[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1 Enrolled Bill (ENR)]
H.R.1
One Hundred Fifteenth Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Tuesday,
the third day of January, two thousand and seventeen
An Act
To provide for reconciliation pursuant to titles II and V of the
concurrent resolution on the budget for fiscal year 2018.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
TITLE I
SECTION 11000. SHORT TITLE, ETC.
(a) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this title an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
Subtitle A--Individual Tax Reform
PART I--TAX RATE REFORM
SEC. 11001. MODIFICATION OF RATES.
(a) In General.--Section 1 is amended by adding at the end the
following new subsection:
``(j) Modifications for Taxable Years 2018 Through 2025.--
``(1) In general.--In the case of a taxable year beginning
after December 31, 2017, and before January 1, 2026--
``(A) subsection (i) shall not apply, and
``(B) this section (other than subsection (i)) shall be
applied as provided in paragraphs (2) through (6).
``(2) Rate tables.--
``(A) Married individuals filing joint returns and
surviving spouses.--The following table shall be applied in
lieu of the table contained in subsection (a):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $19,050..................... 10% of taxable income.
Over $19,050 but not over $77,400.... $1,905, plus 12% of the excess
over $19,050.
Over $77,400 but not over $165,000... $8,907, plus 22% of the excess
over $77,400.
Over $165,000 but not over $315,000.. $28,179, plus 24% of the excess
over $165,000.
Over $315,000 but not over $400,000.. $64,179, plus 32% of the excess
over $315,000.
Over $400,000 but not over $600,000.. $91,379, plus 35% of the excess
over $400,000.
Over $600,000........................ $161,379, plus 37% of the excess
over $600,000.
``(B) Heads of households.--The following table shall be
applied in lieu of the table contained in subsection (b):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $13,600..................... 10% of taxable income.
Over $13,600 but not over $51,800.... $1,360, plus 12% of the excess
over $13,600.
Over $51,800 but not over $82,500.... $5,944, plus 22% of the excess
over $51,800.
Over $82,500 but not over $157,500... $12,698, plus 24% of the excess
over $82,500.
Over $157,500 but not over $200,000.. $30,698, plus 32% of the excess
over $157,500.
Over $200,000 but not over $500,000.. $44,298, plus 35% of the excess
over $200,000.
Over $500,000........................ $149,298, plus 37% of the excess
over $500,000.
``(C) Unmarried individuals other than surviving spouses
and heads of households.--The following table shall be applied
in lieu of the table contained in subsection (c):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $9,525...................... 10% of taxable income.
Over $9,525 but not over $38,700..... $952.50, plus 12% of the excess
over $9,525.
Over $38,700 but not over $82,500.... $4,453.50, plus 22% of the excess
over $38,700.
Over $82,500 but not over $157,500... $14,089.50, plus 24% of the
excess over $82,500.
Over $157,500 but not over $200,000.. $32,089.50, plus 32% of the
excess over $157,500.
Over $200,000 but not over $500,000.. $45,689.50, plus 35% of the
excess over $200,000.
Over $500,000........................ $150,689.50, plus 37% of the
excess over $500,000.
``(D) Married individuals filing separate returns.--The
following table shall be applied in lieu of the table contained
in subsection (d):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $9,525...................... 10% of taxable income.
Over $9,525 but not over $38,700..... $952.50, plus 12% of the excess
over $9,525.
Over $38,700 but not over $82,500.... $4,453.50, plus 22% of the excess
over $38,700.
Over $82,500 but not over $157,500... $14,089.50, plus 24% of the
excess over $82,500.
Over $157,500 but not over $200,000.. $32,089.50, plus 32% of the
excess over $157,500.
Over $200,000 but not over $300,000.. $45,689.50, plus 35% of the
excess over $200,000.
Over $300,000........................ $80,689.50, plus 37% of the
excess over $300,000.
``(E) Estates and trusts.--The following table shall be
applied in lieu of the table contained in subsection (e):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $2,550...................... 10% of taxable income.
Over $2,550 but not over $9,150...... $255, plus 24% of the excess over
$2,550.
Over $9,150 but not over $12,500..... $1,839, plus 35% of the excess
over $9,150.
Over $12,500......................... $3,011.50, plus 37% of the excess
over $12,500.
``(F) References to rate tables.--Any reference in this
title to a rate of tax under subsection (c) shall be treated as
a reference to the corresponding rate bracket under
subparagraph (C) of this paragraph, except that the reference
in section 3402(q)(1) to the third lowest rate of tax
applicable under subsection (c) shall be treated as a reference
to the fourth lowest rate of tax under subparagraph (C).
``(3) Adjustments.--
``(A) No adjustment in 2018.--The tables contained in
paragraph (2) shall apply without adjustment for taxable years
beginning after December 31, 2017, and before January 1, 2019.
``(B) Subsequent years.--For taxable years beginning after
December 31, 2018, the Secretary shall prescribe tables which
shall apply in lieu of the tables contained in paragraph (2) in
the same manner as under paragraphs (1) and (2) of subsection
(f) (applied without regard to clauses (i) and (ii) of
subsection (f)(2)(A)), except that in prescribing such tables--
``(i) subsection (f)(3) shall be applied by
substituting `calendar year 2017' for `calendar year 2016'
in subparagraph (A)(ii) thereof,
``(ii) subsection (f)(7)(B) shall apply to any
unmarried individual other than a surviving spouse or head
of household, and
``(iii) subsection (f)(8) shall not apply.
``(4) Special rules for certain children with unearned
income.--
``(A) In general.--In the case of a child to whom
subsection (g) applies for the taxable year, the rules of
subparagraphs (B) and (C) shall apply in lieu of the rule under
subsection (g)(1).
``(B) Modifications to applicable rate brackets.--In
determining the amount of tax imposed by this section for the
taxable year on a child described in subparagraph (A), the
income tax table otherwise applicable under this subsection to
the child shall be applied with the following modifications:
``(i) 24-percent bracket.--The maximum taxable income
which is taxed at a rate below 24 percent shall not be more
than the sum of--
``(I) the earned taxable income of such child, plus
``(II) the minimum taxable income for the 24-
percent bracket in the table under paragraph (2)(E) (as
adjusted under paragraph (3)) for the taxable year.
``(ii) 35-percent bracket.--The maximum taxable income
which is taxed at a rate below 35 percent shall not be more
than the sum of--
``(I) the earned taxable income of such child, plus
``(II) the minimum taxable income for the 35-
percent bracket in the table under paragraph (2)(E) (as
adjusted under paragraph (3)) for the taxable year.
``(iii) 37-percent bracket.--The maximum taxable income
which is taxed at a rate below 37 percent shall not be more
than the sum of--
``(I) the earned taxable income of such child, plus
``(II) the minimum taxable income for the 37-
percent bracket in the table under paragraph (2)(E) (as
adjusted under paragraph (3)) for the taxable year.
``(C) Coordination with capital gains rates.--For purposes
of applying section 1(h) (after the modifications under
paragraph (5)(A))--
``(i) the maximum zero rate amount shall not be more
than the sum of--
``(I) the earned taxable income of such child, plus
``(II) the amount in effect under paragraph
(5)(B)(i)(IV) for the taxable year, and
``(ii) the maximum 15-percent rate amount shall not be
more than the sum of--
``(I) the earned taxable income of such child, plus
``(II) the amount in effect under paragraph
(5)(B)(ii)(IV) for the taxable year.
``(D) Earned taxable income.--For purposes of this
paragraph, the term `earned taxable income' means, with respect
to any child for any taxable year, the taxable income of such
child reduced (but not below zero) by the net unearned income
(as defined in subsection (g)(4)) of such child.
``(5) Application of current income tax brackets to capital
gains brackets.--
``(A) In general.--Section 1(h)(1) shall be applied--
``(i) by substituting `below the maximum zero rate
amount' for `which would (without regard to this paragraph)
be taxed at a rate below 25 percent' in subparagraph
(B)(i), and
``(ii) by substituting `below the maximum 15-percent
rate amount' for `which would (without regard to this
paragraph) be taxed at a rate below 39.6 percent' in
subparagraph (C)(ii)(I).
``(B) Maximum amounts defined.--For purposes of applying
section 1(h) with the modifications described in subparagraph
(A)--
``(i) Maximum zero rate amount.--The maximum zero rate
amount shall be--
``(I) in the case of a joint return or surviving
spouse, $77,200,
``(II) in the case of an individual who is a head
of household (as defined in section 2(b)), $51,700,
``(III) in the case of any other individual (other
than an estate or trust), an amount equal to \1/2\ of
the amount in effect for the taxable year under
subclause (I), and
``(IV) in the case of an estate or trust, $2,600.
``(ii) Maximum 15-percent rate amount.--The maximum 15-
percent rate amount shall be--
``(I) in the case of a joint return or surviving
spouse, $479,000 (\1/2\ such amount in the case of a
married individual filing a separate return),
``(II) in the case of an individual who is the head
of a household (as defined in section 2(b)), $452,400,
``(III) in the case of any other individual (other
than an estate or trust), $425,800, and
``(IV) in the case of an estate or trust, $12,700.
``(C) Inflation adjustment.--In the case of any taxable
year beginning after 2018, each of the dollar amounts in
clauses (i) and (ii) of subparagraph (B) shall be increased by
an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
subsection (f)(3) for the calendar year in which the
taxable year begins, determined by substituting `calendar
year 2017' for `calendar year 2016' in subparagraph (A)(ii)
thereof.
If any increase under this subparagraph is not a multiple of
$50, such increase shall be rounded to the next lowest multiple
of $50.
``(6) Section 15 not to apply.--Section 15 shall not apply to
any change in a rate of tax by reason of this subsection.''.
(b) Due Diligence Tax Preparer Requirement With Respect to Head of
Household Filing Status.--Subsection (g) of section 6695 is amended to
read as follows:
``(g) Failure to Be Diligent in Determining Eligibility for Certain
Tax Benefits.--Any person who is a tax return preparer with respect to
any return or claim for refund who fails to comply with due diligence
requirements imposed by the Secretary by regulations with respect to
determining--
``(1) eligibility to file as a head of household (as defined in
section 2(b)) on the return, or
``(2) eligibility for, or the amount of, the credit allowable
by section 24, 25A(a)(1), or 32,
shall pay a penalty of $500 for each such failure.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 11002. INFLATION ADJUSTMENTS BASED ON CHAINED CPI.
(a) In General.--Subsection (f) of section 1 is amended by striking
paragraph (3) and by inserting after paragraph (2) the following new
paragraph:
``(3) Cost-of-living adjustment.--For purposes of this
subsection--
``(A) In general.--The cost-of-living adjustment for any
calendar year is the percentage (if any) by which--
``(i) the C-CPI-U for the preceding calendar year,
exceeds
``(ii) the CPI for calendar year 2016, multiplied by
the amount determined under subparagraph (B).
``(B) Amount determined.--The amount determined under this
clause is the amount obtained by dividing--
``(i) the C-CPI-U for calendar year 2016, by
``(ii) the CPI for calendar year 2016.
``(C) Special rule for adjustments with a base year after
2016.--For purposes of any provision of this title which
provides for the substitution of a year after 2016 for `2016'
in subparagraph (A)(ii), subparagraph (A) shall be applied by
substituting `the C-CPI-U for calendar year 2016' for `the CPI
for calendar year 2016' and all that follows in clause (ii)
thereof.''.
(b) C-CPI-U.--Subsection (f) of section 1 is amended by striking
paragraph (7), by redesignating paragraph (6) as paragraph (7), and by
inserting after paragraph (5) the following new paragraph:
``(6) C-CPI-U.--For purposes of this subsection--
``(A) In general.--The term `C-CPI-U' means the Chained
Consumer Price Index for All Urban Consumers (as published by
the Bureau of Labor Statistics of the Department of Labor). The
values of the Chained Consumer Price Index for All Urban
Consumers taken into account for purposes of determining the
cost-of-living adjustment for any calendar year under this
subsection shall be the latest values so published as of the
date on which such Bureau publishes the initial value of the
Chained Consumer Price Index for All Urban Consumers for the
month of August for the preceding calendar year.
``(B) Determination for calendar year.--The C-CPI-U for any
calendar year is the average of the C-CPI-U as of the close of
the 12-month period ending on August 31 of such calendar
year.''.
(c) Application to Permanent Tax Tables.--
(1) In general.--Section 1(f)(2)(A) is amended to read as
follows:
``(A) except as provided in paragraph (8), by increasing
the minimum and maximum dollar amounts for each bracket for
which a tax is imposed under such table by the cost-of-living
adjustment for such calendar year, determined--
``(i) except as provided in clause (ii), by
substituting `1992' for `2016' in paragraph (3)(A)(ii), and
``(ii) in the case of adjustments to the dollar amounts
at which the 36 percent rate bracket begins or at which the
39.6 percent rate bracket begins, by substituting `1993'
for `2016' in paragraph (3)(A)(ii),''.
(2) Conforming amendments.--Section 1(i) is amended--
(A) by striking ``for `1992' in subparagraph (B)'' in
paragraph (1)(C) and inserting ``for `2016' in subparagraph
(A)(ii)'', and
(B) by striking ``subsection (f)(3)(B) shall be applied by
substituting `2012' for `1992''' in paragraph (3)(C) and
inserting ``subsection (f)(3)(A)(ii) shall be applied by
substituting `2012' for `2016'''.
(d) Application to Other Internal Revenue Code of 1986
Provisions.--
(1) The following sections are each amended by striking ``for
`calendar year 1992' in subparagraph (B)'' and inserting ``for
`calendar year 2016' in subparagraph (A)(ii)'':
(A) Section 23(h)(2).
(B) Paragraphs (1)(A)(ii) and (2)(A)(ii) of section 25A(h).
(C) Section 25B(b)(3)(B).
(D) Subsection (b)(2)(B)(ii)(II), and clauses (i) and (ii)
of subsection (j)(1)(B), of section 32.
(E) Section 36B(f)(2)(B)(ii)(II).
(F) Section 41(e)(5)(C)(i).
(G) Subsections (e)(3)(D)(ii) and (h)(3)(H)(i)(II) of
section 42.
(H) Section 45R(d)(3)(B)(ii).
(I) Section 55(d)(4)(A)(ii).
(J) Section 62(d)(3)(B).
(K) Section 63(c)(4)(B).
(L) Section 125(i)(2)(B).
(M) Section 135(b)(2)(B)(ii).
(N) Section 137(f)(2).
(O) Section 146(d)(2)(B).
(P) Section 147(c)(2)(H)(ii).
(Q) Section 151(d)(4)(B).
(R) Section 179(b)(6)(A)(ii).
(S) Subsections (b)(5)(C)(i)(II) and (g)(8)(B) of section
219.
(T) Section 220(g)(2).
(U) Section 221(f)(1)(B).
(V) Section 223(g)(1)(B).
(W) Section 408A(c)(3)(D)(ii).
(X) Section 430(c)(7)(D)(vii)(II).
(Y) Section 512(d)(2)(B).
(Z) Section 513(h)(2)(C)(ii).
(AA) Section 831(b)(2)(D)(ii).
(BB) Section 877A(a)(3)(B)(i)(II).
(CC) Section 2010(c)(3)(B)(ii).
(DD) Section 2032A(a)(3)(B).
(EE) Section 2503(b)(2)(B).
(FF) Section 4261(e)(4)(A)(ii).
(GG) Section 5000A(c)(3)(D)(ii).
(HH) Section 6323(i)(4)(B).
(II) Section 6334(g)(1)(B).
(JJ) Section 6601(j)(3)(B).
(KK) Section 6651(i)(1).
(LL) Section 6652(c)(7)(A).
(MM) Section 6695(h)(1).
(NN) Section 6698(e)(1).
(OO) Section 6699(e)(1).
(PP) Section 6721(f)(1).
(QQ) Section 6722(f)(1).
(RR) Section 7345(f)(2).
(SS) Section 7430(c)(1).
(TT) Section 9831(d)(2)(D)(ii)(II).
(2) Sections 41(e)(5)(C)(ii) and 68(b)(2)(B) are each amended--
(A) by striking ``1(f)(3)(B)'' and inserting
``1(f)(3)(A)(ii)'', and
(B) by striking ``1992'' and inserting ``2016''.
(3) Section 42(h)(6)(G) is amended--
(A) by striking ``for `calendar year 1987''' in clause
(i)(II) and inserting ``for `calendar year 2016' in
subparagraph (A)(ii) thereof'', and
(B) by striking ``if the CPI for any calendar year'' and
all that follows in clause (ii) and inserting ``if the C-CPI-U
for any calendar year (as defined in section 1(f)(6)) exceeds
the C-CPI-U for the preceding calendar year by more than 5
percent, the C-CPI-U for the base calendar year shall be
increased such that such excess shall never be taken into
account under clause (i). In the case of a base calendar year
before 2017, the C-CPI-U for such year shall be determined by
multiplying the CPI for such year by the amount determined
under section 1(f)(3)(B).''.
(4) Section 59(j)(2)(B) is amended by striking ``for `1992' in
subparagraph (B)'' and inserting ``for `2016' in subparagraph
(A)(ii)''.
(5) Section 132(f)(6)(A)(ii) is amended by striking ``for
`calendar year 1992''' and inserting ``for `calendar year 2016' in
subparagraph (A)(ii) thereof''.
(6) Section 162(o)(3) is amended by striking ``adjusted for
changes in the Consumer Price Index (as defined in section 1(f)(5))
since 1991'' and inserting ``adjusted by increasing any such amount
under the 1991 agreement by an amount equal to--
``(A) such amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable year
begins, by substituting `calendar year 1990' for `calendar year
2016' in subparagraph (A)(ii) thereof''.
(7) So much of clause (ii) of section 213(d)(10)(B) as precedes
the last sentence is amended to read as follows:
``(ii) Medical care cost adjustment.--For purposes of
clause (i), the medical care cost adjustment for any
calendar year is the percentage (if any) by which--
``(I) the medical care component of the C-CPI-U (as
defined in section 1(f)(6)) for August of the preceding
calendar year, exceeds
``(II) such component of the CPI (as defined in
section 1(f)(4)) for August of 1996, multiplied by the
amount determined under section 1(f)(3)(B).''.
(8) Subparagraph (B) of section 280F(d)(7) is amended to read
as follows:
``(B) Automobile price inflation adjustment.--For purposes
of this paragraph--
``(i) In general.--The automobile price inflation
adjustment for any calendar year is the percentage (if any)
by which--
``(I) the C-CPI-U automobile component for October
of the preceding calendar year, exceeds
``(II) the automobile component of the CPI (as
defined in section 1(f)(4)) for October of 1987,
multiplied by the amount determined under 1(f)(3)(B).
``(ii) C-CPI-U automobile component.--The term `C-CPI-U
automobile component' means the automobile component of the
Chained Consumer Price Index for All Urban Consumers (as
described in section 1(f)(6)).''.
(9) Section 911(b)(2)(D)(ii)(II) is amended by striking ``for
`1992' in subparagraph (B)'' and inserting ``for `2016' in
subparagraph (A)(ii)''.
(10) Paragraph (2) of section 1274A(d) is amended to read as
follows:
``(2) Adjustment for inflation.--In the case of any debt
instrument arising out of a sale or exchange during any calendar
year after 1989, each dollar amount contained in the preceding
provisions of this section shall be increased by an amount equal
to--
``(A) such amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable year
begins, by substituting `calendar year 1988' for `calendar year
2016' in subparagraph (A)(ii) thereof.
Any increase under the preceding sentence shall be rounded to the
nearest multiple of $100 (or, if such increase is a multiple of
$50, such increase shall be increased to the nearest multiple of
$100).''.
(11) Section 4161(b)(2)(C)(i)(II) is amended by striking ``for
`1992' in subparagraph (B)'' and inserting ``for `2016' in
subparagraph (A)(ii)''.
(12) Section 4980I(b)(3)(C)(v)(II) is amended by striking ``for
`1992' in subparagraph (B)'' and inserting ``for `2016' in
subparagraph (A)(ii)''.
(13) Section 6039F(d) is amended by striking ``subparagraph (B)
thereof shall be applied by substituting `1995' for `1992''' and
inserting ``subparagraph (A)(ii) thereof shall be applied by
substituting `1995' for `2016'''.
(14) Section 7872(g)(5) is amended to read as follows:
``(5) Adjustment of limit for inflation.--In the case of any
loan made during any calendar year after 1986, the dollar amount in
paragraph (2) shall be increased by an amount equal to--
``(A) such amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable year
begins, by substituting `calendar year 1985' for `calendar year
2016' in subparagraph (A)(ii) thereof.
Any increase under the preceding sentence shall be rounded to the
nearest multiple of $100 (or, if such increase is a multiple of
$50, such increase shall be increased to the nearest multiple of
$100).''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
PART II--DEDUCTION FOR QUALIFIED BUSINESS INCOME OF PASS-THRU ENTITIES
SEC. 11011. DEDUCTION FOR QUALIFIED BUSINESS INCOME.
(a) In General.--Part VI of subchapter B of chapter 1 is amended by
adding at the end the following new section:
``SEC. 199A. QUALIFIED BUSINESS INCOME.
``(a) In General.--In the case of a taxpayer other than a
corporation, there shall be allowed as a deduction for any taxable year
an amount equal to the sum of--
``(1) the lesser of--
``(A) the combined qualified business income amount of the
taxpayer, or
``(B) an amount equal to 20 percent of the excess (if any)
of--
``(i) the taxable income of the taxpayer for the
taxable year, over
``(ii) the sum of any net capital gain (as defined in
section 1(h)), plus the aggregate amount of the qualified
cooperative dividends, of the taxpayer for the taxable
year, plus
``(2) the lesser of--
``(A) 20 percent of the aggregate amount of the qualified
cooperative dividends of the taxpayer for the taxable year, or
``(B) taxable income (reduced by the net capital gain (as
so defined)) of the taxpayer for the taxable year.
The amount determined under the preceding sentence shall not exceed the
taxable income (reduced by the net capital gain (as so defined)) of the
taxpayer for the taxable year.
``(b) Combined Qualified Business Income Amount.--For purposes of
this section--
``(1) In general.--The term `combined qualified business income
amount' means, with respect to any taxable year, an amount equal
to--
``(A) the sum of the amounts determined under paragraph (2)
for each qualified trade or business carried on by the
taxpayer, plus
``(B) 20 percent of the aggregate amount of the qualified
REIT dividends and qualified publicly traded partnership income
of the taxpayer for the taxable year.
``(2) Determination of deductible amount for each trade or
business.--The amount determined under this paragraph with respect
to any qualified trade or business is the lesser of--
``(A) 20 percent of the taxpayer's qualified business
income with respect to the qualified trade or business, or
``(B) the greater of--
``(i) 50 percent of the W-2 wages with respect to the
qualified trade or business, or
``(ii) the sum of 25 percent of the W-2 wages with
respect to the qualified trade or business, plus 2.5
percent of the unadjusted basis immediately after
acquisition of all qualified property.
``(3) Modifications to limit based on taxable income.--
``(A) Exception from limit.--In the case of any taxpayer
whose taxable income for the taxable year does not exceed the
threshold amount, paragraph (2) shall be applied without regard
to subparagraph (B).
``(B) Phase-in of limit for certain taxpayers.--
``(i) In general.--If--
``(I) the taxable income of a taxpayer for any
taxable year exceeds the threshold amount, but does not
exceed the sum of the threshold amount plus $50,000
($100,000 in the case of a joint return), and
``(II) the amount determined under paragraph (2)(B)
(determined without regard to this subparagraph) with
respect to any qualified trade or business carried on
by the taxpayer is less than the amount determined
under paragraph (2)(A) with respect such trade or
business,
then paragraph (2) shall be applied with respect to such
trade or business without regard to subparagraph (B)
thereof and by reducing the amount determined under
subparagraph (A) thereof by the amount determined under
clause (ii).
``(ii) Amount of reduction.--The amount determined
under this subparagraph is the amount which bears the same
ratio to the excess amount as--
``(I) the amount by which the taxpayer's taxable
income for the taxable year exceeds the threshold
amount, bears to
``(II) $50,000 ($100,000 in the case of a joint
return).
``(iii) Excess amount.--For purposes of clause (ii),
the excess amount is the excess of--
``(I) the amount determined under paragraph (2)(A)
(determined without regard to this paragraph), over
``(II) the amount determined under paragraph (2)(B)
(determined without regard to this paragraph).
``(4) Wages, etc.--
``(A) In general.--The term `W-2 wages' means, with respect
to any person for any taxable year of such person, the amounts
described in paragraphs (3) and (8) of section 6051(a) paid by
such person with respect to employment of employees by such
person during the calendar year ending during such taxable
year.
``(B) Limitation to wages attributable to qualified
business income.--Such term shall not include any amount which
is not properly allocable to qualified business income for
purposes of subsection (c)(1).
``(C) Return requirement.--Such term shall not include any
amount which is not properly included in a return filed with
the Social Security Administration on or before the 60th day
after the due date (including extensions) for such return.
``(5) Acquisitions, dispositions, and short taxable years.--The
Secretary shall provide for the application of this subsection in
cases of a short taxable year or where the taxpayer acquires, or
disposes of, the major portion of a trade or business or the major
portion of a separate unit of a trade or business during the
taxable year.
``(6) Qualified property.--For purposes of this section:
``(A) In general.--The term `qualified property' means,
with respect to any qualified trade or business for a taxable
year, tangible property of a character subject to the allowance
for depreciation under section 167--
``(i) which is held by, and available for use in, the
qualified trade or business at the close of the taxable
year,
``(ii) which is used at any point during the taxable
year in the production of qualified business income, and
``(iii) the depreciable period for which has not ended
before the close of the taxable year.
``(B) Depreciable period.--The term `depreciable period'
means, with respect to qualified property of a taxpayer, the
period beginning on the date the property was first placed in
service by the taxpayer and ending on the later of--
``(i) the date that is 10 years after such date, or
``(ii) the last day of the last full year in the
applicable recovery period that would apply to the property
under section 168 (determined without regard to subsection
(g) thereof).
``(c) Qualified Business Income.--For purposes of this section--
``(1) In general.--The term `qualified business income' means,
for any taxable year, the net amount of qualified items of income,
gain, deduction, and loss with respect to any qualified trade or
business of the taxpayer. Such term shall not include any qualified
REIT dividends, qualified cooperative dividends, or qualified
publicly traded partnership income.
``(2) Carryover of losses.--If the net amount of qualified
income, gain, deduction, and loss with respect to qualified trades
or businesses of the taxpayer for any taxable year is less than
zero, such amount shall be treated as a loss from a qualified trade
or business in the succeeding taxable year.
``(3) Qualified items of income, gain, deduction, and loss.--
For purposes of this subsection--
``(A) In general.--The term `qualified items of income,
gain, deduction, and loss' means items of income, gain,
deduction, and loss to the extent such items are--
``(i) effectively connected with the conduct of a trade
or business within the United States (within the meaning of
section 864(c), determined by substituting `qualified trade
or business (within the meaning of section 199A)' for
`nonresident alien individual or a foreign corporation' or
for `a foreign corporation' each place it appears), and
``(ii) included or allowed in determining taxable
income for the taxable year.
``(B) Exceptions.--The following investment items shall not
be taken into account as a qualified item of income, gain,
deduction, or loss:
``(i) Any item of short-term capital gain, short-term
capital loss, long-term capital gain, or long-term capital
loss.
``(ii) Any dividend, income equivalent to a dividend,
or payment in lieu of dividends described in section
954(c)(1)(G).
``(iii) Any interest income other than interest income
which is properly allocable to a trade or business.
``(iv) Any item of gain or loss described in
subparagraph (C) or (D) of section 954(c)(1) (applied by
substituting `qualified trade or business' for `controlled
foreign corporation').
``(v) Any item of income, gain, deduction, or loss
taken into account under section 954(c)(1)(F) (determined
without regard to clause (ii) thereof and other than items
attributable to notional principal contracts entered into
in transactions qualifying under section 1221(a)(7)).
``(vi) Any amount received from an annuity which is not
received in connection with the trade or business.
``(vii) Any item of deduction or loss properly
allocable to an amount described in any of the preceding
clauses.
``(4) Treatment of reasonable compensation and guaranteed
payments.--Qualified business income shall not include--
``(A) reasonable compensation paid to the taxpayer by any
qualified trade or business of the taxpayer for services
rendered with respect to the trade or business,
``(B) any guaranteed payment described in section 707(c)
paid to a partner for services rendered with respect to the
trade or business, and
``(C) to the extent provided in regulations, any payment
described in section 707(a) to a partner for services rendered
with respect to the trade or business.
``(d) Qualified Trade or Business.--For purposes of this section--
``(1) In general.--The term `qualified trade or business' means
any trade or business other than--
``(A) a specified service trade or business, or
``(B) the trade or business of performing services as an
employee.
``(2) Specified service trade or business.--The term `specified
service trade or business' means any trade or business--
``(A) which is described in section 1202(e)(3)(A) (applied
without regard to the words `engineering, architecture,') or
which would be so described if the term `employees or owners'
were substituted for `employees' therein, or
``(B) which involves the performance of services that
consist of investing and investment management, trading, or
dealing in securities (as defined in section 475(c)(2)),
partnership interests, or commodities (as defined in section
475(e)(2)).
``(3) Exception for specified service businesses based on
taxpayer's income.--
``(A) In general.--If, for any taxable year, the taxable
income of any taxpayer is less than the sum of the threshold
amount plus $50,000 ($100,000 in the case of a joint return),
then--
``(i) any specified service trade or business of the
taxpayer shall not fail to be treated as a qualified trade
or business due to paragraph (1)(A), but
``(ii) only the applicable percentage of qualified
items of income, gain, deduction, or loss, and the W-2
wages and the unadjusted basis immediately after
acquisition of qualified property, of the taxpayer
allocable to such specified service trade or business shall
be taken into account in computing the qualified business
income, W-2 wages, and the unadjusted basis immediately
after acquisition of qualified property of the taxpayer for
the taxable year for purposes of applying this section.
``(B) Applicable percentage.--For purposes of subparagraph
(A), the term `applicable percentage' means, with respect to
any taxable year, 100 percent reduced (not below zero) by the
percentage equal to the ratio of--
``(i) the taxable income of the taxpayer for the
taxable year in excess of the threshold amount, bears to
``(ii) $50,000 ($100,000 in the case of a joint
return).
``(e) Other Definitions.--For purposes of this section--
``(1) Taxable income.--Taxable income shall be computed without
regard to the deduction allowable under this section.
``(2) Threshold amount.--
``(A) In general.--The term `threshold amount' means
$157,500 (200 percent of such amount in the case of a joint
return).
``(B) Inflation adjustment.--In the case of any taxable
year beginning after 2018, the dollar amount in subparagraph
(A) shall be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year
2017' for `calendar year 2016' in subparagraph (A)(ii)
thereof.
The amount of any increase under the preceding sentence shall
be rounded as provided in section 1(f)(7).
``(3) Qualified reit dividend.--The term `qualified REIT
dividend' means any dividend from a real estate investment trust
received during the taxable year which--
``(A) is not a capital gain dividend, as defined in section
857(b)(3), and
``(B) is not qualified dividend income, as defined in
section 1(h)(11).
``(4) Qualified cooperative dividend.--The term `qualified
cooperative dividend' means any patronage dividend (as defined in
section 1388(a)), any per-unit retain allocation (as defined in
section 1388(f)), and any qualified written notice of allocation
(as defined in section 1388(c)), or any similar amount received
from an organization described in subparagraph (B)(ii), which--
``(A) is includible in gross income, and
``(B) is received from--
``(i) an organization or corporation described in
section 501(c)(12) or 1381(a), or
``(ii) an organization which is governed under this
title by the rules applicable to cooperatives under this
title before the enactment of subchapter T.
``(5) Qualified publicly traded partnership income.--The term
`qualified publicly traded partnership income' means, with respect
to any qualified trade or business of a taxpayer, the sum of--
``(A) the net amount of such taxpayer's allocable share of
each qualified item of income, gain, deduction, and loss (as
defined in subsection (c)(3) and determined after the
application of subsection (c)(4)) from a publicly traded
partnership (as defined in section 7704(a)) which is not
treated as a corporation under section 7704(c), plus
``(B) any gain recognized by such taxpayer upon disposition
of its interest in such partnership to the extent such gain is
treated as an amount realized from the sale or exchange of
property other than a capital asset under section 751(a).
``(f) Special Rules.--
``(1) Application to partnerships and s corporations.--
``(A) In general.--In the case of a partnership or S
corporation--
``(i) this section shall be applied at the partner or
shareholder level,
``(ii) each partner or shareholder shall take into
account such person's allocable share of each qualified
item of income, gain, deduction, and loss, and
``(iii) each partner or shareholder shall be treated
for purposes of subsection (b) as having W-2 wages and
unadjusted basis immediately after acquisition of qualified
property for the taxable year in an amount equal to such
person's allocable share of the W-2 wages and the
unadjusted basis immediately after acquisition of qualified
property of the partnership or S corporation for the
taxable year (as determined under regulations prescribed by
the Secretary).
For purposes of clause (iii), a partner's or shareholder's
allocable share of W-2 wages shall be determined in the same
manner as the partner's or shareholder's allocable share of
wage expenses. For purposes of such clause, partner's or
shareholder's allocable share of the unadjusted basis
immediately after acquisition of qualified property shall be
determined in the same manner as the partner's or shareholder's
allocable share of depreciation. For purposes of this
subparagraph, in the case of an S corporation, an allocable
share shall be the shareholder's pro rata share of an item.
``(B) Application to trusts and estates.--Rules similar to
the rules under section 199(d)(1)(B)(i) (as in effect on
December 1, 2017) for the apportionment of W-2 wages shall
apply to the apportionment of W-2 wages and the apportionment
of unadjusted basis immediately after acquisition of qualified
property under this section.
``(C) Treatment of trades or business in puerto rico.--
``(i) In general.--In the case of any taxpayer with
qualified business income from sources within the
commonwealth of Puerto Rico, if all such income is taxable
under section 1 for such taxable year, then for purposes of
determining the qualified business income of such taxpayer
for such taxable year, the term `United States' shall
include the Commonwealth of Puerto Rico.
``(ii) Special rule for applying limit.--In the case of
any taxpayer described in clause (i), the determination of
W-2 wages of such taxpayer with respect to any qualified
trade or business conducted in Puerto Rico shall be made
without regard to any exclusion under section 3401(a)(8)
for remuneration paid for services in Puerto Rico.
``(2) Coordination with minimum tax.--For purposes of
determining alternative minimum taxable income under section 55,
qualified business income shall be determined without regard to any
adjustments under sections 56 through 59.
``(3) Deduction limited to income taxes.--The deduction under
subsection (a) shall only be allowed for purposes of this chapter.
``(4) Regulations.--The Secretary shall prescribe such
regulations as are necessary to carry out the purposes of this
section, including regulations--
``(A) for requiring or restricting the allocation of items
and wages under this section and such reporting requirements as
the Secretary determines appropriate, and
``(B) for the application of this section in the case of
tiered entities.
``(g) Deduction Allowed to Specified Agricultural or Horticultural
Cooperatives.--
``(1) In general.--In the case of any taxable year of a
specified agricultural or horticultural cooperative beginning after
December 31, 2017, there shall be allowed a deduction in an amount
equal to the lesser of--
``(A) 20 percent of the excess (if any) of--
``(i) the gross income of a specified agricultural or
horticultural cooperative, over
``(ii) the qualified cooperative dividends (as defined
in subsection (e)(4)) paid during the taxable year for the
taxable year, or
``(B) the greater of--
``(i) 50 percent of the W-2 wages of the cooperative
with respect to its trade or business, or
``(ii) the sum of 25 percent of the W-2 wages of the
cooperative with respect to its trade or business, plus 2.5
percent of the unadjusted basis immediately after
acquisition of all qualified property of the cooperative.
``(2) Limitation.--The amount determined under paragraph (1)
shall not exceed the taxable income of the specified agricultural
or horticultural for the taxable year.
``(3) Specified agricultural or horticultural cooperative.--For
purposes of this subsection, the term `specified agricultural or
horticultural cooperative' means an organization to which part I of
subchapter T applies which is engaged in--
``(A) the manufacturing, production, growth, or extraction
in whole or significant part of any agricultural or
horticultural product,
``(B) the marketing of agricultural or horticultural
products which its patrons have so manufactured, produced,
grown, or extracted, or
``(C) the provision of supplies, equipment, or services to
farmers or to organizations described in subparagraph (A) or
(B).
``(h) Anti-abuse Rules.--The Secretary shall--
``(1) apply rules similar to the rules under section 179(d)(2)
in order to prevent the manipulation of the depreciable period of
qualified property using transactions between related parties, and
``(2) prescribe rules for determining the unadjusted basis
immediately after acquisition of qualified property acquired in
like-kind exchanges or involuntary conversions.
``(i) Termination.--This section shall not apply to taxable years
beginning after December 31, 2025.''.
(b) Treatment of Deduction in Computing Adjusted Gross and Taxable
Income.--
(1) Deduction not allowed in computing adjusted gross income.--
Section 62(a) is amended by adding at the end the following new
sentence: ``The deduction allowed by section 199A shall not be
treated as a deduction described in any of the preceding paragraphs
of this subsection.''.
(2) Deduction allowed to nonitemizers.--Section 63(b) is
amended by striking ``and'' at the end of paragraph (1), by
striking the period at the end of paragraph (2) and inserting ``,
and'', and by adding at the end the following new paragraph:
``(3) the deduction provided in section 199A.''.
(3) Deduction allowed to itemizers without limits on itemized
deductions.--Section 63(d) is amended by striking ``and'' at the
end of paragraph (1), by striking the period at the end of
paragraph (2) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(3) the deduction provided in section 199A.''.
(4) Conforming amendment.--Section 3402(m)(1) is amended by
inserting ``and the estimated deduction allowed under section
199A'' after ``chapter 1''.
(c) Accuracy-Related Penalty on Determination of Applicable
Percentage.--Section 6662(d)(1) is amended by inserting at the end the
following new subparagraph:
``(C) Special rule for taxpayers claiming section 199a
deduction.--In the case of any taxpayer who claims the
deduction allowed under section 199A for the taxable year,
subparagraph (A) shall be applied by substituting `5 percent'
for `10 percent'.''.
(d) Conforming Amendments.--
(1) Section 172(d) is amended by adding at the end the
following new paragraph:
``(8) Qualified business income deduction.--The deduction under
section 199A shall not be allowed.''.
(2) Section 246(b)(1) is amended by inserting ``199A,'' before
``243(a)(1)''.
(3) Section 613(a) is amended by inserting ``and without the
deduction under section 199A'' after ``and without the deduction
under section 199''.
(4) Section 613A(d)(1) is amended by redesignating
subparagraphs (C), (D), and (E) as subparagraphs (D), (E), and (F),
respectively, and by inserting after subparagraph (B), the
following new subparagraph:
``(C) any deduction allowable under section 199A,''.
(5) Section 170(b)(2)(D) is amended by striking ``and'' in
clause (iv), by striking the period at the end of clause (v), and
by adding at the end the following new clause:
``(vi) section 199A(g).''.
(6) The table of sections for part VI of subchapter B of
chapter 1 is amended by inserting at the end the following new
item:
``Sec. 199A. Qualified business income.''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 11012. LIMITATION ON LOSSES FOR TAXPAYERS OTHER THAN CORPORATIONS.
(a) In General.--Section 461 is amended by adding at the end the
following new subsection:
``(l) Limitation on Excess Business Losses of Noncorporate
Taxpayers.--
``(1) Limitation.--In the case of taxable year of a taxpayer
other than a corporation beginning after December 31, 2017, and
before January 1, 2026--
``(A) subsection (j) (relating to limitation on excess farm
losses of certain taxpayers) shall not apply, and
``(B) any excess business loss of the taxpayer for the
taxable year shall not be allowed.
``(2) Disallowed loss carryover.--Any loss which is disallowed
under paragraph (1) shall be treated as a net operating loss
carryover to the following taxable year under section 172.
``(3) Excess business loss.--For purposes of this subsection--
``(A) In general.--The term `excess business loss' means
the excess (if any) of--
``(i) the aggregate deductions of the taxpayer for the
taxable year which are attributable to trades or businesses
of such taxpayer (determined without regard to whether or
not such deductions are disallowed for such taxable year
under paragraph (1)), over
``(ii) the sum of--
``(I) the aggregate gross income or gain of such
taxpayer for the taxable year which is attributable to
such trades or businesses, plus
``(II) $250,000 (200 percent of such amount in the
case of a joint return).
``(B) Adjustment for inflation.--In the case of any taxable
year beginning after December 31, 2018, the $250,000 amount in
subparagraph (A)(ii)(II) shall be increased by an amount equal
to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `2017' for `2016'
in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is
not a multiple of $1,000, such amount shall be rounded to
the nearest multiple of $1,000.
``(4) Application of subsection in case of partnerships and s
corporations.--In the case of a partnership or S corporation--
``(A) this subsection shall be applied at the partner or
shareholder level, and
``(B) each partner's or shareholder's allocable share of
the items of income, gain, deduction, or loss of the
partnership or S corporation for any taxable year from trades
or businesses attributable to the partnership or S corporation
shall be taken into account by the partner or shareholder in
applying this subsection to the taxable year of such partner or
shareholder with or within which the taxable year of the
partnership or S corporation ends.
For purposes of this paragraph, in the case of an S corporation, an
allocable share shall be the shareholder's pro rata share of an
item.
``(5) Additional reporting.--The Secretary shall prescribe such
additional reporting requirements as the Secretary determines
necessary to carry out the purposes of this subsection.
``(6) Coordination with section 469.--This subsection shall be
applied after the application of section 469.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
PART III--TAX BENEFITS FOR FAMILIES AND INDIVIDUALS
SEC. 11021. INCREASE IN STANDARD DEDUCTION.
(a) In General.--Subsection (c) of section 63 is amended by adding
at the end the following new paragraph:
``(7) Special rules for taxable years 2018 through 2025.--In
the case of a taxable year beginning after December 31, 2017, and
before January 1, 2026--
``(A) Increase in standard deduction.--Paragraph (2) shall
be applied--
``(i) by substituting `$18,000' for `$4,400' in
subparagraph (B), and
``(ii) by substituting `$12,000' for `$3,000' in
subparagraph (C).
``(B) Adjustment for inflation.--
``(i) In general.--Paragraph (4) shall not apply to the
dollar amounts contained in paragraphs (2)(B) and (2)(C).
``(ii) Adjustment of increased amounts.--In the case of
a taxable year beginning after 2018, the $18,000 and
$12,000 amounts in subparagraph (A) shall each be increased
by an amount equal to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting
`2017' for `2016' in subparagraph (A)(ii) thereof.
If any increase under this clause is not a multiple of $50,
such increase shall be rounded to the next lowest multiple
of $50.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2017.
SEC. 11022. INCREASE IN AND MODIFICATION OF CHILD TAX CREDIT.
(a) In General.--Section 24 is amended by adding at the end the
following new subsection:
``(h) Special Rules for Taxable Years 2018 Through 2025.--
``(1) In general.--In the case of a taxable year beginning
after December 31, 2017, and before January 1, 2026, this section
shall be applied as provided in paragraphs (2) through (7).
``(2) Credit amount.--Subsection (a) shall be applied by
substituting `$2,000' for `$1,000'.
``(3) Limitation.--In lieu of the amount determined under
subsection (b)(2), the threshold amount shall be $400,000 in the
case of a joint return ($200,000 in any other case).
``(4) Partial credit allowed for certain other dependents.--
``(A) In general.--The credit determined under subsection
(a) (after the application of paragraph (2)) shall be increased
by $500 for each dependent of the taxpayer (as defined in
section 152) other than a qualifying child described in
subsection (c).
``(B) Exception for certain noncitizens.--Subparagraph (A)
shall not apply with respect to any individual who would not be
a dependent if subparagraph (A) of section 152(b)(3) were
applied without regard to all that follows `resident of the
United States'.
``(C) Certain qualifying children.--In the case of any
qualifying child with respect to whom a credit is not allowed
under this section by reason of paragraph (7), such child shall
be treated as a dependent to whom subparagraph (A) applies.
``(5) Maximum amount of refundable credit.--
``(A) In general.--The amount determined under subsection
(d)(1)(A) with respect to any qualifying child shall not exceed
$1,400, and such subsection shall be applied without regard to
paragraph (4) of this subsection.
``(B) Adjustment for inflation.--In the case of a taxable
year beginning after 2018, the $1,400 amount in subparagraph
(A) shall be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `2017' for `2016'
in subparagraph (A)(ii) thereof.
If any increase under this clause is not a multiple of $100,
such increase shall be rounded to the next lowest multiple of
$100.
``(6) Earned income threshold for refundable credit.--
Subsection (d)(1)(B)(i) shall be applied by substituting `$2,500'
for `$3,000'.
``(7) Social security number required.--No credit shall be
allowed under this section to a taxpayer with respect to any
qualifying child unless the taxpayer includes the social security
number of such child on the return of tax for the taxable year. For
purposes of the preceding sentence, the term `social security
number' means a social security number issued to an individual by
the Social Security Administration, but only if the social security
number is issued--
``(A) to a citizen of the United States or pursuant to
subclause (I) (or that portion of subclause (III) that relates
to subclause (I)) of section 205(c)(2)(B)(i) of the Social
Security Act, and
``(B) before the due date for such return.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2017.
SEC. 11023. INCREASED LIMITATION FOR CERTAIN CHARITABLE CONTRIBUTIONS.
(a) In General.--Section 170(b)(1) is amended by redesignating
subparagraph (G) as subparagraph (H) and by inserting after
subparagraph (F) the following new subparagraph:
``(G) Increased limitation for cash contributions.--
``(i) In general.--In the case of any contribution of
cash to an organization described in subparagraph (A), the
total amount of such contributions which may be taken into
account under subsection (a) for any taxable year beginning
after December 31, 2017, and before January 1, 2026, shall
not exceed 60 percent of the taxpayer's contribution base
for such year.
``(ii) Carryover.--If the aggregate amount of
contributions described in clause (i) exceeds the
applicable limitation under clause (i) for any taxable year
described in such clause, such excess shall be treated (in
a manner consistent with the rules of subsection (d)(1)) as
a charitable contribution to which clause (i) applies in
each of the 5 succeeding years in order of time.
``(iii) Coordination with subparagraphs (a) and (b).--
``(I) In general.--Contributions taken into account
under this subparagraph shall not be taken into account
under subparagraph (A).
``(II) Limitation reduction.--For each taxable year
described in clause (i), and each taxable year to which
any contribution under this subparagraph is carried
over under clause (ii), subparagraph (A) shall be
applied by reducing (but not below zero) the
contribution limitation allowed for the taxable year
under such subparagraph by the aggregate contributions
allowed under this subparagraph for such taxable year,
and subparagraph (B) shall be applied by treating any
reference to subparagraph (A) as a reference to both
subparagraph (A) and this subparagraph.''.
(b) Effective Date.--The amendment made by this section shall apply
to contributions in taxable years beginning after December 31, 2017.
SEC. 11024. INCREASED CONTRIBUTIONS TO ABLE ACCOUNTS.
(a) Increase in Limitation for Contributions From Compensation of
Individuals With Disabilities.--
(1) In general.--Section 529A(b)(2)(B) is amended to read as
follows:
``(B) except in the case of contributions under subsection
(c)(1)(C), if such contribution to an ABLE account would result
in aggregate contributions from all contributors to the ABLE
account for the taxable year exceeding the sum of--
``(i) the amount in effect under section 2503(b) for
the calendar year in which the taxable year begins, plus
``(ii) in the case of any contribution by a designated
beneficiary described in paragraph (7) before January 1,
2026, the lesser of--
``(I) compensation (as defined by section
219(f)(1)) includible in the designated beneficiary's
gross income for the taxable year, or
``(II) an amount equal to the poverty line for a
one-person household, as determined for the calendar
year preceding the calendar year in which the taxable
year begins.''.
(2) Responsibility for contribution limitation.--Paragraph (2)
of section 529A(b) is amended by adding at the end the following:
``A designated beneficiary (or a person acting on behalf of such
beneficiary) shall maintain adequate records for purposes of
ensuring, and shall be responsible for ensuring, that the
requirements of subparagraph (B)(ii) are met.''
(3) Eligible designated beneficiary.--Section 529A(b) is
amended by adding at the end the following:
``(7) Special rules related to contribution limit.--For
purposes of paragraph (2)(B)(ii)--
``(A) Designated beneficiary.--A designated beneficiary
described in this paragraph is an employee (including an
employee within the meaning of section 401(c)) with respect to
whom--
``(i) no contribution is made for the taxable year to a
defined contribution plan (within the meaning of section
414(i)) with respect to which the requirements of section
401(a) or 403(a) are met,
``(ii) no contribution is made for the taxable year to
an annuity contract described in section 403(b), and
``(iii) no contribution is made for the taxable year to
an eligible deferred compensation plan described in section
457(b).
``(B) Poverty line.--The term `poverty line' has the
meaning given such term by section 673 of the Community
Services Block Grant Act (42 U.S.C. 9902).''.
(b) Allowance of Saver's Credit for ABLE Contributions by Account
Holder.--Section 25B(d)(1) is amended by striking ``and'' at the end of
subparagraph (B)(ii), by striking the period at the end of subparagraph
(C) and inserting ``, and'', and by inserting at the end the following:
``(D) the amount of contributions made before January 1,
2026, by such individual to the ABLE account (within the
meaning of section 529A) of which such individual is the
designated beneficiary.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 11025. ROLLOVERS TO ABLE PROGRAMS FROM 529 PROGRAMS.
(a) In General.--Clause (i) of section 529(c)(3)(C) is amended by
striking ``or'' at the end of subclause (I), by striking the period at
the end of subclause (II) and inserting ``, or'', and by adding at the
end the following:
``(III) before January 1, 2026, to an ABLE account
(as defined in section 529A(e)(6)) of the designated
beneficiary or a member of the family of the designated
beneficiary.
Subclause (III) shall not apply to so much of a
distribution which, when added to all other contributions
made to the ABLE account for the taxable year, exceeds the
limitation under section 529A(b)(2)(B)(i).''.
(b) Effective Date.--The amendments made by this section shall
apply to distributions after the date of the enactment of this Act.
SEC. 11026. TREATMENT OF CERTAIN INDIVIDUALS PERFORMING SERVICES IN THE
SINAI PENINSULA OF EGYPT.
(a) In General.--For purposes of the following provisions of the
Internal Revenue Code of 1986, with respect to the applicable period, a
qualified hazardous duty area shall be treated in the same manner as if
it were a combat zone (as determined under section 112 of such Code):
(1) Section 2(a)(3) (relating to special rule where deceased
spouse was in missing status).
(2) Section 112 (relating to the exclusion of certain combat
pay of members of the Armed Forces).
(3) Section 692 (relating to income taxes of members of Armed
Forces on death).
(4) Section 2201 (relating to members of the Armed Forces dying
in combat zone or by reason of combat-zone-incurred wounds, etc.).
(5) Section 3401(a)(1) (defining wages relating to combat pay
for members of the Armed Forces).
(6) Section 4253(d) (relating to the taxation of phone service
originating from a combat zone from members of the Armed Forces).
(7) Section 6013(f)(1) (relating to joint return where
individual is in missing status).
(8) Section 7508 (relating to time for performing certain acts
postponed by reason of service in combat zone).
(b) Qualified Hazardous Duty Area.--For purposes of this section,
the term ``qualified hazardous duty area'' means the Sinai Peninsula of
Egypt, if as of the date of the enactment of this section any member of
the Armed Forces of the United States is entitled to special pay under
section 310 of title 37, United States Code (relating to special pay;
duty subject to hostile fire or imminent danger), for services
performed in such location. Such term includes such location only
during the period such entitlement is in effect.
(c) Applicable Period.--
(1) In general.--Except as provided in paragraph (2), the
applicable period is--
(A) the portion of the first taxable year ending after June
9, 2015, which begins on such date, and
(B) any subsequent taxable year beginning before January 1,
2026.
(2) Withholding.--In the case of subsection (a)(5), the
applicable period is--
(A) the portion of the first taxable year ending after the
date of the enactment of this Act which begins on such date,
and
(B) any subsequent taxable year beginning before January 1,
2026.
