ORIGINAL DOCMENT LOCATED AT https://www.govinfo.gov/content/pkg/PLAW-115publ97/html/PLAW-115publ97.htm
[115th Congress Public Law 97]
[From the U.S. Government Publishing Office]
[[Page 2053]]
NOTE: Public Law 115-97 is re-printed to remove the editorial
description contained on the original half title page of the printed
Slip law.
<star> (Star Print)
[[Page 131 STAT. 2054]]
Public Law 115-97
115th Congress
An Act
To provide for reconciliation pursuant to titles II and V of the
concurrent resolution on the budget for fiscal year 2018. <<NOTE: Dec.
22, 2017 - [H.R. 1]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
TITLE I
SECTION 11000. SHORT TITLE, ETC.
(a) Amendment of 1986 Code.--Except as otherwise expressly provided,
whenever in this title an amendment or repeal is expressed in terms of
an amendment to, or repeal of, a section or other provision, the
reference shall be considered to be made to a section or other provision
of the Internal Revenue Code of 1986.
Subtitle A--Individual Tax Reform
PART I--TAX RATE REFORM
SEC. 11001. MODIFICATION OF RATES.
(a) <<NOTE: 26 USC 1.>> In General.--Section 1 is amended by adding
at the end the following new subsection:
``(j) Modifications for Taxable Years 2018 Through 2025.--
``(1) In general.--In the case of a taxable year beginning
after December 31, 2017, and before January 1, 2026--
``(A) subsection (i) shall not apply, and
``(B) this section (other than subsection (i)) shall
be applied as provided in paragraphs (2) through (6).
``(2) Rate tables.--
``(A) Married individuals filing joint returns and
surviving spouses.--The following table shall be applied
in lieu of the table contained in subsection (a):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $19,050..................... 10% of taxable income.
Over $19,050 but not over $77,400.... $1,905, plus 12% of the excess
over $19,050.
Over $77,400 but not over $165,000... $8,907, plus 22% of the excess
over $77,400.
Over $165,000 but not over $315,000.. $28,179, plus 24% of the excess
over $165,000.
Over $315,000 but not over $400,000.. $64,179, plus 32% of the excess
over $315,000.
[[Page 131 STAT. 2055]]
Over $400,000 but not over $600,000.. $91,379, plus 35% of the excess
over $400,000.
Over $600,000........................ $161,379, plus 37% of the excess
over $600,000.
``(B) Heads of households.--The following table
shall be applied in lieu of the table contained in
subsection (b):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $13,600..................... 10% of taxable income.
Over $13,600 but not over $51,800.... $1,360, plus 12% of the excess
over $13,600.
Over $51,800 but not over $82,500.... $5,944, plus 22% of the excess
over $51,800.
Over $82,500 but not over $157,500... $12,698, plus 24% of the excess
over $82,500.
Over $157,500 but not over $200,000.. $30,698, plus 32% of the excess
over $157,500.
Over $200,000 but not over $500,000.. $44,298, plus 35% of the excess
over $200,000.
Over $500,000........................ $149,298, plus 37% of the excess
over $500,000.
``(C) Unmarried individuals other than surviving
spouses and heads of households.--The following table
shall be applied in lieu of the table contained in
subsection (c):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $9,525...................... 10% of taxable income.
Over $9,525 but not over $38,700..... $952.50, plus 12% of the excess
over $9,525.
Over $38,700 but not over $82,500.... $4,453.50, plus 22% of the excess
over $38,700.
Over $82,500 but not over $157,500... $14,089.50, plus 24% of the
excess over $82,500.
Over $157,500 but not over $200,000.. $32,089.50, plus 32% of the
excess over $157,500.
Over $200,000 but not over $500,000.. $45,689.50, plus 35% of the
excess over $200,000.
Over $500,000........................ $150,689.50, plus 37% of the
excess over $500,000.
``(D) Married individuals filing separate returns.--
The following table shall be applied in lieu of the
table contained in subsection (d):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $9,525...................... 10% of taxable income.
Over $9,525 but not over $38,700..... $952.50, plus 12% of the excess
over $9,525.
Over $38,700 but not over $82,500.... $4,453.50, plus 22% of the excess
over $38,700.
Over $82,500 but not over $157,500... $14,089.50, plus 24% of the
excess over $82,500.
Over $157,500 but not over $200,000.. $32,089.50, plus 32% of the
excess over $157,500.
Over $200,000 but not over $300,000.. $45,689.50, plus 35% of the
excess over $200,000.
[[Page 131 STAT. 2056]]
Over $300,000........................ $80,689.50, plus 37% of the
excess over $300,000.
``(E) Estates and trusts.--The following table shall
be applied in lieu of the table contained in subsection
(e):
``If taxable income is: The tax is:
------------------------------------------------------------------------
Not over $2,550...................... 10% of taxable income.
Over $2,550 but not over $9,150...... $255, plus 24% of the excess over
$2,550.
Over $9,150 but not over $12,500..... $1,839, plus 35% of the excess
over $9,150.
Over $12,500......................... $3,011.50, plus 37% of the excess
over $12,500.
``(F) References to rate tables.--Any reference in
this title to a rate of tax under subsection (c) shall
be treated as a reference to the corresponding rate
bracket under subparagraph (C) of this paragraph, except
that the reference in section 3402(q)(1) to the third
lowest rate of tax applicable under subsection (c) shall
be treated as a reference to the fourth lowest rate of
tax under subparagraph (C).
``(3) Adjustments.--
``(A) No adjustment in 2018.--The tables contained
in paragraph (2) shall apply without adjustment for
taxable years beginning after December 31, 2017, and
before January 1, 2019.
``(B) Subsequent years.--For taxable years beginning
after December 31, 2018, the Secretary shall prescribe
tables which shall apply in lieu of the tables contained
in paragraph (2) in the same manner as under paragraphs
(1) and (2) of subsection (f) (applied without regard to
clauses (i) and (ii) of subsection (f)(2)(A)), except
that in prescribing such tables--
``(i) subsection (f)(3) shall be applied by
substituting `calendar year 2017' for `calendar
year 2016' in subparagraph (A)(ii) thereof,
``(ii) subsection (f)(7)(B) shall apply to any
unmarried individual other than a surviving spouse
or head of household, and
``(iii) subsection (f)(8) shall not apply.
``(4) Special rules for certain children with unearned
income.--
``(A) In general.--In the case of a child to whom
subsection (g) applies for the taxable year, the rules
of subparagraphs (B) and (C) shall apply in lieu of the
rule under subsection (g)(1).
