY COM- 14 PENSATED EMPLOYEES.—For 15 this section to a contribution to a health savings ac- 16 count of an employee who is not a highly com- 17 pensated employee (as defined in section 414(q)), 18 highly compensated employees shall not be treated 19 as comparable participating employees. 20 ‘‘(e) CONTROLLED GROUPS.—For purposes of this purposes of applying 21 section, all persons treated as a single employer under sub22 section (b), (c), (m), or (o) of section 414 shall be treated 23 as 1 employer. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00132 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 133 1 ‘‘(f) DEFINITIONS.—Terms used in this section which 2 are also used in section 223 have the respective meanings 3 given such terms in section 223. 4 ‘‘(g) REGULATIONS.—The Secretary shall issue regu- 5 lations to carry out the purposes of this section.’’. 6 (11) Section 6051(a) is amended by striking 7 paragraph (11). 8 (12) Section 6051(a)(14)(A) is amended by 9 striking ‘‘paragraphs (11) and (12)’’ and inserting 10 ‘‘paragraph (12)’’. 11 (d) EFFECTIVE DATE.—The amendment made by 12 this section shall apply to taxable years beginning after 13 December 31, 2017. 14 SEC. 1312. DENIAL OF DEDUCTION FOR EXPENSES ATTRIB- 15 UTABLE TO THE TRADE OR BUSINESS OF 16 BEING AN EMPLOYEE. 17 (a) IN GENERAL.—Part IX of subchapter B of chap- 18 ter 1 is amended by inserting after the item relating to 19 section 262 the following new item: 20 ‘‘SEC. 262A. EXPENSES ATTRIBUTABLE TO BEING AN EM- 21 22 PLOYEE. ‘‘(a) IN GENERAL.—Except as otherwise provided in 23 this section, no deduction shall be allowed with respect to 24 any trade or business of the taxpayer which consists of g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00133 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 134 1 the performance of services by the taxpayer as an em2 ployee. 3 4 ‘‘(b) EXCEPTION TIONS.—Subsection FOR ABOVE-THE-LINE DEDUC- (a) shall not apply to any deduction 5 allowable (determined without regard to subsection (a)) in 6 determining adjusted gross income.’’. 7 8 (b) REPEAL AND (1) IN GENERAL.—Section 62(a)(2) is amend- ed— 11 (A) by striking subparagraphs (B), (C), 12 and (D), and 13 (B) by redesignating subparagraph (E) as 14 subparagraph (B). 15 (2) CONFORMING AMENDMENTS.— 16 (A) Section 62 is amended by striking sub- 17 sections (b) and (d) and by redesignating sub- 18 sections (c) and (e) as subsections (b) and (c), 19 respectively. 20 (B) Section 62(a)(20) is amended by strik- 21 ing ‘‘subsection (e)’’ and inserting ‘‘subsection 22 (c)’’. 23 24 (c) CONTINUED EXCLUSION TION g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 CERTAIN ABOVE-THE-LINE TRADE BUSINESS DEDUCTIONS OF EMPLOYEES.— 9 10 OF 10:46 Nov 02, 2017 OF WORKING CONDI- FRINGE BENEFITS.—Section 132(d) is amended by Jkt 000000 (679209 10) PO 00000 Frm 00134 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 135 1 inserting ‘‘(determined without regard to section 262A)’’ 2 after ‘‘section 162’’. 3 (d) EFFECTIVE DATE.—The amendments made by 4 this section shall apply to taxable years beginning after 5 December 31, 2017. 8 Subtitle E—Simplification and Reform of Exclusions and Taxable Compensation 9 SEC. 1401. LIMITATION ON EXCLUSION FOR EMPLOYER- 6 7 10 11 PROVIDED HOUSING. (a) IN GENERAL.—Section 119 is amended by adding 12 at the end the following new subsection: 13 ‘‘(e) LIMITATION ON EXCLUSION OF LODGING.— 14 ‘‘(1) IN aggregate amount ex- 15 cluded from gross income of the taxpayer under sub- 16 sections (a) and (d) with respect to lodging for any 17 taxable year shall not exceed $50,000 (half such 18 amount in the case of a married individual filing a 19 separate return). 20 ‘‘(2) LIMITATION TO 1 HOME.—Subsections (a) 21 and (d) (separately and in combination) shall not 22 apply with respect to more than 1 residence of the 23 taxpayer at any given time. In the case of a joint re- 24 turn, the preceding sentence shall apply separately 25 to each spouse for any period during which each g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00135 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 136 1 spouse resides separate from the other spouse in a 2 residence which is provided in connection with the 3 employment of each spouse, respectively. 4 5 ‘‘(3) LIMITATION EMPLOYEES.— 6 ‘‘(A) REDUCED FOR EXCESS COMPENSA- 7 TION.—In 8 pensation for the taxable year exceeds the 9 amount in effect under section 414(q)(1)(B)(i) 10 for the calendar in which such taxable year be- 11 gins, the $50,000 amount under paragraph (1) 12 shall be reduced (but not below zero) by an 13 amount equal to 50 percent of such excess. For 14 purposes of the preceding sentence, the term 15 ‘compensation’ means wages (as defined in sec- 16 tion 3121(a) (without regard to the contribu- 17 tion and benefit base limitation in section 18 3121(a)(1)). 19 the case of an individual whose com- ‘‘(B) EXCLUSION DENIED FOR 5-PERCENT 20 OWNERS.—In 21 a 5-percent owner (as defined in section 22 416(i)(1)(B)(i)) of the employer at any time 23 during the taxable year, the amount under 24 paragraph (1) shall be zero.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FOR HIGHLY COMPENSATED 10:46 Nov 02, 2017 Jkt 000000 the case of an individual who is (679209 10) PO 00000 Frm 00136 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 137 1 (b) EFFECTIVE DATE.—The amendment made by 2 this section shall apply to taxable years beginning after 3 December 31, 2017. 4 SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRIN- 5 6 CIPAL RESIDENCE. (a) REQUIREMENT THAT RESIDENCE BE PRINCIPAL 7 RESIDENCE FOR 5 YEARS DURING 8-YEAR PERIOD.— 8 Subsection (a) of section 121 is amended— 9 10 (1) by striking ‘‘5-year period’’ and inserting ‘‘8-year period’’, and 11 (2) by striking ‘‘2 years’’ and inserting ‘‘5 12 years’’. 13 (b) APPLICATION ONLY 1 SALE TO OR EXCHANGE 14 EVERY 5 YEARS.—Paragraph (3) of section 121(b) is 15 amended to read as follows: 16 ‘‘(3) APPLICATION TO ONLY 1 SALE OR EX- 17 CHANGE EVERY 5 YEARS.—Subsection 18 apply to any sale or exchange by the taxpayer if, 19 during the 5-year period ending on the date of such 20 sale or exchange, there was any other sale or ex- 21 change by the taxpayer to which subsection (a) ap- 22 plied.’’. 23 (c) PHASEOUT BASED ON (a) shall not MODIFIED ADJUSTED 24 GROSS INCOME.—Section 121 is amended by adding at 25 the end the following new subsection: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00137 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 138 1 ‘‘(h) PHASEOUT BASED ON MODIFIED ADJUSTED 2 GROSS INCOME.— 3 ‘‘(1) IN the average modified ad- 4 justed gross income of the taxpayer for the taxable 5 year and the 2 preceding taxable years exceeds 6 $250,000 (twice such amount in the case of a joint 7 return), the amount which would (but for this sub- 8 section) be excluded from gross income under sub- 9 section (a) for such taxable year shall be reduced 10 (but not below zero) by the amount of such excess. 11 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.— 12 For purposes of this subsection, the term ‘modified 13 adjusted gross income’ means, with respect to any 14 taxable year, adjusted gross income determined after 15 application of this section (but without regard to 16 subsection (b)(1) and this subsection). 17 ‘‘(3) SPECIAL RULE FOR JOINT RETURNS.—In 18 the case of a joint return, the average modified ad- 19 justed gross income of the taxpayer shall be deter- 20 mined without regard to any taxable year with re- 21 spect to which the taxpayer did not file a joint re- 22 turn.’’. 23 (d) CONFORMING AMENDMENTS.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—If 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00138 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 139 1 (1) The last paragraph of section 121(b) (relat- 2 ing to exclusion of gain allocated to nonqualified 3 use) is redesignated as paragraph (5). 4 (2) The following provisions of section 121 are 5 each amended by striking ‘‘5-year period’’ each place 6 it appears therein and inserting ‘‘8-year period’’: 7 (A) Subsection (b)(5)(C)(ii)(I) (as redesig- 8 nated by paragraph (1)). 9 (B) Subsection (c)(1)(B)(i)(I). 10 (C) Subsection (d)(7)(B). 11 (D) Subparagraphs (A) and (B) of sub- 12 section (d)(9). 13 (E) Subsection (d)(10) 14 (F) Subsection (d)(12)(A). 15 (3) Section 121(c)(1)(B)(ii) is amended by 16 striking ‘‘2 years’’ and inserting ‘‘5 years’’: 17 (e) EFFECTIVE DATE.—The amendments made by 18 this section shall apply to sales and exchanges after De19 cember 31, 2017. 20 SEC. 1403. REPEAL OF EXCLUSION, ETC., FOR EMPLOYEE 21 22 ACHIEVEMENT AWARDS. (a) IN GENERAL.—Section 74 is amended by striking 23 subsection (c). 24 (b) REPEAL OF LIMITATION ON DEDUCTION.—Sec- 25 tion 274 is amended by striking subsection (j). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00139 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 140 1 (c) CONFORMING AMENDMENTS.— 2 (1) Section 102(c)(2) is amended by striking 3 the first sentence. 4 (2) Section 414(n)(3)(C) is amended by strik- 5 ing ‘‘274(j),’’. 6 (3) Section 414(t)(2) is amended by striking 7 ‘‘274(j),’’. 8 (4) Section 3121(a)(20) is amended by striking 9 ‘‘74(c)’’. 10 (5) Section 3231(e)(5) is amended by striking 11 ‘‘74(c),’’. 12 (6) Section 3306(b)(16) is amended by striking 13 ‘‘74(c),’’. 14 (7) Section 3401(a)(19) is amended by striking 15 ‘‘74(c),’’. 16 (d) EFFECTIVE DATE.—The amendments made by 17 this section shall apply to taxable years beginning after 18 December 31, 2017. 19 SEC. 1404. REPEAL OF EXCLUSION FOR DEPENDENT CARE 20 21 ASSISTANCE PROGRAMS. (a) IN GENERAL.—Part III of subchapter B of chap- 22 ter 1 is amended by striking section 129 (and by striking 23 the item relating to such section in the table of sections 24 for such part). 25 (b) CONFORMING AMENDMENTS.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00140 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 141 1 2 (1) Section 414(n)(3)(C) is amended by striking ‘‘, 129’’. 3 4 (2) Section 414(r)(1) is amended by striking ‘‘sections 129(d)(8) and’’ and inserting ‘‘section’’. 5 6 (3) Section 414(t)(2) is amended by striking ‘‘, 129’’. 7 (4) Section 125(j)(6) is amended— 8 (A) by inserting ‘‘or’’ before ‘‘section 9 105(h)’’, and 10 (B) by striking ‘‘, or paragraph (2), (3), 11 (4), or (8) of section 129(d)’’. 12 (5) Section 3121(a)(18) is amended by striking 13 ‘‘129,’’. 14 15 (6) Section 3306(b)(13) is amended by striking ‘‘129,’’. 16 17 (7) Section 3401(a)(18) is amended by striking ‘‘129,’’. 18 19 (8) Section 6039D(d)(1) is amended by striking ‘‘, 129’’. 20 (9) Section 6051(a) is amended by striking 21 paragraph (9). 22 (c) EFFECTIVE DATE.—The amendments made by 23 this section shall apply to taxable years beginning after 24 December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00141 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 142 1 SEC. 1405. REPEAL OF EXCLUSION FOR QUALIFIED MOVING 2 EXPENSE REIMBURSEMENT. 3 (a) IN GENERAL.—Section 132(a) is amended by 4 striking paragraph (6). 5 (b) CONFORMING AMENDMENTS.— 6 (1) Section 82 is amended by striking ‘‘Except 7 as provided in section 132(a)(6), there’’ and insert- 8 ing ‘‘There’’. 9 (2) Section 132 is amended by striking sub- 10 section (g). 11 (3) Section 132(l) is amended by striking by 12 striking ‘‘subsections (e) and (g)’’ and inserting 13 ‘‘subsection (e)’’. 14 (c) EFFECTIVE DATE.—The amendments made by 15 this section shall apply to taxable years beginning after 16 December 31, 2017. 17 SEC. 1406. REPEAL OF EXCLUSION FOR ADOPTION ASSIST- 18 19 ANCE PROGRAMS. (a) IN GENERAL.—Part III of subchapter B of chap- 20 ter 1 is amended by striking section 137 (and by striking 21 the item relating to such section in the table of sections 22 for such part). 23 (b) CONFORMING AMENDMENTS.— 24 (1) 414(n)(3)(C), 414(t)(2), 25 74(d)(2)(B), 86(b)(2)(A), 219(g)(3)(A)(ii) are each 26 amended by striking ‘‘, 137’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 Sections 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00142 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 143 1 (2) Section 1016(a), as amended by the pre- 2 ceding provision of this Act, is amended by striking 3 paragraph (26). 4 (3) Section 6039D(d)(1), as amended by the 5 preceding provisions of this Act, is amended— 6 (A) by striking ‘‘, or 137’’, and 7 (B) by inserting ‘‘or’’ before ‘‘125’’. 8 (c) EFFECTIVE DATE.—The amendments made by 9 this section shall apply to taxable years beginning after 10 December 31, 2017. 13 Subtitle F—Simplification and Reform of Savings, Pensions, Retirement 14 SEC. 1501. REPEAL OF SPECIAL RULE PERMITTING RE- 11 12 15 CHARACTERIZATION 16 TRIBUTIONS 17 TRIBUTIONS. 18 AS OF ROTH IRA CON- TRADITIONAL IRA CON- (a) IN GENERAL.—Section 408A(d) is amended by 19 striking paragraph (6) and by redesignating paragraph 20 (7) as paragraph (6). 21 (b) EFFECTIVE DATE.—The amendments made by 22 this section shall apply to taxable years beginning after 23 December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00143 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 144 1 SEC. 1502. REDUCTION IN MINIMUM AGE FOR ALLOWABLE 2 IN-SERVICE DISTRIBUTIONS. 3 (a) IN GENERAL.—Section 401(a)(36) is amended by 4 striking ‘‘age 62’’ and inserting ‘‘age 59 1⁄2’’. 5 (b) APPLICATION TO GOVERNMENTAL SECTION 6 457(b) PLANS.—Clause (i) of section 457(d)(1)(A) is 7 amended by inserting ‘‘(in the case of a plan maintained 8 by an employer described in subsection (e)(1)(A), age 59 9 12 ⁄ )’’ before the comma at the end. 10 (c) EFFECTIVE DATE.—The amendments made by 11 this section shall apply to plan years beginning after De12 cember 31, 2017. 13 SEC. 1503. MODIFICATION OF RULES GOVERNING HARD- 14 15 SHIP DISTRIBUTIONS. (a) IN GENERAL.—Not later than 1 year after the 16 date of the enactment of this Act, the Secretary of the 17 Treasury shall modify Treasury Regulation section 18 1.401(k)–1(d)(3)(iv)(E) to— 19 20 (1) delete the 6-month prohibition on contributions imposed by paragraph (2) thereof, and 21 (2) make any other modifications necessary to 22 carry 23 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 24 1986. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 out the purposes of section (679209 10) PO 00000 Frm 00144 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 145 1 (b) EFFECTIVE DATE.—The revised regulations 2 under this section shall apply to plan years beginning after 3 December 31, 2017. 4 SEC. 1504. MODIFICATION OF RULES RELATING TO HARD- 5 SHIP WITHDRAWALS FROM CASH OR DE- 6 FERRED ARRANGEMENTS. 7 (a) IN GENERAL.—Section 401(k) is amended by 8 adding at the end the following: 9 ‘‘(14) SPECIAL 10 WITHDRAWALS.—For 11 (2)(B)(i)(IV)— 12 purposes ‘‘(A) AMOUNTS WHICH of MAY paragraph BE 13 DRAWN.—The 14 tributed upon hardship of the employee: WITH- following amounts may be dis- 15 ‘‘(i) Contributions to a profit-sharing 16 or stock bonus plan to which section 17 402(e)(3) applies. 18 ‘‘(ii) Qualified nonelective contribu- 19 tions (as defined in subsection (m)(4)(C)). 20 ‘‘(iii) Qualified matching contributions 21 described in paragraph (3)(D)(ii)(I). 22 ‘‘(iv) Earnings on any contributions 23 described in clause (i), (ii), or (iii). 24 ‘‘(B) NO 25 10:46 Nov 02, 2017 REQUIREMENT TO TAKE AVAIL- ABLE LOAN.—A g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 RULES RELATING TO HARDSHIP Jkt 000000 distribution shall not be treat- (679209 10) PO 00000 Frm 00145 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 146 1 ed as failing to be made upon the hardship of 2 an employee solely because the employee does 3 not take any available loan under the plan..’’. 4 (b) CONFORMING AMENDMENT.—Section 5 401(k)(2)(B)(i)(IV) is amended to read as follows: 6 ‘‘(IV) subject to the provisions of 7 paragraph (14), upon hardship of the 8 employee, or.’’. 9 (c) EFFECTIVE DATE.—The amendments made by 10 this section shall apply to plan years beginning after De11 cember 31, 2017. 12 SEC. 1505. EXTENDED ROLLOVER PERIOD FOR THE ROLL- 13 OVER OF PLAN LOAN OFFSET AMOUNTS IN 14 CERTAIN CASES. 15 (a) IN GENERAL.—Paragraph (3) of section 402(c) 16 is amended by adding at the end the following new sub17 paragraph: 18 ‘‘(C) ROLLOVER 19 OFFSET AMOUNTS.— 20 ‘‘(i) IN GENERAL.—In the case of a 21 qualified plan loan offset amount, para- 22 graph (1) shall not apply to any transfer 23 of such amount made after the due date 24 (including extensions) for filing the return 25 of tax for the taxable year in which such g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF CERTAIN PLAN LOAN 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00146 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 147 1 amount is treated as distributed from a 2 qualified employer plan. 3 ‘‘(ii) QUALIFIED 4 AMOUNT.—For 5 graph, the term ‘qualified plan loan offset 6 amount’ means a plan loan offset amount 7 which is treated as distributed from a 8 qualified employer plan to a participant or 9 beneficiary solely by reason of— 10 purposes of this subpara- ‘‘(I) the termination of the quali- 11 fied employer plan, or 12 ‘‘(II) the failure to meet the re- 13 payment terms of the loan from such 14 plan because of the separation from 15 service of the participant (whether 16 due to layoff, cessation of business, 17 termination of employment, or other- 18 wise). 19 ‘‘(iii) PLAN LOAN OFFSET AMOUNT.— 20 For purposes of clause (ii), the term ‘plan 21 loan offset amount’ means the amount by 22 which the participant’s accrued benefit 23 under the plan is reduced in order to repay 24 a loan from the plan. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 PLAN LOAN OFFSET 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00147 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 148 1 ‘‘(iv) LIMITATION.—This subpara- 2 graph shall not apply to any plan loan off- 3 set amount unless such plan loan offset 4 amount relates to a loan to which section 5 72(p)(1) does not apply by reason of sec- 6 tion 72(p)(2). 7 ‘‘(v) QUALIFIED EMPLOYER PLAN.— 8 For purposes of this subsection, the term 9 ‘qualified employer plan’ has the meaning 10 given such term by section 72(p)(4).’’. 11 (b) CONFORMING AMENDMENT.—Subparagraph (A) 12 of section 402(c)(3) is amended by striking ‘‘subpara13 graph (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’. 14 (c) EFFECTIVE DATE.—The amendments made by 15 this section shall apply to taxable years beginning after 16 December 31, 2017. 17 SEC. 1506. MODIFICATION OF NONDISCRIMINATION RULES 18 TO PROTECT OLDER, LONGER SERVICE PAR- 19 TICIPANTS. 20 (a) IN GENERAL.—Section 401 is amended— 21 22 (1) by redesignating subsection (o) as subsection (p), and 23 24 (2) by inserting after subsection (n) the following new subsection: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00148 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 149 1 2 ‘‘(o) SPECIAL DISCRIMINATION RULES RULES TO FOR APPLYING NON- PROTECT OLDER, LONGER 3 SERVICE AND GRANDFATHERED PARTICIPANTS.— 4 5 ‘‘(1) TESTING WITH CLOSED CLASSES OF PARTICIPANTS.— 6 ‘‘(A) BENEFITS, RIGHTS, OR FEATURES 7 PROVIDED 8 benefit plan which provides benefits, rights, or 9 features to a closed class of participants shall 10 not fail to satisfy the requirements of sub- 11 section (a)(4) by reason of the composition of 12 such closed class or the benefits, rights, or fea- 13 tures provided to such closed class, if— TO CLOSED CLASSES.—A defined 14 ‘‘(i) for the plan year as of which the 15 class closes and the 2 succeeding plan 16 years, such benefits, rights, and features 17 satisfy the requirements of subsection 18 (a)(4) (without regard to this subpara- 19 graph but taking into account the rules of 20 subparagraph (I)), 21 ‘‘(ii) after the date as of which the 22 class was closed, any plan amendment 23 which modifies the closed class or the ben- 24 efits, rights, and features provided to such 25 closed class does not discriminate signifi- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF DEFINED BENEFIT PLANS 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00149 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 150 1 cantly in favor of highly compensated em- 2 ployees, and 3 ‘‘(iii) the class was closed before April 4 5, 2017, or the plan is described in sub- 5 paragraph (C). 6 ‘‘(B) AGGREGATE 7 CONTRIBUTION PLANS PERMITTED ON A BENE- 8 FITS BASIS.— 9 ‘‘(i) IN GENERAL.—For purposes of 10 determining compliance with subsection 11 (a)(4) and section 410(b), a defined benefit 12 plan described in clause (iii) may be aggre- 13 gated and tested on a benefits basis with 14 1 or more defined contribution plans, in- 15 cluding with the portion of 1 or more de- 16 fined contribution plans which— 17 ‘‘(I) provides matching contribu- 18 tions 19 (m)(4)(A)), (as defined in subsection 20 ‘‘(II) provides annuity contracts 21 described in section 403(b) which are 22 purchased with matching contribu- 23 tions or nonelective contributions, or 24 ‘‘(III) consists of an employee 25 stock ownership plan (within the g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 TESTING WITH DEFINED 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00150 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 151 1 meaning of section 4975(e)(7)) or a 2 tax credit employee stock ownership 3 plan (within the meaning of section 4 409(a)). 5 ‘‘(ii) SPECIAL 6 CONTRIBUTIONS.—For 7 (i), if a defined benefit plan is aggregated 8 with a portion of a defined contribution 9 plan providing matching contributions— purposes of clause 10 ‘‘(I) such defined benefit plan 11 must also be aggregated with any por- 12 tion of such defined contribution plan 13 which provides elective deferrals de- 14 scribed in subparagraph (A) or (C) of 15 section 402(g)(3), and 16 ‘‘(II) such matching contribu- 17 tions shall be treated in the same 18 manner as nonelective contributions, 19 including for purposes of applying the 20 rules of subsection (l). 21 ‘‘(iii) PLANS DESCRIBED.—A defined 22 benefit plan is described in this clause if— 23 ‘‘(I) the plan provides benefits to 24 a closed class of participants, g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 RULES FOR MATCHING 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00151 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 152 1 ‘‘(II) for the plan year as of 2 which the class closes and the 2 suc- 3 ceeding plan years, the plan satisfies 4 the requirements of section 410(b) 5 and subsection (a)(4) (without regard 6 to this subparagraph but taking into 7 account the rules of subparagraph 8 (I)), 9 ‘‘(III) after the date as of which 10 the class was closed, any plan amend- 11 ment which modifies the closed class 12 or the benefits provided to such closed 13 class does not discriminate signifi- 14 cantly in favor of highly compensated 15 employees, and 16 ‘‘(IV) the class was closed before 17 April 5, 2017, or the plan is described 18 in subparagraph (C). 19 ‘‘(C) PLANS plan is de- 20 scribed in this subparagraph if, taking into ac- 21 count any predecessor plan— 22 ‘‘(i) such plan has been in effect for 23 at least 5 years as of the date the class is 24 closed, and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 DESCRIBED.—A 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00152 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 153 1 ‘‘(ii) during the 5-year period pre- 2 ceding the date the class is closed, there 3 has not been a substantial increase in the 4 coverage or value of the benefits, rights, or 5 features described in subparagraph (A) or 6 in the coverage or benefits under the plan 7 described in subparagraph (B)(iii) (which- 8 ever is applicable). 9 ‘‘(D) DETERMINATION 10 INCREASE FOR BENEFITS, RIGHTS, AND FEA- 11 TURES.—In 12 purposes of subparagraph (A)(iii), a plan shall 13 be treated as having had a substantial increase 14 in coverage or value of the benefits, rights, or 15 features described in subparagraph (A) during 16 the applicable 5-year period only if, during such 17 period— applying subparagraph (C)(ii) for 18 ‘‘(i) the number of participants cov- 19 ered by such benefits, rights, or features 20 on the date such period ends is more than 21 50 percent greater than the number of 22 such participants on the first day of the 23 plan year in which such period began, or 24 ‘‘(ii) such benefits, rights, and fea- 25 tures have been modified by 1 or more g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF SUBSTANTIAL 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00153 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 154 1 plan amendments in such a way that, as of 2 the date the class is closed, the value of 3 such benefits, rights, and features to the 4 closed class as a whole is substantially 5 greater than the value as of the first day 6 of such 5-year period, solely as a result of 7 such amendments. 8 ‘‘(E) DETERMINATION 9 SUBSTANTIAL INCREASE FOR AGGREGATE TESTING ON BENE- 10 FITS BASIS.—In 11 for purposes of subparagraph (B)(iii)(IV), a 12 plan shall be treated as having had a substan- 13 tial increase in coverage or benefits during the 14 applicable 5-year period only if, during such pe- 15 riod— applying subparagraph (C)(ii) 16 ‘‘(i) the number of participants bene- 17 fitting under the plan on the date such pe- 18 riod ends is more than 50 percent greater 19 than the number of such participants on 20 the first day of the plan year in which such 21 period began, or 22 ‘‘(ii) the average benefit provided to 23 such participants on the date such period 24 ends is more than 50 percent greater than 25 the average benefit provided on the first g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00154 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 155 1 day of the plan year in which such period 2 began. 3 ‘‘(F) EMPLOYEES DIS- 4 REGARDED.—For 5 (D) and (E), any increase in coverage or value 6 or in coverage or benefits, whichever is applica- 7 ble, which is attributable to such coverage and 8 value or coverage and benefits provided to em- 9 ployees— purposes of subparagraphs 10 ‘‘(i) who became participants as a re- 11 sult of a merger, acquisition, or similar 12 event which occurred during the 7-year pe- 13 riod preceding the date the class is closed, 14 or 15 ‘‘(ii) who became participants by rea- 16 son of a merger of the plan with another 17 plan which had been in effect for at least 18 5 years as of the date of the merger, 19 shall be disregarded, except that clause (ii) 20 shall apply for purposes of subparagraph (D) 21 only if, under the merger, the benefits, rights, 22 or features under 1 plan are conformed to the 23 benefits, rights, or features of the other plan 24 prospectively. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 CERTAIN 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00155 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 156 1 ‘‘(G) RULES 2 EFIT.—For purposes of subparagraph (E)— 3 ‘‘(i) the average benefit provided to 4 participants under the plan will be treated 5 as having remained the same between the 6 2 dates described in subparagraph (E)(ii) 7 if the benefit formula applicable to such 8 participants has not changed between such 9 dates, and 10 ‘‘(ii) if the benefit formula applicable 11 to 1 or more participants under the plan 12 has changed between such 2 dates, then 13 the average benefit under the plan shall be 14 considered to have increased by more than 15 50 percent only if— 16 ‘‘(I) the total amount determined 17 under section 430(b)(1)(A)(i) for all 18 participants 19 plan for the plan year in which the 5- 20 year period described in subparagraph 21 (E) ends, exceeds benefitting under the 22 ‘‘(II) the total amount deter- 23 mined under section 430(b)(1)(A)(i) 24 for all such participants for such plan 25 year, by using the benefit formula in g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 RELATING TO AVERAGE BEN- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00156 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 157 1 effect for each such participant for 2 the first plan year in such 5-year pe- 3 riod, by more than 50 percent. 4 In the case of a CSEC plan (as defined in 5 section 414(y)), the normal cost of the 6 plan 7 433(j)(1)(B)) shall be used in lieu of the 8 amount 9 430(b)(1)(A)(i). 10 determined determined ‘‘(H) TREATMENT under under section section AS SINGLE PLAN.—For 11 purposes of subparagraphs (E) and (G), a plan 12 described in section 413(c) shall be treated as 13 a single plan rather than as separate plans 14 maintained by each participating employer. 15 ‘‘(I) SPECIAL RULES.—For purposes of 16 subparagraphs (A)(i) and (B)(iii)(II), the fol- 17 lowing rules shall apply: 18 ‘‘(i) In applying section 410(b)(6)(C), 19 the closing of the class of participants shall 20 not be treated as a significant change in 21 coverage under section 410(b)(6)(C)(i)(II). 22 ‘‘(ii) 2 or more plans shall not fail to 23 be eligible to be aggregated and treated as 24 a single plan solely by reason of having dif- 25 ferent plan years. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 (as 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00157 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 158 1 ‘‘(iii) Changes in the employee popu- 2 lation shall be disregarded to the extent at- 3 tributable to individuals who become em- 4 ployees or cease to be employees, after the 5 date the class is closed, by reason of a 6 merger, acquisition, divestiture, or similar 7 event. 8 ‘‘(iv) Aggregation and all other testing 9 methodologies otherwise applicable under 10 subsection (a)(4) and section 410(b) may 11 be taken into account. 12 The rule of clause (ii) shall also apply for pur- 13 poses of determining whether plans to which 14 subparagraph (B)(i) applies may be aggregated 15 and treated as 1 plan for purposes of deter- 16 mining whether such plans meet the require- 17 ments of subsection (a)(4) and section 410(b). 18 ‘‘(J) SPUN-OFF purposes of 19 this paragraph, if a portion of a defined benefit 20 plan described in subparagraph (A) or (B)(iii) 21 is spun off to another employer and the spun- 22 off plan continues to satisfy the requirements 23 of— 24 ‘‘(i) 25 10:46 Nov 02, 2017 subparagraph (A)(i) or (B)(iii)(II), whichever is applicable, if the g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 PLANS.—For Jkt 000000 (679209 10) PO 00000 Frm 00158 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 159 1 original plan was still within the 3-year pe- 2 riod described in such subparagraph at the 3 time of the spin off, and 4 ‘‘(ii) 5 (A)(ii) or (B)(iii)(III), whichever is applicable, 6 the treatment under subparagraph (A) or (B) 7 of the spun-off plan shall continue with respect 8 to such other employer. 9 ‘‘(2) TESTING 10 OF DEFINED CONTRIBUTION PLANS.— 11 ‘‘(A) TESTING ON A BENEFITS BASIS.—A 12 defined contribution plan shall be permitted to 13 be tested on a benefits basis if— 14 ‘‘(i) such defined contribution plan 15 provides make-whole contributions to a 16 closed class of participants whose accruals 17 under a defined benefit plan have been re- 18 duced or eliminated, 19 ‘‘(ii) for the plan year of the defined 20 contribution plan as of which the class eli- 21 gible to receive such make-whole contribu- 22 tions closes and the 2 succeeding plan 23 years, such closed class of participants sat- 24 isfies g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 subparagraph 10:46 Nov 02, 2017 Jkt 000000 the requirements of section (679209 10) PO 00000 Frm 00159 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 160 1 410(b)(2)(A)(i) (determined by applying 2 the rules of paragraph (1)(I)), 3 ‘‘(iii) after the date as of which the 4 class was closed, any plan amendment to 5 the defined contribution plan which modi- 6 fies the closed class or the allocations, ben- 7 efits, rights, and features provided to such 8 closed class does not discriminate signifi- 9 cantly in favor of highly compensated em- 10 ployees, and 11 ‘‘(iv) the class was closed before April 12 5, 2017, or the defined benefit plan under 13 clause (i) is described in paragraph (1)(C) 14 (as applied for purposes of paragraph 15 (1)(B)(iii)(IV)). 16 ‘‘(B) AGGREGATION 17 ING MATCHING CONTRIBUTIONS.— 18 ‘‘(i) IN GENERAL.—With respect to 1 19 or more defined contribution plans de- 20 scribed in subparagraph (A), for purposes 21 of determining compliance with subsection 22 (a)(4) and section 410(b), the portion of 23 such plans which provides make-whole con- 24 tributions or other nonelective contribu- 25 tions may be aggregated and tested on a g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 WITH PLANS INCLUD- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00160 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 161 1 benefits basis with the portion of 1 or 2 more other defined contribution plans 3 which— 4 ‘‘(I) provides matching contribu- 5 tions 6 (m)(4)(A)), defined in subsection 7 ‘‘(II) provides annuity contracts 8 described in section 403(b) which are 9 purchased with matching contribu- 10 tions or nonelective contributions, or 11 ‘‘(III) consists of an employee 12 stock ownership plan (within the 13 meaning of section 4975(e)(7)) or a 14 tax credit employee stock ownership 15 plan (within the meaning of section 16 409(a)). 17 ‘‘(ii) SPECIAL 18 CONTRIBUTIONS.—Rules 19 rules of paragraph (1)(B)(ii) shall apply 20 for purposes of clause (i). 21 ‘‘(C) SPECIAL RULES FOR MATCHING similar to the RULES FOR TESTING DE- 22 FINED CONTRIBUTION PLAN FEATURES PRO- 23 VIDING MATCHING CONTRIBUTIONS TO CERTAIN 24 OLDER, LONGER SERVICE PARTICIPANTS.—In 25 the case of a defined contribution plan which g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 (as 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00161 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 162 1 provides benefits, rights, or features to a closed 2 class of participants whose accruals under a de- 3 fined benefit plan have been reduced or elimi- 4 nated, the plan shall not fail to satisfy the re- 5 quirements of subsection (a)(4) solely by reason 6 of the composition of the closed class or the 7 benefits, rights, or features provided to such 8 closed class if the defined contribution plan and 9 defined benefit plan otherwise meet the require- 10 ments of subparagraph (A) but for the fact that 11 the make-whole contributions under the defined 12 contribution plan are made in whole or in part 13 through matching contributions. 14 ‘‘(D) SPUN-OFF purposes of 15 this paragraph, if a portion of a defined con- 16 tribution plan described in subparagraph (A) or 17 (C) is spun off to another employer, the treat- 18 ment under subparagraph (A) or (C) of the 19 spun-off plan shall continue with respect to the 20 other employer if such plan continues to comply 21 with the requirements of clauses (ii) (if the 22 original plan was still within the 3-year period 23 described in such clause at the time of the spin 24 off) and (iii) of subparagraph (A), as deter- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 PLANS.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00162 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 163 1 mined for purposes of subparagraph (A) or (C), 2 whichever is applicable. 3 ‘‘(3) DEFINITIONS.—For purposes of this sub- 4 section— 5 ‘‘(A) MAKE-WHOLE 6 cept as otherwise provided in paragraph (2)(C), 7 the term ‘make-whole contributions’ means non- 8 elective allocations for each employee in the 9 class which are reasonably calculated, in a con- 10 sistent manner, to replace some or all of the re- 11 tirement benefits which the employee would 12 have received under the defined benefit plan 13 and any other plan or qualified cash or deferred 14 arrangement under subsection (k)(2) if no 15 change had been made to such defined benefit 16 plan and such other plan or arrangement. For 17 purposes of the preceding sentence, consistency 18 shall not be required with respect to employees 19 who were subject to different benefit formulas 20 under the defined benefit plan. 21 ‘‘(B) REFERENCES TO CLOSED CLASS OF 22 PARTICIPANTS.—References 23 participants and similar references to a closed 24 class shall include arrangements under which 1 25 or more classes of participants are closed, ex- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 CONTRIBUTIONS.—Ex- 10:46 Nov 02, 2017 Jkt 000000 to a closed class of (679209 10) PO 00000 Frm 00163 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 164 1 cept that 1 or more classes of participants 2 closed on different dates shall not be aggre- 3 gated for purposes of determining the date any 4 such class was closed. 5 ‘‘(C) HIGHLY COMPENSATED EMPLOYEE.— 6 The term ‘highly compensated employee’ has 7 the meaning given such term in section 8 414(q)..’’. 9 (b) PARTICIPATION REQUIREMENTS.—Paragraph 10 (26) of section 401(a) is amended by adding at the end 11 the following new subparagraph: 12 ‘‘(I) PROTECTED 13 ‘‘(i) IN GENERAL.—A plan shall be 14 deemed to satisfy the requirements of sub- 15 paragraph (A) if— 16 ‘‘(I) the plan is amended— 17 ‘‘(aa) to cease all benefit ac- 18 cruals, or 19 ‘‘(bb) to provide future ben- 20 efit accruals only to a closed 21 class of participants, 22 ‘‘(II) the plan satisfies subpara- 23 graph (A) (without regard to this sub- 24 paragraph) as of the effective date of 25 the amendment, and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 PARTICIPANTS.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00164 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 165 1 ‘‘(III) the amendment was adopt- 2 ed before April 5, 2017, or the plan is 3 described in clause (ii). 4 ‘‘(ii) PLANS plan is 5 described in this clause if the plan would 6 be described in subsection (o)(1)(C), as ap- 7 plied 8 (o)(1)(B)(iii)(IV) and by treating the effec- 9 tive date of the amendment as the date the 10 class was closed for purposes of subsection 11 (o)(1)(C). 12 for purposes ‘‘(iii) SPECIAL of subsection RULES.—For purposes 13 of clause (i)(II), in applying section 14 410(b)(6)(C), the amendments described in 15 clause (i) shall not be treated as a signifi- 16 cant change in coverage under section 17 410(b)(6)(C)(i)(II). 18 ‘‘(iv) SPUN-OFF PLANS.—For pur- 19 poses of this subparagraph, if a portion of 20 a plan described in clause (i) is spun off to 21 another employer, the treatment under 22 clause (i) of the spun-off plan shall con- 23 tinue with respect to the other employer.’’. 24 (c) EFFECTIVE DATE.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 DESCRIBED.—A 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00165 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 166 1 as provided in para- 2 graph (2), the amendments made by this section 3 shall take effect on the date of the enactment of this 4 Act, without regard to whether any plan modifica- 5 tions referred to in such amendments are adopted or 6 effective before, on, or after such date of enactment. 7 (2) SPECIAL 8 RULES.— (A) ELECTION 9 TION.—At OF EARLIER APPLICA- the election of the plan sponsor, the 10 amendments made by this section shall apply to 11 plan years beginning after December 31, 2013. 12 (B) CLOSED CLASSES OF PARTICIPANTS.— 13 For 14 (1)(B)(iii)(IV), and (2)(A)(iv) of section 401(o) 15 of the Internal Revenue Code of 1986 (as added 16 by this section), a closed class of participants 17 shall be treated as being closed before April 5, 18 2017, if the plan sponsor’s intention to create 19 such closed class is reflected in formal written 20 documents and communicated to participants 21 before such date. 22 purposes (C) of CERTAIN paragraphs (1)(A)(iii), POST-ENACTMENT PLAN 23 AMENDMENTS.—A 24 failing to be eligible for the application of sec- 25 tion g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Except (1) IN 10:46 Nov 02, 2017 Jkt 000000 plan shall not be treated as 401(o)(1)(A), 401(o)(1)(B)(iii), or (679209 10) PO 00000 Frm 00166 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 167 1 401(a)(26) of such Code (as added by this sec- 2 tion) to such plan solely because in the case 3 of— 4 (i) such section 401(o)(1)(A), the plan 5 was amended before the date of the enact- 6 ment of this Act to eliminate 1 or more 7 benefits, rights, or features, and is further 8 amended after such date of enactment to 9 provide such previously eliminated benefits, 10 rights, or features to a closed class of par- 11 ticipants, or 12 (ii) such section 401(o)(1)(B)(iii) or 13 section 401(a)(26), the plan was amended 14 before the date of the enactment of this 15 Act to cease all benefit accruals, and is 16 further amended after such date of enact- 17 ment to provide benefit accruals to a closed 18 class of participants. Any such section 19 shall only apply if the plan otherwise meets 20 the requirements of such section and in ap- 21 plying such section, the date the class of 22 participants is closed shall be the effective 23 date of the later amendment. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00167 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 168 2 Subtitle G—Estate, Gift, and Generation-skipping Transfer Taxes 3 SEC. 1601. INCREASE IN CREDIT AGAINST ESTATE, GIFT, 1 4 AND GENERATION-SKIPPING TRANSFER TAX. 5 (a) IN GENERAL.—Section 2010(c)(3) is amended by 6 striking ‘‘$5,000,000’’ and inserting ‘‘$10,000,000’’. 7 (b) EFFECTIVE DATE.—The amendments made by 8 this section shall apply to estates of decedents dying, gen9 eration-skipping transfers, and gifts made, after Decem10 ber 31, 2017. 11 SEC. 1602. REPEAL OF ESTATE AND GENERATION-SKIPPING 12 TRANSFER TAXES. 13 (a) ESTATE TAX REPEAL.— 14 (1) IN GENERAL.—Subchapter C of chapter 11 15 is amended by adding at the end the following new 16 section: 17 ‘‘SEC. 2210. TERMINATION. 18 ‘‘(a) IN GENERAL.—Except as provided in subsection 19 (b), this chapter shall not apply to the estates of decedents 20 dying after December 31, 2023. 21 ‘‘(b) CERTAIN DISTRIBUTIONS FROM QUALIFIED 22 DOMESTIC TRUSTS.—In applying section 2056A with re23 spect to the surviving spouse of a decedent dying on or 24 before December 31, 2023— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00168 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 169 1 ‘‘(1) section 2056A(b)(1)(A) shall not apply to 2 distributions made after the 10-year period begin- 3 ning on such date, and 4 5 ‘‘(2) section 2056A(b)(1)(B) shall not apply after such date.’’. 6 7 (2) AMENDMENTS.—Section 1014(b) is amended— 8 (A) in paragraph (6), by striking ‘‘was in- 9 cludible in determining’’ and all that follows 10 through the end and inserting ‘‘was includible 11 (or would have been includible without regard 12 to section 2210) in determining the value of the 13 decedent’s gross estate under chapter 11 of 14 subtitle B’’ , 15 (B) in paragraph (9), by striking ‘‘required 16 to be included’’ through ‘‘Code of 1939’’ and 17 inserting ‘‘required to be included (or would 18 have been required to be included without re- 19 gard to section 2210) in determining the value 20 of the decedent’s gross estate under chapter 11 21 of subtitle B’’, and 22 (C) in paragraph (10), by striking ‘‘Prop- 23 erty includible in the gross estate’’ and insert- 24 ing ‘‘Property includible (or which would have g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 CONFORMING 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00169 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 170 1 been includible without regard to section 2210) 2 in the gross estate’’. 3 (3) CLERICAL AMENDMENT.—The table of sec- 4 tions for subchapter C of chapter 11 is amended by 5 adding at the end the following new item: ‘‘Sec. 2210. Termination.’’. 6 7 (b) GENERATION-SKIPPING TRANSFER TAX REPEAL.— 8 (1) IN 9 G of chapter 13 of subtitle B of such Code is amended by adding at 10 11 GENERAL.—Subchapter the end the following new section: ‘‘SEC. 2664. TERMINATION. 12 ‘‘This chapter shall not apply to generation-skipping 13 transfers after December 31, 2023.’’. 14 (2) CLERICAL AMENDMENT.—The table of sec- 15 tions for subchapter G of chapter 13 of such Code 16 is amended by adding at the end the following new 17 item: ‘‘Sec. 2664. Termination.’’. 18 (c) CONFORMING AMENDMENTS RELATED TO GIFT OF GIFT TAX.—Section 2502 19 TAX.— 20 (1) COMPUTATION 21 is amended by adding at the end the following new 22 subsection: 23 ‘‘(d) GIFTS MADE AFTER 2023.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00170 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 171 1 ‘‘(1) IN GENERAL.—In the case of a gift made 2 after December 31, 2023, subsection (a) shall be ap- 3 plied by substituting ‘subsection (d)(2)’ for ‘section 4 2001(c)’ and ‘such subsection’ for ‘such section’. 5 ‘‘(2) RATE SCHEDULE.