(d) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
provisions of this section shall take effect on June 9, 2015.
(2) Withholding.--Subsection (a)(5) shall apply to remuneration
paid after the date of the enactment of this Act.
SEC. 11027. TEMPORARY REDUCTION IN MEDICAL EXPENSE DEDUCTION FLOOR.
(a) In General.--Subsection (f) of section 213 is amended to read
as follows:
``(f) Special Rules for 2013 Through 2018.--In the case of any
taxable year--
``(1) beginning after December 31, 2012, and ending before
January 1, 2017, in the case of a taxpayer if such taxpayer or such
taxpayer's spouse has attained age 65 before the close of such
taxable year, and
``(2) beginning after December 31, 2016, and ending before
January 1, 2019, in the case of any taxpayer,
subsection (a) shall be applied with respect to a taxpayer by
substituting `7.5 percent' for `10 percent'.''.
(b) Minimum Tax Preference Not to Apply.--Section 56(b)(1)(B) is
amended by adding at the end the following new sentence: ``This
subparagraph shall not apply to taxable years beginning after December
31, 2016, and ending before January 1, 2019''.
(c) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2016.
SEC. 11028. RELIEF FOR 2016 DISASTER AREAS.
(a) In General.--For purposes of this section, the term ``2016
disaster area'' means any area with respect to which a major disaster
has been declared by the President under section 401 of the Robert T.
Stafford Disaster Relief and Emergency Assistance Act during calendar
year 2016.
(b) Special Rules for Use of Retirement Funds With Respect to Areas
Damaged by 2016 Disasters.--
(1) Tax-favored withdrawals from retirement plans.--
(A) In general.--Section 72(t) of the Internal Revenue Code
of 1986 shall not apply to any qualified 2016 disaster
distribution.
(B) Aggregate dollar limitation.--
(i) In general.--For purposes of this subsection, the
aggregate amount of distributions received by an individual
which may be treated as qualified 2016 disaster
distributions for any taxable year shall not exceed the
excess (if any) of--
(I) $100,000, over
(II) the aggregate amounts treated as qualified
2016 disaster distributions received by such individual
for all prior taxable years.
(ii) Treatment of plan distributions.--If a
distribution to an individual would (without regard to
clause (i)) be a qualified 2016 disaster distribution, a
plan shall not be treated as violating any requirement of
this title merely because the plan treats such distribution
as a qualified 2016 disaster distribution, unless the
aggregate amount of such distributions from all plans
maintained by the employer (and any member of any
controlled group which includes the employer) to such
individual exceeds $100,000.
(iii) Controlled group.--For purposes of clause (ii),
the term ``controlled group'' means any group treated as a
single employer under subsection (b), (c), (m), or (o) of
section 414 of the Internal Revenue Code of 1986.
(C) Amount distributed may be repaid.--
(i) In general.--Any individual who receives a
qualified 2016 disaster distribution may, at any time
during the 3-year period beginning on the day after the
date on which such distribution was received, make one or
more contributions in an aggregate amount not to exceed the
amount of such distribution to an eligible retirement plan
of which such individual is a beneficiary and to which a
rollover contribution of such distribution could be made
under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or
457(e)(16) of the Internal Revenue Code of 1986, as the
case may be.
(ii) Treatment of repayments of distributions from
eligible retirement plans other than iras.--For purposes of
the Internal Revenue Code of 1986, if a contribution is
made pursuant to clause (i) with respect to a qualified
2016 disaster distribution from an eligible retirement plan
other than an individual retirement plan, then the taxpayer
shall, to the extent of the amount of the contribution, be
treated as having received the qualified 2016 disaster
distribution in an eligible rollover distribution (as
defined in section 402(c)(4) of the Internal Revenue Code
of 1986) and as having transferred the amount to the
eligible retirement plan in a direct trustee to trustee
transfer within 60 days of the distribution.
(iii) Treatment of repayments for distributions from
iras.--For purposes of the Internal Revenue Code of 1986,
if a contribution is made pursuant to clause (i) with
respect to a qualified 2016 disaster distribution from an
individual retirement plan (as defined by section
7701(a)(37) of the Internal Revenue Code of 1986), then, to
the extent of the amount of the contribution, the qualified
2016 disaster distribution shall be treated as a
distribution described in section 408(d)(3) of such Code
and as having been transferred to the eligible retirement
plan in a direct trustee to trustee transfer within 60 days
of the distribution.
(D) Definitions.--For purposes of this paragraph--
(i) Qualified 2016 disaster distribution.--Except as
provided in subparagraph (B), the term ``qualified 2016
disaster distribution'' means any distribution from an
eligible retirement plan made on or after January 1, 2016,
and before January 1, 2018, to an individual whose
principal place of abode at any time during calendar year
2016 was located in a disaster area described in subsection
(a) and who has sustained an economic loss by reason of the
events giving rise to the Presidential declaration
described in subsection (a) which was applicable to such
area.
(ii) Eligible retirement plan.--The term ``eligible
retirement plan'' shall have the meaning given such term by
section 402(c)(8)(B) of the Internal Revenue Code of 1986.
(E) Income inclusion spread over 3-year period.--
(i) In general.--In the case of any qualified 2016
disaster distribution, unless the taxpayer elects not to
have this subparagraph apply for any taxable year, any
amount required to be included in gross income for such
taxable year shall be so included ratably over the 3-
taxable-year period beginning with such taxable year.
(ii) Special rule.--For purposes of clause (i), rules
similar to the rules of subparagraph (E) of section
408A(d)(3) of the Internal Revenue Code of 1986 shall
apply.
(F) Special rules.--
(i) Exemption of distributions from trustee to trustee
transfer and withholding rules.--For purposes of sections
401(a)(31), 402(f), and 3405 of the Internal Revenue Code
of 1986, qualified 2016 disaster distribution shall not be
treated as eligible rollover distributions.
(ii) Qualified 2016 disaster distributions treated as
meeting plan distribution requirements.--For purposes of
the Internal Revenue Code of 1986, a qualified 2016
disaster distribution shall be treated as meeting the
requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii),
403(b)(11), and 457(d)(1)(A) of the Internal Revenue Code
of 1986.
(2) Provisions relating to plan amendments.--
(A) In general.--If this paragraph applies to any amendment
to any plan or annuity contract, such plan or contract shall be
treated as being operated in accordance with the terms of the
plan during the period described in subparagraph (B)(ii)(I).
(B) Amendments to which subsection applies.--
(i) In general.--This paragraph shall apply to any
amendment to any plan or annuity contract which is made--
(I) pursuant to any provision of this section, or
pursuant to any regulation under any provision of this
section, and
(II) on or before the last day of the first plan
year beginning on or after January 1, 2018, or such
later date as the Secretary prescribes.
In the case of a governmental plan (as defined in section
414(d) of the Internal Revenue Code of 1986), subclause
(II) shall be applied by substituting the date which is 2
years after the date otherwise applied under subclause
(II).
(ii) Conditions.--This paragraph shall not apply to any
amendment to a plan or contract unless such amendment
applies retroactively for such period, and shall not apply
to any such amendment unless the plan or contract is
operated as if such amendment were in effect during the
period--
(I) beginning on the date that this section or the
regulation described in clause (i)(I) takes effect (or
in the case of a plan or contract amendment not
required by this section or such regulation, the
effective date specified by the plan), and
(II) ending on the date described in clause (i)(II)
(or, if earlier, the date the plan or contract
amendment is adopted).
(c) Special Rules for Personal Casualty Losses Related to 2016
Major Disaster.--
(1) In general.--If an individual has a net disaster loss for
any taxable year beginning after December 31, 2015, and before
January 1, 2018--
(A) the amount determined under section 165(h)(2)(A)(ii) of
the Internal Revenue Code of 1986 shall be equal to the sum
of--
(i) such net disaster loss, and
(ii) so much of the excess referred to in the matter
preceding clause (i) of section 165(h)(2)(A) of such Code
(reduced by the amount in clause (i) of this subparagraph)
as exceeds 10 percent of the adjusted gross income of the
individual,
(B) section 165(h)(1) of such Code shall be applied by
substituting ``$500'' for ``$500 ($100 for taxable years
beginning after December 31, 2009)'',
(C) the standard deduction determined under section 63(c)
of such Code shall be increased by the net disaster loss, and
(D) section 56(b)(1)(E) of such Code shall not apply to so
much of the standard deduction as is attributable to the
increase under subparagraph (C) of this paragraph.
(2) Net disaster loss.--For purposes of this subsection, the
term ``net disaster loss'' means the excess of qualified disaster-
related personal casualty losses over personal casualty gains (as
defined in section 165(h)(3)(A) of the Internal Revenue Code of
1986).
(3) Qualified disaster-related personal casualty losses.--For
purposes of this paragraph, the term ``qualified disaster-related
personal casualty losses'' means losses described in section
165(c)(3) of the Internal Revenue Code of 1986 which arise in a
disaster area described in subsection (a) on or after January 1,
2016, and which are attributable to the events giving rise to the
Presidential declaration described in subsection (a) which was
applicable to such area.
PART IV--EDUCATION
SEC. 11031. TREATMENT OF STUDENT LOANS DISCHARGED ON ACCOUNT OF DEATH
OR DISABILITY.
(a) In General.--Section 108(f) is amended by adding at the end the
following new paragraph:
``(5) Discharges on account of death or disability.--
``(A) In general.--In the case of an individual, gross
income does not include any amount which (but for this
subsection) would be includible in gross income for such
taxable year by reasons of the discharge (in whole or in part)
of any loan described in subparagraph (B) after December 31,
2017, and before January 1, 2026, if such discharge was--
``(i) pursuant to subsection (a) or (d) of section 437
of the Higher Education Act of 1965 or the parallel benefit
under part D of title IV of such Act (relating to the
repayment of loan liability),
``(ii) pursuant to section 464(c)(1)(F) of such Act, or
``(iii) otherwise discharged on account of the death or
total and permanent disability of the student.
``(B) Loans described.--A loan is described in this
subparagraph if such loan is--
``(i) a student loan (as defined in paragraph (2)), or
``(ii) a private education loan (as defined in section
140(7) of the Consumer Credit Protection Act (15 U.S.C.
1650(7))).''.
(b) Effective Date.--The amendment made by this section shall apply
to discharges of indebtedness after December 31, 2017.
SEC. 11032. 529 ACCOUNT FUNDING FOR ELEMENTARY AND SECONDARY EDUCATION.
(a) In General.--
(1) In general.--Section 529(c) is amended by adding at the end
the following new paragraph:
``(7) Treatment of elementary and secondary tuition.--Any
reference in this subsection to the term `qualified higher
education expense' shall include a reference to expenses for
tuition in connection with enrollment or attendance at an
elementary or secondary public, private, or religious school.''.
(2) Limitation.--Section 529(e)(3)(A) is amended by adding at
the end the following: ``The amount of cash distributions from all
qualified tuition programs described in subsection (b)(1)(A)(ii)
with respect to a beneficiary during any taxable year shall, in the
aggregate, include not more than $10,000 in expenses described in
subsection (c)(7) incurred during the taxable year.''.
(b) Effective Date.--The amendments made by this section shall
apply to distributions made after December 31, 2017.
PART V--DEDUCTIONS AND EXCLUSIONS
SEC. 11041. SUSPENSION OF DEDUCTION FOR PERSONAL EXEMPTIONS.
(a) In General.--Subsection (d) of section 151 is amended--
(1) by striking ``In the case of'' in paragraph (4) and
inserting ``Except as provided in paragraph (5), in the case of'',
and
(2) by adding at the end the following new paragraph:
``(5) Special rules for taxable years 2018 through 2025.--In
the case of a taxable year beginning after December 31, 2017, and
before January 1, 2026--
``(A) Exemption amount.--The term `exemption amount' means
zero.
``(B) References.--For purposes of any other provision of
this title, the reduction of the exemption amount to zero under
subparagraph (A) shall not be taken into account in determining
whether a deduction is allowed or allowable, or whether a
taxpayer is entitled to a deduction, under this section.''.
(b) Application to Estates and Trusts.--Section 642(b)(2)(C) is
amended by adding at the end the following new clause:
``(iii) Years when personal exemption amount is zero.--
``(I) In general.--In the case of any taxable year
in which the exemption amount under section 151(d) is
zero, clause (i) shall be applied by substituting
`$4,150' for `the exemption amount under section
151(d)'.
``(II) Inflation adjustment.--In the case of any
taxable year beginning in a calendar year after 2018,
the $4,150 amount in subparagraph (A) shall be
increased in the same manner as provided in section
6334(d)(4)(C).''.
(c) Modification of Wage Withholding Rules.--
(1) In general.--Section 3402(a)(2) is amended by striking
``means the amount'' and all that follows and inserting ``means the
amount by which the wages exceed the taxpayer's withholding
allowance, prorated to the payroll period.''.
(2) Conforming amendments.--
(A) Section 3401 is amended by striking subsection (e).
(B) Paragraphs (1) and (2) of section 3402(f) are amended
to read as follows:
``(1) In general.--Under rules determined by the Secretary, an
employee receiving wages shall on any day be entitled to a
withholding allowance determined based on--
``(A) whether the employee is an individual for whom a
deduction is allowable with respect to another taxpayer under
section 151;
``(B) if the employee is married, whether the employee's
spouse is entitled to an allowance, or would be so entitled if
such spouse were an employee receiving wages, under
subparagraph (A) or (D), but only if such spouse does not have
in effect a withholding allowance certificate claiming such
allowance;
``(C) the number of individuals with respect to whom, on
the basis of facts existing at the beginning of such day, there
may reasonably be expected to be allowable a credit under
section 24(a) for the taxable year under subtitle A in respect
of which amounts deducted and withheld under this chapter in
the calendar year in which such day falls are allowed as a
credit;
``(D) any additional amounts to which the employee elects
to take into account under subsection (m), but only if the
employee's spouse does not have in effect a withholding
allowance certificate making such an election;
``(E) the standard deduction allowable to such employee
(one-half of such standard deduction in the case of an employee
who is married (as determined under section 7703) and whose
spouse is an employee receiving wages subject to withholding);
and
``(F) whether the employee has withholding allowance
certificates in effect with respect to more than 1 employer.
``(2) Allowance certificates.--
``(A) On commencement of employment.--On or before the date
of the commencement of employment with an employer, the
employee shall furnish the employer with a signed withholding
allowance certificate relating to the withholding allowance
claimed by the employee, which shall in no event exceed the
amount to which the employee is entitled.
``(B) Change of status.--If, on any day during the calendar
year, an employee's withholding allowance is in excess of the
withholding allowance to which the employee would be entitled
had the employee submitted a true and accurate withholding
allowance certificate to the employer on that day, the employee
shall within 10 days thereafter furnish the employer with a new
withholding allowance certificate. If, on any day during the
calendar year, an employee's withholding allowance is greater
than the withholding allowance claimed, the employee may
furnish the employer with a new withholding allowance
certificate relating to the withholding allowance to which the
employee is so entitled, which shall in no event exceed the
amount to which the employee is entitled on such day.
``(C) Change of status which affects next calendar year.--
If on any day during the calendar year the withholding
allowance to which the employee will be, or may reasonably be
expected to be, entitled at the beginning of the employee's
next taxable year under subtitle A is different from the
allowance to which the employee is entitled on such day, the
employee shall, in such cases and at such times as the
Secretary shall by regulations prescribe, furnish the employer
with a withholding allowance certificate relating to the
withholding allowance which the employee claims with respect to
such next taxable year, which shall in no event exceed the
withholding allowance to which the employee will be, or may
reasonably be expected to be, so entitled.''.
(C) Subsections (b)(1), (b)(2), (f)(3), (f)(4), (f)(5),
(f)(7) (including the heading thereof), (g)(4), (l)(1), (l)(2),
and (n) of section 3402 are each amended by striking
``exemption'' each place it appears and inserting
``allowance''.
(D) The heading of section 3402(f) is amended by striking
``Exemptions'' and inserting ``Allowance''.
(E) Section 3402(m) is amended by striking ``additional
withholding allowances or additional reductions in withholding
under this subsection. In determining the number of additional
withholding allowances'' and inserting ``an additional
withholding allowance or additional reductions in withholding
under this subsection. In determining the additional
withholding allowance''.
(F) Paragraphs (3) and (4) of section 3405(a) (and the
heading for such paragraph (4)) are each amended by striking
``exemption'' each place it appears and inserting
``allowance''.
(G) Section 3405(a)(4) is amended by striking ``shall be
determined'' and all that follows through ``3 withholding
exemptions'' and inserting ``shall be determined under rules
prescribed by the Secretary''.
(d) Exception for Determining Property Exempt From Levy.--Section
6334(d) is amended by adding at the end the following new paragraph:
``(4) Years when personal exemption amount is zero.--
``(A) In general.--In the case of any taxable year in which
the exemption amount under section 151(d) is zero, paragraph
(2) shall not apply and for purposes of paragraph (1) the term
`exempt amount' means an amount equal to--
``(i) the sum of the amount determined under
subparagraph (B) and the standard deduction, divided by
``(ii) 52.
``(B) Amount determined.--For purposes of subparagraph (A),
the amount determined under this subparagraph is $4,150
multiplied by the number of the taxpayer's dependents for the
taxable year in which the levy occurs.
``(C) Inflation adjustment.--In the case of any taxable
year beginning in a calendar year after 2018, the $4,150 amount
in subparagraph (B) shall be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `2017' for `2016'
in subparagraph (A)(ii) thereof.
If any increase determined under the preceding sentence is not
a multiple of $100, such increase shall be rounded to the next
lowest multiple of $100.
``(D) Verified statement.--Unless the taxpayer submits to
the Secretary a written and properly verified statement
specifying the facts necessary to determine the proper amount
under subparagraph (A), subparagraph (A) shall be applied as if
the taxpayer were a married individual filing a separate return
with no dependents.''.
(e) Persons Required to Make Returns of Income.--Section 6012 is
amended by adding at the end the following new subsection:
``(f) Special Rule for Taxable Years 2018 Through 2025.--In the
case of a taxable year beginning after December 31, 2017, and before
January 1, 2026, subsection (a)(1) shall not apply, and every
individual who has gross income for the taxable year shall be required
to make returns with respect to income taxes under subtitle A, except
that a return shall not be required of--
``(1) an individual who is not married (determined by applying
section 7703) and who has gross income for the taxable year which
does not exceed the standard deduction applicable to such
individual for such taxable year under section 63, or
``(2) an individual entitled to make a joint return if--
``(A) the gross income of such individual, when combined
with the gross income of such individual's spouse, for the
taxable year does not exceed the standard deduction which would
be applicable to the taxpayer for such taxable year under
section 63 if such individual and such individual's spouse made
a joint return,
``(B) such individual and such individual's spouse have the
same household as their home at the close of the taxable year,
``(C) such individual's spouse does not make a separate
return, and
``(D) neither such individual nor such individual's spouse
is an individual described in section 63(c)(5) who has income
(other than earned income) in excess of the amount in effect
under section 63(c)(5)(A).''.
(f) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2017.
(2) Wage withholding.--The Secretary of the Treasury may
administer section 3402 for taxable years beginning before January
1, 2019, without regard to the amendments made by subsections (a)
and (c).
SEC. 11042. LIMITATION ON DEDUCTION FOR STATE AND LOCAL, ETC. TAXES.
(a) In General.--Subsection (b) of section 164 is amended by adding
at the end the following new paragraph:
``(6) Limitation on individual deductions for taxable years
2018 through 2025.--In the case of an individual and a taxable year
beginning after December 31, 2017, and before January 1, 2026--
``(A) foreign real property taxes shall not be taken into
account under subsection (a)(1), and
``(B) the aggregate amount of taxes taken into account
under paragraphs (1), (2), and (3) of subsection (a) and
paragraph (5) of this subsection for any taxable year shall not
exceed $10,000 ($5,000 in the case of a married individual
filing a separate return).
The preceding sentence shall not apply to any foreign taxes
described in subsection (a)(3) or to any taxes described in
paragraph (1) and (2) of subsection (a) which are paid or accrued
in carrying on a trade or business or an activity described in
section 212. For purposes of subparagraph (B), an amount paid in a
taxable year beginning before January 1, 2018, with respect to a
State or local income tax imposed for a taxable year beginning
after December 31, 2017, shall be treated as paid on the last day
of the taxable year for which such tax is so imposed.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2016.
SEC. 11043. LIMITATION ON DEDUCTION FOR QUALIFIED RESIDENCE INTEREST.
(a) In General.--Section 163(h)(3) is amended by adding at the end
the following new subparagraph:
``(F) Special rules for taxable years 2018 through 2025.--
``(i) In general.--In the case of taxable years
beginning after December 31, 2017, and before January 1,
2026--
``(I) Disallowance of home equity indebtedness
interest.--Subparagraph (A)(ii) shall not apply.
``(II) Limitation on acquisition indebtedness.--
Subparagraph (B)(ii) shall be applied by substituting
`$750,000 ($375,000' for `$1,000,000 ($500,000'.
``(III) Treatment of indebtedness incurred on or
before december 15, 2017.--Subclause (II) shall not
apply to any indebtedness incurred on or before
December 15, 2017, and, in applying such subclause to
any indebtedness incurred after such date, the
limitation under such subclause shall be reduced (but
not below zero) by the amount of any indebtedness
incurred on or before December 15, 2017, which is
treated as acquisition indebtedness for purposes of
this subsection for the taxable year.
``(IV) Binding contract exception.--In the case of
a taxpayer who enters into a written binding contract
before December 15, 2017, to close on the purchase of a
principal residence before January 1, 2018, and who
purchases such residence before April 1, 2018,
subclause (III) shall be applied by substituting `April
1, 2018' for `December 15, 2017'.
``(ii) Treatment of limitation in taxable years after
december 31, 2025.--In the case of taxable years beginning
after December 31, 2025, the limitation under subparagraph
(B)(ii) shall be applied to the aggregate amount of
indebtedness of the taxpayer described in subparagraph
(B)(i) without regard to the taxable year in which the
indebtedness was incurred.
``(iii) Treatment of refinancings of indebtedness.--
``(I) In general.--In the case of any indebtedness
which is incurred to refinance indebtedness, such
refinanced indebtedness shall be treated for purposes
of clause (i)(III) as incurred on the date that the
original indebtedness was incurred to the extent the
amount of the indebtedness resulting from such
refinancing does not exceed the amount of the
refinanced indebtedness.
``(II) Limitation on period of refinancing.--
Subclause (I) shall not apply to any indebtedness after
the expiration of the term of the original indebtedness
or, if the principal of such original indebtedness is
not amortized over its term, the expiration of the term
of the 1st refinancing of such indebtedness (or if
earlier, the date which is 30 years after the date of
such 1st refinancing).
``(iv) Coordination with exclusion of income from
discharge of indebtedness.--Section 108(h)(2) shall be
applied without regard to this subparagraph.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 11044. MODIFICATION OF DEDUCTION FOR PERSONAL CASUALTY LOSSES.
(a) In General.--Subsection (h) of section 165 is amended by adding
at the end the following new paragraph:
``(5) Limitation for taxable years 2018 through 2025.--
``(A) In general.--In the case of an individual, except as
provided in subparagraph (B), any personal casualty loss which
(but for this paragraph) would be deductible in a taxable year
beginning after December 31, 2017, and before January 1, 2026,
shall be allowed as a deduction under subsection (a) only to
the extent it is attributable to a Federally declared disaster
(as defined in subsection (i)(5)).
``(B) Exception related to personal casualty gains.--If a
taxpayer has personal casualty gains for any taxable year to
which subparagraph (A) applies--
``(i) subparagraph (A) shall not apply to the portion
of the personal casualty loss not attributable to a
Federally declared disaster (as so defined) to the extent
such loss does not exceed such gains, and
``(ii) in applying paragraph (2) for purposes of
subparagraph (A) to the portion of personal casualty loss
which is so attributable to such a disaster, the amount of
personal casualty gains taken into account under paragraph
(2)(A) shall be reduced by the portion of such gains taken
into account under clause (i).''.
(b) Effective Date.--The amendment made by this section shall apply
to losses incurred in taxable years beginning after December 31, 2017.
SEC. 11045. SUSPENSION OF MISCELLANEOUS ITEMIZED DEDUCTIONS.
(a) In General.--Section 67 is amended by adding at the end the
following new subsection:
``(g) Suspension for Taxable Years 2018 Through 2025.--
Notwithstanding subsection (a), no miscellaneous itemized deduction
shall be allowed for any taxable year beginning after December 31,
2017, and before January 1, 2026.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2017.
SEC. 11046. SUSPENSION OF OVERALL LIMITATION ON ITEMIZED DEDUCTIONS.
(a) In General.--Section 68 is amended by adding at the end the
following new subsection:
``(f) Section Not to Apply.--This section shall not apply to any
taxable year beginning after December 31, 2017, and before January 1,
2026.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 11047. SUSPENSION OF EXCLUSION FOR QUALIFIED BICYCLE COMMUTING
REIMBURSEMENT.
(a) In General.--Section 132(f) is amended by adding at the end the
following new paragraph:
``(8) Suspension of qualified bicycle commuting reimbursement
exclusion.--Paragraph (1)(D) shall not apply to any taxable year
beginning after December 31, 2017, and before January 1, 2026.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2017.
SEC. 11048. SUSPENSION OF EXCLUSION FOR QUALIFIED MOVING EXPENSE
REIMBURSEMENT.
(a) In General.--Section 132(g) is amended--
(1) by striking ``For purposes of this section, the term'' and
inserting ``For purposes of this section--
``(1) In general.--The term'', and
(2) by adding at the end the following new paragraph:
``(2) Suspension for taxable years 2018 through 2025.--Except
in the case of a member of the Armed Forces of the United States on
active duty who moves pursuant to a military order and incident to
a permanent change of station, subsection (a)(6) shall not apply to
any taxable year beginning after December 31, 2017, and before
January 1, 2026.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 11049. SUSPENSION OF DEDUCTION FOR MOVING EXPENSES.
(a) In General.--Section 217 is amended by adding at the end the
following new subsection:
``(k) Suspension of Deduction for Taxable Years 2018 Through
2025.--Except in the case of an individual to whom subsection (g)
applies, this section shall not apply to any taxable year beginning
after December 31, 2017, and before January 1, 2026.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2017.
SEC. 11050. LIMITATION ON WAGERING LOSSES.
(a) In General.--Section 165(d) is amended by adding at the end the
following: ``For purposes of the preceding sentence, in the case of
taxable years beginning after December 31, 2017, and before January 1,
2026, the term `losses from wagering transactions' includes any
deduction otherwise allowable under this chapter incurred in carrying
on any wagering transaction.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2017.
SEC. 11051. REPEAL OF DEDUCTION FOR ALIMONY PAYMENTS.
(a) In General.--Part VII of subchapter B is amended by striking
section 215 (and by striking the item relating to such section in the
table of sections for such subpart).
(b) Conforming Amendments.--
(1) Corresponding repeal of provisions providing for inclusion
of alimony in gross income.--
(A) Subsection (a) of section 61 is amended by striking
paragraph (8) and by redesignating paragraphs (9) through (15)
as paragraphs (8) through (14), respectively.
(B) Part II of subchapter B of chapter 1 is amended by
striking section 71 (and by striking the item relating to such
section in the table of sections for such part).
(C) Subpart F of part I of subchapter J of chapter 1 is
amended by striking section 682 (and by striking the item
relating to such section in the table of sections for such
subpart).
(2) Related to repeal of section 215.--
(A) Section 62(a) is amended by striking paragraph (10).
(B) Section 3402(m)(1) is amended by striking ``(other than
paragraph (10) thereof)''.
(C) Section 6724(d)(3) is amended by striking subparagraph
(C) and by redesignating subparagraph (D) as subparagraph (C).
(3) Related to repeal of section 71.--
(A) Section 121(d)(3) is amended--
(i) by striking ``(as defined in section 71(b)(2))'' in
subparagraph (B), and
(ii) by adding at the end the following new
subparagraph:
``(C) Divorce or separation instrument.--For purposes of
this paragraph, the term `divorce or separation instrument'
means--
``(i) a decree of divorce or separate maintenance or a
written instrument incident to such a decree,
``(ii) a written separation agreement, or
``(iii) a decree (not described in clause (i))
requiring a spouse to make payments for the support or
maintenance of the other spouse.''.
(B) Section 152(d)(5) is amended to read as follows:
``(5) Special rules for support.--
``(A) In general.--For purposes of this subsection--
``(i) payments to a spouse of alimony or separate
maintenance payments shall not be treated as a payment by
the payor spouse for the support of any dependent, and
``(ii) in the case of the remarriage of a parent,
support of a child received from the parent's spouse shall
be treated as received from the parent.
``(B) Alimony or separate maintenance payment.--For
purposes of subparagraph (A), the term `alimony or separate
maintenance payment' means any payment in cash if--
``(i) such payment is received by (or on behalf of) a
spouse under a divorce or separation instrument (as defined
in section 121(d)(3)(C)),
``(ii) in the case of an individual legally separated
from the individual's spouse under a decree of divorce or
of separate maintenance, the payee spouse and the payor
spouse are not members of the same household at the time
such payment is made, and
``(iii) there is no liability to make any such payment
for any period after the death of the payee spouse and
there is no liability to make any payment (in cash or
property) as a substitute for such payments after the death
of the payee spouse.''.
(C) Section 219(f)(1) is amended by striking the third
sentence.
(D) Section 220(f)(7) is amended by striking ``subparagraph
(A) of section 71(b)(2)'' and inserting ``clause (i) of section
121(d)(3)(C)''.
(E) Section 223(f)(7) is amended by striking ``subparagraph
(A) of section 71(b)(2)'' and inserting ``clause (i) of section
121(d)(3)(C)''.
(F) Section 382(l)(3)(B)(iii) is amended by striking
``section 71(b)(2)'' and inserting ``section 121(d)(3)(C)''.
(G) Section 408(d)(6) is amended by striking ``subparagraph
(A) of section 71(b)(2)'' and inserting ``clause (i) of section
121(d)(3)(C)''.
(4) Additional conforming amendments.--Section 7701(a)(17) is
amended--
(A) by striking ``sections 682 and 2516'' and inserting
``section 2516'', and
(B) by striking ``such sections'' each place it appears and
inserting ``such section''.
(c) Effective Date.--The amendments made by this section shall
apply to--
(1) any divorce or separation instrument (as defined in section
71(b)(2) of the Internal Revenue Code of 1986 as in effect before
the date of the enactment of this Act) executed after December 31,
2018, and
(2) any divorce or separation instrument (as so defined)
executed on or before such date and modified after such date if the
modification expressly provides that the amendments made by this
section apply to such modification.
PART VI--INCREASE IN ESTATE AND GIFT TAX EXEMPTION
SEC. 11061. INCREASE IN ESTATE AND GIFT TAX EXEMPTION.
(a) In General.--Section 2010(c)(3) is amended by adding at the end
the following new subparagraph:
``(C) Increase in basic exclusion amount.--In the case of
estates of decedents dying or gifts made after December 31,
2017, and before January 1, 2026, subparagraph (A) shall be
applied by substituting `$10,000,000' for `$5,000,000'.''.
(b) Conforming Amendment.--Subsection (g) of section 2001 is
amended to read as follows:
``(g) Modifications to Tax Payable.--
``(1) Modifications to gift tax payable to reflect different
tax rates.--For purposes of applying subsection (b)(2) with respect
to 1 or more gifts, the rates of tax under subsection (c) in effect
at the decedent's death shall, in lieu of the rates of tax in
effect at the time of such gifts, be used both to compute--
``(A) the tax imposed by chapter 12 with respect to such
gifts, and
``(B) the credit allowed against such tax under section
2505, including in computing--
``(i) the applicable credit amount under section
2505(a)(1), and
``(ii) the sum of the amounts allowed as a credit for
all preceding periods under section 2505(a)(2).
``(2) Modifications to estate tax payable to reflect different
basic exclusion amounts.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out this
section with respect to any difference between--
``(A) the basic exclusion amount under section 2010(c)(3)
applicable at the time of the decedent's death, and
``(B) the basic exclusion amount under such section
applicable with respect to any gifts made by the decedent.''.
(c) Effective Date.--The amendments made by this section shall
apply to estates of decedents dying and gifts made after December 31,
2017.
PART VII--EXTENSION OF TIME LIMIT FOR CONTESTING IRS LEVY
SEC. 11071. EXTENSION OF TIME LIMIT FOR CONTESTING IRS LEVY.
(a) Extension of Time for Return of Property Subject to Levy.--
Subsection (b) of section 6343 is amended by striking ``9 months'' and
inserting ``2 years''.
(b) Period of Limitation on Suits.--Subsection (c) of section 6532
is amended--
(1) by striking ``9 months'' in paragraph (1) and inserting ``2
years'', and
(2) by striking ``9-month'' in paragraph (2) and inserting ``2-
year''.
(c) Effective Date.--The amendments made by this section shall
apply to--
(1) levies made after the date of the enactment of this Act,
and
(2) levies made on or before such date if the 9-month period
has not expired under section 6343(b) of the Internal Revenue Code
of 1986 (without regard to this section) as of such date.
PART VIII--INDIVIDUAL MANDATE
SEC. 11081. ELIMINATION OF SHARED RESPONSIBILITY PAYMENT FOR
INDIVIDUALS FAILING TO MAINTAIN MINIMUM ESSENTIAL COVERAGE.
(a) In General.--Section 5000A(c) is amended--
(1) in paragraph (2)(B)(iii), by striking ``2.5 percent'' and
inserting ``Zero percent'', and
(2) in paragraph (3)--
(A) by striking ``$695'' in subparagraph (A) and inserting
``$0'', and
(B) by striking subparagraph (D).
(b) Effective Date.--The amendments made by this section shall
apply to months beginning after December 31, 2018.
Subtitle B--Alternative Minimum Tax
SEC. 12001. REPEAL OF TAX FOR CORPORATIONS.
(a) In General.--Section 55(a) is amended by striking ``There'' and
inserting ``In the case of a taxpayer other than a corporation,
there''.
(b) Conforming Amendments.--
(1) Section 38(c)(6) is amended by adding at the end the
following new subparagraph:
``(E) Corporations.--In the case of a corporation, this
subsection shall be applied by treating the corporation as
having a tentative minimum tax of zero.''.
(2) Section 53(d)(2) is amended by inserting ``, except that in
the case of a corporation, the tentative minimum tax shall be
treated as zero'' before the period at the end.
(3)(A) Section 55(b)(1) is amended to read as follows:
``(1) Amount of tentative tax.--
``(A) In general.--The tentative minimum tax for the
taxable year is the sum of--
``(i) 26 percent of so much of the taxable excess as
does not exceed $175,000, plus
``(ii) 28 percent of so much of the taxable excess as
exceeds $175,000.
The amount determined under the preceding sentence shall be
reduced by the alternative minimum tax foreign tax credit for
the taxable year.
``(B) Taxable excess.--For purposes of this subsection, the
term `taxable excess' means so much of the alternative minimum
taxable income for the taxable year as exceeds the exemption
amount.
``(C) Married individual filing separate return.--In the
case of a married individual filing a separate return,
subparagraph (A) shall be applied by substituting 50 percent of
the dollar amount otherwise applicable under clause (i) and
clause (ii) thereof. For purposes of the preceding sentence,
marital status shall be determined under section 7703.''.
(B) Section 55(b)(3) is amended by striking ``paragraph
(1)(A)(i)'' and inserting ``paragraph (1)(A)''.
(C) Section 59(a) is amended--
(i) by striking ``subparagraph (A)(i) or (B)(i) of section
55(b)(1) (whichever applies) in lieu of the highest rate of tax
specified in section 1 or 11 (whichever applies)'' in paragraph
(1)(C) and inserting ``section 55(b)(1) in lieu of the highest
rate of tax specified in section 1'', and
(ii) in paragraph (2), by striking ``means'' and all that
follows and inserting ``means the amount determined under the
first sentence of section 55(b)(1)(A).''.
(D) Section 897(a)(2)(A) is amended by striking ``section
55(b)(1)(A)'' and inserting ``section 55(b)(1)''.
(E) Section 911(f) is amended--
(i) in paragraph (1)(B)--
(I) by striking ``section 55(b)(1)(A)(ii)'' and
inserting ``section 55(b)(1)(B)'', and
(II) by striking ``section 55(b)(1)(A)(i)'' and
inserting ``section 55(b)(1)(A)'', and
(ii) in paragraph (2)(B), by striking ``section
55(b)(1)(A)(ii)'' each place it appears and inserting ``section
55(b)(1)(B)''.
(4) Section 55(c)(1) is amended by striking ``, the section 936
credit allowable under section 27(b), and the Puerto Rico economic
activity credit under section 30A''.
(5) Section 55(d), as amended by section 11002, is amended--
(A) by striking paragraph (2) and redesignating paragraphs
(3) and (4) as paragraphs (2) and (3), respectively,
(B) in paragraph (2) (as so redesignated), by inserting
``and'' at the end of subparagraph (B), by striking ``, and''
at the end of subparagraph (C) and inserting a period, and by
striking subparagraph (D), and
(C) in paragraph (3) (as so redesignated)--
(i) by striking ``(b)(1)(A)(i)'' in subparagraph (B)(i)
and inserting ``(b)(1)(A)'', and
(ii) by striking ``paragraph (3)'' in subparagraph
(B)(iii) and inserting ``paragraph (2)''.
(6) Section 55 is amended by striking subsection (e).
(7) Section 56(b)(2) is amended by striking subparagraph (C)
and by redesignating subparagraph (D) as subparagraph (C).
(8)(A) Section 56 is amended by striking subsections (c) and
(g).
(B) Section 847 is amended by striking the last sentence of
paragraph (9).
(C) Section 848 is amended by striking subsection (i).
(9) Section 58(a) is amended by striking paragraph (3) and
redesignating paragraph (4) as paragraph (3).
(10) Section 59 is amended by striking subsections (b) and (f).
(11) Section 11(d) is amended by striking ``the taxes imposed
by subsection (a) and section 55'' and inserting ``the tax imposed
by subsection (a)''.
(12) Section 12 is amended by striking paragraph (7).
(13) Section 168(k) is amended by striking paragraph (4).
(14) Section 882(a)(1) is amended by striking ``, 55,''.
(15) Section 962(a)(1) is amended by striking ``sections 11 and
55'' and inserting ``section 11''.
(16) Section 1561(a) is amended--
(A) by inserting ``and'' at the end of paragraph (1), by
striking ``, and'' at the end of paragraph (2) and inserting a
period, and by striking paragraph (3), and
(B) by striking the last sentence.
(17) Section 6425(c)(1)(A) is amended to read as follows:
``(A) the tax imposed by section 11 or 1201(a), or
subchapter L of chapter 1, whichever is applicable, over''.
(18) Section 6655(e)(2) is amended by striking ``and
alternative minimum taxable income'' each place it appears in
subparagraphs (A) and (B)(i).
(19) Section 6655(g)(1)(A) is amended by inserting ``plus'' at
the end of clause (i), by striking clause (ii), and by
redesignating clause (iii) as clause (ii).
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 12002. CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY OF
CORPORATIONS.
(a) Credits Treated as Refundable.--Section 53 is amended by adding
at the end the following new subsection:
``(e) Portion of Credit Treated as Refundable.--
``(1) In general.--In the case of any taxable year of a
corporation beginning in 2018, 2019, 2020, or 2021, the limitation
under subsection (c) shall be increased by the AMT refundable
credit amount for such year.
``(2) AMT refundable credit amount.--For purposes of paragraph
(1), the AMT refundable credit amount is an amount equal to 50
percent (100 percent in the case of a taxable year beginning in
2021) of the excess (if any) of--
``(A) the minimum tax credit determined under subsection
(b) for the taxable year, over
``(B) the minimum tax credit allowed under subsection (a)
for such year (before the application of this subsection for
such year).
``(3) Credit refundable.--For purposes of this title (other
than this section), the credit allowed by reason of this subsection
shall be treated as a credit allowed under subpart C (and not this
subpart).
``(4) Short taxable years.--In the case of any taxable year of
less than 365 days, the AMT refundable credit amount determined
under paragraph (2) with respect to such taxable year shall be the
amount which bears the same ratio to such amount determined without
regard to this paragraph as the number of days in such taxable year
bears to 365.''.
(b) Treatment of References.--Section 53(d) is amended by adding at
the end the following new paragraph:
``(3) AMT term references.--In the case of a corporation, any
references in this subsection to section 55, 56, or 57 shall be
treated as a reference to such section as in effect before the
amendments made by Tax Cuts and Jobs Act.''.
(c) Conforming Amendment.--Section 1374(b)(3)(B) is amended by
striking the last sentence thereof.
(d) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
(2) Conforming amendment.--The amendment made by subsection (c)
shall apply to taxable years beginning after December 31, 2021.
SEC. 12003. INCREASED EXEMPTION FOR INDIVIDUALS.
(a) In General.--Section 55(d), as amended by the preceding
provisions of this Act, is amended by adding at the end the following
new paragraph:
``(4) Special rule for taxable years beginning after 2017 and
before 2026.--
``(A) In general.--In the case of any taxable year
beginning after December 31, 2017, and before January 1, 2026--
``(i) paragraph (1) shall be applied--
``(I) by substituting `$109,400' for `$78,750' in
subparagraph (A), and
``(II) by substituting `$70,300' for `$50,600' in
subparagraph (B), and
``(ii) paragraph (2) shall be applied--
``(I) by substituting `$1,000,000' for `$150,000'
in subparagraph (A),
``(II) by substituting `50 percent of the dollar
amount applicable under subparagraph (A)' for
`$112,500' in subparagraph (B), and
``(III) in the case of a taxpayer described in
paragraph (1)(D), without regard to the substitution
under subclause (I).
``(B) Inflation adjustment.--
``(i) In general.--In the case of any taxable year
beginning in a calendar year after 2018, the amounts
described in clause (ii) shall each be increased by an
amount equal to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting
`calendar year 2017' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
``(ii) Amounts described.--The amounts described in
this clause are the $109,400 amount in subparagraph
(A)(i)(I), the $70,300 amount in subparagraph (A)(i)(II),
and the $1,000,000 amount in subparagraph (A)(ii)(I).
``(iii) Rounding.--Any increased amount determined
under clause (i) shall be rounded to the nearest multiple
of $100.
``(iv) Coordination with current adjustments.--In the
case of any taxable year to which subparagraph (A) applies,
no adjustment shall be made under paragraph (3) to any of
the numbers which are substituted under subparagraph (A)
and adjusted under this subparagraph.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
Subtitle C--Business-related Provisions
PART I--CORPORATE PROVISIONS
SEC. 13001. 21-PERCENT CORPORATE TAX RATE.
(a) In General.--Subsection (b) of section 11 is amended to read as
follows:
``(b) Amount of Tax.--The amount of the tax imposed by subsection
(a) shall be 21 percent of taxable income.''.
(b) Conforming Amendments.--
(1) The following sections are each amended by striking
``section 11(b)(1)'' and inserting ``section 11(b)'':
(A) Section 280C(c)(3)(B)(ii)(II).
(B) Paragraphs (2)(B) and (6)(A)(ii) of section 860E(e).
(C) Section 7874(e)(1)(B).
(2)(A) Part I of subchapter P of chapter 1 is amended by
striking section 1201 (and by striking the item relating to such
section in the table of sections for such part).
(B) Section 12 is amended by striking paragraphs (4) and (6),
and by redesignating paragraph (5) as paragraph (4).
(C) Section 453A(c)(3) is amended by striking ``or 1201
(whichever is appropriate)''.
(D) Section 527(b) is amended--
(i) by striking paragraph (2), and
(ii) by striking all that precedes ``is hereby imposed''
and inserting:
``(b) Tax Imposed.--A tax''.
(E) Sections 594(a) is amended by striking ``taxes imposed by
section 11 or 1201(a)'' and inserting ``tax imposed by section
11''.
(F) Section 691(c)(4) is amended by striking ``1201,''.
(G) Section 801(a) is amended--
(i) by striking paragraph (2), and
(ii) by striking all that precedes ``is hereby imposed''
and inserting:
``(a) Tax Imposed.--A tax''.
(H) Section 831(e) is amended by striking paragraph (1) and by
redesignating paragraphs (2) and (3) as paragraphs (1) and (2),
respectively.
(I) Sections 832(c)(5) and 834(b)(1)(D) are each amended by
striking ``sec. 1201 and following,''.
(J) Section 852(b)(3)(A) is amended by striking ``section
1201(a)'' and inserting ``section 11(b)''.
(K) Section 857(b)(3) is amended--
(i) by striking subparagraph (A) and redesignating
subparagraphs (B) through (F) as subparagraphs (A) through (E),
respectively,
(ii) in subparagraph (C), as so redesignated--
(I) by striking ``subparagraph (A)(ii)'' in clause (i)
thereof and inserting ``paragraph (1)'',
(II) by striking ``the tax imposed by subparagraph
(A)(ii)'' in clauses (ii) and (iv) thereof and inserting
``the tax imposed by paragraph (1) on undistributed capital
gain'',
(iii) in subparagraph (E), as so redesignated, by striking
``subparagraph (B) or (D)'' and inserting ``subparagraph (A) or
(C)'', and
(iv) by adding at the end the following new subparagraph:
``(F) Undistributed capital gain.--For purposes of this
paragraph, the term `undistributed capital gain' means the
excess of the net capital gain over the deduction for dividends
paid (as defined in section 561) determined with reference to
capital gain dividends only.''.
(L) Section 882(a)(1), as amended by section 12001, is further
amended by striking ``or 1201(a)''.
(M) Section 904(b) is amended--
(i) by striking ``or 1201(a)'' in paragraph (2)(C),
(ii) by striking paragraph (3)(D) and inserting the
following:
``(D) Capital gain rate differential.--There is a capital
gain rate differential for any year if subsection (h) of
section 1 applies to such taxable year.'', and
(iii) by striking paragraph (3)(E) and inserting the
following:
``(E) Rate differential portion.--The rate differential
portion of foreign source net capital gain, net capital gain,
or the excess of net capital gain from sources within the
United States over net capital gain, as the case may be, is the
same proportion of such amount as--
``(i) the excess of--
``(I) the highest rate of tax set forth in
subsection (a), (b), (c), (d), or (e) of section 1
(whichever applies), over
``(II) the alternative rate of tax determined under
section 1(h), bears to
``(ii) that rate referred to in subclause (I).''.
(N) Section 1374(b) is amended by striking paragraph (4).
(O) Section 1381(b) is amended by striking ``taxes imposed by
section 11 or 1201'' and inserting ``tax imposed by section 11''.
(P) Sections 6425(c)(1)(A), as amended by section 12001, and
6655(g)(1)(A)(i) are each amended by striking ``or 1201(a),''.
(Q) Section 7518(g)(6)(A) is amended by striking ``or
1201(a)''.
(3)(A) Section 1445(e)(1) is amended--
(i) by striking ``35 percent'' and inserting ``the highest
rate of tax in effect for the taxable year under section
11(b)'', and
(ii) by striking ``of the gain'' and inserting ``multiplied
by the gain''.
(B) Section 1445(e)(2) is amended by striking ``35 percent of
the amount'' and inserting ``the highest rate of tax in effect for
the taxable year under section 11(b) multiplied by the amount''.
(C) Section 1445(e)(6) is amended--
(i) by striking ``35 percent'' and inserting ``the highest
rate of tax in effect for the taxable year under section
11(b)'', and
(ii) by striking ``of the amount'' and inserting
``multiplied by the amount''.
(D) Section 1446(b)(2)(B) is amended by striking ``section
11(b)(1)'' and inserting ``section 11(b)''.
(4) Section 852(b)(1) is amended by striking the last sentence.
(5)(A) Part I of subchapter B of chapter 5 is amended by
striking section 1551 (and by striking the item relating to such
section in the table of sections for such part).
(B) Section 535(c)(5) is amended to read as follows:
``(5) Cross reference.--For limitation on credit provided in
paragraph (2) or (3) in the case of certain controlled
corporations, see section 1561.''.
(6)(A) Section 1561, as amended by section 12001, is amended to
read as follows:
``SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS CREDIT IN THE CASE OF
CERTAIN CONTROLLED CORPORATIONS.
``(a) In General.--The component members of a controlled group of
corporations on a December 31 shall, for their taxable years which
include such December 31, be limited for purposes of this subtitle to
one $250,000 ($150,000 if any component member is a corporation
described in section 535(c)(2)(B)) amount for purposes of computing the
accumulated earnings credit under section 535(c)(2) and (3). Such
amount shall be divided equally among the component members of such
group on such December 31 unless the Secretary prescribes regulations
permitting an unequal allocation of such amount.
``(b) Certain Short Taxable Years.--If a corporation has a short
taxable year which does not include a December 31 and is a component
member of a controlled group of corporations with respect to such
taxable year, then for purposes of this subtitle, the amount to be used
in computing the accumulated earnings credit under section 535(c)(2)
and (3) of such corporation for such taxable year shall be the amount
specified in subsection (a) with respect to such group, divided by the
number of corporations which are component members of such group on the
last day of such taxable year. For purposes of the preceding sentence,
section 1563(b) shall be applied as if such last day were substituted
for December 31.''.
(B) The table of sections for part II of subchapter B of
chapter 5 is amended by striking the item relating to section
1561 and inserting the following new item:
``Sec. 1561. Limitation on accumulated earnings credit in the case of
certain controlled corporations.''.
(7) Section 7518(g)(6)(A) is amended--
(A) by striking ``With respect to the portion'' and
inserting ``In the case of a taxpayer other than a corporation,
with respect to the portion'', and
(B) by striking ``(34 percent in the case of a
corporation)''.
(c) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by subsections (a) and (b) shall
apply to taxable years beginning after December 31, 2017.
(2) Withholding.--The amendments made by subsection (b)(3)
shall apply to distributions made after December 31, 2017.
(3) Certain transfers.--The amendments made by subsection
(b)(6) shall apply to transfers made after December 31, 2017.
(d) Normalization Requirements.--
(1) In general.--A normalization method of accounting shall not
be treated as being used with respect to any public utility
property for purposes of section 167 or 168 of the Internal Revenue
Code of 1986 if the taxpayer, in computing its cost of service for
ratemaking purposes and reflecting operating results in its
regulated books of account, reduces the excess tax reserve more
rapidly or to a greater extent than such reserve would be reduced
under the average rate assumption method.
(2) Alternative method for certain taxpayers.--If, as of the
first day of the taxable year that includes the date of enactment
of this Act--
(A) the taxpayer was required by a regulatory agency to
compute depreciation for public utility property on the basis
of an average life or composite rate method, and
(B) the taxpayer's books and underlying records did not
contain the vintage account data necessary to apply the average
rate assumption method,
the taxpayer will be treated as using a normalization method of
accounting if, with respect to such jurisdiction, the taxpayer uses
the alternative method for public utility property that is subject
to the regulatory authority of that jurisdiction.
(3) Definitions.--For purposes of this subsection--
(A) Excess tax reserve.--The term ``excess tax reserve''
means the excess of--
(i) the reserve for deferred taxes (as described in
section 168(i)(9)(A)(ii) of the Internal Revenue Code of
1986) as of the day before the corporate rate reductions
provided in the amendments made by this section take
effect, over
(ii) the amount which would be the balance in such
reserve if the amount of such reserve were determined by
assuming that the corporate rate reductions provided in
this Act were in effect for all prior periods.
(B) Average rate assumption method.--The average rate
assumption method is the method under which the excess in the
reserve for deferred taxes is reduced over the remaining lives
of the property as used in its regulated books of account which
gave rise to the reserve for deferred taxes. Under such method,
during the time period in which the timing differences for the
property reverse, the amount of the adjustment to the reserve
for the deferred taxes is calculated by multiplying--
(i) the ratio of the aggregate deferred taxes for the
property to the aggregate timing differences for the
property as of the beginning of the period in question, by
(ii) the amount of the timing differences which reverse
during such period.
(C) Alternative method.--The ``alternative method'' is the
method in which the taxpayer--
(i) computes the excess tax reserve on all public
utility property included in the plant account on the basis
of the weighted average life or composite rate used to
compute depreciation for regulatory purposes, and
(ii) reduces the excess tax reserve ratably over the
remaining regulatory life of the property.