``(B) Modifications to applicable rate brackets.--In
determining the amount of tax imposed by this section
for the taxable year on a child described in
subparagraph (A), the income tax table otherwise
applicable under this subsection to the child shall be
applied with the following modifications:
[[Page 131 STAT. 2057]]
``(i) 24-percent bracket.--The maximum taxable
income which is taxed at a rate below 24 percent
shall not be more than the sum of--
``(I) the earned taxable income of
such child, plus
``(II) the minimum taxable income
for the 24-percent bracket in the table
under paragraph (2)(E) (as adjusted
under paragraph (3)) for the taxable
year.
``(ii) 35-percent bracket.--The maximum
taxable income which is taxed at a rate below 35
percent shall not be more than the sum of--
``(I) the earned taxable income of
such child, plus
``(II) the minimum taxable income
for the 35-percent bracket in the table
under paragraph (2)(E) (as adjusted
under paragraph (3)) for the taxable
year.
``(iii) 37-percent bracket.--The maximum
taxable income which is taxed at a rate below 37
percent shall not be more than the sum of--
``(I) the earned taxable income of
such child, plus
``(II) the minimum taxable income
for the 37-percent bracket in the table
under paragraph (2)(E) (as adjusted
under paragraph (3)) for the taxable
year.
``(C) Coordination with capital gains rates.--For
purposes of applying section 1(h) (after the
modifications under paragraph (5)(A))--
``(i) the maximum zero rate amount shall not
be more than the sum of--
``(I) the earned taxable income of
such child, plus
``(II) the amount in effect under
paragraph (5)(B)(i)(IV) for the taxable
year, and
``(ii) the maximum 15-percent rate amount
shall not be more than the sum of--
``(I) the earned taxable income of
such child, plus
``(II) the amount in effect under
paragraph (5)(B)(ii)(IV) for the taxable
year.
``(D) Earned taxable income.--For purposes of this
paragraph, the term `earned taxable income' means, with
respect to any child for any taxable year, the taxable
income of such child reduced (but not below zero) by the
net unearned income (as defined in subsection (g)(4)) of
such child.
``(5) Application of current income tax brackets to capital
gains brackets.--
``(A) In general.--Section 1(h)(1) shall be
applied--
``(i) by substituting `below the maximum zero
rate amount' for `which would (without regard to
this paragraph) be taxed at a rate below 25
percent' in subparagraph (B)(i), and
``(ii) by substituting `below the maximum 15-
percent rate amount' for `which would (without
regard
[[Page 131 STAT. 2058]]
to this paragraph) be taxed at a rate below 39.6
percent' in subparagraph (C)(ii)(I).
``(B) Maximum amounts defined.--For purposes of
applying section 1(h) with the modifications described
in subparagraph (A)--
``(i) Maximum zero rate amount.--The maximum
zero rate amount shall be--
``(I) in the case of a joint return
or surviving spouse, $77,200,
``(II) in the case of an individual
who is a head of household (as defined
in section 2(b)), $51,700,
``(III) in the case of any other
individual (other than an estate or
trust), an amount equal to \1/2\ of the
amount in effect for the taxable year
under subclause (I), and
``(IV) in the case of an estate or
trust, $2,600.
``(ii) Maximum 15-percent rate amount.--The
maximum 15-percent rate amount shall be--
``(I) in the case of a joint return
or surviving spouse, $479,000 (\1/2\
such amount in the case of a married
individual filing a separate return),
``(II) in the case of an individual
who is the head of a household (as
defined in section 2(b)), $452,400,
``(III) in the case of any other
individual (other than an estate or
trust), $425,800, and
``(IV) in the case of an estate or
trust, $12,700.
``(C) Inflation adjustment.--In the case of any
taxable year beginning after 2018, each of the dollar
amounts in clauses (i) and (ii) of subparagraph (B)
shall be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under subsection (f)(3) for the
calendar year in which the taxable year begins,
determined by substituting `calendar year 2017'
for `calendar year 2016' in subparagraph (A)(ii)
thereof.
If any increase under this subparagraph is not a
multiple of $50, such increase shall be rounded to the
next lowest multiple of $50.
``(6) Section 15 not to apply.--Section 15 shall not apply
to any change in a rate of tax by reason of this subsection.''.
(b) Due Diligence Tax Preparer Requirement With Respect to Head of
Household Filing Status.--Subsection (g) of section 6695 is
amended <<NOTE: 26 USC 6695.>> to read as follows:
``(g) Failure to Be Diligent in Determining Eligibility for Certain
Tax Benefits.--Any person who is a tax return preparer with respect to
any return or claim for refund who fails to comply with due diligence
requirements imposed by the Secretary by regulations with respect to
determining--
``(1) eligibility to file as a head of household (as defined
in section 2(b)) on the return, or
``(2) eligibility for, or the amount of, the credit
allowable by section 24, 25A(a)(1), or 32,
shall pay a penalty of $500 for each such failure.''.
[[Page 131 STAT. 2059]]
(c) <<NOTE: 26 USC 1 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 11002. INFLATION ADJUSTMENTS BASED ON CHAINED CPI.
(a) <<NOTE: 26 USC 1.>> In General.--Subsection (f) of section 1 is
amended by striking paragraph (3) and by inserting after paragraph (2)
the following new paragraph:
``(3) Cost-of-living adjustment.--For purposes of this
subsection--
``(A) In general.--The cost-of-living adjustment for
any calendar year is the percentage (if any) by which--
``(i) the C-CPI-U for the preceding calendar
year, exceeds
``(ii) the CPI for calendar year 2016,
multiplied by the amount determined under
subparagraph (B).
``(B) Amount determined.--The amount determined
under this clause is the amount obtained by dividing--
``(i) the C-CPI-U for calendar year 2016, by
``(ii) the CPI for calendar year 2016.
``(C) Special rule for adjustments with a base year
after 2016.--For purposes of any provision of this title
which provides for the substitution of a year after 2016
for `2016' in subparagraph (A)(ii), subparagraph (A)
shall be applied by substituting `the C-CPI-U for
calendar year 2016' for `the CPI for calendar year 2016'
and all that follows in clause (ii) thereof.''.
(b) C-CPI-U.--Subsection (f) of section 1 is amended by striking
paragraph (7), by redesignating paragraph (6) as paragraph (7), and by
inserting after paragraph (5) the following new paragraph:
``(6) C-CPI-U.--For purposes of this subsection--
``(A) In general.--The term `C-CPI-U' means the
Chained Consumer Price Index for All Urban Consumers (as
published by the Bureau of Labor Statistics of the
Department of Labor). The values of the Chained Consumer
Price Index for All Urban Consumers taken into account
for purposes of determining the cost-of-living
adjustment for any calendar year under this subsection
shall be the latest values so published as of the date
on which such Bureau publishes the initial value of the
Chained Consumer Price Index for All Urban Consumers for
the month of August for the preceding calendar year.