— ‘‘If the amount with respect to which the tentative tax to be computed is:. Not over $10,000 ........................................................... Over $10,000 but not over $20,000 .............................. Over $20,000 but not over $40,000 .............................. Over $40,000 but not over $60,000 .............................. Over $60,000 but not over $80,000 .............................. Over $80,000 but not over $100,000 ............................ Over $100,000 but not over $150,000 .......................... Over $150,000 but not over $250,000 .......................... Over $250,000 but not over $500,000 .......................... Over $500,000 ............................................................... 6 (2) LIFETIME GIFT EXEMPTION.—Section 2505 7 is amended by adding at the end the following new 8 subsection: 9 ‘‘(d) GIFTS MADE AFTER 2023.— 10 11 ‘‘(1) IN 10:46 Nov 02, 2017 GENERAL.—In the case of a gift made after December 31, 2023, subsection (a)(1) shall be g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 The tentative tax is: 18% of such amount. $1,800, plus 20% of the excess over $10,000. $3,800, plus 22% of the excess over $20,000. $8,200, plus 24% of the excess over $40,000. $13,000, plus 26% of the excess over $60,000. $18,200, plus 28% of the excess over $80,000. $23,800, plus 30% of the excess over $100,000. $38,800, plus 32% of the excess of $150,000. $70,800, plus 34% of the excess over $250,000. $155,800, plus 35% of the excess of $500,000.’’. Jkt 000000 (679209 10) PO 00000 Frm 00171 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 172 1 applied by substituting ‘the amount of the tentative 2 tax which would be determined under the rate sched- 3 ule set forth in section 2502(a)(2) if the amount 4 with respect to which such tentative tax is to be 5 computed were $10,000,000’ for ‘the applicable 6 credit amount in effect under section 2010(c) which 7 would apply if the donor died as of the end of the 8 calendar year’. 9 ‘‘(2) INFLATION 10 ‘‘(A) IN GENERAL.—In the case of any cal- 11 endar year after 2023, the dollar amount in 12 subsection (a)(1) (after application of this sub- 13 section) shall be increased by an amount equal 14 to— 15 ‘‘(i) such dollar amount, multiplied by 16 ‘‘(ii) the cost-of-living adjustment de- 17 termined under section 1(f)(3) for such 18 calendar year by substituting ‘calendar 19 year 2011’ for ‘calendar year 1992’ in sub- 20 paragraph (B) thereof. 21 ‘‘(B) ROUNDING.—If any amount as ad- 22 justed under paragraph (1) is not a multiple of 23 $10,000, such amount shall be rounded to the 24 nearest multiple of $10,000.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ADJUSTMENT.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00172 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 173 1 (3) OTHER CONFORMING AMENDMENTS RE- 2 LATED TO GIFT TAX.—Section 3 adding at the end the following new subsection: 4 striking and inserting ‘‘section 2502(a)(2)’’ 5 ‘‘(g) GIFTS RECEIVED AFTER 2023.—In the case of 2801 is amended by 6 a gift received after December 31, 2023, subsection (a)(1) 7 shall be applied by substituting ‘section 2502(a)(2)’ for 8 ‘section 2001(c) as in effect on the date of such receipt’.’’. 9 (d) EFFECTIVE DATE.—The amendments made by 10 this section shall apply to estates of decedents dying, gen11 eration-skipping transfers, and gifts made, after Decem12 ber 31, 2023. 14 TITLE II—ALTERNATIVE MINIMUM TAX REPEAL 15 SEC. 2001. REPEAL OF ALTERNATIVE MINIMUM TAX. 13 16 (a) IN GENERAL.—Subchapter A of chapter 1 is 17 amended by striking part VI (and by striking the item 18 relating to such part in the table of parts for subchapter 19 A). 20 21 (b) CREDIT FOR PRIOR YEAR MINIMUM TAX LIABIL- ITY.— 22 (1) LIMITATION.—Subsection (c) of section 53 23 is amended to read as follows: 24 ‘‘(c) LIMITATION.—The credit allowable under sub- 25 section (a) shall not exceed the regular tax liability of the g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00173 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 174 1 taxpayer reduced by the sum of the credits allowed under 2 subparts A, B, and D.’’. 3 (2) CREDITS 4 tion 53 is amended by adding at the end the fol- 5 lowing new subsection: 6 ‘‘(e) PORTION 7 OF CREDIT TREATED AS REFUND- ABLE.— 8 ‘‘(1) IN GENERAL.—In the case of any taxable 9 year beginning in 2019, 2020, 2021, or 2022, the 10 limitation under subsection (c) shall be increased by 11 the AMT refundable credit amount for such year. 12 ‘‘(2) AMT REFUNDABLE CREDIT AMOUNT.— 13 For purposes of paragraph (1), the AMT refundable 14 credit amount is an amount equal to 50 percent 15 (100 percent in the case of a taxable year beginning 16 in 2022) of the excess (if any) of— 17 ‘‘(A) the minimum tax credit determined 18 under subsection (b) for the taxable year, over 19 ‘‘(B) the minimum tax credit allowed 20 under subsection (a) for such year (before the 21 application of this subsection for such year). 22 ‘‘(3) CREDIT REFUNDABLE.—For purposes of 23 this title (other than this section), the credit allowed 24 by reason of this subsection shall be treated as a g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 TREATED AS REFUNDABLE.—Sec- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00174 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 175 1 credit allowed under subpart C (and not this sub- 2 part). 3 ‘‘(4) SHORT TAXABLE YEARS.—In the case of 4 any taxable year of less than 365 days, the AMT re- 5 fundable credit amount determined under paragraph 6 (2) with respect to such taxable year shall be the 7 amount which bears the same ratio to such amount 8 determined without regard to this paragraph as the 9 number of days in such taxable year bears to 365.’’. 10 (3) TREATMENT OF REFERENCES.—Section 11 53(d) is amended by adding at the end the following 12 new paragraph: 13 ‘‘(3) AMT TERM REFERENCES.—Any references 14 in this subsection to section 55, 56, or 57 shall be 15 treated as a reference to such section as in effect be- 16 fore its repeal by the Tax Cuts and Jobs Act.’’. 17 (c) CONFORMING AMENDMENTS RELATED TO AMT 18 REPEAL.— 19 20 (1) Section 2(d) is amended by striking ‘‘sections 1 and 55’’ and inserting ‘‘section 1’’. 21 22 (2) Section 5(a) is amended by striking paragraph (4). 23 (3) Section 11(d) is amended by striking ‘‘the 24 taxes imposed by subsection (a) and section 55’’ and 25 inserting ‘‘the tax imposed by subsection (a)’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00175 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 176 1 2 (4) Section 12 is amended by striking paragraph (7). 3 4 (5) Section 26(a) is amended to read as follows: ‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—The 5 aggregate amount of credits allowed by this subpart for 6 the taxable year shall not exceed the taxpayer’s regular 7 tax liability for the taxable year.’’. 8 9 (6) Section 26(b)(2) is amended by striking subparagraph (A). 10 11 (7) Section 26 is amended by striking subsection (c). 12 (8) Section 38(c) is amended— 13 (A) by striking paragraphs (1) through 14 (5), 15 (B) by redesignating paragraph (6) as 16 paragraph (2), 17 (C) by inserting before paragraph (2) (as 18 so redesignated) the following new paragraph: 19 ‘‘(1) IN credit allowed under 20 subsection (a) for any taxable year shall not exceed 21 the excess (if any) of— 22 ‘‘(A) the sum of— 23 ‘‘(i) so much of the regular tax liabil- 24 ity as does not exceed $25,000, plus g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00176 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 177 1 ‘‘(ii) 75 percent of so much of the reg- 2 ular tax liability as exceeds $25,000, over 3 ‘‘(B) the sum of the credits allowable 4 under subparts A and B of this part.’’, and 5 (D) by striking ‘‘subparagraph (B) of 6 paragraph (1)’’ each place it appears in para- 7 graph (2) (as so redesignated) and inserting 8 ‘‘clauses (i) and (ii) of paragraph (1)(A)’’. 9 (9) Section 39(a) is amended— 10 (A) by striking ‘‘or the eligible small busi- 11 ness credits’’ in paragraph (3)(A), and 12 (B) by striking paragraph (4). 13 14 (10) Section 45D(g)(4)(B) is amended by striking ‘‘or for purposes of section 55’’. 15 16 (11) Section 54(c)(1) is amended to read as follows: 17 18 ‘‘(1) regular tax liability (as defined in section 26(b)), over’’. 19 20 (12) Section 54A(c)(1)(A) is amended to read as follows: 21 ‘‘(A) regular tax liability (as defined in 22 section 26(b)), over’’. 23 (13) Section 148(b)(3) is amended to read as 24 follows: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00177 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 178 1 ‘‘(3) TAX-EXEMPT 2 VESTMENT PROPERTY.—The 3 erty’ does not include any tax-exempt bond.’’. 4 5 subparagraph (G). (15) Section 168(k) is amended by striking paragraph (4). 8 9 term ‘investment prop- (14) Section 168(k)(2) is amended by striking 6 7 BONDS NOT TREATED AS IN- (16) Section 168(k)(5) is amended by striking subparagraph (E). 10 (17) Section 168(m)(2)(B)(i) is amended by 11 striking ‘‘(determined without regard to paragraph 12 (4) thereof)’’. 13 14 (18) Section 168(m)(2) is amended by striking subparagraph (D). 15 16 (19) Section 173 is amended by striking subsection (b). 17 (20) Section 174(f) is amended to read as fol- 18 lows: 19 ‘‘(f) CROSS REFERENCE.—For adjustments to basis 20 of property for amounts allowed as deductions as deferred 21 expenses under subsection (b), see section 1016(a)(14).’’. 22 (21) Section 263(c) is amended by striking 23 ‘‘section 59(e) or 291’’ and inserting ‘‘section 291’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00178 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 179 1 (22) Section 263A(c) is amended by striking 2 paragraph (6) and by redesignating paragraph (7) 3 (as amended) as paragraph (6). 4 (23) Section 382(l) is amended by striking 5 paragraph (7) and by redesignating paragraph (8) 6 as paragraph (7). 7 (24) Section 443 is amended by striking sub- 8 section (d) and by redesignating subsection (e) as 9 subsection (d). 10 11 (25) Section 616 is amended by striking subsection (e). 12 13 (26) Section 617 is amended by striking subsection (i). 14 (27) Section 641(c) is amended— 15 (A) in paragraph (2) by striking subpara- 16 graph (B) and by redesignating subparagraphs 17 (C) and (D) as subparagraphs (B) and (C), re- 18 spectively, and 19 (B) in paragraph (3), by striking ‘‘para- 20 graph 21 (2)(B)’’. 22 (28) Subsections (b) and (c) of section 666 are 23 each amended by striking ‘‘(other than the tax im- 24 posed by section 55)’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (2)(C)’’ and inserting ‘‘paragraph (679209 10) PO 00000 Frm 00179 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 180 1 2 (29) Section 848 is amended by striking subsection (i). 3 4 (30) Section 860E(a) is amended by striking paragraph (4). 5 6 (31) Section 871(b)(1) is amended by striking ‘‘or 55’’. 7 8 (32) Section 882(a)(1) is amended by striking ‘‘55,’’. 9 (33) Section 897(a) is amended to read as fol- 10 lows: 11 ‘‘(a) TREATMENT AS EFFECTIVELY CONNECTED 12 WITH UNITED STATES TRADE OR BUSINESS.—For pur- 13 poses of this title, gain or loss of a nonresident alien indi14 vidual or a foreign corporation from the disposition of a 15 United States real property interest shall be taken into 16 account— 17 18 ‘‘(1) in the case of a nonresident alien individual, under section 871(b)(1), or 19 20 ‘‘(2) in the case of a foreign corporation, under section 882(a)(1), 21 as if the taxpayer were engaged in a trade or business 22 within the United States during the taxable year and as 23 if such gain or loss were effectively connected with such 24 trade or business.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00180 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 181 1 (34) Section 904(k) is amended to read as fol- 2 lows: 3 ‘‘(k) CROSS REFERENCE.—For increase of limitation 4 under subsection (a) for taxes paid with respect to 5 amounts received which were included in the gross income 6 of the taxpayer for a prior taxable year as a United States 7 shareholder with respect to a controlled foreign corpora8 tion, see section 960(b).’’. 9 (35) Section 911(f) is amended to read as fol- 10 lows: 11 ‘‘(f) DETERMINATION OF TAX LIABILITY.— 12 ‘‘(1) IN for any taxable year, 13 any amount is excluded from gross income of a tax- 14 payer under subsection (a), then, notwithstanding 15 section 1, if such taxpayer has taxable income for 16 such taxable year, the tax imposed by section 1 for 17 such taxable year shall be equal to the excess (if 18 any) of— 19 ‘‘(A) the tax which would be imposed by 20 section 1 for such taxable year if the taxpayer’s 21 taxable income were increased by the amount 22 excluded under subsection (a) for such taxable 23 year, over 24 ‘‘(B) the tax which would be imposed by 25 section 1 for such taxable year if the taxpayer’s g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—If, 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00181 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 182 1 taxable income were equal to the amount ex- 2 cluded under subsection (a) for such taxable 3 year. 4 For purposes of this paragraph, the amount ex- 5 cluded under subsection (a) shall be reduced by the 6 aggregate amount of any deductions or exclusions 7 disallowed under subsection (d)(6) with respect to 8 such excluded amount. 9 ‘‘(2) TREATMENT 10 ‘‘(A) IN GENERAL.—In applying section 11 1(h) for purposes of determining the tax under 12 paragraph (1)(A) for any taxable year in which, 13 without regard to this subsection, the tax- 14 payer’s net capital gain exceeds taxable income 15 (hereafter in this subparagraph referred to as 16 the capital gain excess)— 17 ‘‘(i) the taxpayer’s net capital gain 18 (determined without regard to section 19 1(h)(11)) shall be reduced (but not below 20 zero) by such capital gain excess, 21 ‘‘(ii) the taxpayer’s qualified dividend 22 income shall be reduced by so much of 23 such capital gain excess as exceeds the tax- 24 payer’s net capital gain (determined with- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF CAPITAL GAIN EXCESS.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00182 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 183 1 out regard to section 1(h)(11) and the re- 2 duction under clause (i)), and 3 ‘‘(iii) net capital gain, 4 unrecaptured section 1250 gain, and 28- 5 percent rate gain shall each be determined 6 after increasing the amount described in 7 section 1(h)(4)(B) by such capital gain ex- 8 cess. 9 ‘‘(B) DEFINITIONS.—Terms used in this 10 paragraph which are also used in section 1(h) 11 shall have the respective meanings given such 12 terms by section 1(h).’’. 13 (36) Section 962(a)(1) is amended— 14 (A) by striking ‘‘sections 1 and 55’’ and 15 inserting ‘‘section 1’’, and 16 (B) by striking ‘‘sections 11 and 55’’ and 17 inserting ‘‘section 11’’. 18 (37) Section 1016(a) is amended by striking 19 paragraph (20). 20 (38) Section 1202(a)(4) is amended by insert- 21 ing ‘‘and’’ at the end of subparagraph (A), by strik- 22 ing ‘‘, and’’ and inserting a period at the end of sub- 23 paragraph (B), and by striking subparagraph (C). 24 25 (39) Section 1374(b)(3)(B) is amended by striking the last sentence thereof. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 adjusted 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00183 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 184 1 (40) Section 1561(a) is amended— 2 (A) by inserting ‘‘and’’ at the end of para- 3 graph (1), by striking ‘‘, and’’ at the end of 4 paragraph (2) and inserting a period, and by 5 striking paragraph (3), and 6 (B) by striking the last sentence. 7 8 (41) Section 6015(d)(2)(B) is amended by striking ‘‘or 55’’. 9 10 (42) Section 6211(b)(4)(A) is amended by striking‘‘, 168(k)(4)’’. 11 12 (43) Section 6425(c)(1)(A) is amended to read as follows: 13 ‘‘(A) the tax imposed under section 11 or 14 subchapter L of chapter 1, whichever is applica- 15 ble, over’’. 16 (44) Section 6654(d)(2) is amended— 17 (A) in clause (i) of subparagraph (B), by 18 striking ‘‘, alternative minimum taxable in- 19 come,’’, and 20 (B) in clause (i) of subparagraph (C), by 21 striking ‘‘, alternative minimum taxable in- 22 come,’’. 23 (45) Section 6655(e)(2)(B)(i) is amended by 24 striking ‘‘The taxable income and alternative min- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00184 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 185 1 imum taxable income shall’’ and inserting ‘‘Taxable 2 income shall’’. 3 (46) Section 6655(g)(1)(A) is amended by add- 4 ing ‘‘plus’’ at the end of clause (i), by striking clause 5 (ii), and by redesignating clause (iii) as clause (ii). 6 (47) Section 6662(e)(3)(C) is amended by strik- 7 ing ‘‘the regular tax (as defined in section 55(c))’’ 8 and inserting ‘‘the regular tax liability (as defined in 9 section 26(b))’’. 10 (d) EFFECTIVE DATES.— 11 (1) IN as otherwise pro- 12 vided in this subsection, the amendments made by 13 this section shall apply to taxable years beginning 14 after December 31, 2017. 15 (2) PRIOR ELECTIONS WITH RESPECT TO CER- 16 TAIN TAX PREFERENCES.—So 17 ment made by subsection (a) as relates to the repeal 18 of section 59(e) of the Internal Revenue Code of 19 1986 shall apply to amounts paid or incurred after 20 December 31, 2017. 21 (3) TREATMENT OF much of the amend- NET OPERATING LOSS 22 CARRYBACKS.—For 23 Internal Revenue Code of 1986 (as in effect before 24 its repeal), the amount of any net operating loss 25 which may be carried back from a taxable year be- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Except 10:46 Nov 02, 2017 Jkt 000000 purposes of section 56(d) of the (679209 10) PO 00000 Frm 00185 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 186 1 ginning after December 31, 2017, to taxable years 2 beginning before January 1, 2018, shall be deter- 3 mined without regard to any adjustments under sec- 4 tion 56(d)(2)(A) of such Code (as so in effect). 5 TITLE III—BUSINESS TAX REFORM Subtitle A—Tax Rates 6 7 8 SEC. 3001. REDUCTION IN CORPORATE TAX RATE. 9 (a) IN GENERAL.—Section 11(b) is amended to read 10 as follows: 11 ‘‘(b) AMOUNT OF TAX.— 12 ‘‘(1) IN as otherwise pro- 13 vided in this subsection, the amount of the tax im- 14 posed by subsection (a) shall be 20 percent of tax- 15 able income. 16 ‘‘(2) SPECIAL 17 CORPORATIONS.— 18 ‘‘(A) IN RULE FOR PERSONAL SERVICE GENERAL.—In the case of a per- 19 sonal service corporation (as defined in section 20 448(d)(2)), the amount of the tax imposed by 21 subsection (a) shall be 25 percent of taxable in- 22 come. 23 ‘‘(B) REFERENCES TO CORPORATE 24 RATE.—Any 25 under this section or to the highest rate in ef- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Except 10:46 Nov 02, 2017 Jkt 000000 reference to the rate imposed (679209 10) PO 00000 Frm 00186 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 187 1 fect under this section (or any similar ref- 2 erence) shall be determined without regard to 3 the rate imposed with respect to personal serv- 4 ice corporations (as so defined).’’. 5 (b) CONFORMING AMENDMENTS.— 6 (1)(A) Part I of subchapter P of chapter 1 is 7 amended by striking section 1201 (and by striking 8 the item relating to such section in the table of sec- 9 tions for such part). 10 11 (B) Section 12 is amended by striking paragraph (4). 12 (C) Section 527(b) is amended— 13 (i) by striking paragraph (2), and 14 (ii) by striking all that precedes ‘‘is hereby 15 imposed’’ and inserting: 16 ‘‘(b) TAX IMPOSED.—A tax’’. 17 (D) Section 594(a) is amended by striking 18 ‘‘taxes imposed by section 11 or 1201(a)’’ and in- 19 serting ‘‘tax imposed by section 11’’. 20 21 (E) Section 691(c)(4) is amended by striking ‘‘1201,’’. 22 (F) Section 801(a) is amended— 23 (i) by striking paragraph (2), and 24 (ii) by striking all that precedes ‘‘is hereby 25 imposed’’ and inserting: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00187 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 188 1 ‘‘(a) TAX IMPOSED.—A tax’’. 2 (G) Section 831(e) is amended by striking para- 3 graph (1) and by redesignating paragraphs (2) and 4 (3) as paragraphs (1) and (2), respectively. 5 (H) Sections 832(c)(5) and 834(b)(1)(D) are 6 each amended by striking ‘‘sec. 1201 and fol- 7 lowing,’’. 8 (I) Section 852(b)(3)(A) is amended by striking 9 ‘‘section 1201(a)’’ and inserting ‘‘section 11(b)(1)’’. 10 (J) Section 857(b)(3) is amended— 11 (i) by striking subparagraph (A) and re- 12 designating subparagraphs (B) through (F) as 13 subparagraphs (A) through (E), respectively, 14 (ii) in subparagraph (C), as so redesig- 15 nated— 16 (I) by striking ‘‘subparagraph (A)(ii)’’ 17 in clause (i) thereof and inserting ‘‘para- 18 graph (1)’’, 19 (II) by striking ‘‘the tax imposed by 20 subparagraph (A)(ii)’’ in clauses (ii) and 21 (iv) thereof and inserting ‘‘the tax imposed 22 by paragraph (1) on undistributed capital 23 gain’’, g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00188 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 189 1 (iii) in subparagraph (E), as so redesig- 2 nated, by striking ‘‘subparagraph (B) or (D)’’ 3 and inserting ‘‘subparagraph (A) or (C)’’, and 4 (iv) by adding at the end the following new 5 subparagraph: 6 ‘‘(F) UNDISTRIBUTED GAIN.— 7 For purposes of this paragraph, the term ‘un- 8 distributed capital gain’ means the excess of the 9 net capital gain over the deduction for divi- 10 dends paid (as defined in section 561) deter- 11 mined with reference to capital gain dividends 12 only.’’. 13 (K) Section 882(a)(1) is amended by striking ‘‘, 14 or 1201(a)’’. 15 16 (L) Section 1374(b) is amended by striking paragraph (4). 17 (M) Section 1381(b) is amended by striking 18 ‘‘taxes imposed by section 11 or 1201’’ and inserting 19 ‘‘tax imposed by section 11’’. 20 21 (N) Section 6655(g)(1)(A)(i) is amended by striking ‘‘or 1201(a),’’. 22 23 (O) Section 7518(g)(6)(A) is amended by striking ‘‘or 1201(a)’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 CAPITAL 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00189 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 190 1 (2) Section 1445(e)(1) is amended by striking 2 ‘‘35 percent (or, to the extent provided in regula- 3 tions, 20 percent)’’ and inserting ‘‘20 percent’’. 4 5 (3) Section 1445(e)(2) is amended by striking ‘‘35 percent’’ and inserting ‘‘20 percent’’. 6 (4) Section 1445(e)(6) is amended by striking 7 ‘‘35 percent (or, to the extent provided in regula- 8 tions, 20 percent)’’ and inserting ‘‘20 percent’’. 9 (5)(A) Part I of subchapter B of chapter 5 is 10 amended by striking section 1551 (and by striking 11 the item relating to such section in the table of sec- 12 tions for such part). 13 14 (B) Section 12 is amended by striking paragraph (6). 15 16 (C) Section 535(c)(5) is amended to read as follows: 17 ‘‘(5) CROSS limitation on 18 credit provided in paragraph (2) or (3) in the case 19 of certain controlled corporations, see section 20 1561.’’. 21 (6)(A) Section 1561, as amended by the pre- 22 ceding provisions of this Act, is amended to read as 23 follows: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 REFERENCE.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00190 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 191 1 ‘‘SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS 2 CREDIT IN THE CASE OF CERTAIN CON- 3 TROLLED CORPORATIONS. 4 ‘‘(a) IN GENERAL.—The component members of a 5 controlled group of corporations on a December 31 shall, 6 for their taxable years which include such December 31, 7 be limited for purposes of this subtitle to one $250,000 8 ($150,000 if any component member is a corporation de9 scribed in section 535(c)(2)(B)) amount for purposes of 10 computing the accumulated earnings credit under section 11 535(c)(2) and (3). Such amount shall be divided equally 12 among the component members of such group on such De13 cember 31 unless the Secretary prescribes regulations per14 mitting an unequal allocation of such amount. 15 ‘‘(b) CERTAIN SHORT TAXABLE YEARS.—If a cor- 16 poration has a short taxable year which does not include 17 a December 31 and is a component member of a controlled 18 group of corporations with respect to such taxable year, 19 then for purposes of this subtitle, the amount to be used 20 in computing the accumulated earnings credit under sec21 tion 535(c)(2) and (3) of such corporation for such taxable 22 year shall be the amount specified in subsection (a) with 23 respect to such group, divided by the number of corpora24 tions which are component members of such group on the 25 last day of such taxable year. For purposes of the pre- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00191 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 192 1 ceding sentence, section 1563(b) shall be applied as if such 2 last day were substituted for December 31.’’. 3 (B) The table of sections for part II of sub- 4 chapter B of chapter 5 is amended by striking the 5 item relating to section 1561 and inserting the fol- 6 lowing new item: ‘‘Sec. 1561. Limitation on accumulated earnings credit in the case of certain controlled corporations.’’. 7 (7) Section 7518(g)(6)(A) is amended— 8 (A) by striking ‘‘With respect to the por- 9 tion’’ and inserting ‘‘In the case of a taxpayer 10 other than a corporation, with respect to the 11 portion’’, and 12 (B) by striking ‘‘(34 percent in the case of 13 a corporation)’’. 14 (c) EFFECTIVE DATE.— 15 (1) IN as otherwise pro- 16 vided in this subsection, the amendments made by 17 this section shall apply to taxable years beginning 18 after December 31, 2017. 19 (2) CERTAIN CONFORMING AMENDMENTS.—The 20 amendments made by paragraphs (2), (3), and (4) 21 of subsection (b) shall apply to distributions after 22 December 31, 2017. 23 (d) NORMALIZATION REQUIREMENTS.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Except 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00192 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 193 1 (1) IN normalization method of 2 accounting shall not be treated as being used with 3 respect to any public utility property for purposes of 4 section 167 or 168 of the Internal Revenue Code of 5 1986 if the taxpayer, in computing its cost of service 6 for ratemaking purposes and reflecting operating re- 7 sults in its regulated books of account, reduces the 8 excess tax reserve more rapidly or to a greater ex- 9 tent than such reserve would be reduced under the 10 average rate assumption method. 11 (2) ALTERNATIVE METHOD FOR CERTAIN TAX- 12 PAYERS.—If, 13 that includes the date of enactment of this Act— as of the first day of the taxable year 14 (A) the taxpayer was required by a regu- 15 latory agency to compute depreciation for public 16 utility property on the basis of an average life 17 or composite rate method, and 18 (B) the taxpayer’s books and underlying 19 records did not contain the vintage account 20 data necessary to apply the average rate as- 21 sumption method, 22 the taxpayer will be treated as using a normalization 23 method of accounting if, with respect to such juris- 24 diction, the taxpayer uses the alternative method for g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—A 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00193 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 194 1 public utility property that is subject to the regu- 2 latory authority of that jurisdiction. 3 4 (3) DEFINITIONS.—For purposes of this subsection— 5 (A) EXCESS 6 RESERVE.—The term ‘‘excess tax reserve’’ means the excess of— 7 (i) the reserve for deferred taxes (as 8 described in section 168(i)(9)(A)(ii) of the 9 Internal Revenue Code of 1986 as in effect 10 on the day before the date of the enact- 11 ment of this Act), over 12 (ii) the amount which would be the 13 balance in such reserve if the amount of 14 such reserve were determined by assuming 15 that the corporate rate reductions provided 16 in this Act were in effect for all prior peri- 17 ods. 18 (B) AVERAGE RATE ASSUMPTION METH- 19 OD.—The 20 the method under which the excess in the re- 21 serve for deferred taxes is reduced over the re- 22 maining lives of the property as used in its reg- 23 ulated books of account which gave rise to the 24 reserve for deferred taxes. Under such method, 25 if timing differences for the property reverse, g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 TAX 10:46 Nov 02, 2017 Jkt 000000 average rate assumption method is (679209 10) PO 00000 Frm 00194 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 195 1 the amount of the adjustment to the reserve for 2 the deferred taxes is calculated by multi- 3 plying— 4 (i) the ratio of the aggregate deferred 5 taxes for the property to the aggregate 6 timing differences for the property as of 7 the beginning of the period in question, by 8 (ii) the amount of the timing dif- 9 ferences which reverse during such period. 10 (C) ALTERNATIVE ‘‘alter- 11 native method’’ is the method in which the tax- 12 payer— 13 (i) computes the excess tax reserve on 14 all public utility property included in the 15 plant account on the basis of the weighted 16 average life or composite rate used to com- 17 pute depreciation for regulatory purposes, 18 and 19 (ii) reduces the excess tax reserve rat- 20 ably over the remaining regulatory life of 21 the property. 22 (4) TAX INCREASED FOR NORMALIZATION VIO- 23 LATION.—If, for any taxable year ending after the 24 date of the enactment of this Act, the taxpayer does 25 not use a normalization method of accounting, the g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 METHOD.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00195 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 196 1 taxpayer’s tax for the taxable year shall be increased 2 by the amount by which it reduces its excess tax re- 3 serve more rapidly than permitted under a normal- 4 ization method of accounting. Subtitle B—Cost Recovery 5 6 SEC. 3101. INCREASED EXPENSING. 7 (a) 100 PERCENT EXPENSING.—Section 8 168(k)(1)(A) is amended by striking ‘‘50 percent’’ and in9 serting ‘‘100 percent’’. 10 (b) EXTENSION THROUGH JANUARY 1, 2023.—Sec- 11 tion 168(k)(2) is amended— 12 13 (1) in subparagraph (A)(iii), by striking ‘‘January 1, 2020’’ and inserting ‘‘January 1, 2023’’, 14 (2) in subparagraph (B)(i)(II), by striking 15 ‘‘January 1, 2021’’ and inserting ‘‘January 1, 16 2024’’, 17 (3) in subparagraph (B)(i)(III), by striking 18 ‘‘January 1, 2020’’ and inserting ‘‘January 1, 19 2023’’, 20 (4) in subparagraph (B)(ii), by striking ‘‘Janu- 21 ary 1, 2020’’ in each place it appears and inserting 22 ‘‘January 1, 2023’’, and 23 (5) in subparagraph (E)(i), by striking ‘‘Janu- 24 ary 1, 2020’’ and replacing it with ‘‘January 1, 25 2023’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00196 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 197 1 (c) APPLICATION TO USED PROPERTY.— 2 3 (1) IN 168(k)(2)(A)(ii) is amended to read as follows: 4 ‘‘(ii) the original use of which begins 5 with the taxpayer or the acquisition of 6 which by the taxpayer meets the require- 7 ments of clause (ii) of subparagraph (E), 8 and’’. 9 (2) ACQUISITION REQUIREMENTS.—Section 10 168(k)(2)(E)(ii) is amended to read as follows: 11 ‘‘(ii) ACQUISITION REQUIREMENTS.— 12 An acquisition of property meets the re- 13 quirements of this clause if— 14 ‘‘(I) such property was not used 15 by the taxpayer at any time prior to 16 such acquisition, and 17 ‘‘(II) the acquisition of such 18 property meets the requirements of 19 paragraphs (2)(A), (2)(B), (2)(C), 20 and (3) of section 179(d).’’, 21 (3) ANTI-ABUSE RULES.—Section 168(k)(2)(E) 22 is further amended by amending clause (iii)(I) to 23 read as follows: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Section 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00197 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 198 1 ‘‘(I) property is used by a lessor 2 of such property and such use is the 3 lessor’s first use of such property,’’. 4 (d) EXCEPTION 5 NESSES 6 PENSE.—Section CERTAIN TRADES FOR NOT SUBJECT TO LIMITATION AND BUSI- ON INTEREST EX- 168(k)(2), as amended by section 2001, 7 is amended by inserting after subparagraph (F) the fol8 lowing new subparagraph: 9 ‘‘(G) EXCEPTION FOR CERTAIN PROPERTY 10 OF REAL PROPERTY BUSINESSES AND REGU- 11 LATED UTILITIES.—The 12 erty’ shall not include any property used in a 13 trade or business described in subparagraph 14 (B) or (C) of section 163(j)(7).’’. 15 term ‘qualified prop- (e) COORDINATION WITH SECTION 280F.—Section 16 168(k)(2)(F) is amended— 17 (1) by striking ‘‘$8,000’’ in clauses (i) and (iii) 18 and inserting ‘‘$16,000’’, and 19 (2) in clause (iii)— 20 (A) by striking ‘‘placed in service by the 21 taxpayer after December 31, 2017’’ and insert- 22 ing ‘‘acquired by the taxpayer before September 23 28, 2017, and placed in service by the taxpayer 24 after September 27, 2017’’, and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00198 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 199 1 (B) by redesignating subclauses (I) and 2 (II) as subclauses (II) and (III) respectively, 3 and inserting before clause (II), as so redesig- 4 nated, the following new subclause: 5 ‘‘(I) in the case of a passenger 6 automobile placed in service before 7 January 1, 2018, ‘$8,000’,’’. 8 (f) CONFORMING AMENDMENTS.— 9 10 (1) Section (k)(2)(B)(i)(III), as amended, is amended by inserting ‘‘binding’’ before ‘‘contract’’. 11 (2) Section 168(k)(5) is amended by— 12 (A) by striking ‘‘January 1, 2020’’ in sub- 13 paragraph (A) and inserting ‘‘January 1, 14 2023’’, 15 (B) by striking ‘‘50 percent’’ in subpara- 16 graph (A)(i) and inserting ‘‘100 percent’’, and 17 (C) by striking subparagraph (F). 18 19 (3) Section 168(k)(6) is amended to read as follows: 20 ‘‘(6) PHASE the case of qualified 21 property acquired by the taxpayer before September 22 28, 2017, and placed in service by the taxpayer after 23 September 27, 2017, paragraph (1)(A) shall be ap- 24 plied by substituting for ‘100 percent’— 25 ‘‘(A) ‘50 percent’ in the case of— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 DOWN.—In 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00199 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 200 1 ‘‘(i) property placed in service before 2 January 1, 2018, and 3 ‘‘(ii) property described in subpara- 4 graph (B) or (C) of paragraph (2) which 5 is placed in service in 2018, 6 ‘‘(B) ‘40 percent’ in the case of— 7 ‘‘(i) property placed in service in 2018 8 (other than property described in subpara- 9 graph (B) or (C) of paragraph (2)), and 10 ‘‘(ii) property described in subpara- 11 graph (B) or (C) of paragraph (2) which 12 is placed in service in 2019, and 13 ‘‘(C) ‘30 percent’ in the case of— 14 ‘‘(i) property placed in service in 2019 15 (other than property described in subpara- 16 graph (B) or (C) of paragraph (2)), and 17 ‘‘(ii) property described in subpara- 18 graph (B) or (C) of paragraph (2) which 19 is placed in service in 2020.’’. 20 (4) The heading of section 168(k) is amended 21 by striking ‘‘SPECIAL ALLOWANCE 22 PROPERTY ACQUIRED AFTER DECEMBER 31, 2007, 23 AND 24 ‘‘FULL EXPENSING g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 FOR CERTAIN BEFORE JANUARY 1, 2020’’ and inserting OF CERTAIN PROPERTY’’. (679209 10) PO 00000 Frm 00200 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 201 1 (5) Section 460(c)(6)(B)(ii) is amended by 2 striking ‘‘January 1, 2020 (January 1, 2021 in the 3 case of property described in section 168(k)(2)(B))’’ 4 and inserting ‘‘January 1, 2023 (January 1, 2024 in 5 the 6 168(k)(2)(B))’’. 7 (g) EFFECTIVE DATE.— 8 9 10 case (1) IN property described GENERAL.—Except in section at provided by para- graph (2), the amendments made by this section shall apply to property which— 11 (A) is acquired after September 27, 2017, 12 and 13 (B) is placed in service after such date. 14 For purposes of the preceding sentence, property 15 shall not be treated as acquired after the date on 16 which a written binding contract is entered into for 17 such acquisition. 18 (2) SPECIFIED PLANTS.—The amendments 19 made by subsection (f)(2) shall apply to specified 20 plants planted or grafted after September 27, 2017. 21 (3) TRANSITION RULE.—In the case of any tax- 22 payer’s first taxable year ending after September 27, 23 2017, the taxpayer may elect (at such time and in 24 such form and manner as the Secretary of the 25 Treasury, or his designee, may provide) to apply sec- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 of 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00201 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 202 1 tion 168 of the Internal Revenue Code of 1986 with- 2 out regard to the amendments made by this section. 3 (4) LIMITATION NET OPERATING LOSS 4 CARRYBACKS 5 ING.—In 6 any portion of the period beginning on September 7 28, 2017, and ending on December 31, 2017, the 8 amount of any net operating loss for such taxable 9 year which may be treated as a net operating loss 10 carryback (including any such carryback attributable 11 to 12 172(b)(1)(C), any corporate equity reduction inter- 13 est loss under section 172(b)(1)(D), any eligible loss 14 under section 172(b)(1)(E), and any farming loss 15 under section 172(b)(1)(F)) shall be determined 16 without regard to the amendments made by this sec- 17 tion. For purposes of this paragraph, terms which 18 are used in section 172 of the Internal Revenue 19 Code of 1986 (determined without regard to the 20 amendments made by section 3302) shall have the 21 same meaning as when used in such section. any ATTRIBUTABLE TO FULL EXPENS- the case of any taxable year which includes specified liability loss under section Subtitle C—Small Business Reforms 22 23 24 SEC. 3201. EXPANSION OF SECTION 179 EXPENSING. 25 (a) INCREASED DOLLAR LIMITATIONS.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ON 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00202 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 203 1 2 (1) IN 179(b) is amend- ed— 3 (A) by inserting ‘‘($5,000,000, in the case 4 of taxable years beginning before January 1, 5 2023)’’ after ‘‘$500,000’’ in paragraph (1), and 6 (B) by inserting ‘‘($20,000,000, in the 7 case of taxable years beginning before January 8 1, 2023)’’ after ‘‘$2,000,000’’ in paragraph (2). 9 (2) 10 INFLATION ADJUSTMENT.—Section 179(b)(6) is amended to read as follows: 11 ‘‘(6) INFLATION 12 ‘‘(A) IN ADJUSTMENT.— GENERAL.—In the case of a tax- 13 able year beginning after 2015 (2018 in the 14 case of the $5,000,000 and $20,000,000 15 amounts in subsection (b)), each dollar amount 16 in subsection (b) shall be increased by an 17 amount equal to such dollar amount multiplied 18 by— 19 ‘‘(i) in the case of the $500,000 and 20 $2,000,000 amounts in subsection (b), the 21 cost-of-living adjustment determined under 22 section 1(c)(2) for the calendar year in 23 which the taxable year begins, determined 24 by substituting ‘calendar year 2014’ for g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Section 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00203 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 204 1 ‘calendar year 2016’ in subparagraph 2 (A)(ii) thereof, and 3 ‘‘(ii) in the case of the $5,000,000 4 and $20,000,000 amounts in subsection 5 (b), the cost-of-living adjustment deter- 6 mined under section 1(c)(2) for the cal- 7 endar year in which the taxable year be- 8 gins, determined by substituting ‘calendar 9 year 2017’ for ‘calendar year 2016’ in sub- 10 paragraph (A)(ii) thereof. 11 ‘‘(B) ROUNDING.—The amount of any in- 12 crease under subparagraph (A) shall be round- 13 ed 14 ($100,000 in the case of the $5,000,000 and 15 $20,000,000 amounts in subsection (b)).’’. 16 (b) APPLICATION TO QUALIFIED ENERGY EFFICIENT to the nearest multiple of $10,000 17 HEATING AND AIR-CONDITIONING PROPERTY.— 18 (1) IN 179(f)(2) is amend- 19 ed by striking ‘‘and’’ at the end of subparagraph 20 (B), by striking the period at the end of subpara- 21 graph (C) and inserting ‘‘, and’’, and by adding at 22 the end the following new subparagraph: 23 ‘‘(D) qualified energy efficient heating and 24 air-conditioning property.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Section 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00204 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 205 1 (2) QUALIFIED 2 AND AIR-CONDITIONING PROPERTY.—Section 3 is amended by adding at the end the following new 4 paragraph: 5 ‘‘(3) QUALIFIED AND AIR-CONDITIONING PROPERTY.—For 7 of this subsection— ‘‘(A) IN 9 179(f) ENERGY EFFICIENT HEATING 6 8 GENERAL.—The purposes term ‘qualified energy efficient heating and air-conditioning 10 property’ means any section 1250 property— 11 ‘‘(i) with respect to which depreciation 12 (or amortization in lieu of depreciation) is 13 allowable, 14 ‘‘(ii) which is installed as part of a 15 building’s heating, cooling, ventilation, or 16 hot water system, and 17 ‘‘(iii) which is within the scope of 18 Standard 90.1–2007 or any successor 19 standard. 20 ‘‘(B) STANDARD 90.1–2007.—The term 21 ‘Standard 90.1–2007’ means Standard 90.1– 22 2007 of the American Society of Heating, Re- 23 frigerating and Air-Conditioning Engineers and 24 the Illuminating Engineering Society of North 25 America (as in effect on the day before the date g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ENERGY EFFICIENT HEATING 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00205 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 206 1 of the adoption of Standard 90.1–2010 of such 2 Societies).’’. 3 (c) EFFECTIVE DATE.— 4 (1) INCREASED DOLLAR LIMITATIONS.—The 5 amendments made by subsection (a) shall apply to 6 taxable years beginning after December 31, 2017. 7 (2) APPLICATION 8 CIENT 9 ERTY.—The HEATING TO QUALIFIED ENERGY EFFI- AND AIR-CONDITIONING PROP- amendments made by subsection (b) 10 shall apply to property acquired and placed in serv- 11 ice after November 2, 2017. For purposes of the 12 preceding sentence, property shall not be treated as 13 acquired after the date on which a written binding 14 contract is entered into for such acquisition. 15 SEC. 3202. SMALL BUSINESS ACCOUNTING METHOD RE- 16 FORM AND SIMPLIFICATION. 17 18 (a) MODIFICATION OD OF ON CASH METH- LIMITATION.—So much of sec- OF LIMITATION ACCOUNTING.— 19 (1) INCREASED 20 tion 448(c) as precedes paragraph (2) is amended to 21 read as follows: 22 ‘‘(c) GROSS RECEIPTS TEST.—For purposes of this 23 section— 24 25 ‘‘(1) IN 10:46 Nov 02, 2017 corporation or partner- ship meets the gross receipts test of this subsection g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—A Jkt 000000 (679209 10) PO 00000 Frm 00206 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 207 1 for any taxable year if the average annual gross re- 2 ceipts of such entity for the 3-taxable-year period 3 ending with the taxable year which precedes such 4 taxable year does not exceed $25,000,000.’’. 5 (2) APPLICATION 6 BASIS.—Section 7 lows: 448(b)(3) is amended to read as fol- 8 ‘‘(3) ENTITIES WHICH MEET GROSS RECEIPTS 9 TEST.—Paragraphs (1) and (2) of subsection (a) 10 shall not apply to any corporation or partnership for 11 any taxable year if such entity (or any predecessor) 12 meets the gross receipts test of subsection (c) for 13 such taxable year.’’. 14 (3) INFLATION ADJUSTMENT.—Section 448(c) 15 is amended by adding at the end the following new 16 paragraph: 17 ‘‘(4) ADJUSTMENT FOR INFLATION.—In the 18 case of any taxable year beginning after December 19 31, 2018, the dollar amount in paragraph (1) shall 20 be increased by an amount equal to— 21 ‘‘(A) such dollar amount, multiplied by 22 ‘‘(B) the cost-of-living adjustment deter- 23 mined under section 1(c)(2) for the calendar 24 year in which the taxable year begins, by sub- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF EXCEPTION ON ANNUAL 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00207 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 208 1 stituting ‘calendar year 2017’ for ‘calendar year 2 2016’ in subparagraph (A)(ii) thereof. 3 If any amount as increased under the preceding sen- 4 tence is not a multiple of $1,000,000, such amount 5 shall be rounded to the nearest multiple of 6 $1,000,000.’’. 7 8 (4) COORDINATION tion 448(d)(7) is amended to read as follows: 9 ‘‘(7) COORDINATION WITH SECTION 481.—Any 10 change in method of accounting made pursuant to 11 this section shall be treated for purposes of section 12 481 as initiated by the taxpayer and made with the 13 consent of the Secretary.’’. 14 (5) APPLICATION 15 OF EXCEPTION TO CORPORA- TIONS ENGAGED IN FARMING.— 16 (A) 17 IN GENERAL.—Section 447(c) is amended— 18 (i) by inserting ‘‘for any taxable year’’ 19 after ‘‘not being a corporation’’ in the mat- 20 ter preceding paragraph (1), and 21 (ii) by amending paragraph (2) to 22 read as follows: 23 ‘‘(2) a corporation which meets the gross re- 24 ceipts test of section 448(c) for such taxable year.