(4) Tax increased for normalization violation.--If, for any
taxable year ending after the date of the enactment of this Act,
the taxpayer does not use a normalization method of accounting for
the corporate rate reductions provided in the amendments made by
this section--
(A) the taxpayer's tax for the taxable year shall be
increased by the amount by which it reduces its excess tax
reserve more rapidly than permitted under a normalization
method of accounting, and
(B) such taxpayer shall not be treated as using a
normalization method of accounting for purposes of subsections
(f)(2) and (i)(9)(C) of section 168 of the Internal Revenue
Code of 1986.
SEC. 13002. REDUCTION IN DIVIDEND RECEIVED DEDUCTIONS TO REFLECT LOWER
CORPORATE INCOME TAX RATES.
(a) Dividends Received by Corporations.--
(1) In general.--Section 243(a)(1) is amended by striking ``70
percent'' and inserting ``50 percent''.
(2) Dividends from 20-percent owned corporations.--Section
243(c)(1) is amended--
(A) by striking ``80 percent'' and inserting ``65
percent'', and
(B) by striking ``70 percent'' and inserting ``50
percent''.
(3) Conforming amendment.--The heading for section 243(c) is
amended by striking ``Retention of 80-percent Dividend Received
Deduction'' and inserting ``Increased Percentage''.
(b) Dividends Received From FSC.--Section 245(c)(1)(B) is amended--
(1) by striking ``70 percent'' and inserting ``50 percent'',
and
(2) by striking ``80 percent'' and inserting ``65 percent''.
(c) Limitation on Aggregate Amount of Deductions.--Section
246(b)(3) is amended--
(1) by striking ``80 percent'' in subparagraph (A) and
inserting ``65 percent'', and
(2) by striking ``70 percent'' in subparagraph (B) and
inserting ``50 percent''.
(d) Reduction in Deduction Where Portfolio Stock Is Debt-
financed.--Section 246A(a)(1) is amended--
(1) by striking ``70 percent'' and inserting ``50 percent'',
and
(2) by striking ``80 percent'' and inserting ``65 percent''.
(e) Income From Sources Within the United States.--Section
861(a)(2) is amended--
(1) by striking ``100/70th'' and inserting ``100/50th'' in
subparagraph (B), and
(2) in the flush sentence at the end--
(A) by striking ``100/80th'' and inserting ``100/65th'',
and
(B) by striking ``100/70th'' and inserting ``100/50th''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
PART II--SMALL BUSINESS REFORMS
SEC. 13101. MODIFICATIONS OF RULES FOR EXPENSING DEPRECIABLE BUSINESS
ASSETS.
(a) Increase in Limitation.--
(1) Dollar limitation.--Section 179(b)(1) is amended by
striking ``$500,000'' and inserting ``$1,000,000''.
(2) Reduction in limitation.--Section 179(b)(2) is amended by
striking ``$2,000,000'' and inserting ``$2,500,000''.
(3) Inflation adjustments.--
(A) In general.--Subparagraph (A) of section 179(b)(6), as
amended by section 11002(d), is amended--
(i) by striking ``2015'' and inserting ``2018'', and
(ii) in clause (ii), by striking ``calendar year 2014''
and inserting ``calendar year 2017''.
(B) Sport utility vehicles.--Section 179(b)(6) is amended--
(i) in subparagraph (A), by striking ``paragraphs (1)
and (2)'' and inserting ``paragraphs (1), (2), and
(5)(A)'', and
(ii) in subparagraph (B), by inserting ``($100 in the
case of any increase in the amount under paragraph
(5)(A))'' after ``$10,000''.
(b) Section 179 Property To Include Qualified Real Property.--
(1) In general.--Subparagraph (B) of section 179(d)(1) is
amended to read as follows:
``(B) which is--
``(i) section 1245 property (as defined in section
1245(a)(3)), or
``(ii) at the election of the taxpayer, qualified real
property (as defined in subsection (f)), and''.
(2) Qualified real property defined.--Subsection (f) of section
179 is amended to read as follows:
``(f) Qualified Real Property.--For purposes of this section, the
term `qualified real property' means--
``(1) any qualified improvement property described in section
168(e)(6), and
``(2) any of the following improvements to nonresidential real
property placed in service after the date such property was first
placed in service:
``(A) Roofs.
``(B) Heating, ventilation, and air-conditioning property.
``(C) Fire protection and alarm systems.
``(D) Security systems.''.
(c) Repeal of Exclusion for Certain Property.--The last sentence of
section 179(d)(1) is amended by inserting ``(other than paragraph (2)
thereof)'' after ``section 50(b)''.
(d) Effective Date.--The amendments made by this section shall
apply to property placed in service in taxable years beginning after
December 31, 2017.
SEC. 13102. SMALL BUSINESS ACCOUNTING METHOD REFORM AND SIMPLIFICATION.
(a) Modification of Limitation on Cash Method of Accounting.--
(1) Increased limitation.--So much of section 448(c) as
precedes paragraph (2) is amended to read as follows:
``(c) Gross Receipts Test.--For purposes of this section--
``(1) In general.--A corporation or partnership meets the gross
receipts test of this subsection for any taxable year if the
average annual gross receipts of such entity for the 3-taxable-year
period ending with the taxable year which precedes such taxable
year does not exceed $25,000,000.''.
(2) Application of exception on annual basis.--Section
448(b)(3) is amended to read as follows:
``(3) Entities which meet gross receipts test.--Paragraphs (1)
and (2) of subsection (a) shall not apply to any corporation or
partnership for any taxable year if such entity (or any
predecessor) meets the gross receipts test of subsection (c) for
such taxable year.''.
(3) Inflation adjustment.--Section 448(c) is amended by adding
at the end the following new paragraph:
``(4) Adjustment for inflation.--In the case of any taxable
year beginning after December 31, 2018, the dollar amount in
paragraph (1) shall be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable year
begins, by substituting `calendar year 2017' for `calendar year
2016' in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a
multiple of $1,000,000, such amount shall be rounded to the nearest
multiple of $1,000,000.''.
(4) Coordination with section 481.--Section 448(d)(7) is
amended to read as follows:
``(7) Coordination with section 481.--Any change in method of
accounting made pursuant to this section shall be treated for
purposes of section 481 as initiated by the taxpayer and made with
the consent of the Secretary.''.
(5) Application of exception to corporations engaged in
farming.--
(A) In general.--Section 447(c) is amended--
(i) by inserting ``for any taxable year'' after ``not
being a corporation'' in the matter preceding paragraph
(1), and
(ii) by amending paragraph (2) to read as follows:
``(2) a corporation which meets the gross receipts test of
section 448(c) for such taxable year.''.
(B) Coordination with section 481.--Section 447(f) is
amended to read as follows:
``(f) Coordination With Section 481.--Any change in method of
accounting made pursuant to this section shall be treated for purposes
of section 481 as initiated by the taxpayer and made with the consent
of the Secretary.''.
(C) Conforming amendments.--Section 447 is amended--
(i) by striking subsections (d), (e), (h), and (i), and
(ii) by redesignating subsections (f) and (g) (as
amended by subparagraph (B)) as subsections (d) and (e),
respectively.
(b) Exemption From UNICAP Requirements.--
(1) In general.--Section 263A is amended by redesignating
subsection (i) as subsection (j) and by inserting after subsection
(h) the following new subsection:
``(i) Exemption for Certain Small Businesses.--
``(1) In general.--In the case of any taxpayer (other than a
tax shelter prohibited from using the cash receipts and
disbursements method of accounting under section 448(a)(3)) which
meets the gross receipts test of section 448(c) for any taxable
year, this section shall not apply with respect to such taxpayer
for such taxable year.
``(2) Application of gross receipts test to individuals, etc.--
In the case of any taxpayer which is not a corporation or a
partnership, the gross receipts test of section 448(c) shall be
applied in the same manner as if each trade or business of such
taxpayer were a corporation or partnership.
``(3) Coordination with section 481.--Any change in method of
accounting made pursuant to this subsection shall be treated for
purposes of section 481 as initiated by the taxpayer and made with
the consent of the Secretary.''.
(2) Conforming amendment.--Section 263A(b)(2) is amended to
read as follows:
``(2) Property acquired for resale.--Real or personal property
described in section 1221(a)(1) which is acquired by the taxpayer
for resale.''.
(c) Exemption From Inventories.--Section 471 is amended by
redesignating subsection (c) as subsection (d) and by inserting after
subsection (b) the following new subsection:
``(c) Exemption for Certain Small Businesses.--
``(1) In general.--In the case of any taxpayer (other than a
tax shelter prohibited from using the cash receipts and
disbursements method of accounting under section 448(a)(3)) which
meets the gross receipts test of section 448(c) for any taxable
year--
``(A) subsection (a) shall not apply with respect to such
taxpayer for such taxable year, and
``(B) the taxpayer's method of accounting for inventory for
such taxable year shall not be treated as failing to clearly
reflect income if such method either--
``(i) treats inventory as non-incidental materials and
supplies, or
``(ii) conforms to such taxpayer's method of accounting
reflected in an applicable financial statement of the
taxpayer with respect to such taxable year or, if the
taxpayer does not have any applicable financial statement
with respect to such taxable year, the books and records of
the taxpayer prepared in accordance with the taxpayer's
accounting procedures.
``(2) Applicable financial statement.--For purposes of this
subsection, the term `applicable financial statement' has the
meaning given the term in section 451(b)(3).
``(3) Application of gross receipts test to individuals, etc.--
In the case of any taxpayer which is not a corporation or a
partnership, the gross receipts test of section 448(c) shall be
applied in the same manner as if each trade or business of such
taxpayer were a corporation or partnership.
``(4) Coordination with section 481.--Any change in method of
accounting made pursuant to this subsection shall be treated for
purposes of section 481 as initiated by the taxpayer and made with
the consent of the Secretary.''.
(d) Exemption From Percentage Completion for Long-term Contracts.--
(1) In general.--Section 460(e)(1)(B) is amended--
(A) by inserting ``(other than a tax shelter prohibited
from using the cash receipts and disbursements method of
accounting under section 448(a)(3))'' after ``taxpayer'' in the
matter preceding clause (i), and
(B) by amending clause (ii) to read as follows:
``(ii) who meets the gross receipts test of section
448(c) for the taxable year in which such contract is
entered into.''.
(2) Conforming amendments.--Section 460(e) is amended by
striking paragraphs (2) and (3), by redesignating paragraphs (4),
(5), and (6) as paragraphs (3), (4), and (5), respectively, and by
inserting after paragraph (1) the following new paragraph:
``(2) Rules related to gross receipts test.--
``(A) Application of gross receipts test to individuals,
etc.-- For purposes of paragraph (1)(B)(ii), in the case of any
taxpayer which is not a corporation or a partnership, the gross
receipts test of section 448(c) shall be applied in the same
manner as if each trade or business of such taxpayer were a
corporation or partnership.
``(B) Coordination with section 481.--Any change in method
of accounting made pursuant to paragraph (1)(B)(ii) shall be
treated as initiated by the taxpayer and made with the consent
of the Secretary. Such change shall be effected on a cut-off
basis for all similarly classified contracts entered into on or
after the year of change.''.
(e) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
taxable years beginning after December 31, 2017.
(2) Preservation of suspense account rules with respect to any
existing suspense accounts.--So much of the amendments made by
subsection (a)(5)(C) as relate to section 447(i) of the Internal
Revenue Code of 1986 shall not apply with respect to any suspense
account established under such section before the date of the
enactment of this Act.
(3) Exemption from percentage completion for long-term
contracts.--The amendments made by subsection (d) shall apply to
contracts entered into after December 31, 2017, in taxable years
ending after such date.
PART III--COST RECOVERY AND ACCOUNTING METHODS
Subpart A--Cost Recovery
SEC. 13201. TEMPORARY 100-PERCENT EXPENSING FOR CERTAIN BUSINESS
ASSETS.
(a) Increased Expensing.--
(1) In general.--Section 168(k) is amended--
(A) in paragraph (1)(A), by striking ``50 percent'' and
inserting ``the applicable percentage'', and
(B) in paragraph (5)(A)(i), by striking ``50 percent'' and
inserting ``the applicable percentage''.
(2) Applicable percentage.--Paragraph (6) of section 168(k) is
amended to read as follows:
``(6) Applicable percentage.--For purposes of this subsection--
``(A) In general.--Except as otherwise provided in this
paragraph, the term `applicable percentage' means--
``(i) in the case of property placed in service after
September 27, 2017, and before January 1, 2023, 100
percent,
``(ii) in the case of property placed in service after
December 31, 2022, and before January 1, 2024, 80 percent,
``(iii) in the case of property placed in service after
December 31, 2023, and before January 1, 2025, 60 percent,
``(iv) in the case of property placed in service after
December 31, 2024, and before January 1, 2026, 40 percent,
and
``(v) in the case of property placed in service after
December 31, 2025, and before January 1, 2027, 20 percent.
``(B) Rule for property with longer production periods.--In
the case of property described in subparagraph (B) or (C) of
paragraph (2), the term `applicable percentage' means--
``(i) in the case of property placed in service after
September 27, 2017, and before January 1, 2024, 100
percent,
``(ii) in the case of property placed in service after
December 31, 2023, and before January 1, 2025, 80 percent,
``(iii) in the case of property placed in service after
December 31, 2024, and before January 1, 2026, 60 percent,
``(iv) in the case of property placed in service after
December 31, 2025, and before January 1, 2027, 40 percent,
and
``(v) in the case of property placed in service after
December 31, 2026, and before January 1, 2028, 20 percent.
``(C) Rule for plants bearing fruits and nuts.--In the case
of a specified plant described in paragraph (5), the term
`applicable percentage' means--
``(i) in the case of a plant which is planted or
grafted after September 27, 2017, and before January 1,
2023, 100 percent,
``(ii) in the case of a plant which is planted or
grafted after December 31, 2022, and before January 1,
2024, 80 percent,
``(iii) in the case of a plant which is planted or
grafted after December 31, 2023, and before January 1,
2025, 60 percent,
``(iv) in the case of a plant which is planted or
grafted after December 31, 2024, and before January 1,
2026, 40 percent, and
``(v) in the case of a plant which is planted or
grafted after December 31, 2025, and before January 1,
2027, 20 percent.''.
(3) Conforming amendment.--
(A) Paragraph (5) of section 168(k) is amended by striking
subparagraph (F).
(B) Section 168(k) is amended by adding at the end the
following new paragraph:
``(8) Phase down.--In the case of qualified property acquired
by the taxpayer before September 28, 2017, and placed in service by
the taxpayer after September 27, 2017, paragraph (6) shall be
applied by substituting for each percentage therein--
``(A) `50 percent' in the case of--
``(i) property placed in service before January 1,
2018, and
``(ii) property described in subparagraph (B) or (C) of
paragraph (2) which is placed in service in 2018,
``(B) `40 percent' in the case of--
``(i) property placed in service in 2018 (other than
property described in subparagraph (B) or (C) of paragraph
(2)), and
``(ii) property described in subparagraph (B) or (C) of
paragraph (2) which is placed in service in 2019,
``(C) `30 percent' in the case of--
``(i) property placed in service in 2019 (other than
property described in subparagraph (B) or (C) of paragraph
(2)), and
``(ii) property described in subparagraph (B) or (C) of
paragraph (2) which is placed in service in 2020, and
``(D) `0 percent' in the case of--
``(i) property placed in service after 2019 (other than
property described in subparagraph (B) or (C) of paragraph
(2)), and
``(ii) property described in subparagraph (B) or (C) of
paragraph (2) which is placed in service after 2020.''.
(b) Extension.--
(1) In general.--Section 168(k) is amended--
(A) in paragraph (2)--
(i) in subparagraph (A)(iii), clauses (i)(III) and (ii)
of subparagraph (B), and subparagraph (E)(i), by striking
``January 1, 2020'' each place it appears and inserting
``January 1, 2027'', and
(ii) in subparagraph (B)--
(I) in clause (i)(II), by striking ``January 1,
2021'' and inserting ``January 1, 2028'', and
(II) in the heading of clause (ii), by striking
``pre-january 1, 2020'' and inserting ``pre-january 1,
2027'', and
(B) in paragraph (5)(A), by striking ``January 1, 2020''
and inserting ``January 1, 2027''.
(2) Conforming amendments.--
(A) Clause (ii) of section 460(c)(6)(B) is amended by
striking ``January 1, 2020 (January 1, 2021'' and inserting
``January 1, 2027 (January 1, 2028''.
(B) The heading of section 168(k) is amended by striking
``Acquired After December 31, 2007, and Before January 1,
2020''.
(c) Application to Used Property.--
(1) In general.--Section 168(k)(2)(A)(ii) is amended to read as
follows:
``(ii) the original use of which begins with the
taxpayer or the acquisition of which by the taxpayer meets
the requirements of clause (ii) of subparagraph (E), and''.
(2) Acquisition requirements.--Section 168(k)(2)(E)(ii) is
amended to read as follows:
``(ii) Acquisition requirements.--An acquisition of
property meets the requirements of this clause if--
``(I) such property was not used by the taxpayer at
any time prior to such acquisition, and
``(II) the acquisition of such property meets the
requirements of paragraphs (2)(A), (2)(B), (2)(C), and
(3) of section 179(d).'',
(3) Anti-abuse rules.--Section 168(k)(2)(E) is further amended
by amending clause (iii)(I) to read as follows:
``(I) property is used by a lessor of such property
and such use is the lessor's first use of such
property,''.
(d) Exception for Certain Property.--Section 168(k), as amended by
this section, is amended by adding at the end the following new
paragraph:
``(9) Exception for certain property.--The term `qualified
property' shall not include--
``(A) any property which is primarily used in a trade or
business described in clause (iv) of section 163(j)(7)(A), or
``(B) any property used in a trade or business that has had
floor plan financing indebtedness (as defined in paragraph (9)
of section 163(j)), if the floor plan financing interest
related to such indebtedness was taken into account under
paragraph (1)(C) of such section.''.
(e) Special Rule.--Section 168(k), as amended by this section, is
amended by adding at the end the following new paragraph:
``(10) Special rule for property placed in service during
certain periods.--
``(A) In general.--In the case of qualified property placed
in service by the taxpayer during the first taxable year ending
after September 27, 2017, if the taxpayer elects to have this
paragraph apply for such taxable year, paragraphs (1)(A) and
(5)(A)(i) shall be applied by substituting `50 percent' for
`the applicable percentage'.
``(B) Form of election.--Any election under this paragraph
shall be made at such time and in such form and manner as the
Secretary may prescribe.''.
(f) Coordination With Section 280F.--Clause (iii) of section
168(k)(2)(F) is amended by striking ``placed in service by the taxpayer
after December 31, 2017'' and inserting ``acquired by the taxpayer
before September 28, 2017, and placed in service by the taxpayer after
September 27, 2017''.
(g) Qualified Film and Television and Live Theatrical
Productions.--
(1) In general.--Clause (i) of section 168(k)(2)(A), as amended
by section 13204, is amended--
(A) in subclause (II), by striking ``or'',
(B) in subclause (III), by adding ``or'' after the comma,
and
(C) by adding at the end the following:
``(IV) which is a qualified film or television
production (as defined in subsection (d) of section 181)
for which a deduction would have been allowable under
section 181 without regard to subsections (a)(2) and (g) of
such section or this subsection, or
``(V) which is a qualified live theatrical production
(as defined in subsection (e) of section 181) for which a
deduction would have been allowable under section 181
without regard to subsections (a)(2) and (g) of such
section or this subsection,''.
(2) Production placed in service.--Paragraph (2) of section
168(k) is amended by adding at the end the following:
``(H) Production placed in service.--For purposes of
subparagraph (A)--
``(i) a qualified film or television production shall
be considered to be placed in service at the time of
initial release or broadcast, and
``(ii) a qualified live theatrical production shall be
considered to be placed in service at the time of the
initial live staged performance.''.
(h) Effective Date.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall apply to property which--
(A) is acquired after September 27, 2017, and
(B) is placed in service after such date.
For purposes of the preceding sentence, property shall not be
treated as acquired after the date on which a written binding
contract is entered into for such acquisition.
(2) Specified plants.--The amendments made by this section
shall apply to specified plants planted or grafted after September
27, 2017.
SEC. 13202. MODIFICATIONS TO DEPRECIATION LIMITATIONS ON LUXURY
AUTOMOBILES AND PERSONAL USE PROPERTY.
(a) Luxury Automobiles.--
(1) In general.--280F(a)(1)(A) is amended--
(A) in clause (i), by striking ``$2,560'' and inserting
``$10,000'',
(B) in clause (ii), by striking ``$4,100'' and inserting
``$16,000'',
(C) in clause (iii), by striking ``$2,450'' and inserting
``$9,600'', and
(D) in clause (iv), by striking ``$1,475'' and inserting
``$5,760''.
(2) Conforming amendments.--
(A) Clause (ii) of section 280F(a)(1)(B) is amended by
striking ``$1,475'' in the text and heading and inserting
``$5,760''.
(B) Paragraph (7) of section 280F(d) is amended--
(i) in subparagraph (A), by striking ``1988'' and
inserting ``2018'', and
(ii) in subparagraph (B)(i)(II), by striking ``1987''
and inserting ``2017''.
(b) Removal of Computer Equipment From Listed Property.--
(1) In general.--Section 280F(d)(4)(A) is amended--
(A) by inserting ``and'' at the end of clause (iii),
(B) by striking clause (iv), and
(C) by redesignating clause (v) as clause (iv).
(2) Conforming amendment.--Section 280F(d)(4) is amended by
striking subparagraph (B) and by redesignating subparagraph (C) as
subparagraph (B).
(c) Effective Date.--The amendments made by this section shall
apply to property placed in service after December 31, 2017, in taxable
years ending after such date.
SEC. 13203. MODIFICATIONS OF TREATMENT OF CERTAIN FARM PROPERTY.
(a) Treatment of Certain Farm Property as 5-Year Property.--Clause
(vii) of section 168(e)(3)(B) is amended by striking ``after December
31, 2008, and which is placed in service before January 1, 2010'' and
inserting ``after December 31, 2017''.
(b) Repeal of Required Use of 150-Percent Declining Balance
Method.--Section 168(b)(2) is amended by striking subparagraph (B) and
by redesignating subparagraphs (C) and (D) as subparagraphs (B) and
(C), respectively.
(c) Effective Date.--The amendments made by this section shall
apply to property placed in service after December 31, 2017, in taxable
years ending after such date.
SEC. 13204. APPLICABLE RECOVERY PERIOD FOR REAL PROPERTY.
(a) Improvements to Real Property.--
(1) Elimination of qualified leasehold improvement, qualified
restaurant, and qualified retail improvement property.--Subsection
(e) of section 168 is amended--
(A) in subparagraph (E) of paragraph (3)--
(i) by striking clauses (iv), (v), and (ix),
(ii) in clause (vii), by inserting ``and'' at the end,
(iii) in clause (viii), by striking ``, and'' and
inserting a period, and
(iv) by redesignating clauses (vi), (vii), and (viii),
as so amended, as clauses (iv), (v), and (vi),
respectively, and
(B) by striking paragraphs (6), (7), and (8).
(2) Application of straight line method to qualified
improvement property.--Paragraph (3) of section 168(b) is amended--
(A) by striking subparagraphs (G), (H), and (I), and
(B) by inserting after subparagraph (F) the following new
subparagraph:
``(G) Qualified improvement property described in
subsection (e)(6).''.
(3) Alternative depreciation system.--
(A) Electing real property trade or business.--Subsection
(g) of section 168 is amended--
(i) in paragraph (1)--
(I) in subparagraph (D), by striking ``and'' at the
end,
(II) in subparagraph (E), by inserting ``and'' at
the end, and
(III) by inserting after subparagraph (E) the
following new subparagraph:
``(F) any property described in paragraph (8),'', and
(ii) by adding at the end the following new paragraph:
``(8) Electing real property trade or business.--The property
described in this paragraph shall consist of any nonresidential
real property, residential rental property, and qualified
improvement property held by an electing real property trade or
business (as defined in 163(j)(7)(B)).''.
(B) Qualified improvement property.--The table contained in
subparagraph (B) of section 168(g)(3) is amended--
(i) by inserting after the item relating to
subparagraph (D)(ii) the following new item:
``(D)(v)..................................................
20''
, and
(ii) by striking the item relating to subparagraph
(E)(iv) and all that follows through the item relating to
subparagraph (E)(ix) and inserting the following:
``(E)(iv).................................................
20
(E)(v)....................................................
30
(E)(vi)...................................................
35''.
(C) Applicable recovery period for residential rental
property.--The table contained in subparagraph (C) of section
168(g)(2) is amended by striking clauses (iii) and (iv) and
inserting the following:
``(iii) Residential rental property.......................
30 years
(iv) Nonresidential real property.........................
40 years
(v) Any railroad grading or tunnel bore or water utility
property................................................
50 years''.
(4) Conforming amendments.--
(A) Clause (i) of section 168(k)(2)(A) is amended--
(i) in subclause (II), by inserting ``or'' after the
comma,
(ii) in subclause (III), by striking ``or'' at the end,
and
(iii) by striking subclause (IV).
(B) Section 168 is amended--
(i) in subsection (e), as amended by paragraph (1)(B),
by adding at the end the following:
``(6) Qualified improvement property.--
``(A) In general.--The term `qualified improvement
property' means any improvement to an interior portion of a
building which is nonresidential real property if such
improvement is placed in service after the date such building
was first placed in service.
``(B) Certain improvements not included.--Such term shall
not include any improvement for which the expenditure is
attributable to--
``(i) the enlargement of the building,
``(ii) any elevator or escalator, or
``(iii) the internal structural framework of the
building.'', and
(ii) in subsection (k), by striking paragraph (3).
(b) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to property placed in
service after December 31, 2017.
(2) Amendments related to electing real property trade or
business.--The amendments made by subsection (a)(3)(A) shall apply
to taxable years beginning after December 31, 2017.
SEC. 13205. USE OF ALTERNATIVE DEPRECIATION SYSTEM FOR ELECTING FARMING
BUSINESSES.
(a) In General.--Section 168(g)(1), as amended by section 13204, is
amended by striking ``and'' at the end of subparagraph (E), by
inserting ``and'' at the end of subparagraph (F), and by inserting
after subparagraph (F) the following new subparagraph:
``(G) any property with a recovery period of 10 years or
more which is held by an electing farming business (as defined
in section 163(j)(7)(C)),''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13206. AMORTIZATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.
(a) In General.--Section 174 is amended to read as follows:
``SEC. 174. AMORTIZATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.
``(a) In General.--In the case of a taxpayer's specified research
or experimental expenditures for any taxable year--
``(1) except as provided in paragraph (2), no deduction shall
be allowed for such expenditures, and
``(2) the taxpayer shall--
``(A) charge such expenditures to capital account, and
``(B) be allowed an amortization deduction of such
expenditures ratably over the 5-year period (15-year period in
the case of any specified research or experimental expenditures
which are attributable to foreign research (within the meaning
of section 41(d)(4)(F))) beginning with the midpoint of the
taxable year in which such expenditures are paid or incurred.
``(b) Specified Research or Experimental Expenditures.--For
purposes of this section, the term `specified research or experimental
expenditures' means, with respect to any taxable year, research or
experimental expenditures which are paid or incurred by the taxpayer
during such taxable year in connection with the taxpayer's trade or
business.
``(c) Special Rules.--
``(1) Land and other property.--This section shall not apply to
any expenditure for the acquisition or improvement of land, or for
the acquisition or improvement of property to be used in connection
with the research or experimentation and of a character which is
subject to the allowance under section 167 (relating to allowance
for depreciation, etc.) or section 611 (relating to allowance for
depletion); but for purposes of this section allowances under
section 167, and allowances under section 611, shall be considered
as expenditures.
``(2) Exploration expenditures.--This section shall not apply
to any expenditure paid or incurred for the purpose of ascertaining
the existence, location, extent, or quality of any deposit of ore
or other mineral (including oil and gas).
``(3) Software development.--For purposes of this section, any
amount paid or incurred in connection with the development of any
software shall be treated as a research or experimental
expenditure.
``(d) Treatment Upon Disposition, Retirement, or Abandonment.--If
any property with respect to which specified research or experimental
expenditures are paid or incurred is disposed, retired, or abandoned
during the period during which such expenditures are allowed as an
amortization deduction under this section, no deduction shall be
allowed with respect to such expenditures on account of such
disposition, retirement, or abandonment and such amortization deduction
shall continue with respect to such expenditures.''.
(b) Change in Method of Accounting.--The amendments made by
subsection (a) shall be treated as a change in method of accounting for
purposes of section 481 of the Internal Revenue Code of 1986 and--
(1) such change shall be treated as initiated by the taxpayer,
(2) such change shall be treated as made with the consent of
the Secretary, and
(3) such change shall be applied only on a cut-off basis for
any research or experimental expenditures paid or incurred in
taxable years beginning after December 31, 2021, and no adjustments
under section 481(a) shall be made.
(c) Clerical Amendment.--The table of sections for part VI of
subchapter B of chapter 1 is amended by striking the item relating to
section 174 and inserting the following new item:
``Sec. 174. Amortization of research and experimental expenditures.''.
(d) Conforming Amendments.--
(1) Section 41(d)(1)(A) is amended by striking ``expenses under
section 174'' and inserting ``specified research or experimental
expenditures under section 174''.
(2) Subsection (c) of section 280C is amended--
(A) by striking paragraph (1) and inserting the following:
``(1) In general.--If--
``(A) the amount of the credit determined for the taxable
year under section 41(a)(1), exceeds
``(B) the amount allowable as a deduction for such taxable
year for qualified research expenses or basic research
expenses,
the amount chargeable to capital account for the taxable year for
such expenses shall be reduced by the amount of such excess.'',
(B) by striking paragraph (2),
(C) by redesignating paragraphs (3) (as amended by this
Act) and (4) as paragraphs (2) and (3), respectively, and
(D) in paragraph (2), as redesignated by subparagraph (C),
by striking ``paragraphs (1) and (2)'' and inserting
``paragraph (1)''.
(e) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred in taxable years beginning after
December 31, 2021.
SEC. 13207. EXPENSING OF CERTAIN COSTS OF REPLANTING CITRUS PLANTS LOST
BY REASON OF CASUALTY.
(a) In General.--Section 263A(d)(2) is amended by adding at the end
the following new subparagraph:
``(C) Special temporary rule for citrus plants lost by
reason of casualty.--
``(i) In general.--In the case of the replanting of
citrus plants, subparagraph (A) shall apply to amounts paid
or incurred by a person (other than the taxpayer described
in subparagraph (A)) if--
``(I) the taxpayer described in subparagraph (A)
has an equity interest of not less than 50 percent in
the replanted citrus plants at all times during the
taxable year in which such amounts were paid or
incurred and such other person holds any part of the
remaining equity interest, or
``(II) such other person acquired the entirety of
such taxpayer's equity interest in the land on which
the lost or damaged citrus plants were located at the
time of such loss or damage, and the replanting is on
such land.
``(ii) Termination.--Clause (i) shall not apply to any
cost paid or incurred after the date which is 10 years
after the date of the enactment of the Tax Cuts and Jobs
Act.''.
(b) Effective Date.--The amendment made by this section shall apply
to costs paid or incurred after the date of the enactment of this Act.
Subpart B--Accounting Methods
SEC. 13221. CERTAIN SPECIAL RULES FOR TAXABLE YEAR OF INCLUSION.
(a) Inclusion Not Later Than for Financial Accounting Purposes.--
Section 451 is amended by redesignating subsections (b) through (i) as
subsections (c) through (j), respectively, and by inserting after
subsection (a) the following new subsection:
``(b) Inclusion Not Later Than for Financial Accounting Purposes.--
``(1) Income taken into account in financial statement.--
``(A) In general.--In the case of a taxpayer the taxable
income of which is computed under an accrual method of
accounting, the all events test with respect to any item of
gross income (or portion thereof) shall not be treated as met
any later than when such item (or portion thereof) is taken
into account as revenue in--
``(i) an applicable financial statement of the
taxpayer, or
``(ii) such other financial statement as the Secretary
may specify for purposes of this subsection.
``(B) Exception.--This paragraph shall not apply to--
``(i) a taxpayer which does not have a financial
statement described in clause (i) or (ii) of subparagraph
(A) for a taxable year, or
``(ii) any item of gross income in connection with a
mortgage servicing contract.
``(C) All events test.--For purposes of this section, the
all events test is met with respect to any item of gross income
if all the events have occurred which fix the right to receive
such income and the amount of such income can be determined
with reasonable accuracy.
``(2) Coordination with special methods of accounting.--
Paragraph (1) shall not apply with respect to any item of gross
income for which the taxpayer uses a special method of accounting
provided under any other provision of this chapter, other than any
provision of part V of subchapter P (except as provided in clause
(ii) of paragraph (1)(B)).
``(3) Applicable financial statement.--For purposes of this
subsection, the term `applicable financial statement' means--
``(A) a financial statement which is certified as being
prepared in accordance with generally accepted accounting
principles and which is--
``(i) a 10-K (or successor form), or annual statement
to shareholders, required to be filed by the taxpayer with
the United States Securities and Exchange Commission,
``(ii) an audited financial statement of the taxpayer
which is used for--
``(I) credit purposes,
``(II) reporting to shareholders, partners, or
other proprietors, or to beneficiaries, or
``(III) any other substantial nontax purpose,
but only if there is no statement of the taxpayer described
in clause (i), or
``(iii) filed by the taxpayer with any other Federal
agency for purposes other than Federal tax purposes, but
only if there is no statement of the taxpayer described in
clause (i) or (ii),
``(B) a financial statement which is made on the basis of
international financial reporting standards and is filed by the
taxpayer with an agency of a foreign government which is
equivalent to the United States Securities and Exchange
Commission and which has reporting standards not less stringent
than the standards required by such Commission, but only if
there is no statement of the taxpayer described in subparagraph
(A), or
``(C) a financial statement filed by the taxpayer with any
other regulatory or governmental body specified by the
Secretary, but only if there is no statement of the taxpayer
described in subparagraph (A) or (B).
``(4) Allocation of transaction price.--For purposes of this
subsection, in the case of a contract which contains multiple
performance obligations, the allocation of the transaction price to
each performance obligation shall be equal to the amount allocated
to each performance obligation for purposes of including such item
in revenue in the applicable financial statement of the taxpayer.
``(5) Group of entities.--For purposes of paragraph (1), if the
financial results of a taxpayer are reported on the applicable
financial statement (as defined in paragraph (3)) for a group of
entities, such statement shall be treated as the applicable
financial statement of the taxpayer.''.
(b) Treatment of Advance Payments.--Section 451, as amended by
subsection (a), is amended by redesignating subsections (c) through (j)
as subsections (d) through (k), respectively, and by inserting after
subsection (b) the following new subsection:
``(c) Treatment of Advance Payments.--
``(1) In general.--A taxpayer which computes taxable income
under the accrual method of accounting, and receives any advance
payment during the taxable year, shall--
``(A) except as provided in subparagraph (B), include such
advance payment in gross income for such taxable year, or
``(B) if the taxpayer elects the application of this
subparagraph with respect to the category of advance payments
to which such advance payment belongs, the taxpayer shall--
``(i) to the extent that any portion of such advance
payment is required under subsection (b) to be included in
gross income in the taxable year in which such payment is
received, so include such portion, and
``(ii) include the remaining portion of such advance
payment in gross income in the taxable year following the
taxable year in which such payment is received.
``(2) Election.--
``(A) In general.--Except as otherwise provided in this
paragraph, the election under paragraph (1)(B) shall be made at
such time, in such form and manner, and with respect to such
categories of advance payments, as the Secretary may provide.
``(B) Period to which election applies.--An election under
paragraph (1)(B) shall be effective for the taxable year with
respect to which it is first made and for all subsequent
taxable years, unless the taxpayer secures the consent of the
Secretary to revoke such election. For purposes of this title,
the computation of taxable income under an election made under
paragraph (1)(B) shall be treated as a method of accounting.
``(3) Taxpayers ceasing to exist.--Except as otherwise provided
by the Secretary, the election under paragraph (1)(B) shall not
apply with respect to advance payments received by the taxpayer
during a taxable year if such taxpayer ceases to exist during (or
with the close of) such taxable year.
``(4) Advance payment.--For purposes of this subsection--
``(A) In general.--The term `advance payment' means any
payment--
``(i) the full inclusion of which in the gross income
of the taxpayer for the taxable year of receipt is a
permissible method of accounting under this section
(determined without regard to this subsection),
``(ii) any portion of which is included in revenue by
the taxpayer in a financial statement described in clause
(i) or (ii) of subsection (b)(1)(A) for a subsequent
taxable year, and
``(iii) which is for goods, services, or such other
items as may be identified by the Secretary for purposes of
this clause.
``(B) Exclusions.--Except as otherwise provided by the
Secretary, such term shall not include--
``(i) rent,
``(ii) insurance premiums governed by subchapter L,
``(iii) payments with respect to financial instruments,
``(iv) payments with respect to warranty or guarantee
contracts under which a third party is the primary obligor,
``(v) payments subject to section 871(a), 881, 1441, or
1442,
``(vi) payments in property to which section 83
applies, and
``(vii) any other payment identified by the Secretary
for purposes of this subparagraph.
``(C) Receipt.--For purposes of this subsection, an item of
gross income is received by the taxpayer if it is actually or
constructively received, or if it is due and payable to the
taxpayer.
``(D) Allocation of transaction price.--For purposes of
this subsection, rules similar to subsection (b)(4) shall
apply.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
(d) Coordination With Section 481.--
(1) In general.--In the case of any qualified change in method
of accounting for the taxpayer's first taxable year beginning after
December 31, 2017--
(A) such change shall be treated as initiated by the
taxpayer, and
(B) such change shall be treated as made with the consent
of the Secretary of the Treasury.
(2) Qualified change in method of accounting.--For purposes of
this subsection, the term ``qualified change in method of
accounting'' means any change in method of accounting which--
(A) is required by the amendments made by this section, or
(B) was prohibited under the Internal Revenue Code of 1986
prior to such amendments and is permitted under such Code after
such amendments.
(e) Special Rules for Original Issue Discount.--Notwithstanding
subsection (c), in the case of income from a debt instrument having
original issue discount--
(1) the amendments made by this section shall apply to taxable
years beginning after December 31, 2018, and
(2) the period for taking into account any adjustments under
section 481 by reason of a qualified change in method of accounting
(as defined in subsection (d)) shall be 6 years.
PART IV--BUSINESS-RELATED EXCLUSIONS AND DEDUCTIONS
SEC. 13301. LIMITATION ON DEDUCTION FOR INTEREST.
(a) In General.--Section 163(j) is amended to read as follows:
``(j) Limitation on Business Interest.--
``(1) In general.--The amount allowed as a deduction under this
chapter for any taxable year for business interest shall not exceed
the sum of--
``(A) the business interest income of such taxpayer for
such taxable year,
``(B) 30 percent of the adjusted taxable income of such
taxpayer for such taxable year, plus
``(C) the floor plan financing interest of such taxpayer
for such taxable year.
The amount determined under subparagraph (B) shall not be less than
zero.
``(2) Carryforward of disallowed business interest.--The amount
of any business interest not allowed as a deduction for any taxable
year by reason of paragraph (1) shall be treated as business
interest paid or accrued in the succeeding taxable year.
``(3) Exemption for certain small businesses.--In the case of
any taxpayer (other than a tax shelter prohibited from using the
cash receipts and disbursements method of accounting under section
448(a)(3)) which meets the gross receipts test of section 448(c)
for any taxable year, paragraph (1) shall not apply to such
taxpayer for such taxable year. In the case of any taxpayer which
is not a corporation or a partnership, the gross receipts test of
section 448(c) shall be applied in the same manner as if such
taxpayer were a corporation or partnership.
``(4) Application to partnerships, etc.--
``(A) In general.--In the case of any partnership--
``(i) this subsection shall be applied at the
partnership level and any deduction for business interest
shall be taken into account in determining the non-
separately stated taxable income or loss of the
partnership, and
``(ii) the adjusted taxable income of each partner of
such partnership--
``(I) shall be determined without regard to such
partner's distributive share of any items of income,
gain, deduction, or loss of such partnership, and
``(II) shall be increased by such partner's
distributive share of such partnership's excess taxable
income.
For purposes of clause (ii)(II), a partner's distributive
share of partnership excess taxable income shall be
determined in the same manner as the partner's distributive
share of nonseparately stated taxable income or loss of the
partnership.
``(B) Special rules for carryforwards.--
``(i) In general.--The amount of any business interest
not allowed as a deduction to a partnership for any taxable
year by reason of paragraph (1) for any taxable year--
``(I) shall not be treated under paragraph (2) as
business interest paid or accrued by the partnership in
the succeeding taxable year, and
``(II) shall, subject to clause (ii), be treated as
excess business interest which is allocated to each
partner in the same manner as the non-separately stated
taxable income or loss of the partnership.
``(ii) Treatment of excess business interest allocated
to partners.--If a partner is allocated any excess business
interest from a partnership under clause (i) for any
taxable year--
``(I) such excess business interest shall be
treated as business interest paid or accrued by the
partner in the next succeeding taxable year in which
the partner is allocated excess taxable income from
such partnership, but only to the extent of such excess
taxable income, and
``(II) any portion of such excess business interest
remaining after the application of subclause (I) shall,
subject to the limitations of subclause (I), be treated
as business interest paid or accrued in succeeding
taxable years.
For purposes of applying this paragraph, excess taxable
income allocated to a partner from a partnership for any
taxable year shall not be taken into account under
paragraph (1)(A) with respect to any business interest
other than excess business interest from the partnership
until all such excess business interest for such taxable
year and all preceding taxable years has been treated as
paid or accrued under clause (ii).
``(iii) Basis adjustments.--
``(I) In general.--The adjusted basis of a partner
in a partnership interest shall be reduced (but not
below zero) by the amount of excess business interest
allocated to the partner under clause (i)(II).
``(II) Special rule for dispositions.--If a partner
disposes of a partnership interest, the adjusted basis
of the partner in the partnership interest shall be
increased immediately before the disposition by the
amount of the excess (if any) of the amount of the
basis reduction under subclause (I) over the portion of
any excess business interest allocated to the partner
under clause (i)(II) which has previously been treated
under clause (ii) as business interest paid or accrued
by the partner. The preceding sentence shall also apply
to transfers of the partnership interest (including by
reason of death) in a transaction in which gain is not
recognized in whole or in part. No deduction shall be
allowed to the transferor or transferee under this
chapter for any excess business interest resulting in a
basis increase under this subclause.
``(C) Excess taxable income.--The term `excess taxable
income' means, with respect to any partnership, the amount
which bears the same ratio to the partnership's adjusted
taxable income as--
``(i) the excess (if any) of--
``(I) the amount determined for the partnership
under paragraph (1)(B), over
``(II) the amount (if any) by which the business
interest of the partnership, reduced by the floor plan
financing interest, exceeds the business interest
income of the partnership, bears to
``(ii) the amount determined for the partnership under
paragraph (1)(B).
``(D) Application to s corporations.--Rules similar to the
rules of subparagraphs (A) and (C) shall apply with respect to
any S corporation and its shareholders.
``(5) Business interest.--For purposes of this subsection, the
term `business interest' means any interest paid or accrued on
indebtedness properly allocable to a trade or business. Such term
shall not include investment interest (within the meaning of
subsection (d)).
``(6) Business interest income.--For purposes of this
subsection, the term `business interest income' means the amount of
interest includible in the gross income of the taxpayer for the
taxable year which is properly allocable to a trade or business.
Such term shall not include investment income (within the meaning
of subsection (d)).
``(7) Trade or business.--For purposes of this subsection--
``(A) In general.--The term `trade or business' shall not
include--
``(i) the trade or business of performing services as
an employee,
``(ii) any electing real property trade or business,
``(iii) any electing farming business, or
``(iv) the trade or business of the furnishing or sale
of--
``(I) electrical energy, water, or sewage disposal
services,
``(II) gas or steam through a local distribution
system, or
``(III) transportation of gas or steam by pipeline,
if the rates for such furnishing or sale, as the case may
be, have been established or approved by a State or
political subdivision thereof, by any agency or
instrumentality of the United States, by a public service
or public utility commission or other similar body of any
State or political subdivision thereof, or by the governing
or ratemaking body of an electric cooperative.
``(B) Electing real property trade or business.--For
purposes of this paragraph, the term `electing real property
trade or business' means any trade or business which is
described in section 469(c)(7)(C) and which makes an election
under this subparagraph. Any such election shall be made at
such time and in such manner as the Secretary shall prescribe,
and, once made, shall be irrevocable.
``(C) Electing farming business.--For purposes of this
paragraph, the term `electing farming business' means--
``(i) a farming business (as defined in section
263A(e)(4)) which makes an election under this
subparagraph, or
``(ii) any trade or business of a specified
agricultural or horticultural cooperative (as defined in
section 199A(g)(2)) with respect to which the cooperative
makes an election under this subparagraph.
Any such election shall be made at such time and in such manner
as the Secretary shall prescribe, and, once made, shall be
irrevocable.
``(8) Adjusted taxable income.--For purposes of this
subsection, the term `adjusted taxable income' means the taxable
income of the taxpayer--
``(A) computed without regard to--
``(i) any item of income, gain, deduction, or loss
which is not properly allocable to a trade or business,
``(ii) any business interest or business interest
income,
``(iii) the amount of any net operating loss deduction
under section 172,
``(iv) the amount of any deduction allowed under
section 199A, and
``(v) in the case of taxable years beginning before
January 1, 2022, any deduction allowable for depreciation,
amortization, or depletion, and
``(B) computed with such other adjustments as provided by
the Secretary.
``(9) Floor plan financing interest defined.--For purposes of
this subsection--
``(A) In general.--The term `floor plan financing interest'
means interest paid or accrued on floor plan financing
indebtedness.
``(B) Floor plan financing indebtedness.--The term `floor
plan financing indebtedness' means indebtedness--
``(i) used to finance the acquisition of motor vehicles
held for sale or lease, and
``(ii) secured by the inventory so acquired.
``(C) Motor vehicle.--The term `motor vehicle' means a
motor vehicle that is any of the following:
``(i) Any self-propelled vehicle designed for
transporting persons or property on a public street,
highway, or road.
``(ii) A boat.
``(iii) Farm machinery or equipment.
``(10) Cross references.--
``(A) For requirement that an electing real property trade
or business use the alternative depreciation system, see
section 168(g)(1)(F).
``(B) For requirement that an electing farming business use
the alternative depreciation system, see section
168(g)(1)(G).''.
(b) Treatment of Carryforward of Disallowed Business Interest in
Certain Corporate Acquisitions.--
(1) In general.--Section 381(c) is amended by inserting after
paragraph (19) the following new paragraph:
``(20) Carryforward of disallowed business interest.--The
carryover of disallowed business interest described in section
163(j)(2) to taxable years ending after the date of distribution or
transfer.''.
(2) Application of limitation.--Section 382(d) is amended by
adding at the end the following new paragraph:
``(3) Application to carryforward of disallowed interest.--The
term `pre-change loss' shall include any carryover of disallowed
interest described in section 163(j)(2) under rules similar to the
rules of paragraph (1).''.
(3) Conforming amendment.--Section 382(k)(1) is amended by
inserting after the first sentence the following: ``Such term shall
include any corporation entitled to use a carryforward of
disallowed interest described in section 381(c)(20).''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13302. MODIFICATION OF NET OPERATING LOSS DEDUCTION.
(a) Limitation on Deduction.--
(1) In general.--Section 172(a) is amended to read as follows:
``(a) Deduction Allowed.--There shall be allowed as a deduction for
the taxable year an amount equal to the lesser of--
``(1) the aggregate of the net operating loss carryovers to
such year, plus the net operating loss carrybacks to such year, or
``(2) 80 percent of taxable income computed without regard to
the deduction allowable under this section.
For purposes of this subtitle, the term `net operating loss deduction'
means the deduction allowed by this subsection.''.
(2) Coordination of limitation with carrybacks and
carryovers.--Section 172(b)(2) is amended by striking ``shall be
computed--'' and all that follows and inserting ``shall--
``(A) be computed with the modifications specified in
subsection (d) other than paragraphs (1), (4), and (5) thereof,
and by determining the amount of the net operating loss
deduction without regard to the net operating loss for the loss
year or for any taxable year thereafter,
``(B) not be considered to be less than zero, and
``(C) not exceed the amount determined under subsection
(a)(2) for such prior taxable year.''.
(3) Conforming amendment.--Section 172(d)(6) is amended by
striking ``and'' at the end of subparagraph (A), by striking the
period at the end of subparagraph (B) and inserting ``; and'', and
by adding at the end the following new subparagraph:
``(C) subsection (a)(2) shall be applied by substituting
`real estate investment trust taxable income (as defined in
section 857(b)(2) but without regard to the deduction for
dividends paid (as defined in section 561))' for `taxable
income'.''.
(b) Repeal of Net Operating Loss Carryback; Indefinite
Carryforward.--
(1) In general.--Section 172(b)(1)(A) is amended--
(A) by striking ``shall be a net operating loss carryback
to each of the 2 taxable years'' in clause (i) and inserting
``except as otherwise provided in this paragraph, shall not be
a net operating loss carryback to any taxable year'', and
(B) by striking ``to each of the 20 taxable years'' in
clause (ii) and inserting ``to each taxable year''.
(2) Conforming amendment.--Section 172(b)(1) is amended by
striking subparagraphs (B) through (F).
(c) Treatment of Farming Losses.--
(1) Allowance of carrybacks.--Section 172(b)(1), as amended by
subsection (b)(2), is amended by adding at the end the following
new subparagraph:
``(B) Farming losses.--
``(i) In general.--In the case of any portion of a net
operating loss for the taxable year which is a farming loss
with respect to the taxpayer, such loss shall be a net
operating loss carryback to each of the 2 taxable years
preceding the taxable year of such loss.
``(ii) Farming loss.--For purposes of this section, the
term `farming loss' means the lesser of--
``(I) the amount which would be the net operating
loss for the taxable year if only income and deductions
attributable to farming businesses (as defined in
section 263A(e)(4)) are taken into account, or
``(II) the amount of the net operating loss for
such taxable year.
``(iii) Coordination with paragraph (2).--For purposes
of applying paragraph (2), a farming loss for any taxable
year shall be treated as a separate net operating loss for
such taxable year to be taken into account after the
remaining portion of the net operating loss for such
taxable year.
``(iv) Election.--Any taxpayer entitled to a 2-year
carryback under clause (i) from any loss year may elect not
to have such clause apply to such loss year. Such election
shall be made in such manner as prescribed by the Secretary
and shall be made by the due date (including extensions of
time) for filing the taxpayer's return for the taxable year
of the net operating loss. Such election, once made for any
taxable year, shall be irrevocable for such taxable
year.''.
(2) Conforming amendments.--
(A) Section 172 is amended by striking subsections (f),
(g), and (h), and by redesignating subsection (i) as subsection
(f).
(B) Section 537(b)(4) is amended by inserting ``(as in
effect before the date of enactment of the Tax Cuts and Jobs
Act)'' after ``as defined in section 172(f)''.
(d) Treatment of Certain Insurance Losses.--
(1) Treatment of carryforwards and carrybacks.--Section
172(b)(1), as amended by subsections (b)(2) and (c)(1), is amended
by adding at the end the following new subparagraph:
``(C) Insurance companies.--In the case of an insurance
company (as defined in section 816(a)) other than a life
insurance company, the net operating loss for any taxable
year--
``(i) shall be a net operating loss carryback to each
of the 2 taxable years preceding the taxable year of such
loss, and
``(ii) shall be a net operating loss carryover to each
of the 20 taxable years following the taxable year of the
loss.''.
(2) Exemption from limitation.--Section 172, as amended by
subsection (c)(2)(A), is amended by redesignating subsection (f) as
subsection (g) and inserting after subsection (e) the following new
subsection:
``(f) Special Rule for Insurance Companies.--In the case of an
insurance company (as defined in section 816(a)) other than a life
insurance company--
``(1) the amount of the deduction allowed under subsection (a)
shall be the aggregate of the net operating loss carryovers to such
year, plus the net operating loss carrybacks to such year, and
``(2) subparagraph (C) of subsection (b)(2) shall not apply.''.