``(B) Determination for calendar year.--The C-CPI-U
for any calendar year is the average of the C-CPI-U as
of the close of the 12-month period ending on August 31
of such calendar year.''.
(c) Application to Permanent Tax Tables.--
(1) In general.--Section 1(f)(2)(A) is amended to read as
follows:
``(A) except as provided in paragraph (8), by
increasing the minimum and maximum dollar amounts for
each bracket for which a tax is imposed under such table
by the cost-of-living adjustment for such calendar year,
determined--
``(i) except as provided in clause (ii), by
substituting `1992' for `2016' in paragraph
(3)(A)(ii), and
``(ii) in the case of adjustments to the
dollar amounts at which the 36 percent rate
bracket begins
[[Page 131 STAT. 2060]]
or at which the 39.6 percent rate bracket begins,
by substituting `1993' for `2016' in paragraph
(3)(A)(ii),''.
(2) <<NOTE: 26 USC 1.>> Conforming amendments.--Section
1(i) is amended--
(A) by striking ``for `1992' in subparagraph (B)''
in paragraph (1)(C) and inserting ``for `2016' in
subparagraph (A)(ii)'', and
(B) by striking ``subsection (f)(3)(B) shall be
applied by substituting `2012' for `1992' '' in
paragraph (3)(C) and inserting ``subsection
(f)(3)(A)(ii) shall be applied by substituting `2012'
for `2016' ''.
(d) Application to Other Internal Revenue Code of 1986 Provisions.--
(1) The following sections are each amended by striking
``for `calendar year 1992' in subparagraph (B)'' and inserting
``for `calendar year 2016' in subparagraph (A)(ii)'':
(A) Section 23(h)(2).
(B) Paragraphs (1)(A)(ii) and (2)(A)(ii) of section
25A(h).
(C) Section 25B(b)(3)(B).
(D) Subsection (b)(2)(B)(ii)(II), and clauses (i)
and (ii) of subsection (j)(1)(B), of section 32.
(E) Section 36B(f)(2)(B)(ii)(II).
(F) Section 41(e)(5)(C)(i).
(G) Subsections (e)(3)(D)(ii) and (h)(3)(H)(i)(II)
of section 42.
(H) Section 45R(d)(3)(B)(ii).
(I) Section 55(d)(4)(A)(ii).
(J) Section 62(d)(3)(B).
(K) Section 63(c)(4)(B).
(L) Section 125(i)(2)(B).
(M) Section 135(b)(2)(B)(ii).
(N) Section 137(f)(2).
(O) Section 146(d)(2)(B).
(P) Section 147(c)(2)(H)(ii).
(Q) Section 151(d)(4)(B).
(R) Section 179(b)(6)(A)(ii).
(S) Subsections (b)(5)(C)(i)(II) and (g)(8)(B) of
section 219.
(T) Section 220(g)(2).
(U) Section 221(f)(1)(B).
(V) Section 223(g)(1)(B).
(W) Section 408A(c)(3)(D)(ii).
(X) Section 430(c)(7)(D)(vii)(II).
(Y) Section 512(d)(2)(B).
(Z) Section 513(h)(2)(C)(ii).
(AA) Section 831(b)(2)(D)(ii).
(BB) Section 877A(a)(3)(B)(i)(II).
(CC) Section 2010(c)(3)(B)(ii).
(DD) Section 2032A(a)(3)(B).
(EE) Section 2503(b)(2)(B).
(FF) Section 4261(e)(4)(A)(ii).
(GG) Section 5000A(c)(3)(D)(ii).
(HH) Section 6323(i)(4)(B).
(II) Section 6334(g)(1)(B).
(JJ) Section 6601(j)(3)(B).
(KK) Section 6651(i)(1).
(LL) Section 6652(c)(7)(A).
(MM) Section 6695(h)(1).
[[Page 131 STAT. 2061]]
(NN) Section 6698(e)(1).
(OO) Section 6699(e)(1).
(PP) Section 6721(f)(1).
(QQ) Section 6722(f)(1).
(RR) Section 7345(f)(2).
(SS) Section 7430(c)(1).
(TT) Section 9831(d)(2)(D)(ii)(II).
(2) <<NOTE: 26 USC 41, 68.>> Sections 41(e)(5)(C)(ii) and
68(b)(2)(B) are each amended--
(A) by striking ``1(f)(3)(B)'' and inserting
``1(f)(3)(A)(ii)'', and
(B) by striking ``1992'' and inserting ``2016''.
(3) Section 42(h)(6)(G) is amended--
(A) by striking ``for `calendar year 1987' '' in
clause (i)(II) and inserting ``for `calendar year 2016'
in subparagraph (A)(ii) thereof'', and
(B) by striking ``if the CPI for any calendar year''
and all that follows in clause (ii) and inserting ``if
the C-CPI-U for any calendar year (as defined in section
1(f)(6)) exceeds the C-CPI-U for the preceding calendar
year by more than 5 percent, the C-CPI-U for the base
calendar year shall be increased such that such excess
shall never be taken into account under clause (i). In
the case of a base calendar year before 2017, the C-CPI-
U for such year shall be determined by multiplying the
CPI for such year by the amount determined under section
1(f)(3)(B).''.
(4) Section 59(j)(2)(B) is amended by striking ``for `1992'
in subparagraph (B)'' and inserting ``for `2016' in subparagraph
(A)(ii)''.
(5) Section 132(f)(6)(A)(ii) is amended by striking ``for
`calendar year 1992' '' and inserting ``for `calendar year 2016'
in subparagraph (A)(ii) thereof''.
(6) Section 162(o)(3) is amended by striking ``adjusted for
changes in the Consumer Price Index (as defined in section
1(f)(5)) since 1991'' and inserting ``adjusted by increasing any
such amount under the 1991 agreement by an amount equal to--
``(A) such amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the
taxable year begins, by substituting `calendar year
1990' for `calendar year 2016' in subparagraph (A)(ii)
thereof''.
(7) So much of clause (ii) of section 213(d)(10)(B) as
precedes the last sentence is amended to read as follows:
``(ii) Medical care cost adjustment.--For
purposes of clause (i), the medical care cost
adjustment for any calendar year is the percentage
(if any) by which--
``(I) the medical care component of
the C-CPI-U (as defined in section
1(f)(6)) for August of the preceding
calendar year, exceeds
``(II) such component of the CPI (as
defined in section 1(f)(4)) for August
of 1996, multiplied by the amount
determined under section 1(f)(3)(B).''.
(8) Subparagraph (B) of section 280F(d)(7) is amended to
read as follows:
[[Page 131 STAT. 2062]]
``(B) Automobile price inflation adjustment.--For
purposes of this paragraph--
``(i) In general.--The automobile price
inflation adjustment for any calendar year is the
percentage (if any) by which--
``(I) the C-CPI-U automobile
component for October of the preceding
calendar year, exceeds
``(II) the automobile component of
the CPI (as defined in section 1(f)(4))
for October of 1987, multiplied by the
amount determined under 1(f)(3)(B).