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 WITH SECTION 481.—Sec- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00208 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 209 1 (B) COORDINATION 2 WITH SECTION 481.— Section 447(f) is amended to read as follows: 3 ‘‘(f) COORDINATION WITH SECTION 481.—Any 4 change in method of accounting made pursuant to this 5 section shall be treated for purposes of section 481 as ini6 tiated by the taxpayer and made with the consent of the 7 Secretary.’’. 8 (C) CONFORMING 9 447 is amended— 10 (i) by striking subsections (d), (e), 11 (h), and (i), and 12 (ii) by redesignating subsections (f) 13 and (g) (as amended by subparagraph (B)) 14 as subsections (d) and (e), respectively. 15 (b) EXEMPTION FROM UNICAP REQUIREMENTS.— 16 (1) IN GENERAL.—Section 263A is amended by 17 redesignating subsection (i) as subsection (j) and by 18 inserting after subsection (h) the following new sub- 19 section: 20 ‘‘(i) EXEMPTION 21 FOR CERTAIN SMALL BUSI- NESSES.— 22 ‘‘(1) IN GENERAL.—In the case of any taxpayer 23 (other than a tax shelter prohibited from using the 24 cash receipts and disbursements method of account- 25 ing under section 448(a)(3)) which meets the gross g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AMENDMENTS.—Section 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00209 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 210 1 receipts test of section 448(c) for any taxable year, 2 this section shall not apply with respect to such tax- 3 payer for such taxable year. 4 ‘‘(2) APPLICATION OF GROSS RECEIPTS TEST 5 TO INDIVIDUALS, ETC.— 6 which is not a corporation or a partnership, the 7 gross receipts test of section 448(c) shall be applied 8 in the same manner as if each trade or business of 9 such taxpayer were a corporation or partnership. 10 In the case of any taxpayer ‘‘(3) COORDINATION WITH SECTION 481.—Any 11 change in method of accounting made pursuant to 12 this subsection shall be treated for purposes of sec- 13 tion 481 as initiated by the taxpayer and made with 14 the consent of the Secretary.’’. 15 (2) 16 CONFORMING AMENDMENT.—Section 263A(b)(2) is amended to read as follows: 17 ‘‘(2) PROPERTY ACQUIRED FOR RESALE.—Real 18 or personal property described in section 1221(a)(1) 19 which is acquired by the taxpayer for resale.’’. 20 (c) EXEMPTION FROM INVENTORIES.—Section 471 21 is amended by redesignating subsection (c) as subsection 22 (d) and by inserting after subsection (b) the following new 23 subsection: 24 25 ‘‘(c) EXEMPTION CERTAIN SMALL BUSI- NESSES.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FOR 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00210 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 211 1 ‘‘(1) IN the case of any taxpayer 2 (other than a tax shelter prohibited from using the 3 cash receipts and disbursements method of account- 4 ing under section 448(a)(3)) which meets the gross 5 receipts test of section 448(c) for any taxable year— 6 ‘‘(A) subsection (a) shall not apply with re- 7 spect to such taxpayer for such taxable year, 8 and 9 ‘‘(B) the taxpayer’s method of accounting 10 for inventory for such taxable year shall not be 11 treated as failing to clearly reflect income if 12 such method either— 13 ‘‘(i) treats inventory as non-incidental 14 materials and supplies, or 15 ‘‘(ii) conforms to such taxpayer’s 16 method of accounting reflected in an appli- 17 cable financial statement of the taxpayer 18 with respect to such taxable year or, if the 19 taxpayer does not have any applicable fi- 20 nancial statement with respect to such tax- 21 able year, the books and records of the 22 taxpayer prepared in accordance with the 23 taxpayer’s accounting procedures. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—In 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00211 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 212 1 ‘‘(2) APPLICABLE STATEMENT.— 2 For purposes of this subsection, the term ‘applicable 3 financial statement’ means— 4 ‘‘(A) a financial statement which is cer- 5 tified as being prepared in accordance with gen- 6 erally accepted accounting principles and which 7 is— 8 ‘‘(i) a 10-K (or successor form), or 9 annual statement to shareholders, required 10 to be filed by the taxpayer with the United 11 States Securities and Exchange Commis- 12 sion, 13 ‘‘(ii) an audited financial statement of 14 the taxpayer which is used for— 15 ‘‘(I) credit purposes, 16 ‘‘(II) reporting to shareholders, 17 partners, or other proprietors, or to 18 beneficiaries, or 19 ‘‘(III) 20 nontax purpose, any other substantial 21 but only if there is no statement of the 22 taxpayer described in clause (i), or 23 ‘‘(iii) filed by the taxpayer with any 24 other Federal or State agency for nontax 25 purposes, but only if there is no statement g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FINANCIAL 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00212 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 213 1 of the taxpayer described in clause (i) or 2 (ii), or 3 ‘‘(B) a financial statement of the taxpayer 4 which— 5 ‘‘(i) is used for a purpose described in 6 subclause (I), (II), or (III) of subpara- 7 graph (A)(ii), or 8 ‘‘(ii) filed by the taxpayer with any 9 regulatory or governmental body (whether 10 domestic or foreign) specified by the Sec- 11 retary, 12 but only if there is no statement of the taxpayer 13 described in subparagraph (A). 14 ‘‘(3) APPLICATION 15 TO INDIVIDUALS, ETC.—In 16 which is not a corporation or a partnership, the 17 gross receipts test of section 448(c) shall be applied 18 in the same manner as if each trade or business of 19 such taxpayer were a corporation or partnership. 20 ‘‘(4) COORDINATION the case of any taxpayer WITH SECTION 481.—Any 21 change in method of accounting made pursuant to 22 this subsection shall be treated for purposes of sec- 23 tion 481 as initiated by the taxpayer and made with 24 the consent of the Secretary.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF GROSS RECEIPTS TEST 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00213 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 214 1 2 (d) EXEMPTION FROM PERCENTAGE COMPLETION FOR LONG-TERM CONTRACTS.— 3 4 (1) IN 460(e)(1)(B) is amended— 5 (A) by inserting ‘‘(other than a tax shelter 6 prohibited from using the cash receipts and dis- 7 bursements method of accounting under section 8 448(a)(3))’’ after ‘‘taxpayer’’ in the matter pre- 9 ceding clause (i), and 10 (B) by amending clause (ii) to read as fol- 11 lows: 12 ‘‘(ii) who meets the gross receipts test 13 of section 448(c) for the taxable year in 14 which such contract is entered into.’’. 15 (2) CONFORMING AMENDMENTS.—Section 16 460(e) is amended by striking paragraphs (2) and 17 (3), by redesignating paragraphs (4), (5), and (6) as 18 paragraphs (3), (4), and (5), respectively, and by in- 19 serting after paragraph (1) the following new para- 20 graph: 21 22 ‘‘(2) RULES RELATED TO GROSS RECEIPTS TEST.— 23 ‘‘(A) APPLICATION OF GROSS RECEIPTS 24 TEST TO INDIVIDUALS, ETC.— 25 paragraph (1)(B)(ii), in the case of any tax- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Section 10:46 Nov 02, 2017 Jkt 000000 For purposes of (679209 10) PO 00000 Frm 00214 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 215 1 payer which is not a corporation or a partner- 2 ship, the gross receipts test of section 448(c) 3 shall be applied in the same manner as if each 4 trade or business of such taxpayer were a cor- 5 poration or partnership. 6 ‘‘(B) COORDINATION 7 Any change in method of accounting made pur- 8 suant to paragraph (1)(B)(ii) shall be treated 9 as initiated by the taxpayer and made with the 10 consent of the Secretary. Such change shall be 11 effected on a cut-off basis for all similarly clas- 12 sified contracts entered into on or after the 13 year of change.’’. 14 (e) EFFECTIVE DATE.— 15 (1) IN GENERAL.—Except as otherwise pro- 16 vided in this subsection, the amendments made by 17 this section shall apply to taxable years beginning 18 after December 31, 2017. 19 (2) PRESERVATION OF SUSPENSE ACCOUNT 20 RULES WITH RESPECT TO ANY EXISTING SUSPENSE 21 ACCOUNTS.—So 22 subsection (a)(5)(C) as relate to section 447(i) of 23 the Internal Revenue Code of 1986 shall not apply 24 with respect to any suspense account established g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 WITH SECTION 481.— 10:46 Nov 02, 2017 Jkt 000000 much of the amendments made by (679209 10) PO 00000 Frm 00215 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 216 1 under such section before the date of the enactment 2 of this Act. 3 (3) EXEMPTION FROM PERCENTAGE COMPLE- 4 TION FOR LONG-TERM CONTRACTS.—The 5 ments made by subsection (d) shall apply to con- 6 tracts entered into after December 31, 2017, in tax- 7 able years ending after such date. 8 amend- SEC. 3203. SMALL BUSINESS EXCEPTION FROM LIMITATION 9 10 ON DEDUCTION OF BUSINESS INTEREST. (a) IN GENERAL.—Section 163(j)(2), as amended by 11 section 3301, is amended to read as follows: 12 ‘‘(2) EXEMPTION 13 NESSES.—In 14 tax shelter prohibited from using the cash receipts 15 and disbursements method of accounting under sec- 16 tion 448(a)(3)) which meets the gross receipts test 17 of section 448(c) for any taxable year, paragraph (1) 18 shall not apply to such taxpayer for such taxable 19 year. In the case of any taxpayer which is not a cor- 20 poration or a partnership, the gross receipts test of 21 section 448(c) shall be applied in the same manner 22 as if such taxpayer were a corporation or partner- 23 ship.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FOR CERTAIN SMALL BUSI- 10:46 Nov 02, 2017 Jkt 000000 the case of any taxpayer (other than a (679209 10) PO 00000 Frm 00216 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 217 1 (b) EFFECTIVE DATE.—The amendment made by 2 this section shall apply to taxable years beginning after 3 December 31, 2017. 5 Subtitle D—Reform of Businessrelated Exclusions, Deductions, etc. 6 SEC. 3301. INTEREST. 4 7 (a) IN GENERAL.—Section 163(j) is amended to read 8 as follows: 9 ‘‘(j) LIMITATION ON BUSINESS INTEREST.— 10 ‘‘(1) IN the case of any taxpayer 11 for any taxable year, the amount allowed as a deduc- 12 tion under this chapter for business interest shall 13 not exceed the sum of— 14 ‘‘(A) the business interest income of such 15 taxpayer for such taxable year, plus 16 ‘‘(B) 30 percent of the adjusted taxable in- 17 come of such taxpayer for such taxable year. 18 The amount determined under subparagraph (B) 19 (after any increases in such amount under para- 20 graph (3)(A)(iii)) shall not be less than zero. 21 ‘‘(2) EXEMPTION FOR CERTAIN SMALL BUSI- 22 NESSES.—For 23 nesses, see the amendment made by section 3204 of 24 the Tax Cuts and Jobs Act. 25 ‘‘(3) APPLICATION g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—In 10:46 Nov 02, 2017 Jkt 000000 exemption for certain small busi- TO PARTNERSHIPS, ETC.— (679209 10) PO 00000 Frm 00217 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 218 1 ‘‘(A) IN 2 partnership— the case of any 3 ‘‘(i) this subsection shall be applied at 4 the partnership level and any deduction for 5 business interest shall be taken into ac- 6 count in determining the non-separately 7 stated taxable income or loss of the part- 8 nership, 9 ‘‘(ii) the adjusted taxable income of 10 each partner of such partnership shall be 11 determined without regard to such part- 12 ner’s distributive share of the non-sepa- 13 rately stated taxable income or loss of such 14 partnership, and 15 ‘‘(iii) the amount determined under 16 paragraph (1)(B) with respect to each 17 partner of such partnership shall be in- 18 creased by such partner’s distributive 19 share of such partnership’s excess amount. 20 ‘‘(B) EXCESS AMOUNT.—The term ‘excess 21 amount’ means, with respect to any partner- 22 ship, the excess (if any) of— 23 ‘‘(i) 30 percent of the adjusted taxable 24 income of the partnership, over g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—In 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00218 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 219 1 ‘‘(ii) the amount (if any) by which the 2 business interest of the partnership ex- 3 ceeds the business interest income of the 4 partnership. 5 ‘‘(C) APPLICATION 6 Rules similar to the rules of subparagraphs (A) 7 and (B) shall apply with respect to any S cor- 8 poration and its shareholders. 9 ‘‘(4) BUSINESS INTEREST.—For purposes of 10 this subsection, the term ‘business interest’ means 11 any interest paid or accrued on indebtedness prop- 12 erly allocable to a trade or business. Such term shall 13 not include investment interest (within the meaning 14 of subsection (d)). 15 ‘‘(5) BUSINESS INTEREST INCOME.—For pur- 16 poses of this subsection, the term ‘business interest 17 income’ means the amount of interest includible in 18 the gross income of the taxpayer for the taxable year 19 which is properly allocable to a trade or business. 20 Such term shall not include investment income 21 (within the meaning of subsection (d)). 22 ‘‘(6) ADJUSTED TAXABLE INCOME.—For pur- 23 poses of this subsection, the term ‘adjusted taxable 24 income’ means the taxable income of the taxpayer— 25 ‘‘(A) computed without regard to— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 TO S CORPORATIONS.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00219 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 220 1 ‘‘(i) any item of income, gain, deduc- 2 tion, or loss which is not properly allocable 3 to a trade or business, 4 ‘‘(ii) any business interest or business 5 interest income, 6 ‘‘(iii) the amount of any net operating 7 loss deduction under section 172, and 8 ‘‘(iv) any deduction allowable for de- 9 preciation, amortization, or depletion, and 10 ‘‘(B) computed with such other adjust- 11 ments as the Secretary may provide. 12 ‘‘(7) TRADE purposes of 13 this subsection, the term ‘trade or business’ shall not 14 include— 15 ‘‘(A) the trade or business of performing 16 services as an employee, 17 ‘‘(B) a real property trade or business (as 18 such term is defined in section 469(c)(7)(C)), 19 or 20 ‘‘(C) the trade or business of the fur- 21 nishing or sale of— 22 ‘‘(i) electrical energy, water, or sewage 23 disposal services, 24 ‘‘(ii) gas or steam through a local dis- 25 tribution system, or g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OR BUSINESS.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00220 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 221 1 ‘‘(iii) transportation of gas or steam 2 by pipeline, or 3 if the rates for such furnishing or sale, as the 4 case may be, have been established or approved 5 by a State or political subdivision thereof, by 6 any agency or instrumentality of the United 7 States, or by a public service or public utility 8 commission or other similar body of any State 9 or political subdivision thereof. 10 ‘‘(8) CARRYFORWARD OF DISALLOWED INTER- 11 EST.—For 12 paragraph (1), see subsection (o).’’. 13 (b) CARRYFORWARD 14 carryforward of interest disallowed under TEREST.—Section OF DISALLOWED BUSINESS IN- 163, after amendment by section 15 4302(a) and before amendment by section 4302(b), is 16 amended by inserting after subsection (n) the following 17 new subsection: 18 19 ‘‘(o) CARRYFORWARD OF DISALLOWED BUSINESS INTEREST.—The amount of any business interest not al- 20 lowed as a deduction for any taxable year by reason of 21 subsection (j) shall be treated as business interest paid 22 or accrued in the succeeding taxable year. Business inter23 est paid or accrued in any taxable year (determined with24 out regard to the preceding sentence) shall not be carried 25 past the 5th taxable year following such taxable year, de- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00221 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 222 1 termined by treating business interest as allowed as a de2 duction on a first-in, first-out basis.’’. 3 4 (c) TREATMENT ALLOWED CARRYFORWARD OF BUSINESS INTEREST IN OF DIS- CERTAIN CORPORATE 5 ACQUISITIONS.— 6 (1) IN 381(c) is amended 7 by inserting after paragraph (19) the following new 8 paragraph: 9 ‘‘(20) CARRYFORWARD OF DISALLOWED INTER- 10 EST.—The 11 in section 163(o) to taxable years ending after the 12 date of distribution or transfer.’’. 13 (2) carryover of disallowed interest described APPLICATION OF LIMITATION.—Section 14 382(d) is amended by adding at the end the fol- 15 lowing new paragraph: 16 ‘‘(3) APPLICATION 17 ALLOWED INTEREST.—The 18 shall include any carryover of disallowed interest de- 19 scribed in section 163(o) under rules similar to the 20 rules of paragraph (1).’’. 21 (3) TO CARRYFORWARD OF DIS- CONFORMING term ‘pre-change loss’ AMENDMENT.—Section 22 382(k)(1) is amended by inserting after the first 23 sentence the following: ‘‘Such term shall include any 24 corporation entitled to use a carryforward of dis- 25 allowed interest described in section 381(c)(20).’’ g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Section 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00222 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 223 1 (d) EFFECTIVE DATE.—The amendments made by 2 this section shall apply to taxable years beginning after 3 December 31, 2017. 4 SEC. 3302. MODIFICATION OF NET OPERATING LOSS DE- 5 DUCTION. 6 7 (a) INDEFINITE CARRYFORWARD ATING OF NET OPER- LOSSES.—Section 172(b)(1)(A)(ii) is amended by 8 striking ‘‘to each of the 20 taxable years’’ and inserting 9 ‘‘to each taxable year’’. 10 (b) REPEAL OF NET OPERATING LOSS CARRYBACKS 11 OTHER THAN 1-YEAR CARRYBACK 12 ASTER 13 14 ELIGIBLE DIS- LOSSES.— (1) IN GENERAL.—Section 172(b)(1)(A)(i) is amended to read as follows: 15 ‘‘(i) in the case of any portion of a net 16 operating loss for the taxable year which is 17 an eligible disaster loss with respect to the 18 taxpayer, shall be a net operating loss 19 carryback to the taxable year preceding the 20 taxable year of such loss, and’’. 21 (2) CONFORMING AMENDMENTS.— 22 (A) Section 172(b)(1) is amended by strik- 23 ing subparagraphs (B) through (F) and insert- 24 ing the following: 25 ‘‘(B) ELIGIBLE g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF 10:46 Nov 02, 2017 Jkt 000000 DISASTER LOSS.— (679209 10) PO 00000 Frm 00223 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 224 1 ‘‘(i) IN purposes of 2 subparagraph (A)(i), the term ‘eligible dis- 3 aster loss’ means— 4 ‘‘(I) in the case of a taxpayer 5 which is a small business, net oper- 6 ating losses attributable to federally 7 declared disasters (as defined by sec- 8 tion 165(i)(5)), and 9 ‘‘(II) in the case of a taxpayer 10 engaged in the trade or business of 11 farming, net operating losses attrib- 12 utable to such federally declared dis- 13 asters. 14 ‘‘(ii) SMALL BUSINESS.—For purposes 15 of this subparagraph, the term ‘small busi- 16 ness’ means a corporation or partnership 17 which meets the gross receipts test of sec- 18 tion 448(c) (determined by substituting 19 ‘$5,000,000’ for ‘$25,000,000’ each place 20 it appears therein) for the taxable year in 21 which the loss arose (or, in the case of a 22 sole proprietorship, which would meet such 23 test if such proprietorship were a corpora- 24 tion). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00224 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 225 1 ‘‘(iii) TRADE OR BUSINESS OF FARM- 2 ING.—For 3 the trade or business of farming shall in- 4 clude the trade or business of— 5 purposes of this subparagraph, ‘‘(I) operating a nursery or sod 6 farm, or 7 ‘‘(II) the raising or harvesting of 8 trees bearing fruit, nuts, or other 9 crops, or ornamental trees. 10 For purposes of subclause (II), an ever- 11 green tree which is more than 6 years old 12 at the time severed from the roots shall 13 not be treated as an ornamental tree.’’. 14 (B) Section 172 is amended by striking 15 16 subsections (f), (g), and (h). (c) LIMITATION OF NET OPERATING LOSS TO 90 17 PERCENT OF TAXABLE INCOME.— 18 (1) IN GENERAL.—Section 172(a) is amended 19 to read as follows: 20 ‘‘(a) DEDUCTION ALLOWED.—There shall be allowed 21 as a deduction for the taxable year an amount equal to 22 the lesser of— 23 ‘‘(1) the aggregate of the net operating loss 24 carryovers to such year, plus the net operating loss 25 carrybacks to such year, or g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00225 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 226 1 ‘‘(2) 90 percent of taxable income computed 2 without regard to the deduction allowable under this 3 section. 4 For purposes of this subtitle, the term ‘net operating loss 5 deduction’ means the deduction allowed by this sub6 section.’’. 7 (2) OF LIMITATION WITH 8 CARRYBACKS AND CARRYOVERS.—Section 9 is amended by striking ‘‘shall be computed—’’ and 10 172(b)(2) all that follows and inserting ‘‘shall— 11 ‘‘(A) be computed with the modifications 12 specified in subsection (d) other than para- 13 graphs (1), (4), and (5) thereof, and by deter- 14 mining the amount of the net operating loss de- 15 duction without regard to the net operating loss 16 for the loss year or for any taxable year there- 17 after, 18 ‘‘(B) not be considered to be less than 19 zero, and 20 ‘‘(C) not exceed the amount determined 21 under subsection (a)(2) for such prior taxable 22 year.’’. 23 (3) CONFORMING AMENDMENT.—Section 24 172(d)(6) is amended by striking ‘‘and’’ at the end 25 of subparagraph (A), by striking the period at the g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 COORDINATION 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00226 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 227 1 end of subparagraph (B) and inserting ‘‘; and’’, and 2 by adding at the end the following new subpara- 3 graph: 4 ‘‘(C) subsection (a)(2) shall be applied by 5 substituting ‘real estate investment trust tax- 6 able income (as defined in section 857(b)(2) but 7 without regard to the deduction for dividends 8 paid (as defined in section 561))’ for ‘taxable 9 income’.’’. 10 (d) ANNUAL INCREASE OF INDEFINITE CARRYOVER 11 AMOUNTS.—Section 172(b) is amended by redesignating 12 paragraph (3) as paragraph (4) and by inserting after 13 paragraph (2) the following new paragraph: 14 ‘‘(3) ANNUAL 15 OVER AMOUNTS.—For purposes of paragraph (2)— 16 ‘‘(A) the amount of any indefinite net op- 17 erating loss which is carried to the next suc- 18 ceeding taxable year after the loss year (within 19 the meaning of paragraph (2)) shall be in- 20 creased by an amount equal to— 21 ‘‘(i) the amount of the loss which may 22 be so carried over to such succeeding tax- 23 able year (determined without regard to 24 this paragraph), multiplied by 25 ‘‘(ii) the sum of— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 INCREASE OF INDEFINITE CARRY- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00227 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 228 1 ‘‘(I) the annual Federal short- 2 term rate (determined under section 3 1274(d)) for the last month ending 4 before the beginning of such taxable 5 year, plus 6 ‘‘(II) 4 percentage points, and 7 ‘‘(B) the amount of any indefinite net op- 8 erating loss which is carried to any succeeding 9 taxable year (after such next succeeding taxable 10 year) shall be an amount equal to— 11 ‘‘(i) the excess of— 12 ‘‘(I) the amount of the loss car- 13 ried to the prior taxable year (after 14 any increase under this paragraph 15 with respect to such amount), over 16 ‘‘(II) the amount by which such 17 loss was reduced under paragraph (2) 18 by reason of the taxable income for 19 such prior taxable year, multiplied by 20 ‘‘(ii) a percentage equal to 100 per- 21 cent plus the percentage determined under 22 subparagraph (A)(ii) with respect to such 23 succeeding taxable year. 24 For purposes of the preceding sentence, the 25 term ‘indefinite net operating loss’ means any g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00228 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 229 1 net operating loss arising in a taxable year be- 2 ginning after December 31, 2017.’’. 3 (e) EFFECTIVE DATE.— 4 (1) CARRYFORWARDS 5 amendments made by subsections (a) and (b) shall 6 apply to net operating losses arising in taxable years 7 beginning after December 31, 2017. 8 9 (2) NET CENT OF OPERATING LOSS LIMITED TO 90 PER- TAXABLE INCOME.—The amendments 10 made by subsection (c) shall apply to taxable years 11 beginning after December 31, 2017. 12 (3) ANNUAL INCREASE IN CARRYOVER 13 AMOUNTS.—The 14 (d) shall apply to amounts carried to taxable years 15 beginning after December 31, 2017. 16 (4) amendments made by subsection SPECIAL RULE FOR NET DISASTER 17 LOSSES.—Notwithstanding 18 amendments made by subsection (b) shall not apply 19 to the portion of the net operating loss for any tax- 20 able year which is a net disaster loss to which sec- 21 tion 504(b) of the Disaster Tax Relief and Airport 22 and Airway Extension Act of 2017 applies. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AND CARRYBACKS.—The 10:46 Nov 02, 2017 Jkt 000000 paragraph (1), the (679209 10) PO 00000 Frm 00229 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 230 1 SEC. 3303. LIKE-KIND EXCHANGES OF REAL PROPERTY. 2 (a) IN GENERAL.—Section 1031(a)(1) is amended by 3 striking ‘‘property’’ each place it appears and inserting 4 ‘‘real property’’. 5 (b) CONFORMING AMENDMENTS.— 6 (1) Paragraph (2) of section 1031(a) is amend- 7 ed to read as follows: 8 ‘‘(2) EXCEPTION 9 FOR SALE.—This FOR REAL PROPERTY HELD subsection shall not apply to any 10 exchange of real property held primarily for sale.’’. 11 (2) Section 1031 is amended by striking sub- 12 sections (e) and (i). 13 (3) Section 1031, as amended by paragraph 14 (2), is amended by inserting after subsection (d) the 15 following new subsection: 16 ‘‘(e) APPLICATION TO CERTAIN PARTNERSHIPS.— 17 For purposes of this section, an interest in a partnership 18 which has in effect a valid election under section 761(a) 19 to be excluded from the application of all of subchapter 20 K shall be treated as an interest in each of the assets of 21 such partnership and not as an interest in a partnership.’’. 22 (4) Section 1031(h) is amended to read as fol- 23 lows: 24 ‘‘(h) SPECIAL RULES 25 ERTY.—Real g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 FOR FOREIGN REAL PROP- property located in the United States and (679209 10) PO 00000 Frm 00230 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 231 1 real property located outside the United States are not 2 property of a like kind.’’. 3 (5) The heading of section 1031 is amended by 4 striking ‘‘PROPERTY’’ and inserting ‘‘REAL 5 ERTY’’. PROP- 6 (6) The table of sections for part III of sub- 7 chapter O of chapter 1 is amended by striking the 8 item relating to section 1031 and inserting the fol- 9 lowing new item: ‘‘Sec. 1031. Exchange of real property held for productive use or investment.’’. 10 (c) EFFECTIVE DATE.— 11 (1) IN as otherwise pro- 12 vided in this subsection, the amendments made by 13 this section shall apply to exchanges completed after 14 December 31, 2017. 15 (2) TRANSITION RULE.—The amendments 16 made by this section shall not apply to any exchange 17 if— 18 (A) the property disposed of by the tax- 19 payer in the exchange is disposed of on or be- 20 fore December 31 2017, or 21 (B) the property received by the taxpayer 22 in the exchange is received on or before Decem- 23 ber 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Except 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00231 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 232 1 SEC. 3304. REVISION OF TREATMENT OF CONTRIBUTIONS 2 TO CAPITAL. 3 (a) INCLUSION OF CONTRIBUTIONS TO CAPITAL.— 4 Part II of subchapter B of chapter 1 is amended by insert5 ing after section 75 the following new section: 6 ‘‘SEC. 76. CONTRIBUTIONS TO CAPITAL. 7 ‘‘(a) IN GENERAL.—Gross income includes any con- 8 tribution to the capital of any entity. 9 10 ‘‘(b) TREATMENT FOR CONTRIBUTIONS IN EXCHANGE STOCK, ETC.— 11 ‘‘(1) IN GENERAL.—In the case of any con- 12 tribution of money or other property to a corpora- 13 tion in exchange for stock of such corporation— 14 ‘‘(A) such contribution shall not be treated 15 for purposes of subsection (a) as a contribution 16 to the capital of such corporation (and shall not 17 be includible in the gross income of such cor- 18 poration), and 19 ‘‘(B) no gain or loss shall be recognized to 20 such corporation upon the issuance of such 21 stock. 22 ‘‘(2) TREATMENT LIMITED TO VALUE OF 23 STOCK.—For 24 tion of money or other property to a corporation 25 shall be treated as being in exchange for stock of 26 such corporation only to the extent that the fair g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF 10:46 Nov 02, 2017 Jkt 000000 purposes of this subsection, a contribu- (679209 10) PO 00000 Frm 00232 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 233 1 market value of such money and other property does 2 not exceed the fair market value of such stock. 3 ‘‘(3) APPLICATION TO ENTITIES OTHER THAN 4 CORPORATIONS.—In 5 than a corporation, rules similar to the rules of 6 paragraphs (1) and (2) shall apply in the case of 7 any contribution of money or other property to such 8 entity in exchange for any interest in such entity. 9 ‘‘(c) TREASURY STOCK TREATED the case of any entity other AS STOCK.—Any 10 reference in this section to stock shall be treated as includ11 ing a reference to treasury stock.’’. 12 13 (b) BASIS OF CORPORATION IN CONTRIBUTED PROP- ERTY.— 14 (1) CONTRIBUTIONS TO CAPITAL.—Subsection 15 (c) of section 362 is amended to read as follows: 16 ‘‘(c) CONTRIBUTIONS TO CAPITAL.—If property 17 other than money is transferred to a corporation as a con18 tribution to the capital of such corporation (within the 19 meaning of section 76) then the basis of such property 20 shall be the greater of— 21 ‘‘(1) the basis determined in the hands of the 22 transferor, increased by the amount of gain recog- 23 nized to the transferor on such transfer, or g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00233 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 234 1 ‘‘(2) the amount included in gross income by 2 such corporation under section 76 with respect to 3 such contribution.’’. 4 (2) CONTRIBUTIONS IN EXCHANGE FOR 5 STOCK.—Paragraph 6 ed by striking ‘‘contribution to capital’’ and insert- 7 ing ‘‘contribution in exchange for stock of such cor- 8 poration (determined under rules similar to the rules 9 of paragraphs (2) and (3) of section 76(b))’’. 10 (2) of section 362(a) is amend- (c) CONFORMING AMENDMENTS.— 11 (1) Section 108(e) is amended by striking para- 12 graph (6). 13 (2) Part III of subchapter B of chapter 1 is 14 amended by striking section 118 (and by striking 15 the item relating to such section in the table of sec- 16 tions for such part). 17 (3) The table of sections for part II of sub- 18 chapter B of chapter 1 is amended by inserting after 19 the item relating to section 75 the following new 20 item: ‘‘Sec. 76. Contributions to capital.’’. 21 (d) EFFECTIVE DATE.—The amendments made by 22 this section shall apply to contributions made, and trans23 actions entered into, after the date of the enactment of 24 this Act. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00234 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 235 1 SEC. 3305. REPEAL OF DEDUCTION FOR LOCAL LOBBYING 2 EXPENSES. 3 (a) IN GENERAL.—Section 162(e) is amended by 4 striking paragraphs (2) and (7) and by redesignating 5 paragraphs (3), (4), (5), (6), and (8) as paragraphs (2), 6 (3), (4), (5), and (6), respectively. 7 (b) CONFORMING 8 6033(e)(1)(B)(ii) is 9 162(e)(5)(B)(ii)’’ AMENDMENT.—Section amended by striking and inserting ‘‘section ‘‘section 10 162(e)(4)(B)(ii)’’. 11 (c) EFFECTIVE DATE.—The amendments made by 12 this section shall apply to amounts paid or incurred after 13 December 31, 2017. 14 SEC. 3306. REPEAL OF DEDUCTION FOR INCOME ATTRIB- 15 UTABLE TO DOMESTIC PRODUCTION ACTIVI- 16 TIES. 17 (a) IN GENERAL.—Part VI of subchapter B of chap- 18 ter 1 is amended by striking section 199 (and by striking 19 the item relating to such section in the table of sections 20 for such part). 21 (b) CONFORMING AMENDMENTS.— 22 (1) 74(d)(2)(B), 86(b)(2)(A), 23 137(b)(3)(A), and 246(b)(1) are each amended by 24 striking ‘‘199,’’. 25 (2) Section 170(b)(2)(D), as amended by the 26 preceding provisions of this Act, is amended by g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 Sections 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00235 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 236 1 striking clause (iv), by redesignating clause (v) as 2 clause (iv), and by inserting ‘‘and’’ at the end of 3 clause (iii). 4 (3) Section 172(d) is amended by striking para- 5 graph (7). 6 (4) Section 613(a) is amended by striking ‘‘and 7 without the deduction under section 199’’. 8 (5) Section 613A(d)(1) is amended by striking 9 subparagraph (B) and by redesignating subpara- 10 graphs (C), (D), and (E) as subparagraphs (B), (C), 11 and (D), respectively. 12 (6) Section 1402(a) is amended by adding 13 ‘‘and’’ at the end of paragraph (15) and by striking 14 paragraph (16). 15 (c) EFFECTIVE DATE.—The amendments made by 16 this section shall apply to taxable years beginning after 17 December 31, 2017. 18 SEC. 3307. ENTERTAINMENT, ETC. EXPENSES. 19 (a) DENIAL OF DEDUCTION.—Subsection (a) of sec- 20 tion 274 is amended to read as follows: 21 22 ‘‘(a) ENTERTAINMENT, AMUSEMENT, RECREATION, AND OTHER FRINGE BENEFITS .— 23 24 ‘‘(1) IN 10:46 Nov 02, 2017 deduction otherwise al- lowable under this chapter shall be allowed for g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—No Jkt 000000 (679209 10) PO 00000 Frm 00236 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 237 1 amounts paid or incurred for any of the following 2 items: 3 ‘‘(A) ACTIVITY.—With respect to an activ- 4 ity which is of a type generally considered to 5 constitute entertainment, amusement, or recre- 6 ation. 7 ‘‘(B) MEMBERSHIP respect 8 to membership in any club organized for busi- 9 ness, pleasure, recreation or other social pur- 10 poses. 11 ‘‘(C) AMENITY.—With respect to a de 12 minimis fringe (as defined in section 132(e)(1)) 13 that is primarily personal in nature and involv- 14 ing property or services that are not directly re- 15 lated to the taxpayer’s trade or business. 16 ‘‘(D) FACILITY.—With respect to a facility 17 or portion thereof used in connection with an 18 activity referred to in subparagraph (A), mem- 19 bership dues or similar amounts referred to in 20 subparagraph (B), or an amenity referred to in 21 subparagraph (C). 22 ‘‘(E) QUALIFIED TRANSPORTATION 23 FRINGE AND PARKING FACILITY.—Which 24 qualified transportation fringe (as defined in 25 section 132(f)) or which is a parking facility g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 DUES.—With 10:46 Nov 02, 2017 Jkt 000000 is a (679209 10) PO 00000 Frm 00237 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 238 1 used in connection with qualified parking (as 2 defined in section 132(f)(5)(C)). 3 ‘‘(F) ON-PREMISES 4 Which is an on-premises athletic facility as de- 5 fined in section 132(j)(4)(B). 6 ‘‘(2) SPECIAL RULES.—For purposes of apply- 7 ing paragraph (1), an activity described in section 8 212 shall be treated as a trade or business. 9 ‘‘(3) REGULATIONS.—Under the regulations 10 prescribed to carry out this section, the Secretary 11 shall include regulations— 12 ‘‘(A) defining entertainment, amenities, 13 recreation, amusement, and facilities for pur- 14 poses of this subsection, 15 ‘‘(B) providing for the appropriate alloca- 16 tion of depreciation and other costs with respect 17 to facilities used for parking or for on-premises 18 athletic facilities, and 19 ‘‘(C) specifying arrangements a primary 20 purpose of which is the avoidance of this sub- 21 section.’’. 22 23 (b) EXCEPTION IBLE IN INCOME OF g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ATHLETIC FACILITY.— 10:46 Nov 02, 2017 Jkt 000000 FOR CERTAIN EXPENSES INCLUD- RECIPIENT.— (679209 10) PO 00000 Frm 00238 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 239 1 TREATED AS COMPENSATION.— (1) EXPENSES 2 Paragraph (2) of section 274(e) is amended to read 3 as follows: 4 ‘‘(2) EXPENSES TREATED AS COMPENSATION.— 5 Expenses for goods, services, and facilities, to the 6 extent that the expenses do not exceed the amount 7 of the expenses which are treated by the taxpayer, 8 with respect to the recipient of the entertainment, 9 amusement, or recreation, as compensation to an 10 employee on the taxpayer’s return of tax under this 11 chapter and as wages to such employee for purposes 12 of chapter 24 (relating to withholding of income tax 13 at source on wages).’’. 14 (2) EXPENSES INCLUDIBLE IN INCOME OF PER- 15 SONS WHO ARE NOT EMPLOYEES.—Paragraph 16 section 274(e) is amended by striking ‘‘to the extent 17 that the expenses’’ and inserting ‘‘to the extent that 18 the expenses do not exceed the amount of the ex- 19 penses that’’. 20 (c) EXCEPTIONS FOR (9) of REIMBURSED EXPENSES.— 21 Paragraph (3) of section 274(e) is amended to read as 22 follows: 23 ‘‘(3) REIMBURSED 24 ‘‘(A) IN 25 10:46 Nov 02, 2017 GENERAL.—Expenses paid or in- curred by the taxpayer, in connection with the g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 EXPENSES.— Jkt 000000 (679209 10) PO 00000 Frm 00239 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 240 1 performance by him of services for another per- 2 son (whether or not such other person is the 3 taxpayer’s employer), under a reimbursement or 4 other expense allowance arrangement with such 5 other person, but this paragraph shall apply— 6 ‘‘(i) where the services are performed 7 for an employer, only if the employer has 8 not treated such expenses in the manner 9 provided in paragraph (2), or 10 ‘‘(ii) where the services are performed 11 for a person other than an employer, only 12 if the taxpayer accounts (to the extent pro- 13 vided by subsection (d)) to such person. 14 ‘‘(B) EXCEPTION.—Except as provided by 15 the Secretary, subparagraph (A) shall not 16 apply— 17 ‘‘(i) in the case of an arrangement in 18 which the person other than the employer 19 is 20 168(h)(2)(A), or entity described in section 21 ‘‘(ii) to any other arrangement des- 22 ignated by the Secretary as having the ef- 23 fect of avoiding the limitation under sub- 24 paragraph (A).’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 an 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00240 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 241 1 2 (d) 50 PERCENT LIMITATION TERTAINMENT ON MEALS AND EN- EXPENSES.—Subsection (n) of section 274 3 is amended to read as follows: 4 ‘‘(n) LIMITATION ON CERTAIN EXPENSES.— 5 ‘‘(1) IN amount allowable as a 6 deduction under this chapter for any expense for 7 food or beverages (pursuant to subsection (e)(1)) or 8 business meals (pursuant to subsection (k)(1)) shall 9 not exceed 50 percent of the amount of such expense 10 or item which would (but for this paragraph) be al- 11 lowable as a deduction under this chapter. 12 13 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not apply to any expense if— 14 ‘‘(A) such expense is described in para- 15 graph (2), (3), (6), (7), or (8) of subsection (e), 16 ‘‘(B) in the case of an expense for food or 17 beverages, such expense is excludable from the 18 gross income of the recipient under section 132 19 by reason of subsection (e) thereof (relating to 20 de minimis fringes) or under section 119 (relat- 21 ing to meals and lodging furnished for conven- 22 ience of employer), or 23 ‘‘(C) in the case of an employer who pays 24 or reimburses moving expenses of an employee, g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00241 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 242 1 such expenses are includible in the income of 2 the employee under section 82. 3 ‘‘(3) SPECIAL 4 TO FEDERAL HOURS OF SERVICE.—In 5 any expenses for food or beverages consumed while 6 away from home (within the meaning of section 7 162(a)(2)) by an individual during, or incident to, 8 the period of duty subject to the hours of service 9 limitations of the Department of Transportation, 10 paragraph (1) shall be applied by substituting ‘80 11 percent’ for ‘50 percent’.’’. 12 (e) CONFORMING AMENDMENTS.— 13 the case of (1) Section 274(d) is amended— 14 (A) by striking paragraph (2) and redesig- 15 nating paragraphs (3) and (4) as paragraphs 16 (2) and (3), respectively, and 17 (B) in the flush material following para- 18 graph (3) (as so redesignated)— 19 (i) by striking ‘‘, entertainment, 20 amusement, recreation, or’’ in item (B), 21 and 22 (ii) by striking ‘‘(D) the business rela- 23 tionship to the taxpayer of persons enter- 24 tained, using the facility or property, or re- 25 ceiving the gift’’ and inserting ‘‘(D) the g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 RULE FOR INDIVIDUALS SUBJECT 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00242 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 243 1 business relationship to the taxpayer of the 2 person receiving the benefit’’. 3 (2) Section 274(e) is amended by striking para- 4 graph (4) and redesignating paragraphs (5), (6), 5 (7), (8), and (9) as paragraphs (4), (5), (6), (7), 6 and (8), respectively. 7 (3) Section 274(k)(2)(A) is amended by strik- 8 ing ‘‘(4), (7), (8), or (9)’’ and inserting ‘‘(6), (7), or 9 (8)’’. 10 (4) Section 274 is amended by striking sub- 11 section (l). 12 (5) Section 274(m)(1)(B)(ii) is amended by 13 striking ‘‘(4), (7), (8), or (9)’’ and inserting ‘‘(6), 14 (7), or (8)’’. 15 (f) EFFECTIVE DATE.—The amendments made by 16 this section shall apply to amounts paid or incurred after 17 December 31, 2017. 18 SEC. 3308. UNRELATED BUSINESS TAXABLE INCOME IN- 19 CREASED BY AMOUNT OF CERTAIN FRINGE 20 BENEFIT EXPENSES FOR WHICH DEDUCTION 21 IS DISALLOWED. 22 (a) IN GENERAL.—Section 512(a) is amended by 23 adding at the end the following new paragraph: 24 25 ‘‘(6) INCREASE ABLE INCOME BY DISALLOWED FRINGE.—Unrelated g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 IN UNRELATED BUSINESS TAX- Jkt 000000 (679209 10) PO 00000 Frm 00243 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 244 1 business taxable income of an organization shall be 2 increased by any amount for which a deduction is 3 not allowable under this chapter by reason of section 4 274 and which is paid or incurred by such organiza- 5 tion for any qualified transportation fringe (as de- 6 fined in section 132(f)), any parking facility used in 7 connection with qualified parking (as defined in sec- 8 tion 132(f)(5)(C)), or any on-premises athletic facil- 9 ity (as defined in section 132(j)(4)(B)). The pre- 10 ceding sentence shall not apply to the extent the 11 amount paid or incurred is directly connected with 12 an unrelated trade or business which is regularly 13 carried on by the organization. The Secretary may 14 issue such regulations or other guidance as may be 15 necessary or appropriate to carry out the purposes 16 of this paragraph, including regulations or other 17 guidance providing for the appropriate allocation of 18 depreciation and other costs with respect to facilities 19 used for parking or for on-premises athletic facili- 20 ties. 21 ’’. 22 (b) EFFECTIVE DATE.—The amendment made by 23 this section shall apply to amounts paid or incurred after 24 December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00244 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 245 1 SEC. 3309. LIMITATION ON DEDUCTION FOR FDIC PRE- 2 3 MIUMS. (a) IN GENERAL.—Section 162 is amended by redes- 4 ignating subsection (q) as subsection (r) and by inserting 5 after subsection (p) the following new subsection: 6 ‘‘(q) DISALLOWANCE OF FDIC PREMIUMS PAID BY 7 CERTAIN LARGE FINANCIAL INSTITUTIONS.— 8 9 10 ‘‘(1) IN deduction shall be al- lowed for the applicable percentage of any FDIC premium paid or incurred by the taxpayer. 11 ‘‘(2) EXCEPTION FOR SMALL INSTITUTIONS.— 12 Paragraph (1) shall not apply to any taxpayer for 13 any taxable year if the total consolidated assets of 14 such taxpayer (determined as of the close of such 15 taxable year) do not exceed $10,000,000,000. 16 ‘‘(3) APPLICABLE PERCENTAGE.—For purposes 17 of this subsection, the term ‘applicable percentage’ 18 means, with respect to any taxpayer for any taxable 19 year, the ratio (expressed as a percentage but not 20 greater than 100 percent) which— 21 ‘‘(A) the excess of— 22 ‘‘(i) the total consolidated assets of 23 such taxpayer (determined as of the close 24 of such taxable year), over 25 ‘‘(ii) $10,000,000,000, bears to 26 ‘‘(B) $40,000,000,000. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—No 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00245 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 246 1 ‘‘(4) FDIC purposes of this 2 subsection, the term ‘FDIC premium’ means any as- 3 sessment imposed under section 7(b) of the Federal 4 Deposit Insurance Act (12 U.S.C. 1817(b)). 5 ‘‘(5) TOTAL CONSOLIDATED ASSETS.—For pur- 6 poses of this subsection, the term ‘total consolidated 7 assets’ has the meaning given such term under sec- 8 tion 165 of the Dodd-Frank Wall Street Reform and 9 Consumer Protection Act (12 U.S.C. 5365). 10 ‘‘(6) AGGREGATION 11 ‘‘(A) IN RULE.— GENERAL.—Members of an ex- 12 panded affiliated group shall be treated as a 13 single taxpayer for purposes of applying this 14 subsection. 15 ‘‘(B) EXPANDED AFFILIATED GROUP.— 16 For purposes of this paragraph, the term ‘ex- 17 panded affiliated group’ means an affiliated 18 group as defined in section 1504(a), deter- 19 mined— 20 ‘‘(i) by substituting ‘more than 50 21 percent’ for ‘at least 80 percent’ each place 22 it appears, and 23 ‘‘(ii) without regard to paragraphs (2) 24 and (3) of section 1504(b). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 PREMIUMS.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00246 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 247 1 A partnership or any other entity (other than a 2 corporation) shall be treated as a member of an 3 expanded affiliated group if such entity is con- 4 trolled 5 954(d)(3)) by members of such group (includ- 6 ing any entity treated as a member of such 7 group by reason of this sentence).’’. 8 (within the meaning of section (b) EFFECTIVE DATE.—The amendments made by 9 this section shall apply to taxable years beginning after 10 December 31, 2017. 11 SEC. 3310. REPEAL OF ROLLOVER OF PUBLICLY TRADED 12 SECURITIES GAIN INTO SPECIALIZED SMALL 13 BUSINESS INVESTMENT COMPANIES. 14 (a) IN GENERAL.—Part III of subchapter O of chap- 15 ter 1 is amended by striking section 1044 (and by striking 16 the item relating to such section in the table of sections 17 of such part). 18 (b) CONFORMING AMENDMENTS.—Section 19 1016(a)(23) is amended— 20 (1) by striking ‘‘1044,’’, and 21 (2) by striking ‘‘1044(d),’’. 22 (c) EFFECTIVE DATE.—The amendments made by 23 this section shall apply to sales after December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00247 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 248 1 SEC. 3311. CERTAIN SELF-CREATED PROPERTY NOT TREAT- 2 ED AS A CAPITAL ASSET. 3 (a) PATENTS, ETC.—Section 1221(a)(3) is amended 4 by inserting ‘‘a patent, invention, model or design (wheth5 er or not patented), a secret formula or process,’’ before 6 ‘‘a copyright’’. 7 (b) SELF-CREATED MUSICAL WORKS.—Section 8 1221(b) is amended by striking paragraph (3) and redes9 ignating paragraph (4) as paragraph (3). 10 (c) CONFORMING AMENDMENTS.— 11 (1) Section 170(e)(1)(A) is amended by striking 12 ‘‘(determined 13 1221(b)(3))’’. without regard to section 14 (2) Section 1231(b)(1)(C) is amended by insert- 15 ing ‘‘a patent, invention, model or design (whether 16 or not patented), a secret formula or process,’’ be- 17 fore ‘‘a copyright’’. 18 (d) EFFECTIVE DATE.—The amendments made by 19 this section shall apply to dispositions after December 31, 20 2017. 21 SEC. 3312. REPEAL OF SPECIAL RULE FOR SALE OR EX- 22 23 CHANGE OF PATENTS. (a) IN GENERAL.—Part IV of subchapter P of chap- 24 ter 1 is amended by striking section 1235 (and by striking 25 the item relating to such section in the table of sections 26 of such part). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00248 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 249 1 (b) CONFORMING AMENDMENTS.— 2 (1) Section 483(d) is amended by striking para- 3 graph (4). 4 (2) Section 901(l)(5) is amended by striking 5 ‘‘without regard to section 1235 or any similar rule’’ 6 and inserting ‘‘without regard to any provision 7 which treats a disposition as a sale or exchange of 8 a capital asset held for more than 1 year or any 9 similar provision’’. 10 (3) Section 1274(c)(3) is amended by striking 11 subparagraph (E) and redesignating subparagraph 12 (F) as subparagraph (E). 13 (c) EFFECTIVE DATE.—The amendments made by 14 this section shall apply to dispositions after December 31, 15 2017. 16 SEC. 3313. REPEAL OF TECHNICAL TERMINATION OF PART- 17 18 NERSHIPS. (a) IN GENERAL.—Paragraph (1) of section 708(b) 19 is amended— 20 (1) by striking ‘‘, or’’ at the end of subpara- 21 graph (A) and all that follows and inserting a pe- 22 riod, and 23 (2) by striking ‘‘only if—’’ and all that follows 24 through ‘‘no part of any business’’ and inserting the 25 following: ‘‘only if no part of any business’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00249 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 250 1 (b) EFFECTIVE DATE.—The amendments made by 2 this section shall apply to partnership taxable years begin3 ning after December 31, 2017. 5 Subtitle E—Reform of Business Credits 6 SEC. 3401. REPEAL OF CREDIT FOR CLINICAL TESTING EX- 7 PENSES FOR CERTAIN DRUGS FOR RARE DIS- 8 EASES OR CONDITIONS. 4 9 (a) IN GENERAL.—Subpart D of part IV of sub- 10 chapter A of chapter 1 is amended by striking section 45C 11 (and by striking the item relating to such section in the 12 table of sections for such subpart). 13 (b) CONFORMING AMENDMENTS.— 14 15 (1) Section 38(b) is amended by striking paragraph (12). 16 17 (2) Section 280C is amended by striking subsection (b). 18 (3) Section 6501(m) is amended by striking 19 ‘‘45C(d)(4),’’. 20 (c) EFFECTIVE DATE.—The amendments made by 21 this section shall apply to amounts paid or incurred in tax22 able years beginning after December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00250 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 251 1 SEC. 3402. REPEAL OF EMPLOYER-PROVIDED CHILD CARE 2 CREDIT. 3 (a) IN GENERAL.—Subpart D of part IV of sub- 4 chapter A of chapter 1 is amended by striking section 45F 5 (and by striking the item relating to such section in the 6 table of sections for such subpart). 7 (b) CONFORMING AMENDMENTS.— 8 (1) Section 38(b) is amended by striking para- 9 graph (15). 10 (2) Section 1016(a) is amended by striking 11 paragraph (28). 12 (c) EFFECTIVE DATE.— 13 (1) IN GENERAL.—Except as otherwise pro- 14 vided in this subsection, the amendments made by 15 this section shall apply to taxable years beginning 16 after December 31, 2017. 17 (2) BASIS ADJUSTMENTS.—The amendment 18 made by subsection (b)(2) shall apply to credits de- 19 termined for taxable years beginning after December 20 31, 2017. 21 SEC. 3403. REPEAL OF REHABILITATION CREDIT. 22 (a) IN GENERAL.—Subpart E of part IV of sub- 23 chapter A of chapter 1 is amended by striking section 47 24 (and by striking the item relating to such section in the 25 table of sections for such subpart). 26 (b) CONFORMING AMENDMENTS.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00251 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 252 1 (1) Section 170(f)(14)(A) is amended by insert- 2 ing ‘‘(as in effect before its repeal by the Tax Cuts 3 and Jobs Act)’’ after ‘‘section 47’’. 4 (2) Section 170(h)(4) is amended— 5 (A) by striking ‘‘(as defined in section 6 47(c)(3)(B))’’ in subparagraph (C)(ii), and 7 (B) by adding at the end the following new 8 subparagraph: 9 ‘‘(D) REGISTERED 10 The term ‘registered historic district’ means— 11 ‘‘(i) any district listed in the National 12 Register, and 13 ‘‘(ii) any district— 14 ‘‘(I) which is designated under a 15 statute of the appropriate State or 16 local government, if such statute is 17 certified by the Secretary of the Inte- 18 rior to the Secretary as containing cri- 19 teria which will substantially achieve 20 the purpose of preserving and reha- 21 bilitating buildings of historic signifi- 22 cance to the district, and 23 ‘‘(II) which is certified by the 24 Secretary of the Interior to the Sec- 25 retary as meeting substantially all of g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 HISTORIC DISTRICT.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00252 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 253 1 the requirements for the listing of dis- 2 tricts in the National Register.’’. 3 4 (3) Section 469(i)(3) is amended by striking subparagraph (B). 5 (4) Section 469(i)(6)(B) is amended— 6 (A) by striking ‘‘in the case of—’’ and all 7 that follows and inserting ‘‘in the case of any 8 credit determined under section 42 for any tax- 9 able year.’’, and 10 (B) by striking ‘‘, 11 IT,’’ 12 (5) Section 469(k)(1) is amended by striking ‘‘, 13 or any rehabilitation credit determined under section 14 47,’’. 15 (c) EFFECTIVE DATE.— 16 in the heading thereof. (1) IN GENERAL.—Except as provided in para- 17 graph (2), the amendments made by this section 18 shall apply to amounts paid or incurred after De- 19 cember 31, 2017. 20 (2) TRANSITION RULE.—In the case of quali- 21 fied rehabilitation expenditures (within the meaning 22 of section 47 of the Internal Revenue Code of 1986 23 as in effect before its repeal) with respect to any 24 building— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 REHABILITATION CRED- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00253 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 254 1 (A) owned or leased (as permitted by sec- 2 tion 47 of the Internal Revenue Code of 1986 3 as in effect before its repeal) by the taxpayer at 4 all times after December 31, 2017, and 5 (B) with respect to which the 24-month 6 period selected by the taxpayer under section 7 47(c)(1)(C) of such Code begins not later than 8 the end of the 180-day period beginning on the 9 date of the enactment of this Act, 10 the amendments made by this section shall apply to 11 such expenditures paid or incurred after the end of 12 the taxable year in which the 24-month period re- 13 ferred to in subparagraph (B) ends. 14 SEC. 3404. REPEAL OF WORK OPPORTUNITY TAX CREDIT. 15 (a) IN GENERAL.—Subpart F of part IV of sub- 16 chapter A of chapter 1 is amended by striking section 51 17 (and by striking the item relating to such section in the 18 table of sections for such subpart). 19 (b) CLERICAL AMENDMENT.—The heading of such 20 subpart F (and the item relating to such subpart in the 21 table of subparts for part IV of subchapter A of chapter 22 1) are each amended by striking ‘‘Rules for Computing 23 Work Opportunity Credit’’ and inserting ‘‘Special Rules’’. 24 (c) EFFECTIVE DATE.—The amendments made by 25 this section shall apply to amounts paid or incurred to g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00254 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 255 1 individuals who begin work for the employer after Decem2 ber 31, 2017. 3 SEC. 3405. REPEAL OF DEDUCTION FOR CERTAIN UNUSED 4 BUSINESS CREDITS. 5 (a) IN GENERAL.—Part VI of subchapter B of chap- 6 ter 1 is amended by striking section 196 (and by striking 7 the item relating to such section in the table of sections 8 for such part). 9 (b) EFFECTIVE DATE.—The amendments made by 10 this section shall apply to taxable years beginning after 11 December 31, 2017. 12 SEC. 3406. TERMINATION OF NEW MARKETS TAX CREDIT. 13 (a) IN GENERAL.—Section 45D(f) is amended— 14 (1) by striking ‘‘2019’’ in paragraph (1)(G) and 15 inserting ‘‘2017’’, and 16 (2) by striking ‘‘2024’’ in paragraph (3) and in- 17 serting ‘‘2022’’. 18 (b) EFFECTIVE DATE.—The amendments made by 19 this section shall apply to calendar years beginning after 20 December 31, 2017. 21 SEC. 3407. REPEAL OF CREDIT FOR EXPENDITURES TO 22 PROVIDE 23 UALS. 24 ACCESS TO DISABLED INDIVID- (a) IN GENERAL.—Subpart D of part IV of sub- 25 chapter A of chapter 1 is amended by striking section 44 g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00255 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 256 1 (and by striking the item relating to such section in the 2 table of sections for such subpart). 3 (b) CONFORMING AMENDMENT.—Section 38(b) is 4 amended by striking paragraph (7). 5 (c) EFFECTIVE DATE.—The amendments made by 6 this section shall apply to taxable years beginning after 7 December 31, 2017. 8 SEC. 3408. MODIFICATION OF CREDIT FOR PORTION OF EM- 9 PLOYER SOCIAL SECURITY TAXES PAID WITH 10 RESPECT TO EMPLOYEE TIPS. 11 12 (a) CREDIT DETERMINED WITH RESPECT IMUM WAGE AS IN TO MIN- EFFECT.—Section 45B(b)(1)(B) is 13 amended by striking ‘‘as in effect on January 1, 2007, 14 and’’. 15 (b) INFORMATION RETURN REQUIREMENT.—Section 16 45B is amended by redesignating subsections (c) and (d) 17 as subsections (d) and (e), respectively, and by inserting 18 after subsection (b) the following new subsection: 19 ‘‘(c) INFORMATION RETURN REQUIREMENT.— 20 ‘‘(1) IN credit shall be deter- 21 mined under subsection (a) with respect to any food 22 or beverage establishment of any taxpayer for any 23 taxable year unless such taxpayer has, with respect 24 to the calendar year which ends in or with such tax- 25 able year— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—No 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00256 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 257 1 ‘‘(A) made a report to the Secretary show- 2 ing 3 6053(c)(1) with respect to such food or bev- 4 erage establishment, and information described in section 5 ‘‘(B) furnished written statements to each 6 employee of such food or beverage establish- 7 ment showing the information described in sec- 8 tion 6053(c)(2). 9 ‘‘(2) ALLOCATION OF 10 PERCENT OF GROSS 10 RECEIPTS.—For 11 mation referred to in subparagraphs (A) and (B), 12 section 6053(c)(3)(A)(i) shall be applied by sub- 13 stituting ‘10 percent’ for ‘8 percent’. For purposes 14 of section 6053(c)(5), any reference to section 15 6053(c)(3)(B) contained therein shall be treated as 16 including a reference to this paragraph. 17 ‘‘(3) FOOD purposes of determining the infor- OR BEVERAGE ESTABLISHMENT.— 18 For purposes of this subsection, the term ‘food or 19 beverage establishment’ means any trade or business 20 (or portion thereof) which would be a large food or 21 beverage 22 6053(c)(4)) if such section were applied without re- 23 gard to subparagraph (C) thereof.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 the 10:46 Nov 02, 2017 Jkt 000000 establishment (as defined in section (679209 10) PO 00000 Frm 00257 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 258 1 (c) EFFECTIVE DATE.—The amendments made by 2 this section shall apply to taxable years beginning after 3 December 31, 2017. 4 Subtitle F—Energy Credits 5 SEC. 3501. MODIFICATIONS TO CREDIT FOR ELECTRICITY 6 PRODUCED FROM CERTAIN RENEWABLE RE- 7 SOURCES. 8 (a) TERMINATION INFLATION ADJUSTMENT.— OF 9 Section 45(b)(2) is amended— 10 (1) by striking ‘‘The 1.5 cent amount’’ and in- 11 serting the following: 12 ‘‘(A) 13 amount’’, and 14 (2) by adding at the end the following new sub- 15 IN GENERAL.—The 1.5 cent paragraph: 16 ‘‘(B) TERMINATION.—Subparagraph (A) 17 shall not apply with respect to any electricity or 18 refined coal produced at a facility the construc- 19 tion of which begins after the date of the enact- 20 ment of this subparagraph.’’. 21 22 (b) SPECIAL RULE NING OF FOR DETERMINATION OF BEGIN- CONSTRUCTION.—Section 45(e) is amended by 23 adding at the end the following new paragraph: 24 25 ‘‘(12) SPECIAL GINNING OF CONSTRUCTION.—For g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 RULE FOR DETERMINING BE- Jkt 000000 purposes of sub- (679209 10) PO 00000 Frm 00258 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 259 1 section (d), the construction of any facility, modi- 2 fication, improvement, addition, or other property 3 shall not be treated as beginning before any date un- 4 less there is a continuous program of construction 5 which begins before such date and ends on the date 6 that such property is placed in service.’’. 7 (c) EFFECTIVE DATES.— 8 (1) TERMINATION 9 MENT.—The OF INFLATION ADJUST- amendments made by subsection (a) 10 shall apply to taxable years ending after the date of 11 the enactment of this Act. 12 (2) SPECIAL RULE FOR DETERMINATION OF 13 BEGINNING 14 made by subsection (b) shall apply to taxable years 15 beginning before, on, or after the date of the enact- 16 ment of this Act. 17 CONSTRUCTION.—The OF amendment SEC. 3502. MODIFICATION OF THE ENERGY INVESTMENT 18 TAX CREDIT. 19 (a) EXTENSION OF SOLAR ENERGY PROPERTY.— 20 Section 48(a)(3)(A)(ii) is amended by striking ‘‘periods 21 ending before January 1, 2017’’ and inserting ‘‘property 22 the construction of which begins before January 1, 2022’’. 23 24 (b) EXTENSION ERTY.—Section OF QUALIFIED FUEL CELL PROP- 48(c)(1)(D) is amended by striking ‘‘for 25 any period after December 31, 2016’’ and inserting ‘‘the g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00259 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 260 1 construction of which does not begin before January 1, 2 2022’’. 3 (c) EXTENSION OF QUALIFIED MICROTURBINE 4 PROPERTY.—Section 48(c)(2)(D) is amended by striking 5 ‘‘for any period after December 31, 2016’’ and inserting 6 ‘‘the construction of which does not begin before January 7 1, 2022’’. 8 (d) EXTENSION OF COMBINED HEAT AND POWER 9 SYSTEM PROPERTY.—Section 48(c)(3)(A)(iv) is amended 10 by striking ‘‘which is placed in service before January 1, 11 2017’’ and inserting ‘‘the construction of which begins be12 fore January 1, 2022’’. 13 14 (e) EXTENSION ERGY OF QUALIFIED SMALL WIND EN- PROPERTY.—Section 48(c)(4)(C) is amended by 15 striking ‘‘for any period after December 31, 2016’’ and 16 inserting ‘‘the construction of which does not begin before 17 January 1, 2022’’. 18 (f) EXTENSION OF THERMAL ENERGY PROPERTY.— 19 Section 48(a)(3)(A)(vii) is amended by striking ‘‘periods 20 ending before January 1, 2017’’ and inserting ‘‘property 21 the construction of which begins before January 1, 2022’’. 22 (g) PHASEOUT 23 FUEL CELL AND OF 30 PERCENT CREDIT RATE FOR SMALL WIND ENERGY PROPERTY.— 24 Section 48(a) is amended by adding at the end the fol25 lowing new paragraph: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00260 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 261 1 ‘‘(7) PHASEOUT 2 PROPERTY AND QUALIFIED SMALL WIND ENERGY 3 PROPERTY.— 4 ‘‘(A) IN GENERAL.—In the case of quali- 5 fied fuel cell property or qualified small wind 6 energy property, the construction of which be- 7 gins before January 1, 2022, the energy per- 8 centage determined under paragraph (2) shall 9 be equal to— 10 ‘‘(i) in the case of any property the 11 construction of which begins after Decem- 12 ber 31, 2019, and before January 1, 2021, 13 26 percent, and 14 ‘‘(ii) in the case of any property the 15 construction of which begins after Decem- 16 ber 31, 2020, and before January 1, 2022, 17 22 percent. 18 ‘‘(B) PLACED IN SERVICE DEADLINE.—In 19 the case of any qualified fuel cell property or 20 qualified small wind energy property, the con- 21 struction of which begins before January 1, 22 2022, and which is not placed in service before 23 January 1, 2024, the energy percentage deter- 24 mined under paragraph (2) shall be equal to 10 25 percent.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FOR QUALIFIED FUEL CELL 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00261 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 262 1 (h) PHASEOUT FOR FIBER-OPTIC SOLAR ENERGY 2 PROPERTY.—Subparagraphs (A) and (B) of section 3 48(a)(6) are each amended by inserting ‘‘or (3)(A)(ii)’’ 4 after ‘‘paragraph (3)(A)(i)’’. 5 (i) TERMINATION OF SOLAR ENERGY PROPERTY.— 6 Section 48(a)(3)(A)(i) is amended by inserting ‘‘, the con7 struction of which begins before January 1, 2028, and’’ 8 after ‘‘equipment’’. 9 10 (j) TERMINATION ERTY.—Section OF GEOTHERMAL ENERGY PROP- 48(a)(3)(A)(iii) is amended by inserting 11 ‘‘, the construction of which begins before January 1, 12 2028, and’’ after ‘‘equipment’’. 13 14 (k) SPECIAL RULE NING OF FOR DETERMINATION OF BEGIN- CONSTRUCTION.—Section 48(c) is amended by 15 adding at the end the following new paragraph: 16 ‘‘(5) SPECIAL 17 NING OF CONSTRUCTION.—The 18 facility, modification, improvement, addition, or 19 other property shall not be treated as beginning be- 20 fore any date unless there is a continuous program 21 of construction which begins before such date and 22 ends on the date that such property is placed in 23 service.’’. 24 (l) EFFECTIVE DATE.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 RULE FOR DETERMINING BEGIN- 10:46 Nov 02, 2017 Jkt 000000 construction of any (679209 10) PO 00000 Frm 00262 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 263 1 (1) IN GENERAL.—Except as otherwise pro- 2 vided in this subsection, the amendments made by 3 this section shall apply to periods after December 4 31, 2016, under rules similar to the rules of section 5 48(m) of the Internal Revenue Code of 1986 (as in 6 effect on the day before the date of the enactment 7 of the Revenue Reconciliation Act of 1990). 8 (2) EXTENSION 9 OF COMBINED POWER SYSTEM PROPERTY.—The HEAT AND amendment made 10 by subsection (d) shall apply to property placed in 11 service after December 31, 2016. 12 (3) PHASEOUTS AND TERMINATIONS.—The 13 amendments made by subsections (g), (h), (i), and 14 (j) shall take effect on the date of the enactment of 15 this Act. 16 (4) SPECIAL RULE FOR DETERMINATION OF 17 BEGINNING 18 made by subsection (k) shall apply to taxable years 19 beginning before, on, or after the date of the enact- 20 ment of this Act. CONSTRUCTION.—The OF amendment 21 SEC. 3503. EXTENSION AND PHASEOUT OF RESIDENTIAL 22 ENERGY EFFICIENT PROPERTY. 23 (a) EXTENSION.—Section 25D(h) is amended by 24 striking ‘‘December 31, 2016 (December 31, 2021, in the 25 case of any qualified solar electric property expenditures g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00263 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 264 1 and qualified solar water heating property expenditures)’’ 2 and inserting ‘‘December 31, 2021’’. 3 (b) PHASEOUT.— 4 (1) IN GENERAL.—Paragraphs (3), (4), and (5) 5 of section 25D(a) are amended by striking ‘‘30 per- 6 cent’’ each place it appears and inserting ‘‘the appli- 7 cable percentage’’. 8 (2) 9 CONFORMING AMENDMENT.—Section 25D(g) of such Code is amended by striking ‘‘para- 10 graphs (1) and (2) of’’. 11 (c) EFFECTIVE DATE.—The amendments made by 12 this section shall apply to property placed in service after 13 December 31, 2016. 14 SEC. 3504. REPEAL OF ENHANCED OIL RECOVERY CREDIT. 15 (a) IN GENERAL.—Subpart D of part IV of sub- 16 chapter A of chapter 1 is amended by striking section 43 17 (and by striking the item relating to such section in the 18 table of sections for such subpart). 19 (b) CONFORMING AMENDMENTS.— 20 21 (1) Section 38(b) is amended by striking paragraph (6). 22 23 (2) Section 6501(m) is amended by striking ‘‘43,’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00264 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 265 1 (c) EFFECTIVE DATE.—The amendments made by 2 this section shall apply to taxable years beginning after 3 December 31, 2017. 4 SEC. 3505. REPEAL OF CREDIT FOR PRODUCING OIL AND 5 GAS FROM MARGINAL WELLS. 6 (a) IN GENERAL.—Subpart D of part IV of sub- 7 chapter A of chapter 1 is amended by striking section 45I 8 (and by striking the item relating to such section in the 9 table of sections for such subpart). 10 (b) CONFORMING AMENDMENT.—Section 38(b) is 11 amended by striking paragraph (19). 12 (c) EFFECTIVE DATE.—The amendments made by 13 this section shall apply to taxable years beginning after 14 December 31, 2017. 15 SEC. 3506. MODIFICATIONS OF CREDIT FOR PRODUCTION 16 FROM ADVANCED NUCLEAR POWER FACILI- 17 TIES. 18 (a) TREATMENT OF UNUTILIZED LIMITATION 19 AMOUNTS.—Section 45J(b) is amended— 20 21 (1) in paragraph (4), by inserting ‘‘or any amendment to’’ after ‘‘enactment of’’; and 22 23 (2) by adding at the end the following new paragraph: 24 25 ‘‘(5) ALLOCATION 10:46 Nov 02, 2017 UNUTILIZED LIMITA- TION.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF Jkt 000000 (679209 10) PO 00000 Frm 00265 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 266 1 ‘‘(A) IN unutilized na- 2 tional megawatt capacity limitation shall be al- 3 located by the Secretary under paragraph (3) 4 as rapidly as is practicable after December 31, 5 2020— 6 ‘‘(i) first to facilities placed in service 7 on or before such date to the extent that 8 such facilities did not receive an allocation 9 equal to their full nameplate capacity; and 10 ‘‘(ii) then to facilities placed in service 11 after such date in the order in which such 12 facilities are placed in service. 13 ‘‘(B) UNUTILIZED NATIONAL MEGAWATT 14 CAPACITY LIMITATION.—The 15 national megawatt capacity limitation’ means 16 the excess (if any) of— term ‘unutilized 17 ‘‘(i) 6,000 megawatts, over 18 ‘‘(ii) the aggregate amount of national 19 megawatt capacity limitation allocated by 20 the Secretary before January 1, 2021, re- 21 duced by any amount of such limitation 22 which was allocated to a facility which was 23 not placed in service before such date. 24 ‘‘(C) COORDINATION 25 SIONS.—In g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Any 10:46 Nov 02, 2017 Jkt 000000 WITH OTHER PROVI- the case of any unutilized national (679209 10) PO 00000 Frm 00266 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 267 1 megawatt capacity limitation allocated by the 2 Secretary pursuant to this paragraph— 3 ‘‘(i) such allocation shall be treated 4 for purposes of this section in the same 5 manner as an allocation of national mega- 6 watt capacity limitation; and 7 ‘‘(ii) subsection (d)(1)(B) shall not 8 apply to any facility which receives such al- 9 location.’’. 10 11 (b) TRANSFER (1) IN 13 BY CERTAIN PUBLIC EN- GENERAL.—Section 45J is amended— (A) by redesignating subsection (e) as sub- 14 section (f); and 15 (B) by inserting after subsection (d) the 16 following new subsection: 17 ‘‘(e) TRANSFER OF CREDIT BY CERTAIN PUBLIC ENTITIES.— 19 20 ‘‘(1) IN GENERAL.—If, with respect to a credit under subsection (a) for any taxable year— 21 ‘‘(A) the taxpayer would be a qualified 22 public entity; and 23 ‘‘(B) such entity elects the application of 24 this paragraph for such taxable year with re- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 CREDIT TITIES.— 12 18 OF 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00267 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 268 1 spect to all (or any portion specified in such 2 election) of such credit, 3 the eligible project partner specified in such election 4 (and not the qualified public entity) shall be treated 5 as the taxpayer for purposes of this title with re- 6 spect to such credit (or such portion thereof). 7 8 ‘‘(2) DEFINITIONS.—For purposes of this subsection— 9 ‘‘(A) QUALIFIED 10 ENTITY.—The term ‘qualified public entity’ means— 11 ‘‘(i) a Federal, State, or local govern- 12 ment entity, or any political subdivision, 13 agency, or instrumentality thereof; 14 ‘‘(ii) a mutual or cooperative electric 15 company described in section 501(c)(12) or 16 section 1381(a)(2); or 17 ‘‘(iii) a not-for-profit electric utility 18 which has or had received a loan or loan 19 guarantee under the Rural Electrification 20 Act of 1936. 21 ‘‘(B) ELIGIBLE 22 PROJECT PARTNER.—The term ‘eligible project partner’ means— 23 ‘‘(i) any person responsible for, or 24 participating in, the design or construction 25 of the advanced nuclear power facility to g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 PUBLIC 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00268 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 269 1 which the credit under subsection (a) re- 2 lates; 3 ‘‘(ii) any person who participates in 4 the provision of the nuclear steam supply 5 system to the advanced nuclear power fa- 6 cility to which the credit under subsection 7 (a) relates; 8 ‘‘(iii) any person who participates in 9 the provision of nuclear fuel to the ad- 10 vanced nuclear power facility to which the 11 credit under subsection (a) relates; or 12 ‘‘(iv) any person who has an owner- 13 ship interest in such facility. 14 ‘‘(3) SPECIAL 15 ‘‘(A) APPLICATION TO PARTNERSHIPS.—In 16 the case of a credit under subsection (a) which 17 is determined at the partnership level— 18 ‘‘(i) for purposes of paragraph (1)(A), 19 a qualified public entity shall be treated as 20 the taxpayer with respect to such entity’s 21 distributive share of such credit; and 22 ‘‘(ii) the term ‘eligible project partner’ 23 shall include any partner of the partner- 24 ship. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 RULES.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00269 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 270 1 ‘‘(B) TAXABLE 2 TAKEN INTO ACCOUNT.—In 3 credit (or portion thereof) with respect to which 4 an election is made under paragraph (1), such 5 credit shall be taken into account in the first 6 taxable year of the eligible project partner end- 7 ing with, or after, the qualified public entity’s 8 taxable year with respect to which the credit 9 was determined. the case of any 10 ‘‘(C) TREATMENT 11 PRIVATE USE RULES.—For 12 141(b)(1), any benefit derived by an eligible 13 project partner in connection with an election 14 under this subsection shall not be taken into ac- 15 count as a private business use.’’. 16 (2) SPECIAL OF TRANSFER UNDER purposes of section RULE FOR PROCEEDS OF TRANS- 17 FERS 18 COMPANIES.—Section 19 amended by adding at the end the following new 20 subparagraph: FOR MUTUAL OR COOPERATIVE ELECTRIC 501(c)(12) of such Code is 21 ‘‘(I) In the case of a mutual or cooperative 22 electric company described in this paragraph or 23 an organization described in section 1381(a)(2), 24 income received or accrued in connection with 25 an election under section 45J(e)(1) shall be g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 YEAR IN WHICH CREDIT 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00270 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 271 1 treated as an amount collected from members 2 for the sole purpose of meeting losses and ex- 3 penses.’’. 4 (c) EFFECTIVE DATES.— 5 (1) TREATMENT OF UNUTILIZED LIMITATION 6 AMOUNTS.—The 7 shall take effect on the date of the enactment of this 8 Act. 9 amendment made by subsection (a) (2) TRANSFER OF CREDIT BY CERTAIN PUBLIC 10 ENTITIES.—The 11 (b) shall apply to taxable years beginning after the 12 date of the enactment of this Act. Subtitle G—Bond Reforms 13 14 amendments made by subsection SEC. 3601. TERMINATION OF PRIVATE ACTIVITY BONDS. 15 (a) IN GENERAL.—Paragraph (1) of section 103(b) 16 is amended— 17 18 (1) by striking ‘‘which is not a qualified bond (within the meaning of section 141)’’, and 19 (2) by striking ‘‘WHICH 20 BOND’’ 21 (b) CONFORMING AMENDMENTS.— in the heading thereof. 22 (1) Subpart A of part IV of subchapter B of 23 chapter 1 is amended by striking sections 142, 143, 24 144, 145, 146, and 147 (and by striking each of the g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 IS NOT A QUALIFIED 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00271 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 272 1 items relating to such sections in the table of sec- 2 tions for such subpart). 3 (2) Section 25 is amended by adding at the end 4 the following new subsection: 5 ‘‘(j) COORDINATION WITH REPEAL 6 TIVITY OF PRIVATE AC- BONDS.—Any reference to section 143, 144, or 7 146 shall be treated as a reference to such section as in 8 effect before its repeal by the Tax Cuts and Jobs Act.’’. 9 10 (3) Section 26(b)(2) is amended by striking subparagraph (D). 11 12 (4) Section 141(b) is amended by striking paragraphs (5) and (9). 13 14 (5) Section 141(d) is amended by striking paragraph (5). 15 16 (6) Section 141 is amended by striking subsection (e). 17 (7) Section 148(f)(4) is amended— 18 (A) by striking ‘‘(determined in accordance 19 with section 147(b)(2)(A))’’ in the flush matter 20 following subparagraph (A)(ii) and inserting 21 ‘‘(determined by taking into account the respec- 22 tive issue prices of the bonds issued as part of 23 the issue)’’, and 24 (B) by striking the last sentence of sub- 25 paragraph (D)(v). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00272 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 273 1 2 (8) Clause (iv) of section 148(f)(4)(C) is amended to read as follows: 3 ‘‘(iv) 4 ISSUE.—For purposes of this subparagraph— 5 ‘‘(I) IN GENERAL.—The term 6 ‘construction issue’ means any issue if 7 at least 75 percent of the available 8 construction proceeds of such issue 9 are to be used for construction ex- 10 penditures. 11 ‘‘(II) CONSTRUCTION.—The term 12 ‘construction’ includes reconstruction 13 and rehabilitation’’. 14 15 (9) Section 149(b)(3) is amended by striking subparagraph (C). 16 (10) Section 149(e)(2) is amended— 17 (A) by striking subparagraphs (C), (D), 18 and (F) and by redesignating subparagraphs 19 (E) and (G) as subparagraphs (C) and (D), re- 20 spectively, and 21 (B) by striking the second sentence. 22 (11) Section 149(f)(6) is amended— 23 (A) by striking subparagraph (B), and 24 (B) by striking ‘‘For purposes of this sub- 25 section’’ and all that follows through ‘‘The g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 CONSTRUCTION 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00273 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 274 1 term’’ and inserting the following: ‘‘For pur- 2 poses of this subsection, the term’’. 3 (12) Section 150(e)(3) is amended to read as 4 follows: 5 ‘‘(3) PUBLIC REQUIREMENT.—A 6 bond shall not be treated as part of an issue which 7 meets the requirements of paragraph (1) unless such 8 bond satisfies the requirements of section 147(f)(2) 9 (as in effect before its repeal by the Tax Cuts and 10 Jobs Act).’’. 11 12 (13) Section 269A(b)(3) is amended by striking ‘‘144(a)(3)’’ and inserting ‘‘414(n)(6)(A)’’. 13 (14) Section 414(m)(5) is amended by striking 14 ‘‘section 15 (n)(6)(A)’’. 16 17 144(a)(3)’’ and inserting ‘‘subsection (15) Section 414(n)(6)(A) is amended to read as follows: 18 ‘‘(A) RELATED 19 PERSONS.—A person is a related person to another person if— 20 ‘‘(i) the relationship between such per- 21 sons would result in a disallowance of 22 losses under section 267 or 707(b), or 23 ‘‘(ii) such persons are members of the 24 same controlled group of corporations (as 25 defined in section 1563(a), except that g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 APPROVAL 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00274 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 275 1 ‘more than 50 percent’ shall be substituted 2 for ‘at least 80 percent’ each place it ap- 3 pears therein).’’. 4 (16) Section 6045(e)(4)(B) is amended by in- 5 serting ‘‘(as in effect before its repeal by the Tax 6 Cuts and Jobs Act)’’ after ‘‘section 143(m)(3)’’. 7 (17) Section 6654(f)(1) is amended by inserting 8 ‘‘(as in effect before its repeal by the Tax Cuts and 9 Jobs Act)’’ after ‘‘section 143(m)’’. 10 (18) Section 7871(c) is amended— 11 (A) by striking paragraphs (2) and (3), 12 and 13 (B) by striking ‘‘TAX-EXEMPT BONDS.—’’ 14 and all that follows through ‘‘Subsection (a) of 15 section 103’’ and inserting the following: ‘‘TAX- 16 EXEMPT 17 103’’. 18 BONDS.—Subsection (a) of section (c) EFFECTIVE DATE.—The amendments made by 19 this section shall apply to bonds issued after December 20 31, 2017. 21 SEC. 3602. REPEAL OF ADVANCE REFUNDING BONDS. 22 (a) IN GENERAL.—Paragraph (1) of section 149(d) 23 is amended by striking ‘‘as part of an issue described in 24 paragraph (2), (3), or (4).’’ and inserting ‘‘to advance re25 fund another bond.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00275 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 276 1 (b) CONFORMING AMENDMENTS.— 2 (1) Section 149(d) is amended by striking para- 3 graphs (2), (3), (4), and (6) and by redesignating 4 paragraphs (5) and (7) as paragraphs (2) and (3). 5 (2) Section 148(f)(4)(C) is amended by striking 6 clause (xiv) and by redesignating clauses (xv) to 7 (xvii) as clauses (xiv) to (xvi). 8 (c) EFFECTIVE DATE.—The amendments made by 9 this section shall apply to advance refunding bonds issued 10 after December 31, 2017. 11 SEC. 3603. REPEAL OF TAX CREDIT BONDS. 12 (a) IN GENERAL.—Part IV of subchapter A of chap- 13 ter 1 is amended by striking subparts H, I, and J (and 14 by striking the items relating to such subparts in the table 15 of subparts for such part). 16 (b) PAYMENTS TO ISSUERS.—Subchapter B of chap- 17 ter 65 is amended by striking section 6431 (and by strik18 ing the item relating to such section in the table of sec19 tions for such subchapter). 20 (c) CONFORMING AMENDMENTS.— 21 (1) Part IV of subchapter U of chapter 1 is 22 amended by striking section 1397E (and by striking 23 the item relating to such section in the table of sec- 24 tions for such part). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00276 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 277 1 (2) Section 54(l)(3)(B) is amended by inserting 2 ‘‘(as in effect before its repeal by the Tax Cuts and 3 Jobs Act)’’ after ‘‘section 1397E(I)’’. 4 (3) Section 6211(b)(4)(A) is amended by strik- 5 ing ‘‘, and 6431’’ and inserting ‘‘and’’ before 6 ‘‘36B’’. 7 (4) Section 6401(b)(1) is amended by striking 8 ‘‘G, H, I, and J’’ and inserting ‘‘and G’’. 9 (d) EFFECTIVE DATE.—The amendments made by 10 this section shall apply to bonds issued after December 11 31, 2017. 12 SEC. 3604. NO TAX EXEMPT BONDS FOR PROFESSIONAL 13 14 STADIUMS. (a) IN GENERAL.—Section 103(b), as amended by 15 this Act, is further amended by adding at the end the fol16 lowing new paragraph: 17 ‘‘(4) PROFESSIONAL 18 fessional stadium bond.’’. 19 (b) PROFESSIONAL STADIUM BOND DEFINED.—Sub- STADIUM BOND.—Any pro- 20 section (c) of section 103 is amended by adding at the 21 end the following new paragraph: 22 ‘‘(3) STADIUM BOND.—The 23 term ‘professional stadium bond’ means any bond 24 issued as part of an issue any proceeds of which are 25 used to finance or refinance capital expenditures al- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 PROFESSIONAL 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00277 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 278 1 locable to a facility (or appurtenant real property) 2 which, during at least 5 days during any calendar 3 year, is used as a stadium or arena for professional 4 sports exhibitions, games, or training.’’. 5 (c) EFFECTIVE DATE.—The amendments made by 6 this section shall apply to bonds issued after November 7 2, 2017. 8 Subtitle H—Insurance 9 SEC. 3701. NET OPERATING LOSSES OF LIFE INSURANCE 10 11 COMPANIES. (a) IN GENERAL.—Section 805(b) is amended by 12 striking paragraph (4) and by redesignating paragraph 13 (5) as paragraph (4). 14 (b) CONFORMING AMENDMENTS.— 15 (1) Part I of subchapter L of chapter 1 is 16 amended by striking section 810 (and by striking 17 the item relating to such section in the table of sec- 18 tions for such part). 19 (2) Part III of subchapter L of chapter 1 is 20 amended by striking section 844 (and by striking 21 the item relating to such section in the table of sec- 22 tions for such part). 23 24 (3) Section 381 is amended by striking subsection (d). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00278 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 279 1 (4) Section 805(a)(4)(B)(ii) is amended to read 2 as follows: 3 ‘‘(ii) the deduction allowed under sec- 4 tion 172,’’. 5 (5) Section 805(a) is amended by striking para- 6 graph (5). 7 (6) Section 953(b)(1)(B) is amended to read as 8 follows: 9 ‘‘(B) So much of section 805(a)(8) as re- 10 lates to the deduction allowed under section 11 172.’’. 12 (c) EFFECTIVE DATE.—The amendments made by 13 this section shall apply to losses arising in taxable years 14 beginning after December 31, 2017. 15 SEC. 3702. REPEAL OF SMALL LIFE INSURANCE COMPANY 16 17 DEDUCTION. (a) IN GENERAL.—Part I of subchapter L of chapter 18 1 is amended by striking section 806 (and by striking the 19 item relating to such section in the table of sections for 20 such part). 21 (b) CONFORMING AMENDMENTS.— 22 (1) Section 453B(e) is amended— 23 (A) by striking ‘‘(as defined in section 24 806(b)(3))’’ in paragraph (2)(B), and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00279 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 280 1 (B) by adding at the end the following new 2 paragraph: 3 ‘‘(3) NONINSURANCE 4 ‘‘(A) IN GENERAL.—For purposes of this 5 subsection, the term ‘noninsurance business’ 6 means any activity which is not an insurance 7 business. 8 ‘‘(B) CERTAIN 9 ACTIVITIES TREATED AS IN- SURANCE BUSINESSES.—For purposes of sub- 10 paragraph (A), any activity which is not an in- 11 surance business shall be treated as an insur- 12 ance business if— 13 ‘‘(i) it is of a type traditionally carried 14 on by life insurance companies for invest- 15 ment purposes, but only if the carrying on 16 of such activity (other than in the case of 17 real estate) does not constitute the active 18 conduct of a trade or business, or 19 ‘‘(ii) it involves the performance of ad- 20 ministrative services in connection with 21 plans providing life insurance, pension, or 22 accident and health benefits.’’. 23 (2) Section 465(c)(7)(D)(v)(II) is amended by 24 striking ‘‘section 806(b)(3)’’ and inserting ‘‘section 25 453B(e)(3)’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 BUSINESS.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00280 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 281 1 2 (3) Section 801(a)(2) is amended by striking subparagraph (C). 3 (4) Section 804 is amended by striking 4 ‘‘means—’’ and all that follows and inserting 5 ‘‘means the general deductions provided in section 6 805.’’. 7 (5) Section 805(a)(4)(B), as amended by sec- 8 tion 3701, is amended by striking clause (i) and by 9 redesignating clauses (ii), (iii), and (iv) as clauses 10 (i), (ii), and (iii), respectively. 11 (6) Section 805(b)(2)(A) is amended by strik- 12 ing clause (iii) and by redesignating clauses (iv) and 13 (v) as clauses (iii) and (iv), respectively. 14 (7) Section 842(c) is amended by striking para- 15 graph (1) and by redesignating paragraphs (2) and 16 (3) as paragraphs (1) and (2), respectively. 17 (8) Section 953(b)(1), as amended by section 18 3701, is amended by striking subparagraph (A) and 19 by redesignating subparagraphs (B) and (C) as sub- 20 paragraphs (A) and (B), respectively. 21 (c) EFFECTIVE DATE.—The amendments made by 22 this section shall apply to taxable years beginning after 23 December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00281 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 282 1 SEC. 3703. COMPUTATION OF LIFE INSURANCE TAX RE- 2 SERVES. 3 (a) IN GENERAL.—Section 807 is amended by strik- 4 ing subsections (c), (d), and (e) and inserting the following 5 new subsections: 6 ‘‘(c) ITEMS DESCRIBED.—The items described in this 7 subsection are the reserves for future unaccrued claims 8 defined in subsection (e) as determined by applying the 9 method of computing the reserves in subsection (d). 10 11 ‘‘(d) METHOD POSES OF OF COMPUTING RESERVES FOR PUR- DETERMINING INCOME.—For purposes of this 12 part (other than section 816), the amount of the reserves 13 for future unaccrued claims shall be 76.5 percent of the 14 amount of such reserves as defined in subsection (e). 15 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur- 16 poses of this section— 17 ‘‘(1) RESERVES 18 CLAIMS.—The 19 claims’ means— FUTURE UNACCRUED term ‘reserves for future unaccrued 20 ‘‘(A) life insurance reserves (as defined in 21 section 816(b)) determined in accordance with 22 the method prescribed by the National Associa- 23 tion of Insurance Commissioners and reported 24 by the taxpayer on its annual statement for the 25 calendar year that is the taxable year, g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FOR 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00282 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 283 1 ‘‘(B) unpaid losses included in total re- 2 serves under section 816(c)(2), and 3 ‘‘(C) the amount (not included in subpara- 4 graph (A) or (B)) of reserves solely for claims 5 with respect to insurance risks which are deter- 6 mined in accordance with the method prescribed 7 by the National Association of Insurance Com- 8 missioners and reported by the taxpayer on its 9 annual statement for the calendar year that is 10 the taxable year, 11 but not including any amount of asset adequacy re- 12 serves, contingency reserves, unearned premium re- 13 serves, or any other amount not constituting re- 14 serves for future unaccrued claims as provided in 15 guidance by the Secretary. For purposes of subpara- 16 graph (B) and section 805(a)(1), the amount of the 17 unpaid losses (other than losses on life insurance 18 contracts) shall be the amount of the discounted un- 19 paid losses as defined in section 846. 