(e) Effective Date.--
(1) Net operating loss limitation.--The amendments made by
subsections (a) and (d)(2) shall apply to losses arising in taxable
years beginning after December 31, 2017.
(2) Carryforwards and carrybacks.--The amendments made by
subsections (b), (c), and (d)(1) shall apply to net operating
losses arising in taxable years ending after December 31, 2017.
SEC. 13303. LIKE-KIND EXCHANGES OF REAL PROPERTY.
(a) In General.--Section 1031(a)(1) is amended by striking
``property'' each place it appears and inserting ``real property''.
(b) Conforming Amendments.--
(1)(A) Paragraph (2) of section 1031(a) is amended to read as
follows:
``(2) Exception for real property held for sale.--This
subsection shall not apply to any exchange of real property held
primarily for sale.''.
(B) Section 1031 is amended by striking subsection (i).
(2) Section 1031 is amended by striking subsection (e).
(3) Section 1031, as amended by paragraph (2), is amended by
inserting after subsection (d) the following new subsection:
``(e) Application to Certain Partnerships.--For purposes of this
section, an interest in a partnership which has in effect a valid
election under section 761(a) to be excluded from the application of
all of subchapter K shall be treated as an interest in each of the
assets of such partnership and not as an interest in a partnership.''.
(4) Section 1031(h) is amended to read as follows:
``(h) Special Rules for Foreign Real Property.--Real property
located in the United States and real property located outside the
United States are not property of a like kind.''.
(5) The heading of section 1031 is amended by striking
``property'' and inserting ``real property''.
(6) The table of sections for part III of subchapter O of
chapter 1 is amended by striking the item relating to section 1031
and inserting the following new item:
``Sec. 1031. Exchange of real property held for productive use or
investment.''.
(c) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
exchanges completed after December 31, 2017.
(2) Transition rule.--The amendments made by this section shall
not apply to any exchange if--
(A) the property disposed of by the taxpayer in the
exchange is disposed of on or before December 31, 2017, or
(B) the property received by the taxpayer in the exchange
is received on or before December 31, 2017.
SEC. 13304. LIMITATION ON DEDUCTION BY EMPLOYERS OF EXPENSES FOR FRINGE
BENEFITS.
(a) No Deduction Allowed for Entertainment Expenses.--
(1) In general.--Section 274(a) is amended--
(A) in paragraph (1)(A), by striking ``unless'' and all
that follows through ``trade or business,'',
(B) by striking the flush sentence at the end of paragraph
(1), and
(C) by striking paragraph (2)(C).
(2) Conforming amendments.--
(A) Section 274(d) is amended--
(i) by striking paragraph (2) and redesignating
paragraphs (3) and (4) as paragraphs (2) and (3),
respectively, and
(ii) in the flush text following paragraph (3) (as so
redesignated)--
(I) by striking ``, entertainment, amusement,
recreation, or use of the facility or property,'' in
item (B), and
(II) by striking ``(D) the business relationship to
the taxpayer of persons entertained, using the facility
or property, or receiving the gift'' and inserting
``(D) the business relationship to the taxpayer of the
person receiving the benefit'',
(B) Section 274 is amended by striking subsection (l).
(C) Section 274(n) is amended by striking ``and
Entertainment'' in the heading.
(D) Section 274(n)(1) is amended to read as follows:
``(1) In general.--The amount allowable as a deduction under
this chapter for any expense for food or beverages shall not exceed
50 percent of the amount of such expense which would (but for this
paragraph) be allowable as a deduction under this chapter.''.
(E) Section 274(n)(2) is amended--
(i) in subparagraph (B), by striking ``in the case of
an expense for food or beverages,'',
(ii) by striking subparagraph (C) and redesignating
subparagraphs (D) and (E) as subparagraphs (C) and (D),
respectively,
(iii) by striking ``of subparagraph (E)'' the last
sentence and inserting ``of subparagraph (D)'', and
(iv) by striking ``in subparagraph (D)'' in the last
sentence and inserting ``in subparagraph (C)''.
(F) Clause (iv) of section 7701(b)(5)(A) is amended to read
as follows:
``(iv) a professional athlete who is temporarily in the
United States to compete in a sports event--
``(I) which is organized for the primary purpose of
benefiting an organization which is described in
section 501(c)(3) and exempt from tax under section
501(a),
``(II) all of the net proceeds of which are
contributed to such organization, and,
``(III) which utilizes volunteers for substantially
all of the work performed in carrying out such
event.''.
(b) Only 50 Percent of Expenses for Meals Provided on or Near
Business Premises Allowed as Deduction.--Paragraph (2) of section
274(n), as amended by subsection (a), is amended--
(1) by striking subparagraph (B),
(2) by redesignating subparagraphs (C) and (D) as subparagraphs
(B) and (C), respectively,
(3) by striking ``of subparagraph (D)'' in the last sentence
and inserting ``of subparagraph (C)'', and
(4) by striking ``in subparagraph (C)'' in the last sentence
and inserting ``in subparagraph (B)''.
(c) Treatment of Transportation Benefits.--Section 274, as amended
by subsection (a), is amended--
(1) in subsection (a)--
(A) in the heading, by striking ``or Recreation'' and
inserting ``Recreation, or Qualified Transportation Fringes'',
and
(B) by adding at the end the following new paragraph:
``(4) Qualified transportation fringes.--No deduction shall be
allowed under this chapter for the expense of any qualified
transportation fringe (as defined in section 132(f)) provided to an
employee of the taxpayer.'', and
(2) by inserting after subsection (k) the following new
subsection:
``(l) Transportation and Commuting Benefits.--
``(1) In general.--No deduction shall be allowed under this
chapter for any expense incurred for providing any transportation,
or any payment or reimbursement, to an employee of the taxpayer in
connection with travel between the employee's residence and place
of employment, except as necessary for ensuring the safety of the
employee.
``(2) Exception.--In the case of any qualified bicycle
commuting reimbursement (as described in section 132(f)(5)(F)),
this subsection shall not apply for any amounts paid or incurred
after December 31, 2017, and before January 1, 2026.''.
(d) Elimination of Deduction for Meals Provided at Convenience of
Employer.--Section 274, as amended by subsection (c), is amended--
(1) by redesignating subsection (o) as subsection (p), and
(2) by inserting after subsection (n) the following new
subsection:
``(o) Meals Provided at Convenience of Employer.--No deduction
shall be allowed under this chapter for--
``(1) any expense for the operation of a facility described in
section 132(e)(2), and any expense for food or beverages, including
under section 132(e)(1), associated with such facility, or
``(2) any expense for meals described in section 119(a).''.
(e) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to amounts incurred or
paid after December 31, 2017.
(2) Effective date for elimination of deduction for meals
provided at convenience of employer.--The amendments made by
subsection (d) shall apply to amounts incurred or paid after
December 31, 2025.
SEC. 13305. REPEAL OF DEDUCTION FOR INCOME ATTRIBUTABLE TO DOMESTIC
PRODUCTION ACTIVITIES.
(a) In General.--Part VI of subchapter B of chapter 1 is amended by
striking section 199 (and by striking the item relating to such section
in the table of sections for such part).
(b) Conforming Amendments.--
(1) Sections 74(d)(2)(B), 86(b)(2)(A), 135(c)(4)(A),
137(b)(3)(A), 219(g)(3)(A)(ii), 221(b)(2)(C), 222(b)(2)(C),
246(b)(1), and 469(i)(3)(F)(iii) are each amended by striking
``199,''.
(2) Section 170(b)(2)(D), as amended by subtitle A, is amended
by striking clause (iv), and by redesignating clauses (v) and (vi)
as clauses (iv) and (v).
(3) Section 172(d) is amended by striking paragraph (7).
(4) Section 613(a), as amended by section 11011, is amended by
striking ``and without the deduction under section 199''.
(5) Section 613A(d)(1), as amended by section 11011, is amended
by striking subparagraph (B) and by redesignating subparagraphs
(C), (D), (E), and (F) as subparagraphs (B), (C), (D), and (E),
respectively.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13306. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES, AND OTHER
AMOUNTS.
(a) Denial of Deduction.--
(1) In general.--Subsection (f) of section 162 is amended to
read as follows:
``(f) Fines, Penalties, and Other Amounts.--
``(1) In general.--Except as provided in the following
paragraphs of this subsection, no deduction otherwise allowable
shall be allowed under this chapter for any amount paid or incurred
(whether by suit, agreement, or otherwise) to, or at the direction
of, a government or governmental entity in relation to the
violation of any law or the investigation or inquiry by such
government or entity into the potential violation of any law.
``(2) Exception for amounts constituting restitution or paid to
come into compliance with law.--
``(A) In general.--Paragraph (1) shall not apply to any
amount that--
``(i) the taxpayer establishes--
``(I) constitutes restitution (including
remediation of property) for damage or harm which was
or may be caused by the violation of any law or the
potential violation of any law, or
``(II) is paid to come into compliance with any law
which was violated or otherwise involved in the
investigation or inquiry described in paragraph (1),
``(ii) is identified as restitution or as an amount
paid to come into compliance with such law, as the case may
be, in the court order or settlement agreement, and
``(iii) in the case of any amount of restitution for
failure to pay any tax imposed under this title in the same
manner as if such amount were such tax, would have been
allowed as a deduction under this chapter if it had been
timely paid.
The identification under clause (ii) alone shall not be
sufficient to make the establishment required under clause (i).
``(B) Limitation.--Subparagraph (A) shall not apply to any
amount paid or incurred as reimbursement to the government or
entity for the costs of any investigation or litigation.
``(3) Exception for amounts paid or incurred as the result of
certain court orders.--Paragraph (1) shall not apply to any amount
paid or incurred by reason of any order of a court in a suit in
which no government or governmental entity is a party.
``(4) Exception for taxes due.--Paragraph (1) shall not apply
to any amount paid or incurred as taxes due.
``(5) Treatment of certain nongovernmental regulatory
entities.--For purposes of this subsection, the following
nongovernmental entities shall be treated as governmental entities:
``(A) Any nongovernmental entity which exercises self-
regulatory powers (including imposing sanctions) in connection
with a qualified board or exchange (as defined in section
1256(g)(7)).
``(B) To the extent provided in regulations, any
nongovernmental entity which exercises self-regulatory powers
(including imposing sanctions) as part of performing an
essential governmental function.''.
(2) Effective date.--The amendment made by this subsection
shall apply to amounts paid or incurred on or after the date of the
enactment of this Act, except that such amendments shall not apply
to amounts paid or incurred under any binding order or agreement
entered into before such date. Such exception shall not apply to an
order or agreement requiring court approval unless the approval was
obtained before such date.
(b) Reporting of Deductible Amounts.--
(1) In general.--Subpart B of part III of subchapter A of
chapter 61 is amended by inserting after section 6050W the
following new section:
``SEC. 6050X. INFORMATION WITH RESPECT TO CERTAIN FINES, PENALTIES, AND
OTHER AMOUNTS.
``(a) Requirement of Reporting.--
``(1) In general.--The appropriate official of any government
or any entity described in section 162(f)(5) which is involved in a
suit or agreement described in paragraph (2) shall make a return in
such form as determined by the Secretary setting forth--
``(A) the amount required to be paid as a result of the
suit or agreement to which paragraph (1) of section 162(f)
applies,
``(B) any amount required to be paid as a result of the
suit or agreement which constitutes restitution or remediation
of property, and
``(C) any amount required to be paid as a result of the
suit or agreement for the purpose of coming into compliance
with any law which was violated or involved in the
investigation or inquiry.
``(2) Suit or agreement described.--
``(A) In general.--A suit or agreement is described in this
paragraph if--
``(i) it is--
``(I) a suit with respect to a violation of any law
over which the government or entity has authority and
with respect to which there has been a court order, or
``(II) an agreement which is entered into with
respect to a violation of any law over which the
government or entity has authority, or with respect to
an investigation or inquiry by the government or entity
into the potential violation of any law over which such
government or entity has authority, and
``(ii) the aggregate amount involved in all court
orders and agreements with respect to the violation,
investigation, or inquiry is $600 or more.
``(B) Adjustment of reporting threshold.--The Secretary
shall adjust the $600 amount in subparagraph (A)(ii) as
necessary in order to ensure the efficient administration of
the internal revenue laws.
``(3) Time of filing.--The return required under this
subsection shall be filed at the time the agreement is entered
into, as determined by the Secretary.
``(b) Statements to Be Furnished to Individuals Involved in the
Settlement.--Every person required to make a return under subsection
(a) shall furnish to each person who is a party to the suit or
agreement a written statement showing--
``(1) the name of the government or entity, and
``(2) the information supplied to the Secretary under
subsection (a)(1).
The written statement required under the preceding sentence shall be
furnished to the person at the same time the government or entity
provides the Secretary with the information required under subsection
(a).
``(c) Appropriate Official Defined.--For purposes of this section,
the term `appropriate official' means the officer or employee having
control of the suit, investigation, or inquiry or the person
appropriately designated for purposes of this section.''.
(2) Conforming amendment.--The table of sections for subpart B
of part III of subchapter A of chapter 61 is amended by inserting
after the item relating to section 6050W the following new item:
``Sec. 6050X. Information with respect to certain fines, penalties, and
other amounts.''.
(3) Effective date.--The amendments made by this subsection
shall apply to amounts paid or incurred on or after the date of the
enactment of this Act, except that such amendments shall not apply
to amounts paid or incurred under any binding order or agreement
entered into before such date. Such exception shall not apply to an
order or agreement requiring court approval unless the approval was
obtained before such date.
SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS SUBJECT TO
NONDISCLOSURE AGREEMENTS PAID IN CONNECTION WITH SEXUAL HARASSMENT OR
SEXUAL ABUSE.
(a) Denial of Deduction.--Section 162 is amended by redesignating
subsection (q) as subsection (r) and by inserting after subsection (p)
the following new subsection:
``(q) Payments Related to Sexual Harassment and Sexual Abuse.--No
deduction shall be allowed under this chapter for--
``(1) any settlement or payment related to sexual harassment or
sexual abuse if such settlement or payment is subject to a
nondisclosure agreement, or
``(2) attorney's fees related to such a settlement or
payment.''.
(b) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred after the date of the enactment of
this Act.
SEC. 13308. REPEAL OF DEDUCTION FOR LOCAL LOBBYING EXPENSES.
(a) In General.--Section 162(e) is amended by striking paragraphs
(2) and (7) and by redesignating paragraphs (3), (4), (5), (6), and (8)
as paragraphs (2), (3), (4), (5), and (6), respectively.
(b) Conforming Amendment.--Section 6033(e)(1)(B)(ii) is amended by
striking ``section 162(e)(5)(B)(ii)'' and inserting ``section
162(e)(4)(B)(ii)''.
(c) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred on or after the date of the enactment
of this Act.
SEC. 13309. RECHARACTERIZATION OF CERTAIN GAINS IN THE CASE OF
PARTNERSHIP PROFITS INTERESTS HELD IN CONNECTION WITH PERFORMANCE OF
INVESTMENT SERVICES.
(a) In General.--Part IV of subchapter O of chapter 1 is amended--
(1) by redesignating section 1061 as section 1062, and
(2) by inserting after section 1060 the following new section:
``SEC. 1061. PARTNERSHIP INTERESTS HELD IN CONNECTION WITH PERFORMANCE
OF SERVICES.
``(a) In General.--If one or more applicable partnership interests
are held by a taxpayer at any time during the taxable year, the excess
(if any) of--
``(1) the taxpayer's net long-term capital gain with respect to
such interests for such taxable year, over
``(2) the taxpayer's net long-term capital gain with respect to
such interests for such taxable year computed by applying
paragraphs (3) and (4) of sections 1222 by substituting `3 years'
for `1 year',
shall be treated as short-term capital gain, notwithstanding section 83
or any election in effect under section 83(b).
``(b) Special Rule.--To the extent provided by the Secretary,
subsection (a) shall not apply to income or gain attributable to any
asset not held for portfolio investment on behalf of third party
investors.
``(c) Applicable Partnership Interest.--For purposes of this
section--
``(1) In general.--Except as provided in this paragraph or
paragraph (4), the term `applicable partnership interest' means any
interest in a partnership which, directly or indirectly, is
transferred to (or is held by) the taxpayer in connection with the
performance of substantial services by the taxpayer, or any other
related person, in any applicable trade or business. The previous
sentence shall not apply to an interest held by a person who is
employed by another entity that is conducting a trade or business
(other than an applicable trade or business) and only provides
services to such other entity.
``(2) Applicable trade or business.--The term `applicable trade
or business' means any activity conducted on a regular, continuous,
and substantial basis which, regardless of whether the activity is
conducted in one or more entities, consists, in whole or in part,
of--
``(A) raising or returning capital, and
``(B) either--
``(i) investing in (or disposing of) specified assets
(or identifying specified assets for such investing or
disposition), or
``(ii) developing specified assets.
``(3) Specified asset.--The term `specified asset' means
securities (as defined in section 475(c)(2) without regard to the
last sentence thereof), commodities (as defined in section
475(e)(2)), real estate held for rental or investment, cash or cash
equivalents, options or derivative contracts with respect to any of
the foregoing, and an interest in a partnership to the extent of
the partnership's proportionate interest in any of the foregoing.
``(4) Exceptions.--The term `applicable partnership interest'
shall not include--
``(A) any interest in a partnership directly or indirectly
held by a corporation, or
``(B) any capital interest in the partnership which
provides the taxpayer with a right to share in partnership
capital commensurate with--
``(i) the amount of capital contributed (determined at
the time of receipt of such partnership interest), or
``(ii) the value of such interest subject to tax under
section 83 upon the receipt or vesting of such interest.
``(5) Third party investor.--The term `third party investor'
means a person who--
``(A) holds an interest in the partnership which does not
constitute property held in connection with an applicable trade
or business; and
``(B) is not (and has not been) actively engaged, and is
(and was) not related to a person so engaged, in (directly or
indirectly) providing substantial services described in
paragraph (1) for such partnership or any applicable trade or
business.
``(d) Transfer of Applicable Partnership Interest to Related
Person.--
``(1) In general.--If a taxpayer transfers any applicable
partnership interest, directly or indirectly, to a person related
to the taxpayer, the taxpayer shall include in gross income (as
short term capital gain) the excess (if any) of--
``(A) so much of the taxpayer's long-term capital gains
with respect to such interest for such taxable year
attributable to the sale or exchange of any asset held for not
more than 3 years as is allocable to such interest, over
``(B) any amount treated as short term capital gain under
subsection (a) with respect to the transfer of such interest.
``(2) Related person.--For purposes of this paragraph, a person
is related to the taxpayer if--
``(A) the person is a member of the taxpayer's family
within the meaning of section 318(a)(1), or
``(B) the person performed a service within the current
calendar year or the preceding three calendar years in any
applicable trade or business in which or for which the taxpayer
performed a service.
``(e) Reporting.--The Secretary shall require such reporting (at
the time and in the manner prescribed by the Secretary) as is necessary
to carry out the purposes of this section.
``(f) Regulations.--The Secretary shall issue such regulations or
other guidance as is necessary or appropriate to carry out the purposes
of this section''.
(b) Clerical Amendment.--The table of sections for part IV of
subchapter O of chapter 1 is amended by striking the item relating to
1061 and inserting the following new items:
``Sec. 1061. Partnership interests held in connection with performance
of services.
``Sec. 1062. Cross references.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13310. PROHIBITION ON CASH, GIFT CARDS, AND OTHER NON-TANGIBLE
PERSONAL PROPERTY AS EMPLOYEE ACHIEVEMENT AWARDS.
(a) In General.--Subparagraph (A) of section 274(j)(3) is amended--
(1) by striking ``The term'' and inserting the following:
``(i) In general.--The term''.
(2) by redesignating clauses (i), (ii), and (iii) as subclauses
(I), (II), and (III), respectively, and conforming the margins
accordingly, and
(3) by adding at the end the following new clause:
``(ii) Tangible personal property.--For purposes of
clause (i), the term `tangible personal property' shall not
include--
``(I) cash, cash equivalents, gift cards, gift
coupons, or gift certificates (other than arrangements
conferring only the right to select and receive
tangible personal property from a limited array of such
items pre-selected or pre-approved by the employer), or
``(II) vacations, meals, lodging, tickets to
theater or sporting events, stocks, bonds, other
securities, and other similar items.''.
(b) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred after December 31, 2017.
SEC. 13311. ELIMINATION OF DEDUCTION FOR LIVING EXPENSES INCURRED BY
MEMBERS OF CONGRESS.
(a) In General.--Subsection (a) of section 162 is amended in the
matter following paragraph (3) by striking ``in excess of $3,000''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after the date of the enactment of this Act.
SEC. 13312. CERTAIN CONTRIBUTIONS BY GOVERNMENTAL ENTITIES NOT TREATED
AS CONTRIBUTIONS TO CAPITAL.
(a) In General.--Section 118 is amended--
(1) by striking subsections (b), (c), and (d),
(2) by redesignating subsection (e) as subsection (d), and
(3) by inserting after subsection (a) the following new
subsections:
``(b) Exceptions.--For purposes of subsection (a), the term
`contribution to the capital of the taxpayer' does not include--
``(1) any contribution in aid of construction or any other
contribution as a customer or potential customer, and
``(2) any contribution by any governmental entity or civic
group (other than a contribution made by a shareholder as such).
``(c) Regulations.--The Secretary shall issue such regulations or
other guidance as may be necessary or appropriate to carry out this
section, including regulations or other guidance for determining
whether any contribution constitutes a contribution in aid of
construction.''.
(b) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to contributions made
after the date of enactment of this Act.
(2) Exception.--The amendments made by this section shall not
apply to any contribution, made after the date of enactment of this
Act by a governmental entity, which is made pursuant to a master
development plan that has been approved prior to such date by a
governmental entity.
SEC. 13313. REPEAL OF ROLLOVER OF PUBLICLY TRADED SECURITIES GAIN INTO
SPECIALIZED SMALL BUSINESS INVESTMENT COMPANIES.
(a) In General.--Part III of subchapter O of chapter 1 is amended
by striking section 1044 (and by striking the item relating to such
section in the table of sections of such part).
(b) Conforming Amendments.--Section 1016(a)(23) is amended--
(1) by striking ``1044,'', and
(2) by striking ``1044(d),''.
(c) Effective Date.--The amendments made by this section shall
apply to sales after December 31, 2017.
SEC. 13314. CERTAIN SELF-CREATED PROPERTY NOT TREATED AS A CAPITAL
ASSET.
(a) Patents, etc.--Section 1221(a)(3) is amended by inserting ``a
patent, invention, model or design (whether or not patented), a secret
formula or process,'' before ``a copyright''.
(b) Conforming Amendment.--Section 1231(b)(1)(C) is amended by
inserting ``a patent, invention, model or design (whether or not
patented), a secret formula or process,'' before ``a copyright''.
(c) Effective Date.--The amendments made by this section shall
apply to dispositions after December 31, 2017.
PART V--BUSINESS CREDITS
SEC. 13401. MODIFICATION OF ORPHAN DRUG CREDIT.
(a) Credit Rate.--Subsection (a) of section 45C is amended by
striking ``50 percent'' and inserting ``25 percent''.
(b) Election of Reduced Credit.--Subsection (b) of section 280C is
amended by redesignating paragraph (3) as paragraph (4) and by
inserting after paragraph (2) the following new paragraph:
``(3) Election of reduced credit.--
``(A) In general.--In the case of any taxable year for
which an election is made under this paragraph--
``(i) paragraphs (1) and (2) shall not apply, and
``(ii) the amount of the credit under section 45C(a)
shall be the amount determined under subparagraph (B).
``(B) Amount of reduced credit.--The amount of credit
determined under this subparagraph for any taxable year shall
be the amount equal to the excess of--
``(i) the amount of credit determined under section
45C(a) without regard to this paragraph, over
``(ii) the product of--
``(I) the amount described in clause (i), and
``(II) the maximum rate of tax under section 11(b).
``(C) Election.--An election under this paragraph for any
taxable year shall be made not later than the time for filing
the return of tax for such year (including extensions), shall
be made on such return, and shall be made in such manner as the
Secretary shall prescribe. Such an election, once made, shall
be irrevocable.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13402. REHABILITATION CREDIT LIMITED TO CERTIFIED HISTORIC
STRUCTURES.
(a) In General.--Subsection (a) of section 47 is amended to read as
follows:
``(a) General Rule.--
``(1) In general.--For purposes of section 46, for any taxable
year during the 5-year period beginning in the taxable year in
which a qualified rehabilitated building is placed in service, the
rehabilitation credit for such year is an amount equal to the
ratable share for such year.
``(2) Ratable share.--For purposes of paragraph (1), the
ratable share for any taxable year during the period described in
such paragraph is the amount equal to 20 percent of the qualified
rehabilitation expenditures with respect to the qualified
rehabilitated building, as allocated ratably to each year during
such period.''.
(b) Conforming Amendments.--
(1) Section 47(c) is amended--
(A) in paragraph (1)--
(i) in subparagraph (A), by amending clause (iii) to
read as follows:
``(iii) such building is a certified historic
structure, and'',
(ii) by striking subparagraph (B), and
(iii) by redesignating subparagraphs (C) and (D) as
subparagraphs (B) and (C), respectively, and
(B) in paragraph (2)(B), by amending clause (iv) to read as
follows:
``(iv) Certified historic structure.--Any expenditure
attributable to the rehabilitation of a qualified
rehabilitated building unless the rehabilitation is a
certified rehabilitation (within the meaning of
subparagraph (C)).''.
(2) Paragraph (4) of section 145(d) is amended--
(A) by striking ``of section 47(c)(1)(C)'' each place it
appears and inserting ``of section 47(c)(1)(B)'', and
(B) by striking ``section 47(c)(1)(C)(i)'' and inserting
``section 47(c)(1)(B)(i)''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to amounts paid or
incurred after December 31, 2017.
(2) Transition rule.--In the case of qualified rehabilitation
expenditures with respect to any building--
(A) owned or leased by the taxpayer during the entirety of
the period after December 31, 2017, and
(B) with respect to which the 24-month period selected by
the taxpayer under clause (i) of section 47(c)(1)(B) of the
Internal Revenue Code (as amended by subsection (b)), or the
60-month period applicable under clause (ii) of such section,
begins not later than 180 days after the date of the enactment
of this Act,
the amendments made by this section shall apply to such
expenditures paid or incurred after the end of the taxable year in
which the 24-month period, or the 60-month period, referred to in
subparagraph (B) ends.
SEC. 13403. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE.
(a) In General.--
(1) Allowance of credit.--Subpart D of part IV of subchapter A
of chapter 1 is amended by adding at the end the following new
section:
``SEC. 45S. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE.
``(a) Establishment of Credit.--
``(1) In general.--For purposes of section 38, in the case of
an eligible employer, the paid family and medical leave credit is
an amount equal to the applicable percentage of the amount of wages
paid to qualifying employees during any period in which such
employees are on family and medical leave.
``(2) Applicable percentage.--For purposes of paragraph (1),
the term `applicable percentage' means 12.5 percent increased (but
not above 25 percent) by 0.25 percentage points for each percentage
point by which the rate of payment (as described under subsection
(c)(1)(B)) exceeds 50 percent.
``(b) Limitation.--
``(1) In general.--The credit allowed under subsection (a) with
respect to any employee for any taxable year shall not exceed an
amount equal to the product of the normal hourly wage rate of such
employee for each hour (or fraction thereof) of actual services
performed for the employer and the number of hours (or fraction
thereof) for which family and medical leave is taken.
``(2) Non-hourly wage rate.--For purposes of paragraph (1), in
the case of any employee who is not paid on an hourly wage rate,
the wages of such employee shall be prorated to an hourly wage rate
under regulations established by the Secretary.
``(3) Maximum amount of leave subject to credit.--The amount of
family and medical leave that may be taken into account with
respect to any employee under subsection (a) for any taxable year
shall not exceed 12 weeks.
``(c) Eligible Employer.--For purposes of this section--
``(1) In general.--The term `eligible employer' means any
employer who has in place a written policy that meets the following
requirements:
``(A) The policy provides--
``(i) in the case of a qualifying employee who is not a
part-time employee (as defined in section 4980E(d)(4)(B)),
not less than 2 weeks of annual paid family and medical
leave, and
``(ii) in the case of a qualifying employee who is a
part-time employee, an amount of annual paid family and
medical leave that is not less than an amount which bears
the same ratio to the amount of annual paid family and
medical leave that is provided to a qualifying employee
described in clause (i) as--
``(I) the number of hours the employee is expected
to work during any week, bears to
``(II) the number of hours an equivalent qualifying
employee described in clause (i) is expected to work
during the week.
``(B) The policy requires that the rate of payment under
the program is not less than 50 percent of the wages normally
paid to such employee for services performed for the employer.
``(2) Special rule for certain employers.--
``(A) In general.--An added employer shall not be treated
as an eligible employer unless such employer provides paid
family and medical leave in compliance with a written policy
which ensures that the employer--
``(i) will not interfere with, restrain, or deny the
exercise of or the attempt to exercise, any right provided
under the policy, and
``(ii) will not discharge or in any other manner
discriminate against any individual for opposing any
practice prohibited by the policy.
``(B) Added employer; added employee.--For purposes of this
paragraph--
``(i) Added employee.--The term `added employee' means
a qualifying employee who is not covered by title I of the
Family and Medical Leave Act of 1993, as amended.
``(ii) Added employer.--The term `added employer' means
an eligible employer (determined without regard to this
paragraph), whether or not covered by that title I, who
offers paid family and medical leave to added employees.
``(3) Aggregation rule.--All persons which are treated as a
single employer under subsections (a) and (b) of section 52 shall
be treated as a single taxpayer.
``(4) Treatment of benefits mandated or paid for by state or
local governments.--For purposes of this section, any leave which
is paid by a State or local government or required by State or
local law shall not be taken into account in determining the amount
of paid family and medical leave provided by the employer.
``(5) No inference.--Nothing in this subsection shall be
construed as subjecting an employer to any penalty, liability, or
other consequence (other than ineligibility for the credit allowed
by reason of subsection (a) or recapturing the benefit of such
credit) for failure to comply with the requirements of this
subsection.
``(d) Qualifying Employees.--For purposes of this section, the term
`qualifying employee' means any employee (as defined in section 3(e) of
the Fair Labor Standards Act of 1938, as amended) who--
``(1) has been employed by the employer for 1 year or more, and
``(2) for the preceding year, had compensation not in excess of
an amount equal to 60 percent of the amount applicable for such
year under clause (i) of section 414(q)(1)(B).
``(e) Family and Medical Leave.--
``(1) In general.--Except as provided in paragraph (2), for
purposes of this section, the term `family and medical leave' means
leave for any 1 or more of the purposes described under
subparagraph (A), (B), (C), (D), or (E) of paragraph (1), or
paragraph (3), of section 102(a) of the Family and Medical Leave
Act of 1993, as amended, whether the leave is provided under that
Act or by a policy of the employer.
``(2) Exclusion.--If an employer provides paid leave as
vacation leave, personal leave, or medical or sick leave (other
than leave specifically for 1 or more of the purposes referred to
in paragraph (1)), that paid leave shall not be considered to be
family and medical leave under paragraph (1).
``(3) Definitions.--In this subsection, the terms `vacation
leave', `personal leave', and `medical or sick leave' mean those 3
types of leave, within the meaning of section 102(d)(2) of that
Act.
``(f) Determinations Made by Secretary of Treasury.--For purposes
of this section, any determination as to whether an employer or an
employee satisfies the applicable requirements for an eligible employer
(as described in subsection (c)) or qualifying employee (as described
in subsection (d)), respectively, shall be made by the Secretary based
on such information, to be provided by the employer, as the Secretary
determines to be necessary or appropriate.
``(g) Wages.--For purposes of this section, the term `wages' has
the meaning given such term by subsection (b) of section 3306
(determined without regard to any dollar limitation contained in such
section). Such term shall not include any amount taken into account for
purposes of determining any other credit allowed under this subpart.
``(h) Election to Have Credit Not Apply.--
``(1) In general.--A taxpayer may elect to have this section
not apply for any taxable year.
``(2) Other rules.--Rules similar to the rules of paragraphs
(2) and (3) of section 51(j) shall apply for purposes of this
subsection.
``(i) Termination.--This section shall not apply to wages paid in
taxable years beginning after December 31, 2019.''.
(b) Credit Part of General Business Credit.--Section 38(b) is
amended by striking ``plus'' at the end of paragraph (35), by striking
the period at the end of paragraph (36) and inserting ``, plus'', and
by adding at the end the following new paragraph:
``(37) in the case of an eligible employer (as defined in
section 45S(c)), the paid family and medical leave credit
determined under section 45S(a).''.
(c) Credit Allowed Against AMT.--Subparagraph (B) of section
38(c)(4) is amended by redesignating clauses (ix) through (xi) as
clauses (x) through (xii), respectively, and by inserting after clause
(viii) the following new clause:
``(ix) the credit determined under section 45S,''.
(d) Conforming Amendments.--
(1) Denial of double benefit.--Section 280C(a) is amended by
inserting ``45S(a),'' after ``45P(a),''.
(2) Election to have credit not apply.--Section 6501(m) is
amended by inserting ``45S(h),'' after ``45H(g),''.
(3) Clerical amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 is amended by adding at the
end the following new item:
``Sec. 45S. Employer credit for paid family and medical leave.''.
(e) Effective Date.--The amendments made by this section shall
apply to wages paid in taxable years beginning after December 31, 2017.
SEC. 13404. REPEAL OF TAX CREDIT BONDS.
(a) In General.--Part IV of subchapter A of chapter 1 is amended by
striking subparts H, I, and J (and by striking the items relating to
such subparts in the table of subparts for such part).
(b) Payments to Issuers.--Subchapter B of chapter 65 is amended by
striking section 6431 (and by striking the item relating to such
section in the table of sections for such subchapter).
(c) Conforming Amendments.--
(1) Part IV of subchapter U of chapter 1 is amended by striking
section 1397E (and by striking the item relating to such section in
the table of sections for such part).
(2) Section 54(l)(3)(B) is amended by inserting ``(as in effect
before its repeal by the Tax Cuts and Jobs Act)'' after ``section
1397E(I)''.
(3) Section 6211(b)(4)(A) is amended by striking ``, and 6431''
and inserting ``and'' before ``36B''.
(4) Section 6401(b)(1) is amended by striking ``G, H, I, and
J'' and inserting ``and G''.
(d) Effective Date.--The amendments made by this section shall
apply to bonds issued after December 31, 2017.
PART VI--PROVISIONS RELATED TO SPECIFIC ENTITIES AND INDUSTRIES
Subpart A--Partnership Provisions
SEC. 13501. TREATMENT OF GAIN OR LOSS OF FOREIGN PERSONS FROM SALE OR
EXCHANGE OF INTERESTS IN PARTNERSHIPS ENGAGED IN TRADE OR BUSINESS
WITHIN THE UNITED STATES.
(a) Amount Treated as Effectively Connected.--
(1) In general.--Section 864(c) is amended by adding at the end
the following:
``(8) Gain or loss of foreign persons from sale or exchange of
certain partnership interests.--
``(A) In general.--Notwithstanding any other provision of
this subtitle, if a nonresident alien individual or foreign
corporation owns, directly or indirectly, an interest in a
partnership which is engaged in any trade or business within
the United States, gain or loss on the sale or exchange of all
(or any portion of) such interest shall be treated as
effectively connected with the conduct of such trade or
business to the extent such gain or loss does not exceed the
amount determined under subparagraph (B).
``(B) Amount treated as effectively connected.--The amount
determined under this subparagraph with respect to any
partnership interest sold or exchanged--
``(i) in the case of any gain on the sale or exchange
of the partnership interest, is--
``(I) the portion of the partner's distributive
share of the amount of gain which would have been
effectively connected with the conduct of a trade or
business within the United States if the partnership
had sold all of its assets at their fair market value
as of the date of the sale or exchange of such
interest, or
``(II) zero if no gain on such deemed sale would
have been so effectively connected, and
``(ii) in the case of any loss on the sale or exchange
of the partnership interest, is--
``(I) the portion of the partner's distributive
share of the amount of loss on the deemed sale
described in clause (i)(I) which would have been so
effectively connected, or
``(II) zero if no loss on such deemed sale would be
have been so effectively connected.
For purposes of this subparagraph, a partner's distributive
share of gain or loss on the deemed sale shall be
determined in the same manner as such partner's
distributive share of the non-separately stated taxable
income or loss of such partnership.
``(C) Coordination with united states real property
interests.--If a partnership described in subparagraph (A)
holds any United States real property interest (as defined in
section 897(c)) at the time of the sale or exchange of the
partnership interest, then the gain or loss treated as
effectively connected income under subparagraph (A) shall be
reduced by the amount so treated with respect to such United
States real property interest under section 897.
``(D) Sale or exchange.--For purposes of this paragraph,
the term `sale or exchange' means any sale, exchange, or other
disposition.
``(E) Secretarial authority.--The Secretary shall prescribe
such regulations or other guidance as the Secretary determines
appropriate for the application of this paragraph, including
with respect to exchanges described in section 332, 351, 354,
355, 356, or 361.''.
(2) Conforming amendments.--Section 864(c)(1) is amended--
(A) by striking ``and (7)'' in subparagraph (A), and
inserting ``(7), and (8)'', and
(B) by striking ``or (7)'' in subparagraph (B), and
inserting ``(7), or (8)''.
(b) Withholding Requirements.--Section 1446 is amended by
redesignating subsection (f) as subsection (g) and by inserting after
subsection (e) the following:
``(f) Special Rules for Withholding on Dispositions of Partnership
Interests.--
``(1) In general.--Except as provided in this subsection, if
any portion of the gain (if any) on any disposition of an interest
in a partnership would be treated under section 864(c)(8) as
effectively connected with the conduct of a trade or business
within the United States, the transferee shall be required to
deduct and withhold a tax equal to 10 percent of the amount
realized on the disposition.
``(2) Exception if nonforeign affidavit furnished.--
``(A) In general.--No person shall be required to deduct
and withhold any amount under paragraph (1) with respect to any
disposition if the transferor furnishes to the transferee an
affidavit by the transferor stating, under penalty of perjury,
the transferor's United States taxpayer identification number
and that the transferor is not a foreign person.
``(B) False affidavit.--Subparagraph (A) shall not apply to
any disposition if--
``(i) the transferee has actual knowledge that the
affidavit is false, or the transferee receives a notice (as
described in section 1445(d)) from a transferor's agent or
transferee's agent that such affidavit or statement is
false, or
``(ii) the Secretary by regulations requires the
transferee to furnish a copy of such affidavit or statement
to the Secretary and the transferee fails to furnish a copy
of such affidavit or statement to the Secretary at such
time and in such manner as required by such regulations.
``(C) Rules for agents.--The rules of section 1445(d) shall
apply to a transferor's agent or transferee's agent with
respect to any affidavit described in subparagraph (A) in the
same manner as such rules apply with respect to the disposition
of a United States real property interest under such section.
``(3) Authority of secretary to prescribe reduced amount.--At
the request of the transferor or transferee, the Secretary may
prescribe a reduced amount to be withheld under this section if the
Secretary determines that to substitute such reduced amount will
not jeopardize the collection of the tax imposed under this title
with respect to gain treated under section 864(c)(8) as effectively
connected with the conduct of a trade or business with in the
United States.
``(4) Partnership to withhold amounts not withheld by the
transferee.--If a transferee fails to withhold any amount required
to be withheld under paragraph (1), the partnership shall be
required to deduct and withhold from distributions to the
transferee a tax in an amount equal to the amount the transferee
failed to withhold (plus interest under this title on such amount).
``(5) Definitions.--Any term used in this subsection which is
also used under section 1445 shall have the same meaning as when
used in such section.
``(6) Regulations.--The Secretary shall prescribe such
regulations or other guidance as may be necessary to carry out the
purposes of this subsection, including regulations providing for
exceptions from the provisions of this subsection.''.
(c) Effective Dates.--
(1) Subsection (a).--The amendments made by subsection (a)
shall apply to sales, exchanges, and dispositions on or after
November 27, 2017.
(2) Subsection (b).--The amendment made by subsection (b) shall
apply to sales, exchanges, and dispositions after December 31,
2017.
SEC. 13502. MODIFY DEFINITION OF SUBSTANTIAL BUILT-IN LOSS IN THE CASE
OF TRANSFER OF PARTNERSHIP INTEREST.
(a) In General.--Paragraph (1) of section 743(d) is to read as
follows:
``(1) In general.--For purposes of this section, a partnership
has a substantial built-in loss with respect to a transfer of an
interest in the partnership if--
``(A) the partnership's adjusted basis in the partnership
property exceeds by more than $250,000 the fair market value of
such property, or
``(B) the transferee partner would be allocated a loss of
more than $250,000 if the partnership assets were sold for cash
equal to their fair market value immediately after such
transfer.''.
(b) Effective Date.--The amendments made by this section shall
apply to transfers of partnership interests after December 31, 2017.
SEC. 13503. CHARITABLE CONTRIBUTIONS AND FOREIGN TAXES TAKEN INTO
ACCOUNT IN DETERMINING LIMITATION ON ALLOWANCE OF PARTNER'S SHARE OF
LOSS.
(a) In General.--Subsection (d) of section 704 is amended--
(1) by striking ``A partner's distributive share'' and
inserting the following:
``(1) In general.--A partner's distributive share'',
(2) by striking ``Any excess of such loss'' and inserting the
following:
``(2) Carryover.--Any excess of such loss'', and
(3) by adding at the end the following new paragraph:
``(3) Special rules.--
``(A) In general.--In determining the amount of any loss
under paragraph (1), there shall be taken into account the
partner's distributive share of amounts described in paragraphs
(4) and (6) of section 702(a).
``(B) Exception.--In the case of a charitable contribution
of property whose fair market value exceeds its adjusted basis,
subparagraph (A) shall not apply to the extent of the partner's
distributive share of such excess.''.
(b) Effective Date.--The amendments made by this section shall
apply to partnership taxable years beginning after December 31, 2017.
SEC. 13504. REPEAL OF TECHNICAL TERMINATION OF PARTNERSHIPS.
(a) In General.--Paragraph (1) of section 708(b) is amended--
(1) by striking ``, or'' at the end of subparagraph (A) and all
that follows and inserting a period, and
(2) by striking ``only if--'' and all that follows through ``no
part of any business'' and inserting the following: ``only if no
part of any business''.
(b) Conforming Amendment.--
(1) Section 168(i)(7)(B) is amended by striking the second
sentence.
(2) Section 743(e) is amended by striking paragraph (4) and
redesignating paragraphs (5), (6), and (7) as paragraphs (4), (5),
and (6).
(c) Effective Date.--The amendments made by this section shall
apply to partnership taxable years beginning after December 31, 2017.
Subpart B--Insurance Reforms
SEC. 13511. NET OPERATING LOSSES OF LIFE INSURANCE COMPANIES.
(a) In General.--Section 805(b) is amended by striking paragraph
(4) and by redesignating paragraph (5) as paragraph (4).
(b) Conforming Amendments.--
(1) Part I of subchapter L of chapter 1 is amended by striking
section 810 (and by striking the item relating to such section in
the table of sections for such part).
(2)(A) Part III of subchapter L of chapter 1 is amended by
striking section 844 (and by striking the item relating to such
section in the table of sections for such part).
(B) Section 831(b)(3) is amended by striking ``except as
provided in section 844,''
(3) Section 381 is amended by striking subsection (d).
(4) Section 805(a)(4)(B)(ii) is amended to read as follows:
``(ii) the deduction allowed under section 172,''.
(5) Section 805(a) is amended by striking paragraph (5).
(6) Section 805(b)(2)(A)(iv) is amended to read as follows:
``(iv) any net operating loss carryback to the taxable
year under section 172, and''.
(7) Section 953(b)(1)(B) is amended to read as follows:
``(B) So much of section 805(a)(8) as relates to the
deduction allowed under section 172.''.
(8) Section 1351(i)(3) is amended by striking ``or the
operations loss deduction under section 810,''.
(c) Effective Date.--The amendments made by this section shall
apply to losses arising in taxable years beginning after December 31,
2017.
SEC. 13512. REPEAL OF SMALL LIFE INSURANCE COMPANY DEDUCTION.
(a) In General.--Part I of subchapter L of chapter 1 is amended by
striking section 806 (and by striking the item relating to such section
in the table of sections for such part).
(b) Conforming Amendments.--
(1) Section 453B(e) is amended--
(A) by striking ``(as defined in section 806(b)(3))'' in
paragraph (2)(B), and
(B) by adding at the end the following new paragraph:
``(3) Noninsurance business.--
``(A) In general.--For purposes of this subsection, the
term `noninsurance business' means any activity which is not an
insurance business.
``(B) Certain activities treated as insurance businesses.--
For purposes of subparagraph (A), any activity which is not an
insurance business shall be treated as an insurance business
if--
``(i) it is of a type traditionally carried on by life
insurance companies for investment purposes, but only if
the carrying on of such activity (other than in the case of
real estate) does not constitute the active conduct of a
trade or business, or
``(ii) it involves the performance of administrative
services in connection with plans providing life insurance,
pension, or accident and health benefits.''.
(2) Section 465(c)(7)(D)(v)(II) is amended by striking
``section 806(b)(3)'' and inserting ``section 453B(e)(3)''.
(3) Section 801(a)(2) is amended by striking subparagraph (C).
(4) Section 804 is amended by striking ``means--'' and all that
follows and inserting ``means the general deductions provided in
section 805.''.
(5) Section 805(a)(4)(B), as amended by this Act, is amended by
striking clause (i) and by redesignating clauses (ii), (iii), and
(iv) as clauses (i), (ii), and (iii), respectively.
(6) Section 805(b)(2)(A), as amended by this Act, is amended by
striking clause (iii) and by redesignating clauses (iv) and (v) as
clauses (iii) and (iv), respectively.
(7) Section 842(c) is amended by striking paragraph (1) and by
redesignating paragraphs (2) and (3) as paragraphs (1) and (2),
respectively.
(8) Section 953(b)(1), as amended by section 13511, is amended
by striking subparagraph (A) and by redesignating subparagraphs (B)
and (C) as subparagraphs (A) and (B), respectively.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13513. ADJUSTMENT FOR CHANGE IN COMPUTING RESERVES.
(a) In General.--Paragraph (1) of section 807(f) is amended to read
as follows:
``(1) Treatment as change in method of accounting.--If the
basis for determining any item referred to in subsection (c) as of
the close of any taxable year differs from the basis for such
determination as of the close of the preceding taxable year, then
so much of the difference between--
``(A) the amount of the item at the close of the taxable
year, computed on the new basis, and
``(B) the amount of the item at the close of the taxable
year, computed on the old basis,
as is attributable to contracts issued before the taxable year
shall be taken into account under section 481 as adjustments
attributable to a change in method of accounting initiated by the
taxpayer and made with the consent of the Secretary.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13514. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS TO SHAREHOLDERS
FROM PRE-1984 POLICYHOLDERS SURPLUS ACCOUNT.
(a) In General.--Subpart D of part I of subchapter L is amended by
striking section 815 (and by striking the item relating to such section
in the table of sections for such subpart).
(b) Conforming Amendment.--Section 801 is amended by striking
subsection (c).
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
(d) Phased Inclusion of Remaining Balance of Policyholders Surplus
Accounts.--In the case of any stock life insurance company which has a
balance (determined as of the close of such company's last taxable year
beginning before January 1, 2018) in an existing policyholders surplus
account (as defined in section 815 of the Internal Revenue Code of
1986, as in effect before its repeal), the tax imposed by section 801
of such Code for the first 8 taxable years beginning after December 31,
2017, shall be the amount which would be imposed by such section for
such year on the sum of--
(1) life insurance company taxable income for such year (within
the meaning of such section 801 but not less than zero), plus
(2) \1/8\ of such balance.
SEC. 13515. MODIFICATION OF PRORATION RULES FOR PROPERTY AND CASUALTY
INSURANCE COMPANIES.
(a) In General.--Section 832(b)(5)(B) is amended--
(1) by striking ``15 percent'' and inserting ``the applicable
percentage'', and
(2) by inserting at the end the following new sentence: ``For
purposes of this subparagraph, the applicable percentage is 5.25
percent divided by the highest rate in effect under section
11(b).''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13516. REPEAL OF SPECIAL ESTIMATED TAX PAYMENTS.
(a) In General.--Part III of subchapter L of chapter 1 is amended
by striking section 847 (and by striking the item relating to such
section in the table of sections for such part).
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13517. COMPUTATION OF LIFE INSURANCE TAX RESERVES.
(a) In General.--
(1) Appropriate rate of interest.--The second sentence of
section 807(c) is amended to read as follows: ``For purposes of
paragraph (3), the appropriate rate of interest is the highest rate
or rates permitted to be used to discount the obligations by the
National Association of Insurance Commissioners as of the date the
reserve is determined.''.
(2) Method of computing reserves.--Section 807(d) is amended--
(A) by striking paragraphs (1), (2), (4), and (5),
(B) by redesignating paragraph (6) as paragraph (4),
(C) by inserting before paragraph (3) the following new
paragraphs:
``(1) Determination of reserve.--
``(A) In general.--For purposes of this part (other than
section 816), the amount of the life insurance reserves for any
contract (other than a contract to which subparagraph (B)
applies) shall be the greater of--
``(i) the net surrender value of such contract, or
``(ii) 92.81 percent of the reserve determined under
paragraph (2).
``(B) Variable contracts.--For purposes of this part (other
than section 816), the amount of the life insurance reserves
for a variable contract shall be equal to the sum of--
``(i) the greater of--
``(I) the net surrender value of such contract, or
``(II) the portion of the reserve that is
separately accounted for under section 817, plus
``(ii) 92.81 percent of the excess (if any) of the
reserve determined under paragraph (2) over the amount in
clause (i).
``(C) Statutory cap.--In no event shall the reserves
determined under subparagraphs (A) or (B) for any contract as
of any time exceed the amount which would be taken into account
with respect to such contract as of such time in determining
statutory reserves (as defined in paragraph (4)).
``(D) No double counting.--In no event shall any amount or
item be taken into account more than once in determining any
reserve under this subchapter.
``(2) Amount of reserve.--The amount of the reserve determined
under this paragraph with respect to any contract shall be
determined by using the tax reserve method applicable to such
contract.''.
(D) by striking ``(other than a qualified long-term care
insurance contract, as defined in section 7702B(b)), a 2-year
full preliminary term method'' in paragraph (3)(A)(iii) and
inserting ``, the reserve method prescribed by the National
Association of Insurance Commissioners which covers such
contract as of the date the reserve is determined'',
(E) by striking ``(as of the date of issuance)'' in
paragraph (3)(A)(iv)(I) and inserting ``(as of the date the
reserve is determined)'',
(F) by striking ``as of the date of the issuance of'' in
paragraph (3)(A)(iv)(II) and inserting ``as of the date the
reserve is determined for'',
(G) by striking ``in effect on the date of the issuance of
the contract'' in paragraph (3)(B)(i) and inserting
``applicable to the contract and in effect as of the date the
reserve is determined'', and
(H) by striking ``in effect on the date of the issuance of
the contract'' in paragraph (3)(B)(ii) and inserting
``applicable to the contract and in effect as of the date the
reserve is determined''.
(3) Special rules.--Section 807(e) is amended--
(A) by striking paragraphs (2) and (5),
(B) by redesignating paragraphs (3), (4), (6), and (7) as
paragraphs (2), (3), (4), and (5), respectively,
(C) by amending paragraph (2) (as so redesignated) to read
as follows:
``(2) Qualified supplemental benefits.--
``(A) Qualified supplemental benefits treated separately.--
For purposes of this part, the amount of the life insurance
reserve for any qualified supplemental benefit shall be
computed separately as though such benefit were under a
separate contract.
``(B) Qualified supplemental benefit.--For purposes of this
paragraph, the term `qualified supplemental benefit' means any
supplemental benefit described in subparagraph (C) if--
``(i) there is a separately identified premium or
charge for such benefit, and
``(ii) any net surrender value under the contract
attributable to any other benefit is not available to fund
such benefit.