``(ii) C-CPI-U automobile component.--The term
`C-CPI-U automobile component' means the
automobile component of the Chained Consumer Price
Index for All Urban Consumers (as described in
section 1(f)(6)).''.
(9) <<NOTE: 26 USC 911.>> Section 911(b)(2)(D)(ii)(II) is
amended by striking ``for `1992' in subparagraph (B)'' and
inserting ``for `2016' in subparagraph (A)(ii)''.
(10) Paragraph (2) of section 1274A(d) is amended to read as
follows:
``(2) Adjustment for inflation.--In the case of any debt
instrument arising out of a sale or exchange during any calendar
year after 1989, each dollar amount contained in the preceding
provisions of this section shall be increased by an amount equal
to--
``(A) such amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the
taxable year begins, by substituting `calendar year
1988' for `calendar year 2016' in subparagraph (A)(ii)
thereof.
Any increase under the preceding sentence shall be rounded to
the nearest multiple of $100 (or, if such increase is a multiple
of $50, such increase shall be increased to the nearest multiple
of $100).''.
(11) Section 4161(b)(2)(C)(i)(II) is amended by striking
``for `1992' in subparagraph (B)'' and inserting ``for `2016' in
subparagraph (A)(ii)''.
(12) Section 4980I(b)(3)(C)(v)(II) is amended by striking
``for `1992' in subparagraph (B)'' and inserting ``for `2016' in
subparagraph (A)(ii)''.
(13) Section 6039F(d) is amended by striking ``subparagraph
(B) thereof shall be applied by substituting `1995' for `1992'
'' and inserting ``subparagraph (A)(ii) thereof shall be applied
by substituting `1995' for `2016' ''.
(14) Section 7872(g)(5) is amended to read as follows:
``(5) Adjustment of limit for inflation.--In the case of any
loan made during any calendar year after 1986, the dollar amount
in paragraph (2) shall be increased by an amount equal to--
``(A) such amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the
taxable year begins, by substituting `calendar year
1985' for `calendar year 2016' in subparagraph (A)(ii)
thereof.
Any increase under the preceding sentence shall be rounded to
the nearest multiple of $100 (or, if such increase is a multiple
[[Page 131 STAT. 2063]]
of $50, such increase shall be increased to the nearest multiple
of $100).''.
(e) <<NOTE: 26 USC 1 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
PART II--DEDUCTION FOR QUALIFIED BUSINESS INCOME OF PASS-THRU ENTITIES
SEC. 11011. DEDUCTION FOR QUALIFIED BUSINESS INCOME.
(a) In General.--Part VI of subchapter B of chapter 1 is amended by
adding at the end the following new section:
``SEC. 199A. <<NOTE: 26 USC 199A.>> QUALIFIED BUSINESS INCOME.
``(a) In General.--In the case of a taxpayer other than a
corporation, there shall be allowed as a deduction for any taxable year
an amount equal to the sum of--
``(1) the lesser of--
``(A) the combined qualified business income amount
of the taxpayer, or
``(B) an amount equal to 20 percent of the excess
(if any) of--
``(i) the taxable income of the taxpayer for
the taxable year, over
``(ii) the sum of any net capital gain (as
defined in section 1(h)), plus the aggregate
amount of the qualified cooperative dividends, of
the taxpayer for the taxable year, plus
``(2) the lesser of--
``(A) 20 percent of the aggregate amount of the
qualified cooperative dividends of the taxpayer for the
taxable year, or
``(B) taxable income (reduced by the net capital
gain (as so defined)) of the taxpayer for the taxable
year.
The amount determined under the preceding sentence shall not exceed the
taxable income (reduced by the net capital gain (as so defined)) of the
taxpayer for the taxable year.
``(b) Combined Qualified Business Income Amount.--For purposes of
this section--
``(1) In general.--The term `combined qualified business
income amount' means, with respect to any taxable year, an
amount equal to--
``(A) the sum of the amounts determined under
paragraph (2) for each qualified trade or business
carried on by the taxpayer, plus
``(B) 20 percent of the aggregate amount of the
qualified REIT dividends and qualified publicly traded
partnership income of the taxpayer for the taxable year.
``(2) Determination of deductible amount for each trade or
business.--The amount determined under this paragraph with
respect to any qualified trade or business is the lesser of--
``(A) 20 percent of the taxpayer's qualified
business income with respect to the qualified trade or
business, or
``(B) the greater of--
``(i) 50 percent of the W-2 wages with respect
to the qualified trade or business, or
[[Page 131 STAT. 2064]]
``(ii) the sum of 25 percent of the W-2 wages
with respect to the qualified trade or business,
plus 2.5 percent of the unadjusted basis
immediately after acquisition of all qualified
property.
``(3) Modifications to limit based on taxable income.--
``(A) Exception from limit.--In the case of any
taxpayer whose taxable income for the taxable year does
not exceed the threshold amount, paragraph (2) shall be
applied without regard to subparagraph (B).
``(B) Phase-in of limit for certain taxpayers.--
``(i) In general.--If--
``(I) the taxable income of a
taxpayer for any taxable year exceeds
the threshold amount, but does not
exceed the sum of the threshold amount
plus $50,000 ($100,000 in the case of a
joint return), and
``(II) the amount determined under
paragraph (2)(B) (determined without
regard to this subparagraph) with
respect to any qualified trade or
business carried on by the taxpayer is
less than the amount determined under
paragraph (2)(A) with respect such trade
or business,
then paragraph (2) shall be applied with respect
to such trade or business without regard to
subparagraph (B) thereof and by reducing the
amount determined under subparagraph (A) thereof
by the amount determined under clause (ii).
``(ii) Amount of reduction.--The amount
determined under this subparagraph is the amount
which bears the same ratio to the excess amount
as--
``(I) the amount by which the
taxpayer's taxable income for the
taxable year exceeds the threshold
amount, bears to
``(II) $50,000 ($100,000 in the case
of a joint return).
``(iii) Excess amount.--For purposes of clause
(ii), the excess amount is the excess of--
``(I) the amount determined under
paragraph (2)(A) (determined without
regard to this paragraph), over
``(II) the amount determined under
paragraph (2)(B) (determined without
regard to this paragraph).
``(4) Wages, etc.--
``(A) In general.--The term `W-2 wages' means, with
respect to any person for any taxable year of such
person, the amounts described in paragraphs (3) and (8)
of section 6051(a) paid by such person with respect to
employment of employees by such person during the
calendar year ending during such taxable year.