20 ‘‘(2) REPORTING Secretary shall 21 require reporting (at such time and in such manner 22 as the Secretary shall prescribe) with respect to the 23 opening balance and closing balance of reserves and 24 with respect to the method of computing reserves for 25 purposes of determining income.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 RULES.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00283 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 284 1 (b) CONFORMING AMENDMENTS.— 2 (1) Section 808 is amended by adding at the 3 end the following new subsection: 4 ‘‘(g) PREVAILING STATE ASSUMED INTEREST 5 RATE.—For purposes of this subchapter— 6 ‘‘(1) IN term ‘prevailing State 7 assumed interest rate’ means, with respect to any 8 contract, the highest assumed interest rate per- 9 mitted to be used in computing life insurance re- 10 serves for insurance contracts or annuity contracts 11 (as the case may be) under the insurance laws of at 12 least 26 States. For purposes of the preceding sen- 13 tence, the effect of nonforfeiture laws of a State on 14 interest rates for reserves shall not be taken into ac- 15 count. 16 ‘‘(2) WHEN RATE DETERMINED.—The pre- 17 vailing State assumed interest rate with respect to 18 any contract shall be determined as of the beginning 19 of the calendar year in which the contract was 20 issued.’’. 21 (2) Paragraph (1) of section 811(d) is amended 22 by striking ‘‘the greater of the prevailing State as- 23 sumed interest rate or applicable Federal interest 24 rate in effect under section 807’’ and inserting ‘‘the 25 interest rate in effect under section 808(g)’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00284 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 285 1 (3) Subparagraph (A) of section 846(f)(6) is 2 amended by striking ‘‘except that’’ and all that fol- 3 lows and inserting ‘‘except that the limitation of 4 subsection (a)(3) shall apply, and’’. 5 (4) Subparagraph (B) of section 954(i)(5) is 6 amended by striking ‘‘shall apply, and’’. 7 (c) EFFECTIVE DATE.— 8 9 (1) IN amendments made by this section shall apply to taxable years beginning 10 after December 31, 2017. 11 (2) TRANSITION RULE.—For the first taxable 12 year beginning after December 31, 2017, the reserve 13 with respect to any contract (as determined under 14 section 807(d)(2) of the Internal Revenue Code of 15 1986) at the end of the preceding taxable year shall 16 be determined as if the amendments made by this 17 section had applied to such reserve in such preceding 18 taxable year. 19 (3) TRANSITION 20 (A) IN RELIEF.— GENERAL.—If— 21 (i) the reserve determined under sec- 22 tion 807(d)(2) of the Internal Revenue 23 Code of 1986 (determined without regard 24 to the amendments made by this section) 25 with respect to any contract as of the close g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00285 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 286 1 of the year preceding the first taxable year 2 beginning after December 31, 2017, differs 3 from 4 (ii) the reserve which would have been 5 determined with respect to such contract 6 as of the close of such taxable year under 7 such section determined without regard to 8 paragraph (2), 9 then the difference between the amount of the 10 reserve described in clause (i) and the amount 11 of the reserve described in clause (ii) shall be 12 taken into account under the method provided 13 in subparagraph (B). 14 (B) METHOD.—The method provided in 15 this subparagraph is as follows: 16 (i) if the amount determined under 17 subparagraph (A)(i) exceeds the amount 18 determined under subparagraph (A)(ii), 1⁄8 19 of such excess shall be taken into account, 20 for each of the 8 succeeding taxable years, 21 as a deduction under section 805(a)(2) of 22 such Code, or 23 (ii) if the amount determined under 24 subparagraph (A)(ii) exceeds the amount 25 determined under subparagraph (A)(i), 1⁄8 g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00286 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 287 1 of such excess shall be included in gross in- 2 come, for each of the 8 succeeding taxable 3 years, under section 803(a)(2) of such 4 Code. 5 SEC. 3704. ADJUSTMENT FOR CHANGE IN COMPUTING RE- 6 7 SERVES. (a) IN GENERAL.—Paragraph (1) of section 807(f) 8 is amended to read as follows: 9 ‘‘(1) TREATMENT 10 ACCOUNTING.—If 11 referred to in subsection (c) as of the close of any 12 taxable year differs from the basis for such deter- 13 mination as of the close of the preceding taxable 14 year, then so much of the difference between— the basis for determining any item 15 ‘‘(A) the amount of the item at the close 16 of the taxable year, computed on the new basis, 17 and 18 ‘‘(B) the amount of the item at the close 19 of the taxable year, computed on the old basis, 20 as is attributable to contracts issued before the tax- 21 able year shall be taken into account under section 22 481 as adjustments attributable to a change in 23 method of accounting initiated by the taxpayer and 24 made with the consent of the Secretary.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AS CHANGE IN METHOD OF 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00287 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 288 1 (b) EFFECTIVE DATE.—The amendments made by 2 this section shall apply to taxable years beginning after 3 December 31, 2017. 4 SEC. 3705. MODIFICATION OF RULES FOR LIFE INSURANCE 5 PRORATION 6 MINING THE DIVIDENDS RECEIVED DEDUC- 7 TION. 8 FOR PURPOSES OF DETER- (a) IN GENERAL.—Section 812 is amended to read 9 as follows: 10 ‘‘SEC. 812. DEFINITION OF COMPANY’S SHARE AND POLICY- 11 12 HOLDER’S SHARE. ‘‘(a) COMPANY’S SHARE.—For purposes of section 13 805(a)(4), the term ‘company’s share’ means, with respect 14 to any taxable year beginning after December 31, 2017, 15 40 percent. 16 ‘‘(b) POLICYHOLDER’S SHARE.—For purposes of sec- 17 tion 807, the term ‘policyholder’s share’ means, with re18 spect to any taxable year beginning after December 31, 19 2017, 60 percent.’’. 20 (b) CONFORMING AMENDMENT.—Section 817A(e)(2) 21 is amended by striking ‘‘, 807(d)(2)(B), and 812’’ and in22 serting ‘‘and 807(d)(2)(B)’’. 23 (c) EFFECTIVE DATE.—The amendments made by 24 this section shall apply to taxable years beginning after 25 December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00288 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 289 1 SEC. 3706. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS 2 TO SHAREHOLDERS FROM PRE-1984 POLICY- 3 HOLDERS SURPLUS ACCOUNT. 4 (a) IN GENERAL.—Subpart D of part I of subchapter 5 L is amended by striking section 815 (and by striking the 6 item relating to such section in the table of sections for 7 such subpart). 8 (b) CONFORMING AMENDMENT.—Section 801 is 9 amended by striking subsection (c). 10 (c) EFFECTIVE DATE.—The amendments made by 11 this section shall apply to taxable years beginning after 12 December 31, 2017. 13 (d) PHASED INCLUSION OF REMAINING BALANCE OF 14 POLICYHOLDERS SURPLUS ACCOUNTS.—In the case of 15 any stock life insurance company which has a balance (de16 termined as of the close of such company’s last taxable 17 year beginning before January 1, 2018) in an existing pol18 icyholders surplus account (as defined in section 815 of 19 the Internal Revenue Code of 1986, as in effect before 20 its repeal), the tax imposed by section 801 of such Code 21 for the first 8 taxable years beginning after December 31, 22 2017, shall be the amount which would be imposed by 23 such section for such year on the sum of— 24 (1) life insurance company taxable income for 25 such year (within the meaning of such section 801 26 but not less than zero), plus g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00289 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 290 1 (2) 1⁄8 of such balance. 2 SEC. 3707. MODIFICATION OF PRORATION RULES FOR 3 PROPERTY AND CASUALTY INSURANCE COM- 4 PANIES. 5 (a) IN GENERAL.—Section 832(b)(5)(B) is amended 6 by striking ‘‘15 percent’’ and inserting ‘‘26.25 percent’’. 7 (b) EFFECTIVE DATE.—The amendment made by 8 this section shall apply to taxable years beginning after 9 December 31, 2017. 10 SEC. 3708. MODIFICATION OF DISCOUNTING RULES FOR 11 PROPERTY AND CASUALTY INSURANCE COM- 12 PANIES. 13 (a) MODIFICATION OF RATE OF INTEREST USED TO 14 DISCOUNT UNPAID LOSSES.—Paragraph (2) of section 15 846(c) is amended to read as follows: 16 ‘‘(2) DETERMINATION OF ANNUAL RATE.—The 17 annual rate determined by the Secretary under this 18 paragraph for any calendar year shall be a rate de- 19 termined on the basis of the corporate bond yield 20 curve (as defined in section 430(h)(2)(D)(i)).’’. 21 (b) MODIFICATION OF COMPUTATIONAL RULES FOR 22 LOSS PAYMENT PATTERNS.—Section 846(d)(3) is amend23 ed by striking subparagraphs (B) through (G) and insert24 ing the following new subparagraphs: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00290 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 291 1 ‘‘(B) TREATMENT 2 Losses which would have been treated as paid 3 in the last year of the period applicable under 4 subparagraph (A)(i) or (A)(ii) shall be treated 5 as paid in the following manner: 6 ‘‘(i) 3-YEAR 7 LOSS PAYMENT PAT- TERN.— 8 ‘‘(I) IN GENERAL.—The period 9 taken into account under subpara- 10 graph (A)(i) shall be extended to the 11 extent required under subclause (II). 12 ‘‘(II) COMPUTATION OF EXTEN- 13 SION.—The 14 would have been treated as paid in the 15 3d year after the accident year shall 16 be treated as paid in such 3d year 17 and each subsequent year in an 18 amount equal to the average of the 19 losses treated as paid in the 1st and 20 2d years after the accident year (or, if 21 lesser, the portion of the unpaid losses 22 not theretofore taken into account). 23 To the extent such unpaid losses have 24 not been treated as paid before the 25 18th year after the accident year, they g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF CERTAIN LOSSES.— 10:46 Nov 02, 2017 Jkt 000000 amount of losses which (679209 10) PO 00000 Frm 00291 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 292 1 shall be treated as paid in such 18th 2 year. 3 ‘‘(ii) 10-YEAR 4 TERN.— 5 ‘‘(I) IN GENERAL.—The period 6 taken into account under subpara- 7 graph (A)(ii) shall be extended to the 8 extent required under subclause (II). 9 ‘‘(II) COMPUTATION OF EXTEN- 10 SION.—The 11 would have been treated as paid in the 12 10th year after the accident year shall 13 be treated as paid in such 10th year 14 and each subsequent year in an 15 amount equal to the amount of the 16 average of the losses treated as paid 17 in the 7th, 8th, and 9th years after 18 the accident year (or, if lesser, the 19 portion of the unpaid losses not there- 20 tofore taken into account). To the ex- 21 tent such unpaid losses have not been 22 treated as paid before the 25th year 23 after the accident year, they shall be 24 treated as paid in such 25th year.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 LOSS PAYMENT PAT- 10:46 Nov 02, 2017 Jkt 000000 amount of losses which (679209 10) PO 00000 Frm 00292 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 293 1 (c) REPEAL OF HISTORICAL PAYMENT PATTERN 2 ELECTION.—Section 846 is amended by striking sub3 section (e) and by redesignating subsections (f) and (g) 4 as subsections (e) and (f), respectively. 5 (d) EFFECTIVE DATE.—The amendments made by 6 this section shall apply to taxable years beginning after 7 December 31, 2017. 8 (e) TRANSITIONAL RULE.—For the first taxable year 9 beginning after December 31, 2017— 10 (1) the unpaid losses and the expenses unpaid 11 (as defined in paragraphs (5)(B) and (6) of section 12 832(b) of the Internal Revenue Code of 1986) at the 13 end of the preceding taxable year, and 14 (2) the unpaid losses as defined in sections 15 807(c)(2) and 805(a)(1) of such Code at the end of 16 the preceding taxable year, 17 shall be determined as if the amendments made by this 18 section had applied to such unpaid losses and expenses 19 unpaid in the preceding taxable year and by using the in20 terest rate and loss payment patterns applicable to acci21 dent years ending with calendar year 2018, and any ad22 justment shall be taken into account ratably in such first 23 taxable year and the 7 succeeding taxable years. For sub24 sequent taxable years, such amendments shall be applied 25 with respect to such unpaid losses and expenses unpaid g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00293 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 294 1 by using the interest rate and loss payment patterns appli2 cable to accident years ending with calendar year 2018. 3 SEC. 3709. REPEAL OF SPECIAL ESTIMATED TAX PAY- 4 MENTS. 5 (a) IN GENERAL.—Part III of subchapter L of chap- 6 ter 1 is amended by striking section 847 (and by striking 7 the item relating to such section in the table of sections 8 for such part). 9 (b) EFFECTIVE DATE.—The amendments made by 10 this section shall apply to taxable years beginning after 11 December 31, 2017. 12 SEC. 3710. CAPITALIZATION OF CERTAIN POLICY ACQUISI- 13 14 TION EXPENSES. (a) IN GENERAL.—Paragraph (1) of section 848(c) 15 is amended by striking subparagraphs (A), (B), and (C) 16 and inserting the following new subparagraphs: 17 ‘‘(A) 4 percent of the net premiums for 18 such taxable year on specified insurance con- 19 tracts which are group contracts, and 20 ‘‘(B) 11 percent of the net premiums for 21 such taxable year on specified insurance con- 22 tracts not described in subparagraph (A).’’. 23 (b) GROUP CONTRACTS.—So much of paragraph (2) 24 of section 848(e) as precedes subparagraph (A) thereof is 25 amended to read as follows: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00294 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 295 1 ‘‘(2) GROUP CONTRACT.—The term ‘group con- 2 tract’ means any specified insurance contract—’’. 3 (c) CONFORMING AMENDMENTS.—Section 848(e) is 4 amended by striking paragraphs (3) and (6) and by redes5 ignating paragraphs (4) and (5) as paragraphs (3) and 6 (4), respectively. 7 (d) EFFECTIVE DATE.—The amendments made by 8 this section shall apply to taxable years beginning after 9 December 31, 2017. Subtitle I—Compensation 10 11 SEC. 3801. NONQUALIFIED DEFERRED COMPENSATION. 12 (a) IN GENERAL.—Subpart A of part I of subchapter 13 D of chapter 1 is amended by adding at the end the fol14 lowing new section: 15 ‘‘SEC. 409B. NONQUALIFIED DEFERRED COMPENSATION. 16 ‘‘(a) IN GENERAL.—Any compensation which is de- 17 ferred under a nonqualified deferred compensation plan 18 shall be includible in the gross income of the person who 19 performed the services to which such compensation relates 20 when there is no substantial risk of forfeiture of the rights 21 of such person to such compensation. 22 ‘‘(b) DEFINITIONS.—For purposes of this section— 23 ‘‘(1) SUBSTANTIAL 24 rights of a person to compensation shall be treated 25 as subject to a substantial risk of forfeiture only if g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 RISK OF FORFEITURE.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00295 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 296 1 such person’s rights to such compensation are condi- 2 tioned upon the future performance of substantial 3 services by any person. Such rights shall not be 4 treated as subject to a substantial risk of forfeiture 5 solely by reason of a covenant not to compete or the 6 occurrence of a condition related to a purpose of the 7 compensation other than the future performance of 8 services . 9 10 ‘‘(2) NONQUALIFIED TION PLAN.—For 11 ‘‘(A) COMPENSA- purposes of this section: NONQUALIFIED DEFERRED COM- 12 PENSATION PLAN.—The 13 ferred compensation plan’ means any plan that 14 provides for the deferral of compensation, other 15 than— term ‘nonqualified de- 16 ‘‘(i) a qualified employer plan, 17 ‘‘(ii) any bona fide vacation leave, sick 18 leave, compensatory time, disability pay, or 19 death benefit plan, and 20 ‘‘(iii) any other plan or arrangement 21 designated by the Secretary consistent with 22 the purposes of this section. 23 ‘‘(B) EQUITY-BASED COMPENSATION.— 24 The term ‘nonqualified deferred compensation 25 plan’ shall include any plan that provides— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 DEFERRED 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00296 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 297 1 ‘‘(i) a right to compensation based on 2 the value of, or appreciation in value of, a 3 specified number of equity units of the 4 service recipient, whether paid in cash or 5 equity, or 6 ‘‘(ii) stock appreciation rights or stock 7 options. 8 Such term shall not include that portion of any 9 plan which consists of a transfer of property de- 10 scribed in section 83 (other than stock options) 11 or which consists of a trust to which section 12 402(b) applies. 13 ‘‘(3) QUALIFIED term 14 ‘qualified employer plan’ means any plan, contract, 15 pension, account, or trust described in section 16 408(p)(2)(D)(ii) or a simple retirement account 17 (within the meaning of section 408(p)). 18 ‘‘(4) PLAN INCLUDES ARRANGEMENTS, ETC.— 19 The term ‘plan’ includes any agreement or arrange- 20 ment, including an agreement or arrangement that 21 includes one person. 22 ‘‘(5) EXCEPTION.—Compensation shall not be 23 treated as deferred for purposes of this section if the 24 service provider receives payment of such compensa- 25 tion not later than 2 1⁄2 months after the end of the g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 EMPLOYER PLAN.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00297 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 298 1 taxable year of the service recipient during which the 2 right to the payment of such compensation is no 3 longer subject to a substantial risk of forfeiture. 4 ‘‘(6) TREATMENT OF EARNINGS.—References to 5 deferred compensation shall be treated as including 6 references to income (whether actual or notional) at- 7 tributable to such compensation or such income. 8 ‘‘(7) AGGREGATION 9 RULES.—Except as pro- vided by the Secretary, rules similar to the rules of 10 subsections (b) and (c) of section 414 shall apply. 11 ‘‘(c) NO INFERENCE 12 SION OR REQUIREMENT ON OF EARLIER INCOME INCLU- LATER INCLUSION.—Nothing 13 in this section shall be construed to prevent the inclusion 14 of amounts in gross income under any other provision of 15 this chapter or any other rule of law earlier than the time 16 provided in this section. Any amount included in gross in17 come under this section shall not be required to be in18 cluded in gross income under any other provision of this 19 chapter or any other rule of law later than the time pro20 vided in this section. 21 ‘‘(d) APPLICATION TO EXISTING DEFERRALS.—In 22 the case of any amount deferred to which this section does 23 not otherwise apply solely by reason of the fact that the 24 amount is attributable to services performed before Janu25 ary 1, 2018, to the extent such amount is not includible g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00298 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 299 1 in gross income in a taxable year beginning before 2026, 2 such amounts shall be includible in gross income in the 3 later of— 4 ‘‘(1) the last taxable year beginning before 5 2026, or 6 ‘‘(2) the taxable year in which there is no sub- 7 stantial risk of forfeiture of the rights to such com- 8 pensation. 9 ‘‘(e) REGULATIONS.—The Secretary shall prescribe 10 such regulations as may be necessary or appropriate to 11 carry out the purposes of this section, including regula12 tions disregarding a substantial risk of forfeiture in cases 13 where necessary to carry out the purposes of this sec14 tion.’’. 15 16 (b) REPORTING WITHHOLDING REQUIRE- MENTS.— 17 (1) WAGE WITHHOLDING.—The flush sentence 18 at the end of section 3401(a) is amended by insert- 19 ing ‘‘or 409B’’ after ‘‘409A’’. 20 (2) WITHHOLDING OF TAX ON NONRESIDENT 21 ALIENS.—Section 22 ing ‘‘(other than under a nonqualified deferred com- 23 pensation plan (within the meaning of section 24 409B(b))’’ after ‘‘compensation for personal serv- 25 ices’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AND 10:46 Nov 02, 2017 Jkt 000000 1441(c)(4) is amended by insert- (679209 10) PO 00000 Frm 00299 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 300 1 (3) 2 6041(g) is amended— 3 (A) by inserting ‘‘or 409B(b)’’ after 4 ‘‘409A(d)’’ in paragraph (1), and 5 (B) by inserting ‘‘or 409B’’ after ‘‘409A’’ 6 in paragraph (2). 7 (4) RECEIPTS EMPLOYEES.—Section FOR 8 6051(a)(13), as amended by the preceding provi- 9 sions of this Act, is amended by inserting ‘‘or 10 409B(b)’’ after ‘‘409A(d)’’. 11 (c) 12 TERMINATION QUALIFIED OF CERTAIN OTHER NON- DEFERRED COMPENSATION RULES.— 13 (1) 14 TION.— 15 NONQUALIFIED (A) IN DEFERRED GENERAL.—Subpart COMPENSA- A of part I of 16 subchapter D of chapter 1 is amended by strik- 17 ing section 409A (and by striking the item re- 18 lating to such section in the table of sections 19 for such subpart). 20 (B) CONFORMING AMENDMENT.—Section 21 26(b)(2) is amended by striking subparagraph 22 (V). 23 (2) 457(b) PLANS OF TAX EXEMPT ORGANIZA- 24 TIONS.—Section 25 end the following new subsection: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 REPORTING.—Section INFORMATION 10:46 Nov 02, 2017 Jkt 000000 457 is amended by adding at the (679209 10) PO 00000 Frm 00300 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 301 1 ‘‘(h) TERMINATION OF CERTAIN PLANS.— 2 ‘‘(1) TAX-EXEMPT ORGANIZATION PLANS.— 3 This section shall not apply to amounts deferred 4 which are attributable to services performed after 5 December 31, 2017, under a plan maintained by an 6 employer described in subsection (e)(1)(B). 7 ‘‘(2) INELIGIBLE DEFERRED COMPENSATION 8 PLANS.—Subsection 9 deferred which are attributable to services performed 10 (f) shall not apply to amounts after December 31, 2017.’’. 11 (3) NONQUALIFIED 12 DEFERRED COMPENSATION FROM CERTAIN TAX INDIFFERENT PARTIES.— 13 (A) IN GENERAL.—Subpart B of part II of 14 subchapter E of chapter 1 is amended by strik- 15 ing section 457A (and by striking the item re- 16 lating to such section in the table of sections 17 for such subpart). 18 (B) CONFORMING AMENDMENT.—Section 19 26(b)(2) is amended by striking subparagraph 20 (X). 21 (d) CLERICAL AMENDMENT.—The table of sections 22 for part I of subchapter D of chapter 1 is amended by 23 adding at the end the following new item: ‘‘Sec. 409B. Nonqualified deferred compensation.’’. 24 (e) EFFECTIVE DATE.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00301 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 302 1 (1) IN as otherwise pro- 2 vided in this subsection and section 409B(d) of the 3 Internal Revenue Code of 1986 (as added by this 4 Act), the amendments made by this section shall 5 apply to amounts which are attributable to services 6 performed after December 31, 2017. 7 (2) ACCELERATED PAYMENTS.—No later than 8 120 days after the date of the enactment of this Act, 9 the Secretary shall issue guidance providing a lim- 10 ited period of time during which a nonqualified de- 11 ferred compensation arrangement attributable to 12 services performed on or before December 31, 2017, 13 may, without violating the requirements of section 14 409A of the Internal Revenue Code of 1986, be 15 amended to conform the date of distribution to the 16 date the amounts are required to be included in in- 17 come. 18 (3) CERTAIN BACK-TO-BACK ARRANGEMENTS.— 19 If the taxpayer is also a service recipient and main- 20 tains one or more nonqualified deferred compensa- 21 tion arrangements for its service providers under 22 which any amount is attributable to services per- 23 formed on or before December 31, 2017, the guid- 24 ance issued under paragraph (3) shall permit such 25 arrangements to be amended to conform the dates of g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Except 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00302 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 303 1 distribution under such arrangement to the date 2 amounts are required to be included in the income 3 of such taxpayer under this subsection. 4 (4) ACCELERATED PAYMENT NOT TREATED AS 5 MATERIAL MODIFICATION.—Any 6 nonqualified deferred compensation arrangement 7 made pursuant to paragraph (3) or (4) shall not be 8 treated as a material modification of the arrange- 9 ment for purposes of section 409A of the Internal 10 11 Revenue Code of 1986. SEC. 3802. MODIFICATION OF LIMITATION ON EXCESSIVE 12 EMPLOYEE REMUNERATION. 13 14 amendment to a (a) REPEAL TION AND OF PERFORMANCE-BASED COMPENSA- COMMISSION EXCEPTIONS FOR LIMITATION ON 15 EXCESSIVE EMPLOYEE REMUNERATION.— 16 (1) IN 162(m)(4) is amend- 17 ed by striking subparagraphs (B) and (C) and by re- 18 designating subparagraphs (D), (E), (F), and (G) as 19 subparagraphs (B), (C), (D), and (E), respectively. 20 (2) CONFORMING AMENDMENTS.— 21 (A) Paragraphs (5)(E) and (6)(D) of sec- 22 tion 162(m) are each amended by striking 23 ‘‘subparagraphs (B), (C), and (D)’’ and insert- 24 ing ‘‘subparagraph (B)’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Section 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00303 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 304 1 (B) Paragraphs (5)(G) and (6)(G) of sec- 2 tion 162(m) are each amended by striking ‘‘(F) 3 and (G)’’ and inserting ‘‘(D) and (E)’’. 4 (b) EXPANSION OF APPLICABLE EMPLOYER.—Sec- 5 tion 162(m)(2) is amended to read as follows: 6 ‘‘(2) PUBLICLY pur- 7 poses of this subsection, the term ‘publicly held cor- 8 poration’ means any corporation which is an issuer 9 (as defined in section 3 of the Securities Exchange 10 Act of 1934 (15 U.S.C. 78c))— 11 ‘‘(A) the securities of which are required to 12 be registered under section 12 of such Act (15 13 U.S.C. 78l), or 14 ‘‘(B) that is required to file reports under 15 section 15(d) of such Act (15 U.S.C. 78o(d)).’’. 16 17 (c) MODIFICATION PLOYEES.—Section OF DEFINITION OF COVERED EM- 162(m)(3) is amended— 18 (1) in subparagraph (A), by striking ‘‘as of the 19 close of the taxable year, such employee is the chief 20 executive officer of the taxpayer or is’’ and inserting 21 ‘‘such employee is the principal executive officer or 22 principal financial officer of the taxpayer at any 23 time during the taxable year, or was’’, 24 (2) in subparagraph (B)— 25 (A) by striking ‘‘4’’ and inserting ‘‘3’’, and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 HELD CORPORATION.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00304 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 305 1 (B) by striking ‘‘(other than the chief exec- 2 utive officer)’’ and inserting ‘‘(other than the 3 principal executive officer)’’, and 4 (3) by striking ‘‘or’’ at the end of subparagraph 5 (A), by striking the period at the end of subpara- 6 graph (B) and inserting ‘‘, or’’, and by adding at the 7 end the following: 8 ‘‘(C) was a covered employee of the tax- 9 payer (or any predecessor) for any preceding 10 taxable year beginning after December 31, 11 2016. 12 Such term shall include any employee who would be 13 described in subparagraph (B) if the reporting de- 14 scribed in such subparagraph were required as so 15 described.’’. 16 (d) SPECIAL RULE FOR REMUNERATION PAID TO 17 BENEFICIARIES, ETC.—Section 162(m)(4), as amended by 18 subsection (a), is amended by adding at the end the fol19 lowing new subparagraph: 20 ‘‘(F) SPECIAL 21 PAID TO BENEFICIARIES, ETC.—Remuneration 22 shall not fail to be applicable employee remu- 23 neration merely because it is includible in the 24 income of, or paid to, a person other than the g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 RULE FOR REMUNERATION 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00305 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 306 1 covered employee, including after the death of 2 the covered employee.’’. 3 (e) EFFECTIVE DATE.—The amendments made by 4 this section shall apply to taxable years beginning after 5 December 31, 2017. 6 SEC. 3803. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZA- 7 TION EXECUTIVE COMPENSATION. 8 (a) IN GENERAL.—Subchapter D of chapter 42 is 9 amended by adding at the end the following new section: 10 ‘‘SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION 11 12 EXECUTIVE COMPENSATION. ‘‘(a) TAX IMPOSED.—There is hereby imposed a tax 13 equal to 20 percent of the sum of— 14 ‘‘(1) so much of the remuneration paid (other 15 than any excess parachute payment) by an applica- 16 ble tax-exempt organization for the taxable year with 17 respect to employment of any covered employee in 18 excess of $1,000,000, plus 19 ‘‘(2) any excess parachute payment paid by 20 such an organization to any covered employee. 21 ‘‘(b) LIABILITY FOR TAX.—The employer shall be lia- 22 ble for the tax imposed under subsection (a). 23 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur- 24 poses of this section— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00306 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 307 1 ‘‘(1) TAX-EXEMPT ORGANIZA- 2 TION.—The 3 tion’ means any organization that for the taxable 4 year— 5 term ‘applicable tax-exempt organiza- ‘‘(A) is exempt from taxation under section 6 501(a), 7 ‘‘(B) is a farmers’ cooperative organization 8 described in section 521(b)(1), 9 ‘‘(C) has income excluded from taxation 10 under section 115(1), or 11 ‘‘(D) is a political organization described in 12 section 527(e)(1). 13 ‘‘(2) COVERED EMPLOYEE.—For purposes of 14 this section, the term ‘covered employee’ means any 15 employee (including any former employee) of an ap- 16 plicable tax-exempt organization if the employee— 17 ‘‘(A) is one of the 5 highest compensated 18 employees of the organization for the taxable 19 year, or 20 ‘‘(B) was a covered employee of the organi- 21 zation (or any predecessor) for any preceding 22 taxable year beginning after December 31, 23 2016. 24 ‘‘(3) REMUNERATION.—For purposes of this 25 section, the term ‘remuneration’ means wages (as g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 APPLICABLE 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00307 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 308 1 defined in section 3401(a)), except that such term 2 shall not include any designated Roth contribution 3 (as defined in section 402A(c)). 4 ‘‘(4) REMUNERATION 5 ZATIONS.— 6 ‘‘(A) IN GENERAL.—Remuneration of a 7 covered employee paid by an applicable tax-ex- 8 empt organization shall include any remunera- 9 tion paid with respect to employment of such 10 employee by any related person or governmental 11 entity. 12 ‘‘(B) RELATED ORGANIZATIONS.—A per- 13 son or governmental entity shall be treated as 14 related to an applicable tax-exempt organization 15 if such person or governmental entity— 16 ‘‘(i) controls, or is controlled by, the 17 organization, 18 ‘‘(ii) is controlled by one or more per- 19 sons that control the organization, 20 ‘‘(iii) is a supported organization (as 21 defined in section 509(f)(2)) during the 22 taxable year with respect to the organiza- 23 tion, 24 ‘‘(iv) is a supporting organization de- 25 scribed in section 509(a)(3) during the g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FROM RELATED ORGANI- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00308 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 309 1 taxable year with respect to the organiza- 2 tion, or 3 ‘‘(v) in the case of an organization 4 that is a voluntary employees’ beneficiary 5 association described in section 501(a)(9), 6 establishes, maintains, or makes contribu- 7 tions to such voluntary employees’ bene- 8 ficiary association. 9 ‘‘(C) LIABILITY any case in 10 which remuneration from more than one em- 11 ployer is taken into account under this para- 12 graph in determining the tax imposed by sub- 13 section (a), each such employer shall be liable 14 for such tax in an amount which bears the 15 same ratio to the total tax determined under 16 subsection (a) with respect to such remunera- 17 tion as— 18 ‘‘(i) the amount of remuneration paid 19 by such employer with respect to such em- 20 ployee, bears to 21 ‘‘(ii) the amount of remuneration paid 22 by all such employers to such employee. 23 ‘‘(5) EXCESS PARACHUTE PAYMENT.—For pur- 24 poses determining the tax imposed by subsection 25 (a)(2)— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FOR TAX.—In 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00309 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 310 1 ‘‘(A) IN term ‘excess 2 parachute payment’ means an amount equal to 3 the excess of any parachute payment over the 4 portion of the base amount allocated to such 5 payment. 6 ‘‘(B) PARACHUTE PAYMENT.—The term 7 ‘parachute payment’ means any payment in the 8 nature of compensation to (or for the benefit 9 of) a covered employee if— 10 ‘‘(i) such payment is contingent on 11 such employee’s separation from employ- 12 ment with the employer, and 13 ‘‘(ii) the aggregate present value of 14 the payments in the nature of compensa- 15 tion to (or for the benefit of) such indi- 16 vidual which are contingent on such sepa- 17 ration equals or exceeds an amount equal 18 to 3 times the base amount. 19 Such term does not include any payment de- 20 scribed in section 280G(b)(6) (relating to ex- 21 emption for payments under qualified plans) or 22 any payment made under or to an annuity con- 23 tract described in section 403(b) or a plan de- 24 scribed in section 457(b). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00310 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 311 1 ‘‘(C) BASE AMOUNT.—Rules similar to the 2 rules of 280G(b)(3) shall apply for purposes of 3 determining the base amount. 4 ‘‘(D) PROPERTY TRANSFERS; PRESENT 5 VALUE.—Rules 6 graphs (3) and (4) of section 280G(d) shall 7 apply. 8 ‘‘(6) COORDINATION 9 similar to the rules of para- TION.—Remuneration WITH DEDUCTION LIMITA- the deduction for which is not 10 allowed by reason of section 162(m) shall not be 11 taken into account for purposes of this section. 12 ‘‘(d) REGULATIONS.—The Secretary shall prescribe 13 such regulations as may be necessary to prevent avoidance 14 of the purposes of this section through the performance 15 of services other than as an employee.’’. 16 (b) CLERICAL AMENDMENT.—The table of sections 17 for subchapter D of chapter 42 is amended by adding at 18 the end the following new item: ‘‘Sec. 4960. Tax on excess exempt organization executive compensation.’’. 19 (c) EFFECTIVE DATE.—The amendments made by 20 this section shall apply to taxable years beginning after 21 December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00311 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 312 6 TITLE IV—TAXATION OF FOREIGN INCOME AND FOREIGN PERSONS Subtitle A—Establishment of Participation Exemption System for Taxation of Foreign Income 7 SEC. 4001. DEDUCTION FOR FOREIGN-SOURCE PORTION OF 8 DIVIDENDS RECEIVED BY DOMESTIC COR- 9 PORATIONS FROM SPECIFIED 10-PERCENT 1 2 3 4 5 10 OWNED FOREIGN CORPORATIONS. 11 (a) IN GENERAL.—Part VIII of subchapter B of 12 chapter 1 is amended by inserting after section 245 the 13 following new section: 14 ‘‘SEC. 245A. DEDUCTION FOR FOREIGN-SOURCE PORTION 15 OF DIVIDENDS RECEIVED BY DOMESTIC COR- 16 PORATIONS FROM SPECIFIED 10-PERCENT 17 OWNED FOREIGN CORPORATIONS. 18 ‘‘(a) IN GENERAL.—In the case of any dividend re- 19 ceived from a specified 10-percent owned foreign corpora20 tion by a domestic corporation which is a United States 21 shareholder with respect to such foreign corporation, there 22 shall be allowed as a deduction an amount equal to the 23 foreign-source portion of such dividend. 24 25 ‘‘(b) SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATION.—For g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 purposes of this section, the term ‘speci- (679209 10) PO 00000 Frm 00312 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 313 1 fied 10-percent owned foreign corporation’ means any for2 eign corporation with respect to which any domestic cor3 poration is a United States shareholder. Such term shall 4 not include any passive foreign investment company (with5 in the meaning of subpart D of part VI of subchapter P) 6 that is not a controlled foreign corporation. 7 ‘‘(c) FOREIGN-SOURCE PORTION.—For purposes of 8 this section— 9 ‘‘(1) IN foreign-source portion 10 of any dividend is an amount which bears the same 11 ratio to such dividend as— 12 ‘‘(A) the post-1986 undistributed foreign 13 earnings of the specified 10-percent owned for- 14 eign corporation, bears to 15 ‘‘(B) the total post-1986 undistributed 16 earnings of such foreign corporation. 17 ‘‘(2) POST-1986 UNDISTRIBUTED EARNINGS.— 18 The term ‘post-1986 undistributed earnings’ means 19 the amount of the earnings and profits of the speci- 20 fied 10-percent owned foreign corporation (computed 21 in accordance with sections 964(a) and 986) accu- 22 mulated in taxable years beginning after December 23 31, 1986— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00313 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 314 1 ‘‘(A) as of the close of the taxable year of 2 the specified 10-percent owned foreign corpora- 3 tion in which the dividend is distributed, and 4 ‘‘(B) without diminution by reason of divi- 5 dends distributed during such taxable year. 6 ‘‘(3) UNDISTRIBUTED FOREIGN 7 EARNINGS.—The 8 eign earnings’ means the portion of the post-1986 9 undistributed earnings which is attributable to nei- 10 term ‘post-1986 undistributed for- ther— 11 ‘‘(A) income described in subparagraph (A) 12 of section 245(a)(5), nor 13 ‘‘(B) dividends described in subparagraph 14 (B) of such section (determined without regard 15 to section 245(a)(12)). 16 ‘‘(4) TREATMENT OF 17 EARNINGS BEFORE 1987.— 18 ‘‘(A) IN DISTRIBUTIONS GENERAL.—In FROM the case of any div- 19 idend paid out of earnings and profits of the 20 specified 10-percent owned foreign corporation 21 (computed in accordance with sections 964(a) 22 and 986) accumulated in taxable years begin- 23 ning before January 1, 1987— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 POST-1986 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00314 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 315 1 ‘‘(i) paragraphs (1), (2), and (3) shall 2 be applied without regard to the phrase 3 ‘post-1986’ each place it appears, and 4 ‘‘(ii) paragraph (2) shall be applied by 5 substituting ‘after the date specified in sec- 6 tion 316(a)(1)’ for ‘in taxable years begin- 7 ning after December 31, 1986’. 8 ‘‘(B) DIVIDENDS 9 FIRST POST-1986 EARNINGS.—Dividends OUT OF shall be treat- 10 ed as paid out of post-1986 undistributed earn- 11 ings to the extent thereof. 12 ‘‘(5) TREATMENT OF CERTAIN DIVIDENDS IN 13 EXCESS OF UNDISTRIBUTED EARNINGS.—In 14 of any dividend from the specified 10-percent owned 15 foreign corporation which is in excess of undistrib- 16 uted earnings (as determined under paragraph (2) 17 after taking into account the modifications described 18 in clauses (i) and (ii) of paragraph (4)(A)), the for- 19 eign-source portion of such dividend is an amount 20 which bears the same ratio to such dividend as— the case 21 ‘‘(A) the portion of the earnings and prof- 22 its described in subparagraph (B) which is at- 23 tributable to neither income described in para- 24 graph (3)(A) nor dividends described in para- 25 graph (3)(B), bears to g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 PAID 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00315 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 316 1 ‘‘(B) the earnings and profits of such cor- 2 poration for the taxable year in which such dis- 3 tribution is made (computed as of the close of 4 the taxable year without diminution by reason 5 of any distributions made during the taxable 6 year). 7 8 ‘‘(d) DISALLOWANCE OF FOREIGN TAX CREDIT, ETC.— 9 ‘‘(1) IN GENERAL.—No credit shall be allowed 10 under section 901 for any taxes paid or accrued (or 11 treated as paid or accrued) with respect to any divi- 12 dend for which a deduction is allowed under this sec- 13 tion. 14 ‘‘(2) DENIAL OF DEDUCTION.—No deduction 15 shall be allowed under this chapter for any tax for 16 which credit is not allowable under section 901 by 17 reason of paragraph (1) (determined by treating the 18 taxpayer as having elected the benefits of subpart A 19 of part III of subchapter N). 20 ‘‘(e) REGULATIONS.—The Secretary may prescribe 21 such regulations or other guidance as may be necessary 22 or appropriate to carry out the provisions of this section.’’. 23 24 (b) APPLICATION MENT.—Section g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 OF HOLDING PERIOD REQUIRE- 246(c) is amended— (679209 10) PO 00000 Frm 00316 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 317 1 2 (1) by striking ‘‘or 245’’ in paragraph (1) and inserting ‘‘245, or 245A’’, and 3 4 (2) by adding at the end the following new paragraph: 5 ‘‘(5) SPECIAL 6 PORTION OF DIVIDENDS RECEIVED FROM SPECIFIED 7 10-PERCENT OWNED FOREIGN CORPORATIONS.— 8 ‘‘(A) 6-MONTH 9 MENT.—For 10 HOLDING PERIOD REQUIRE- purposes of section 245A— ‘‘(i) paragraph (1)(A) shall be ap- 11 plied— 12 ‘‘(I) by substituting ‘180 days’ 13 for ‘45 days’each place it appears, and 14 ‘‘(II) by substituting ‘361-day pe- 15 riod’ for ‘91-day period’, and 16 ‘‘(ii) paragraph (2) shall not apply. 17 ‘‘(B) STATUS MUST BE MAINTAINED DUR- 18 ING HOLDING PERIOD.—For 19 ing paragraph (1) with respect to section 245A, 20 the taxpayer shall be treated as holding the 21 stock referred to in paragraph (1) for any pe- 22 riod only if— purposes of apply- 23 ‘‘(i) the specified 10-percent owned 24 foreign corporation referred to in section g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 RULES FOR FOREIGN SOURCE 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00317 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 318 1 245A(a) is a specified 10-percent owned 2 foreign corporation for such period, and 3 ‘‘(ii) the taxpayer is a United States 4 shareholder with respect to such specified 5 10-percent owned foreign corporation for 6 such period.’’. 7 8 (c) APPLICATION BLE TO 9 OF RULES GENERALLY APPLICA- DEDUCTIONS FOR DIVIDENDS RECEIVED.— (1) TREATMENT OF DIVIDENDS FROM CERTAIN 10 CORPORATIONS.—Section 11 striking ‘‘and 245’’ and inserting ‘‘245, and 245A’’. 12 (2) COORDINATION 246(a)(1) is amended by WITH SECTION 1059.—Sec- 13 tion 1059(b)(2)(B) is amended by striking ‘‘or 245’’ 14 and inserting ‘‘245, or 245A’’. 15 (d) COORDINATION WITH FOREIGN TAX CREDIT 16 LIMITATION.—Section 904(b) is amended by adding at 17 the end the following new paragraph: 18 ‘‘(5) TREATMENT 19 DEDUCTION IS ALLOWED UNDER SECTION 245A.— 20 For purposes of subsection (a), in the case of a 21 United States shareholder with respect to a specified 22 10-percent owned foreign corporation, such share- 23 holder’s taxable income from sources without the 24 United States (and entire taxable income) shall be 25 determined without regard to— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF DIVIDENDS FOR WHICH 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00318 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 319 1 ‘‘(A) the foreign-source portion of any divi- 2 dend received from such foreign corporation, 3 and 4 ‘‘(B) any deductions properly allocable or 5 apportioned to— 6 ‘‘(i) income (other than subpart F in- 7 come (as defined in section 952) and for- 8 eign high return amounts (as defined in 9 section 951A(b)) with respect to stock of 10 such specified 10-percent owned foreign 11 corporation, or 12 ‘‘(ii) such stock (to the extent income 13 with respect to such stock is other than 14 subpart F income (as so defined) or for- 15 eign high return amounts (as so defined)). 16 Any term which is used in section 245A and in this 17 paragraph shall have the same meaning for purposes 18 of this paragraph as when used in such section.’’. 19 (e) CONFORMING AMENDMENTS.— 20 (1) Section 245(a)(4) is amended by striking 21 ‘‘section 22 245A(c)(2) applied by substituting ‘qualified 10-per- 23 cent owned foreign corporation’ for ‘specified 10-per- 24 cent owned foreign corporation’ each place it ap- 25 pears’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 902(c)(1)’’ and inserting ‘‘section (679209 10) PO 00000 Frm 00319 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 320 1 (2) Section 951(b) is amended by striking ‘‘sub- 2 part’’ and inserting ‘‘title’’. 3 (3) Section 957(a) is amended by striking ‘‘sub- 4 part’’ in the matter preceding paragraph (1) and in- 5 serting ‘‘title’’. 