``(C) Supplemental benefits.--For purposes of this
paragraph, the supplemental benefits described in this
subparagraph are any--
``(i) guaranteed insurability,
``(ii) accidental death or disability benefit,
``(iii) convertibility,
``(iv) disability waiver benefit, or
``(v) other benefit prescribed by regulations,
which is supplemental to a contract for which there is a
reserve described in subsection (c).'', and
(D) by adding at the end the following new paragraph:
``(6) Reporting rules.--The Secretary shall require reporting
(at such time and in such manner as the Secretary shall prescribe)
with respect to the opening balance and closing balance of reserves
and with respect to the method of computing reserves for purposes
of determining income.''.
(4) Definition of life insurance contract.--Section 7702 is
amended--
(A) by striking clause (i) of subsection (c)(3)(B) and
inserting the following:
``(i) reasonable mortality charges which meet the
requirements prescribed in regulations to be promulgated by
the Secretary or that do not exceed the mortality charges
specified in the prevailing commissioners' standard tables
as defined in subsection (f)(10),'' and
(B) by adding at the end of subsection (f) the following
new paragraph:
``(10) Prevailing commissioners' standard tables.--For purposes
of subsection (c)(3)(B)(i), the term `prevailing commissioners'
standard tables' means the most recent commissioners' standard
tables prescribed by the National Association of Insurance
Commissioners which are permitted to be used in computing reserves
for that type of contract under the insurance laws of at least 26
States when the contract was issued. If the prevailing
commissioners' standard tables as of the beginning of any calendar
year (hereinafter in this paragraph referred to as the `year of
change') are different from the prevailing commissioners' standard
tables as of the beginning of the preceding calendar year, the
issuer may use the prevailing commissioners' standard tables as of
the beginning of the preceding calendar year with respect to any
contract issued after the change and before the close of the 3-year
period beginning on the first day of the year of change.''.
(b) Conforming Amendments.--
(1) Section 808 is amended by adding at the end the following
new subsection:
``(g) Prevailing State Assumed Interest Rate.--For purposes of this
subchapter--
``(1) In general.--The term `prevailing State assumed interest
rate' means, with respect to any contract, the highest assumed
interest rate permitted to be used in computing life insurance
reserves for insurance contracts or annuity contracts (as the case
may be) under the insurance laws of at least 26 States. For
purposes of the preceding sentence, the effect of nonforfeiture
laws of a State on interest rates for reserves shall not be taken
into account.
``(2) When rate determined.--The prevailing State assumed
interest rate with respect to any contract shall be determined as
of the beginning of the calendar year in which the contract was
issued.''.
(2) Paragraph (1) of section 811(d) is amended by striking
``the greater of the prevailing State assumed interest rate or
applicable Federal interest rate in effect under section 807'' and
inserting ``the interest rate in effect under section 808(g)''.
(3) Subparagraph (A) of section 846(f)(6) is amended by
striking ``except that'' and all that follows and inserting
``except that the limitation of subsection (a)(3) shall apply,
and''.
(4) Section 848(e)(1)(B)(iii) is amended by striking
``807(e)(4)'' and inserting ``807(e)(3)''.
(5) Subparagraph (B) of section 954(i)(5) is amended by
striking ``shall be substituted for the prevailing State assumed
interest rate,'' and inserting ``shall apply,''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
(2) Transition rule.--For the first taxable year beginning
after December 31, 2017, the reserve with respect to any contract
(as determined under section 807(d) of the Internal Revenue Code of
1986) at the end of the preceding taxable year shall be determined
as if the amendments made by this section had applied to such
reserve in such preceding taxable year.
(3) Transition relief.--
(A) In general.--If--
(i) the reserve determined under section 807(d) of the
Internal Revenue Code of 1986 (determined after application
of paragraph (2)) with respect to any contract as of the
close of the year preceding the first taxable year
beginning after December 31, 2017, differs from
(ii) the reserve which would have been determined with
respect to such contract as of the close of such taxable
year under such section determined without regard to
paragraph (2),
then the difference between the amount of the reserve described
in clause (i) and the amount of the reserve described in clause
(ii) shall be taken into account under the method provided in
subparagraph (B).
(B) Method.--The method provided in this subparagraph is as
follows:
(i) If the amount determined under subparagraph (A)(i)
exceeds the amount determined under subparagraph (A)(ii),
1/8 of such excess shall be taken into account, for each of
the 8 succeeding taxable years, as a deduction under
section 805(a)(2) or 832(c)(4) of such Code, as applicable.
(ii) If the amount determined under subparagraph
(A)(ii) exceeds the amount determined under subparagraph
(A)(i), 1/8 of such excess shall be included in gross
income, for each of the 8 succeeding taxable years, under
section 803(a)(2) or 832(b)(1)(C) of such Code, as
applicable.
SEC. 13518. MODIFICATION OF RULES FOR LIFE INSURANCE PRORATION FOR
PURPOSES OF DETERMINING THE DIVIDENDS RECEIVED DEDUCTION.
(a) In General.--Section 812 is amended to read as follows:
``SEC. 812. DEFINITION OF COMPANY'S SHARE AND POLICYHOLDER'S SHARE.
``(a) Company's Share.--For purposes of section 805(a)(4), the term
`company's share' means, with respect to any taxable year beginning
after December 31, 2017, 70 percent.
``(b) Policyholder's Share.--For purposes of section 807, the term
`policyholder's share' means, with respect to any taxable year
beginning after December 31, 2017, 30 percent.''.
(b) Conforming Amendment.--Section 817A(e)(2) is amended by
striking ``, 807(d)(2)(B), and 812'' and inserting ``and
807(d)(2)(B)''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13519. CAPITALIZATION OF CERTAIN POLICY ACQUISITION EXPENSES.
(a) In General.--
(1) Section 848(a)(2) is amended by striking ``120-month'' and
inserting ``180-month''.
(2) Section 848(c)(1) is amended by striking ``1.75 percent''
and inserting ``2.09 percent''.
(3) Section 848(c)(2) is amended by striking ``2.05 percent''
and inserting ``2.45 percent''.
(4) Section 848(c)(3) is amended by striking ``7.7 percent''
and inserting ``9.2 percent''.
(b) Conforming Amendments.--Section 848(b)(1) is amended by
striking ``120-month'' and inserting ``180-month''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to net premiums for taxable years beginning after December
31, 2017.
(2) Transition rule.--Specified policy acquisition expenses
first required to be capitalized in a taxable year beginning before
January 1, 2018, will continue to be allowed as a deduction ratably
over the 120-month period beginning with the first month in the
second half of such taxable year.
SEC. 13520. TAX REPORTING FOR LIFE SETTLEMENT TRANSACTIONS.
(a) In General.--Subpart B of part III of subchapter A of chapter
61, as amended by section 13306, is amended by adding at the end the
following new section:
``SEC. 6050Y. RETURNS RELATING TO CERTAIN LIFE INSURANCE CONTRACT
TRANSACTIONS.
``(a) Requirement of Reporting of Certain Payments.--
``(1) In general.--Every person who acquires a life insurance
contract or any interest in a life insurance contract in a
reportable policy sale during any taxable year shall make a return
for such taxable year (at such time and in such manner as the
Secretary shall prescribe) setting forth--
``(A) the name, address, and TIN of such person,
``(B) the name, address, and TIN of each recipient of
payment in the reportable policy sale,
``(C) the date of such sale,
``(D) the name of the issuer of the life insurance contract
sold and the policy number of such contract, and
``(E) the amount of each payment.
``(2) Statement to be furnished to persons with respect to whom
information is required.--Every person required to make a return
under this subsection shall furnish to each person whose name is
required to be set forth in such return a written statement
showing--
``(A) the name, address, and phone number of the
information contact of the person required to make such return,
and
``(B) the information required to be shown on such return
with respect to such person, except that in the case of an
issuer of a life insurance contract, such statement is not
required to include the information specified in paragraph
(1)(E).
``(b) Requirement of Reporting of Seller's Basis in Life Insurance
Contracts.--
``(1) In general.--Upon receipt of the statement required under
subsection (a)(2) or upon notice of a transfer of a life insurance
contract to a foreign person, each issuer of a life insurance
contract shall make a return (at such time and in such manner as
the Secretary shall prescribe) setting forth--
``(A) the name, address, and TIN of the seller who
transfers any interest in such contract in such sale,
``(B) the investment in the contract (as defined in section
72(e)(6)) with respect to such seller, and
``(C) the policy number of such contract.
``(2) Statement to be furnished to persons with respect to whom
information is required.--Every person required to make a return
under this subsection shall furnish to each person whose name is
required to be set forth in such return a written statement
showing--
``(A) the name, address, and phone number of the
information contact of the person required to make such return,
and
``(B) the information required to be shown on such return
with respect to each seller whose name is required to be set
forth in such return.
``(c) Requirement of Reporting With Respect to Reportable Death
Benefits.--
``(1) In general.--Every person who makes a payment of
reportable death benefits during any taxable year shall make a
return for such taxable year (at such time and in such manner as
the Secretary shall prescribe) setting forth--
``(A) the name, address, and TIN of the person making such
payment,
``(B) the name, address, and TIN of each recipient of such
payment,
``(C) the date of each such payment,
``(D) the gross amount of each such payment, and
``(E) such person's estimate of the investment in the
contract (as defined in section 72(e)(6)) with respect to the
buyer.
``(2) Statement to be furnished to persons with respect to whom
information is required.--Every person required to make a return
under this subsection shall furnish to each person whose name is
required to be set forth in such return a written statement
showing--
``(A) the name, address, and phone number of the
information contact of the person required to make such return,
and
``(B) the information required to be shown on such return
with respect to each recipient of payment whose name is
required to be set forth in such return.
``(d) Definitions.--For purposes of this section:
``(1) Payment.--The term `payment' means, with respect to any
reportable policy sale, the amount of cash and the fair market
value of any consideration transferred in the sale.
``(2) Reportable policy sale.--The term `reportable policy
sale' has the meaning given such term in section 101(a)(3)(B).
``(3) Issuer.--The term `issuer' means any life insurance
company that bears the risk with respect to a life insurance
contract on the date any return or statement is required to be made
under this section.
``(4) Reportable death benefits.--The term `reportable death
benefits' means amounts paid by reason of the death of the insured
under a life insurance contract that has been transferred in a
reportable policy sale.''.
(b) Clerical Amendment.--The table of sections for subpart B of
part III of subchapter A of chapter 61, as amended by section 13306, is
amended by inserting after the item relating to section 6050X the
following new item:
``Sec. 6050Y. Returns relating to certain life insurance contract
transactions.''.
(c) Conforming Amendments.--
(1) Subsection (d) of section 6724 is amended--
(A) by striking ``or'' at the end of clause (xxiv) of
paragraph (1)(B), by striking ``and'' at the end of clause
(xxv) of such paragraph and inserting ``or'', and by inserting
after such clause (xxv) the following new clause:
``(xxvi) section 6050Y (relating to returns relating to
certain life insurance contract transactions), and'', and
(B) by striking ``or'' at the end of subparagraph (HH) of
paragraph (2), by striking the period at the end of
subparagraph (II) of such paragraph and inserting ``, or'', and
by inserting after such subparagraph (II) the following new
subparagraph:
``(JJ) subsection (a)(2), (b)(2), or (c)(2) of section
6050Y (relating to returns relating to certain life insurance
contract transactions).''.
(2) Section 6047 is amended--
(A) by redesignating subsection (g) as subsection (h),
(B) by inserting after subsection (f) the following new
subsection:
``(g) Information Relating to Life Insurance Contract
Transactions.--This section shall not apply to any information which is
required to be reported under section 6050Y.'', and
(C) by adding at the end of subsection (h), as so
redesignated, the following new paragraph:
``(4) For provisions requiring reporting of information
relating to certain life insurance contract transactions, see
section 6050Y.''.
(d) Effective Date.--The amendments made by this section shall
apply to--
(1) reportable policy sales (as defined in section 6050Y(d)(2)
of the Internal Revenue Code of 1986 (as added by subsection (a))
after December 31, 2017, and
(2) reportable death benefits (as defined in section
6050Y(d)(4) of such Code (as added by subsection (a)) paid after
December 31, 2017.
SEC. 13521. CLARIFICATION OF TAX BASIS OF LIFE INSURANCE CONTRACTS.
(a) Clarification With Respect to Adjustments.--Paragraph (1) of
section 1016(a) is amended by striking subparagraph (A) and all that
follows and inserting the following:
``(A) for--
``(i) taxes or other carrying charges described in
section 266; or
``(ii) expenditures described in section 173 (relating
to circulation expenditures),
for which deductions have been taken by the taxpayer in
determining taxable income for the taxable year or prior
taxable years; or
``(B) for mortality, expense, or other reasonable charges
incurred under an annuity or life insurance contract;''.
(b) Effective Date.--The amendment made by this section shall apply
to transactions entered into after August 25, 2009.
SEC. 13522. EXCEPTION TO TRANSFER FOR VALUABLE CONSIDERATION RULES.
(a) In General.--Subsection (a) of section 101 is amended by
inserting after paragraph (2) the following new paragraph:
``(3) Exception to valuable consideration rules for commercial
transfers.--
``(A) In general.--The second sentence of paragraph (2)
shall not apply in the case of a transfer of a life insurance
contract, or any interest therein, which is a reportable policy
sale.
``(B) Reportable policy sale.--For purposes of this
paragraph, the term `reportable policy sale' means the
acquisition of an interest in a life insurance contract,
directly or indirectly, if the acquirer has no substantial
family, business, or financial relationship with the insured
apart from the acquirer's interest in such life insurance
contract. For purposes of the preceding sentence, the term
`indirectly' applies to the acquisition of an interest in a
partnership, trust, or other entity that holds an interest in
the life insurance contract.''.
(b) Conforming Amendment.--Paragraph (1) of section 101(a) is
amended by striking ``paragraph (2)'' and inserting ``paragraphs (2)
and (3)''.
(c) Effective Date.--The amendments made by this section shall
apply to transfers after December 31, 2017.
SEC. 13523. MODIFICATION OF DISCOUNTING RULES FOR PROPERTY AND CASUALTY
INSURANCE COMPANIES.
(a) Modification of Rate of Interest Used to Discount Unpaid
Losses.--Paragraph (2) of section 846(c) is amended to read as follows:
``(2) Determination of annual rate.--The annual rate determined
by the Secretary under this paragraph for any calendar year shall
be a rate determined on the basis of the corporate bond yield curve
(as defined in section 430(h)(2)(D)(i), determined by substituting
`60-month period' for `24-month period' therein).''.
(b) Modification of Computational Rules for Loss Payment
Patterns.--Section 846(d)(3) is amended by striking subparagraphs (B)
through (G) and inserting the following new subparagraph:
``(B) Treatment of certain losses.--
``(i) 3-year loss payment pattern.--In the case of any
line of business not described in subparagraph (A)(ii),
losses paid after the 1st year following the accident year
shall be treated as paid equally in the 2nd and 3rd year
following the accident year.
``(ii) 10-year loss payment pattern.--
``(I) In general.--The period taken into account
under subparagraph (A)(ii) shall be extended to the
extent required under subclause (II).
``(II) Computation of extension.--The amount of
losses which would have been treated as paid in the
10th year after the accident year shall be treated as
paid in such 10th year and each subsequent year in an
amount equal to the amount of the average of the losses
treated as paid in the 7th, 8th, and 9th years after
the accident year (or, if lesser, the portion of the
unpaid losses not theretofore taken into account). To
the extent such unpaid losses have not been treated as
paid before the 24th year after the accident year, they
shall be treated as paid in such 24th year.''.
(c) Repeal of Historical Payment Pattern Election.--Section 846, as
amended by this Act, is amended by striking subsection (e) and by
redesignating subsections (f) and (g) as subsections (e) and (f),
respectively.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
(e) Transitional Rule.--For the first taxable year beginning after
December 31, 2017--
(1) the unpaid losses and the expenses unpaid (as defined in
paragraphs (5)(B) and (6) of section 832(b) of the Internal Revenue
Code of 1986) at the end of the preceding taxable year, and
(2) the unpaid losses as defined in sections 807(c)(2) and
805(a)(1) of such Code at the end of the preceding taxable year,
shall be determined as if the amendments made by this section had
applied to such unpaid losses and expenses unpaid in the preceding
taxable year and by using the interest rate and loss payment patterns
applicable to accident years ending with calendar year 2018, and any
adjustment shall be taken into account ratably in such first taxable
year and the 7 succeeding taxable years. For subsequent taxable years,
such amendments shall be applied with respect to such unpaid losses and
expenses unpaid by using the interest rate and loss payment patterns
applicable to accident years ending with calendar year 2018.
Subpart C--Banks and Financial Instruments
SEC. 13531. LIMITATION ON DEDUCTION FOR FDIC PREMIUMS.
(a) In General.--Section 162, as amended by sections 13307, is
amended by redesignating subsection (r) as subsection (s) and by
inserting after subsection (q) the following new subsection:
``(r) Disallowance of FDIC Premiums Paid by Certain Large Financial
Institutions.--
``(1) In general.--No deduction shall be allowed for the
applicable percentage of any FDIC premium paid or incurred by the
taxpayer.
``(2) Exception for small institutions.--Paragraph (1) shall
not apply to any taxpayer for any taxable year if the total
consolidated assets of such taxpayer (determined as of the close of
such taxable year) do not exceed $10,000,000,000.
``(3) Applicable percentage.--For purposes of this subsection,
the term `applicable percentage' means, with respect to any
taxpayer for any taxable year, the ratio (expressed as a percentage
but not greater than 100 percent) which--
``(A) the excess of--
``(i) the total consolidated assets of such taxpayer
(determined as of the close of such taxable year), over
``(ii) $10,000,000,000, bears to
``(B) $40,000,000,000.
``(4) FDIC premiums.--For purposes of this subsection, the term
`FDIC premium' means any assessment imposed under section 7(b) of
the Federal Deposit Insurance Act (12 U.S.C. 1817(b)).
``(5) Total consolidated assets.--For purposes of this
subsection, the term `total consolidated assets' has the meaning
given such term under section 165 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (12 U.S.C. 5365).
``(6) Aggregation rule.--
``(A) In general.--Members of an expanded affiliated group
shall be treated as a single taxpayer for purposes of applying
this subsection.
``(B) Expanded affiliated group.--
``(i) In general.--For purposes of this paragraph, the
term `expanded affiliated group' means an affiliated group
as defined in section 1504(a), determined--
``(I) by substituting `more than 50 percent' for
`at least 80 percent' each place it appears, and
``(II) without regard to paragraphs (2) and (3) of
section 1504(b).
``(ii) Control of non-corporate entities.--A
partnership or any other entity (other than a corporation)
shall be treated as a member of an expanded affiliated
group if such entity is controlled (within the meaning of
section 954(d)(3)) by members of such group (including any
entity treated as a member of such group by reason of this
clause).''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13532. REPEAL OF ADVANCE REFUNDING BONDS.
(a) In General.--Paragraph (1) of section 149(d) is amended by
striking ``as part of an issue described in paragraph (2), (3), or
(4).'' and inserting ``to advance refund another bond.''.
(b) Conforming Amendments.--
(1) Section 149(d) is amended by striking paragraphs (2), (3),
(4), and (6) and by redesignating paragraphs (5) and (7) as
paragraphs (2) and (3).
(2) Section 148(f)(4)(C) is amended by striking clause (xiv)
and by redesignating clauses (xv) to (xvii) as clauses (xiv) to
(xvi).
(c) Effective Date.--The amendments made by this section shall
apply to advance refunding bonds issued after December 31, 2017.
Subpart D--S Corporations
SEC. 13541. EXPANSION OF QUALIFYING BENEFICIARIES OF AN ELECTING SMALL
BUSINESS TRUST.
(a) No Look-through for Eligibility Purposes.--Section
1361(c)(2)(B)(v) is amended by adding at the end the following new
sentence: ``This clause shall not apply for purposes of subsection
(b)(1)(C).''.
(b) Effective Date.--The amendment made by this section shall take
effect on January 1, 2018.
SEC. 13542. CHARITABLE CONTRIBUTION DEDUCTION FOR ELECTING SMALL
BUSINESS TRUSTS.
(a) In General.--Section 641(c)(2) is amended by inserting after
subparagraph (D) the following new subparagraph:
``(E)(i) Section 642(c) shall not apply.
``(ii) For purposes of section 170(b)(1)(G), adjusted gross
income shall be computed in the same manner as in the case of
an individual, except that the deductions for costs which are
paid or incurred in connection with the administration of the
trust and which would not have been incurred if the property
were not held in such trust shall be treated as allowable in
arriving at adjusted gross income.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2017.
SEC. 13543. MODIFICATION OF TREATMENT OF S CORPORATION CONVERSIONS TO C
CORPORATIONS.
(a) Adjustments Attributable to Conversion From S Corporation to C
Corporation.--Section 481 is amended by adding at the end the following
new subsection:
``(d) Adjustments Attributable to Conversion From S Corporation to
C Corporation.--
``(1) In general.--In the case of an eligible terminated S
corporation, any adjustment required by subsection (a)(2) which is
attributable to such corporation's revocation described in
paragraph (2)(A)(ii) shall be taken into account ratably during the
6-taxable year period beginning with the year of change.
``(2) Eligible terminated s corporation.--For purposes of this
subsection, the term `eligible terminated S corporation' means any
C corporation--
``(A) which--
``(i) was an S corporation on the day before the date
of the enactment of the Tax Cuts and Jobs Act, and
``(ii) during the 2-year period beginning on the date
of such enactment makes a revocation of its election under
section 1362(a), and
``(B) the owners of the stock of which, determined on the
date such revocation is made, are the same owners (and in
identical proportions) as on the date of such enactment.''.
(b) Cash Distributions Following Post-termination Transition Period
From S Corporation Status.--Section 1371 is amended by adding at the
end the following new subsection:
``(f) Cash Distributions Following Post-termination Transition
Period.--In the case of a distribution of money by an eligible
terminated S corporation (as defined in section 481(d)) after the post-
termination transition period, the accumulated adjustments account
shall be allocated to such distribution, and the distribution shall be
chargeable to accumulated earnings and profits, in the same ratio as
the amount of such accumulated adjustments account bears to the amount
of such accumulated earnings and profits.''.
PART VII--EMPLOYMENT
Subpart A--Compensation
SEC. 13601. MODIFICATION OF LIMITATION ON EXCESSIVE EMPLOYEE
REMUNERATION.
(a) Repeal of Performance-based Compensation and Commission
Exceptions for Limitation on Excessive Employee Remuneration.--
(1) In general.--Paragraph (4) of section 162(m) is amended by
striking subparagraphs (B) and (C) and by redesignating
subparagraphs (D), (E), (F), and (G) as subparagraphs (B), (C),
(D), and (E), respectively.
(2) Conforming amendments.--
(A) Paragraphs (5)(E) and (6)(D) of section 162(m) are each
amended by striking ``subparagraphs (B), (C), and (D)'' and
inserting ``subparagraph (B)''.
(B) Paragraphs (5)(G) and (6)(G) of section 162(m) are each
amended by striking ``(F) and (G)'' and inserting ``(D) and
(E)''.
(b) Modification of Definition of Covered Employees.--Paragraph (3)
of section 162(m) is amended--
(1) in subparagraph (A), by striking ``as of the close of the
taxable year, such employee is the chief executive officer of the
taxpayer or is'' and inserting ``such employee is the principal
executive officer or principal financial officer of the taxpayer at
any time during the taxable year, or was'',
(2) in subparagraph (B)--
(A) by striking ``4'' and inserting ``3'', and
(B) by striking ``(other than the chief executive
officer)'' and inserting ``(other than any individual described
in subparagraph (A))'', and
(3) by striking ``or'' at the end of subparagraph (A), by
striking the period at the end of subparagraph (B) and inserting
``, or'', and by adding at the end the following:
``(C) was a covered employee of the taxpayer (or any
predecessor) for any preceding taxable year beginning after
December 31, 2016.''.
(c) Expansion of Applicable Employer.--
(1) In general.--Section 162(m)(2) is amended to read as
follows:
``(2) Publicly held corporation.--For purposes of this
subsection, the term `publicly held corporation' means any
corporation which is an issuer (as defined in section 3 of the
Securities Exchange Act of 1934 (15 U.S.C. 78c))--
``(A) the securities of which are required to be registered
under section 12 of such Act (15 U.S.C. 78l), or
``(B) that is required to file reports under section 15(d)
of such Act (15 U.S.C. 78o(d)).''.
(2) Conforming amendment.--Section 162(m)(3), as amended by
subsection (b), is amended by adding at the end the following flush
sentence:
``Such term shall include any employee who would be described
in subparagraph (B) if the reporting described in such subparagraph
were required as so described.''.
(d) Special Rule for Remuneration Paid to Beneficiaries, etc.--
Paragraph (4) of section 162(m), as amended by subsection (a), is
amended by adding at the end the following new subparagraph:
``(F) Special rule for remuneration paid to beneficiaries,
etc.--Remuneration shall not fail to be applicable employee
remuneration merely because it is includible in the income of,
or paid to, a person other than the covered employee, including
after the death of the covered employee.''.
(e) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2017.
(2) Exception for binding contracts.--The amendments made by
this section shall not apply to remuneration which is provided
pursuant to a written binding contract which was in effect on
November 2, 2017, and which was not modified in any material
respect on or after such date.
SEC. 13602. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE
COMPENSATION.
(a) In General.--Subchapter D of chapter 42 is amended by adding at
the end the following new section:
``SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE
COMPENSATION.
``(a) Tax Imposed.--There is hereby imposed a tax equal to the
product of the rate of tax under section 11 and the sum of--
``(1) so much of the remuneration paid (other than any excess
parachute payment) by an applicable tax-exempt organization for the
taxable year with respect to employment of any covered employee in
excess of $1,000,000, plus
``(2) any excess parachute payment paid by such an organization
to any covered employee.
For purposes of the preceding sentence, remuneration shall be treated
as paid when there is no substantial risk of forfeiture (within the
meaning of section 457(f)(3)(B)) of the rights to such remuneration.
``(b) Liability for Tax.--The employer shall be liable for the tax
imposed under subsection (a).
``(c) Definitions and Special Rules.--For purposes of this
section--
``(1) Applicable tax-exempt organization.--The term `applicable
tax-exempt organization' means any organization which for the
taxable year--
``(A) is exempt from taxation under section 501(a),
``(B) is a farmers' cooperative organization described in
section 521(b)(1),
``(C) has income excluded from taxation under section
115(1), or
``(D) is a political organization described in section
527(e)(1).
``(2) Covered employee.--For purposes of this section, the term
`covered employee' means any employee (including any former
employee) of an applicable tax-exempt organization if the
employee--
``(A) is one of the 5 highest compensated employees of the
organization for the taxable year, or
``(B) was a covered employee of the organization (or any
predecessor) for any preceding taxable year beginning after
December 31, 2016.
``(3) Remuneration.--For purposes of this section:
``(A) In general.--The term `remuneration' means wages (as
defined in section 3401(a)), except that such term shall not
include any designated Roth contribution (as defined in section
402A(c)) and shall include amounts required to be included in
gross income under section 457(f).
``(B) Exception for remuneration for medical services.--The
term `remuneration' shall not include the portion of any
remuneration paid to a licensed medical professional (including
a veterinarian) which is for the performance of medical or
veterinary services by such professional.
``(4) Remuneration from related organizations.--
``(A) In general.--Remuneration of a covered employee by an
applicable tax-exempt organization shall include any
remuneration paid with respect to employment of such employee
by any related person or governmental entity.
``(B) Related organizations.--A person or governmental
entity shall be treated as related to an applicable tax-exempt
organization if such person or governmental entity--
``(i) controls, or is controlled by, the organization,
``(ii) is controlled by one or more persons which
control the organization,
``(iii) is a supported organization (as defined in
section 509(f)(3)) during the taxable year with respect to
the organization,
``(iv) is a supporting organization described in
section 509(a)(3) during the taxable year with respect to
the organization, or
``(v) in the case of an organization which is a
voluntary employees' beneficiary association described in
section 501(c)(9), establishes, maintains, or makes
contributions to such voluntary employees' beneficiary
association.
``(C) Liability for tax.--In any case in which remuneration
from more than one employer is taken into account under this
paragraph in determining the tax imposed by subsection (a),
each such employer shall be liable for such tax in an amount
which bears the same ratio to the total tax determined under
subsection (a) with respect to such remuneration as--
``(i) the amount of remuneration paid by such employer
with respect to such employee, bears to
``(ii) the amount of remuneration paid by all such
employers to such employee.
``(5) Excess parachute payment.--For purposes of determining
the tax imposed by subsection (a)(2)--
``(A) In general.--The term `excess parachute payment'
means an amount equal to the excess of any parachute payment
over the portion of the base amount allocated to such payment.
``(B) Parachute payment.--The term `parachute payment'
means any payment in the nature of compensation to (or for the
benefit of) a covered employee if--
``(i) such payment is contingent on such employee's
separation from employment with the employer, and
``(ii) the aggregate present value of the payments in
the nature of compensation to (or for the benefit of) such
individual which are contingent on such separation equals
or exceeds an amount equal to 3 times the base amount.
``(C) Exception.--Such term does not include any payment--
``(i) described in section 280G(b)(6) (relating to
exemption for payments under qualified plans),
``(ii) made under or to an annuity contract described
in section 403(b) or a plan described in section 457(b),
``(iii) to a licensed medical professional (including a
veterinarian) to the extent that such payment is for the
performance of medical or veterinary services by such
professional, or
``(iv) to an individual who is not a highly compensated
employee as defined in section 414(q).
``(D) Base amount.--Rules similar to the rules of
280G(b)(3) shall apply for purposes of determining the base
amount.
``(E) Property transfers; present value.--Rules similar to
the rules of paragraphs (3) and (4) of section 280G(d) shall
apply.
``(6) Coordination with deduction limitation.--Remuneration the
deduction for which is not allowed by reason of section 162(m)
shall not be taken into account for purposes of this section.
``(d) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to prevent avoidance of the tax under this section,
including regulations to prevent avoidance of such tax through the
performance of services other than as an employee or by providing
compensation through a pass-through or other entity to avoid such
tax.''.
(b) Clerical Amendment.--The table of sections for subchapter D of
chapter 42 is amended by adding at the end the following new item:
``Sec. 4960. Tax on excess tax-exempt organization executive
compensation.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13603. TREATMENT OF QUALIFIED EQUITY GRANTS.
(a) In General.--Section 83 is amended by adding at the end the
following new subsection:
``(i) Qualified Equity Grants.--
``(1) In general.--For purposes of this subtitle--
``(A) Timing of inclusion.--If qualified stock is
transferred to a qualified employee who makes an election with
respect to such stock under this subsection, subsection (a)
shall be applied by including the amount determined under such
subsection with respect to such stock in income of the employee
in the taxable year determined under subparagraph (B) in lieu
of the taxable year described in subsection (a).
``(B) Taxable year determined.--The taxable year determined
under this subparagraph is the taxable year of the employee
which includes the earliest of--
``(i) the first date such qualified stock becomes
transferable (including, solely for purposes of this
clause, becoming transferable to the employer),
``(ii) the date the employee first becomes an excluded
employee,
``(iii) the first date on which any stock of the
corporation which issued the qualified stock becomes
readily tradable on an established securities market (as
determined by the Secretary, but not including any market
unless such market is recognized as an established
securities market by the Secretary for purposes of a
provision of this title other than this subsection),
``(iv) the date that is 5 years after the first date
the rights of the employee in such stock are transferable
or are not subject to a substantial risk of forfeiture,
whichever occurs earlier, or
``(v) the date on which the employee revokes (at such
time and in such manner as the Secretary provides) the
election under this subsection with respect to such stock.
``(2) Qualified stock.--
``(A) In general.--For purposes of this subsection, the
term `qualified stock' means, with respect to any qualified
employee, any stock in a corporation which is the employer of
such employee, if--
``(i) such stock is received--
``(I) in connection with the exercise of an option,
or
``(II) in settlement of a restricted stock unit,
and
``(ii) such option or restricted stock unit was granted
by the corporation--
``(I) in connection with the performance of
services as an employee, and
``(II) during a calendar year in which such
corporation was an eligible corporation.
``(B) Limitation.--The term `qualified stock' shall not
include any stock if the employee may sell such stock to, or
otherwise receive cash in lieu of stock from, the corporation
at the time that the rights of the employee in such stock first
become transferable or not subject to a substantial risk of
forfeiture.
``(C) Eligible corporation.--For purposes of subparagraph
(A)(ii)(II)--
``(i) In general.--The term `eligible corporation'
means, with respect to any calendar year, any corporation
if--
``(I) no stock of such corporation (or any
predecessor of such corporation) is readily tradable on
an established securities market (as determined under
paragraph (1)(B)(iii)) during any preceding calendar
year, and
``(II) such corporation has a written plan under
which, in such calendar year, not less than 80 percent
of all employees who provide services to such
corporation in the United States (or any possession of
the United States) are granted stock options, or are
granted restricted stock units, with the same rights
and privileges to receive qualified stock.
``(ii) Same rights and privileges.--For purposes of
clause (i)(II)--
``(I) except as provided in subclauses (II) and
(III), the determination of rights and privileges with
respect to stock shall be made in a similar manner as
under section 423(b)(5),
``(II) employees shall not fail to be treated as
having the same rights and privileges to receive
qualified stock solely because the number of shares
available to all employees is not equal in amount, so
long as the number of shares available to each employee
is more than a de minimis amount, and
``(III) rights and privileges with respect to the
exercise of an option shall not be treated as the same
as rights and privileges with respect to the settlement
of a restricted stock unit.
``(iii) Employee.--For purposes of clause (i)(II), the
term `employee' shall not include any employee described in
section 4980E(d)(4) or any excluded employee.
``(iv) Special rule for calendar years before 2018.--In
the case of any calendar year beginning before January 1,
2018, clause (i)(II) shall be applied without regard to
whether the rights and privileges with respect to the
qualified stock are the same.
``(3) Qualified employee; excluded employee.--For purposes of
this subsection--
``(A) In general.--The term `qualified employee' means any
individual who--
``(i) is not an excluded employee, and
``(ii) agrees in the election made under this
subsection to meet such requirements as are determined by
the Secretary to be necessary to ensure that the
withholding requirements of the corporation under chapter
24 with respect to the qualified stock are met.
``(B) Excluded employee.--The term `excluded employee'
means, with respect to any corporation, any individual--
``(i) who is a 1-percent owner (within the meaning of
section 416(i)(1)(B)(ii)) at any time during the calendar
year or who was such a 1 percent owner at any time during
the 10 preceding calendar years,
``(ii) who is or has been at any prior time--
``(I) the chief executive officer of such
corporation or an individual acting in such a capacity,
or
``(II) the chief financial officer of such
corporation or an individual acting in such a capacity,
``(iii) who bears a relationship described in section
318(a)(1) to any individual described in subclause (I) or
(II) of clause (ii), or
``(iv) who is one of the 4 highest compensated officers
of such corporation for the taxable year, or was one of the
4 highest compensated officers of such corporation for any
of the 10 preceding taxable years, determined with respect
to each such taxable year on the basis of the shareholder
disclosure rules for compensation under the Securities
Exchange Act of 1934 (as if such rules applied to such
corporation).
``(4) Election.--
``(A) Time for making election.--An election with respect
to qualified stock shall be made under this subsection no later
than 30 days after the first date the rights of the employee in
such stock are transferable or are not subject to a substantial
risk of forfeiture, whichever occurs earlier, and shall be made
in a manner similar to the manner in which an election is made
under subsection (b).
``(B) Limitations.--No election may be made under this
section with respect to any qualified stock if--
``(i) the qualified employee has made an election under
subsection (b) with respect to such qualified stock,
``(ii) any stock of the corporation which issued the
qualified stock is readily tradable on an established
securities market (as determined under paragraph
(1)(B)(iii)) at any time before the election is made, or
``(iii) such corporation purchased any of its
outstanding stock in the calendar year preceding the
calendar year which includes the first date the rights of
the employee in such stock are transferable or are not
subject to a substantial risk of forfeiture, unless--
``(I) not less than 25 percent of the total dollar
amount of the stock so purchased is deferral stock, and
``(II) the determination of which individuals from
whom deferral stock is purchased is made on a
reasonable basis.
``(C) Definitions and special rules related to limitation
on stock redemptions.--
``(i) Deferral stock.--For purposes of this paragraph,
the term `deferral stock' means stock with respect to which
an election is in effect under this subsection.
``(ii) Deferral stock with respect to any individual
not taken into account if individual holds deferral stock
with longer deferral period.--Stock purchased by a
corporation from any individual shall not be treated as
deferral stock for purposes of subparagraph (B)(iii) if
such individual (immediately after such purchase) holds any
deferral stock with respect to which an election has been
in effect under this subsection for a longer period than
the election with respect to the stock so purchased.
``(iii) Purchase of all outstanding deferral stock.--
The requirements of subclauses (I) and (II) of subparagraph
(B)(iii) shall be treated as met if the stock so purchased
includes all of the corporation's outstanding deferral
stock.
``(iv) Reporting.--Any corporation which has
outstanding deferral stock as of the beginning of any
calendar year and which purchases any of its outstanding
stock during such calendar year shall include on its return
of tax for the taxable year in which, or with which, such
calendar year ends the total dollar amount of its
outstanding stock so purchased during such calendar year
and such other information as the Secretary requires for
purposes of administering this paragraph.
``(5) Controlled groups.--For purposes of this subsection, all
persons treated as a single employer under section 414(b) shall be
treated as 1 corporation.
``(6) Notice requirement.--Any corporation which transfers
qualified stock to a qualified employee shall, at the time that (or
a reasonable period before) an amount attributable to such stock
would (but for this subsection) first be includible in the gross
income of such employee--
``(A) certify to such employee that such stock is qualified
stock, and
``(B) notify such employee--
``(i) that the employee may be eligible to elect to
defer income on such stock under this subsection, and
``(ii) that, if the employee makes such an election--
``(I) the amount of income recognized at the end of
the deferral period will be based on the value of the
stock at the time at which the rights of the employee
in such stock first become transferable or not subject
to substantial risk of forfeiture, notwithstanding
whether the value of the stock has declined during the
deferral period,
``(II) the amount of such income recognized at the
end of the deferral period will be subject to
withholding under section 3401(i) at the rate
determined under section 3402(t), and
``(III) the responsibilities of the employee (as
determined by the Secretary under paragraph (3)(A)(ii))
with respect to such withholding.
``(7) Restricted stock units.--This section (other than this
subsection), including any election under subsection (b), shall not
apply to restricted stock units.''.
(b) Withholding.--
(1) Time of withholding.--Section 3401 is amended by adding at
the end the following new subsection:
``(i) Qualified Stock for Which an Election Is in Effect Under
Section 83(i).--For purposes of subsection (a), qualified stock (as
defined in section 83(i)) with respect to which an election is made
under section 83(i) shall be treated as wages--
``(1) received on the earliest date described in section
83(i)(1)(B), and
``(2) in an amount equal to the amount included in income under
section 83 for the taxable year which includes such date.''.
(2) Amount of withholding.--Section 3402 is amended by adding
at the end the following new subsection:
``(t) Rate of Withholding for Certain Stock.--In the case of any
qualified stock (as defined in section 83(i)(2)) with respect to which
an election is made under section 83(i)--
``(1) the rate of tax under subsection (a) shall not be less
than the maximum rate of tax in effect under section 1, and
``(2) such stock shall be treated for purposes of section
3501(b) in the same manner as a non-cash fringe benefit.''.
(c) Coordination With Other Deferred Compensation Rules.--
(1) Election to apply deferral to statutory options.--
(A) Incentive stock options.--Section 422(b) is amended by
adding at the end the following: ``Such term shall not include
any option if an election is made under section 83(i) with
respect to the stock received in connection with the exercise
of such option.''.
(B) Employee stock purchase plans.--Section 423 is
amended--
(i) in subsection (b)(5), by striking ``and'' before
``the plan'' and by inserting ``, and the rules of section
83(i) shall apply in determining which employees have a
right to make an election under such section'' before the
semicolon at the end, and
(ii) by adding at the end the following new subsection:
``(d) Coordination With Qualified Equity Grants.--An option for
which an election is made under section 83(i) with respect to the stock
received in connection with its exercise shall not be considered as
granted pursuant an employee stock purchase plan.''.
(2) Exclusion from definition of nonqualified deferred
compensation plan.--Subsection (d) of section 409A is amended by
adding at the end the following new paragraph:
``(7) Treatment of qualified stock.--An arrangement under which
an employee may receive qualified stock (as defined in section
83(i)(2)) shall not be treated as a nonqualified deferred
compensation plan with respect to such employee solely because of
such employee's election, or ability to make an election, to defer
recognition of income under section 83(i).''.
(d) Information Reporting.--Section 6051(a) is amended by striking
``and'' at the end of paragraph (14)(B), by striking the period at the
end of paragraph (15) and inserting a comma, and by inserting after
paragraph (15) the following new paragraphs:
``(16) the amount includible in gross income under subparagraph
(A) of section 83(i)(1) with respect to an event described in
subparagraph (B) of such section which occurs in such calendar
year, and
``(17) the aggregate amount of income which is being deferred
pursuant to elections under section 83(i), determined as of the
close of the calendar year.''.
(e) Penalty for Failure of Employer to Provide Notice of Tax
Consequences.--Section 6652 is amended by adding at the end the
following new subsection:
``(p) Failure to Provide Notice Under Section 83(i).--In the case
of each failure to provide a notice as required by section 83(i)(6), at
the time prescribed therefor, unless it is shown that such failure is
due to reasonable cause and not to willful neglect, there shall be
paid, on notice and demand of the Secretary and in the same manner as
tax, by the person failing to provide such notice, an amount equal to
$100 for each such failure, but the total amount imposed on such person
for all such failures during any calendar year shall not exceed
$50,000.''.
(f) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to stock attributable
to options exercised, or restricted stock units settled, after
December 31, 2017.
(2) Requirement to provide notice.--The amendments made by
subsection (e) shall apply to failures after December 31, 2017.
(g) Transition Rule.--Until such time as the Secretary (or the
Secretary's delegate) issues regulations or other guidance for purposes
of implementing the requirements of paragraph (2)(C)(i)(II) of section
83(i) of the Internal Revenue Code of 1986 (as added by this section),
or the requirements of paragraph (6) of such section, a corporation
shall be treated as being in compliance with such requirements
(respectively) if such corporation complies with a reasonable good
faith interpretation of such requirements.
SEC. 13604. INCREASE IN EXCISE TAX RATE FOR STOCK COMPENSATION OF
INSIDERS IN EXPATRIATED CORPORATIONS.
(a) In General.--Section 4985(a)(1) is amended by striking
``section 1(h)(1)(C)'' and inserting ``section 1(h)(1)(D)''.
(b) Effective Date.--The amendment made by this section shall apply
to corporations first becoming expatriated corporations (as defined in
section 4985 of the Internal Revenue Code of 1986) after the date of
enactment of this Act.
Subpart B--Retirement Plans
SEC. 13611. REPEAL OF SPECIAL RULE PERMITTING RECHARACTERIZATION OF
ROTH CONVERSIONS.
(a) In General.--Section 408A(d)(6)(B) is amended by adding at the
end the following new clause:
``(iii) Conversions.--Subparagraph (A) shall not apply
in the case of a qualified rollover contribution to which
subsection (d)(3) applies (including by reason of
subparagraph (C) thereof).''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13612. MODIFICATION OF RULES APPLICABLE TO LENGTH OF SERVICE AWARD
PLANS.
(a) Maximum Deferral Amount.--Clause (ii) of section 457(e)(11)(B)
is amended by striking ``$3,000'' and inserting ``$6,000''.
(b) Cost of Living Adjustment.--Subparagraph (B) of section
457(e)(11) is amended by adding at the end the following:
``(iii) Cost of living adjustment.--In the case of
taxable years beginning after December 31, 2017, the
Secretary shall adjust the $6,000 amount under clause (ii)
at the same time and in the same manner as under section
415(d), except that the base period shall be the calendar
quarter beginning July 1, 2016, and any increase under this
paragraph that is not a multiple of $500 shall be rounded
to the next lowest multiple of $500.''.
(c) Application of Limitation on Accruals.--Subparagraph (B) of
section 457(e)(11), as amended by subsection (b), is amended by adding
at the end the following:
``(iv) Special rule for application of limitation on
accruals for certain plans.--In the case of a plan
described in subparagraph (A)(ii) which is a defined
benefit plan (as defined in section 414(j)), the limitation
under clause (ii) shall apply to the actuarial present
value of the aggregate amount of length of service awards
accruing with respect to any year of service. Such
actuarial present value with respect to any year shall be
calculated using reasonable actuarial assumptions and
methods, assuming payment will be made under the most
valuable form of payment under the plan with payment
commencing at the later of the earliest age at which
unreduced benefits are payable under the plan or the
participant's age at the time of the calculation.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13613. EXTENDED ROLLOVER PERIOD FOR PLAN LOAN OFFSET AMOUNTS.
(a) In General.--Paragraph (3) of section 402(c) is amended by
adding at the end the following new subparagraph:
``(C) Rollover of certain plan loan offset amounts.--
``(i) In general.--In the case of a qualified plan loan
offset amount, paragraph (1) shall not apply to any
transfer of such amount made after the due date (including
extensions) for filing the return of tax for the taxable
year in which such amount is treated as distributed from a
qualified employer plan.
``(ii) Qualified plan loan offset amount.--For purposes
of this subparagraph, the term `qualified plan loan offset
amount' means a plan loan offset amount which is treated as
distributed from a qualified employer plan to a participant
or beneficiary solely by reason of--
``(I) the termination of the qualified employer
plan, or
``(II) the failure to meet the repayment terms of
the loan from such plan because of the severance from
employment of the participant.
``(iii) Plan loan offset amount.--For purposes of
clause (ii), the term `plan loan offset amount' means the
amount by which the participant's accrued benefit under the
plan is reduced in order to repay a loan from the plan.
``(iv) Limitation.--This subparagraph shall not apply
to any plan loan offset amount unless such plan loan offset
amount relates to a loan to which section 72(p)(1) does not
apply by reason of section 72(p)(2).
``(v) Qualified employer plan.--For purposes of this
subsection, the term `qualified employer plan' has the
meaning given such term by section 72(p)(4).''.
(b) Conforming Amendments.--Section 402(c)(3) is amended--
(1) by striking ``Transfer must be made within 60 days of
receipt'' in the heading and inserting ``Time limit on transfers'',
and
(2) by striking ``subparagraph (B)'' in subparagraph (A) and
inserting ``subparagraphs (B) and (C)''.
(c) Effective Date.--The amendments made by this section shall
apply to plan loan offset amounts which are treated as distributed in
taxable years beginning after December 31, 2017.
PART VIII--EXEMPT ORGANIZATIONS
SEC. 13701. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES
AND UNIVERSITIES.
(a) In General.--Chapter 42 is amended by adding at the end the
following new subchapter:
``Subchapter H--Excise Tax Based on Investment Income of Private
Colleges and Universities
``Sec. 4968. Excise tax based on investment income of private colleges
and universities.
``SEC. 4968. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES
AND UNIVERSITIES.
``(a) Tax Imposed.--There is hereby imposed on each applicable
educational institution for the taxable year a tax equal to 1.4 percent
of the net investment income of such institution for the taxable year.
``(b) Applicable Educational Institution.--For purposes of this
subchapter--
``(1) In general.--The term `applicable educational
institution' means an eligible educational institution (as defined
in section 25A(f)(2))--
``(A) which had at least 500 students during the preceding
taxable year,
``(B) more than 50 percent of the students of which are
located in the United States,
``(C) which is not described in the first sentence of
section 511(a)(2)(B) (relating to State colleges and
universities), and
``(D) the aggregate fair market value of the assets of
which at the end of the preceding taxable year (other than
those assets which are used directly in carrying out the
institution's exempt purpose) is at least $500,000 per student
of the institution.
``(2) Students.--For purposes of paragraph (1), the number of
students of an institution (including for purposes of determining
the number of students at a particular location) shall be based on
the daily average number of full-time students attending such
institution (with part-time students taken into account on a full-
time student equivalent basis).
``(c) Net Investment Income.--For purposes of this section, net
investment income shall be determined under rules similar to the rules
of section 4940(c).
``(d) Assets and Net Investment Income of Related Organizations.--
``(1) In general.--For purposes of subsections (b)(1)(C) and
(c), assets and net investment income of any related organization
with respect to an educational institution shall be treated as
assets and net investment income, respectively, of the educational
institution, except that--
``(A) no such amount shall be taken into account with
respect to more than 1 educational institution, and
``(B) unless such organization is controlled by such
institution or is described in section 509(a)(3) with respect
to such institution for the taxable year, assets and net
investment income which are not intended or available for the
use or benefit of the educational institution shall not be
taken into account.
``(2) Related organization.--For purposes of this subsection,
the term `related organization' means, with respect to an
educational institution, any organization which--
``(A) controls, or is controlled by, such institution,
``(B) is controlled by 1 or more persons which also control
such institution, or
``(C) is a supported organization (as defined in section
509(f)(3)), or an organization described in section 509(a)(3),
during the taxable year with respect to such institution.''.
(b) Clerical Amendment.--The table of subchapters for chapter 42 is
amended by adding at the end the following new item:
``subchapter h--excise tax based on investment income of private
colleges and universities''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 13702. UNRELATED BUSINESS TAXABLE INCOME SEPARATELY COMPUTED FOR
EACH TRADE OR BUSINESS ACTIVITY.
(a) In General.--Subsection (a) of section 512 is amended by adding
at the end the following new paragraph:
``(6) Special rule for organization with more than 1 unrelated
trade or business.--In the case of any organization with more than
1 unrelated trade or business--
``(A) unrelated business taxable income, including for
purposes of determining any net operating loss deduction, shall
be computed separately with respect to each such trade or
business and without regard to subsection (b)(12),
``(B) the unrelated business taxable income of such
organization shall be the sum of the unrelated business taxable
income so computed with respect to each such trade or business,
less a specific deduction under subsection (b)(12), and
``(C) for purposes of subparagraph (B), unrelated business
taxable income with respect to any such trade or business shall
not be less than zero.''.
(b) Effective Date.--
(1) In general.--Except to the extent provided in paragraph
(2), the amendment made by this section shall apply to taxable
years beginning after December 31, 2017.
(2) Carryovers of net operating losses.--If any net operating
loss arising in a taxable year beginning before January 1, 2018, is
carried over to a taxable year beginning on or after such date--
(A) subparagraph (A) of section 512(a)(6) of the Internal
Revenue Code of 1986, as added by this Act, shall not apply to
such net operating loss, and
(B) the unrelated business taxable income of the
organization, after the application of subparagraph (B) of such
section, shall be reduced by the amount of such net operating
loss.
SEC. 13703. UNRELATED BUSINESS TAXABLE INCOME INCREASED BY AMOUNT OF
CERTAIN FRINGE BENEFIT EXPENSES FOR WHICH DEDUCTION IS DISALLOWED.
(a) In General.--Section 512(a), as amended by this Act, is further
amended by adding at the end the following new paragraph:
``(7) Increase in unrelated business taxable income by
disallowed fringe.--Unrelated business taxable income of an
organization shall be increased by any amount for which a deduction
is not allowable under this chapter by reason of section 274 and
which is paid or incurred by such organization for any qualified
transportation fringe (as defined in section 132(f)), any parking
facility used in connection with qualified parking (as defined in
section 132(f)(5)(C)), or any on-premises athletic facility (as
defined in section 132(j)(4)(B)). The preceding sentence shall not
apply to the extent the amount paid or incurred is directly
connected with an unrelated trade or business which is regularly
carried on by the organization. The Secretary shall issue such
regulations or other guidance as may be necessary or appropriate to
carry out the purposes of this paragraph, including regulations or
other guidance providing for the appropriate allocation of
depreciation and other costs with respect to facilities used for
parking or for on-premises athletic facilities.''.
(b) Effective Date.--The amendment made by this section shall apply
to amounts paid or incurred after December 31, 2017.