``(B) Limitation to wages attributable to qualified
business income.--Such term shall not include any amount
which is not properly allocable to qualified business
income for purposes of subsection (c)(1).
``(C) Return requirement.--Such term shall not
include any amount which is not properly included in a
return filed with the Social Security Administration on
[[Page 131 STAT. 2065]]
or before the 60th day after the due date (including
extensions) for such return.
``(5) Acquisitions, dispositions, and short taxable years.--
The Secretary shall provide for the application of this
subsection in cases of a short taxable year or where the
taxpayer acquires, or disposes of, the major portion of a trade
or business or the major portion of a separate unit of a trade
or business during the taxable year.
``(6) Qualified property.--For purposes of this section:
``(A) In general.--The term `qualified property'
means, with respect to any qualified trade or business
for a taxable year, tangible property of a character
subject to the allowance for depreciation under section
167--
``(i) which is held by, and available for use
in, the qualified trade or business at the close
of the taxable year,
``(ii) which is used at any point during the
taxable year in the production of qualified
business income, and
``(iii) the depreciable period for which has
not ended before the close of the taxable year.
``(B) Depreciable period.--The term `depreciable
period' means, with respect to qualified property of a
taxpayer, the period beginning on the date the property
was first placed in service by the taxpayer and ending
on the later of--
``(i) the date that is 10 years after such
date, or
``(ii) the last day of the last full year in
the applicable recovery period that would apply to
the property under section 168 (determined without
regard to subsection (g) thereof).
``(c) Qualified Business Income.--For purposes of this section--
``(1) In general.--The term `qualified business income'
means, for any taxable year, the net amount of qualified items
of income, gain, deduction, and loss with respect to any
qualified trade or business of the taxpayer. Such term shall not
include any qualified REIT dividends, qualified cooperative
dividends, or qualified publicly traded partnership income.
``(2) Carryover of losses.--If the net amount of qualified
income, gain, deduction, and loss with respect to qualified
trades or businesses of the taxpayer for any taxable year is
less than zero, such amount shall be treated as a loss from a
qualified trade or business in the succeeding taxable year.
``(3) Qualified items of income, gain, deduction, and
loss.--For purposes of this subsection--
``(A) In general.--The term `qualified items of
income, gain, deduction, and loss' means items of
income, gain, deduction, and loss to the extent such
items are--
``(i) effectively connected with the conduct
of a trade or business within the United States
(within the meaning of section 864(c), determined
by substituting `qualified trade or business
(within the meaning of section 199A)' for
`nonresident alien individual or a foreign
corporation' or for `a foreign corporation' each
place it appears), and
[[Page 131 STAT. 2066]]
``(ii) included or allowed in determining
taxable income for the taxable year.
``(B) Exceptions.--The following investment items
shall not be taken into account as a qualified item of
income, gain, deduction, or loss:
``(i) Any item of short-term capital gain,
short-term capital loss, long-term capital gain,
or long-term capital loss.
``(ii) Any dividend, income equivalent to a
dividend, or payment in lieu of dividends
described in section 954(c)(1)(G).
``(iii) Any interest income other than
interest income which is properly allocable to a
trade or business.
``(iv) Any item of gain or loss described in
subparagraph (C) or (D) of section 954(c)(1)
(applied by substituting `qualified trade or
business' for `controlled foreign corporation').
``(v) Any item of income, gain, deduction, or
loss taken into account under section 954(c)(1)(F)
(determined without regard to clause (ii) thereof
and other than items attributable to notional
principal contracts entered into in transactions
qualifying under section 1221(a)(7)).
``(vi) Any amount received from an annuity
which is not received in connection with the trade
or business.
``(vii) Any item of deduction or loss properly
allocable to an amount described in any of the
preceding clauses.
``(4) Treatment of reasonable compensation and guaranteed
payments.--Qualified business income shall not include--
``(A) reasonable compensation paid to the taxpayer
by any qualified trade or business of the taxpayer for
services rendered with respect to the trade or business,
``(B) any guaranteed payment described in section
707(c) paid to a partner for services rendered with
respect to the trade or business, and
``(C) to the extent provided in regulations, any
payment described in section 707(a) to a partner for
services rendered with respect to the trade or business.
``(d) Qualified Trade or Business.--For purposes of this section--
``(1) In general.--The term `qualified trade or business'
means any trade or business other than--
``(A) a specified service trade or business, or
``(B) the trade or business of performing services
as an employee.
``(2) Specified service trade or business.--The term
`specified service trade or business' means any trade or
business--
``(A) which is described in section 1202(e)(3)(A)
(applied without regard to the words `engineering,
architecture,') or which would be so described if the
term `employees or owners' were substituted for
`employees' therein, or
``(B) which involves the performance of services
that consist of investing and investment management,
trading,
[[Page 131 STAT. 2067]]
or dealing in securities (as defined in section
475(c)(2)), partnership interests, or commodities (as
defined in section 475(e)(2)).
``(3) Exception for specified service businesses based on
taxpayer's income.--
``(A) In general.--If, for any taxable year, the
taxable income of any taxpayer is less than the sum of
the threshold amount plus $50,000 ($100,000 in the case
of a joint return), then--
``(i) any specified service trade or business
of the taxpayer shall not fail to be treated as a
qualified trade or business due to paragraph
(1)(A), but
``(ii) only the applicable percentage of
qualified items of income, gain, deduction, or
loss, and the W-2 wages and the unadjusted basis
immediately after acquisition of qualified
property, of the taxpayer allocable to such
specified service trade or business shall be taken
into account in computing the qualified business
income, W-2 wages, and the unadjusted basis
immediately after acquisition of qualified
property of the taxpayer for the taxable year for
purposes of applying this section.
``(B) Applicable percentage.--For purposes of
subparagraph (A), the term `applicable percentage'
means, with respect to any taxable year, 100 percent
reduced (not below zero) by the percentage equal to the
ratio of--
``(i) the taxable income of the taxpayer for
the taxable year in excess of the threshold
amount, bears to
``(ii) $50,000 ($100,000 in the case of a
joint return).
``(e) Other Definitions.--For purposes of this section--
``(1) Taxable income.--Taxable income shall be computed
without regard to the deduction allowable under this section.
``(2) Threshold amount.--
``(A) In general.--The term `threshold amount' means
$157,500 (200 percent of such amount in the case of a
joint return).
``(B) Inflation adjustment.--In the case of any
taxable year beginning after 2018, the dollar amount in
subparagraph (A) shall be increased by an amount equal
to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the calendar
year in which the taxable year begins, determined
by substituting `calendar year 2017' for `calendar
year 2016' in subparagraph (A)(ii) thereof.
The amount of any increase under the preceding sentence
shall be rounded as provided in section 1(f)(7).