6 (4) The table of sections for part VIII of sub- 7 chapter B of chapter 1 is amended by inserting after 8 section 245 the following new item: ‘‘Sec. 245A. Deduction for foreign-source portion of dividends received by domestic corporations from specified 10-percent owned foreign corporations.’’. 9 (f) EFFECTIVE DATE.—The amendments made by 10 this section shall apply to distributions made after (and, 11 in the case of the amendments made by subsection (d), 12 deductions with respect to taxable years ending after) De13 cember 31, 2017. 14 SEC. 4002. APPLICATION OF PARTICIPATION EXEMPTION 15 TO INVESTMENTS IN UNITED STATES PROP- 16 ERTY. 17 (a) IN GENERAL.—Section 956(a) is amended in the 18 matter preceding paragraph (1) by inserting ‘‘(other than 19 a corporation)’’ after ‘‘United States shareholder’’. 20 (b) REGULATORY AUTHORITY TO PREVENT 21 ABUSE.—Section 956(e) is amended by striking ‘‘includ22 ing regulations to prevent’’ and inserting ‘‘including regu23 lations— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00320 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 321 1 ‘‘(1) to address United States shareholders that 2 are partnerships with corporate partners, and 3 ‘‘(2) to prevent’’. 4 (c) EFFECTIVE DATE.—The amendments made by 5 this section shall apply to taxable years of foreign corpora6 tions beginning after December 31, 2017. 7 SEC. 4003. LIMITATION ON LOSSES WITH RESPECT TO 8 SPECIFIED 9 CORPORATIONS. 10 (a) BASIS 11 EIGN 12 OF IN 10-PERCENT 13 FOR (1) IN FOREIGN SPECIFIED 10-PERCENT OWNED FOR- CORPORATION REDUCED DIVIDEND OWNED PURPOSES BY OF NONTAXED PORTION DETERMINING LOSS.— GENERAL.—Section 961 is amended by 14 adding at the end the following new subsection: 15 ‘‘(d) BASIS 16 EIGN 17 OF IN SPECIFIED 10-PERCENT OWNED FOR- CORPORATION REDUCED DIVIDEND FOR PURPOSES BY OF NONTAXED PORTION DETERMINING LOSS.— 18 If a domestic corporation received a dividend from a speci19 fied 10-percent owned foreign corporation (as defined in 20 section 245A) in any taxable year, solely for purposes of 21 determining loss on any disposition of stock of such for22 eign corporation in such taxable year or any subsequent 23 taxable year, the basis of such domestic corporation in 24 such stock shall be reduced (but not below zero) by the 25 amount of any deduction allowable to such domestic cor- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00321 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 322 1 poration under section 245A with respect to such stock 2 except to the extent such basis was reduced under section 3 1059 by reason of a dividend for which such a deduction 4 was allowable.’’. 5 (2) EFFECTIVE DATE.—The amendments made 6 by this subsection shall apply to distributions made 7 after December 31, 2017. 8 (b) TREATMENT 9 TRANSFERRED 10 EIGN TO OF FOREIGN BRANCH LOSSES SPECIFIED 10-PERCENT OWNED FOR- CORPORATIONS.— 11 (1) IN GENERAL.—Part II of subchapter B of 12 chapter 1 is amended by adding at the end the fol- 13 lowing new section: 14 ‘‘SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANS- 15 FERRED TO SPECIFIED 10-PERCENT OWNED 16 FOREIGN CORPORATIONS. 17 ‘‘(a) IN GENERAL.—If a domestic corporation trans- 18 fers substantially all of the assets of a foreign branch 19 (within the meaning of section 367(a)(3)(C)) to a specified 20 10-percent owned foreign corporation (as defined in sec21 tion 245A) with respect to which it is a United States 22 shareholder after such transfer, such domestic corporation 23 shall include in gross income for the taxable year which 24 includes such transfer an amount equal to the transferred 25 loss amount with respect to such transfer. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00322 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 323 1 ‘‘(b) TRANSFERRED LOSS AMOUNT.—For purposes 2 of this section, the term ‘transferred loss amount’ means, 3 with respect to any transfer of substantially all of the as4 sets of a foreign branch, the excess (if any) of— 5 ‘‘(1) the sum of losses— 6 ‘‘(A) which were incurred by the foreign 7 branch after December 31, 2017, and before 8 the transfer, and 9 ‘‘(B) with respect to which a deduction was 10 allowed to the taxpayer, over 11 ‘‘(2) the sum of— 12 ‘‘(A) any taxable income of such branch 13 for a taxable year after the taxable year in 14 which the loss was incurred and through the 15 close of the taxable year of the transfer, and 16 ‘‘(B) any amount which is recognized 17 under section 904(f)(3) on account of the trans- 18 fer. 19 ‘‘(c) REDUCTION FOR RECOGNIZED GAINS.— 20 ‘‘(1) IN the case of a transfer 21 not described in section 367(a)(3)(C), the trans- 22 ferred loss amount shall be reduced (but not below 23 zero) by the amount of gain recognized by the tax- 24 payer on account of the transfer (other than g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—In 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00323 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 324 1 amounts taken into account under subsection 2 (c)(2)(B)). 3 ‘‘(2) COORDINATION WITH RECOGNITION 4 UNDER SECTION 367.—In 5 scribed in section 367(a)(3)(C), the transferred loss 6 amount shall not exceed the excess (if any) of— the case of a transfer de- 7 ‘‘(A) the excess of the amount described in 8 section 367(a)(3)(C)(i) over the amount de- 9 scribed in section 367(a)(3)(C)(ii) with respect 10 to such transfer, over 11 ‘‘(B) the amount of gain recognized under 12 section 367(a)(3)(C) with respect to such trans- 13 fer. 14 ‘‘(d) SOURCE OF INCOME.—Amounts included in 15 gross income under this section shall be treated as derived 16 from sources within the United States. 17 ‘‘(e) BASIS ADJUSTMENTS.—Consistent with such 18 regulations or other guidance as the Secretary may pre19 scribe, proper adjustments shall be made in the adjusted 20 basis of the taxpayer’s stock in the specified 10-percent 21 owned foreign corporation to which the transfer is made, 22 and in the transferee’s adjusted basis in the property 23 transferred, to reflect amounts included in gross income 24 under this section.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00324 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 325 1 (2) AMOUNTS RECOGNIZED UNDER SECTION 367 2 ON TRANSFER OF FOREIGN BRANCH WITH PRE- 3 VIOUSLY DEDUCTED LOSSES TREATED AS UNITED 4 STATES SOURCE.—Section 5 by striking ‘‘outside’’ in the last sentence and insert- 6 ing ‘‘within’’. 7 (3) CLERICAL 367(a)(3)(C) is amended AMENDMENT.—The table of sec- 8 tions for part II of subchapter B of chapter 1 is 9 amended by adding at the end the following new 10 item: ‘‘Sec. 91. Certain foreign branch losses transferred to specified 10-percent owned foreign corporations.’’. 11 (4) EFFECTIVE DATE.—The amendments made 12 by this subsection shall apply to transfers after De- 13 cember 31, 2017. 14 SEC. 4004. TREATMENT OF DEFERRED FOREIGN INCOME 15 UPON TRANSITION TO PARTICIPATION EX- 16 EMPTION SYSTEM OF TAXATION. 17 (a) IN GENERAL.—Section 965 is amended to read 18 as follows: 19 ‘‘SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME 20 UPON TRANSITION TO PARTICIPATION EX- 21 EMPTION SYSTEM OF TAXATION. 22 23 ‘‘(a) TREATMENT AS OF DEFERRED FOREIGN INCOME SUBPART F INCOME.—In the case of the last taxable 24 year of a deferred foreign income corporation which begins g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00325 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 326 1 before January 1, 2018, the subpart F income of such 2 foreign corporation (as otherwise determined for such tax3 able year under section 952) shall be increased by the 4 greater of— 5 ‘‘(1) the accumulated post-1986 deferred for- 6 eign income of such corporation determined as of 7 November 2, 2017, or 8 ‘‘(2) the accumulated post-1986 deferred for- 9 eign income of such corporation determined as of 10 December 31, 2017. 11 ‘‘(b) REDUCTION 12 INCOME 13 FIED 14 INGS AND AMOUNTS INCLUDED UNITED STATES SHAREHOLDERS IN GROSS OF SPECI- FOREIGN CORPORATIONS WITH DEFICITS 15 IN EARN- PROFITS.— ‘‘(1) IN GENERAL.—In the case of a taxpayer 16 which is a United States shareholder with respect to 17 at least one deferred foreign income corporation and 18 at least one E&P deficit foreign corporation, the 19 amount which would (but for this subsection) be 20 taken into account under section 951(a)(1) by rea- 21 son of subsection (a) as such United States share- 22 holder’s pro rata share of the subpart F income of 23 each deferred foreign income corporation shall be re- 24 duced (but not below zero) by the amount of such 25 United States shareholder’s aggregate foreign E&P g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF IN 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00326 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 327 1 deficit which is allocated under paragraph (2) to 2 such deferred foreign income corporation. 3 ‘‘(2) ALLOCATION 4 DEFICIT.—The 5 United States shareholder shall be allocated among 6 the deferred foreign income corporations of such 7 United States shareholder in an amount which bears 8 the same proportion to such aggregate as— aggregate foreign E&P deficit of any 9 ‘‘(A) such United States shareholder’s pro 10 rata share of the accumulated post-1986 de- 11 ferred foreign income of each such deferred for- 12 eign income corporation, bears to 13 ‘‘(B) the aggregate of such United States 14 shareholder’s pro rata share of the accumulated 15 post-1986 deferred foreign income of all de- 16 ferred foreign income corporations of such 17 United States shareholder. 18 ‘‘(3) DEFINITIONS 19 CITS.—For 20 RELATED TO E&P DEFI- E&P DEF- purposes of this subsection— ‘‘(A) AGGREGATE FOREIGN 21 ICIT.—The 22 means, with respect to any United States share- 23 holder, the aggregate of such shareholder’s pro 24 rata shares of the specified E&P deficits of the g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF AGGREGATE FOREIGN E&P 10:46 Nov 02, 2017 Jkt 000000 term ‘aggregate foreign E&P deficit’ (679209 10) PO 00000 Frm 00327 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 328 1 E&P deficit foreign corporations of such share- 2 holder. 3 ‘‘(B) E&P FOREIGN CORPORA- 4 TION.—The 5 tion’ means, with respect to any taxpayer, any 6 specified foreign corporation with respect to 7 which such taxpayer is a United States share- 8 holder, if— term ‘E&P deficit foreign corpora- 9 ‘‘(i) such specified foreign corporation 10 has a deficit in post-1986 earnings and 11 profits, and 12 ‘‘(ii) as of November 2, 2017— 13 ‘‘(I) such corporation was a spec- 14 ified foreign corporation, and 15 ‘‘(II) such taxpayer was a United 16 States shareholder of such corpora- 17 tion. 18 ‘‘(C) SPECIFIED E&P DEFICIT.—The term 19 ‘specified E&P deficit’ means, with respect to 20 any E&P deficit foreign corporation, the 21 amount of the deficit referred to in subpara- 22 graph (B). 23 ‘‘(4) NETTING 24 10:46 Nov 02, 2017 AMONG UNITED STATES SHARE- HOLDERS IN SAME AFFILIATED GROUP.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 DEFICIT Jkt 000000 (679209 10) PO 00000 Frm 00328 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 329 1 ‘‘(A) IN the case of any af- 2 filiated group which includes at least one E&P 3 net surplus shareholder and one E&P net def- 4 icit shareholder, the amount which would (but 5 for this paragraph) be taken into account under 6 section 951(a)(1) by reason of subsection (a) by 7 each such E&P net surplus shareholder shall be 8 reduced (but not below zero) by such share- 9 holder’s applicable share of the affiliated 10 group’s aggregate unused E&P deficit. 11 ‘‘(B) 12 HOLDER.—For 13 term ‘E&P net surplus shareholder’ means any 14 United States shareholder which would (deter- 15 mined without regard to this paragraph) take 16 into account an amount greater than zero 17 under section 951(a)(1) by reason of subsection 18 (a). 19 E&P ‘‘(C) E&P NET SURPLUS SHARE- purposes of this paragraph, the NET DEFICIT SHAREHOLDER.— 20 For purposes of this paragraph, the term ‘E&P 21 net deficit shareholder’ means any United 22 States shareholder if— 23 ‘‘(i) the aggregate foreign E&P deficit 24 with respect to such shareholder (as de- 25 fined in paragraph (3)(A)), exceeds g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—In 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00329 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 330 1 ‘‘(ii) the amount which would (but for 2 this subsection) be taken into account by 3 such shareholder under section 951(a)(1) 4 by reason of subsection (a). 5 ‘‘(D) AGGREGATE 6 For purposes of this paragraph— 7 ‘‘(i) IN GENERAL.—The term ‘aggre- 8 gate unused E&P deficit’ means, with re- 9 spect to any affiliated group, the lesser 10 of— 11 ‘‘(I) the sum of the excesses de- 12 scribed in subparagraph (C), deter- 13 mined with respect to each E&P net 14 deficit shareholder in such group, or 15 ‘‘(II) the amount determined 16 under subparagraph (E)(ii). 17 ‘‘(ii) REDUCTION WITH RESPECT TO 18 E&P NET DEFICIT SHAREHOLDERS WHICH 19 ARE NOT WHOLLY OWNED BY THE AFFILI- 20 ATED GROUP.—If 21 centage of any E&P net deficit shareholder 22 is less than 100 percent, the amount of the 23 excess described in subparagraph (C) 24 which is taken into account under clause 25 (i)(I) with respect to such E&P net deficit g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 UNUSED E&P DEFICIT.— 10:46 Nov 02, 2017 Jkt 000000 the group ownership per- (679209 10) PO 00000 Frm 00330 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 331 1 shareholder shall be such group ownership 2 percentage of such amount. 3 ‘‘(E) APPLICABLE purposes 4 of this paragraph, the term ‘applicable share’ 5 means, with respect to any E&P net surplus 6 shareholder in any affiliated group, the amount 7 which bears the same proportion to such 8 group’s aggregate unused E&P deficit as— 9 ‘‘(i) the product of— 10 ‘‘(I) such shareholder’s group 11 ownership percentage, multiplied by 12 ‘‘(II) the amount which would 13 (but for this paragraph) be taken into 14 account under section 951(a)(1) by 15 reason of subsection (a) by such 16 shareholder, bears to 17 ‘‘(ii) the aggregate amount deter- 18 mined under clause (i) with respect to all 19 E&P net surplus shareholders in such 20 group. 21 ‘‘(F) GROUP OWNERSHIP PERCENTAGE.— 22 For purposes of this paragraph, the term 23 ‘group ownership percentage’ means, with re- 24 spect to any United States shareholder in any 25 affiliated group, the percentage of the value of g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 SHARE.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00331 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 332 1 the stock of such United States shareholder 2 which is held by other includible corporations in 3 such affiliated group. Notwithstanding the pre- 4 ceding sentence, the group ownership percent- 5 age of the common parent of the affiliated 6 group is 100 percent. Any term used in this 7 subparagraph which is also used in section 8 1504 shall have the same meaning as when 9 used in such section. 10 11 ‘‘(c) APPLICATION PARTICIPATION EXEMPTION TO INCLUDED INCOME.— 12 ‘‘(1) IN GENERAL.—In the case of a United 13 States shareholder of a deferred foreign income cor- 14 poration, there shall be allowed as a deduction for 15 the taxable year in which an amount is included in 16 the gross income of such United States shareholder 17 under section 951(a)(1) by reason of this section an 18 amount equal to the sum of— 19 ‘‘(A) the United States shareholder’s 5 20 percent rate equivalent percentage of the excess 21 (if any) of— 22 ‘‘(i) the amount so included as gross 23 income, over g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00332 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 333 1 ‘‘(ii) the amount of such United 2 States shareholder’s aggregate foreign cash 3 position, plus 4 ‘‘(B) the United States shareholder’s 12 5 percent rate equivalent percentage of so much 6 of the amount described in subparagraph (A)(ii) 7 as does not exceed the amount described in sub- 8 paragraph (A)(i). 9 ‘‘(2) 5 10 PERCENTAGES.—For purposes of this subsection— 11 ‘‘(A) 5 12 CENTAGE.—The 13 percentage’ means, with respect to any United 14 States shareholder for any taxable year, the 15 percentage which would result in the amount to 16 which such percentage applies being subject to 17 a 5 percent rate of tax determined by only tak- 18 ing into account a deduction equal to such per- 19 centage of such amount and the highest rate of 20 tax specified in section 11 for such taxable 21 year. In the case of any taxable year of a 22 United States shareholder to which section 15 23 applies, the highest rate of tax under section 11 24 before the effective date of the change in rates 25 and the highest rate of tax under section 11 g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AND 12 PERCENT RATE EQUIVALENT 10:46 Nov 02, 2017 Jkt 000000 PERCENT RATE EQUIVALENT PER- term ‘5 percent rate equivalent (679209 10) PO 00000 Frm 00333 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 334 1 after the effective date of such change shall 2 each be taken into account under the preceding 3 sentence in the same proportions as the portion 4 of such taxable year which is before and after 5 such effective date, respectively. 6 ‘‘(B) 12 7 CENTAGE.—The 8 lent percentage’ means, with respect to any 9 United States shareholder for any taxable year, 10 the percentage determined under subparagraph 11 (A) applied by substituting ‘12 percent rate of 12 tax’ for ‘5 percent rate of tax’. 13 ‘‘(3) AGGREGATE 14 term ‘12 percent rate equiva- FOREIGN CASH POSITION.— For purposes of this subsection— 15 ‘‘(A) IN GENERAL.—The term ‘aggregate 16 foreign cash position’ means, with respect to 17 any United States shareholder, one-third of the 18 sum of— 19 ‘‘(i) the aggregate of such United 20 States shareholder’s pro rata share of the 21 cash position of each specified foreign cor- 22 poration of such United States shareholder 23 determined as of November 2, 2017, 24 ‘‘(ii) the aggregate described in clause 25 (i) determined as of the close of the last g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 PERCENT RATE EQUIVALENT PER- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00334 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 335 1 taxable year of each such specified foreign 2 corporation which ends before November 2, 3 2017, and 4 ‘‘(iii) aggregate described in 5 clause (i) determined as of the close of the 6 taxable year of each such specified foreign 7 corporation which precedes the taxable 8 year referred to in clause (ii). 9 In the case of any foreign corporation which did 10 not exist as of the determination date described 11 in clause (ii) or (iii), this subparagraph shall be 12 applied separately to such foreign corporation 13 by not taking into account such clause and by 14 substituting ‘one-half (100 percent in the case 15 that both clauses (ii) and (iii) are disregarded)’ 16 for ‘one-third’. 17 ‘‘(B) CASH POSITION.—For purposes of 18 this paragraph, the cash position of any speci- 19 fied foreign corporation is the sum of— 20 ‘‘(i) cash held by such foreign cor- 21 poration, 22 ‘‘(ii) the net accounts receivable of 23 such foreign corporation, plus 24 ‘‘(iii) the fair market value of the fol- 25 lowing assets held by such corporation: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 the 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00335 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 336 1 ‘‘(I) traded personal 2 property for which there is an estab- 3 lished financial market. 4 ‘‘(II) Commercial paper, certifi- 5 cates of deposit, the securities of the 6 Federal government and of any State 7 or foreign government. 8 ‘‘(III) Any foreign currency. 9 ‘‘(IV) Any obligation with a term 10 of less than one year. 11 ‘‘(V) Any asset which the Sec- 12 retary identifies as being economically 13 equivalent to any asset described in 14 this subparagraph. 15 ‘‘(C) NET ACCOUNTS RECEIVABLE.—For 16 purposes of this paragraph, the term ‘net ac- 17 counts receivable’ means, with respect to any 18 specified foreign corporation, the excess (if any) 19 of— 20 ‘‘(i) such corporation’s accounts re- 21 ceivable, over 22 ‘‘(ii) such corporation’s accounts pay- 23 able (determined consistent with the rules 24 of section 461). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 Actively 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00336 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 337 1 ‘‘(D) PREVENTION 2 ING.— 3 ‘‘(i) IN GENERAL.—The applicable 4 percentage of each specified cash position 5 of a specified foreign corporation shall not 6 be taken into account by— 7 ‘‘(I) the United States share- 8 holder referred to in clause (ii) with 9 respect to such position, or 10 ‘‘(II) any United States share- 11 holder which is an includible corpora- 12 tion in the same affiliated group as 13 such United States shareholder re- 14 ferred to in clause (ii). 15 ‘‘(ii) SPECIFIED CASH POSITION.—For 16 purposes of this subparagraph, the term 17 ‘specified cash position’ means— 18 ‘‘(I) amounts described in sub- 19 paragraph (B)(ii) to the extent such 20 amounts are receivable from another 21 specified foreign corporation with re- 22 spect to any United States share- 23 holder, 24 ‘‘(II) amounts described in sub- 25 paragraph (B)(iii)(I) to the extent g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF DOUBLE COUNT- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00337 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 338 1 such amounts consist of an equity in- 2 terest in another specified foreign cor- 3 poration with respect to any United 4 States shareholder, and 5 ‘‘(III) amounts described in sub- 6 paragraph (B)(iii)(IV) to the extent 7 that another specified foreign corpora- 8 tion with respect to any United States 9 shareholder is obligated to repay such 10 amount. 11 ‘‘(iii) PERCENTAGE.— 12 For purposes of this subparagraph, the 13 term ‘applicable percentage’ means— 14 ‘‘(I) with respect to each speci- 15 fied cash position described in sub- 16 clause (I) or (III) of clause (ii), the 17 pro rata share of the United States 18 shareholder referred to in clause (ii) 19 with respect to the specified foreign 20 corporation referred to in such clause, 21 and 22 ‘‘(II) with respect to each speci- 23 fied cash position described in clause 24 (ii)(II), the ratio (expressed as a per- 25 centage and not in excess of 100 per- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 APPLICABLE 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00338 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 339 1 cent) of the United States share- 2 holder’s pro rata share of the cash po- 3 sition of the specified foreign corpora- 4 tion referred to in such clause divided 5 by the amount of such specified cash 6 position. 7 For purposes of this subparagraph, a sepa- 8 rate applicable percentage shall be deter- 9 mined under each of subclauses (I) and 10 (II) with respect to each specified foreign 11 corporation referred to in clause (ii) with 12 respect to which a specified cash position 13 is determined for the specified foreign cor- 14 poration referred to in clause (i). 15 ‘‘(iv) REDUCTION 16 AFFILIATED GROUP MEMBERS NOT WHOL- 17 LY OWNED BY THE AFFILIATED GROUP.— 18 For purposes of clause (i)(II), in the case 19 of an includible corporation the group own- 20 ership percentage of which is less than 100 21 percent (as determined under subsection 22 (b)(4)(F)), the amount not take into ac- 23 count by reason of such clause shall be the 24 group g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 WITH RESPECT TO 10:46 Nov 02, 2017 Jkt 000000 ownership percentage of such (679209 10) PO 00000 Frm 00339 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 340 1 amount (determined without regard to this 2 clause). 3 ‘‘(E) CERTAIN ASSETS NOT 4 TAKEN INTO ACCOUNT.—A 5 specified foreign corporation shall not be taken 6 into account under subparagraph (A) if such 7 position could not (as of the date that it would 8 otherwise have been taken into account under 9 clause (i), (ii), or (iii) of subparagraph (A)) 10 have been distributed by such specified foreign 11 corporation to United States shareholders of 12 such specified foreign corporation because of 13 currency or other restrictions or limitations im- 14 posed under the laws of any foreign country 15 (within the meaning of section 964(b)). 16 ‘‘(F) CASH cash position of a POSITIONS OF CERTAIN NON- 17 CORPORATE ENTITIES TAKEN INTO ACCOUNT.— 18 An entity (other than a domestic corporation) 19 shall be treated as a specified foreign corpora- 20 tion of a United States shareholder for pur- 21 poses of determining such United States share- 22 holder’s aggregate foreign cash position if any 23 interest in such entity is held by a specified for- 24 eign corporation of such United States share- 25 holder (determined after application of this sub- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 BLOCKED 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00340 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 341 1 paragraph) and such entity would be a specified 2 foreign corporation of such United States 3 shareholder if such entity were a foreign cor- 4 poration 5 ‘‘(G) TIME OF CERTAIN DETERMINA- 6 TIONS.—For 7 determination of whether a person is a United 8 States shareholder, whether a person is a speci- 9 fied foreign corporation, and the pro rata share 10 of a United States shareholder with respect to 11 a specified foreign corporation, shall be deter- 12 mined as of the end of the taxable year de- 13 scribed in subsection (a). purposes of this paragraph, the 14 ‘‘(H) ANTI-ABUSE.—If the Secretary de- 15 termines that the principal purpose of any 16 transaction was to reduce the aggregate foreign 17 cash position taken into account under this sub- 18 section, such transaction shall be disregarded 19 for purposes of this subsection. 20 ‘‘(d) DEFERRED FOREIGN INCOME CORPORATION; 21 ACCUMULATED POST-1986 DEFERRED FOREIGN IN22 COME.—For 23 ‘‘(1) DEFERRED FOREIGN INCOME CORPORA- 24 TION.—The 25 tion’ means, with respect to any United States g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 purposes of this section— 10:46 Nov 02, 2017 Jkt 000000 term ‘deferred foreign income corpora- (679209 10) PO 00000 Frm 00341 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 342 1 shareholder, any specified foreign corporation of 2 such United States shareholder which has accumu- 3 lated post-1986 deferred foreign income (as of the 4 date referred to in paragraph (1) or (2) of sub- 5 section (a), whichever is applicable with respect to 6 such foreign corporation) greater than zero. 7 ‘‘(2) ACCUMULATED 8 EIGN INCOME.—The 9 deferred foreign income’ means the post-1986 earn- 10 ings and profits except to the extent such earnings— 11 ‘‘(A) are attributable to income of the 12 specified foreign corporation which is effectively 13 connected with the conduct of a trade or busi- 14 ness within the United States and subject to 15 tax under this chapter, or term ‘accumulated post-1986 16 ‘‘(B) if distributed, would be excluded from 17 the gross income of a United States shareholder 18 under section 959. 19 To the extent provided in regulations or other guid- 20 ance prescribed by the Secretary, in the case of any 21 controlled foreign corporation which has share- 22 holders which are not United States shareholders, 23 accumulated post-1986 deferred foreign income shall 24 be appropriately reduced by amounts which would be g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 POST-1986 DEFERRED FOR- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00342 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 343 1 described in subparagraph (B) if such shareholders 2 were United States shareholders. 3 ‘‘(3) POST-1986 4 term ‘post-1986 earnings and profits’ means the 5 earnings and profits of the foreign corporation (com- 6 puted in accordance with sections 964(a) and 986) 7 accumulated in taxable years beginning after Decem- 8 ber 31, 1986, and determined— 9 ‘‘(A) as of the date referred to in para- 10 graph (1) or (2) of subsection (a), whichever is 11 applicable with respect to such foreign corpora- 12 tion, 13 ‘‘(B) without diminution by reason of divi- 14 dends distributed during the taxable year end- 15 ing with or including such date, and 16 ‘‘(C) increased by the amount of any quali- 17 fied deficit (within the meaning of section 18 952(c)(1)(B)(ii)) arising before January 1, 19 2018, which is treated as a qualified deficit 20 (within the meaning of such section as amended 21 by the Tax Cuts and Jobs Act) for purposes of 22 such foreign corporation’s first taxable year be- 23 ginning after December 31, 2017. 24 ‘‘(e) SPECIFIED FOREIGN CORPORATION.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 EARNINGS AND PROFITS.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00343 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 344 1 ‘‘(1) IN 2 tion, 3 means— the 4 GENERAL.—For term ‘specified purposes of this secforeign corporation’ ‘‘(A) any controlled foreign corporation, 5 and 6 ‘‘(B) any foreign corporation with respect 7 to which one or more domestic corporations is 8 a United States shareholder (determined with- 9 out regard to section 958(b)(4)). 10 ‘‘(2) APPLICATION TO CERTAIN FOREIGN COR- 11 PORATIONS.—For 12 a foreign corporation described in paragraph (1)(B) 13 shall be treated as a controlled foreign corporation 14 solely for purposes of taking into account the sub- 15 part F income of such corporation under subsection 16 (a) (and for purposes of applying subsection (f)). 17 purposes of sections 951 and 961, ‘‘(3) EXCEPTION FOR PASSIVE FOREIGN IN- 18 VESTMENT COMPANIES.—The 19 corporation’ shall not include any passive foreign in- 20 vestment company (within the meaning of subpart D 21 of part VI of subchapter P) that is not a controlled 22 foreign corporation. 23 ‘‘(f) DETERMINATIONS OF term ‘specified foreign PRO RATA SHARE.—For 24 purposes of this section, the determination of any United 25 States shareholder’s pro rata share of any amount with g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00344 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 345 1 respect to any specified foreign corporation shall be deter2 mined under rules similar to the rules of section 951(a)(2) 3 by treating such amount in the same manner as subpart 4 F income (and by treating such specified foreign corpora5 tion as a controlled foreign corporation). 6 7 ‘‘(g) DISALLOWANCE FOREIGN TAX CREDIT, ETC.— 8 ‘‘(1) IN GENERAL.—No credit shall be allowed 9 under section 901 for the applicable percentage of 10 any taxes paid or accrued (or treated as paid or ac- 11 crued) with respect to any amount for which a de- 12 duction is allowed under this section. 13 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 14 of this subsection, the term ‘applicable percentage’ 15 means the amount (expressed as a percentage) equal 16 to the sum of— 17 ‘‘(A) 85.7 percent of the ratio of— 18 ‘‘(i) the excess to which subsection 19 (c)(1)(A) applies, divided by 20 ‘‘(ii) the sum of such excess plus the 21 amount to which subsection (c)(1)(B) ap- 22 plies, plus 23 ‘‘(B) 65.7 percent of the ratio of— 24 ‘‘(i) the amount to which subsection 25 (c)(1)(B) applies, divided by g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00345 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 346 1 ‘‘(ii) the sum described in subpara- 2 graph (A)(ii). 3 ‘‘(3) DENIAL deduction 4 shall be allowed under this chapter for any tax for 5 which credit is not allowable under section 901 by 6 reason of paragraph (1) (determined by treating the 7 taxpayer as having elected the benefits of subpart A 8 of part III of subchapter N). 9 ‘‘(4) COORDINATION WITH SECTION 78.—Sec- 10 tion 78 shall not apply to any tax for which credit 11 is not allowable under section 901 by reason of para- 12 graph (1). 13 ‘‘(5) EXTENSION OF FOREIGN TAX CREDIT CAR- 14 RYOVER PERIOD.—With 15 accrued (or treated as paid or accrued) with respect 16 to any amount for which a deduction is allowed 17 under this section, section 904(c) shall be applied by 18 substituting ‘first 20 succeeding taxable years’ for 19 ‘first 10 succeeding taxable years’. 20 ‘‘(h) ELECTION 21 TO respect to any taxes paid or PAY LIABILITY IN INSTALL- MENTS.— 22 ‘‘(1) IN GENERAL.—In the case of a United 23 States shareholder of a deferred foreign income cor- 24 poration, such United States shareholder may elect g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF DEDUCTION.—No 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00346 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 347 1 to pay the net tax liability under this section in 8 2 equal installments. 3 ‘‘(2) DATE 4 If an election is made under paragraph (1), the first 5 installment shall be paid on the due date (deter- 6 mined without regard to any extension of time for 7 filing the return) for the return of tax for the tax- 8 able year described in subsection (a) and each suc- 9 ceeding installment shall be paid on the due date (as 10 so determined) for the return of tax for the taxable 11 year following the taxable year with respect to which 12 the preceding installment was made. 13 ‘‘(3) ACCELERATION OF PAYMENT.—If there is 14 an addition to tax for failure to timely pay any in- 15 stallment required under this subsection, a liquida- 16 tion or sale of substantially all the assets of the tax- 17 payer (including in a title 11 or similar case), a ces- 18 sation of business by the taxpayer, or any similar 19 circumstance, then the unpaid portion of all remain- 20 ing installments shall be due on the date of such 21 event (or in the case of a title 11 or similar case, 22 the day before the petition is filed). The preceding 23 sentence shall not apply to the sale of substantially 24 all the assets of a taxpayer to a buyer if such buyer 25 enters into an agreement with the Secretary under g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FOR PAYMENT OF INSTALLMENTS.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00347 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 348 1 which such buyer is liable for the remaining install- 2 ments due under this subsection in the same manner 3 as if such buyer were the taxpayer. 4 ‘‘(4) PRORATION 5 MENTS.—If 6 to pay the net tax liability under this section in in- 7 stallments and a deficiency has been assessed with 8 respect to such net tax liability, the deficiency shall 9 be prorated to the installments payable under para- 10 graph (1). The part of the deficiency so prorated to 11 any installment the date for payment of which has 12 not arrived shall be collected at the same time as, 13 and as a part of, such installment. The part of the 14 deficiency so prorated to any installment the date 15 for payment of which has arrived shall be paid upon 16 notice and demand from the Secretary. This sub- 17 section shall not apply if the deficiency is due to 18 negligence, to intentional disregard of rules and reg- 19 ulations, or to fraud with intent to evade tax. an election is made under paragraph (1) 20 ‘‘(5) ELECTION.—Any election under paragraph 21 (1) shall be made not later than the due date for the 22 return of tax for the taxable year described in sub- 23 section (a) and shall be made in such manner as the 24 Secretary may provide. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF DEFICIENCY TO INSTALL- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00348 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 349 1 2 ‘‘(6) NET TION.—For 3 TAX LIABILITY UNDER THIS SEC- purposes of this subsection— ‘‘(A) IN net tax liability 4 under this section with respect to any United 5 States shareholder is the excess (if any) of— 6 ‘‘(i) such taxpayer’s net income tax 7 for the taxable year in which an amount is 8 included in the gross income of such 9 United States shareholder under section 10 951(a)(1) by reason of this section, over 11 ‘‘(ii) such taxpayer’s net income tax 12 for such taxable year determined— 13 ‘‘(I) without regard to this sec- 14 tion, and 15 ‘‘(II) without regard to any in- 16 come, deduction, or credit, properly 17 attributable to a dividend received by 18 such United States shareholder from 19 any deferred foreign income corpora- 20 tion. 21 ‘‘(B) NET INCOME TAX.—The term ‘net 22 income tax’ means the regular tax liability re- 23 duced by the credits allowed under subparts A, 24 B, and D of part IV of subchapter A. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00349 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 350 1 2 ‘‘(i) SPECIAL RULES S CORPORATION SHARE- HOLDERS.— 3 ‘‘(1) IN GENERAL.—In the case of any S cor- 4 poration which is a United States shareholder of a 5 deferred foreign income corporation, each share- 6 holder of such S corporation may elect to defer pay- 7 ment of such shareholder’s net tax liability under 8 this section with respect to such S corporation until 9 the shareholder’s taxable year which includes the 10 triggering event with respect to such liability. Any 11 net tax liability payment of which is deferred under 12 the preceding sentence shall be assessed on the re- 13 turn as an addition to tax in the shareholder’s tax- 14 able year which includes such triggering event. 15 ‘‘(2) TRIGGERING 16 ‘‘(A) IN EVENT.— GENERAL.—In the case of any 17 shareholder’s net tax liability under this section 18 with respect to any S corporation, the trig- 19 gering event with respect to such liability is 20 whichever of the following occurs first: 21 ‘‘(i) Such corporation ceases to be an 22 S corporation (determined as of the first 23 day of the first taxable year that such cor- 24 poration is not an S corporation). g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FOR 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00350 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 351 1 ‘‘(ii) A liquidation or sale of substan- 2 tially all the assets of such S corporation 3 (including in a title 11 or similar case), a 4 cessation of business by such S corpora- 5 tion, such S corporation ceases to exist, or 6 any similar circumstance. 7 ‘‘(iii) A transfer of any share of stock 8 in such S corporation by the taxpayer (in- 9 cluding by reason of death, or otherwise). 10 ‘‘(B) PARTIAL 11 the case of a transfer of less than all of the tax- 12 payer’s shares of stock in the S corporation, 13 such transfer shall only be a triggering event 14 with respect to so much of the taxpayer’s net 15 tax liability under this section with respect to 16 such S corporation as is properly allocable to 17 such stock. 18 ‘‘(C) TRANSFER OF LIABILITY.—A trans- 19 fer described in clause (iii) shall not be treated 20 as a triggering event if the transferee enters 21 into an agreement with the Secretary under 22 which such transferee is liable for net tax liabil- 23 ity with respect to such stock in the same man- 24 ner as if such transferee were the taxpayer. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 TRANSFERS OF STOCK.—In 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00351 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 352 1 ‘‘(3) NET shareholder’s net 2 tax liability under this section with respect to any S 3 corporation is the net tax liability under this section 4 which would be determined under subsection (h)(6) 5 if the only subpart F income taken into account by 6 such shareholder by reason of this section were allo- 7 cations from such S corporation. 8 9 10 ‘‘(4) ELECTION TO PAY DEFERRED LIABILITY IN INSTALLMENTS.—In the case of a taxpayer which elects to defer payment under paragraph (1)— 11 ‘‘(A) subsection (h) shall be applied sepa- 12 rately with respect to the liability to which such 13 election applies, 14 ‘‘(B) an election under subsection (h) with 15 respect to such liability shall be treated as time- 16 ly made if made not later than the due date for 17 the return of tax for the taxable year in which 18 the triggering event with respect to such liabil- 19 ity occurs, 20 ‘‘(C) the first installment under subsection 21 (h) with respect to such liability shall be paid 22 not later than such due date (but determined 23 without regard to any extension of time for fil- 24 ing the return), and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 TAX LIABILITY.—A 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00352 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 353 1 ‘‘(D) if the triggering event with respect to 2 any net tax liability is described in paragraph 3 (2)(A)(ii), an election under subsection (h) with 4 respect to such liability may be made only with 5 the consent of the Secretary. 6 ‘‘(5) JOINT 7 PORATION.—If 8 elects to defer payment under paragraph (1), such 9 S corporation shall be jointly and severally liable for 10 such payment and any penalty, addition to tax, or 11 additional amount attributable thereto. 12 any shareholder of an S corporation ‘‘(6) EXTENSION OF LIMITATION ON COLLEC- 13 TION.—Notwithstanding 14 any limitation on the time period for the collection 15 of a liability deferred under this subsection shall not 16 be treated as beginning before the date of the trig- 17 gering event with respect to such liability. 18 19 ‘‘(7) ANNUAL any other provision of law, REPORTING OF NET TAX LIABIL- ITY.— 20 ‘‘(A) IN GENERAL.—Any shareholder of an 21 S corporation which makes an election under 22 paragraph (1) shall report the amount of such 23 shareholder’s deferred net tax liability on such 24 shareholder’s return of tax for the taxable year 25 for which such election is made and on the re- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AND SEVERAL LIABILITY OF S COR- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00353 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 354 1 turn of tax for each taxable year thereafter 2 until such amount has been fully assessed on 3 such returns. 4 ‘‘(B) DEFERRED 5 For purposes of this paragraph, the term ‘de- 6 ferred net tax liability’ means, with respect to 7 any taxable year, the amount of net tax liability 8 payment of which has been deferred under 9 paragraph (1) and which has not been assessed 10 on a return of tax for any prior taxable year. 11 ‘‘(C) FAILURE TO REPORT.—In the case of 12 any failure to report any amount required to be 13 reported under subparagraph (A) with respect 14 to any taxable year before the due date for the 15 return of tax for such taxable year, there shall 16 be assessed on such return as an addition to 17 tax 5 percent of such amount. 18 ‘‘(8) ELECTION.—Any election under paragraph 19 (1)— 20 ‘‘(A) shall be made by the shareholder of 21 the S corporation not later than the due date 22 for such shareholder’s return of tax for the tax- 23 able year which includes the close of the taxable 24 year of such S corporation in which the amount g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 NET TAX LIABILITY.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00354 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 355 1 described in subsection (a) is taken into ac- 2 count, and 3 ‘‘(B) shall be made in such manner as the 4 Secretary may provide. 5 ‘‘(j) REPORTING BY S CORPORATION.—Each S cor- 6 poration which is a United States shareholder of a de7 ferred foreign income corporation shall report in its return 8 of tax under section 6037(a) the amount includible in its 9 gross income for such taxable year by reason of this sec10 tion and the amount of the deduction allowable by sub11 section (c). Any copy provided to a shareholder under sec12 tion 6037(b) shall include a statement of such share13 holder’s pro rata share of such amounts. 14 ‘‘(k) INCLUSION OF DEFERRED FOREIGN INCOME 15 UNDER THIS SECTION NOT 16 OVERALL FOREIGN LOSS, TO TRIGGER RECAPTURE ETC.—For OF purposes of sections 17 904(f)(1) and 907(c)(4), in the case of a United States 18 shareholder of a deferred foreign income corporation, such 19 United States shareholder’s taxable income from sources 20 without the United States and combined foreign oil and 21 gas income shall be determined without regard to this sec22 tion. 23 ‘‘(l) REGULATIONS.—The Secretary may prescribe 24 such regulations or other guidance as may be necessary 25 or appropriate to carry out the provisions of this section.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00355 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 356 1 (b) CLERICAL AMENDMENT.—The table of section 2 for subpart F of part III of subchapter N of chapter 1 3 is amended by striking the item relating to section 965 4 and inserting the following: ‘‘Sec. 965. Treatment of deferred foreign income upon transition to participation exemption system of taxation.’’