SEC. 13704. REPEAL OF DEDUCTION FOR AMOUNTS PAID IN EXCHANGE FOR
COLLEGE ATHLETIC EVENT SEATING RIGHTS.
(a) In General.--Section 170(l) is amended--
(1) by striking paragraph (1) and inserting the following:
``(1) In general.--No deduction shall be allowed under this
section for any amount described in paragraph (2).'', and
(2) in paragraph (2)(B), by striking ``such amount would be
allowable as a deduction under this section but for the fact
that''.
(b) Effective Date.--The amendments made by this section shall
apply to contributions made in taxable years beginning after December
31, 2017.
SEC. 13705. REPEAL OF SUBSTANTIATION EXCEPTION IN CASE OF CONTRIBUTIONS
REPORTED BY DONEE.
(a) In General.--Section 170(f)(8) is amended by striking
subparagraph (D) and by redesignating subparagraph (E) as subparagraph
(D).
(b) Effective Date.--The amendments made by this section shall
apply to contributions made in taxable years beginning after December
31, 2016.
PART IX--OTHER PROVISIONS
Subpart A--Craft Beverage Modernization and Tax Reform
SEC. 13801. PRODUCTION PERIOD FOR BEER, WINE, AND DISTILLED SPIRITS.
(a) In General.--Section 263A(f) is amended--
(1) by redesignating paragraph (4) as paragraph (5), and
(2) by inserting after paragraph (3) the following new
paragraph:
``(4) Exemption for aging process of beer, wine, and distilled
spirits.--
``(A) In general.--For purposes of this subsection, the
production period shall not include the aging period for--
``(i) beer (as defined in section 5052(a)),
``(ii) wine (as described in section 5041(a)), or
``(iii) distilled spirits (as defined in section
5002(a)(8)), except such spirits that are unfit for use for
beverage purposes.
``(B) Termination.--This paragraph shall not apply to
interest costs paid or accrued after December 31, 2019.''.
(b) Conforming Amendment.--Paragraph (5)(B)(ii) of section 263A(f),
as redesignated by this section, is amended by inserting ``except as
provided in paragraph (4),'' before ``ending on the date''.
(c) Effective Date.--The amendments made by this section shall
apply to interest costs paid or accrued in calendar years beginning
after December 31, 2017.
SEC. 13802. REDUCED RATE OF EXCISE TAX ON BEER.
(a) In General.--Paragraph (1) of section 5051(a) is amended to
read as follows:
``(1) In general.--
``(A) Imposition of tax.--A tax is hereby imposed on all
beer brewed or produced, and removed for consumption or sale,
within the United States, or imported into the United States.
Except as provided in paragraph (2), the rate of such tax shall
be the amount determined under this paragraph.
``(B) Rate.--Except as provided in subparagraph (C), the
rate of tax shall be $18 for per barrel.
``(C) Special rule.--In the case of beer removed after
December 31, 2017, and before January 1, 2020, the rate of tax
shall be--
``(i) $16 on the first 6,000,000 barrels of beer--
``(I) brewed by the brewer and removed during the
calendar year for consumption or sale, or
``(II) imported by the importer into the United
States during the calendar year, and
``(ii) $18 on any barrels of beer to which clause (i)
does not apply.
``(D) Barrel.--For purposes of this section, a barrel shall
contain not more than 31 gallons of beer, and any tax imposed
under this section shall be applied at a like rate for any
other quantity or for fractional parts of a barrel.''.
(b) Reduced Rate for Certain Domestic Production.--Subparagraph (A)
of section 5051(a)(2) is amended--
(1) in the heading, by striking ``$7 a barrel'', and
(2) by inserting ``($3.50 in the case of beer removed after
December 31, 2017, and before January 1, 2020)'' after ``$7''.
(c) Application of Reduced Tax Rate for Foreign Manufacturers and
Importers.--Subsection (a) of section 5051 is amended--
(1) in subparagraph (C)(i)(II) of paragraph (1), as amended by
subsection (a), by inserting ``but only if the importer is an
electing importer under paragraph (4) and the barrels have been
assigned to the importer pursuant to such paragraph'' after
``during the calendar year'', and
(2) by adding at the end the following new paragraph:
``(4) Reduced tax rate for foreign manufacturers and
importers.--
``(A) In general.--In the case of any barrels of beer which
have been brewed or produced outside of the United States and
imported into the United States, the rate of tax applicable
under clause (i) of paragraph (1)(C) (referred to in this
paragraph as the `reduced tax rate') may be assigned by the
brewer (provided that the brewer makes an election described in
subparagraph (B)(ii)) to any electing importer of such barrels
pursuant to the requirements established by the Secretary under
subparagraph (B).
``(B) Assignment.--The Secretary shall, through such rules,
regulations, and procedures as are determined appropriate,
establish procedures for assignment of the reduced tax rate
provided under this paragraph, which shall include--
``(i) a limitation to ensure that the number of barrels
of beer for which the reduced tax rate has been assigned by
a brewer--
``(I) to any importer does not exceed the number of
barrels of beer brewed or produced by such brewer
during the calendar year which were imported into the
United States by such importer, and
``(II) to all importers does not exceed the
6,000,000 barrels to which the reduced tax rate
applies,
``(ii) procedures that allow the election of a brewer
to assign and an importer to receive the reduced tax rate
provided under this paragraph,
``(iii) requirements that the brewer provide any
information as the Secretary determines necessary and
appropriate for purposes of carrying out this paragraph,
and
``(iv) procedures that allow for revocation of
eligibility of the brewer and the importer for the reduced
tax rate provided under this paragraph in the case of any
erroneous or fraudulent information provided under clause
(iii) which the Secretary deems to be material to
qualifying for such reduced rate.
``(C) Controlled group.--For purposes of this section, any
importer making an election described in subparagraph (B)(ii)
shall be deemed to be a member of the controlled group of the
brewer, as described under paragraph (5).''.
(d) Controlled Group and Single Taxpayer Rules.--Subsection (a) of
section 5051, as amended by this section, is amended--
(1) in paragraph (2)--
(A) by striking subparagraph (B), and
(B) by redesignating subparagraph (C) as subparagraph (B),
and
(2) by adding at the end the following new paragraph:
``(5) Controlled group and single taxpayer rules.--
``(A) In general.--Except as provided in subparagraph (B),
in the case of a controlled group, the 6,000,000 barrel
quantity specified in paragraph (1)(C)(i) and the 2,000,000
barrel quantity specified in paragraph (2)(A) shall be applied
to the controlled group, and the 6,000,000 barrel quantity
specified in paragraph (1)(C)(i) and the 60,000 barrel quantity
specified in paragraph (2)(A) shall be apportioned among the
brewers who are members of such group in such manner as the
Secretary or their delegate shall by regulations prescribe. For
purposes of the preceding sentence, the term `controlled group'
has the meaning assigned to it by subsection (a) of section
1563, except that for such purposes the phrase `more than 50
percent' shall be substituted for the phrase `at least 80
percent' in each place it appears in such subsection. Under
regulations prescribed by the Secretary, principles similar to
the principles of the preceding two sentences shall be applied
to a group of brewers under common control where one or more of
the brewers is not a corporation.
``(B) Foreign manufacturers and importers.--For purposes of
paragraph (4), in the case of a controlled group, the 6,000,000
barrel quantity specified in paragraph (1)(C)(i) shall be
applied to the controlled group and apportioned among the
members of such group in such manner as the Secretary shall by
regulations prescribe. For purposes of the preceding sentence,
the term `controlled group' has the meaning given such term
under subparagraph (A). Under regulations prescribed by the
Secretary, principles similar to the principles of the
preceding two sentences shall be applied to a group of brewers
under common control where one or more of the brewers is not a
corporation.
``(C) Single taxpayer.--Pursuant to rules issued by the
Secretary, two or more entities (whether or not under common
control) that produce beer marketed under a similar brand,
license, franchise, or other arrangement shall be treated as a
single taxpayer for purposes of the application of this
subsection.''.
(e) Effective Date.--The amendments made by this section shall
apply to beer removed after December 31, 2017.
SEC. 13803. TRANSFER OF BEER BETWEEN BONDED FACILITIES.
(a) In General.--Section 5414 is amended--
(1) by striking ``Beer may be removed'' and inserting ``(a) In
General.--Beer may be removed'', and
(2) by adding at the end the following:
``(b) Transfer of Beer Between Bonded Facilities.--
``(1) In general.--Beer may be removed from one bonded brewery
to another bonded brewery, without payment of tax, and may be
mingled with beer at the receiving brewery, subject to such
conditions, including payment of the tax, and in such containers,
as the Secretary by regulations shall prescribe, which shall
include--
``(A) any removal from one brewery to another brewery
belonging to the same brewer,
``(B) any removal from a brewery owned by one corporation
to a brewery owned by another corporation when--
``(i) one such corporation owns the controlling
interest in the other such corporation, or
``(ii) the controlling interest in each such
corporation is owned by the same person or persons, and
``(C) any removal from one brewery to another brewery
when--
``(i) the proprietors of transferring and receiving
premises are independent of each other and neither has a
proprietary interest, directly or indirectly, in the
business of the other, and
``(ii) the transferor has divested itself of all
interest in the beer so transferred and the transferee has
accepted responsibility for payment of the tax.
``(2) Transfer of liability for tax.--For purposes of paragraph
(1)(C), such relief from liability shall be effective from the time
of removal from the transferor's bonded premises, or from the time
of divestment of interest, whichever is later.
``(3) Termination.--This subsection shall not apply to any
calendar quarter beginning after December 31, 2019.''.
(b) Removal From Brewery by Pipeline.--Section 5412 is amended by
inserting ``pursuant to section 5414 or'' before ``by pipeline''.
(c) Effective Date.--The amendments made by this section shall
apply to any calendar quarters beginning after December 31, 2017.
SEC. 13804. REDUCED RATE OF EXCISE TAX ON CERTAIN WINE.
(a) In General.--Section 5041(c) is amended by adding at the end
the following new paragraph:
``(8) Special rule for 2018 and 2019.--
``(A) In general.--In the case of wine removed after
December 31, 2017, and before January 1, 2020, paragraphs (1)
and (2) shall not apply and there shall be allowed as a credit
against any tax imposed by this title (other than chapters 2,
21, and 22) an amount equal to the sum of--
``(i) $1 per wine gallon on the first 30,000 wine
gallons of wine, plus
``(ii) 90 cents per wine gallon on the first 100,000
wine gallons of wine to which clause (i) does not apply,
plus
``(iii) 53.5 cents per wine gallon on the first 620,000
wine gallons of wine to which clauses (i) and (ii) do not
apply,
which are produced by the producer and removed during the
calendar year for consumption or sale, or which are imported by
the importer into the United States during the calendar year.
``(B) Adjustment of credit for hard cider.--In the case of
wine described in subsection (b)(6), subparagraph (A) of this
paragraph shall be applied--
``(i) in clause (i) of such subparagraph, by
substituting `6.2 cents' for `$1',
``(ii) in clause (ii) of such subparagraph, by
substituting `5.6 cents' for `90 cents', and
``(iii) in clause (iii) of such subparagraph, by
substituting `3.3 cents' for `53.5 cents'.'',
(b) Controlled Group and Single Taxpayer Rules.--Paragraph (4) of
section 5041(c) is amended by striking ``section 5051(a)(2)(B)'' and
inserting ``section 5051(a)(5)''.
(c) Allowance of Credit for Foreign Manufacturers and Importers.--
Subsection (c) of section 5041, as amended by subsection (a), is
amended--
(1) in subparagraph (A) of paragraph (8), by inserting ``but
only if the importer is an electing importer under paragraph (9)
and the wine gallons of wine have been assigned to the importer
pursuant to such paragraph'' after ``into the United States during
the calendar year'', and
(2) by adding at the end the following new paragraph:
``(9) Allowance of credit for foreign manufacturers and
importers.--
``(A) In general.--In the case of any wine gallons of wine
which have been produced outside of the United States and
imported into the United States, the credit allowable under
paragraph (8) (referred to in this paragraph as the `tax
credit') may be assigned by the person who produced such wine
(referred to in this paragraph as the `foreign producer'),
provided that such person makes an election described in
subparagraph (B)(ii), to any electing importer of such wine
gallons pursuant to the requirements established by the
Secretary under subparagraph (B).
``(B) Assignment.--The Secretary shall, through such rules,
regulations, and procedures as are determined appropriate,
establish procedures for assignment of the tax credit provided
under this paragraph, which shall include--
``(i) a limitation to ensure that the number of wine
gallons of wine for which the tax credit has been assigned
by a foreign producer--
``(I) to any importer does not exceed the number of
wine gallons of wine produced by such foreign producer
during the calendar year which were imported into the
United States by such importer, and
``(II) to all importers does not exceed the 750,000
wine gallons of wine to which the tax credit applies,
``(ii) procedures that allow the election of a foreign
producer to assign and an importer to receive the tax
credit provided under this paragraph,
``(iii) requirements that the foreign producer provide
any information as the Secretary determines necessary and
appropriate for purposes of carrying out this paragraph,
and
``(iv) procedures that allow for revocation of
eligibility of the foreign producer and the importer for
the tax credit provided under this paragraph in the case of
any erroneous or fraudulent information provided under
clause (iii) which the Secretary deems to be material to
qualifying for such credit.
``(C) Controlled group.--For purposes of this section, any
importer making an election described in subparagraph (B)(ii)
shall be deemed to be a member of the controlled group of the
foreign producer, as described under paragraph (4).''.
(d) Effective Date.--The amendments made by this section shall
apply to wine removed after December 31, 2017.
SEC. 13805. ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR APPLICATION OF
EXCISE TAX RATES.
(a) In General.--Paragraphs (1) and (2) of section 5041(b) are each
amended by inserting ``(16 percent in the case of wine removed after
December 31, 2017, and before January 1, 2020'' after ``14 percent''.
(b) Effective Date.--The amendments made by this section shall
apply to wine removed after December 31, 2017.
SEC. 13806. DEFINITION OF MEAD AND LOW ALCOHOL BY VOLUME WINE.
(a) In General.--Section 5041 is amended--
(1) in subsection (a), by striking ``Still wines'' and
inserting ``Subject to subsection (h), still wines'', and
(2) by adding at the end the following new subsection:
``(h) Mead and Low Alcohol by Volume Wine.--
``(1) In general.--For purposes of subsections (a) and (b)(1),
mead and low alcohol by volume wine shall be deemed to be still
wines containing not more than 16 percent of alcohol by volume.
``(2) Definitions.--
``(A) Mead.--For purposes of this section, the term `mead'
means a wine--
``(i) containing not more than 0.64 gram of carbon
dioxide per hundred milliliters of wine, except that the
Secretary shall by regulations prescribe such tolerances to
this limitation as may be reasonably necessary in good
commercial practice,
``(ii) which is derived solely from honey and water,
``(iii) which contains no fruit product or fruit
flavoring, and
``(iv) which contains less than 8.5 percent alcohol by
volume.
``(B) Low alcohol by volume wine.--For purposes of this
section, the term `low alcohol by volume wine' means a wine--
``(i) containing not more than 0.64 gram of carbon
dioxide per hundred milliliters of wine, except that the
Secretary shall by regulations prescribe such tolerances to
this limitation as may be reasonably necessary in good
commercial practice,
``(ii) which is derived--
``(I) primarily from grapes, or
``(II) from grape juice concentrate and water,
``(iii) which contains no fruit product or fruit
flavoring other than grape, and
``(iv) which contains less than 8.5 percent alcohol by
volume.
``(3) Termination.--This subsection shall not apply to wine
removed after December 31, 2019.''.
(b) Effective Date.--The amendments made by this section shall
apply to wine removed after December 31, 2017.
SEC. 13807. REDUCED RATE OF EXCISE TAX ON CERTAIN DISTILLED SPIRITS.
(a) In General.--Section 5001 is amended by redesignating
subsection (c) as subsection (d) and by inserting after subsection (b)
the following new subsection:
``(c) Reduced Rate for 2018 and 2019.--
``(1) In general.--In the case of a distilled spirits
operation, the otherwise applicable tax rate under subsection
(a)(1) shall be--
``(A) $2.70 per proof gallon on the first 100,000 proof
gallons of distilled spirits, and
``(B) $13.34 per proof gallon on the first 22,130,000 of
proof gallons of distilled spirits to which subparagraph (A)
does not apply,
which have been distilled or processed by such operation and
removed during the calendar year for consumption or sale, or which
have been imported by the importer into the United States during
the calendar year.
``(2) Controlled groups.--
``(A) In general.--In the case of a controlled group, the
proof gallon quantities specified under subparagraphs (A) and
(B) of paragraph (1) shall be applied to such group and
apportioned among the members of such group in such manner as
the Secretary or their delegate shall by regulations prescribe.
``(B) Definition.--For purposes of subparagraph (A), the
term `controlled group' shall have the meaning given such term
by subsection (a) of section 1563, except that `more than 50
percent' shall be substituted for `at least 80 percent' each
place it appears in such subsection.
``(C) Rules for non-corporations.--Under regulations
prescribed by the Secretary, principles similar to the
principles of subparagraphs (A) and (B) shall be applied to a
group under common control where one or more of the persons is
not a corporation.
``(D) Single taxpayer.--Pursuant to rules issued by the
Secretary, two or more entities (whether or not under common
control) that produce distilled spirits marketed under a
similar brand, license, franchise, or other arrangement shall
be treated as a single taxpayer for purposes of the application
of this subsection.
``(3) Termination.--This subsection shall not apply to
distilled spirits removed after December 31, 2019.''.
(b) Conforming Amendment.--Section 7652(f)(2) is amended by
striking ``section 5001(a)(1)'' and inserting ``subsection (a)(1) of
section 5001, determined as if subsection (c)(1) of such section did
not apply''.
(c) Application of Reduced Tax Rate for Foreign Manufacturers and
Importers.--Subsection (c) of section 5001, as added by subsection (a),
is amended--
(1) in paragraph (1), by inserting ``but only if the importer
is an electing importer under paragraph (3) and the proof gallons
of distilled spirits have been assigned to the importer pursuant to
such paragraph'' after ``into the United States during the calendar
year'', and
(2) by redesignating paragraph (3) as paragraph (4) and by
inserting after paragraph (2) the following new paragraph:
``(3) Reduced tax rate for foreign manufacturers and
importers.--
``(A) In general.--In the case of any proof gallons of
distilled spirits which have been produced outside of the
United States and imported into the United States, the rate of
tax applicable under paragraph (1) (referred to in this
paragraph as the `reduced tax rate') may be assigned by the
distilled spirits operation (provided that such operation makes
an election described in subparagraph (B)(ii)) to any electing
importer of such proof gallons pursuant to the requirements
established by the Secretary under subparagraph (B).
``(B) Assignment.--The Secretary shall, through such rules,
regulations, and procedures as are determined appropriate,
establish procedures for assignment of the reduced tax rate
provided under this paragraph, which shall include--
``(i) a limitation to ensure that the number of proof
gallons of distilled spirits for which the reduced tax rate
has been assigned by a distilled spirits operation--
``(I) to any importer does not exceed the number of
proof gallons produced by such operation during the
calendar year which were imported into the United
States by such importer, and
``(II) to all importers does not exceed the
22,230,000 proof gallons of distilled spirits to which
the reduced tax rate applies,
``(ii) procedures that allow the election of a
distilled spirits operation to assign and an importer to
receive the reduced tax rate provided under this paragraph,
``(iii) requirements that the distilled spirits
operation provide any information as the Secretary
determines necessary and appropriate for purposes of
carrying out this paragraph, and
``(iv) procedures that allow for revocation of
eligibility of the distilled spirits operation and the
importer for the reduced tax rate provided under this
paragraph in the case of any erroneous or fraudulent
information provided under clause (iii) which the Secretary
deems to be material to qualifying for such reduced rate.
``(C) Controlled group.--
``(i) In general.--For purposes of this section, any
importer making an election described in subparagraph
(B)(ii) shall be deemed to be a member of the controlled
group of the distilled spirits operation, as described
under paragraph (2).
``(ii) Apportionment.--For purposes of this paragraph,
in the case of a controlled group, rules similar to section
5051(a)(5)(B) shall apply.''.
(d) Effective Date.--The amendments made by this section shall
apply to distilled spirits removed after December 31, 2017.
SEC. 13808. BULK DISTILLED SPIRITS.
(a) In General.--Section 5212 is amended by adding at the end the
following sentence: ``In the case of distilled spirits transferred in
bond after December 31, 2017, and before January 1, 2020, this section
shall be applied without regard to whether distilled spirits are bulk
distilled spirits.''.
(b) Effective Date.--The amendments made by this section shall
apply distilled spirits transferred in bond after December 31, 2017.
Subpart B--Miscellaneous Provisions
SEC. 13821. MODIFICATION OF TAX TREATMENT OF ALASKA NATIVE CORPORATIONS
AND SETTLEMENT TRUSTS.
(a) Exclusion for ANCSA Payments Assigned to Alaska Native
Settlement Trusts.--
(1) In general.--Part III of subchapter B of chapter 1 is
amended by inserting before section 140 the following new section:
``SEC. 139G. ASSIGNMENTS TO ALASKA NATIVE SETTLEMENT TRUSTS.
``(a) In General.--In the case of a Native Corporation, gross
income shall not include the value of any payments that would otherwise
be made, or treated as being made, to such Native Corporation pursuant
to, or as required by, any provision of the Alaska Native Claims
Settlement Act (43 U.S.C. 1601 et seq.), including any payment that
would otherwise be made to a Village Corporation pursuant to section
7(j) of the Alaska Native Claims Settlement Act (43 U.S.C. 1606(j)),
provided that any such payments--
``(1) are assigned in writing to a Settlement Trust, and
``(2) were not received by such Native Corporation prior to the
assignment described in paragraph (1).
``(b) Inclusion in Gross Income.--In the case of a Settlement Trust
which has been assigned payments described in subsection (a), gross
income shall include such payments when received by such Settlement
Trust pursuant to the assignment and shall have the same character as
if such payments were received by the Native Corporation.
``(c) Amount and Scope of Assignment.--The amount and scope of any
assignment under subsection (a) shall be described with reasonable
particularity and may either be in a percentage of one or more such
payments or in a fixed dollar amount.
``(d) Duration of Assignment; Revocability.--Any assignment under
subsection (a) shall specify--
``(1) a duration either in perpetuity or for a period of time,
and
``(2) whether such assignment is revocable.
``(e) Prohibition on Deduction.--Notwithstanding section 247, no
deduction shall be allowed to a Native Corporation for purposes of any
amounts described in subsection (a).
``(f) Definitions.--For purposes of this section, the terms `Native
Corporation' and `Settlement Trust' have the same meaning given such
terms under section 646(h).''.
(2) Conforming amendment.--The table of sections for part III
of subchapter B of chapter 1 is amended by inserting before the
item relating to section 140 the following new item:
``Sec. 139G. Assignments to Alaska Native Settlement Trusts.''.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31, 2016.
(b) Deduction of Contributions to Alaska Native Settlement
Trusts.--
(1) In general.--Part VIII of subchapter B of chapter 1 is
amended by inserting before section 248 the following new section:
``SEC. 247. CONTRIBUTIONS TO ALASKA NATIVE SETTLEMENT TRUSTS.
``(a) In General.--In the case of a Native Corporation, there shall
be allowed a deduction for any contributions made by such Native
Corporation to a Settlement Trust (regardless of whether an election
under section 646 is in effect for such Settlement Trust) for which the
Native Corporation has made an annual election under subsection (e).
``(b) Amount of Deduction.--The amount of the deduction under
subsection (a) shall be equal to--
``(1) in the case of a cash contribution (regardless of the
method of payment, including currency, coins, money order, or
check), the amount of such contribution, or
``(2) in the case of a contribution not described in paragraph
(1), the lesser of--
``(A) the Native Corporation's adjusted basis in the
property contributed, or
``(B) the fair market value of the property contributed.
``(c) Limitation and Carryover.--
``(1) In general.--Subject to paragraph (2), the deduction
allowed under subsection (a) for any taxable year shall not exceed
the taxable income (as determined without regard to such deduction)
of the Native Corporation for the taxable year in which the
contribution was made.
``(2) Carryover.--If the aggregate amount of contributions
described in subsection (a) for any taxable year exceeds the
limitation under paragraph (1), such excess shall be treated as a
contribution described in subsection (a) in each of the 15
succeeding years in order of time.
``(d) Definitions.--For purposes of this section, the terms `Native
Corporation' and `Settlement Trust' have the same meaning given such
terms under section 646(h).
``(e) Manner of Making Election.--
``(1) In general.--For each taxable year, a Native Corporation
may elect to have this section apply for such taxable year on the
income tax return or an amendment or supplement to the return of
the Native Corporation, with such election to have effect solely
for such taxable year.
``(2) Revocation.--Any election made by a Native Corporation
pursuant to this subsection may be revoked pursuant to a timely
filed amendment or supplement to the income tax return of such
Native Corporation.
``(f) Additional Rules.--
``(1) Earnings and profits.--Notwithstanding section 646(d)(2),
in the case of a Native Corporation which claims a deduction under
this section for any taxable year, the earnings and profits of such
Native Corporation for such taxable year shall be reduced by the
amount of such deduction.
``(2) Gain or loss.--No gain or loss shall be recognized by the
Native Corporation with respect to a contribution of property for
which a deduction is allowed under this section.
``(3) Income.--Subject to subsection (g), a Settlement Trust
shall include in income the amount of any deduction allowed under
this section in the taxable year in which the Settlement Trust
actually receives such contribution.
``(4) Period.--The holding period under section 1223 of the
Settlement Trust shall include the period the property was held by
the Native Corporation.
``(5) Basis.--The basis that a Settlement Trust has for which a
deduction is allowed under this section shall be equal to the
lesser of--
``(A) the adjusted basis of the Native Corporation in such
property immediately before such contribution, or
``(B) the fair market value of the property immediately
before such contribution.
``(6) Prohibition.--No deduction shall be allowed under this
section with respect to any contributions made to a Settlement
Trust which are in violation of subsection (a)(2) or (c)(2) of
section 39 of the Alaska Native Claims Settlement Act (43 U.S.C.
1629e).
``(g) Election by Settlement Trust to Defer Income Recognition.--
``(1) In general.--In the case of a contribution which consists
of property other than cash, a Settlement Trust may elect to defer
recognition of any income related to such property until the sale
or exchange of such property, in whole or in part, by the
Settlement Trust.
``(2) Treatment.--In the case of property described in
paragraph (1), any income or gain realized on the sale or exchange
of such property shall be treated as--
``(A) for such amount of the income or gain as is equal to
or less than the amount of income which would be included in
income at the time of contribution under subsection (f)(3) but
for the taxpayer's election under this subsection, ordinary
income, and
``(B) for any amounts of the income or gain which are in
excess of the amount of income which would be included in
income at the time of contribution under subsection (f)(3) but
for the taxpayer's election under this subsection, having the
same character as if this subsection did not apply.
``(3) Election.--
``(A) In general.--For each taxable year, a Settlement
Trust may elect to apply this subsection for any property
described in paragraph (1) which was contributed during such
year. Any property to which the election applies shall be
identified and described with reasonable particularity on the
income tax return or an amendment or supplement to the return
of the Settlement Trust, with such election to have effect
solely for such taxable year.
``(B) Revocation.--Any election made by a Settlement Trust
pursuant to this subsection may be revoked pursuant to a timely
filed amendment or supplement to the income tax return of such
Settlement Trust.
``(C) Certain dispositions.--
``(i) In general.--In the case of any property for
which an election is in effect under this subsection and
which is disposed of within the first taxable year
subsequent to the taxable year in which such property was
contributed to the Settlement Trust--
``(I) this section shall be applied as if the
election under this subsection had not been made,
``(II) any income or gain which would have been
included in the year of contribution under subsection
(f)(3) but for the taxpayer's election under this
subsection shall be included in income for the taxable
year of such contribution, and
``(III) the Settlement Trust shall pay any increase
in tax resulting from such inclusion, including any
applicable interest, and increased by 10 percent of the
amount of such increase with interest.
``(ii) Assessment.--Notwithstanding section 6501(a),
any amount described in subclause (III) of clause (i) may
be assessed, or a proceeding in court with respect to such
amount may be initiated without assessment, within 4 years
after the date on which the return making the election
under this subsection for such property was filed.''.
(2) Conforming amendment.--The table of sections for part VIII
of subchapter B of chapter 1 is amended by inserting before the
item relating to section 248 the following new item:
``Sec. 247. Contributions to Alaska Native Settlement Trusts.''.
(3) Effective date.--
(A) In general.--The amendments made by this subsection
shall apply to taxable years for which the period of limitation
on refund or credit under section 6511 of the Internal Revenue
Code of 1986 has not expired.
(B) One-year waiver of statute of limitations.--If the
period of limitation on a credit or refund resulting from the
amendments made by paragraph (1) expires before the end of the
1-year period beginning on the date of the enactment of this
Act, refund or credit of such overpayment (to the extent
attributable to such amendments) may, nevertheless, be made or
allowed if claim therefor is filed before the close of such 1-
year period.
(c) Information Reporting for Deductible Contributions to Alaska
Native Settlement Trusts.--
(1) In general.--Section 6039H is amended--
(A) in the heading, by striking ``sponsoring'', and
(B) by adding at the end the following new subsection:
``(e) Deductible Contributions by Native Corporations to Alaska
Native Settlement Trusts.--
``(1) In general.--Any Native Corporation (as defined in
subsection (m) of section 3 of the Alaska Native Claims Settlement
Act (43 U.S.C. 1602(m))) which has made a contribution to a
Settlement Trust (as defined in subsection (t) of such section) to
which an election under subsection (e) of section 247 applies shall
provide such Settlement Trust with a statement regarding such
election not later than January 31 of the calendar year subsequent
to the calendar year in which the contribution was made.
``(2) Content of statement.--The statement described in
paragraph (1) shall include--
``(A) the total amount of contributions to which the
election under subsection (e) of section 247 applies,
``(B) for each contribution, whether such contribution was
in cash,
``(C) for each contribution which consists of property
other than cash, the date that such property was acquired by
the Native Corporation and the adjusted basis and fair market
value of such property on the date such property was
contributed to the Settlement Trust,
``(D) the date on which each contribution was made to the
Settlement Trust, and
``(E) such information as the Secretary determines to be
necessary or appropriate for the identification of each
contribution and the accurate inclusion of income relating to
such contributions by the Settlement Trust.''.
(2) Conforming amendment.--The item relating to section 6039H
in the table of sections for subpart A of part III of subchapter A
of chapter 61 is amended to read as follows:
``Sec. 6039H. Information With Respect to Alaska Native Settlement
Trusts and Native Corporations.''.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31, 2016.
SEC. 13822. AMOUNTS PAID FOR AIRCRAFT MANAGEMENT SERVICES.
(a) In General.--Subsection (e) of section 4261 is amended by
adding at the end the following new paragraph:
``(5) Amounts paid for aircraft management services.--
``(A) In general.--No tax shall be imposed by this section
or section 4271 on any amounts paid by an aircraft owner for
aircraft management services related to--
``(i) maintenance and support of the aircraft owner's
aircraft, or
``(ii) flights on the aircraft owner's aircraft.
``(B) Aircraft management services.--For purposes of
subparagraph (A), the term `aircraft management services'
includes--
``(i) assisting an aircraft owner with administrative
and support services, such as scheduling, flight planning,
and weather forecasting,
``(ii) obtaining insurance,
``(iii) maintenance, storage and fueling of aircraft,
``(iv) hiring, training, and provision of pilots and
crew,
``(v) establishing and complying with safety standards,
and
``(vi) such other services as are necessary to support
flights operated by an aircraft owner.
``(C) Lessee treated as aircraft owner.--
``(i) In general.--For purposes of this paragraph, the
term `aircraft owner' includes a person who leases the
aircraft other than under a disqualified lease.
``(ii) Disqualified lease.--For purposes of clause (i),
the term `disqualified lease' means a lease from a person
providing aircraft management services with respect to such
aircraft (or a related person (within the meaning of
section 465(b)(3)(C)) to the person providing such
services), if such lease is for a term of 31 days or less.
``(D) Pro rata allocation.--In the case of amounts paid to
any person which (but for this subsection) are subject to the
tax imposed by subsection (a), a portion of which consists of
amounts described in subparagraph (A), this paragraph shall
apply on a pro rata basis only to the portion which consists of
amounts described in such subparagraph.''.
(b) Effective Date.--The amendment made by this section shall apply
to amounts paid after the date of the enactment of this Act.
SEC. 13823. OPPORTUNITY ZONES.
(a) In General.--Chapter 1 is amended by adding at the end the
following:
``Subchapter Z--Opportunity Zones
``Sec. 1400Z-1. Designation.
``Sec. 1400Z-2. Special rules for capital gains invested in opportunity
zones.
``SEC. 1400Z-1. DESIGNATION.
``(a) Qualified Opportunity Zone Defined.--For the purposes of this
subchapter, the term `qualified opportunity zone' means a population
census tract that is a low-income community that is designated as a
qualified opportunity zone.
``(b) Designation.--
``(1) In general.--For purposes of subsection (a), a population
census tract that is a low-income community is designated as a
qualified opportunity zone if--
``(A) not later than the end of the determination period,
the chief executive officer of the State in which the tract is
located--
``(i) nominates the tract for designation as a
qualified opportunity zone, and
``(ii) notifies the Secretary in writing of such
nomination, and
``(B) the Secretary certifies such nomination and
designates such tract as a qualified opportunity zone before
the end of the consideration period.
``(2) Extension of periods.--A chief executive officer of a
State may request that the Secretary extend either the
determination or consideration period, or both (determined without
regard to this subparagraph), for an additional 30 days.
``(c) Other Definitions.--For purposes of this subsection--
``(1) Low-income communities.--The term `low-income community'
has the same meaning as when used in section 45D(e).
``(2) Definition of periods.--
``(A) Consideration period.--The term `consideration
period' means the 30-day period beginning on the date on which
the Secretary receives notice under subsection (b)(1)(A)(ii),
as extended under subsection (b)(2).
``(B) Determination period.--The term `determination
period' means the 90-day period beginning on the date of the
enactment of the Tax Cuts and Jobs Act, as extended under
subsection (b)(2).
``(3) State.--For purposes of this section, the term `State'
includes any possession of the United States.
``(d) Number of Designations.--
``(1) In general.--Except as provided by paragraph (2), the
number of population census tracts in a State that may be
designated as qualified opportunity zones under this section may
not exceed 25 percent of the number of low-income communities in
the State.
``(2) Exception.--If the number of low-income communities in a
State is less than 100, then a total of 25 of such tracts may be
designated as qualified opportunity zones.
``(e) Designation of Tracts Contiguous With Low-income
Communities.--
``(1) In general.--A population census tract that is not a low-
income community may be designated as a qualified opportunity zone
under this section if--
``(A) the tract is contiguous with the low-income community
that is designated as a qualified opportunity zone, and
``(B) the median family income of the tract does not exceed
125 percent of the median family income of the low-income
community with which the tract is contiguous.
``(2) Limitation.--Not more than 5 percent of the population
census tracts designated in a State as a qualified opportunity zone
may be designated under paragraph (1).
``(f) Period for Which Designation Is in Effect.--A designation as
a qualified opportunity zone shall remain in effect for the period
beginning on the date of the designation and ending at the close of the
10th calendar year beginning on or after such date of designation.
``SEC. 1400Z-2. SPECIAL RULES FOR CAPITAL GAINS INVESTED IN OPPORTUNITY
ZONES.
``(a) In General.--
``(1) Treatment of gains.--In the case of gain from the sale
to, or exchange with, an unrelated person of any property held by
the taxpayer, at the election of the taxpayer--
``(A) gross income for the taxable year shall not include
so much of such gain as does not exceed the aggregate amount
invested by the taxpayer in a qualified opportunity fund during
the 180-day period beginning on the date of such sale or
exchange,
``(B) the amount of gain excluded by subparagraph (A) shall
be included in gross income as provided by subsection (b), and
``(C) subsection (c) shall apply.
``(2) Election.--No election may be made under paragraph (1)--
``(A) with respect to a sale or exchange if an election
previously made with respect to such sale or exchange is in
effect, or
``(B) with respect to any sale or exchange after December
31, 2026.
``(b) Deferral of Gain Invested in Opportunity Zone Property.--
``(1) Year of inclusion.--Gain to which subsection (a)(1)(B)
applies shall be included in income in the taxable year which
includes the earlier of--
``(A) the date on which such investment is sold or
exchanged, or
``(B) December 31, 2026.
``(2) Amount includible.--
``(A) In general.--The amount of gain included in gross
income under subsection (a)(1)(A) shall be the excess of--
``(i) the lesser of the amount of gain excluded under
paragraph (1) or the fair market value of the investment as
determined as of the date described in paragraph (1), over
``(ii) the taxpayer's basis in the investment.
``(B) Determination of basis.--
``(i) In general.--Except as otherwise provided in this
clause or subsection (c), the taxpayer's basis in the
investment shall be zero.
``(ii) Increase for gain recognized under subsection
(a)(1)(B).--The basis in the investment shall be increased
by the amount of gain recognized by reason of subsection
(a)(1)(B) with respect to such property.
``(iii) Investments held for 5 years.--In the case of
any investment held for at least 5 years, the basis of such
investment shall be increased by an amount equal to 10
percent of the amount of gain deferred by reason of
subsection (a)(1)(A).
``(iv) Investments held for 7 years.--In the case of
any investment held by the taxpayer for at least 7 years,
in addition to any adjustment made under clause (iii), the
basis of such property shall be increased by an amount
equal to 5 percent of the amount of gain deferred by reason
of subsection (a)(1)(A).
``(c) Special Rule for Investments Held for at Least 10 Years.--In
the case of any investment held by the taxpayer for at least 10 years
and with respect to which the taxpayer makes an election under this
clause, the basis of such property shall be equal to the fair market
value of such investment on the date that the investment is sold or
exchanged.
``(d) Qualified Opportunity Fund.--For purposes of this section--
``(1) In general.--The term `qualified opportunity fund' means
any investment vehicle which is organized as a corporation or a
partnership for the purpose of investing in qualified opportunity
zone property (other than another qualified opportunity fund) that
holds at least 90 percent of its assets in qualified opportunity
zone property, determined by the average of the percentage of
qualified opportunity zone property held in the fund as measured--
``(A) on the last day of the first 6-month period of the
taxable year of the fund, and
``(B) on the last day of the taxable year of the fund.
``(2) Qualified opportunity zone property.--
``(A) In general.--The term `qualified opportunity zone
property' means property which is--
``(i) qualified opportunity zone stock,
``(ii) qualified opportunity zone partnership interest,
or
``(iii) qualified opportunity zone business property.
``(B) Qualified opportunity zone stock.--
``(i) In general.--Except as provided in clause (ii),
the term `qualified opportunity zone stock' means any stock
in a domestic corporation if--
``(I) such stock is acquired by the qualified
opportunity fund after December 31, 2017, at its
original issue (directly or through an underwriter)
from the corporation solely in exchange for cash,
``(II) as of the time such stock was issued, such
corporation was a qualified opportunity zone business
(or, in the case of a new corporation, such corporation
was being organized for purposes of being a qualified
opportunity zone business), and
``(III) during substantially all of the qualified
opportunity fund's holding period for such stock, such
corporation qualified as a qualified opportunity zone
business.
``(ii) Redemptions.--A rule similar to the rule of
section 1202(c)(3) shall apply for purposes of this
paragraph.
``(C) Qualified opportunity zone partnership interest.--The
term `qualified opportunity zone partnership interest' means
any capital or profits interest in a domestic partnership if--
``(i) such interest is acquired by the qualified
opportunity fund after December 31, 2017, from the
partnership solely in exchange for cash,
``(ii) as of the time such interest was acquired, such
partnership was a qualified opportunity zone business (or,
in the case of a new partnership, such partnership was
being organized for purposes of being a qualified
opportunity zone business), and
``(iii) during substantially all of the qualified
opportunity fund's holding period for such interest, such
partnership qualified as a qualified opportunity zone
business.
``(D) Qualified opportunity zone business property.--
``(i) In general.--The term `qualified opportunity zone
business property' means tangible property used in a trade
or business of the qualified opportunity fund if--
``(I) such property was acquired by the qualified
opportunity fund by purchase (as defined in section
179(d)(2)) after December 31, 2017,
``(II) the original use of such property in the
qualified opportunity zone commences with the qualified
opportunity fund or the qualified opportunity fund
substantially improves the property, and
``(III) during substantially all of the qualified
opportunity fund's holding period for such property,
substantially all of the use of such property was in a
qualified opportunity zone.
``(ii) Substantial improvement.--For purposes of
subparagraph (A)(ii), property shall be treated as
substantially improved by the qualified opportunity fund
only if, during any 30-month period beginning after the
date of acquisition of such property, additions to basis
with respect to such property in the hands of the qualified
opportunity fund exceed an amount equal to the adjusted
basis of such property at the beginning of such 30-month
period in the hands of the qualified opportunity fund.
``(iii) Related party.--For purposes of subparagraph
(A)(i), the related person rule of section 179(d)(2) shall
be applied pursuant to paragraph (8) of this subsection in
lieu of the application of such rule in section
179(d)(2)(A).
``(3) Qualified opportunity zone business.--
``(A) In general.--The term `qualified opportunity zone
business' means a trade or business--
``(i) in which substantially all of the tangible
property owned or leased by the taxpayer is qualified
opportunity zone business property (determined by
substituting `qualified opportunity zone business' for
`qualified opportunity fund' each place it appears in
paragraph (2)(D)),
``(ii) which satisfies the requirements of paragraphs
(2), (4), and (8) of section 1397C(b), and
``(iii) which is not described in section 144(c)(6)(B).
``(B) Special rule.--For purposes of subparagraph (A),
tangible property that ceases to be a qualified opportunity
zone business property shall continue to be treated as a
qualified opportunity zone business property for the lesser
of--
``(i) 5 years after the date on which such tangible
property ceases to be so qualified, or
``(ii) the date on which such tangible property is no
longer held by the qualified opportunity zone business.
``(e) Applicable Rules.--
``(1) Treatment of investments with mixed funds.--In the case
of any investment in a qualified opportunity fund only a portion of
which consists of investments of gain to which an election under
subsection (a) is in effect--
``(A) such investment shall be treated as 2 separate
investments, consisting of--
``(i) one investment that only includes amounts to
which the election under subsection (a) applies, and
``(ii) a separate investment consisting of other
amounts, and
``(B) subsections (a), (b), and (c) shall only apply to the
investment described in subparagraph (A)(i).
``(2) Related persons.--For purposes of this section, persons
are related to each other if such persons are described in section
267(b) or 707(b)(1), determined by substituting `20 percent' for
`50 percent' each place it occurs in such sections.
``(3) Decedents.--In the case of a decedent, amounts recognized
under this section shall, if not properly includible in the gross
income of the decedent, be includible in gross income as provided
by section 691.
``(4) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this section, including--
``(A) rules for the certification of qualified opportunity
funds for the purposes of this section,
``(B) rules to ensure a qualified opportunity fund has a
reasonable period of time to reinvest the return of capital
from investments in qualified opportunity zone stock and
qualified opportunity zone partnership interests, and to
reinvest proceeds received from the sale or disposition of
qualified opportunity zone property, and
``(C) rules to prevent abuse.
``(f) Failure of Qualified Opportunity Fund to Maintain Investment
Standard.--
``(1) In general.--If a qualified opportunity fund fails to
meet the 90-percent requirement of subsection (c)(1), the qualified
opportunity fund shall pay a penalty for each month it fails to
meet the requirement in an amount equal to the product of--
``(A) the excess of--
``(i) the amount equal to 90 percent of its aggregate
assets, over
``(ii) the aggregate amount of qualified opportunity
zone property held by the fund, multiplied by
``(B) the underpayment rate established under section
6621(a)(2) for such month.
``(2) Special rule for partnerships.--In the case that the
qualified opportunity fund is a partnership, the penalty imposed by
paragraph (1) shall be taken into account proportionately as part
of the distributive share of each partner of the partnership.
``(3) Reasonable cause exception.--No penalty shall be imposed
under this subsection with respect to any failure if it is shown
that such failure is due to reasonable cause.''.
(b) Basis Adjustments.--Section 1016(a) is amended by striking
``and'' at the end of paragraph (36), by striking the period at the end
of paragraph (37) and inserting ``, and'', and by inserting after
paragraph (37) the following:
``(38) to the extent provided in subsections (b)(2) and (c) of
section 1400Z-2.''.
(c) Clerical Amendment.--The table of subchapters for chapter 1 is
amended by adding at the end the following new item:
``subchapter z. opportunity zones''.
(d) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
Subtitle D--International Tax Provisions
PART I--OUTBOUND TRANSACTIONS
Subpart A--Establishment of Participation Exemption System for Taxation
of Foreign Income
SEC. 14101. DEDUCTION FOR FOREIGN-SOURCE PORTION OF DIVIDENDS RECEIVED
BY DOMESTIC CORPORATIONS FROM SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.
(a) In General.--Part VIII of subchapter B of chapter 1 is amended
by inserting after section 245 the following new section:
``SEC. 245A. DEDUCTION FOR FOREIGN SOURCE-PORTION OF DIVIDENDS RECEIVED
BY DOMESTIC CORPORATIONS FROM SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.
``(a) In General.--In the case of any dividend received from a
specified 10-percent owned foreign corporation by a domestic
corporation which is a United States shareholder with respect to such
foreign corporation, there shall be allowed as a deduction an amount
equal to the foreign-source portion of such dividend.
``(b) Specified 10-percent Owned Foreign Corporation.--For purposes
of this section--
``(1) In general.--The term `specified 10-percent owned foreign
corporation' means any foreign corporation with respect to which
any domestic corporation is a United States shareholder with
respect to such corporation.
``(2) Exclusion of passive foreign investment companies.--Such
term shall not include any corporation which is a passive foreign
investment company (as defined in section 1297) with respect to the
shareholder and which is not a controlled foreign corporation.
``(c) Foreign-source Portion.--For purposes of this section--
``(1) In general.--The foreign-source portion of any dividend
from a specified 10-percent owned foreign corporation is an amount
which bears the same ratio to such dividend as--
``(A) the undistributed foreign earnings of the specified
10-percent owned foreign corporation, bears to
``(B) the total undistributed earnings of such foreign
corporation.
``(2) Undistributed earnings.--The term `undistributed
earnings' means the amount of the earnings and profits of the
specified 10-percent owned foreign corporation (computed in
accordance with sections 964(a) and 986)--
``(A) as of the close of the taxable year of the specified
10-percent owned foreign corporation in which the dividend is
distributed, and
``(B) without diminution by reason of dividends distributed
during such taxable year.
``(3) Undistributed foreign earnings.--The term `undistributed
foreign earnings' means the portion of the undistributed earnings
which is attributable to neither--
``(A) income described in subparagraph (A) of section
245(a)(5), nor
``(B) dividends described in subparagraph (B) of such
section (determined without regard to section 245(a)(12)).
``(d) Disallowance of Foreign Tax Credit, etc.--
``(1) In general.--No credit shall be allowed under section 901
for any taxes paid or accrued (or treated as paid or accrued) with
respect to any dividend for which a deduction is allowed under this
section.
``(2) Denial of deduction.--No deduction shall be allowed under
this chapter for any tax for which credit is not allowable under
section 901 by reason of paragraph (1) (determined by treating the
taxpayer as having elected the benefits of subpart A of part III of
subchapter N).
``(e) Special Rules for Hybrid Dividends.--
``(1) In general.--Subsection (a) shall not apply to any
dividend received by a United States shareholder from a controlled
foreign corporation if the dividend is a hybrid dividend.
``(2) Hybrid dividends of tiered corporations.--If a controlled
foreign corporation with respect to which a domestic corporation is
a United States shareholder receives a hybrid dividend from any
other controlled foreign corporation with respect to which such
domestic corporation is also a United States shareholder, then,
notwithstanding any other provision of this title--
``(A) the hybrid dividend shall be treated for purposes of
section 951(a)(1)(A) as subpart F income of the receiving
controlled foreign corporation for the taxable year of the
controlled foreign corporation in which the dividend was
received, and
``(B) the United States shareholder shall include in gross
income an amount equal to the shareholder's pro rata share
(determined in the same manner as under section 951(a)(2)) of
the subpart F income described in subparagraph (A).
``(3) Denial of foreign tax credit, etc.--The rules of
subsection (d) shall apply to any hybrid dividend received by, or
any amount included under paragraph (2) in the gross income of, a
United States shareholder.
``(4) Hybrid dividend.--The term `hybrid dividend' means an
amount received from a controlled foreign corporation--
``(A) for which a deduction would be allowed under
subsection (a) but for this subsection, and
``(B) for which the controlled foreign corporation received
a deduction (or other tax benefit) with respect to any income,
war profits, or excess profits taxes imposed by any foreign
country or possession of the United States.
``(f) Special Rule for Purging Distributions of Passive Foreign
Investment Companies.--Any amount which is treated as a dividend under
section 1291(d)(2)(B) shall not be treated as a dividend for purposes
of this section.
``(g) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary or appropriate to carry out the
provisions of this section, including regulations for the treatment of
United States shareholders owning stock of a specified 10 percent owned
foreign corporation through a partnership.''.
(b) Application of Holding Period Requirement.--Subsection (c) of
section 246 is amended--
(1) by striking ``or 245'' in paragraph (1) and inserting
``245, or 245A'', and
(2) by adding at the end the following new paragraph:
``(5) Special rules for foreign source portion of dividends
received from specified 10-percent owned foreign corporations.--
``(A) 1-year holding period requirement.--For purposes of
section 245A--
``(i) paragraph (1)(A) shall be applied--
``(I) by substituting `365 days' for `45 days' each
place it appears, and
``(II) by substituting `731-day period' for `91-day
period', and
``(ii) paragraph (2) shall not apply.
``(B) Status must be maintained during holding period.--For
purposes of applying paragraph (1) with respect to section
245A, the taxpayer shall be treated as holding the stock
referred to in paragraph (1) for any period only if--
``(i) the specified 10-percent owned foreign
corporation referred to in section 245A(a) is a specified
10-percent owned foreign corporation at all times during
such period, and
``(ii) the taxpayer is a United States shareholder with
respect to such specified 10-percent owned foreign
corporation at all times during such period.''.
(c) Application of Rules Generally Applicable to Deductions for
Dividends Received.--
(1) Treatment of dividends from certain corporations.--
Paragraph (1) of section 246(a) is amended by striking ``and 245''
and inserting ``245, and 245A''.
(2) Coordination with section 1059.--Subparagraph (B) of
section 1059(b)(2) is amended by striking ``or 245'' and inserting
``245, or 245A''.
(d) Coordination With Foreign Tax Credit Limitation.--Subsection
(b) of section 904 is amended by adding at the end the following new
paragraph:
``(5) Treatment of dividends for which deduction is allowed
under section 245a.--For purposes of subsection (a), in the case of
a domestic corporation which is a United States shareholder with
respect to a specified 10-percent owned foreign corporation, such
shareholder's taxable income from sources without the United States
(and entire taxable income) shall be determined without regard to--
``(A) the foreign-source portion of any dividend received
from such foreign corporation, and
``(B) any deductions properly allocable or apportioned to--
``(i) income (other than amounts includible under
section 951(a)(1) or 951A(a)) with respect to stock of such
specified 10-percent owned foreign corporation, or
``(ii) such stock to the extent income with respect to
such stock is other than amounts includible under section
951(a)(1) or 951A(a).
Any term which is used in section 245A and in this paragraph shall
have the same meaning for purposes of this paragraph as when used
in such section.''.
(e) Conforming Amendments.--
(1) Subsection (b) of section 951 is amended by striking
``subpart'' and inserting ``title''.
(2) Subsection (a) of section 957 is amended by striking
``subpart'' in the matter preceding paragraph (1) and inserting
``title''.
(3) The table of sections for part VIII of subchapter B of
chapter 1 is amended by inserting after the item relating to
section 245 the following new item:
``Sec. 245A. Deduction for foreign source-portion of dividends received
by domestic corporations from certain 10-percent owned foreign
corporations.''.