``(3) Qualified reit dividend.--The term `qualified REIT
dividend' means any dividend from a real estate investment trust
received during the taxable year which--
``(A) is not a capital gain dividend, as defined in
section 857(b)(3), and
``(B) is not qualified dividend income, as defined
in section 1(h)(11).
[[Page 131 STAT. 2068]]
``(4) Qualified cooperative dividend.--The term `qualified
cooperative dividend' means any patronage dividend (as defined
in section 1388(a)), any per-unit retain allocation (as defined
in section 1388(f)), and any qualified written notice of
allocation (as defined in section 1388(c)), or any similar
amount received from an organization described in subparagraph
(B)(ii), which--
``(A) is includible in gross income, and
``(B) is received from--
``(i) an organization or corporation described
in section 501(c)(12) or 1381(a), or
``(ii) an organization which is governed under
this title by the rules applicable to cooperatives
under this title before the enactment of
subchapter T.
``(5) Qualified publicly traded partnership income.--The
term `qualified publicly traded partnership income' means, with
respect to any qualified trade or business of a taxpayer, the
sum of--
``(A) the net amount of such taxpayer's allocable
share of each qualified item of income, gain, deduction,
and loss (as defined in subsection (c)(3) and determined
after the application of subsection (c)(4)) from a
publicly traded partnership (as defined in section
7704(a)) which is not treated as a corporation under
section 7704(c), plus
``(B) any gain recognized by such taxpayer upon
disposition of its interest in such partnership to the
extent such gain is treated as an amount realized from
the sale or exchange of property other than a capital
asset under section 751(a).
``(f) Special Rules.--
``(1) Application to partnerships and s corporations.--
``(A) In general.--In the case of a partnership or S
corporation--
``(i) this section shall be applied at the
partner or shareholder level,
``(ii) each partner or shareholder shall take
into account such person's allocable share of each
qualified item of income, gain, deduction, and
loss, and
``(iii) each partner or shareholder shall be
treated for purposes of subsection (b) as having
W-2 wages and unadjusted basis immediately after
acquisition of qualified property for the taxable
year in an amount equal to such person's allocable
share of the W-2 wages and the unadjusted basis
immediately after acquisition of qualified
property of the partnership or S corporation for
the taxable year (as determined under regulations
prescribed by the Secretary).
For purposes of clause (iii), a partner's or
shareholder's allocable share of W-2 wages shall be
determined in the same manner as the partner's or
shareholder's allocable share of wage expenses. For
purposes of such clause, partner's or shareholder's
allocable share of the unadjusted basis immediately
after acquisition of qualified property shall be
determined in the same manner as the partner's or
shareholder's allocable share of depreciation. For
purposes of this subparagraph, in the case of an S
corporation,
[[Page 131 STAT. 2069]]
an allocable share shall be the shareholder's pro rata
share of an item.
``(B) Application to trusts and estates.--Rules
similar to the rules under section 199(d)(1)(B)(i) (as
in effect on December 1, 2017) for the apportionment of
W-2 wages shall apply to the apportionment of W-2 wages
and the apportionment of unadjusted basis immediately
after acquisition of qualified property under this
section.
``(C) Treatment of trades or business in puerto
rico.--
``(i) In general.--In the case of any taxpayer
with qualified business income from sources within
the commonwealth of Puerto Rico, if all such
income is taxable under section 1 for such taxable
year, then for purposes of determining the
qualified business income of such taxpayer for
such taxable year, the term `United States' shall
include the Commonwealth of Puerto Rico.
``(ii) Special rule for applying limit.--In
the case of any taxpayer described in clause (i),
the determination of W-2 wages of such taxpayer
with respect to any qualified trade or business
conducted in Puerto Rico shall be made without
regard to any exclusion under section 3401(a)(8)
for remuneration paid for services in Puerto Rico.
``(2) Coordination with minimum tax.--For purposes of
determining alternative minimum taxable income under section 55,
qualified business income shall be determined without regard to
any adjustments under sections 56 through 59.
``(3) Deduction limited to income taxes.--The deduction
under subsection (a) shall only be allowed for purposes of this
chapter.
``(4) Regulations.--The Secretary shall prescribe such
regulations as are necessary to carry out the purposes of this
section, including regulations--
``(A) for requiring or restricting the allocation of
items and wages under this section and such reporting
requirements as the Secretary determines appropriate,
and
``(B) for the application of this section in the
case of tiered entities.
``(g) Deduction Allowed to Specified Agricultural or Horticultural
Cooperatives.--
``(1) In general.--In the case of any taxable year of a
specified agricultural or horticultural cooperative beginning
after December 31, 2017, there shall be allowed a deduction in
an amount equal to the lesser of--
``(A) 20 percent of the excess (if any) of--
``(i) the gross income of a specified
agricultural or horticultural cooperative, over
``(ii) the qualified cooperative dividends (as
defined in subsection (e)(4)) paid during the
taxable year for the taxable year, or
``(B) the greater of--
``(i) 50 percent of the W-2 wages of the
cooperative with respect to its trade or business,
or
``(ii) the sum of 25 percent of the W-2 wages
of the cooperative with respect to its trade or
business,
[[Page 131 STAT. 2070]]
plus 2.5 percent of the unadjusted basis
immediately after acquisition of all qualified
property of the cooperative.
``(2) Limitation.--The amount determined under paragraph (1)
shall not exceed the taxable income of the specified
agricultural or horticultural for the taxable year.
``(3) Specified agricultural or horticultural cooperative.--
For purposes of this subsection, the term `specified
agricultural or horticultural cooperative' means an organization
to which part I of subchapter T applies which is engaged in--
``(A) the manufacturing, production, growth, or
extraction in whole or significant part of any
agricultural or horticultural product,
``(B) the marketing of agricultural or horticultural
products which its patrons have so manufactured,
produced, grown, or extracted, or
``(C) the provision of supplies, equipment, or
services to farmers or to organizations described in
subparagraph (A) or (B).
``(h) Anti-abuse Rules.--The Secretary shall--
``(1) apply rules similar to the rules under section
179(d)(2) in order to prevent the manipulation of the
depreciable period of qualified property using transactions
between related parties, and
``(2) prescribe rules for determining the unadjusted basis
immediately after acquisition of qualified property acquired in
like-kind exchanges or involuntary conversions.
``(i) Termination.--This section shall not apply to taxable years
beginning after December 31, 2025.''.
(b) Treatment of Deduction in Computing Adjusted Gross and Taxable
Income.--
(1) Deduction not allowed in computing adjusted gross
income.--Section 62(a) <<NOTE: 26 USC 62.>> is amended by
adding at the end the following new sentence: ``The deduction
allowed by section 199A shall not be treated as a deduction
described in any of the preceding paragraphs of this
subsection.''.