. 6 Subtitle B—Modifications Related to Foreign Tax Credit System 7 SEC. 4101. REPEAL OF SECTION 902 INDIRECT FOREIGN 8 TAX CREDITS; DETERMINATION OF SECTION 9 960 CREDIT ON CURRENT YEAR BASIS. 5 10 (a) REPEAL OF SECTION 902 INDIRECT FOREIGN 11 TAX CREDITS.—Subpart A of part III of subchapter N 12 of chapter 1 is amended by striking section 902. 13 (b) DETERMINATION OF SECTION 960 CREDIT ON 14 CURRENT YEAR BASIS.—Section 960 is amended— 15 (1) by striking subsection (c), by redesignating 16 subsection (b) as subsection (c), by striking all that 17 precedes subsection (c) (as so redesignated) and in- 18 serting the following: 19 ‘‘SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLU- 20 21 SIONS. ‘‘(a) IN GENERAL.—For purposes of this subpart, if 22 there is included in the gross income of a domestic cor23 poration any item of income under section 951(a)(1) with 24 respect to any controlled foreign corporation with respect g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00356 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 357 1 to which such domestic corporation is a United States 2 shareholder, such domestic corporation shall be deemed to 3 have paid so much of such foreign corporation’s foreign 4 income taxes as are properly attributable to such item of 5 income. 6 ‘‘(b) SPECIAL RULES FOR 7 PREVIOUSLY TAXED EARNINGS DISTRIBUTIONS FROM AND PROFITS.—For pur- 8 poses of this subpart— 9 ‘‘(1) IN any portion of a dis- 10 tribution from a controlled foreign corporation to a 11 domestic corporation which is a United States share- 12 holder with respect to such controlled foreign cor- 13 poration is excluded from gross income under section 14 959(a), such domestic corporation shall be deemed 15 to have paid so much of such foreign corporation’s 16 foreign income taxes as— 17 ‘‘(A) are properly attributable to such por- 18 tion, and 19 ‘‘(B) have not been deemed to have to been 20 paid by such domestic corporation under this 21 section for the taxable year or any prior taxable 22 year. 23 ‘‘(2) TIERED CONTROLLED FOREIGN CORPORA- 24 TIONS.—If 25 a distribution from a controlled foreign corporation g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—If 10:46 Nov 02, 2017 Jkt 000000 section 959(b) applies to any portion of (679209 10) PO 00000 Frm 00357 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 358 1 to another controlled foreign corporation, such con- 2 trolled foreign corporation shall be deemed to have 3 paid so much of such other controlled foreign cor- 4 poration’s foreign income taxes as— 5 ‘‘(A) are properly attributable to such por- 6 tion, and 7 ‘‘(B) have not been deemed to have been 8 paid by a domestic corporation under this sec- 9 tion for the taxable year or any prior taxable 10 year.’’, 11 (2) and by adding after subsection (c) (as so re- 12 designated) the following new subsections: 13 ‘‘(d) FOREIGN INCOME TAXES.—The term ‘foreign 14 income taxes’ means any income, war profits, or excess 15 profits taxes paid or accrued to any foreign country or 16 possession of the United States. 17 ‘‘(e) REGULATIONS.—The Secretary may prescribe 18 such regulations or other guidance as may be necessary 19 or appropriate to carry out the provisions of this section.’’. 20 (c) CONFORMING AMENDMENTS.— 21 (1) Section 78 is amended to read as follows: 22 ‘‘SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX 23 24 CREDIT. ‘‘If a domestic corporation chooses to have the bene- 25 fits of subpart A of part III of subchapter N (relating g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00358 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 359 1 to foreign tax credit) for any taxable year, an amount 2 equal to the taxes deemed to be paid by such corporation 3 under subsections (a) and (b) of section 960 for such tax4 able year shall be treated for purposes of this title (other 5 than sections 959, 960, and 961) as an item of income 6 required to be included in the gross income of such domes7 tic corporation under section 951(a) for such taxable 8 year.’’. 9 (2) Section 245(a)(10)(C) is amended by strik- 10 ing ‘‘sections 902, 907, and 960’’ and inserting 11 ‘‘sections 907 and 960’’. 12 (3) Sections 535(b)(1) and 545(b)(1) are each 13 amended by striking ‘‘section 902(a) or 960(a)(1)’’ 14 and inserting ‘‘section 960’’. 15 (4) Section 814(f)(1) is amended— 16 (A) by striking subparagraph (B), and 17 (B) by striking all that precedes ‘‘No in- 18 come’’ and inserting the following: 19 ‘‘(1) TREATMENT 20 (5) Section 865(h)(1)(B) is amended by strik- 21 ing ‘‘sections 902, 907, and 960’’ and inserting 22 ‘‘sections 907 and 960’’. 23 24 (6) Section 901(a) is amended by striking ‘‘sections 902 and 960’’ and inserting ‘‘section 960’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 OF FOREIGN TAXES.—’’. Jkt 000000 (679209 10) PO 00000 Frm 00359 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 360 1 (7) Section 901(e)(2) is amended by striking 2 ‘‘but is not limited to—’’ and all that follows 3 through ‘‘that portion’’ and inserting ‘‘but is not 4 limited to, that portion’’. 5 6 (8) Section 901(f) is amended by striking ‘‘sections 902 and 960’’ and inserting ‘‘section 960’’. 7 8 (9) Section 901(j)(1)(A) is amended by striking ‘‘902 or’’. 9 (10) Section 901(j)(1)(B) is amended by strik- 10 ing ‘‘sections 902 and 960’’ and inserting ‘‘section 11 960’’. 12 (11) Section 901(k)(2) is amended by striking 13 ‘‘section 853, 902, or 960’’ and inserting ‘‘section 14 853 or 960’’. 15 16 (12) Section 901(k)(6) is amended by striking ‘‘902 or’’. 17 (13) Section 901(m)(1) is amended by striking 18 ‘‘relevant foreign assets—’’ and all that follows and 19 inserting ‘‘relevant foreign assets shall not be taken 20 into account in determining the credit allowed under 21 subsection (a).’’. 22 (14) Section 904(d)(1) is amended by striking 23 ‘‘sections 902, 907, and 960’’ and inserting ‘‘sec- 24 tions 907 and 960’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00360 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 361 1 (15) Section 904(d)(6)(A) is amended by strik- 2 ing ‘‘sections 902, 907, and 960’’ and inserting 3 ‘‘sections 907 and 960’’. 4 (16) Section 904(h)(10)(A) is amended by 5 striking ‘‘sections 902, 907, and 960’’ and inserting 6 ‘‘sections 907 and 960’’. 7 8 (17) Section 904 is amended by striking subsection (k). 9 10 (18) Section 905(c)(1) is amended by striking the last sentence. 11 12 (19) Section 905(c)(2)(B)(i) is amended to read as follows: 13 ‘‘(i) shall be taken into account for 14 the taxable year to which such taxes relate, 15 and’’. 16 (20) Section 906(a) is amended by striking ‘‘(or 17 deemed, under section 902, paid or accrued during 18 the taxable year)’’. 19 20 (21) Section 906(b) is amended by striking paragraphs (4) and (5). 21 22 (22) Section 907(b)(2)(B) is amended by striking ‘‘902 or’’. 23 (23) Section 907(c)(3) is amended— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00361 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 362 1 (A) by striking subparagraph (A) and re- 2 designating subparagraphs (B) and (C) as sub- 3 paragraphs (A) and (B), respectively, and 4 (B) by striking ‘‘section 960(a)’’ in sub- 5 paragraph (A) (as so redesignated) and insert- 6 ing ‘‘section 960’’. 7 (24) Section 907(c)(5) is amended by striking 8 ‘‘902 or’’. 9 10 (25) Section 907(f)(2)(B)(i) is amended by striking ‘‘902 or’’. 11 12 (26) Section 908(a) is amended by striking ‘‘902 or’’. 13 (27) Section 909(b) is amended— 14 (A) by striking ‘‘section 902 corporation’’ 15 in the matter preceding paragraph (1) and in- 16 serting ‘‘10/50 corporation’’, 17 (B) by striking ‘‘902 or’’ in paragraph (1), 18 (C) by striking ‘‘by such section 902 cor- 19 poration’’ and all that follows in the matter fol- 20 lowing paragraph (2) and inserting ‘‘by such 21 10/50 corporation or a domestic corporation 22 which is a United States shareholder with re- 23 spect to such 10/50 corporation.’’, and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00362 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 363 1 (D) by striking ‘‘SECTION 902 CORPORA- 2 TIONS’’ 3 ‘‘10/50 CORPORATIONS’’. 4 (28) Section 909(d)(5) is amended to read as 5 follows: 6 ‘‘(5) 10/50 CORPORATION.—The term ‘10/50 7 corporation’ means any foreign corporation with re- 8 spect to which one or more domestic corporations is 9 a United States shareholder.’’. 10 11 (29) Section 958(a)(1) is amended by striking ‘‘960(a)(1)’’ and inserting ‘‘960’’. 12 (30) Section 959(d) is amended by striking 13 ‘‘Except as provided in section 960(a)(3), any’’ and 14 inserting ‘‘Any’’. 15 16 (31) Section 959(e) is amended by striking ‘‘section 960(b)’’ and inserting ‘‘section 960(c)’’. 17 (32) Section 1291(g)(2)(A) is amended by 18 striking ‘‘any distribution—’’ and all that follows 19 through ‘‘but only if’’ and inserting ‘‘any distribu- 20 tion, any withholding tax imposed with respect to 21 such distribution, but only if’’. 22 (33) Section 6038(c)(1)(B) is amended by 23 striking ‘‘sections 902 (relating to foreign tax credit 24 for corporate stockholder in foreign corporation) and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 in the heading thereof and inserting 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00363 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 364 1 960 (relating to special rules for foreign tax credit)’’ 2 and inserting ‘‘section 960’’. 3 (34) Section 6038(c)(4) is amended by striking 4 subparagraph (C). 5 (35) The table of sections for subpart A of part 6 III of subchapter N of chapter 1 is amended by 7 striking the item relating to section 902. 8 (36) The table of sections for subpart F of part 9 III of subchapter N of chapter 1 is amended by 10 striking the item relating to section 960 and insert- 11 ing the following: ‘‘Sec. 960. Deemed paid credit for subpart F inclusions.’’. 12 (d) EFFECTIVE DATE.—The amendments made by 13 this section shall apply to taxable years beginning after 14 December 31, 2017. 15 SEC. 4102. SOURCE OF INCOME FROM SALES OF INVEN- 16 TORY DETERMINED SOLELY ON BASIS OF 17 PRODUCTION ACTIVITIES. 18 (a) IN GENERAL.—Section 863(b) is amended by 19 adding at the end the following: ‘‘Gains, profits, and in20 come from the sale or exchange of inventory property de21 scribed in paragraph (2) shall be allocated and appor22 tioned between sources within and without the United 23 States solely on the basis of the production activities with 24 respect to the property.’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00364 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 365 1 (b) EFFECTIVE DATE.—The amendment made by 2 this section shall apply to taxable years beginning after 3 December 31, 2017. 5 Subtitle C—Modification of Subpart F Provisions 6 SEC. 4201. REPEAL OF INCLUSION BASED ON WITHDRAWAL 7 OF PREVIOUSLY EXCLUDED SUBPART F IN- 8 COME FROM QUALIFIED INVESTMENT. 9 (a) IN GENERAL.—Subpart F of part III of sub- 4 10 chapter N of chapter 1 is amended by striking section 955. 11 (b) CONFORMING AMENDMENTS.— 12 13 (1)(A) Section 951(a)(1)(A) is amended to read as follows: 14 ‘‘(A) his pro rata share (determined under 15 paragraph (2)) of the corporation’s subpart F 16 income for such year, and’’. 17 (B) Section 851(b)(3) is amended by striking 18 ‘‘section 951(a)(1)(A)(i)’’ in the flush language at 19 the end and inserting ‘‘section 951(a)(1)(A)’’. 20 (C) Section 952(c)(1)(B)(i) is amended by 21 striking ‘‘section 951(a)(1)(A)(i)’’ and inserting 22 ‘‘section 951(a)(1)(A)’’. 23 (D) Section 953(c)(1)(C) is amended by strik- 24 ing ‘‘section 951(a)(1)(A)(i)’’ and inserting ‘‘section 25 951(a)(1)(A)’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00365 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 366 1 (2) Section 951(a) is amended by striking para- 2 graph (3). 3 (3) Section 953(d)(4)(B)(iv)(II) is amended by 4 striking ‘‘or amounts referred to in clause (ii) or (iii) 5 of section 951(a)(1)(A)’’. 6 (4) Section 964(b) is amended by striking ‘‘, 7 955,’’. 8 (5) Section 970 is amended by striking sub- 9 section (b). 10 (6) The table of sections for subpart F of part 11 III of subchapter N of chapter 1 is amended by 12 striking the item relating to section 955. 13 (c) EFFECTIVE DATE.—The amendments made by 14 this section shall apply to taxable years of foreign corpora15 tions beginning after December 31, 2017, and to taxable 16 years of United States shareholders in which or with which 17 such taxable years of foreign corporations end. 18 SEC. 4202. REPEAL OF TREATMENT OF FOREIGN BASE COM- 19 PANY OIL RELATED INCOME AS SUBPART F 20 INCOME. 21 (a) IN GENERAL.—Section 954(a) is amended by 22 striking paragraph (5), by striking the comma at the end 23 of paragraph (3) and inserting a period, and by inserting 24 ‘‘and’’ at the end of paragraph (2). 25 (b) CONFORMING AMENDMENTS.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00366 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 367 1 (1) Section 952(c)(1)(B)(iii) is amended by 2 striking subclause (I) and by redesignating sub- 3 clauses (II) through (V) as subclauses (I) through 4 (IV), respectively. 5 (2) Section 954(b)(4) is amended by striking 6 the last sentence. 7 (3) Section 954(b)(5) is amended by striking 8 ‘‘the foreign base company services income, and the 9 foreign base company oil related income’’ and insert- 10 ing ‘‘and the foreign base company services income’’. 11 (4) Section 954(b) is amended by striking para- 12 graph (6). 13 (5) Section 954 is amended by striking sub- 14 section (g). 15 (c) EFFECTIVE DATE.—The amendments made by 16 this section shall apply to taxable years of foreign corpora17 tions beginning after December 31, 2017, and to taxable 18 years of United States shareholders in which or with which 19 such taxable years of foreign corporations end. 20 SEC. 4203. INFLATION ADJUSTMENT OF DE MINIMIS EXCEP- 21 TION FOR FOREIGN BASE COMPANY INCOME. 22 (a) IN GENERAL.—Section 954(b)(3) is amended by 23 adding at the end the following new subparagraph: 24 ‘‘(D) INFLATION 25 10:46 Nov 02, 2017 the case of any taxable year beginning after 2017, g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ADJUSTMENT.—In Jkt 000000 (679209 10) PO 00000 Frm 00367 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 368 1 the dollar amount in subparagraph (A)(ii) shall 2 be increased by an amount equal to— 3 ‘‘(i) such dollar amount, multiplied by 4 ‘‘(ii) the cost-of-living adjustment de- 5 termined under section 1(c)(2)(A) for the 6 calendar year in which the taxable year be- 7 gins. 8 Any increase determined under the preceding 9 sentence shall be rounded to the nearest mul- 10 tiple of $50,000.’’. 11 (b) EFFECTIVE DATE.—The amendments made by 12 this section shall apply to taxable years of foreign corpora13 tions beginning after December 31, 2017, and to taxable 14 years of United States shareholders in which or with which 15 such taxable years of foreign corporations end. 16 SEC. 4204. LOOK-THRU RULE FOR RELATED CONTROLLED 17 FOREIGN 18 NENT. 19 CORPORATIONS MADE PERMA- (a) IN GENERAL.—Paragraph (6) of section 954(c) 20 is amended by striking subparagraph (C). 21 (b) EFFECTIVE DATE.—The amendments made by 22 this section shall apply to taxable years of foreign corpora23 tions beginning after December 31, 2019, and to taxable 24 years of United States shareholders in which or with which 25 such taxable years of foreign corporations end. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00368 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 369 1 SEC. 4205. MODIFICATION OF STOCK ATTRIBUTION RULES 2 FOR 3 TROLLED FOREIGN CORPORATION. 4 DETERMINING STATUS AS A CON- (a) IN GENERAL.—Section 958(b) is amended— 5 (1) by striking paragraph (4), and 6 (2) by striking ‘‘Paragraphs (1) and (4)’’ in the 7 last sentence and inserting ‘‘Paragraph (1)’’. 8 (b) APPLICATION OF CERTAIN REPORTING REQUIRE- 9 MENTS.—Section 6038(e)(2) is amended by striking ‘‘ex- 10 cept that—’’ and all that follows through ‘‘in applying 11 subparagraph (C)’’ and inserting ‘‘except that in applying 12 subparagraph (C)’’. 13 (c) EFFECTIVE DATE.—The amendments made by 14 this section shall apply to taxable years of foreign corpora15 tions beginning after December 31, 2017, and to taxable 16 years of United States shareholders in which or with which 17 such taxable years of foreign corporations end. 18 SEC. 4206. ELIMINATION OF REQUIREMENT THAT COR- 19 PORATION MUST BE CONTROLLED FOR 30 20 DAYS 21 APPLY. 22 BEFORE SUBPART F INCLUSIONS (a) IN GENERAL.—Section 951(a)(1) is amended by 23 striking ‘‘for an uninterrupted period of 30 days or more’’ 24 and inserting ‘‘at any time’’. 25 (b) EFFECTIVE DATE.—The amendment made by 26 this section shall apply to taxable years of foreign corporag:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00369 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 370 1 tions beginning after December 31, 2017, and to taxable 2 years of United States shareholders with or within which 3 such taxable years of foreign corporations end. 5 Subtitle D—Prevention of Base Erosion 6 SEC. 4301. CURRENT YEAR INCLUSION BY UNITED STATES 7 SHAREHOLDERS WITH FOREIGN HIGH RE- 8 TURNS. 4 9 (a) IN GENERAL.—Subpart F of part III of sub- 10 chapter N of chapter 1 is amended by inserting after sec11 tion 951 the following new section: 12 ‘‘SEC. 951A. FOREIGN HIGH RETURN AMOUNT INCLUDED IN 13 GROSS INCOME OF UNITED STATES SHARE- 14 HOLDERS. 15 ‘‘(a) IN GENERAL.—Each person who is a United 16 States shareholder of any controlled foreign corporation 17 for any taxable year of such United States shareholder 18 shall include in gross income for such taxable year 50 per19 cent of such shareholder’s foreign high return amount for 20 such taxable year. 21 ‘‘(b) FOREIGN HIGH RETURN AMOUNT.—For pur- 22 poses of this section— 23 24 ‘‘(1) IN 10:46 Nov 02, 2017 term ‘foreign high re- turn amount’ means, with respect to any United g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The Jkt 000000 (679209 10) PO 00000 Frm 00370 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 371 1 States shareholder for any taxable year of such 2 United States shareholder, the excess (if any) of— 3 ‘‘(A) such shareholder’s net CFC tested in- 4 come for such taxable year, over 5 ‘‘(B) the excess (if any) of— 6 ‘‘(i) the applicable percentage of the 7 aggregate of such shareholder’s pro rata 8 share of the qualified business asset invest- 9 ment of each controlled foreign corporation 10 with respect to which such shareholder is 11 a United States shareholder for such tax- 12 able year (determined for each taxable year 13 of each such controlled foreign corporation 14 which ends in or with such taxable year of 15 such United States shareholder), over 16 ‘‘(ii) the amount of interest expense 17 taken 18 (c)(2)(A)(ii) in determining the share- 19 holder’s net CFC tested income for the 20 taxable year. 21 account ‘‘(2) APPLICABLE under subsection PERCENTAGE.—The term 22 ‘applicable percentage’ means, with respect to any 23 taxable year, the Federal short-term rate (deter- 24 mined under section 1274(d) for the month in which g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 into 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00371 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 372 1 or with which such taxable year ends) plus 7 per- 2 centage points. 3 ‘‘(c) NET CFC TESTED INCOME.—For purposes of 4 this section— 5 ‘‘(1) IN term ‘net CFC tested 6 income’ means, with respect to any United States 7 shareholder for any taxable year of such United 8 States shareholder, the excess (if any) of— 9 ‘‘(A) the aggregate of such shareholder’s 10 pro rata share of the tested income of each con- 11 trolled foreign corporation with respect to which 12 such shareholder is a United States shareholder 13 for such taxable year of such United States 14 shareholder (determined for each taxable year 15 of such controlled foreign corporation which 16 ends in or with such taxable year of such 17 United States shareholder), over 18 ‘‘(B) the aggregate of such shareholder’s 19 pro rata share of the tested loss of each con- 20 trolled foreign corporation with respect to which 21 such shareholder is a United States shareholder 22 for such taxable year of such United States 23 shareholder (determined for each taxable year 24 of such controlled foreign corporation which g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00372 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 373 1 ends in or with such taxable year of such 2 United States shareholder). 3 ‘‘(2) TESTED 4 poses of this section— 5 ‘‘(A) TESTED INCOME.—The pur- term ‘tested 6 income’ means, with respect to any controlled 7 foreign corporation for any taxable year of such 8 controlled foreign corporation, the excess (if 9 any) of— 10 ‘‘(i) the gross income of such corpora- 11 tion determined without regard to— 12 ‘‘(I) any item of income which is 13 effectively connected with the conduct 14 by such corporation of a trade or 15 business within the United States if 16 subject to tax under this chapter, 17 ‘‘(II) any gross income taken into 18 account in determining the subpart F 19 income of such corporation, 20 ‘‘(III) except as otherwise pro- 21 vided by the Secretary, any amount 22 excluded from the foreign personal 23 holding company income (as defined 24 in section 954) of such corporation by 25 reason of section 954(c)(6) but only g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 INCOME; TESTED LOSS.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00373 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 374 1 to the extent that any deduction al- 2 lowable for the payment or accrual of 3 such amount does not result in a re- 4 duction in the foreign high return 5 amount of any United States share- 6 holder (determined without regard to 7 this subclause), 8 ‘‘(IV) any gross income excluded 9 from the foreign personal holding 10 company income (as defined in section 11 954) of such corporation by reason of 12 subsection (h) or (i) of section 954, 13 ‘‘(V) any gross income excluded 14 from the insurance income (as defined 15 in section 953) of such corporation by 16 reason of section 953(a)(2), 17 ‘‘(VI) any gross income excluded 18 from foreign base company income (as 19 defined in section 954) or insurance 20 income (as defined in section 953) of 21 such corporation by reason of section 22 954(b)(4), 23 ‘‘(VII) dividend received 24 from a related person (as defined in 25 section 954(d)(3)), and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 any 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00374 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 375 1 ‘‘(VIII) any commodities gross 2 income of such corporation, over 3 ‘‘(ii) the deductions (including taxes) 4 properly allocable to such gross income 5 under rules similar to the rules of section 6 954(b)(5) (or which would be so properly 7 allocable if such corporation had such 8 gross income). 9 ‘‘(B) TESTED LOSS.—The term ‘tested 10 loss’ means, with respect to any controlled for- 11 eign corporation for any taxable year of such 12 controlled foreign corporation, the excess (if 13 any) of the amount described in subparagraph 14 (A)(ii) over the amount described in subpara- 15 graph (A)(i). 16 ‘‘(d) QUALIFIED BUSINESS ASSET INVESTMENT.— 17 For purposes of this section— 18 ‘‘(1) IN term ‘qualified busi- 19 ness asset investment’ means, with respect to any 20 controlled foreign corporation for any taxable year of 21 such controlled foreign corporation, the aggregate of 22 the corporation’s adjusted bases (determined as of 23 the close of such taxable year and after any adjust- 24 ments with respect to such taxable year) in specified 25 tangible property— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00375 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 376 1 ‘‘(A) used in a trade or business of the 2 corporation, and 3 ‘‘(B) of a type with respect to which a de- 4 duction is allowable under section 168. 5 ‘‘(2) SPECIFIED PROPERTY.—The 6 term ‘specified tangible property’ means any tangible 7 property to the extent such property is used in the 8 production of tested income or tested loss. 9 ‘‘(3) PARTNERSHIP PROPERTY.—For purposes 10 of this subsection, if a controlled foreign corporation 11 holds an interest in a partnership at the close of 12 such taxable year of the controlled foreign corpora- 13 tion, such controlled foreign corporation shall take 14 into account under paragraph (1) the controlled for- 15 eign corporation’s distributive share of the aggregate 16 of the partnership’s adjusted bases (determined as 17 of such date in the hands of the partnership) in tan- 18 gible property held by such partnership to the extent 19 such property— 20 ‘‘(A) is used in the trade or business of the 21 partnership, and 22 ‘‘(B) is used in the production of tested in- 23 come or tested loss (determined with respect to 24 such controlled foreign corporation’s distribu- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 TANGIBLE 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00376 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 377 1 tive share of income or loss with respect to such 2 property). 3 For purposes of this paragraph, the controlled for- 4 eign corporation’s distributive share of the adjusted 5 basis of any property shall be the controlled foreign 6 corporation’s distributive share of income and loss 7 with respect to such property. 8 ‘‘(4) DETERMINATION 9 For purposes of this subsection, the adjusted basis 10 in any property shall be determined without regard 11 to any provision of this title (or any other provision 12 of law) which is enacted after the date of the enact- 13 ment of this section. 14 ‘‘(5) REGULATIONS.—The Secretary shall issue 15 such regulations or other guidance as the Secretary 16 determines appropriate to prevent the avoidance of 17 the purposes of this subsection, including regulations 18 or other guidance which provide for the treatment of 19 property if— 20 ‘‘(A) such property is transferred, or held, 21 temporarily, or 22 ‘‘(B) the avoidance of the purposes of this 23 paragraph is a factor in the transfer or holding 24 of such property. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF ADJUSTED BASIS.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00377 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 378 1 ‘‘(e) COMMODITIES GROSS INCOME.—For purposes 2 of this section— 3 ‘‘(1) COMMODITIES GROSS INCOME.—The term 4 ‘commodities gross income’ means, with respect to 5 any corporation, the gross income of such corpora- 6 tion from the disposition of commodities which are 7 produced or extracted by such corporation. 8 ‘‘(2) 9 means COMMODITY.—The any commodity term described ‘commodity’ in section 10 475(e)(2)(A) or section 475(e)(2)(D) (determined 11 without regard to clause (i) thereof and by sub- 12 stituting ‘a commodity described in subparagraph 13 (A)’ for ‘such a commodity’ in clause (ii) thereof). 14 ‘‘(f) TAXABLE YEARS WHICH PERSONS ARE FOR 15 TREATED AS 16 FOREIGN CORPORATIONS.—For purposes of TROLLED UNITED STATES SHAREHOLDERS OF CON- 17 this section— 18 ‘‘(1) IN United States share- 19 holder of a controlled foreign corporation shall be 20 treated as a United States shareholder of such con- 21 trolled foreign corporation for any taxable year of 22 such United States shareholder if— 23 ‘‘(A) a taxable year of such controlled for- 24 eign corporation ends in or with such taxable 25 year of such person, and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—A 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00378 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 379 1 ‘‘(B) such person owns (within the mean- 2 ing of section 958(a)) stock in such controlled 3 foreign corporation on the last day, in such tax- 4 able year of such foreign corporation, on which 5 the foreign corporation is a controlled foreign 6 corporation. 7 ‘‘(2) TREATMENT AS A CONTROLLED FOREIGN 8 CORPORATION.—Except 9 (1)(B) and the application of section 951(a)(2) to 10 this section pursuant to subsection (g), a foreign 11 corporation shall be treated as a controlled foreign 12 corporation for any taxable year of such foreign cor- 13 poration if such foreign corporation is a controlled 14 foreign corporation at any time during such taxable 15 year. 16 ‘‘(g) DETERMINATION for purposes of paragraph OF PRO RATA SHARE.—For 17 purposes of this section, the pro rata shares referred to 18 in subsections (b)(2), (c)(1)(A), (c)(1)(B), and 19 (c)(2)(B)(ii), respectively, shall be determined under the 20 rules of section 951(a)(2) in the same manner as such sec21 tion applies to subpart F income. 22 ‘‘(h) COORDINATION WITH SUBPART F.— 23 ‘‘(1) TREATMENT 24 CERTAIN PURPOSES.—Except 25 by the Secretary any foreign high return amount in- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AS SUBPART F INCOME FOR 10:46 Nov 02, 2017 Jkt 000000 as otherwise provided (679209 10) PO 00000 Frm 00379 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 380 1 cluded in gross income under subsection (a) shall be 2 treated in the same manner as an amount included 3 under section 951(a)(1)(A) for purposes of applying 4 sections 5 904(h)(1), 959, 961, 962(c), 962(d), 993(a)(1)(E), 6 996(f)(1), 1248(b)(1), 1248(d)(1), 6501(e)(1)(C), 7 6654(d)(2)(D), and 6655(e)(4). 8 9 ‘‘(2) ENTIRE 535(b)(10), 851(b), FOREIGN HIGH RETURN AMOUNT TAKEN INTO ACCOUNT FOR PURPOSES OF CERTAIN 10 SECTIONS.—For 11 with respect to sections 168(h)(2)(B), 851(b), 959, 12 961, 962(c), 962(d), 1248(b)(1), and 1248(d)(1), 13 the foreign high return amount included in gross in- 14 come under subsection (a) shall be determined by 15 substituting ‘100 percent’ for ‘50 percent’ in such 16 subsection. 17 purposes of applying paragraph (1) ‘‘(3) ALLOCATION OF FOREIGN HIGH RETURN 18 AMOUNT 19 TIONS.—For 20 paragraph (1), with respect to any controlled foreign 21 corporation any pro rata amount from which is 22 taken into account in determining the foreign high 23 return amount included in gross income of a United 24 States shareholder under subsection (a), the portion 25 of such foreign high return amount which is treated g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 168(h)(2)(B), 10:46 Nov 02, 2017 Jkt 000000 TO CONTROLLED FOREIGN CORPORA- purposes of the sections referred to in (679209 10) PO 00000 Frm 00380 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 381 1 as being with respect to such controlled foreign cor- 2 poration is— 3 ‘‘(A) in the case of a controlled foreign 4 corporation with tested loss, zero, and 5 ‘‘(B) in the case of a controlled foreign 6 corporation with tested income, the portion of 7 such foreign high return amount which bears 8 the same ratio to such foreign high return 9 amount as— 10 ‘‘(i) such United States shareholder’s 11 pro rata amount of the tested income of 12 such controlled foreign corporation, bears 13 to 14 ‘‘(ii) the aggregate amount deter- 15 mined under subsection (c)(1)(A) with re- 16 spect to such United States shareholder. 17 ‘‘(4) COORDINATION 18 DOUBLE BENEFIT OF LOSSES.—In 19 United States shareholder of any controlled foreign 20 corporation, the amount included in gross income 21 under section 951(a)(1)(A) shall be determined by 22 increasing the earnings and profits of such con- 23 trolled foreign corporation (solely for purposes of de- 24 termining such amount) by an amount that bears 25 the same ratio (not greater than 1) to such share- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 WITH SUBPART F TO DENY 10:46 Nov 02, 2017 Jkt 000000 the case of any (679209 10) PO 00000 Frm 00381 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 382 1 holder’s pro rata share of the tested loss of such 2 controlled foreign corporation as— 3 ‘‘(A) the aggregate amount determined 4 under subsection (c)(1)(A) with respect to such 5 shareholder, bears to 6 ‘‘(B) the aggregate amount determined 7 under subsection (c)(1)(B) with respect to such 8 shareholder.’’. 9 (b) FOREIGN TAX CREDIT.— 10 (1) APPLICATION OF DEEMED PAID FOREIGN 11 TAX CREDIT.—Section 960, as amended by the pre- 12 ceding provisions of this Act, is amended by redesig- 13 nating subsections (d) and (e) as subsections (e) and 14 (f), respectively, and by inserting after subsection (c) 15 the following new subsection: 16 ‘‘(d) DEEMED PAID CREDIT FOR TAXES PROPERLY 17 ATTRIBUTABLE TO TESTED INCOME.— 18 ‘‘(1) IN purposes of this sub- 19 part, if any amount is includible in the gross income 20 of a domestic corporation under section 951A, such 21 domestic corporation shall be deemed to have paid 22 foreign income taxes equal to 80 percent of— 23 ‘‘(A) such domestic corporation’s foreign 24 high return percentage, multiplied by g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00382 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 383 1 ‘‘(B) the aggregate tested foreign income 2 taxes paid or accrued by controlled foreign cor- 3 porations with respect to which such domestic 4 corporation is a United States shareholder. 5 ‘‘(2) FOREIGN 6 For purposes of paragraph (1), the term ‘foreign 7 high return percentage’ means, with respect to any 8 domestic corporation, the ratio (expressed as a per- 9 centage) of— 10 ‘‘(A) such corporation’s foreign high return 11 amount (as defined in section 951A(b)), divided 12 by 13 ‘‘(B) the aggregate amount determined 14 under section 951A(c)(1)(A) with respect to 15 such corporation. 16 ‘‘(3) TESTED FOREIGN INCOME TAXES.—For 17 purposes of paragraph (1), the term ‘tested foreign 18 income taxes’ means, with respect to any domestic 19 corporation which is a United States shareholder of 20 a controlled foreign corporation, the foreign income 21 taxes paid or accrued by such foreign corporation 22 which are properly attributable to gross income de- 23 scribed in section 951A(c)(2)(A)(i).’’. 24 25 (2) APPLICATION 10:46 Nov 02, 2017 OF FOREIGN TAX CREDIT LIMITATION.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 HIGH RETURN PERCENTAGE.— Jkt 000000 (679209 10) PO 00000 Frm 00383 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 384 1 (A) SEPARATE FOR FOREIGN 2 HIGH RETURN AMOUNT.—Section 3 amended by redesignating subparagraphs (A) 4 and (B) as subparagraphs (B) and (C), respec- 5 tively, and by inserting before subparagraph 6 (B) (as so redesignated) the following new sub- 7 paragraph: 8 904(d)(1) is ‘‘(A) any amount includible in gross in- 9 come under section 951A,’’. 10 (B) NO CARRYOVER OF EXCESS TAXES.— 11 Section 904(c) is amended by adding at the end 12 the following: ‘‘This subsection shall not apply 13 to taxes paid or accrued with respect to 14 amounts described in subsection (d)(1)(A).’’ 15 (3) GROSS UP FOR DEEMED PAID FOREIGN TAX 16 CREDIT.—Section 17 provisions of this Act, is amended— 18 78, as amended by the preceding (A) by striking ‘‘any taxable year, an 19 amount’’ and inserting ‘‘any taxable year— 20 ‘‘(1) an amount’’, and 21 (B) by striking the period at the end and 22 inserting ‘‘, and 23 ‘‘(2) an amount equal to the taxes deemed to 24 be paid by such corporation under section 960(d) for 25 such taxable year (determined by substituting ‘100 g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 BASKET 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00384 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 385 1 percent’ for ‘80 percent’ in such section) shall be 2 treated for purposes of this title (other than sections 3 959, 960, and 961) as an increase in the foreign 4 high return amount of such domestic corporation 5 under section 951A for such taxable year.’’. 6 (c) CONFORMING AMENDMENTS.— 7 (1) Section 170(b)(2)(D) is amended by strik- 8 ing ‘‘computed without regard to’’ and all that fol- 9 lows and inserting ‘‘computed— 10 ‘‘(i) without regard to— 11 ‘‘(I) this section, 12 ‘‘(II) part VIII (except section 13 248), 14 ‘‘(III) any net operating loss 15 carryback to the taxable year under 16 section 172, 17 ‘‘(IV) any capital loss carryback 18 to the taxable year under section 19 1212(a)(1), and 20 ‘‘(ii) by substituting ‘100 percent’ for 21 ‘50 percent’ in section 951A(a).’’. 22 (2) Section 246(b)(1) is amended by— 23 (A) striking ‘‘and without regard to’’ and 24 inserting ‘‘without regard to’’, and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00385 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 386 1 (B) by striking the period at the end and 2 inserting ‘‘, and by substituting ‘100 percent’ 3 for ‘50 percent’ in section 951A(a).’’. 4 (3) Section 469(i)(3)(F) is amended by striking 5 ‘‘determined without regard to’’ and all that follows 6 and inserting ‘‘determined— 7 ‘‘(i) without regard to— 8 ‘‘(I) any amount includible in 9 gross income under section 86, 10 ‘‘(II) the amounts allowable as a 11 deduction under section 219, and 12 ‘‘(III) any passive activity loss or 13 any loss allowable by reason of sub- 14 section (c)(7), and 15 ‘‘(ii) by substituting ‘100 percent’ for 16 ‘50 percent’ in section 951A(a).’’. 17 (4) Section 856(c)(2) is amended by striking 18 ‘‘and’’ at the end of subparagraph (H), by adding 19 ‘‘and’’ at the end of subparagraph (I), and by insert- 20 ing after subparagraph (I) the following new sub- 21 paragraph: 22 ‘‘(J) amounts includible in gross income 23 under section 951A(a);’’. 24 (5) Section 856(c)(3)(D) is amended by strik- 25 ing ‘‘dividends or other distributions on, and gain’’ g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00386 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 387 1 and inserting ‘‘dividends, other distributions on, 2 amounts includible in gross income under section 3 951A(a) with respect to, and gain’’. 4 (6) The table of sections for subpart F of part 5 III of subchapter N of chapter 1 is amended by in- 6 serting after the item relating to section 951 the fol- 7 lowing new item: ‘‘Sec. 951A. Foreign high return amount included in gross income of United States shareholders.’’. 8 (d) EFFECTIVE DATE.—The amendments made by 9 this section shall apply to taxable years of foreign corpora10 tions beginning after December 31, 2017, and to taxable 11 years of United States shareholders in which or with which 12 such taxable years of foreign corporations end. 13 SEC. 4302. LIMITATION ON DEDUCTION OF INTEREST BY 14 DOMESTIC CORPORATIONS WHICH ARE MEM- 15 BERS OF AN INTERNATIONAL FINANCIAL RE- 16 PORTING GROUP. 17 (a) IN GENERAL.—Section 163 is amended by redes- 18 ignating subsection (n) as subsection (p) and by inserting 19 after subsection (m) the following new subsection: 20 ‘‘(n) LIMITATION ON DEDUCTION 21 DOMESTIC CORPORATIONS 22 CIAL ‘‘(1) IN 10:46 Nov 02, 2017 BY INTERNATIONAL FINAN- GENERAL.—In the case of any domestic corporation which is a member of any international g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 INTEREST REPORTING GROUPS.— 23 24 IN OF Jkt 000000 (679209 10) PO 00000 Frm 00387 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 388 1 financial reporting group, the deduction under this 2 chapter for interest paid or accrued during the tax- 3 able year shall not exceed the sum of— 4 ‘‘(A) the allowable percentage of 110 per- 5 cent of the excess (if any) of — 6 ‘‘(i) the amount of such interest so 7 paid or accrued, over 8 ‘‘(ii) the amount described in subpara- 9 graph (B), plus 10 ‘‘(B) the amount of interest includible in 11 gross income of such corporation for such tax- 12 able year. 13 ‘‘(2) INTERNATIONAL 14 REPORTING GROUP.— 15 ‘‘(A) For purposes of this subsection, the 16 term ‘international financial reporting group’ 17 means, with respect to any reporting year, any 18 group of entities which— 19 ‘‘(i) includes— 20 ‘‘(I) at least one foreign corpora- 21 tion engaged in a trade or business 22 within the United States, or 23 ‘‘(II) at least one domestic cor- 24 poration and one foreign corporation, g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FINANCIAL 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00388 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 389 1 ‘‘(ii) prepares consolidated financial 2 statements with respect to such year, and 3 ‘‘(iii) reports in such statements aver- 4 age annual gross receipts (determined in 5 the aggregate with respect to all entities 6 which are part of such group) for the 3-re- 7 porting-year period ending with such re- 8 porting year in excess of $100,000,000. 9 ‘‘(B) RULES 10 TION OF AVERAGE GROSS RECEIPTS.—For 11 poses of subparagraph (A)(iii), rules similar to 12 the rules of section 448(c)(3) shall apply. 13 ‘‘(3) ALLOWABLE 14 PERCENTAGE.—For pur- purposes of this subsection— 15 ‘‘(A) IN GENERAL.—The term ‘allowable 16 percentage’ means, with respect to any domestic 17 corporation for any taxable year, the ratio (ex- 18 pressed as a percentage and not greater than 19 100 percent) of— 20 ‘‘(i) such corporation’s allocable share 21 of the international financial reporting 22 group’s reported net interest expense for 23 the reporting year of such group which 24 ends in or with such taxable year of such 25 corporation, over g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 RELATING TO DETERMINA- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00389 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 390 1 ‘‘(ii) such corporation’s reported net 2 interest expense for such reporting year of 3 such group. 4 ‘‘(B) 5 PENSE.—The 6 pense’ means— REPORTED EX- INTEREST term ‘reported net interest ex- 7 ‘‘(i) with respect to any international 8 financial reporting group for any reporting 9 year, the excess of— 10 ‘‘(I) the aggregate amount of in- 11 terest 12 group’s consolidated financial state- 13 ments for such taxable year, over expense reported in such 14 ‘‘(II) the aggregate amount of in- 15 terest income reported in such group’s 16 consolidated financial statements for 17 such taxable year, and 18 ‘‘(ii) with respect to any domestic cor- 19 poration for any reporting year, the excess 20 of— 21 ‘‘(I) the amount of interest ex- 22 pense of such corporation reported in 23 the books and records of the inter- 24 national 25 which are used in preparing such g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 NET 10:46 Nov 02, 2017 Jkt 000000 financial reporting group (679209 10) PO 00000 Frm 00390 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 391 1 group’s consolidated financial state- 2 ments for such taxable year, over 3 ‘‘(II) the amount of interest in- 4 come of such corporation reported in 5 such books and records. 6 ‘‘(C) ALLOCABLE 7 NET INTEREST EXPENSE.—With 8 domestic corporation which is a member of any 9 international financial reporting group, such 10 corporation’s allocable share of such group’s re- 11 ported net interest expense for any reporting 12 year is the portion of such expense which bears 13 the same ratio to such expense as— 14 respect to any ‘‘(i) the EBITDA of such corporation 15 for such reporting year, bears to 16 ‘‘(ii) the EBITDA of such group for 17 such reporting year. 18 ‘‘(D) EBITDA.— 19 ‘‘(i) IN GENERAL.—The term 20 ‘EBITDA’ means, with respect to any re- 21 porting year, earnings before interest, 22 taxes, depreciation, and amortization— 23 ‘‘(I) as determined in the inter- 24 national financial reporting group’s g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 SHARE OF REPORTED 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00391 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 392 1 consolidated financial statements for 2 such year, or 3 ‘‘(II) for purposes of subpara- 4 graph (A)(i), as determined in the 5 books and records of the international 6 financial reporting group which are 7 used in preparing such statements if 8 not determined in such statements. 9 ‘‘(ii) TREATMENT 10 ENTITIES.—The 11 corporation shall not fail to include the 12 EBITDA of any entity which is dis- 13 regarded for purposes of this chapter. 14 EBITDA of any domestic ‘‘(iii) TREATMENT OF INTRA-GROUP 15 DISTRIBUTIONS.—The 16 mestic corporation shall be determined 17 without regard to any distribution received 18 by such corporation from any other mem- 19 ber of the international financial reporting 20 group. 21 ‘‘(E) SPECIAL 22 EBITDA of any do- RULES FOR NON-POSITIVE EBITDA.— 23 ‘‘(i) NON-POSITIVE GROUP EBITDA.— 24 In the case of any international financial 25 reporting group the EBITDA of which is g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF DISREGARDED 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00392 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 393 1 zero or less, paragraph (1) shall not apply 2 to any member of such group the EBITDA 3 of which is above zero. 4 ‘‘(ii) ENTITY 5 EBITDA.—In 6 ber the EBITDA of which is zero or less, 7 paragraph (1) shall be applied without re- 8 gard to subparagraph (A) thereof. 