(f) Effective Date.--The amendments made by this section shall
apply to distributions made after (and, in the case of the amendments
made by subsection (d), deductions with respect to taxable years ending
after) December 31, 2017.
SEC. 14102. SPECIAL RULES RELATING TO SALES OR TRANSFERS INVOLVING
SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATIONS.
(a) Sales by United States Persons of Stock.--
(1) In general.--Section 1248 is amended by redesignating
subsection (j) as subsection (k) and by inserting after subsection
(i) the following new subsection:
``(j) Coordination With Dividends Received Deduction.--In the case
of the sale or exchange by a domestic corporation of stock in a foreign
corporation held for 1 year or more, any amount received by the
domestic corporation which is treated as a dividend by reason of this
section shall be treated as a dividend for purposes of applying section
245A.''.
(2) Effective date.--The amendments made by this subsection
shall apply to sales or exchanges after December 31, 2017.
(b) Basis in Specified 10-percent Owned Foreign Corporation Reduced
by Nontaxed Portion of Dividend for Purposes of Determining Loss.--
(1) In general.--Section 961 is amended by adding at the end
the following new subsection:
``(d) Basis in Specified 10-percent Owned Foreign Corporation
Reduced by Nontaxed Portion of Dividend for Purposes of Determining
Loss.--If a domestic corporation received a dividend from a specified
10-percent owned foreign corporation (as defined in section 245A) in
any taxable year, solely for purposes of determining loss on any
disposition of stock of such foreign corporation in such taxable year
or any subsequent taxable year, the basis of such domestic corporation
in such stock shall be reduced (but not below zero) by the amount of
any deduction allowable to such domestic corporation under section 245A
with respect to such stock except to the extent such basis was reduced
under section 1059 by reason of a dividend for which such a deduction
was allowable.''.
(2) Effective date.--The amendments made by this subsection
shall apply to distributions made after December 31, 2017.
(c) Sale by a CFC of a Lower Tier CFC.--
(1) In general.--Section 964(e) is amended by adding at the end
the following new paragraph:
``(4) Coordination with dividends received deduction.--
``(A) In general.--If, for any taxable year of a controlled
foreign corporation beginning after December 31, 2017, any
amount is treated as a dividend under paragraph (1) by reason
of a sale or exchange by the controlled foreign corporation of
stock in another foreign corporation held for 1 year or more,
then, notwithstanding any other provision of this title--
``(i) the foreign-source portion of such dividend shall
be treated for purposes of section 951(a)(1)(A) as subpart
F income of the selling controlled foreign corporation for
such taxable year,
``(ii) a United States shareholder with respect to the
selling controlled foreign corporation shall include in
gross income for the taxable year of the shareholder with
or within which such taxable year of the controlled foreign
corporation ends an amount equal to the shareholder's pro
rata share (determined in the same manner as under section
951(a)(2)) of the amount treated as subpart F income under
clause (i), and
``(iii) the deduction under section 245A(a) shall be
allowable to the United States shareholder with respect to
the subpart F income included in gross income under clause
(ii) in the same manner as if such subpart F income were a
dividend received by the shareholder from the selling
controlled foreign corporation.
``(B) Application of basis or similar adjustment.--For
purposes of this title, in the case of a sale or exchange by a
controlled foreign corporation of stock in another foreign
corporation in a taxable year of the selling controlled foreign
corporation beginning after December 31, 2017, rules similar to
the rules of section 961(d) shall apply.
``(C) Foreign-source portion.--For purposes of this
paragraph, the foreign-source portion of any amount treated as
a dividend under paragraph (1) shall be determined in the same
manner as under section 245A(c).''.
(2) Effective date.--The amendments made by this subsection
shall apply to sales or exchanges after December 31, 2017.
(d) Treatment of Foreign Branch Losses Transferred to Specified 10-
percent Owned Foreign Corporations.--
(1) In general.--Part II of subchapter B of chapter 1 is
amended by adding at the end the following new section:
``SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANSFERRED TO SPECIFIED 10-
PERCENT OWNED FOREIGN CORPORATIONS.
``(a) In General.--If a domestic corporation transfers
substantially all of the assets of a foreign branch (within the meaning
of section 367(a)(3)(C), as in effect before the date of the enactment
of the Tax Cuts and Jobs Act) to a specified 10-percent owned foreign
corporation (as defined in section 245A) with respect to which it is a
United States shareholder after such transfer, such domestic
corporation shall include in gross income for the taxable year which
includes such transfer an amount equal to the transferred loss amount
with respect to such transfer.
``(b) Transferred Loss Amount.--For purposes of this section, the
term `transferred loss amount' means, with respect to any transfer of
substantially all of the assets of a foreign branch, the excess (if
any) of--
``(1) the sum of losses--
``(A) which were incurred by the foreign branch after
December 31, 2017, and before the transfer, and
``(B) with respect to which a deduction was allowed to the
taxpayer, over
``(2) the sum of--
``(A) any taxable income of such branch for a taxable year
after the taxable year in which the loss was incurred and
through the close of the taxable year of the transfer, and
``(B) any amount which is recognized under section
904(f)(3) on account of the transfer.
``(c) Reduction for Recognized Gains.--The transferred loss amount
shall be reduced (but not below zero) by the amount of gain recognized
by the taxpayer on account of the transfer (other than amounts taken
into account under subsection (b)(2)(B)).
``(d) Source of Income.--Amounts included in gross income under
this section shall be treated as derived from sources within the United
States.
``(e) Basis Adjustments.--Consistent with such regulations or other
guidance as the Secretary shall prescribe, proper adjustments shall be
made in the adjusted basis of the taxpayer's stock in the specified 10-
percent owned foreign corporation to which the transfer is made, and in
the transferee's adjusted basis in the property transferred, to reflect
amounts included in gross income under this section.''.
(2) Clerical amendment.--The table of sections for part II of
subchapter B of chapter 1 is amended by adding at the end the
following new item:
``Sec. 91. Certain foreign branch losses transferred to specified 10-
percent owned foreign corporations.''.
(3) Effective date.--The amendments made by this subsection
shall apply to transfers after December 31, 2017.
(4) Transition rule.--The amount of gain taken into account
under section 91(c) of the Internal Revenue Code of 1986, as added
by this subsection, shall be reduced by the amount of gain which
would be recognized under section 367(a)(3)(C) (determined without
regard to the amendments made by subsection (e)) with respect to
losses incurred before January 1, 2018.
(e) Repeal of Active Trade or Business Exception Under Section
367.--
(1) In general.--Section 367(a) is amended by striking
paragraph (3) and redesignating paragraphs (4), (5), and (6) as
paragraphs (3), (4), and (5), respectively.
(2) Conforming amendments.--Section 367(a)(4), as redesignated
by paragraph (1), is amended--
(A) by striking ``Paragraphs (2) and (3)'' and inserting
``Paragraph (2)'', and
(B) by striking ``Paragraphs (2) and (3)'' in the heading
and inserting ``Paragraph (2)''.
(3) Effective date.--The amendments made by this subsection
shall apply to transfers after December 31, 2017.
SEC. 14103. TREATMENT OF DEFERRED FOREIGN INCOME UPON TRANSITION TO
PARTICIPATION EXEMPTION SYSTEM OF TAXATION.
(a) In General.--Section 965 is amended to read as follows:
``SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME UPON TRANSITION TO
PARTICIPATION EXEMPTION SYSTEM OF TAXATION.
``(a) Treatment of Deferred Foreign Income as Subpart F Income.--In
the case of the last taxable year of a deferred foreign income
corporation which begins before January 1, 2018, the subpart F income
of such foreign corporation (as otherwise determined for such taxable
year under section 952) shall be increased by the greater of--
``(1) the accumulated post-1986 deferred foreign income of such
corporation determined as of November 2, 2017, or
``(2) the accumulated post-1986 deferred foreign income of such
corporation determined as of December 31, 2017.
``(b) Reduction in Amounts Included in Gross Income of United
States Shareholders of Specified Foreign Corporations With Deficits in
Earnings and Profits.--
``(1) In general.--In the case of a taxpayer which is a United
States shareholder with respect to at least one deferred foreign
income corporation and at least one E&P deficit foreign
corporation, the amount which would (but for this subsection) be
taken into account under section 951(a)(1) by reason of subsection
(a) as such United States shareholder's pro rata share of the
subpart F income of each deferred foreign income corporation shall
be reduced by the amount of such United States shareholder's
aggregate foreign E&P deficit which is allocated under paragraph
(2) to such deferred foreign income corporation.
``(2) Allocation of aggregate foreign e&p deficit.--The
aggregate foreign E&P deficit of any United States shareholder
shall be allocated among the deferred foreign income corporations
of such United States shareholder in an amount which bears the same
proportion to such aggregate as--
``(A) such United States shareholder's pro rata share of
the accumulated post-1986 deferred foreign income of each such
deferred foreign income corporation, bears to
``(B) the aggregate of such United States shareholder's pro
rata share of the accumulated post-1986 deferred foreign income
of all deferred foreign income corporations of such United
States shareholder.
``(3) Definitions related to e&p deficits.--For purposes of
this subsection--
``(A) Aggregate foreign e&p deficit.--
``(i) In general.--The term `aggregate foreign E&P
deficit' means, with respect to any United States
shareholder, the lesser of--
``(I) the aggregate of such shareholder's pro rata
shares of the specified E&P deficits of the E&P deficit
foreign corporations of such shareholder, or
``(II) the amount determined under paragraph
(2)(B).
``(ii) Allocation of deficit.--If the amount described
in clause (i)(II) is less than the amount described in
clause (i)(I), then the shareholder shall designate, in
such form and manner as the Secretary determines--
``(I) the amount of the specified E&P deficit which
is to be taken into account for each E&P deficit
corporation with respect to the taxpayer, and
``(II) in the case of an E&P deficit corporation
which has a qualified deficit (as defined in section
952), the portion (if any) of the deficit taken into
account under subclause (I) which is attributable to a
qualified deficit, including the qualified activities
to which such portion is attributable.
``(B) E&P deficit foreign corporation.--The term `E&P
deficit foreign corporation' means, with respect to any
taxpayer, any specified foreign corporation with respect to
which such taxpayer is a United States shareholder, if, as of
November 2, 2017--
``(i) such specified foreign corporation has a deficit
in post-1986 earnings and profits,
``(ii) such corporation was a specified foreign
corporation, and
``(iii) such taxpayer was a United States shareholder
of such corporation.
``(C) Specified e&p deficit.--The term `specified E&P
deficit' means, with respect to any E&P deficit foreign
corporation, the amount of the deficit referred to in
subparagraph (B).
``(4) Treatment of earnings and profits in future years.--
``(A) Reduced earnings and profits treated as previously
taxed income when distributed.--For purposes of applying
section 959 in any taxable year beginning with the taxable year
described in subsection (a), with respect to any United States
shareholder of a deferred foreign income corporation, an amount
equal to such shareholder's reduction under paragraph (1) which
is allocated to such deferred foreign income corporation under
this subsection shall be treated as an amount which was
included in the gross income of such United States shareholder
under section 951(a).
``(B) E&P deficits.--For purposes of this title, with
respect to any taxable year beginning with the taxable year
described in subsection (a), a United States shareholder's pro
rata share of the earnings and profits of any E&P deficit
foreign corporation under this subsection shall be increased by
the amount of the specified E&P deficit of such corporation
taken into account by such shareholder under paragraph (1),
and, for purposes of section 952, such increase shall be
attributable to the same activity to which the deficit so taken
into account was attributable.
``(5) Netting among united states shareholders in same
affiliated group.--
``(A) In general.--In the case of any affiliated group
which includes at least one E&P net surplus shareholder and one
E&P net deficit shareholder, the amount which would (but for
this paragraph) be taken into account under section 951(a)(1)
by reason of subsection (a) by each such E&P net surplus
shareholder shall be reduced (but not below zero) by such
shareholder's applicable share of the affiliated group's
aggregate unused E&P deficit.
``(B) E&P net surplus shareholder.--For purposes of this
paragraph, the term `E&P net surplus shareholder' means any
United States shareholder which would (determined without
regard to this paragraph) take into account an amount greater
than zero under section 951(a)(1) by reason of subsection (a).
``(C) E&P net deficit shareholder.--For purposes of this
paragraph, the term `E&P net deficit shareholder' means any
United States shareholder if--
``(i) the aggregate foreign E&P deficit with respect to
such shareholder (as defined in paragraph (3)(A) without
regard to clause (i)(II) thereof), exceeds
``(ii) the amount which would (but for this subsection)
be taken into account by such shareholder under section
951(a)(1) by reason of subsection (a).
``(D) Aggregate unused e&p deficit.--For purposes of this
paragraph--
``(i) In general.--The term `aggregate unused E&P
deficit' means, with respect to any affiliated group, the
lesser of--
``(I) the sum of the excesses described in
subparagraph (C), determined with respect to each E&P
net deficit shareholder in such group, or
``(II) the amount determined under subparagraph
(E)(ii).
``(ii) Reduction with respect to e&p net deficit
shareholders which are not wholly owned by the affiliated
group.--If the group ownership percentage of any E&P net
deficit shareholder is less than 100 percent, the amount of
the excess described in subparagraph (C) which is taken
into account under clause (i)(I) with respect to such E&P
net deficit shareholder shall be such group ownership
percentage of such amount.
``(E) Applicable share.--For purposes of this paragraph,
the term `applicable share' means, with respect to any E&P net
surplus shareholder in any affiliated group, the amount which
bears the same proportion to such group's aggregate unused E&P
deficit as--
``(i) the product of--
``(I) such shareholder's group ownership
percentage, multiplied by
``(II) the amount which would (but for this
paragraph) be taken into account under section
951(a)(1) by reason of subsection (a) by such
shareholder, bears to
``(ii) the aggregate amount determined under clause (i)
with respect to all E&P net surplus shareholders in such
group.
``(F) Group ownership percentage.--For purposes of this
paragraph, the term `group ownership percentage' means, with
respect to any United States shareholder in any affiliated
group, the percentage of the value of the stock of such United
States shareholder which is held by other includible
corporations in such affiliated group. Notwithstanding the
preceding sentence, the group ownership percentage of the
common parent of the affiliated group is 100 percent. Any term
used in this subparagraph which is also used in section 1504
shall have the same meaning as when used in such section.
``(c) Application of Participation Exemption to Included Income.--
``(1) In general.--In the case of a United States shareholder
of a deferred foreign income corporation, there shall be allowed as
a deduction for the taxable year in which an amount is included in
the gross income of such United States shareholder under section
951(a)(1) by reason of this section an amount equal to the sum of--
``(A) the United States shareholder's 8 percent rate
equivalent percentage of the excess (if any) of--
``(i) the amount so included as gross income, over
``(ii) the amount of such United States shareholder's
aggregate foreign cash position, plus
``(B) the United States shareholder's 15.5 percent rate
equivalent percentage of so much of the amount described in
subparagraph (A)(ii) as does not exceed the amount described in
subparagraph (A)(i).
``(2) 8 and 15.5 percent rate equivalent percentages.--For
purposes of this subsection--
``(A) 8 percent rate equivalent percentage.--The term `8
percent rate equivalent percentage' means, with respect to any
United States shareholder for any taxable year, the percentage
which would result in the amount to which such percentage
applies being subject to a 8 percent rate of tax determined by
only taking into account a deduction equal to such percentage
of such amount and the highest rate of tax specified in section
11 for such taxable year. In the case of any taxable year of a
United States shareholder to which section 15 applies, the
highest rate of tax under section 11 before the effective date
of the change in rates and the highest rate of tax under
section 11 after the effective date of such change shall each
be taken into account under the preceding sentence in the same
proportions as the portion of such taxable year which is before
and after such effective date, respectively.
``(B) 15.5 percent rate equivalent percentage.--The term
`15.5 percent rate equivalent percentage' means, with respect
to any United States shareholder for any taxable year, the
percentage determined under subparagraph (A) applied by
substituting `15.5 percent rate of tax' for `8 percent rate of
tax'.
``(3) Aggregate foreign cash position.--For purposes of this
subsection--
``(A) In general.--The term `aggregate foreign cash
position' means, with respect to any United States shareholder,
the greater of--
``(i) the aggregate of such United States shareholder's
pro rata share of the cash position of each specified
foreign corporation of such United States shareholder
determined as of the close of the last taxable year of such
specified foreign corporation which begins before January
1, 2018, or
``(ii) one half of the sum of--
``(I) the aggregate described in clause (i)
determined as of the close of the last taxable year of
each such specified foreign corporation which ends
before November 2, 2017, plus
``(II) the aggregate described in clause (i)
determined as of the close of the taxable year of each
such specified foreign corporation which precedes the
taxable year referred to in subclause (I).
``(B) Cash position.--For purposes of this paragraph, the
cash position of any specified foreign corporation is the sum
of--
``(i) cash held by such foreign corporation,
``(ii) the net accounts receivable of such foreign
corporation, plus
``(iii) the fair market value of the following assets
held by such corporation:
``(I) Personal property which is of a type that is
actively traded and for which there is an established
financial market.
``(II) Commercial paper, certificates of deposit,
the securities of the Federal government and of any
State or foreign government.
``(III) Any foreign currency.
``(IV) Any obligation with a term of less than one
year.
``(V) Any asset which the Secretary identifies as
being economically equivalent to any asset described in
this subparagraph.
``(C) Net accounts receivable.--For purposes of this
paragraph, the term `net accounts receivable' means, with
respect to any specified foreign corporation, the excess (if
any) of--
``(i) such corporation's accounts receivable, over
``(ii) such corporation's accounts payable (determined
consistent with the rules of section 461).
``(D) Prevention of double counting.--Cash positions of a
specified foreign corporation described in clause (ii),
(iii)(I), or (iii)(IV) of subparagraph (B) shall not be taken
into account by a United States shareholder under subparagraph
(A) to the extent that such United States shareholder
demonstrates to the satisfaction of the Secretary that such
amount is so taken into account by such United States
shareholder with respect to another specified foreign
corporation.
``(E) Cash positions of certain non-corporate entities
taken into account.--An entity (other than a corporation) shall
be treated as a specified foreign corporation of a United
States shareholder for purposes of determining such United
States shareholder's aggregate foreign cash position if any
interest in such entity is held by a specified foreign
corporation of such United States shareholder (determined after
application of this subparagraph) and such entity would be a
specified foreign corporation of such United States shareholder
if such entity were a foreign corporation.
``(F) Anti-abuse.--If the Secretary determines that a
principal purpose of any transaction was to reduce the
aggregate foreign cash position taken into account under this
subsection, such transaction shall be disregarded for purposes
of this subsection.
``(d) Deferred Foreign Income Corporation; Accumulated Post-1986
Deferred Foreign Income.--For purposes of this section--
``(1) Deferred foreign income corporation.--The term `deferred
foreign income corporation' means, with respect to any United
States shareholder, any specified foreign corporation of such
United States shareholder which has accumulated post-1986 deferred
foreign income (as of the date referred to in paragraph (1) or (2)
of subsection (a)) greater than zero.
``(2) Accumulated post-1986 deferred foreign income.--The term
`accumulated post-1986 deferred foreign income' means the post-1986
earnings and profits except to the extent such earnings--
``(A) are attributable to income of the specified foreign
corporation which is effectively connected with the conduct of
a trade or business within the United States and subject to tax
under this chapter, or
``(B) in the case of a controlled foreign corporation, if
distributed, would be excluded from the gross income of a
United States shareholder under section 959.
To the extent provided in regulations or other guidance prescribed
by the Secretary, in the case of any controlled foreign corporation
which has shareholders which are not United States shareholders,
accumulated post-1986 deferred foreign income shall be
appropriately reduced by amounts which would be described in
subparagraph (B) if such shareholders were United States
shareholders.
``(3) Post-1986 earnings and profits.--The term `post-1986
earnings and profits' means the earnings and profits of the foreign
corporation (computed in accordance with sections 964(a) and 986,
and by only taking into account periods when the foreign
corporation was a specified foreign corporation) accumulated in
taxable years beginning after December 31, 1986, and determined--
``(A) as of the date referred to in paragraph (1) or (2) of
subsection (a), whichever is applicable with respect to such
foreign corporation, and
``(B) without diminution by reason of dividends distributed
during the taxable year described in subsection (a) other than
dividends distributed to another specified foreign corporation.
``(e) Specified Foreign Corporation.--
``(1) In general.--For purposes of this section, the term
`specified foreign corporation' means--
``(A) any controlled foreign corporation, and
``(B) any foreign corporation with respect to which one or
more domestic corporations is a United States shareholder.
``(2) Application to certain foreign corporations.--For
purposes of sections 951 and 961, a foreign corporation described
in paragraph (1)(B) shall be treated as a controlled foreign
corporation solely for purposes of taking into account the subpart
F income of such corporation under subsection (a) (and for purposes
of applying subsection (f)).
``(3) Exclusion of passive foreign investment companies.--Such
term shall not include any corporation which is a passive foreign
investment company (as defined in section 1297) with respect to the
shareholder and which is not a controlled foreign corporation.
``(f) Determinations of Pro Rata Share.--
``(1) In general.--For purposes of this section, the
determination of any United States shareholder's pro rata share of
any amount with respect to any specified foreign corporation shall
be determined under rules similar to the rules of section 951(a)(2)
by treating such amount in the same manner as subpart F income (and
by treating such specified foreign corporation as a controlled
foreign corporation).
``(2) Special rules.--The portion which is included in the
income of a United States shareholder under section 951(a)(1) by
reason of subsection (a) which is equal to the deduction allowed
under subsection (c) by reason of such inclusion--
``(A) shall be treated as income exempt from tax for
purposes of sections 705(a)(1)(B) and 1367(a)(1)(A), and
``(B) shall not be treated as income exempt from tax for
purposes of determining whether an adjustment shall be made to
an accumulated adjustment account under section 1368(e)(1)(A).
``(g) Disallowance of Foreign Tax Credit, etc.--
``(1) In general.--No credit shall be allowed under section 901
for the applicable percentage of any taxes paid or accrued (or
treated as paid or accrued) with respect to any amount for which a
deduction is allowed under this section.
``(2) Applicable percentage.--For purposes of this subsection,
the term `applicable percentage' means the amount (expressed as a
percentage) equal to the sum of--
``(A) 0.771 multiplied by the ratio of--
``(i) the excess to which subsection (c)(1)(A) applies,
divided by
``(ii) the sum of such excess plus the amount to which
subsection (c)(1)(B) applies, plus
``(B) 0.557 multiplied by the ratio of--
``(i) the amount to which subsection (c)(1)(B) applies,
divided by
``(ii) the sum described in subparagraph (A)(ii).
``(3) Denial of deduction.--No deduction shall be allowed under
this chapter for any tax for which credit is not allowable under
section 901 by reason of paragraph (1) (determined by treating the
taxpayer as having elected the benefits of subpart A of part III of
subchapter N).
``(4) Coordination with section 78.--With respect to the taxes
treated as paid or accrued by a domestic corporation with respect
to amounts which are includible in gross income of such domestic
corporation by reason of this section, section 78 shall apply only
to so much of such taxes as bears the same proportion to the amount
of such taxes as--
``(A) the excess of--
``(i) the amounts which are includible in gross income
of such domestic corporation by reason of this section,
over
``(ii) the deduction allowable under subsection (c)
with respect to such amounts, bears to
``(B) such amounts.
``(h) Election To Pay Liability in Installments.--
``(1) In general.--In the case of a United States shareholder
of a deferred foreign income corporation, such United States
shareholder may elect to pay the net tax liability under this
section in 8 installments of the following amounts:
``(A) 8 percent of the net tax liability in the case of
each of the first 5 of such installments,
``(B) 15 percent of the net tax liability in the case of
the 6th such installment,
``(C) 20 percent of the net tax liability in the case of
the 7th such installment, and
``(D) 25 percent of the net tax liability in the case of
the 8th such installment.
``(2) Date for payment of installments.--If an election is made
under paragraph (1), the first installment shall be paid on the due
date (determined without regard to any extension of time for filing
the return) for the return of tax for the taxable year described in
subsection (a) and each succeeding installment shall be paid on the
due date (as so determined) for the return of tax for the taxable
year following the taxable year with respect to which the preceding
installment was made.
``(3) Acceleration of payment.--If there is an addition to tax
for failure to timely pay any installment required under this
subsection, a liquidation or sale of substantially all the assets
of the taxpayer (including in a title 11 or similar case), a
cessation of business by the taxpayer, or any similar circumstance,
then the unpaid portion of all remaining installments shall be due
on the date of such event (or in the case of a title 11 or similar
case, the day before the petition is filed). The preceding sentence
shall not apply to the sale of substantially all the assets of a
taxpayer to a buyer if such buyer enters into an agreement with the
Secretary under which such buyer is liable for the remaining
installments due under this subsection in the same manner as if
such buyer were the taxpayer.
``(4) Proration of deficiency to installments.--If an election
is made under paragraph (1) to pay the net tax liability under this
section in installments and a deficiency has been assessed with
respect to such net tax liability, the deficiency shall be prorated
to the installments payable under paragraph (1). The part of the
deficiency so prorated to any installment the date for payment of
which has not arrived shall be collected at the same time as, and
as a part of, such installment. The part of the deficiency so
prorated to any installment the date for payment of which has
arrived shall be paid upon notice and demand from the Secretary.
This subsection shall not apply if the deficiency is due to
negligence, to intentional disregard of rules and regulations, or
to fraud with intent to evade tax.
``(5) Election.--Any election under paragraph (1) shall be made
not later than the due date for the return of tax for the taxable
year described in subsection (a) and shall be made in such manner
as the Secretary shall provide.
``(6) Net tax liability under this section.--For purposes of
this subsection--
``(A) In general.--The net tax liability under this section
with respect to any United States shareholder is the excess (if
any) of--
``(i) such taxpayer's net income tax for the taxable
year in which an amount is included in the gross income of
such United States shareholder under section 951(a)(1) by
reason of this section, over
``(ii) such taxpayer's net income tax for such taxable
year determined--
``(I) without regard to this section, and
``(II) without regard to any income or deduction
properly attributable to a dividend received by such
United States shareholder from any deferred foreign
income corporation.
``(B) Net income tax.--The term `net income tax' means the
regular tax liability reduced by the credits allowed under
subparts A, B, and D of part IV of subchapter A.
``(i) Special Rules for S Corporation Shareholders.--
``(1) In general.--In the case of any S corporation which is a
United States shareholder of a deferred foreign income corporation,
each shareholder of such S corporation may elect to defer payment
of such shareholder's net tax liability under this section with
respect to such S corporation until the shareholder's taxable year
which includes the triggering event with respect to such liability.
Any net tax liability payment of which is deferred under the
preceding sentence shall be assessed on the return of tax as an
addition to tax in the shareholder's taxable year which includes
such triggering event.
``(2) Triggering event.--
``(A) In general.--In the case of any shareholder's net tax
liability under this section with respect to any S corporation,
the triggering event with respect to such liability is
whichever of the following occurs first:
``(i) Such corporation ceases to be an S corporation
(determined as of the first day of the first taxable year
that such corporation is not an S corporation).
``(ii) A liquidation or sale of substantially all the
assets of such S corporation (including in a title 11 or
similar case), a cessation of business by such S
corporation, such S corporation ceases to exist, or any
similar circumstance.
``(iii) A transfer of any share of stock in such S
corporation by the taxpayer (including by reason of death,
or otherwise).
``(B) Partial transfers of stock.--In the case of a
transfer of less than all of the taxpayer's shares of stock in
the S corporation, such transfer shall only be a triggering
event with respect to so much of the taxpayer's net tax
liability under this section with respect to such S corporation
as is properly allocable to such stock.
``(C) Transfer of liability.--A transfer described in
clause (iii) of subparagraph (A) shall not be treated as a
triggering event if the transferee enters into an agreement
with the Secretary under which such transferee is liable for
net tax liability with respect to such stock in the same manner
as if such transferee were the taxpayer.
``(3) Net tax liability.--A shareholder's net tax liability
under this section with respect to any S corporation is the net tax
liability under this section which would be determined under
subsection (h)(6) if the only subpart F income taken into account
by such shareholder by reason of this section were allocations from
such S corporation.
``(4) Election to pay deferred liability in installments.--In
the case of a taxpayer which elects to defer payment under
paragraph (1)--
``(A) subsection (h) shall be applied separately with
respect to the liability to which such election applies,
``(B) an election under subsection (h) with respect to such
liability shall be treated as timely made if made not later
than the due date for the return of tax for the taxable year in
which the triggering event with respect to such liability
occurs,
``(C) the first installment under subsection (h) with
respect to such liability shall be paid not later than such due
date (but determined without regard to any extension of time
for filing the return), and
``(D) if the triggering event with respect to any net tax
liability is described in paragraph (2)(A)(ii), an election
under subsection (h) with respect to such liability may be made
only with the consent of the Secretary.
``(5) Joint and several liability of s corporation.--If any
shareholder of an S corporation elects to defer payment under
paragraph (1), such S corporation shall be jointly and severally
liable for such payment and any penalty, addition to tax, or
additional amount attributable thereto.
``(6) Extension of limitation on collection.--Any limitation on
the time period for the collection of a liability deferred under
this subsection shall not be treated as beginning before the date
of the triggering event with respect to such liability.
``(7) Annual reporting of net tax liability.--
``(A) In general.--Any shareholder of an S corporation
which makes an election under paragraph (1) shall report the
amount of such shareholder's deferred net tax liability on such
shareholder's return of tax for the taxable year for which such
election is made and on the return of tax for each taxable year
thereafter until such amount has been fully assessed on such
returns.
``(B) Deferred net tax liability.--For purposes of this
paragraph, the term `deferred net tax liability' means, with
respect to any taxable year, the amount of net tax liability
payment of which has been deferred under paragraph (1) and
which has not been assessed on a return of tax for any prior
taxable year.
``(C) Failure to report.--In the case of any failure to
report any amount required to be reported under subparagraph
(A) with respect to any taxable year before the due date for
the return of tax for such taxable year, there shall be
assessed on such return as an addition to tax 5 percent of such
amount.
``(8) Election.--Any election under paragraph (1)--
``(A) shall be made by the shareholder of the S corporation
not later than the due date for such shareholder's return of
tax for the taxable year which includes the close of the
taxable year of such S corporation in which the amount
described in subsection (a) is taken into account, and
``(B) shall be made in such manner as the Secretary shall
provide.
``(j) Reporting by S Corporation.--Each S corporation which is a
United States shareholder of a specified foreign corporation shall
report in its return of tax under section 6037(a) the amount includible
in its gross income for such taxable year by reason of this section and
the amount of the deduction allowable by subsection (c). Any copy
provided to a shareholder under section 6037(b) shall include a
statement of such shareholder's pro rata share of such amounts.
``(k) Extension of Limitation on Assessment.--Notwithstanding
section 6501, the limitation on the time period for the assessment of
the net tax liability under this section (as defined in subsection
(h)(6)) shall not expire before the date that is 6 years after the
return for the taxable year described in such subsection was filed.
``(l) Recapture for Expatriated Entities.--
``(1) In general.--If a deduction is allowed under subsection
(c) to a United States shareholder and such shareholder first
becomes an expatriated entity at any time during the 10-year period
beginning on the date of the enactment of the Tax Cuts and Jobs Act
(with respect to a surrogate foreign corporation which first
becomes a surrogate foreign corporation during such period), then--
``(A) the tax imposed by this chapter shall be increased
for the first taxable year in which such taxpayer becomes an
expatriated entity by an amount equal to 35 percent of the
amount of the deduction allowed under subsection (c), and
``(B) no credits shall be allowed against the increase in
tax under subparagraph (A).
``(2) Expatriated entity.--For purposes of this subsection, the
term `expatriated entity' has the same meaning given such term
under section 7874(a)(2), except that such term shall not include
an entity if the surrogate foreign corporation with respect to the
entity is treated as a domestic corporation under section 7874(b).
``(3) Surrogate foreign corporation.--For purposes of this
subsection, the term `surrogate foreign corporation' has the
meaning given such term in section 7874(a)(2)(B).
``(m) Special Rules for United States Shareholders Which Are Real
Estate Investment Trusts.--
``(1) In general.--If a real estate investment trust is a
United States shareholder in 1 or more deferred foreign income
corporations--
``(A) any amount required to be taken into account under
section 951(a)(1) by reason of this section shall not be taken
into account as gross income of the real estate investment
trust for purposes of applying paragraphs (2) and (3) of
section 856(c) to any taxable year for which such amount is
taken into account under section 951(a)(1), and
``(B) if the real estate investment trust elects the
application of this subparagraph, notwithstanding subsection
(a), any amount required to be taken into account under section
951(a)(1) by reason of this section shall, in lieu of the
taxable year in which it would otherwise be included in gross
income (for purposes of the computation of real estate
investment trust taxable income under section 857(b)), be
included in gross income as follows:
``(i) 8 percent of such amount in the case of each of
the taxable years in the 5-taxable year period beginning
with the taxable year in which such amount would otherwise
be included.
``(ii) 15 percent of such amount in the case of the 1st
taxable year following such period.
``(iii) 20 percent of such amount in the case of the
2nd taxable year following such period.
``(iv) 25 percent of such amount in the case of the 3rd
taxable year following such period.
``(2) Rules for trusts electing deferred inclusion.--
``(A) Election.--Any election under paragraph (1)(B) shall
be made not later than the due date for the first taxable year
in the 5-taxable year period described in clause (i) of
paragraph (1)(B) and shall be made in such manner as the
Secretary shall provide.
``(B) Special rules.--If an election under paragraph (1)(B)
is in effect with respect to any real estate investment trust,
the following rules shall apply:
``(i) Application of participation exemption.--For
purposes of subsection (c)(1)--
``(I) the aggregate amount to which subparagraph
(A) or (B) of subsection (c)(1) applies shall be
determined without regard to the election,
``(II) each such aggregate amount shall be
allocated to each taxable year described in paragraph
(1)(B) in the same proportion as the amount included in
the gross income of such United States shareholder
under section 951(a)(1) by reason of this section is
allocated to each such taxable year.
``(III) No installment payments.--The real estate
investment trust may not make an election under
subsection (g) for any taxable year described in
paragraph (1)(B).
``(ii) Acceleration of inclusion.--If there is a
liquidation or sale of substantially all the assets of the
real estate investment trust (including in a title 11 or
similar case), a cessation of business by such trust, or
any similar circumstance, then any amount not yet included
in gross income under paragraph (1)(B) shall be included in
gross income as of the day before the date of the event and
the unpaid portion of any tax liability with respect to
such inclusion shall be due on the date of such event (or
in the case of a title 11 or similar case, the day before
the petition is filed).
``(n) Election Not To Apply Net Operating Loss Deduction.--
``(1) In general.--If a United States shareholder of a deferred
foreign income corporation elects the application of this
subsection for the taxable year described in subsection (a), then
the amount described in paragraph (2) shall not be taken into
account--
``(A) in determining the amount of the net operating loss
deduction under section 172 of such shareholder for such
taxable year, or
``(B) in determining the amount of taxable income for such
taxable year which may be reduced by net operating loss
carryovers or carrybacks to such taxable year under section
172.
``(2) Amount described.--The amount described in this paragraph
is the sum of--
``(A) the amount required to be taken into account under
section 951(a)(1) by reason of this section (determined after
the application of subsection (c)), plus
``(B) in the case of a domestic corporation which chooses
to have the benefits of subpart A of part III of subchapter N
for the taxable year, the taxes deemed to be paid by such
corporation under subsections (a) and (b) of section 960 for
such taxable year with respect to the amount described in
subparagraph (A) which are treated as a dividends under section
78.
``(3) Election.--Any election under this subsection shall be
made not later than the due date (including extensions) for filing
the return of tax for the taxable year and shall be made in such
manner as the Secretary shall prescribe.
``(o) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary or appropriate to carry out the
provisions of this section, including--
``(1) regulations or other guidance to provide appropriate
basis adjustments, and
``(2) regulations or other guidance to prevent the avoidance of
the purposes of this section, including through a reduction in
earnings and profits, through changes in entity classification or
accounting methods, or otherwise.''.
(b) Clerical Amendment.--The table of sections for subpart F of
part III of subchapter N of chapter 1 is amended by striking the item
relating to section 965 and inserting the following:
``Sec. 965. Treatment of deferred foreign income upon transition to
participation exemption system of taxation.''.
Subpart B--Rules Related to Passive and Mobile Income
CHAPTER 1--TAXATION OF FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL
INTANGIBLE LOW-TAXED INCOME
SEC. 14201. CURRENT YEAR INCLUSION OF GLOBAL INTANGIBLE LOW-TAXED
INCOME BY UNITED STATES SHAREHOLDERS.
(a) In General.--Subpart F of part III of subchapter N of chapter 1
is amended by inserting after section 951 the following new section:
``SEC. 951A. GLOBAL INTANGIBLE LOW-TAXED INCOME INCLUDED IN GROSS
INCOME OF UNITED STATES SHAREHOLDERS.
``(a) In General.--Each person who is a United States shareholder
of any controlled foreign corporation for any taxable year of such
United States shareholder shall include in gross income such
shareholder's global intangible low-taxed income for such taxable year.
``(b) Global Intangible Low-taxed Income.--For purposes of this
section--
``(1) In general.--The term `global intangible low-taxed
income' means, with respect to any United States shareholder for
any taxable year of such United States shareholder, the excess (if
any) of--
``(A) such shareholder's net CFC tested income for such
taxable year, over
``(B) such shareholder's net deemed tangible income return
for such taxable year.
``(2) Net deemed tangible income return.--The term `net deemed
tangible income return' means, with respect to any United States
shareholder for any taxable year, the excess of--
``(A) 10 percent of the aggregate of such shareholder's pro
rata share of the qualified business asset investment of each
controlled foreign corporation with respect to which such
shareholder is a United States shareholder for such taxable
year (determined for each taxable year of each such controlled
foreign corporation which ends in or with such taxable year of
such United States shareholder), over
``(B) the amount of interest expense taken into account
under subsection (c)(2)(A)(ii) in determining the shareholder's
net CFC tested income for the taxable year to the extent the
interest income attributable to such expense is not taken into
account in determining such shareholder's net CFC tested
income.
``(c) Net CFC Tested Income.--For purposes of this section--
``(1) In general.--The term `net CFC tested income' means, with
respect to any United States shareholder for any taxable year of
such United States shareholder, the excess (if any) of--
``(A) the aggregate of such shareholder's pro rata share of
the tested income of each controlled foreign corporation with
respect to which such shareholder is a United States
shareholder for such taxable year of such United States
shareholder (determined for each taxable year of such
controlled foreign corporation which ends in or with such
taxable year of such United States shareholder), over
``(B) the aggregate of such shareholder's pro rata share of
the tested loss of each controlled foreign corporation with
respect to which such shareholder is a United States
shareholder for such taxable year of such United States
shareholder (determined for each taxable year of such
controlled foreign corporation which ends in or with such
taxable year of such United States shareholder).
``(2) Tested income; tested loss.--For purposes of this
section--
``(A) Tested income.--The term `tested income' means, with
respect to any controlled foreign corporation for any taxable
year of such controlled foreign corporation, the excess (if
any) of--
``(i) the gross income of such corporation determined
without regard to--
``(I) any item of income described in section
952(b),
``(II) any gross income taken into account in
determining the subpart F income of such corporation,
``(III) any gross income excluded from the foreign
base company income (as defined in section 954) and the
insurance income (as defined in section 953) of such
corporation by reason of section 954(b)(4),
``(IV) any dividend received from a related person
(as defined in section 954(d)(3)), and
``(V) any foreign oil and gas extraction income (as
defined in section 907(c)(1)) of such corporation, over
``(ii) the deductions (including taxes) properly
allocable to such gross income under rules similar to the
rules of section 954(b)(5) (or to which such deductions
would be allocable if there were such gross income).
``(B) Tested loss.--
``(i) In general.--The term `tested loss' means, with
respect to any controlled foreign corporation for any
taxable year of such controlled foreign corporation, the
excess (if any) of the amount described in subparagraph
(A)(ii) over the amount described in subparagraph (A)(i).
``(ii) Coordination with subpart f to deny double
benefit of losses.--Section 952(c)(1)(A) shall be applied
by increasing the earnings and profits of the controlled
foreign corporation by the tested loss of such corporation.
``(d) Qualified Business Asset Investment.--For purposes of this
section--
``(1) In general.--The term `qualified business asset
investment' means, with respect to any controlled foreign
corporation for any taxable year, the average of such corporation's
aggregate adjusted bases as of the close of each quarter of such
taxable year in specified tangible property--
``(A) used in a trade or business of the corporation, and
``(B) of a type with respect to which a deduction is
allowable under section 167.
``(2) Specified tangible property.--
``(A) In general.--The term `specified tangible property'
means, except as provided in subparagraph (B), any tangible
property used in the production of tested income.
``(B) Dual use property.--In the case of property used both
in the production of tested income and income which is not
tested income, such property shall be treated as specified
tangible property in the same proportion that the gross income
described in subsection (c)(1)(A) produced with respect to such
property bears to the total gross income produced with respect
to such property.
``(3) Determination of adjusted basis.--For purposes of this
subsection, notwithstanding any provision of this title (or any
other provision of law) which is enacted after the date of the
enactment of this section, the adjusted basis in any property shall
be determined--
``(A) by using the alternative depreciation system under
section 168(g), and
``(B) by allocating the depreciation deduction with respect
to such property ratably to each day during the period in the
taxable year to which such depreciation relates.
``(3) Partnership property.--For purposes of this subsection,
if a controlled foreign corporation holds an interest in a
partnership at the close of such taxable year of the controlled
foreign corporation, such controlled foreign corporation shall take
into account under paragraph (1) the controlled foreign
corporation's distributive share of the aggregate of the
partnership's adjusted bases (determined as of such date in the
hands of the partnership) in tangible property held by such
partnership to the extent such property--
``(A) is used in the trade or business of the partnership,
``(B) is of a type with respect to which a deduction is
allowable under section 167, and
``(C) is used in the production of tested income
(determined with respect to such controlled foreign
corporation's distributive share of income with respect to such
property).
For purposes of this paragraph, the controlled foreign
corporation's distributive share of the adjusted basis of any
property shall be the controlled foreign corporation's distributive
share of income with respect to such property.
``(4) Regulations.--The Secretary shall issue such regulations
or other guidance as the Secretary determines appropriate to
prevent the avoidance of the purposes of this subsection, including
regulations or other guidance which provide for the treatment of
property if--
``(A) such property is transferred, or held, temporarily,
or
``(B) the avoidance of the purposes of this paragraph is a
factor in the transfer or holding of such property.
``(e) Determination of Pro Rata Share, etc.--For purposes of this
section--
``(1) In general.--The pro rata shares referred to in
subsections (b), (c)(1)(A), and (c)(1)(B), respectively, shall be
determined under the rules of section 951(a)(2) in the same manner
as such section applies to subpart F income and shall be taken into
account in the taxable year of the United States shareholder in
which or with which the taxable year of the controlled foreign
corporation ends.
``(2) Treatment as united states shareholder.--A person shall
be treated as a United States shareholder of a controlled foreign
corporation for any taxable year of such person only if such person
owns (within the meaning of section 958(a)) stock in such foreign
corporation on the last day in the taxable year of such foreign
corporation on which such foreign corporation is a controlled
foreign corporation.
``(3) Treatment as controlled foreign corporation.--A foreign
corporation shall be treated as a controlled foreign corporation
for any taxable year if such foreign corporation is a controlled
foreign corporation at any time during such taxable year.
``(f) Treatment as Subpart F Income for Certain Purposes.--
``(1) In general.--
``(A) Application.--Except as provided in subparagraph (B),
any global intangible low-taxed income included in gross income
under subsection (a) shall be treated in the same manner as an
amount included under section 951(a)(1)(A) for purposes of
applying sections 168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1),
959, 961, 962, 993(a)(1)(E), 996(f)(1), 1248(b)(1), 1248(d)(1),
6501(e)(1)(C), 6654(d)(2)(D), and 6655(e)(4).
``(B) Exception.--The Secretary shall provide rules for the
application of subparagraph (A) to other provisions of this
title in any case in which the determination of subpart F
income is required to be made at the level of the controlled
foreign corporation.
``(2) Allocation of global intangible low-taxed income to
controlled foreign corporations.--For purposes of the sections
referred to in paragraph (1), with respect to any controlled
foreign corporation any pro rata amount from which is taken into
account in determining the global intangible low-taxed income
included in gross income of a United States shareholder under
subsection (a), the portion of such global intangible low-taxed
income which is treated as being with respect to such controlled
foreign corporation is--
``(A) in the case of a controlled foreign corporation with
no tested income, zero, and
``(B) in the case of a controlled foreign corporation with
tested income, the portion of such global intangible low-taxed
income which bears the same ratio to such global intangible
low-taxed income as--
``(i) such United States shareholder's pro rata amount
of the tested income of such controlled foreign
corporation, bears to
``(ii) the aggregate amount described in subsection
(c)(1)(A) with respect to such United States
shareholder.''.
(b) Foreign Tax Credit.--
(1) Application of deemed paid foreign tax credit.--Section 960
is amended adding at the end the following new subsection:
``(d) Deemed Paid Credit for Taxes Properly Attributable to Tested
Income.--
``(1) In general.--For purposes of subpart A of this part, if
any amount is includible in the gross income of a domestic
corporation under section 951A, such domestic corporation shall be
deemed to have paid foreign income taxes equal to 80 percent of the
product of--
``(A) such domestic corporation's inclusion percentage,
multiplied by
``(B) the aggregate tested foreign income taxes paid or
accrued by controlled foreign corporations.
``(2) Inclusion percentage.--For purposes of paragraph (1), the
term `inclusion percentage' means, with respect to any domestic
corporation, the ratio (expressed as a percentage) of--
``(A) such corporation's global intangible low-taxed income
(as defined in section 951A(b)), divided by
``(B) the aggregate amount described in section
951A(c)(1)(A) with respect to such corporation.
``(3) Tested foreign income taxes.--For purposes of paragraph
(1), the term `tested foreign income taxes' means, with respect to
any domestic corporation which is a United States shareholder of a
controlled foreign corporation, the foreign income taxes paid or
accrued by such foreign corporation which are properly attributable
to the tested income of such foreign corporation taken into account
by such domestic corporation under section 951A.''.
(2) Application of foreign tax credit limitation.--
(A) Separate basket for global intangible low-taxed
income.--Section 904(d)(1) is amended by redesignating
subparagraphs (A) and (B) as subparagraphs (B) and (C),
respectively, and by inserting before subparagraph (B) (as so
redesignated) the following new subparagraph:
``(A) any amount includible in gross income under section
951A (other than passive category income),''.
(B) Exclusion from general category income.--Section
904(d)(2)(A)(ii) is amended by inserting ``income described in
paragraph (1)(A) and'' before ``passive category income''.
(C) No carryover or carryback of excess taxes.--Section
904(c) is amended by adding at the end the following: ``This
subsection shall not apply to taxes paid or accrued with
respect to amounts described in subsection (d)(1)(A).''.
(c) Clerical Amendment.--The table of sections for subpart F of
part III of subchapter N of chapter 1 is amended by inserting after the
item relating to section 951 the following new item:
``Sec. 951A. Global intangible low-taxed income included in gross income
of United States shareholders.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years of foreign corporations beginning after December
31, 2017, and to taxable years of United States shareholders in which
or with which such taxable years of foreign corporations end.
SEC. 14202. DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL
INTANGIBLE LOW-TAXED INCOME.
(a) In General.--Part VIII of subchapter B of chapter 1 is amended
by adding at the end the following new section:
``SEC. 250. FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL INTANGIBLE
LOW-TAXED INCOME.
``(a) Allowance of Deduction.--
``(1) In general.--In the case of a domestic corporation for
any taxable year, there shall be allowed as a deduction an amount
equal to the sum of--
``(A) 37.5 percent of the foreign-derived intangible income
of such domestic corporation for such taxable year, plus
``(B) 50 percent of--
``(i) the global intangible low-taxed income amount (if
any) which is included in the gross income of such domestic
corporation under section 951A for such taxable year, and
``(ii) the amount treated as a dividend received by
such corporation under section 78 which is attributable to
the amount described in clause (i).
``(2) Limitation based on taxable income.--
``(A) In general.--If, for any taxable year--
``(i) the sum of the foreign-derived intangible income
and the global intangible low-taxed income amount otherwise
taken into account by the domestic corporation under
paragraph (1), exceeds
``(ii) the taxable income of the domestic corporation
(determined without regard to this section),
then the amount of the foreign-derived intangible income and
the global intangible low-taxed income amount so taken into
account shall be reduced as provided in subparagraph (B).
``(B) Reduction.--For purposes of subparagraph (A)--
``(i) foreign-derived intangible income shall be
reduced by an amount which bears the same ratio to the
excess described in subparagraph (A) as such foreign-
derived intangible income bears to the sum described in
subparagraph (A)(i), and
``(ii) the global intangible low-taxed income amount
shall be reduced by the remainder of such excess.
``(3) Reduction in deduction for taxable years after 2025.--In
the case of any taxable year beginning after December 31, 2025,
paragraph (1) shall be applied by substituting--
``(A) `21.875 percent' for `37.5 percent' in subparagraph
(A), and
``(B) `37.5 percent' for `50 percent' in subparagraph (B).
``(b) Foreign-derived Intangible Income.--For purposes of this
section--
``(1) In general.--The foreign-derived intangible income of any
domestic corporation is the amount which bears the same ratio to
the deemed intangible income of such corporation as--
``(A) the foreign-derived deduction eligible income of such
corporation, bears to
``(B) the deduction eligible income of such corporation.
``(2) Deemed intangible income.--For purposes of this
subsection--
``(A) In general.--The term `deemed intangible income'
means the excess (if any) of--
``(i) the deduction eligible income of the domestic
corporation, over
``(ii) the deemed tangible income return of the
corporation.
``(B) Deemed tangible income return.--The term `deemed
tangible income return' means, with respect to any corporation,
an amount equal to 10 percent of the corporation's qualified
business asset investment (as defined in section 951A(d),
determined by substituting `deduction eligible income' for
`tested income' in paragraph (2) thereof and without regard to
whether the corporation is a controlled foreign corporation).
``(3) Deduction eligible income.--
``(A) In general.--The term `deduction eligible income'
means, with respect to any domestic corporation, the excess (if
any) of--
``(i) gross income of such corporation determined
without regard to--
``(I) any amount included in the gross income of
such corporation under section 951(a)(1),
``(II) the global intangible low-taxed income
included in the gross income of such corporation under
section 951A,
``(III) any financial services income (as defined
in section 904(d)(2)(D)) of such corporation,
``(IV) any dividend received from a corporation
which is a controlled foreign corporation of such
domestic corporation,
``(V) any domestic oil and gas extraction income of
such corporation, and
``(VI) any foreign branch income (as defined in
section 904(d)(2)(J)), over
``(ii) the deductions (including taxes) properly
allocable to such gross income.
``(B) Domestic oil and gas extraction income.--For purposes
of subparagraph (A), the term `domestic oil and gas extraction
income' means income described in section 907(c)(1), determined
by substituting `within the United States' for `without the
United States'.
``(4) Foreign-derived deduction eligible income.--The term
`foreign-derived deduction eligible income' means, with respect to
any taxpayer for any taxable year, any deduction eligible income of
such taxpayer which is derived in connection with--
``(A) property--
``(i) which is sold by the taxpayer to any person who
is not a United States person, and
``(ii) which the taxpayer establishes to the
satisfaction of the Secretary is for a foreign use, or
``(B) services provided by the taxpayer which the taxpayer
establishes to the satisfaction of the Secretary are provided
to any person, or with respect to property, not located within
the United States.
``(5) Rules relating to foreign use property or services.--For
purposes of this subsection--
``(A) Foreign use.--The term `foreign use' means any use,
consumption, or disposition which is not within the United
States.
``(B) Property or services provided to domestic
intermediaries.--
``(i) Property.--If a taxpayer sells property to
another person (other than a related party) for further
manufacture or other modification within the United States,
such property shall not be treated as sold for a foreign
use even if such other person subsequently uses such
property for a foreign use.