(2) Deduction allowed to nonitemizers.--Section 63(b) is
amended by striking ``and'' at the end of paragraph (1), by
striking the period at the end of paragraph (2) and inserting
``, and'', and by adding at the end the following new paragraph:
``(3) the deduction provided in section 199A.''.
(3) Deduction allowed to itemizers without limits on
itemized deductions.--Section 63(d) is amended by striking
``and'' at the end of paragraph (1), by striking the period at
the end of paragraph (2) and inserting ``, and'', and by adding
at the end the following new paragraph:
``(3) the deduction provided in section 199A.''.
(4) Conforming amendment.--Section 3402(m)(1) is amended by
inserting ``and the estimated deduction allowed under section
199A'' after ``chapter 1''.
(c) Accuracy-Related Penalty on Determination of Applicable
Percentage.--Section 6662(d)(1) is amended by inserting at the end the
following new subparagraph:
``(C) Special rule for taxpayers claiming section
199a deduction.--In the case of any taxpayer who claims
the deduction allowed under section 199A for the taxable
[[Page 131 STAT. 2071]]
year, subparagraph (A) shall be applied by substituting
`5 percent' for `10 percent'.''.
(d) Conforming Amendments.--
(1) Section 172(d) <<NOTE: 26 USC 172.>> is amended by
adding at the end the following new paragraph:
``(8) Qualified business income deduction.--The deduction
under section 199A shall not be allowed.''.
(2) Section 246(b)(1) is amended by inserting ``199A,''
before ``243(a)(1)''.
(3) Section 613(a) is amended by inserting ``and without the
deduction under section 199A'' after ``and without the deduction
under section 199''.
(4) Section 613A(d)(1) is amended by redesignating
subparagraphs (C), (D), and (E) as subparagraphs (D), (E), and
(F), respectively, and by inserting after subparagraph (B), the
following new subparagraph:
``(C) any deduction allowable under section 199A,''.
(5) Section 170(b)(2)(D) is amended by striking ``and'' in
clause (iv), by striking the period at the end of clause (v),
and by adding at the end the following new clause:
``(vi) section 199A(g).''.
(6) The table of sections for part VI of subchapter B of
chapter 1 <<NOTE: 26 USC 161 prec.>> is amended by inserting at
the end the following new item:
``Sec. 199A. Qualified business income.''.
(e) <<NOTE: 26 USC 62 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 11012. LIMITATION ON LOSSES FOR TAXPAYERS OTHER THAN
CORPORATIONS.
(a) In General.--Section 461 is amended by adding at the end the
following new subsection:
``(l) Limitation on Excess Business Losses of Noncorporate
Taxpayers.--
``(1) Limitation.--In the case of taxable year of a taxpayer
other than a corporation beginning after December 31, 2017, and
before January 1, 2026--
``(A) subsection (j) (relating to limitation on
excess farm losses of certain taxpayers) shall not
apply, and
``(B) any excess business loss of the taxpayer for
the taxable year shall not be allowed.
``(2) Disallowed loss carryover.--Any loss which is
disallowed under paragraph (1) shall be treated as a net
operating loss carryover to the following taxable year under
section 172.
``(3) Excess business loss.--For purposes of this
subsection--
``(A) In general.--The term `excess business loss'
means the excess (if any) of--
``(i) the aggregate deductions of the taxpayer
for the taxable year which are attributable to
trades or businesses of such taxpayer (determined
without regard to whether or not such deductions
are disallowed for such taxable year under
paragraph (1)), over
``(ii) the sum of--
[[Page 131 STAT. 2072]]
``(I) the aggregate gross income or
gain of such taxpayer for the taxable
year which is attributable to such
trades or businesses, plus
``(II) $250,000 (200 percent of such
amount in the case of a joint return).
``(B) Adjustment for inflation.--In the case of any
taxable year beginning after December 31, 2018, the
$250,000 amount in subparagraph (A)(ii)(II) shall be
increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the calendar
year in which the taxable year begins, determined
by substituting `2017' for `2016' in subparagraph
(A)(ii) thereof.
If any amount as increased under the preceding
sentence is not a multiple of $1,000, such amount
shall be rounded to the nearest multiple of
$1,000.
``(4) Application of subsection in case of partnerships and
s corporations.--In the case of a partnership or S corporation--
``(A) this subsection shall be applied at the
partner or shareholder level, and
``(B) each partner's or shareholder's allocable
share of the items of income, gain, deduction, or loss
of the partnership or S corporation for any taxable year
from trades or businesses attributable to the
partnership or S corporation shall be taken into account
by the partner or shareholder in applying this
subsection to the taxable year of such partner or
shareholder with or within which the taxable year of the
partnership or S corporation ends.
For purposes of this paragraph, in the case of an S corporation,
an allocable share shall be the shareholder's pro rata share of
an item.
``(5) Additional reporting.--The Secretary shall prescribe
such additional reporting requirements as the Secretary
determines necessary to carry out the purposes of this
subsection.
``(6) Coordination with section 469.--This subsection shall
be applied after the application of section 469.''.
(b) <<NOTE: 26 USC 461 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
PART III--TAX BENEFITS FOR FAMILIES AND INDIVIDUALS
SEC. 11021. INCREASE IN STANDARD DEDUCTION.
(a) In General.--Subsection (c) of section 63 <<NOTE: 26 USC 63.>>
is amended by adding at the end the following new paragraph:
``(7) Special rules for taxable years 2018 through 2025.--In
the case of a taxable year beginning after December 31, 2017,
and before January 1, 2026--
``(A) Increase in standard deduction.--Paragraph (2)
shall be applied--
``(i) by substituting `$18,000' for `$4,400'
in subparagraph (B), and
``(ii) by substituting `$12,000' for `$3,000'
in subparagraph (C).
``(B) Adjustment for inflation.--
[[Page 131 STAT. 2073]]
``(i) In general.--Paragraph (4) shall not
apply to the dollar amounts contained in
paragraphs (2)(B) and (2)(C).
``(ii) Adjustment of increased amounts.--In
the case of a taxable year beginning after 2018,
the $18,000 and $12,000 amounts in subparagraph
(A) shall each be increased by an amount equal
to--
``(I) such dollar amount, multiplied
by
``(II) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which the taxable year
begins, determined by substituting
`2017' for `2016' in subparagraph
(A)(ii) thereof.
If any increase under this clause is not a
multiple of $50, such increase shall be rounded to
the next lowest multiple of $50.''.
(b) <<NOTE: 26 USC 63 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 11022. INCREASE IN AND MODIFICATION OF CHILD TAX CREDIT.
(a) In General.--Section 24 <<NOTE: 26 USC 24.>> is amended by
adding at the end the following new subsection:
``(h) Special Rules for Taxable Years 2018 Through 2025.--
``(1) In general.--In the case of a taxable year beginning
after December 31, 2017, and before January 1, 2026, this
section shall be applied as provided in paragraphs (2) through
(7).