9 the case of any group mem- ‘‘(4) CONSOLIDATED FINANCIAL STATEMENT.— 10 For purposes of this subsection, the term ‘consoli- 11 dated financial statement’ means any consolidated 12 financial statement described in paragraph (2)(A)(ii) 13 if such statement is— 14 ‘‘(A) a financial statement which is cer- 15 tified as being prepared in accordance with gen- 16 erally accepted accounting principles, inter- 17 national financial reporting standards, or any 18 other comparable method of accounting identi- 19 fied by the Secretary, and which is— 20 ‘‘(i) a 10-K (or successor form), or 21 annual statement to shareholders, required 22 to be filed with the United States Securi- 23 ties and Exchange Commission, 24 ‘‘(ii) an audited financial statement 25 which is used for— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 NON-POSITIVE 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00393 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 394 1 ‘‘(I) credit purposes, 2 ‘‘(II) reporting to shareholders, 3 partners, or other proprietors, or to 4 beneficiaries, or 5 ‘‘(III) 6 nontax purpose, other substantial 7 but only if there is no statement described 8 in clause (i), or 9 ‘‘(iii) filed with any other Federal or 10 State agency for nontax purposes, but only 11 if there is no statement described in clause 12 (i) or (ii), or 13 ‘‘(B) a financial statement which— 14 ‘‘(i) is used for a purpose described in 15 subclause (I), (II), or (III) of subpara- 16 graph (A)(ii), or 17 ‘‘(ii) filed with any regulatory or gov- 18 ernmental body (whether domestic or for- 19 eign) specified by the Secretary, 20 but only if there is no statement described in 21 subparagraph (A). 22 ‘‘(5) REPORTING YEAR.—For purposes of this 23 subsection, the term ‘reporting year’ means, with re- 24 spect to any international financial reporting group, g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 any 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00394 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 395 1 the year with respect to which the consolidated fi- 2 nancial statements are prepared. 3 ‘‘(6) APPLICATION 4 ‘‘(A) PARTNERSHIPS.—Except as other- 5 wise provided by the Secretary in paragraph 6 (8), this subsection shall apply to any partner- 7 ship which is a member of any international fi- 8 nancial reporting group under rules similar to 9 the rules of section 163(j)(3). 10 ‘‘(B) FOREIGN CORPORATIONS ENGAGED 11 IN TRADE OR BUSINESS WITHIN THE UNITED 12 STATES.—Except 13 Secretary in paragraph (8), any deduction for 14 interest paid or accrued by a foreign corpora- 15 tion engaged in a trade or business within the 16 United States shall be limited in a manner con- 17 sistent with the principles of this subsection. 18 as otherwise provided by the ‘‘(C) CONSOLIDATED GROUPS.—For pur- 19 poses of this subsection, the members of any 20 group that file (or are required to file) a con- 21 solidated return with respect to the tax imposed 22 by chapter 1 for a taxable year shall be treated 23 as a single corporation. 24 ‘‘(7) REGULATIONS.—The Secretary may issue 25 such regulations or other guidance as are necessary g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 TO CERTAIN ENTITIES.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00395 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 396 1 or appropriate to carry out the purposes of this sub- 2 section.’’. 3 (b) CARRYFORWARD 4 (1) IN to read as follows: 6 ‘‘(o) CARRYFORWARD TEREST.—The DISALLOWED INTEREST.— GENERAL.—Section 5 7 OF OF 163(o) is amended CERTAIN DISALLOWED IN- amount of any interest not allowed as a 8 deduction for any taxable year by reason of subsection 9 (j)(1) or (n)(1) (whichever imposes the lower limitation 10 with respect to such taxable year) shall be treated as inter11 est (and as business interest for purposes of subsection 12 (j)(1)) paid or accrued in the succeeding taxable year. In13 terest paid or accrued in any taxable year (determined 14 without regard to the preceding sentence) shall not be car15 ried past the 5th taxable year following such taxable year, 16 determined by treating interest as allowed as a deduction 17 on a first-in, first-out basis.’’. 18 (2) TREATMENT OF CARRYFORWARD OF DIS- 19 ALLOWED INTEREST IN CERTAIN CORPORATE ACQUI- 20 SITIONS.—For 21 disallowed interest in certain corporate acquisitions, 22 see the amendments made by section 3301(c). 23 (c) EFFECTIVE DATE.—The amendments made by rules related to the carryforward of 24 this section shall apply to taxable years beginning after 25 December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00396 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 397 1 SEC. 4303. EXCISE TAX ON CERTAIN PAYMENTS FROM DO- 2 MESTIC CORPORATIONS TO RELATED FOR- 3 EIGN CORPORATIONS; ELECTION TO TREAT 4 SUCH 5 NECTED INCOME. 6 7 PAYMENTS (a) EXCISE TAX MESTIC 8 ON AS EFFECTIVELY CON- CERTAIN AMOUNTS FROM DO- CORPORATIONS TO FOREIGN AFFILIATES.— (1) IN GENERAL.—Chapter 36 is amended by 9 adding at the end the following new subchapter: 10 ‘‘Subchapter E—Tax on Certain Amounts to 11 Foreign Affiliates ‘‘Sec. 4491. Imposition of tax on certain amounts from domestic corporations to foreign affiliates. 12 ‘‘SEC. 4491. IMPOSITION OF TAX ON CERTAIN AMOUNTS 13 FROM DOMESTIC CORPORATIONS TO FOR- 14 EIGN AFFILIATES. 15 ‘‘(a) IN GENERAL.—There is hereby imposed on each 16 specified amount paid or incurred by a domestic corpora17 tion to a foreign corporation which is a member of the 18 same international financial reporting group as such do19 mestic corporation a tax equal to the highest rate of tax 20 in effect under section 11 multiplied by such amount. 21 ‘‘(b) BY WHOM PAID.—The tax imposed by sub- 22 section (a) shall be paid by the domestic corporation de23 scribed in such subsection. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00397 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 398 1 2 ‘‘(c) EXCEPTION COME.—Subsection FOR EFFECTIVELY CONNECTED IN- (a) shall not apply to so much of any 3 specified amount as is effectively connected with the con4 duct of a trade or business within the United States if 5 such amount is subject to tax under chapter 1. In the case 6 of any amount which is treated as effectively connected 7 with the conduct of a trade or business within the United 8 States by reason of section 882(g), the preceding sentence 9 shall apply to such amount only if the domestic corpora10 tion provides to the Secretary (at such time and in such 11 form and manner as the Secretary may provide) a copy 12 of the election made under section 882(g) by the foreign 13 corporation referred to in subsection (a). 14 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—Terms 15 used in this section that are also used in section 882(g) 16 shall have the same meaning as when used in such section 17 and rules similar to the rules of paragraphs (5) and (6) 18 of such section shall apply for purposes of this section.’’. 19 (2) DENIAL DEDUCTION FOR TAX 20 POSED.—Section 21 after paragraph (6) the following new paragraph: 22 ‘‘(7) Taxes imposed by section 4491.’’. 23 (3) CLERICAL IM- 275(a) is amended by inserting AMENDMENT.—The table of sub- 24 chapters for chapter 36 is amended by adding at the 25 end the following new item: ‘‘SUBCHAPTER E. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF 10:46 Nov 02, 2017 Jkt 000000 TAX ON CERTAIN AMOUNTS TO FOREIGN AFFILIATES.’’. (679209 10) PO 00000 Frm 00398 Fmt 6652 Sfmt 6211 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 399 1 (b) ELECTION TO TREAT CERTAIN PAYMENTS FROM 2 DOMESTIC CORPORATIONS 3 PORATIONS AS TO RELATED FOREIGN COR- EFFECTIVELY CONNECTED INCOME.—Sec- 4 tion 882 is amended by adding at the end the following 5 new subsection: 6 ‘‘(g) ELECTION TO TREAT CERTAIN PAYMENTS 7 FROM DOMESTIC CORPORATIONS TO RELATED FOREIGN 8 CORPORATIONS AS EFFECTIVELY CONNECTED INCOME.— 9 ‘‘(1) IN the case of any specified 10 amount paid or incurred by a domestic corporation 11 to a foreign corporation which is a member of the 12 same international financial reporting group as such 13 domestic corporation and which has elected to be 14 subject to the provisions of this subsection— 15 ‘‘(A) such amount shall be taken into ac- 16 count (other than for purposes of sections 245, 17 245A, and 881) as if such foreign corporation 18 were engaged in a trade or business within the 19 United States and had a permanent establish- 20 ment in the United States during the taxable 21 year and as if such payment were effectively 22 connected with the conduct of a trade or busi- 23 ness within the United States and were attrib- 24 utable to such permanent establishment, g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—In 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00399 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 400 1 ‘‘(B) for purposes of subsection (c)(1)(A), 2 no deduction shall be allowed with respect to 3 such amount and such subsection shall be ap- 4 plied without regard to such amount, and 5 ‘‘(C) there shall be allowed as a deduction 6 the deemed expenses with respect such amount. 7 ‘‘(2) SPECIFIED 8 purposes of this subsection— 9 ‘‘(A) IN GENERAL.—The term ‘specified 10 amount’ means any amount which is, with re- 11 spect to the payor, allowable as a deduction or 12 includible in costs of goods sold, inventory, or 13 the basis of a depreciable or amortizable asset. 14 ‘‘(B) EXCEPTIONS.—The term ‘specified 15 amount’ shall not include— 16 ‘‘(i) interest, 17 ‘‘(ii) any amount paid or incurred for 18 the acquisition of any commodity described 19 in 20 475(e)(2)(D) (determined without regard 21 to subclause (i) thereof), section 475(e)(2)(A) or section 22 ‘‘(iii) except as provided in subpara- 23 graph (C), any amount with respect to 24 which tax is imposed under section 881(a), 25 and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AMOUNT.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00400 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 401 1 ‘‘(iv) in the case of a payor which has 2 elected to use a services cost method for 3 purposes of section 482, any amount paid 4 or incurred for services if such amount is 5 the total services cost with no markup. 6 ‘‘(C) AMOUNTS 7 CONNECTED 8 TAX.—Subparagraph 9 any specified amount to the extent of the same 10 TO EXTENT OF GROSS-BASIS (B)(iii) shall not apply to proportion of such amount as— 11 ‘‘(i) the rate of tax imposed under 12 section 13 amount, bears to 14 881(a) with respect to such ‘‘(ii) 30 percent. 15 ‘‘(3) DEEMED 16 ‘‘(A) IN EXPENSES.— GENERAL.—The deemed expenses 17 with respect to any specified amount received 18 by a foreign corporation during any reporting 19 year is the amount of expenses such that the 20 net income ratio of such foreign corporation 21 with respect to such amount (taking into ac- 22 count only such deemed expenses) is equal to 23 the net income ratio of the international finan- 24 cial reporting group determined for such report- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 TREATED AS EFFECTIVELY 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00401 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 402 1 ing year with respect to the product line to 2 which the specified amount relates. 3 ‘‘(B) NET purposes 4 of this paragraph, the term ‘net income ratio’ 5 means the ratio of— 6 ‘‘(i) net income determined without 7 regard to interest income, interest expense, 8 and income taxes, divided by 9 ‘‘(ii) revenues. 10 ‘‘(C) METHOD OF DETERMINATION.— 11 Amounts described in subparagraph (B) shall 12 be determined on the basis of the consolidated 13 financial statements referred to in paragraph 14 (5)(A)(i) and the book and records of the mem- 15 bers of the internal financial reporting group 16 which are used in preparing such statements. 17 ‘‘(4) INTERNATIONAL 18 GROUP.—For 19 FINANCIAL REPORTING purposes of this subsection— ‘‘(A) IN GENERAL.—The term ‘inter- 20 national financial reporting group’ means any 21 group of entities, with respect to any specified 22 amount, if such amount is paid or incurred dur- 23 ing a reporting year of such group with respect 24 to which— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 INCOME RATIO.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00402 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 403 1 ‘‘(i) such group prepares consolidated 2 financial statements (within the meaning 3 of section 163(n)(4)) with respect to such 4 year, and 5 ‘‘(ii) the average annual aggregate 6 payment amount of such group for the 3- 7 reporting-year period ending with such re- 8 porting year exceeds $100,000,000. 9 ‘‘(B) AGGREGATE PAYMENT 10 AMOUNT.—The 11 ment amount’ means, with respect to any re- 12 porting year of the group referred to in sub- 13 paragraph 14 amounts to which paragraph (1) applies (or 15 would apply if such group were an international 16 financial reporting group). 17 term ‘annual aggregate pay- (A)(i), the ‘‘(C) APPLICATION aggregate specified OF CERTAIN RULES.— 18 Rules similar to the rules of subparagraphs (A), 19 (B), and (D) of section 448(c)(3) shall apply 20 for purposes of this paragraph. 21 ‘‘(5) TREATMENT OF PARTNERSHIPS.—Any 22 specified amount paid, incurred, or received by a 23 partnership which is a member of any international 24 financial reporting group (and any amount treated 25 as paid, incurred, or received by a partnership under g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ANNUAL 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00403 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 404 1 this paragraph) shall be treated for purposes of this 2 subsection as amounts paid, incurred, or received, 3 respectively, by each partner of such partnership in 4 an amount equal to such partner’s distributive share 5 of the items of income, gain, deduction, or loss to 6 which such amounts relate. 7 ‘‘(6) TREATMENT 8 WITH UNITED STATES TRADE OR BUSINESS.—Any 9 specified amount paid, incurred, or received by a for- 10 eign corporation in connection with the conduct of a 11 trade or business within the United States (other 12 than a trade or business it is deemed to conduct 13 pursuant to this subsection) shall be treated for pur- 14 poses of this subsection as an amount paid, in- 15 curred, or received, respectively, by a domestic cor- 16 poration. For purposes of the preceding sentence, a 17 foreign corporation shall be deemed to pay, incur, 18 and receive amounts with respect to a trade or busi- 19 ness it conducts within the United States (other 20 than a trade or business it is deemed to conduct 21 pursuant to this subsection) to the extent such for- 22 eign corporation would be treated as paying, incur- 23 ring, or receiving such amounts from such trade or 24 business if such trade or business were a domestic 25 corporation. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF AMOUNTS IN CONNECTION 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00404 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 405 1 ‘‘(7) JOINT 2 BERS 3 GROUP.—In 4 spect to any taxable year of a foreign corporation 5 which is a member of an international financial ac- 6 counting group, each domestic corporation which is 7 a member of such group at any time during such 8 taxable year shall be jointly and severally liable 9 for— OF INTERNAL FINANCIAL REPORTING the case of any underpayment with re- 10 ‘‘(A) so much of such underpayment as 11 does not exceed the excess (if any) of such un- 12 derpayment over the amount of such under- 13 payment determined without regard to this sub- 14 section, and 15 ‘‘(B) any penalty, addition to tax, or addi- 16 tional amount attributable to the amount de- 17 scribed in subparagraph (A). 18 ‘‘(8) DISALLOWANCE 19 OF FOREIGN TAX CREDIT, ETC.— 20 ‘‘(A) IN GENERAL.—No credit shall be al- 21 lowed under section 901 for any taxes paid or 22 accrued (or treated as paid or accrued) with re- 23 spect to any specified amount to which para- 24 graph (1) applies. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AND SEVERAL LIABILITY OF MEM- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00405 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 406 1 ‘‘(B) DENIAL deduc- 2 tion shall be allowed under this chapter for any 3 tax for which credit is not allowable under sec- 4 tion 901 by reason of paragraph (1) (deter- 5 mined by treating the taxpayer as having elect- 6 ed the benefits of subpart A of part III of sub- 7 chapter N). 8 ‘‘(9) RULES 9 RELATED TO ELECTION.—Any election under paragraph (1) shall— 10 ‘‘(A) be made at such time and in such 11 form and manner as the Secretary may provide, 12 and 13 ‘‘(B) apply for the taxable year for which 14 made and all subsequent taxable years unless 15 revoked with the consent of the Secretary. 16 ‘‘(10) REGULATIONS.—The Secretary may issue 17 such regulations or other guidance as are necessary 18 or appropriate to carry out the purposes of this sub- 19 section, including regulations or other guidance— 20 ‘‘(A) to provide for the proper determina- 21 tion of product lines, and 22 ‘‘(B) to prevent the avoidance of the pur- 23 poses of this subsection through the use of con- 24 duit transactions or by other means.’’. 25 (c) REPORTING REQUIREMENTS.— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OF DEDUCTION.—No 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00406 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 407 1 (1) REPORTING 2 Section 6038C(b) is amended to read as follows: 3 ‘‘(b) REQUIRED INFORMATION.— 4 5 ‘‘(1) IN GENERAL.—The information described in this subsection is— 6 ‘‘(A) the information described in section 7 6038A(b), and 8 ‘‘(B) such other information as the Sec- 9 retary may prescribe by regulations relating to 10 any item not directly connected with a trans- 11 action for which information is required under 12 subparagraph (A). 13 ‘‘(2) CERTAIN PAYMENTS FROM RELATED DO- 14 MESTIC CORPORATIONS.— 15 ‘‘(A) IN GENERAL.—In the case of any re- 16 porting corporation that receives during the 17 taxable year any amount to which section 18 882(g)(1) applies, the information described in 19 this subsection shall include, with respect to 20 each member of the international financial re- 21 porting group from which any such amount is 22 received— 23 ‘‘(i) the name and taxpayer identifica- 24 tion number of such member, g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 BY FOREIGN CORPORATION.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00407 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 408 1 ‘‘(ii) the aggregate amounts received 2 from such member, 3 ‘‘(iii) the product lines to which such 4 amounts relate, the aggregate amounts re- 5 lating to each such product line, and the 6 net income ratio for each such product line 7 (determined under section 882(g)(3)(B) 8 with respect to the international financial 9 reporting group), and 10 ‘‘(iv) a summary of any changes in fi- 11 nancial accounting methods that affect the 12 computation of any net income ratio de- 13 scribed in clause (iii). 14 ‘‘(B) DEFINITIONS 15 Terms used in this paragraph that are also 16 used in section 882(g) shall have the same 17 meaning as when used in such section and rules 18 similar to the rules of paragraphs (5) and (6) 19 of such section shall apply for purposes of this 20 paragraph.’’. 21 (2) REPORTING 22 (A) IN 24 GENERAL .—Subpart A of part III of subchapter A of chapter 61 is amended by g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) 10:46 Nov 02, 2017 BY DOMESTIC GROUP MEM- BERS.— 23 VerDate 0ct 09 2002 AND SPECIAL RULES.— Jkt 000000 (679209 10) PO 00000 Frm 00408 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 409 1 inserting after section 6038D the following new 2 section: 3 ‘‘SEC. 6038E. INFORMATION WITH RESPECT TO CERTAIN 4 PAYMENTS FROM DOMESTIC CORPORATIONS 5 TO RELATED FOREIGN CORPORATIONS. 6 ‘‘(a) IN GENERAL.—In the case of any domestic cor- 7 poration which pays or accrues any amount to which sec8 tion 882(g)(1) applies, such person shall— 9 ‘‘(1) make a return according to the forms and 10 regulations prescribed the Secretary, setting forth 11 the information described in subsection (b), and 12 ‘‘(2) maintain (at the location, in the manner, 13 and to the extent prescribed in regulations) such 14 records as may be appropriate to determine liability 15 for tax pursuant to paragraphs (1) and (7) of sec- 16 tion 882(g). 17 ‘‘(b) REQUIRED INFORMATION.—The information de- 18 scribed in this subsection is— 19 ‘‘(1) the name and taxpayer identification num- 20 ber of the common parent of the international finan- 21 cial reporting group in which such domestic corpora- 22 tion is a member, and 23 ‘‘(2) with respect to any person who receives an 24 amount described in subsection (a) from such do- 25 mestic corporation— g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00409 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 410 1 ‘‘(A) the name and taxpayer identification 2 number of such person, 3 ‘‘(B) the aggregate amounts received by 4 such person, 5 ‘‘(C) the product lines to which such 6 amounts relate, the aggregate amounts relating 7 to each such product line, and the net income 8 ratio for each such product line (determined 9 under section 882(g)(3)(B) with respect to the 10 international financial reporting group), and 11 ‘‘(D) a summary of any changes in finan- 12 cial accounting methods that affect the com- 13 putation of any net income ratios described in 14 subparagraph (C). 15 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—Terms 16 used in this paragraph that are also used in section 882(g) 17 shall have the same meaning as when used in such section 18 and rules similar to the rules of paragraphs (5) and (6) 19 of such section shall apply for purposes of this para20 graph.’’. 21 (B) CLERICAL table of 22 sections for subpart A of part III of subchapter 23 A of chapter 61 is amended by inserting after 24 the item relating to section 6038D the following 25 new item: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 AMENDMENT.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00410 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 411 ‘‘Sec. 6038E. Information with respect to certain payments from domestic corporations to related foreign corporations.’’. 1 (d) EFFECTIVE DATE.—The amendments made by 2 this section shall apply to amounts paid or accrued after 3 December 31, 2018. 5 Subtitle E—Provisions Related to Possessions of the United States 6 SEC. 4401. EXTENSION OF DEDUCTION ALLOWABLE WITH 7 RESPECT TO INCOME ATTRIBUTABLE TO DO- 8 MESTIC PRODUCTION ACTIVITIES IN PUERTO 9 RICO. 4 10 (a) IN GENERAL.—Section 199(d)(8)(C), prior to its 11 repeal by this Act, is amended— 12 (1) by striking ‘‘first 11 taxable years’’ and in- 13 serting ‘‘first 12 taxable years’’, and 14 (2) by striking ‘‘January 1, 2017’’ and insert- 15 ing ‘‘January 1, 2018’’. 16 (b) EFFECTIVE DATE.—The amendments made by 17 this section shall apply to taxable years beginning after 18 December 31, 2016. 19 SEC. 4402. EXTENSION OF TEMPORARY INCREASE IN LIMIT 20 ON COVER OVER OF RUM EXCISE TAXES TO 21 PUERTO RICO AND THE VIRGIN ISLANDS. 22 (a) IN GENERAL.—Section 7652(f)(1) is amended by 23 striking ‘‘January 1, 2017’’ and inserting ‘‘January 1, 24 2023’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00411 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 412 1 (b) EFFECTIVE DATE.—The amendment made by 2 this section shall apply to distilled spirits brought into the 3 United States after December 31, 2016. 4 SEC. 4403. EXTENSION OF AMERICAN SAMOA ECONOMIC 5 DEVELOPMENT CREDIT. 6 (a) IN GENERAL.—Section 119(d) of division A of 7 the Tax Relief and Health Care Act of 2006 is amended— 8 (1) by striking ‘‘January 1, 2017’’ each place 9 it appears and inserting ‘‘January 1, 2023’’, 10 (2) by striking ‘‘first 11 taxable years’’ in para- 11 graph (1) and inserting ‘‘first 17 taxable years’’, 12 and 13 (3) by striking ‘‘first 5 taxable years’’ in para- 14 graph (2) and inserting ‘‘first 11 taxable years’’. 15 (b) EFFECTIVE DATE.—The amendments made by 16 this section shall apply to taxable years beginning after 17 December 31, 2016. 19 Subtitle F—Other International Reforms 20 SEC. 4501. RESTRICTION ON INSURANCE BUSINESS EXCEP- 18 21 TION 22 COMPANY RULES. 23 TO PASSIVE FOREIGN INVESTMENT (a) IN GENERAL.—Section 1297(b)(2)(B) is amend- 24 ed to read as follows: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00412 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 413 1 ‘‘(B) derived in the active conduct of an in- 2 surance business by a qualifying insurance cor- 3 poration (as defined in subsection (f)),’’. 4 5 (b) QUALIFYING INSURANCE CORPORATION DEFINED.—Section 1297 is amended by adding at the end 6 the following new subsection: 7 ‘‘(f) QUALIFYING INSURANCE CORPORATION.—For 8 purposes of subsection (b)(2)(B)— 9 ‘‘(1) IN term ‘qualifying insur- 10 ance corporation’ means, with respect to any taxable 11 year, a foreign corporation— 12 ‘‘(A) which would be subject to tax under 13 subchapter L if such corporation were a domes- 14 tic corporation, and 15 ‘‘(B) the applicable insurance liabilities of 16 which constitute more than 25 percent of its 17 total assets, determined on the basis of such li- 18 abilities and assets as reported on the corpora- 19 tion’s applicable financial statement for the last 20 year ending with or within the taxable year. 21 ‘‘(2) ALTERNATIVE FACTS AND CIR- 22 CUMSTANCES TEST FOR CERTAIN CORPORATIONS.— 23 If a corporation fails to qualify as a qualified insur- 24 ance corporation under paragraph (1) solely because 25 the percentage determined under paragraph (1)(B) g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00413 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 414 1 is 25 percent or less, a United States person that 2 owns stock in such corporation may elect to treat 3 such stock as stock of a qualifying insurance cor- 4 poration if— 5 ‘‘(A) the percentage so determined for the 6 corporation is at least 10 percent, and 7 ‘‘(B) under regulations provided by the 8 Secretary, based on the applicable facts and cir- 9 cumstances— 10 ‘‘(i) the corporation is predominantly 11 engaged in an insurance business, and 12 ‘‘(ii) such failure is due solely to run- 13 off-related or rating-related circumstances 14 involving such insurance business. 15 16 ‘‘(3) APPLICABLE For purposes of this subsection— 17 ‘‘(A) IN GENERAL.—The term ‘applicable 18 insurance liabilities’ means, with respect to any 19 life or property and casualty insurance busi- 20 ness— 21 ‘‘(i) loss and loss adjustment ex- 22 penses, and 23 ‘‘(ii) reserves (other than deficiency, 24 contingency, or unearned premium re- 25 serves) for life and health insurance risks g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 INSURANCE LIABILITIES.— 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00414 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 415 1 and life and health insurance claims with 2 respect to contracts providing coverage for 3 mortality or morbidity risks. 4 ‘‘(B) LIMITATIONS 5 ITIES.—Any 6 (i) or (ii) of subparagraph (A) shall not exceed 7 the lesser of such amount— amount determined under clause 8 ‘‘(i) as reported to the applicable in- 9 surance regulatory body in the applicable 10 financial statement described in paragraph 11 (4)(A) (or, if less, the amount required by 12 applicable law or regulation), or 13 ‘‘(ii) as determined under regulations 14 prescribed by the Secretary. 15 16 ‘‘(4) OTHER DEFINITIONS AND RULES.—For purposes of this subsection— 17 ‘‘(A) APPLICABLE FINANCIAL STATE- 18 MENT.—The 19 ment’ means a statement for financial reporting 20 purposes which— 21 term ‘applicable financial state- ‘‘(i) is made on the basis of generally 22 accepted accounting principles, 23 ‘‘(ii) is made on the basis of inter- 24 national financial reporting standards, but g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 ON AMOUNT OF LIABIL- 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00415 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 416 1 only if there is no statement that meets 2 the requirement of clause (i), or 3 ‘‘(iii) except as otherwise provided by 4 the Secretary in regulations, is the annual 5 statement which is required to be filed 6 with the applicable insurance regulatory 7 body, but only if there is no statement 8 which meets the requirements of clause (i) 9 or (ii). 10 ‘‘(B) APPLICABLE INSURANCE REGU- 11 LATORY BODY.—The 12 regulatory body’ means, with respect to any in- 13 surance business, the entity established by law 14 to license, authorize, or regulate such business 15 and to which the statement described in sub- 16 paragraph (A) is provided.’’. 17 term ‘applicable insurance (c) EFFECTIVE DATE.—The amendments made by 18 this section shall apply to taxable years beginning after 19 December 31, 2017. 20 SEC. 4502. LIMITATION ON TREATY BENEFITS FOR CERTAIN 21 DEDUCTIBLE PAYMENTS. 22 (a) IN GENERAL.—Section 894 is amended by adding 23 at the end the following new subsection: 24 25 ‘‘(d) LIMITATION TAIN g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 ON TREATY BENEFITS FOR CER- DEDUCTIBLE PAYMENTS.— Jkt 000000 (679209 10) PO 00000 Frm 00416 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 417 1 ‘‘(1) IN the case of any deduct- 2 ible related-party payment, any withholding tax im- 3 posed under chapter 3 (and any tax imposed under 4 subpart A or B of this part) with respect to such 5 payment may not be reduced under any treaty of the 6 United States unless any such withholding tax would 7 be reduced under a treaty of the United States if 8 such payment were made directly to the foreign par- 9 ent corporation. 10 ‘‘(2) DEDUCTIBLE RELATED-PARTY PAY- 11 MENT.—For 12 ‘deductible related-party payment’ means any pay- 13 ment made, directly or indirectly, by any person to 14 any other person if the payment is allowable as a de- 15 duction under this chapter and both persons are 16 members of the same foreign controlled group of en- 17 tities. 18 19 purposes of this subsection, the term ‘‘(3) FOREIGN TIES.—For 20 CONTROLLED GROUP OF ENTI- purposes of this subsection— ‘‘(A) IN GENERAL.—The term ‘foreign 21 controlled group of entities’ means a controlled 22 group of entities the common parent of which 23 is a foreign corporation. 24 ‘‘(B) CONTROLLED 25 10:46 Nov 02, 2017 GROUP OF ENTITIES.— The term ‘controlled group of entities’ means a g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—In Jkt 000000 (679209 10) PO 00000 Frm 00417 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 418 1 controlled group of corporations as defined in 2 section 1563(a)(1), except that— 3 ‘‘(i) ‘more than 50 percent’ shall be 4 substituted for ‘at least 80 percent’ each 5 place it appears therein, and 6 ‘‘(ii) the determination shall be made 7 without regard to subsections (a)(4) and 8 (b)(2) of section 1563. 9 A partnership or any other entity (other than a 10 corporation) shall be treated as a member of a 11 controlled group of entities if such entity is con- 12 trolled 13 954(d)(3)) by members of such group (includ- 14 ing any entity treated as a member of such 15 group by reason of this sentence). 16 ‘‘(4) FOREIGN the meaning PARENT of section CORPORATION.—For 17 purposes of this subsection, the term ‘foreign parent 18 corporation’ means, with respect to any deductible 19 related-party payment, the common parent of the 20 foreign controlled group of entities referred to in 21 paragraph (3)(A). 22 ‘‘(5) REGULATIONS.—The Secretary may pre- 23 scribe such regulations or other guidance as are nec- 24 essary or appropriate to carry out the purposes of g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 (within 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00418 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 419 1 this subsection, including regulations or other guid- 2 ance which provide for— 3 ‘‘(A) the treatment of two or more persons 4 as members of a foreign controlled group of en- 5 tities if such persons would be the common par- 6 ent of such group if treated as one corporation, 7 and 8 ‘‘(B) the treatment of any member of a 9 foreign controlled group of entities as the com- 10 mon parent of such group if such treatment is 11 appropriate taking into account the economic 12 relationships among such entities.’’. 13 (b) EFFECTIVE DATE.—The amendment made by 14 this section shall apply to payments made after the date 15 of the enactment of this Act. 19 TITLE V—EXEMPT ORGANIZATIONS Subtitle A—Unrelated Business Income Tax 20 SEC. 5001. CLARIFICATION OF UNRELATED BUSINESS IN- 21 COME TAX TREATMENT OF ENTITIES TREAT- 22 ED AS EXEMPT FROM TAXATION UNDER SEC- 23 TION 501(a). 16 17 18 24 (a) IN GENERAL.—Section 511 is amended by adding 25 at the end the following new subsection: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00419 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 420 1 ‘‘(d) ORGANIZATIONS AND 2 TAXATION NOT SOLELY BY TRUSTS EXEMPT FROM REASON OF SECTION 3 501(a).—For purposes of subsections (a)(2) and (b)(2), 4 an organization or trust shall not fail to be treated as ex5 empt from taxation under this subtitle by reason of section 6 501(a) solely because such organization is also so exempt, 7 or excludes amounts from gross income, by reason of any 8 other provision of this title.’’. 9 (b) EFFECTIVE DATE.—The amendments made by 10 this section shall apply to taxable years beginning after 11 December 31, 2017. 12 SEC. 5002. EXCLUSION OF RESEARCH INCOME LIMITED TO 13 PUBLICLY AVAILABLE RESEARCH. 14 (a) IN GENERAL.—Section 512(b)(9) is amended by 15 striking ‘‘from research’’ and inserting ‘‘from such re16 search’’. 17 (b) EFFECTIVE DATE.—The amendments made by 18 this section shall apply to taxable years beginning after 19 December 31, 2017. 20 Subtitle B—Excise Taxes 21 SEC. 5101. SIMPLIFICATION OF EXCISE TAX ON PRIVATE 22 FOUNDATION INVESTMENT INCOME. 23 (a) RATE REDUCTION.—Section 4940(a) is amended 24 by striking ‘‘2 percent’’ and inserting ‘‘1.4 percent’’. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00420 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 421 1 2 (b) REPEAL VATE OF SPECIAL RULES FOR CERTAIN PRI- FOUNDATIONS.—Section 4940 is amended by strik- 3 ing subsection (e). 4 (c) EFFECTIVE DATE.—The amendments made by 5 this section shall apply to taxable years beginning after 6 December 31, 2017. 7 SEC. 5102. PRIVATE OPERATING FOUNDATION REQUIRE- 8 MENTS RELATING TO OPERATION OF ART 9 MUSEUM. 10 (a) IN GENERAL.—Section 4942(j) is amended by 11 adding at the end the following new paragraph: 12 ‘‘(6) ORGANIZATION OPERATING ART MU- 13 SEUM.—For 14 ating foundation’ shall not include an organization 15 which operates an art museum as a substantial ac- 16 tivity unless such museum is open during normal 17 business hours to the public for at least 1,000 hours 18 during the taxable year.’’. 19 (b) EFFECTIVE DATE.—The amendments made by purposes of this section, the term ‘oper- 20 this section shall apply to taxable years beginning after 21 December 31, 2017. 22 SEC. 5103. EXCISE TAX BASED ON INVESTMENT INCOME OF 23 24 PRIVATE COLLEGES AND UNIVERSITIES. (a) IN GENERAL.—Chapter 42 is amended by adding 25 at the end the following new subchapter: g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00421 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 422 1 ‘‘Subchapter H—Excise Tax Based on Invest2 ment Income of Private Colleges and Uni- 3 versities ‘‘Sec. 4969. Excise tax based on investment income of private colleges and universities. 4 ‘‘SEC. 4969. EXCISE TAX BASED ON INVESTMENT INCOME 5 6 OF PRIVATE COLLEGES AND UNIVERSITIES. ‘‘(a) TAX IMPOSED.—There is hereby imposed on 7 each applicable educational institution for the taxable year 8 a tax equal to 1.4 percent of the net investment income 9 of such institution for the taxable year. 10 ‘‘(b) APPLICABLE EDUCATIONAL INSTITUTION.—For 11 purposes of this subchapter— 12 ‘‘(1) IN term ‘applicable edu- 13 cational institution’ means an eligible educational in- 14 stitution (as defined in section 25A(e)(3))— 15 ‘‘(A) which has at least 500 students dur- 16 ing the preceding taxable year, 17 ‘‘(B) which is not described in the first 18 sentence of section 511(a)(2)(B), and 19 ‘‘(C) the aggregate fair market value of 20 the assets of which at the end of the preceding 21 taxable year (other than those assets which are 22 used directly in carrying out the institution’s 23 exempt purpose) is at least $100,000 per stu- 24 dent of the institution. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—The 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00422 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 423 1 ‘‘(2) STUDENTS.—For purposes of paragraph 2 (1), the number of students of an institution shall 3 be based on the daily average number of full-time 4 students attending such institution (with part-time 5 students taken into account on a full-time student 6 equivalent basis). 7 ‘‘(c) NET INVESTMENT INCOME.—For purposes of 8 this section, net investment income shall be determined 9 under rules similar to the rules of section 4940(c).’’. 10 (b) CLERICAL AMENDMENT.—The table of sub- 11 chapters for chapter 42 is amended by adding at the end 12 the following new item: ‘‘SUBCHAPTER H—EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES AND UNIVERSITIES’’. 13 (c) EFFECTIVE DATE.—The amendments made by 14 this section shall apply to taxable years beginning after 15 December 31, 2017. 16 SEC. 5104. EXCEPTION FROM PRIVATE FOUNDATION EX- 17 CESS BUSINESS HOLDING TAX FOR INDE- 18 PENDENTLY-OPERATED 19 BUSINESS HOLDINGS. 20 PHILANTHROPIC (a) IN GENERAL.—Section 4943 is amended by add- 21 ing at the end the following new subsection: 22 ‘‘(g) EXCEPTION 23 TO 24 NESS.— 10:46 Nov 02, 2017 CERTAIN HOLDINGS LIMITED INDEPENDENTLY-OPERATED PHILANTHROPIC BUSI- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 FOR Jkt 000000 (679209 10) PO 00000 Frm 00423 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 424 1 ‘‘(1) IN (a) shall not 2 apply with respect to the holdings of a private foun- 3 dation in any business enterprise which for the tax- 4 able year meets— 5 ‘‘(A) the ownership requirements of para- 6 graph (2), 7 ‘‘(B) the all profits to charity distribution 8 requirement of paragraph (3), and 9 ‘‘(C) the independent operation require- 10 ments of paragraph (4). 11 ‘‘(2) 12 OWNERSHIP.—The ownership require- ments of this paragraph are met if— 13 ‘‘(A) 100 percent of the voting stock in the 14 business enterprise is held by the private foun- 15 dation at all times during the taxable year, and 16 ‘‘(B) all the private foundation’s ownership 17 interests in the business enterprise were ac- 18 quired not by purchase. 19 ‘‘(3) ALL 20 PROFITS TO CHARITY.— ‘‘(A) IN GENERAL.—The all profits to 21 charity distribution requirement of this para- 22 graph is met if the business enterprise, not 23 later than 120 days after the close of the tax- 24 able year, distributes an amount equal to its net g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 GENERAL.—Subsection 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00424 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 425 1 operating income for such taxable year to the 2 private foundation. 3 ‘‘(B) NET pur- 4 poses of this paragraph, the net operating in- 5 come of any business enterprise for any taxable 6 year is an amount equal to the gross income of 7 the business enterprise for the taxable year, re- 8 duced by the sum of— 9 ‘‘(i) the deductions allowed by chapter 10 1 for the taxable year which are directly 11 connected with the production of such in- 12 come, 13 ‘‘(ii) the tax imposed by chapter 1 on 14 the business enterprise for the taxable 15 year, and 16 ‘‘(iii) an amount for a reasonable re- 17 serve for working capital and other busi- 18 ness needs of the business enterprise. 19 ‘‘(4) INDEPENDENT OPERATION.—The inde- 20 pendent operation requirements of this paragraph 21 are met if, at all times during the taxable year— 22 ‘‘(A) no substantial contributor (as defined 23 in section 4958(c)(3)(C)) to the private founda- 24 tion, or family member of such a contributor 25 (determined under section 4958(f)(4)) is a di- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 OPERATING INCOME.—For 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00425 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 426 1 rector, officer, trustee, manager, employee, or 2 contractor of the business enterprise (or an in- 3 dividual having powers or responsibilities simi- 4 lar to any of the foregoing), 5 ‘‘(B) at least a majority of the board of di- 6 rectors of the private foundation are not— 7 ‘‘(i) also directors or officers of the 8 business enterprise, or 9 ‘‘(ii) members of the family (deter- 10 mined under section 4958(f)(4)) of a sub- 11 stantial contributor (as defined in section 12 4958(c)(3)(C)) to the private foundation, 13 and 14 ‘‘(C) there is no loan outstanding from the 15 business enterprise to a substantial contributor 16 (as so defined) to the private foundation or a 17 family member of such contributor (as so deter- 18 mined). 19 ‘‘(5) CERTAIN 20 EXCLUDED.—This subsection shall not apply to— 21 ‘‘(A) any fund or organization treated as a 22 private foundation for purposes of this section 23 by reason of subsection (e) or (f), 24 ‘‘(B) 25 10:46 Nov 02, 2017 any trust described in section 4947(a)(1) (relating to charitable trusts), and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 DEEMED PRIVATE FOUNDATIONS Jkt 000000 (679209 10) PO 00000 Frm 00426 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 427 1 ‘‘(C) 2 any trust described in section 4947(a)(2) (relating to split-interest trusts).’’. 3 (b) EFFECTIVE DATE.—The amendments made by 4 this section shall apply to taxable years beginning after 5 December 31, 2017. 7 Subtitle C—Requirements for Organizations Exempt From Tax 8 SEC. 5201. CHURCHES PERMITTED TO MAKE STATEMENTS 9 RELATING TO POLITICAL CAMPAIGN IN ORDI- 10 NARY COURSE OF RELIGIOUS SERVICES AND 11 ACTIVITIES. 6 12 (a) IN GENERAL.—Section 501 is amended by adding 13 at the end the following new subsection: 14 ‘‘(s) SPECIAL RULE RELATING 15 PAIGN 16 IARIES, ETC.— 17 ‘‘(1) IN OF POLITICAL CAM- CHURCHES, INTEGRATED AUXIL- GENERAL.—For purposes of subsection 18 (c)(3) and sections 170(c)(2), 2055, 2106, 2522, 19 and 4955, an organization described in section 20 508(c)(1)(A) shall not fail to be treated as organized 21 and operated exclusively for a religious purpose, nor 22 shall it be deemed to have participated in, or inter- 23 vened in any political campaign on behalf of (or in 24 opposition to) any candidate for public office, solely 25 because of the content of any homily, sermon, teach- g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 STATEMENTS TO 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00427 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 428 1 ing, dialectic, or other presentation made during re- 2 ligious services or gatherings, but only if the prepa- 3 ration and presentation of such content— 4 ‘‘(A) is in the ordinary course of the orga- 5 nization’s regular and customary activities in 6 carrying out its exempt purpose, and 7 ‘‘(B) results in the organization incurring 8 not more than de minimis incremental ex- 9 penses.’’. 10 (b) EFFECTIVE DATE.—The amendments made by 11 this section shall apply to taxable years ending after the 12 date of the enactment of this Act. 13 SEC. 5202. ADDITIONAL REPORTING REQUIREMENTS FOR 14 DONOR ADVISED FUND SPONSORING ORGA- 15 NIZATIONS. 16 (a) IN GENERAL.—Section 6033(k) is amended by 17 striking ‘‘and’’ at the end of paragraph (2), by striking 18 the period at the end of paragraph (3), and by adding 19 at the end the following new paragraphs: 20 ‘‘(4) indicate the average amount of grants 21 made from such funds during such taxable year (ex- 22 pressed as a percentage of the value of assets held 23 in such funds at the beginning of such taxable year), 24 and g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00428 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X G:\M\15\BRADTX\BRADTX_045.XML 429 1 ‘‘(5) indicate whether the organization has a 2 policy with respect to donor advised funds (as so de- 3 fined) for frequency and minimum level of distribu- 4 tions. 5 Such organization shall include with such return a copy 6 of any policy described in paragraph (5).’’. 7 (b) EFFECTIVE DATE.—The amendment made by 8 this section shall apply for returns filed for taxable years 9 beginning after December 31, 2017. g:\VHLC\110217\110217.061.xml November 2, 2017 (10:46 a.m.) VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 (679209 10) PO 00000 Frm 00429 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X