``(ii) Services.--If a taxpayer provides services to
another person (other than a related party) located within
the United States, such services shall not be treated as
described in paragraph (4)(B) even if such other person
uses such services in providing services which are so
described.
``(C) Special rules with respect to related party
transactions.--
``(i) Sales to related parties.--If property is sold to
a related party who is not a United States person, such
sale shall not be treated as for a foreign use unless--
``(I) such property is ultimately sold by a related
party, or used by a related party in connection with
property which is sold or the provision of services, to
another person who is an unrelated party who is not a
United States person, and
``(II) the taxpayer establishes to the satisfaction
of the Secretary that such property is for a foreign
use.
For purposes of this clause, a sale of property shall be
treated as a sale of each of the components thereof.
``(ii) Service provided to related parties.--If a
service is provided to a related party who is not located
in the United States, such service shall not be treated
described in subparagraph (A)(ii) unless the taxpayer
established to the satisfaction of the Secretary that such
service is not substantially similar to services provided
by such related party to persons located within the United
States.
``(D) Related party.--For purposes of this paragraph, the
term `related party' means any member of an affiliated group as
defined in section 1504(a), determined--
``(i) by substituting `more than 50 percent' for `at
least 80 percent' each place it appears, and
``(ii) without regard to paragraphs (2) and (3) of
section 1504(b).
Any person (other than a corporation) shall be treated as a
member of such group if such person is controlled by members of
such group (including any entity treated as a member of such
group by reason of this sentence) or controls any such member.
For purposes of the preceding sentence, control shall be
determined under the rules of section 954(d)(3).
``(E) Sold.--For purposes of this subsection, the terms
`sold', `sells', and `sale' shall include any lease, license,
exchange, or other disposition.
``(c) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary or appropriate to carry out the
provisions of this section.''.
(b) Conforming Amendments.--
(1) Section 172(d), as amended by this Act, is amended by
adding at the end the following new paragraph:
``(9) Deduction for foreign-derived intangible income.--The
deduction under section 250 shall not be allowed.''.
(2) Section 246(b)(1) is amended--
(A) by striking ``and subsection (a) and (b) of section
245'' the first place it appears and inserting ``, subsection
(a) and (b) of section 245, and section 250'',
(B) by striking ``and subsection (a) and (b) of section
245'' the second place it appears and inserting ``subsection
(a) and (b) of section 245, and 250''.
(3) Section 469(i)(3)(F)(iii) is amended by striking ``and
222'' and inserting ``222, and 250''.
(4) The table of sections for part VIII of subchapter B of
chapter 1 is amended by adding at the end the following new item:
``Sec. 250. Foreign-derived intangible income and global intangible low-
taxed income.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
CHAPTER 2--OTHER MODIFICATIONS OF SUBPART F PROVISIONS
SEC. 14211. ELIMINATION OF INCLUSION OF FOREIGN BASE COMPANY OIL
RELATED INCOME.
(a) Repeal.--Subsection (a) of section 954 is amended--
(1) by inserting ``and'' at the end of paragraph (2),
(2) by striking the comma at the end of paragraph (3) and
inserting a period, and
(3) by striking paragraph (5).
(b) Conforming Amendments.--
(1) Section 952(c)(1)(B)(iii) is amended by striking subclause
(I) and redesignating subclauses (II) through (V) as subclauses (I)
through (IV), respectively.
(2) Section 954(b) is amended--
(A) by striking the second sentence of paragraph (4),
(B) by striking ``the foreign base company services income,
and the foreign base company oil related income'' in paragraph
(5) and inserting ``and the foreign base company services
income'', and
(C) by striking paragraph (6).
(3) Section 954 is amended by striking subsection (g).
(c) Effective Date.--The amendments made by this section shall
apply to taxable years of foreign corporations beginning after December
31, 2017, and to taxable years of United States shareholders with or
within which such taxable years of foreign corporations end.
SEC. 14212. REPEAL OF INCLUSION BASED ON WITHDRAWAL OF PREVIOUSLY
EXCLUDED SUBPART F INCOME FROM QUALIFIED INVESTMENT.
(a) In General.--Subpart F of part III of subchapter N of chapter 1
is amended by striking section 955.
(b) Conforming Amendments.--
(1)(A) Section 951(a)(1)(A) is amended to read as follows:
``(A) his pro rata share (determined under paragraph (2))
of the corporation's subpart F income for such year, and''.
(B) Section 851(b) is amended by striking ``section
951(a)(1)(A)(i)'' in the flush language at the end and inserting
``section 951(a)(1)(A)''.
(C) Section 952(c)(1)(B)(i) is amended by striking ``section
951(a)(1)(A)(i)'' and inserting ``section 951(a)(1)(A)''.
(D) Section 953(c)(1)(C) is amended by striking ``section
951(a)(1)(A)(i)'' and inserting ``section 951(a)(1)(A)''.
(2) Section 951(a) is amended by striking paragraph (3).
(3) Section 953(d)(4)(B)(iv)(II) is amended by striking ``or
amounts referred to in clause (ii) or (iii) of section
951(a)(1)(A)''.
(4) Section 964(b) is amended by striking ``, 955,''.
(5) Section 970 is amended by striking subsection (b).
(6) The table of sections for subpart F of part III of
subchapter N of chapter 1 is amended by striking the item relating
to section 955.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years of foreign corporations beginning after December
31, 2017, and to taxable years of United States shareholders in which
or with which such taxable years of foreign corporations end.
SEC. 14213. MODIFICATION OF STOCK ATTRIBUTION RULES FOR DETERMINING
STATUS AS A CONTROLLED FOREIGN CORPORATION.
(a) In General.--Section 958(b) is amended--
(1) by striking paragraph (4), and
(2) by striking ``Paragraphs (1) and (4)'' in the last sentence
and inserting ``Paragraph (1)''.
(b) Effective Date.--The amendments made by this section shall
apply to--
(1) the last taxable year of foreign corporations beginning
before January 1, 2018, and each subsequent taxable year of such
foreign corporations, and
(2) taxable years of United States shareholders in which or
with which such taxable years of foreign corporations end.
SEC. 14214. MODIFICATION OF DEFINITION OF UNITED STATES SHAREHOLDER.
(a) In General.--Section 951(b) is amended by inserting ``, or 10
percent or more of the total value of shares of all classes of stock of
such foreign corporation'' after ``such foreign corporation''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years of foreign corporations beginning after December 31,
2017, and to taxable years of United States shareholders with or within
which such taxable years of foreign corporations end.
SEC. 14215. ELIMINATION OF REQUIREMENT THAT CORPORATION MUST BE
CONTROLLED FOR 30 DAYS BEFORE SUBPART F INCLUSIONS APPLY.
(a) In General.--Section 951(a)(1) is amended by striking ``for an
uninterrupted period of 30 days or more'' and inserting ``at any
time''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years of foreign corporations beginning after December 31,
2017, and to taxable years of United States shareholders with or within
which such taxable years of foreign corporations end.
CHAPTER 3--PREVENTION OF BASE EROSION
SEC. 14221. LIMITATIONS ON INCOME SHIFTING THROUGH INTANGIBLE PROPERTY
TRANSFERS.
(a) Definition of Intangible Asset.--Section 936(h)(3)(B) is
amended--
(1) by striking ``or'' at the end of clause (v),
(2) by striking clause (vi) and inserting the following:
``(vi) any goodwill, going concern value, or workforce
in place (including its composition and terms and
conditions (contractual or otherwise) of its employment);
or
``(vii) any other item the value or potential value of
which is not attributable to tangible property or the
services of any individual.'', and
(3) by striking the flush language after clause (vii), as added
by paragraph (2).
(b) Clarification of Allowable Valuation Methods.--
(1) Foreign corporations.--Section 367(d)(2) is amended by
adding at the end the following new subparagraph:
``(D) Regulatory authority.--For purposes of the last
sentence of subparagraph (A), the Secretary shall require--
``(i) the valuation of transfers of intangible
property, including intangible property transferred with
other property or services, on an aggregate basis, or
``(ii) the valuation of such a transfer on the basis of
the realistic alternatives to such a transfer,
if the Secretary determines that such basis is the most
reliable means of valuation of such transfers.''.
(2) Allocation among taxpayers.--Section 482 is amended by
adding at the end the following: ``For purposes of this section,
the Secretary shall require the valuation of transfers of
intangible property (including intangible property transferred with
other property or services) on an aggregate basis or the valuation
of such a transfer on the basis of the realistic alternatives to
such a transfer, if the Secretary determines that such basis is the
most reliable means of valuation of such transfers.''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to transfers in taxable years beginning after December 31,
2017.
(2) No inference.--Nothing in the amendment made by subsection
(a) shall be construed to create any inference with respect to the
application of section 936(h)(3) of the Internal Revenue Code of
1986, or the authority of the Secretary of the Treasury to provide
regulations for such application, with respect to taxable years
beginning before January 1, 2018.
SEC. 14222. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED IN HYBRID
TRANSACTIONS OR WITH HYBRID ENTITIES.
(a) In General.--Part IX of subchapter B of chapter 1 is amended by
inserting after section 267 the following:
``SEC. 267A. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED IN HYBRID
TRANSACTIONS OR WITH HYBRID ENTITIES.
``(a) In General.--No deduction shall be allowed under this chapter
for any disqualified related party amount paid or accrued pursuant to a
hybrid transaction or by, or to, a hybrid entity.
``(b) Disqualified Related Party Amount.--For purposes of this
section--
``(1) Disqualified related party amount.--The term
`disqualified related party amount' means any interest or royalty
paid or accrued to a related party to the extent that--
``(A) such amount is not included in the income of such
related party under the tax law of the country of which such
related party is a resident for tax purposes or is subject to
tax, or
``(B) such related party is allowed a deduction with
respect to such amount under the tax law of such country.
Such term shall not include any payment to the extent such payment
is included in the gross income of a United States shareholder
under section 951(a).
``(2) Related party.--The term `related party' means a related
person as defined in section 954(d)(3), except that such section
shall be applied with respect to the person making the payment
described in paragraph (1) in lieu of the controlled foreign
corporation otherwise referred to in such section.
``(c) Hybrid Transaction.--For purposes of this section, the term
`hybrid transaction' means any transaction, series of transactions,
agreement, or instrument one or more payments with respect to which are
treated as interest or royalties for purposes of this chapter and which
are not so treated for purposes the tax law of the foreign country of
which the recipient of such payment is resident for tax purposes or is
subject to tax.
``(d) Hybrid Entity.--For purposes of this section, the term
`hybrid entity' means any entity which is either--
``(1) treated as fiscally transparent for purposes of this
chapter but not so treated for purposes of the tax law of the
foreign country of which the entity is resident for tax purposes or
is subject to tax, or
``(2) treated as fiscally transparent for purposes of such tax
law but not so treated for purposes of this chapter.
``(e) Regulations.--The Secretary shall issue such regulations or
other guidance as may be necessary or appropriate to carry out the
purposes of this section, including regulations or other guidance
providing for--
``(1) rules for treating certain conduit arrangements which
involve a hybrid transaction or a hybrid entity as subject to
subsection (a),
``(2) rules for the application of this section to branches or
domestic entities,
``(3) rules for treating certain structured transactions as
subject to subsection (a),
``(4) rules for treating a tax preference as an exclusion from
income for purposes of applying subsection (b)(1) if such tax
preference has the effect of reducing the generally applicable
statutory rate by 25 percent or more,
``(5) rules for treating the entire amount of interest or
royalty paid or accrued to a related party as a disqualified
related party amount if such amount is subject to a participation
exemption system or other system which provides for the exclusion
or deduction of a substantial portion of such amount,
``(6) rules for determining the tax residence of a foreign
entity if the entity is otherwise considered a resident of more
than one country or of no country,
``(7) exceptions from subsection (a) with respect to--
``(A) cases in which the disqualified related party amount
is taxed under the laws of a foreign country other than the
country of which the related party is a resident for tax
purposes, and
``(B) other cases which the Secretary determines do not
present a risk of eroding the Federal tax base,
``(8) requirements for record keeping and information reporting
in addition to any requirements imposed by section 6038A.''.
(b) Conforming Amendment.--The table of sections for part IX of
subchapter B of chapter 1 is amended by inserting after the item
relating to section 267 the following new item:
``Sec. 267A. Certain related party amounts paid or accrued in hybrid
transactions or with hybrid entities.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 14223. SHAREHOLDERS OF SURROGATE FOREIGN CORPORATIONS NOT ELIGIBLE
FOR REDUCED RATE ON DIVIDENDS.
(a) In General.--Section 1(h)(11)(C)(iii) is amended--
(1) by striking ``shall not include any foreign corporation''
and inserting ``shall not include--
``(I) any foreign corporation'',
(2) by striking the period at the end and inserting ``, and'',
and
(3) by adding at the end the following new subclause:
``(II) any corporation which first becomes a
surrogate foreign corporation (as defined in section
7874(a)(2)(B)) after the date of the enactment of this
subclause, other than a foreign corporation which is
treated as a domestic corporation under section
7874(b).''.
(b) Effective Date.--The amendments made by this section shall
apply to dividends received after the date of the enactment of this
Act.
Subpart C--Modifications Related to Foreign Tax Credit System
SEC. 14301. REPEAL OF SECTION 902 INDIRECT FOREIGN TAX CREDITS;
DETERMINATION OF SECTION 960 CREDIT ON CURRENT YEAR BASIS.
(a) Repeal of Section 902 Indirect Foreign Tax Credits.--Subpart A
of part III of subchapter N of chapter 1 is amended by striking section
902.
(b) Determination of Section 960 Credit on Current Year Basis.--
Section 960, as amended by section 14201, is amended--
(1) by striking subsection (c), by redesignating subsection (b)
as subsection (c), by striking all that precedes subsection (c) (as
so redesignated) and inserting the following:
``SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLUSIONS.
``(a) In General.--For purposes of subpart A of this part, if there
is included in the gross income of a domestic corporation any item of
income under section 951(a)(1) with respect to any controlled foreign
corporation with respect to which such domestic corporation is a United
States shareholder, such domestic corporation shall be deemed to have
paid so much of such foreign corporation's foreign income taxes as are
properly attributable to such item of income.
``(b) Special Rules for Distributions From Previously Taxed
Earnings and Profits.--For purposes of subpart A of this part--
``(1) In general.--If any portion of a distribution from a
controlled foreign corporation to a domestic corporation which is a
United States shareholder with respect to such controlled foreign
corporation is excluded from gross income under section 959(a),
such domestic corporation shall be deemed to have paid so much of
such foreign corporation's foreign income taxes as--
``(A) are properly attributable to such portion, and
``(B) have not been deemed to have to been paid by such
domestic corporation under this section for the taxable year or
any prior taxable year.
``(2) Tiered controlled foreign corporations.--If section
959(b) applies to any portion of a distribution from a controlled
foreign corporation to another controlled foreign corporation, such
controlled foreign corporation shall be deemed to have paid so much
of such other controlled foreign corporation's foreign income taxes
as--
``(A) are properly attributable to such portion, and
``(B) have not been deemed to have been paid by a domestic
corporation under this section for the taxable year or any
prior taxable year.'',
(2) and by adding after subsection (d) (as added by section
14201) the following new subsections:
``(e) Foreign Income Taxes.--The term `foreign income taxes' means
any income, war profits, or excess profits taxes paid or accrued to any
foreign country or possession of the United States.
``(f) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary or appropriate to carry out the
provisions of this section.''.
(c) Conforming Amendments.--
(1) Section 78 is amended to read as follows:
``SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX CREDIT.
``If a domestic corporation chooses to have the benefits of subpart
A of part III of subchapter N (relating to foreign tax credit) for any
taxable year, an amount equal to the taxes deemed to be paid by such
corporation under subsections (a), (b), and (d) of section 960
(determined without regard to the phrase `80 percent of' in subsection
(d)(1) thereof) for such taxable year shall be treated for purposes of
this title (other than sections 245 and 245A) as a dividend received by
such domestic corporation from the foreign corporation.''.
(2) Paragraph (4) of section 245(a) is amended to read as
follows:
``(4) Post-1986 undistributed earnings.--The term `post-1986
undistributed earnings' means the amount of the earnings and
profits of the foreign corporation (computed in accordance with
sections 964(a) and 986) accumulated in taxable years beginning
after December 31, 1986--
``(A) as of the close of the taxable year of the foreign
corporation in which the dividend is distributed, and
``(B) without diminution by reason of dividends distributed
during such taxable year.''.
(3) Section 245(a)(10)(C) is amended by striking ``902, 907,
and 960'' and inserting ``907 and 960''.
(4) Sections 535(b)(1) and 545(b)(1) are each amended by
striking ``section 902(a) or 960(a)(1)'' and inserting ``section
960''.
(5) Section 814(f)(1) is amended--
(A) by striking subparagraph (B), and
(B) by striking all that precedes ``No income'' and
inserting the following:
``(1) Treatment of foreign taxes.--''.
(6) Section 865(h)(1)(B) is amended by striking ``902, 907,''
and inserting ``907''.
(7) Section 901(a) is amended by striking ``sections 902 and
960'' and inserting ``section 960''.
(8) Section 901(e)(2) is amended by striking ``but is not
limited to--'' and all that follows through ``that portion'' and
inserting ``but is not limited to that portion''.
(9) Section 901(f) is amended by striking ``sections 902 and
960'' and inserting ``section 960''.
(10) Section 901(j)(1)(A) is amended by striking ``902 or''.
(11) Section 901(j)(1)(B) is amended by striking ``sections 902
and 960'' and inserting ``section 960''.
(12) Section 901(k)(2) is amended by striking ``, 902,''.
(13) Section 901(k)(6) is amended by striking ``902 or''.
(14) Section 901(m)(1)(B) is amended to read as follows:
``(B) in the case of a foreign income tax paid by a foreign
corporation, shall not be taken into account for purposes of
section 960.''.
(15) Section 904(d)(2)(E) is amended--
(A) by amending clause (i) to read as follows:
``(i) Noncontrolled 10-percent owned foreign
corporation.--The term `noncontrolled 10-percent owned
foreign corporation' means any foreign corporation which
is--
``(I) a specified 10-percent owned foreign
corporation (as defined in section 245A(b)), or
``(II) a passive foreign investment company (as
defined in section 1297(a)) with respect to which the
taxpayer meets the stock ownership requirements of
section 902(a) (or, for purposes of applying paragraphs
(3) and (4), the requirements of section 902(b)).
A controlled foreign corporation shall not be treated as a
noncontrolled 10-percent owned foreign corporation with
respect to any distribution out of its earnings and profits
for periods during which it was a controlled foreign
corporation. Any reference to section 902 in this clause
shall be treated as a reference to such section as in
effect before its repeal.'', and
(B) by striking ``non-controlled section 902 corporation''
in clause (ii) and inserting ``noncontrolled 10-percent owned
foreign corporation''.
(16) Section 904(d)(4) is amended--
(A) by striking ``noncontrolled section 902 corporation''
each place it appears and inserting ``noncontrolled 10-percent
owned foreign corporation'',
(B) by striking ``noncontrolled section 902 corporations''
in the heading thereof and inserting ``noncontrolled 10-percent
owned foreign corporations''.
(17) Section 904(d)(6)(A) is amended by striking ``902, 907,''
and inserting ``907''.
(18) Section 904(h)(10)(A) is amended by striking ``sections
902, 907, and 960'' and inserting ``sections 907 and 960''.
(19) Section 904(k) is amended to read as follows:
``(k) Cross References.--For increase of limitation under
subsection (a) for taxes paid with respect to amounts received which
were included in the gross income of the taxpayer for a prior taxable
year as a United States shareholder with respect to a controlled
foreign corporation, see section 960(c).''.
(20) Section 905(c)(1) is amended by striking the last
sentence.
(21) Section 905(c)(2)(B)(i) is amended to read as follows:
``(i) shall be taken into account for the taxable year
to which such taxes relate, and''.
(22) Section 906(a) is amended by striking ``(or deemed, under
section 902, paid or accrued during the taxable year)''.
(23) Section 906(b) is amended by striking paragraphs (4) and
(5).
(24) Section 907(b)(2)(B) is amended by striking ``902 or''.
(25) Section 907(c)(3)(A) is amended--
(A) by striking subparagraph (A) and inserting the
following:
``(A) interest, to the extent the category of income of
such interest is determined under section 904(d)(3),'', and
(B) by striking ``section 960(a)'' in subparagraph (B) and
inserting ``section 960''.
(26) Section 907(c)(5) is amended by striking ``902 or''.
(27) Section 907(f)(2)(B)(i) is amended by striking ``902 or''.
(28) Section 908(a) is amended by striking ``902 or''.
(29) Section 909(b) is amended--
(A) by striking ``section 902 corporation'' in the matter
preceding paragraph (1) and inserting ``specified 10-percent
owned foreign corporation (as defined in section 245A(b)
without regard to paragraph (2) thereof)'',
(B) by striking ``902 or'' in paragraph (1),
(C) by striking ``by such section 902 corporation'' and all
that follows in the matter following paragraph (2) and
inserting ``by such specified 10-percent owned foreign
corporation or a domestic corporation which is a United States
shareholder with respect to such specified 10-percent owned
foreign corporation.'', and
(D) by striking ``Section 902 Corporations'' in the heading
thereof and inserting ``Specified 10-percent Owned Foreign
Corporations''.
(30) Section 909(d) is amended by striking paragraph (5).
(31) Section 958(a)(1) is amended by striking ``960(a)(1)'' and
inserting ``960''.
(32) Section 959(d) is amended by striking ``Except as provided
in section 960(a)(3), any'' and inserting ``Any''.
(33) Section 959(e) is amended by striking ``section 960(b)''
and inserting ``section 960(c)''.
(34) Section 1291(g)(2)(A) is amended by striking ``any
distribution--'' and all that follows through ``but only if'' and
inserting ``any distribution, any withholding tax imposed with
respect to such distribution, but only if''.
(35) Section 1293(f) is amended by striking ``and'' at the end
of paragraph (1), by striking the period at the end of paragraph
(2) and inserting ``, and'', and by adding at the end the following
new paragraph:
``(3) a domestic corporation which owns (or is treated under
section 1298(a) as owning) stock of a qualified electing fund shall
be treated in the same manner as a United States shareholder of a
controlled foreign corporation (and such qualified electing fund
shall be treated in the same manner as such controlled foreign
corporation) if such domestic corporation meets the stock ownership
requirements of subsection (a) or (b) of section 902 (as in effect
before its repeal) with respect to such qualified electing fund.''.
(36) Section 6038(c)(1)(B) is amended by striking ``sections
902 (relating to foreign tax credit for corporate stockholder in
foreign corporation) and 960 (relating to special rules for foreign
tax credit)'' and inserting ``section 960''.
(37) Section 6038(c)(4) is amended by striking subparagraph
(C).
(38) The table of sections for subpart A of part III of
subchapter N of chapter 1 is amended by striking the item relating
to section 902.
(39) The table of sections for subpart F of part III of
subchapter N of chapter 1 is amended by striking the item relating
to section 960 and inserting the following:
``Sec. 960. Deemed paid credit for subpart F inclusions.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years of foreign corporations beginning after December
31, 2017, and to taxable years of United States shareholders in which
or with which such taxable years of foreign corporations end.
SEC. 14302. SEPARATE FOREIGN TAX CREDIT LIMITATION BASKET FOR FOREIGN
BRANCH INCOME.
(a) In General.--Section 904(d)(1), as amended by section 14201, is
amended by redesignating subparagraphs (B) and (C) as subparagraphs (C)
and (D), respectively, and by inserting after subparagraph (A) the
following new subparagraph:
``(B) foreign branch income,''.
(b) Foreign Branch Income.--
(1) In general.--Section 904(d)(2) is amended by inserting
after subparagraph (I) the following new subparagraph:
``(J) Foreign branch income.--
``(i) In general.--The term `foreign branch income'
means the business profits of such United States person
which are attributable to 1 or more qualified business
units (as defined in section 989(a)) in 1 or more foreign
countries. For purposes of the preceding sentence, the
amount of business profits attributable to a qualified
business unit shall be determined under rules established
by the Secretary.
``(ii) Exception.--Such term shall not include any
income which is passive category income.''.
(2) Conforming amendment.--Section 904(d)(2)(A)(ii), as amended
by section 14201, is amended by striking ``income described in
paragraph (1)(A) and'' and inserting ``income described in
paragraph (1)(A), foreign branch income, and''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 14303. SOURCE OF INCOME FROM SALES OF INVENTORY DETERMINED SOLELY
ON BASIS OF PRODUCTION ACTIVITIES.
(a) In General.--Section 863(b) is amended by adding at the end the
following: ``Gains, profits, and income from the sale or exchange of
inventory property described in paragraph (2) shall be allocated and
apportioned between sources within and without the United States solely
on the basis of the production activities with respect to the
property.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2017.
SEC. 14304. ELECTION TO INCREASE PERCENTAGE OF DOMESTIC TAXABLE INCOME
OFFSET BY OVERALL DOMESTIC LOSS TREATED AS FOREIGN SOURCE.
(a) In General.--Section 904(g) is amended by adding at the end the
following new paragraph:
``(5) Election to increase percentage of taxable income treated
as foreign source.--
``(A) In general.--If any pre-2018 unused overall domestic
loss is taken into account under paragraph (1) for any
applicable taxable year, the taxpayer may elect to have such
paragraph applied to such loss by substituting a percentage
greater than 50 percent (but not greater than 100 percent) for
50 percent in subparagraph (B) thereof.
``(B) Pre-2018 unused overall domestic loss.--For purposes
of this paragraph, the term `pre-2018 unused overall domestic
loss' means any overall domestic loss which--
``(i) arises in a qualified taxable year beginning
before January 1, 2018, and
``(ii) has not been used under paragraph (1) for any
taxable year beginning before such date.
``(C) Applicable taxable year.--For purposes of this
paragraph, the term `applicable taxable year' means any taxable
year of the taxpayer beginning after December 31, 2017, and
before January 1, 2028.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2017.
PART II--INBOUND TRANSACTIONS
SEC. 14401. BASE EROSION AND ANTI-ABUSE TAX.
(a) Imposition of Tax.--Subchapter A of chapter 1 is amended by
adding at the end the following new part:
``PART VII--BASE EROSION AND ANTI-ABUSE TAX
``Sec. 59A. Tax on base erosion payments of taxpayers with substantial
gross receipts.
``SEC. 59A. TAX ON BASE EROSION PAYMENTS OF TAXPAYERS WITH
SUBSTANTIAL GROSS RECEIPTS.
``(a) Imposition of Tax.--There is hereby imposed on each
applicable taxpayer for any taxable year a tax equal to the base
erosion minimum tax amount for the taxable year. Such tax shall be in
addition to any other tax imposed by this subtitle.
``(b) Base Erosion Minimum Tax Amount.--For purposes of this
section--
``(1) In general.--Except as provided in paragraphs (2) and
(3), the term `base erosion minimum tax amount' means, with respect
to any applicable taxpayer for any taxable year, the excess (if
any) of--
``(A) an amount equal to 10 percent (5 percent in the case
of taxable years beginning in calendar year 2018) of the
modified taxable income of such taxpayer for the taxable year,
over
``(B) an amount equal to the regular tax liability (as
defined in section 26(b)) of the taxpayer for the taxable year,
reduced (but not below zero) by the excess (if any) of--
``(i) the credits allowed under this chapter against
such regular tax liability, over
``(ii) the sum of--
``(I) the credit allowed under section 38 for the
taxable year which is properly allocable to the
research credit determined under section 41(a), plus
``(II) the portion of the applicable section 38
credits not in excess of 80 percent of the lesser of
the amount of such credits or the base erosion minimum
tax amount (determined without regard to this
subclause).
``(2) Modifications for taxable years beginning after 2025.--In
the case of any taxable year beginning after December 31, 2025,
paragraph (1) shall be applied--
``(A) by substituting `12.5 percent' for `10 percent' in
subparagraph (A) thereof, and
``(B) by reducing (but not below zero) the regular tax
liability (as defined in section 26(b)) for purposes of
subparagraph (B) thereof by the aggregate amount of the credits
allowed under this chapter against such regular tax liability
rather than the excess described in such subparagraph.
``(3) Increased rate for certain banks and securities
dealers.--
``(A) In general.--In the case of a taxpayer described in
subparagraph (B) who is an applicable taxpayer for any taxable
year, the percentage otherwise in effect under paragraphs
(1)(A) and (2)(A) shall each be increased by one percentage
point.
``(B) Taxpayer described.--A taxpayer is described in this
subparagraph if such taxpayer is a member of an affiliated
group (as defined in section 1504(a)(1)) which includes--
``(i) a bank (as defined in section 581), or
``(ii) a registered securities dealer under section
15(a) of the Securities Exchange Act of 1934.
``(4) Applicable section 38 credits.--For purposes of paragraph
(1)(B)(ii)(II), the term `applicable section 38 credits' means the
credit allowed under section 38 for the taxable year which is
properly allocable to--
``(A) the low-income housing credit determined under
section 42(a),
``(B) the renewable electricity production credit
determined under section 45(a), and
``(C) the investment credit determined under section 46,
but only to the extent properly allocable to the energy credit
determined under section 48.
``(c) Modified Taxable Income.--For purposes of this section--
``(1) In general.--The term `modified taxable income' means the
taxable income of the taxpayer computed under this chapter for the
taxable year, determined without regard to--
``(A) any base erosion tax benefit with respect to any base
erosion payment, or
``(B) the base erosion percentage of any net operating loss
deduction allowed under section 172 for the taxable year.
``(2) Base erosion tax benefit.--
``(A) In general.--The term `base erosion tax benefit'
means--
``(i) any deduction described in subsection (d)(1)
which is allowed under this chapter for the taxable year
with respect to any base erosion payment,
``(ii) in the case of a base erosion payment described
in subsection (d)(2), any deduction allowed under this
chapter for the taxable year for depreciation (or
amortization in lieu of depreciation) with respect to the
property acquired with such payment,
``(iii) in the case of a base erosion payment described
in subsection (d)(3)--
``(I) any reduction under section 803(a)(1)(B) in
the gross amount of premiums and other consideration on
insurance and annuity contracts for premiums and other
consideration arising out of indemnity insurance, and
``(II) any deduction under section 832(b)(4)(A)
from the amount of gross premiums written on insurance
contracts during the taxable year for premiums paid for
reinsurance, and
``(iv) in the case of a base erosion payment described
in subsection (d)(4), any reduction in gross receipts with
respect to such payment in computing gross income of the
taxpayer for the taxable year for purposes of this chapter.
``(B) Tax benefits disregarded if tax withheld on base
erosion payment.--
``(i) In general.--Except as provided in clause (ii),
any base erosion tax benefit attributable to any base
erosion payment--
``(I) on which tax is imposed by section 871 or
881, and
``(II) with respect to which tax has been deducted
and withheld under section 1441 or 1442,
shall not be taken into account in computing modified
taxable income under paragraph (1)(A) or the base erosion
percentage under paragraph (4).
``(ii) Exception.--The amount not taken into account in
computing modified taxable income by reason of clause (i)
shall be reduced under rules similar to the rules under
section 163(j)(5)(B) (as in effect before the date of the
enactment of the Tax Cuts and Jobs Act).
``(3) Special rules for determining interest for which
deduction allowed.--For purposes of applying paragraph (1), in the
case of a taxpayer to which section 163(j) applies for the taxable
year, the reduction in the amount of interest for which a deduction
is allowed by reason of such subsection shall be treated as
allocable first to interest paid or accrued to persons who are not
related parties with respect to the taxpayer and then to such
related parties.
``(4) Base erosion percentage.--For purposes of paragraph
(1)(B)--
``(A) In general.--The term `base erosion percentage'
means, for any taxable year, the percentage determined by
dividing--
``(i) the aggregate amount of base erosion tax benefits
of the taxpayer for the taxable year, by
``(ii) the sum of--
``(I) the aggregate amount of the deductions
(including deductions described in clauses (i) and (ii)
of paragraph (2)(A)) allowable to the taxpayer under
this chapter for the taxable year, plus
``(II) the base erosion tax benefits described in
clauses (iii) and (iv) of paragraph (2)(A) allowable to
the taxpayer for the taxable year.
``(B) Certain items not taken into account.--The amount
under subparagraph (A)(ii) shall be determined by not taking
into account--
``(i) any deduction allowed under section 172, 245A, or
250 for the taxable year,
``(ii) any deduction for amounts paid or accrued for
services to which the exception under subsection (d)(5)
applies, and
``(iii) any deduction for qualified derivative payments
which are not treated as a base erosion payment by reason
of subsection (h).
``(d) Base Erosion Payment.--For purposes of this section--
``(1) In general.--The term `base erosion payment' means any
amount paid or accrued by the taxpayer to a foreign person which is
a related party of the taxpayer and with respect to which a
deduction is allowable under this chapter.
``(2) Purchase of depreciable property.--Such term shall also
include any amount paid or accrued by the taxpayer to a foreign
person which is a related party of the taxpayer in connection with
the acquisition by the taxpayer from such person of property of a
character subject to the allowance for depreciation (or
amortization in lieu of depreciation).
``(3) Reinsurance payments.--Such term shall also include any
premium or other consideration paid or accrued by the taxpayer to a
foreign person which is a related party of the taxpayer for any
reinsurance payments which are taken into account under sections
803(a)(1)(B) or 832(b)(4)(A).
``(4) Certain payments to expatriated entities.--
``(A) In general.--Such term shall also include any amount
paid or accrued by the taxpayer with respect to a person
described in subparagraph (B) which results in a reduction of
the gross receipts of the taxpayer.
``(B) Person described.--A person is described in this
subparagraph if such person is a--
``(i) surrogate foreign corporation which is a related
party of the taxpayer, but only if such person first became
a surrogate foreign corporation after November 9, 2017, or
``(ii) foreign person which is a member of the same
expanded affiliated group as the surrogate foreign
corporation.
``(C) Definitions.--For purposes of this paragraph--
``(i) Surrogate foreign corporation.--The term
`surrogate foreign corporation' has the meaning given such
term by section 7874(a)(2)(B) but does not include a
foreign corporation treated as a domestic corporation under
section 7874(b).
``(ii) Expanded affiliated group.--The term `expanded
affiliated group' has the meaning given such term by
section 7874(c)(1).
``(5) Exception for certain amounts with respect to services.--
Paragraph (1) shall not apply to any amount paid or accrued by a
taxpayer for services if--
``(A) such services are services which meet the
requirements for eligibility for use of the services cost
method under section 482 (determined without regard to the
requirement that the services not contribute significantly to
fundamental risks of business success or failure), and
``(B) such amount constitutes the total services cost with
no markup component.
``(e) Applicable Taxpayer.--For purposes of this section--
``(1) In general.--The term `applicable taxpayer' means, with
respect to any taxable year, a taxpayer--
``(A) which is a corporation other than a regulated
investment company, a real estate investment trust, or an S
corporation,
``(B) the average annual gross receipts of which for the 3-
taxable-year period ending with the preceding taxable year are
at least $500,000,000, and
``(C) the base erosion percentage (as determined under
subsection (c)(4)) of which for the taxable year is 3 percent
(2 percent in the case of a taxpayer described in subsection
(b)(3)(B)) or higher.
``(2) Gross receipts.--
``(A) Special rule for foreign persons.--In the case of a
foreign person the gross receipts of which are taken into
account for purposes of paragraph (1)(B), only gross receipts
which are taken into account in determining income which is
effectively connected with the conduct of a trade or business
within the United States shall be taken into account. In the
case of a taxpayer which is a foreign person, the preceding
sentence shall not apply to the gross receipts of any United
States person which are aggregated with the taxpayer's gross
receipts by reason of paragraph (3).
``(B) Other rules made applicable.--Rules similar to the
rules of subparagraphs (B), (C), and (D) of section 448(c)(3)
shall apply in determining gross receipts for purposes of this
section.
``(3) Aggregation rules.--All persons treated as a single
employer under subsection (a) of section 52 shall be treated as 1
person for purposes of this subsection and subsection (c)(4),
except that in applying section 1563 for purposes of section 52,
the exception for foreign corporations under section 1563(b)(2)(C)
shall be disregarded.
``(f) Foreign Person.--For purposes of this section, the term
`foreign person' has the meaning given such term by section
6038A(c)(3).
``(g) Related Party.--For purposes of this section--
``(1) In general.--The term `related party' means, with respect
to any applicable taxpayer--
``(A) any 25-percent owner of the taxpayer,
``(B) any person who is related (within the meaning of
section 267(b) or 707(b)(1)) to the taxpayer or any 25-percent
owner of the taxpayer, and
``(C) any other person who is related (within the meaning
of section 482) to the taxpayer.
``(2) 25-percent owner.--The term `25-percent owner' means,
with respect to any corporation, any person who owns at least 25
percent of--
``(A) the total voting power of all classes of stock of a
corporation entitled to vote, or
``(B) the total value of all classes of stock of such
corporation.
``(3) Section 318 to apply.--Section 318 shall apply for
purposes of paragraphs (1) and (2), except that--
``(A) `10 percent' shall be substituted for `50 percent' in
section 318(a)(2)(C), and
``(B) subparagraphs (A), (B), and (C) of section 318(a)(3)
shall not be applied so as to consider a United States person
as owning stock which is owned by a person who is not a United
States person.
``(h) Exception for Certain Payments Made in the Ordinary Course of
Trade or Business.--For purposes of this section--
``(1) In general.--Except as provided in paragraph (3), any
qualified derivative payment shall not be treated as a base erosion
payment.
``(2) Qualified derivative payment.--
``(A) In general.--The term `qualified derivative payment'
means any payment made by a taxpayer pursuant to a derivative
with respect to which the taxpayer--
``(i) recognizes gain or loss as if such derivative
were sold for its fair market value on the last business
day of the taxable year (and such additional times as
required by this title or the taxpayer's method of
accounting),
``(ii) treats any gain or loss so recognized as
ordinary, and
``(iii) treats the character of all items of income,
deduction, gain, or loss with respect to a payment pursuant
to the derivative as ordinary.
``(B) Reporting requirement.--No payments shall be treated
as qualified derivative payments under subparagraph (A) for any
taxable year unless the taxpayer includes in the information
required to be reported under section 6038B(b)(2) with respect
to such taxable year such information as is necessary to
identify the payments to be so treated and such other
information as the Secretary determines necessary to carry out
the provisions of this subsection.
``(3) Exceptions for payments otherwise treated as base erosion
payments.--This subsection shall not apply to any qualified
derivative payment if--
``(A) the payment would be treated as a base erosion
payment if it were not made pursuant to a derivative, including
any interest, royalty, or service payment, or
``(B) in the case of a contract which has derivative and
nonderivative components, the payment is properly allocable to
the nonderivative component.
``(4) Derivative defined.--For purposes of this subsection--
``(A) In general.--The term `derivative' means any contract
(including any option, forward contract, futures contract,
short position, swap, or similar contract) the value of which,
or any payment or other transfer with respect to which, is
(directly or indirectly) determined by reference to one or more
of the following:
``(i) Any share of stock in a corporation.
``(ii) Any evidence of indebtedness.
``(iii) Any commodity which is actively traded.
``(iv) Any currency.
``(v) Any rate, price, amount, index, formula, or
algorithm.
Such term shall not include any item described in clauses (i)
through (v).
``(B) Treatment of american depository receipts and similar
instruments.--Except as otherwise provided by the Secretary,
for purposes of this part, American depository receipts (and
similar instruments) with respect to shares of stock in foreign
corporations shall be treated as shares of stock in such
foreign corporations.
``(C) Exception for certain contracts.--Such term shall not
include any insurance, annuity, or endowment contract issued by
an insurance company to which subchapter L applies (or issued
by any foreign corporation to which such subchapter would apply
if such foreign corporation were a domestic corporation).
``(i) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary or appropriate to carry out the
provisions of this section, including regulations--
``(1) providing for such adjustments to the application of this
section as are necessary to prevent the avoidance of the purposes
of this section, including through--
``(A) the use of unrelated persons, conduit transactions,
or other intermediaries, or
``(B) transactions or arrangements designed, in whole or in
part--
``(i) to characterize payments otherwise subject to
this section as payments not subject to this section, or
``(ii) to substitute payments not subject to this
section for payments otherwise subject to this section and
``(2) for the application of subsection (g), including rules to
prevent the avoidance of the exceptions under subsection (g)(3).''.
(b) Reporting Requirements and Penalties.--
(1) In general.--Subsection (b) of section 6038A is amended to
read as follows:
``(b) Required Information.--
``(1) In general.--For purposes of subsection (a), the
information described in this subsection is such information as the
Secretary prescribes by regulations relating to--
``(A) the name, principal place of business, nature of
business, and country or countries in which organized or
resident, of each person which--
``(i) is a related party to the reporting corporation,
and
``(ii) had any transaction with the reporting
corporation during its taxable year,
``(B) the manner in which the reporting corporation is
related to each person referred to in subparagraph (A), and
``(C) transactions between the reporting corporation and
each foreign person which is a related party to the reporting
corporation.
``(2) Additional information regarding base erosion payments.--
For purposes of subsection (a) and section 6038C, if the reporting
corporation or the foreign corporation to whom section 6038C
applies is an applicable taxpayer, the information described in
this subsection shall include--
``(A) such information as the Secretary determines
necessary to determine the base erosion minimum tax amount,
base erosion payments, and base erosion tax benefits of the
taxpayer for purposes of section 59A for the taxable year, and
``(B) such other information as the Secretary determines
necessary to carry out such section.
For purposes of this paragraph, any term used in this paragraph
which is also used in section 59A shall have the same meaning as
when used in such section.''.
(2) Increase in penalty.--Paragraphs (1) and (2) of section
6038A(d) are each amended by striking ``$10,000'' and inserting
``$25,000''.
(c) Disallowance of Credits Against Base Erosion Tax.--Paragraph
(2) of section 26(b) is amended by inserting after subparagraph (A) the
following new subparagraph:
``(B) section 59A (relating to base erosion and anti-abuse
tax),''.
(d) Conforming Amendments.--
(1) The table of parts for subchapter A of chapter 1 is amended
by adding after the item relating to part VI the following new
item:
``Part VII. Base Erosion and Anti-abuse Tax''.
(2) Paragraph (1) of section 882(a), as amended by this Act, is
amended by inserting ``or 59A,'' after ``section 11,''.
(3) Subparagraph (A) of section 6425(c)(1), as amended by
section 13001, is amended to read as follows:
``(A) the sum of--
``(i) the tax imposed by section 11, or subchapter L of
chapter 1, whichever is applicable, plus
``(ii) the tax imposed by section 59A, over''.
(4)(A) Subparagraph (A) of section 6655(g)(1), as amended by
sections 12001 and 13001, is amended by striking ``plus'' at the
end of clause (i), by redesignating clause (ii) as clause (iii),
and by inserting after clause (i) the following new clause:
``(ii) the tax imposed by section 59A, plus''.
(B) Subparagraphs (A)(i) and (B)(i) of section 6655(e)(2), as
amended by sections 12001 and 13001, are each amended by inserting
``and modified taxable income'' after ``taxable income''.
(C) Subparagraph (B) of section 6655(e)(2) is amended by adding
at the end the following new clause:
``(iii) Modified taxable income.--The term `modified
taxable income' has the meaning given such term by section
59A(c)(1).''.
(e) Effective Date.--The amendments made by this section shall
apply to base erosion payments (as defined in section 59A(d) of the
Internal Revenue Code of 1986, as added by this section) paid or
accrued in taxable years beginning after December 31, 2017.
PART III--OTHER PROVISIONS
SEC. 14501. RESTRICTION ON INSURANCE BUSINESS EXCEPTION TO PASSIVE
FOREIGN INVESTMENT COMPANY RULES.
(a) In General.--Section 1297(b)(2)(B) is amended to read as
follows:
``(B) derived in the active conduct of an insurance
business by a qualifying insurance corporation (as defined in
subsection (f)),''.
(b) Qualifying Insurance Corporation Defined.--Section 1297 is
amended by adding at the end the following new subsection:
``(f) Qualifying Insurance Corporation.--For purposes of subsection
(b)(2)(B)--
``(1) In general.--The term `qualifying insurance corporation'
means, with respect to any taxable year, a foreign corporation--
``(A) which would be subject to tax under subchapter L if
such corporation were a domestic corporation, and
``(B) the applicable insurance liabilities of which
constitute more than 25 percent of its total assets, determined
on the basis of such liabilities and assets as reported on the
corporation's applicable financial statement for the last year
ending with or within the taxable year.
``(2) Alternative facts and circumstances test for certain
corporations.--If a corporation fails to qualify as a qualified
insurance corporation under paragraph (1) solely because the
percentage determined under paragraph (1)(B) is 25 percent or less,
a United States person that owns stock in such corporation may
elect to treat such stock as stock of a qualifying insurance
corporation if--
``(A) the percentage so determined for the corporation is
at least 10 percent, and
``(B) under regulations provided by the Secretary, based on
the applicable facts and circumstances--
``(i) the corporation is predominantly engaged in an
insurance business, and
``(ii) such failure is due solely to runoff-related or
rating-related circumstances involving such insurance
business.
``(3) Applicable insurance liabilities.--For purposes of this
subsection--
``(A) In general.--The term `applicable insurance
liabilities' means, with respect to any life or property and
casualty insurance business--
``(i) loss and loss adjustment expenses, and
``(ii) reserves (other than deficiency, contingency, or
unearned premium reserves) for life and health insurance
risks and life and health insurance claims with respect to
contracts providing coverage for mortality or morbidity
risks.
``(B) Limitations on amount of liabilities.--Any amount
determined under clause (i) or (ii) of subparagraph (A) shall
not exceed the lesser of such amount--
``(i) as reported to the applicable insurance
regulatory body in the applicable financial statement
described in paragraph (4)(A) (or, if less, the amount
required by applicable law or regulation), or
``(ii) as determined under regulations prescribed by
the Secretary.
``(4) Other definitions and rules.--For purposes of this
subsection--
``(A) Applicable financial statement.--The term `applicable
financial statement' means a statement for financial reporting
purposes which--
``(i) is made on the basis of generally accepted
accounting principles,
``(ii) is made on the basis of international financial
reporting standards, but only if there is no statement that
meets the requirement of clause (i), or
``(iii) except as otherwise provided by the Secretary
in regulations, is the annual statement which is required
to be filed with the applicable insurance regulatory body,
but only if there is no statement which meets the
requirements of clause (i) or (ii).
``(B) Applicable insurance regulatory body.--The term
`applicable insurance regulatory body' means, with respect to
any insurance business, the entity established by law to
license, authorize, or regulate such business and to which the
statement described in subparagraph (A) is provided.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 14502. REPEAL OF FAIR MARKET VALUE METHOD OF INTEREST EXPENSE
APPORTIONMENT.
(a) In General.--Paragraph (2) of section 864(e) is amended to read
as follows:
``(2) Gross income and fair market value methods may not be
used for interest.--All allocations and apportionments of interest
expense shall be determined using the adjusted bases of assets
rather than on the basis of the fair market value of the assets or
gross income.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2017.
TITLE II
SEC. 20001. OIL AND GAS PROGRAM.
(a) Definitions.--In this section:
(1) Coastal plain.--The term ``Coastal Plain'' means the area
identified as the 1002 Area on the plates prepared by the United
States Geological Survey entitled ``ANWR Map - Plate 1'' and ``ANWR
Map - Plate 2'', dated October 24, 2017, and on file with the
United States Geological Survey and the Office of the Solicitor of
the Department of the Interior.
(2) Secretary.--The term ``Secretary'' means the Secretary of
the Interior, acting through the Bureau of Land Management.
(b) Oil and Gas Program.--
(1) In general.--Section 1003 of the Alaska National Interest
Lands Conservation Act (16 U.S.C. 3143) shall not apply to the
Coastal Plain.
(2) Establishment.--
(A) In general.--The Secretary shall establish and
administer a competitive oil and gas program for the leasing,
development, production, and transportation of oil and gas in
and from the Coastal Plain.
(B) Purposes.--Section 303(2)(B) of the Alaska National
Interest Lands Conservation Act (Public Law 96-487; 94 Stat.
2390) is amended--
(i) in clause (iii), by striking ``and'' at the end;
(ii) in clause (iv), by striking the period at the end
and inserting ``; and''; and
(iii) by adding at the end the following:
``(v) to provide for an oil and gas program on the
Coastal Plain.''.
(3) Management.--Except as otherwise provided in this section,
the Secretary shall manage the oil and gas program on the Coastal
Plain in a manner similar to the administration of lease sales
under the Naval Petroleum Reserves Production Act of 1976 (42
U.S.C. 6501 et seq.) (including regulations).
(4) Royalties.--Notwithstanding the Mineral Leasing Act (30
U.S.C. 181 et seq.), the royalty rate for leases issued pursuant to
this section shall be 16.67 percent.
(5) Receipts.--Notwithstanding the Mineral Leasing Act (30
U.S.C. 181 et seq.), of the amount of adjusted bonus, rental, and
royalty receipts derived from the oil and gas program and
operations on Federal land authorized under this section--
(A) 50 percent shall be paid to the State of Alaska; and
(B) the balance shall be deposited into the Treasury as
miscellaneous receipts.
(c) 2 Lease Sales Within 10 Years.--
(1) Requirement.--
(A) In general.--Subject to subparagraph (B), the Secretary
shall conduct not fewer than 2 lease sales area-wide under the
oil and gas program under this section by not later than 10
years after the date of enactment of this Act.
(B) Sale acreages; schedule.--
(i) Acreages.--The Secretary shall offer for lease
under the oil and gas program under this section--
(I) not fewer than 400,000 acres area-wide in each
lease sale; and
(II) those areas that have the highest potential
for the discovery of hydrocarbons.
(ii) Schedule.--The Secretary shall offer--
(I) the initial lease sale under the oil and gas
program under this section not later than 4 years after
the date of enactment of this Act; and
(II) a second lease sale under the oil and gas
program under this section not later than 7 years after
the date of enactment of this Act.
(2) Rights-of-way.--The Secretary shall issue any rights-of-way
or easements across the Coastal Plain for the exploration,
development, production, or transportation necessary to carry out
this section.
(3) Surface development.--In administering this section, the
Secretary shall authorize up to 2,000 surface acres of Federal land
on the Coastal Plain to be covered by production and support
facilities (including airstrips and any area covered by gravel
berms or piers for support of pipelines) during the term of the
leases under the oil and gas program under this section.
SEC. 20002. LIMITATIONS ON AMOUNT OF DISTRIBUTED QUALIFIED OUTER
CONTINENTAL SHELF REVENUES.
Section 105(f)(1) of the Gulf of Mexico Energy Security Act of 2006
(43 U.S.C. 1331 note; Public Law 109-432) is amended by striking
``exceed $500,000,000 for each of fiscal years 2016 through 2055.'' and
inserting the following: ``exceed--
``(A) $500,000,000 for each of fiscal years 2016 through
2019;
``(B) $650,000,000 for each of fiscal years 2020 and 2021;
and
``(C) $500,000,000 for each of fiscal years 2022 through
2055.''.
SEC. 20003. STRATEGIC PETROLEUM RESERVE DRAWDOWN AND SALE.
(a) Drawdown and Sale.--
(1) In general.--Notwithstanding section 161 of the Energy
Policy and Conservation Act (42 U.S.C. 6241), except as provided in
subsections (b) and (c), the Secretary of Energy shall draw down
and sell from the Strategic Petroleum Reserve 7,000,000 barrels of
crude oil during the period of fiscal years 2026 through 2027.
(2) Deposit of amounts received from sale.--Amounts received
from a sale under paragraph (1) shall be deposited in the general
fund of the Treasury during the fiscal year in which the sale
occurs.
(b) Emergency Protection.--The Secretary of Energy shall not draw
down and sell crude oil under subsection (a) in a quantity that would
limit the authority to sell petroleum products under subsection (h) of
section 161 of the Energy Policy and Conservation Act (42 U.S.C. 6241)
in the full quantity authorized by that subsection.
(c) Limitation.--The Secretary of Energy shall not drawdown or
conduct sales of crude oil under subsection (a) after the date on which
a total of $600,000,000 has been deposited in the general fund of the
Treasury from sales authorized under that subsection.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