``(2) Credit amount.--Subsection (a) shall be applied by
substituting `$2,000' for `$1,000'.
``(3) Limitation.--In lieu of the amount determined under
subsection (b)(2), the threshold amount shall be $400,000 in the
case of a joint return ($200,000 in any other case).
``(4) Partial credit allowed for certain other dependents.--
``(A) In general.--The credit determined under
subsection (a) (after the application of paragraph (2))
shall be increased by $500 for each dependent of the
taxpayer (as defined in section 152) other than a
qualifying child described in subsection (c).
``(B) Exception for certain noncitizens.--
Subparagraph (A) shall not apply with respect to any
individual who would not be a dependent if subparagraph
(A) of section 152(b)(3) were applied without regard to
all that follows `resident of the United States'.
``(C) Certain qualifying children.--In the case of
any qualifying child with respect to whom a credit is
not allowed under this section by reason of paragraph
(7), such child shall be treated as a dependent to whom
subparagraph (A) applies.
``(5) Maximum amount of refundable credit.--
``(A) In general.--The amount determined under
subsection (d)(1)(A) with respect to any qualifying
child shall not exceed $1,400, and such subsection shall
be applied without regard to paragraph (4) of this
subsection.
``(B) Adjustment for inflation.--In the case of a
taxable year beginning after 2018, the $1,400 amount in
[[Page 131 STAT. 2074]]
subparagraph (A) shall be increased by an amount equal
to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the calendar
year in which the taxable year begins, determined
by substituting `2017' for `2016' in subparagraph
(A)(ii) thereof.
If any increase under this clause is not a multiple of
$100, such increase shall be rounded to the next lowest
multiple of $100.
``(6) Earned income threshold for refundable credit.--
Subsection (d)(1)(B)(i) shall be applied by substituting
`$2,500' for `$3,000'.
``(7) Social security number required.--No credit shall be
allowed under this section to a taxpayer with respect to any
qualifying child unless the taxpayer includes the social
security number of such child on the return of tax for the
taxable year. For purposes of the preceding sentence, the term
`social security number' means a social security number issued
to an individual by the Social Security Administration, but only
if the social security number is issued--
``(A) to a citizen of the United States or pursuant
to subclause (I) (or that portion of subclause (III)
that relates to subclause (I)) of section
205(c)(2)(B)(i) of the Social Security Act, and
``(B) before the due date for such return.''.
(b) <<NOTE: 26 USC 24 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 11023. INCREASED LIMITATION FOR CERTAIN CHARITABLE
CONTRIBUTIONS.
(a) In General.--Section 170(b)(1) <<NOTE: 26 USC 170.>> is amended
by redesignating subparagraph (G) as subparagraph (H) and by inserting
after subparagraph (F) the following new subparagraph:
``(G) Increased limitation for cash contributions.--
``(i) In general.--In the case of any
contribution of cash to an organization described
in subparagraph (A), the total amount of such
contributions which may be taken into account
under subsection (a) for any taxable year
beginning after December 31, 2017, and before
January 1, 2026, shall not exceed 60 percent of
the taxpayer's contribution base for such year.
``(ii) Carryover.--If the aggregate amount of
contributions described in clause (i) exceeds the
applicable limitation under clause (i) for any
taxable year described in such clause, such excess
shall be treated (in a manner consistent with the
rules of subsection (d)(1)) as a charitable
contribution to which clause (i) applies in each
of the 5 succeeding years in order of time.
``(iii) Coordination with subparagraphs (a)
and (b).--
``(I) In general.--Contributions
taken into account under this
subparagraph shall not be taken into
account under subparagraph (A).
[[Page 131 STAT. 2075]]
``(II) Limitation reduction.--For
each taxable year described in clause
(i), and each taxable year to which any
contribution under this subparagraph is
carried over under clause (ii),
subparagraph (A) shall be applied by
reducing (but not below zero) the
contribution limitation allowed for the
taxable year under such subparagraph by
the aggregate contributions allowed
under this subparagraph for such taxable
year, and subparagraph (B) shall be
applied by treating any reference to
subparagraph (A) as a reference to both
subparagraph (A) and this
subparagraph.''.
(b) <<NOTE: 26 USC 170 note.>> Effective Date.--The amendment made
by this section shall apply to contributions in taxable years beginning
after December 31, 2017.
SEC. 11024. INCREASED CONTRIBUTIONS TO ABLE ACCOUNTS.
(a) Increase in Limitation for Contributions From Compensation of
Individuals With Disabilities.--
(1) In general.--Section 529A(b)(2)(B) <<NOTE: 26 USC
529A.>> is amended to read as follows:
``(B) except in the case of contributions under
subsection (c)(1)(C), if such contribution to an ABLE
account would result in aggregate contributions from all
contributors to the ABLE account for the taxable year
exceeding the sum of--
``(i) the amount in effect under section
2503(b) for the calendar year in which the taxable
year begins, plus
``(ii) in the case of any contribution by a
designated beneficiary described in paragraph (7)
before January 1, 2026, the lesser of--
``(I) compensation (as defined by
section 219(f)(1)) includible in the
designated beneficiary's gross income
for the taxable year, or
``(II) an amount equal to the
poverty line for a one-person household,
as determined for the calendar year
preceding the calendar year in which the
taxable year begins.''.
(2) Responsibility for contribution limitation.--Paragraph
(2) of section 529A(b) is amended by adding at the end the
following: ``A designated beneficiary (or a person acting on
behalf of such beneficiary) shall maintain adequate records for
purposes of ensuring, and shall be responsible for ensuring,
that the requirements of subparagraph (B)(ii) are met.''
(3) Eligible designated beneficiary.--Section 529A(b) is
amended by adding at the end the following:
``(7) Special rules related to contribution limit.--For
purposes of paragraph (2)(B)(ii)--
``(A) Designated beneficiary.--A designated
beneficiary described in this paragraph is an employee
(including an employee within the meaning of section
401(c)) with respect to whom--
``(i) no contribution is made for the taxable
year to a defined contribution plan (within the
meaning of section 414(i)) with respect to which
the requirements of section 401(a) or 403(a) are
met,
[[Page 131 STAT. 2076]]
``(ii) no contribution is made for the taxable
year to an annuity contract described in section
403(b), and
``(iii) no contribution is made for the
taxable year to an eligible deferred compensation
plan described in section 457(b).
``(B) Poverty line.--The term `poverty line' has the
meaning given such term by section 673 of the Community
Services Block Grant Act (42 U.S.C. 9902).''.
(b) Allowance of Saver's Credit for ABLE Contributions by Account
Holder.--Section 25B(d)(1) <<NOTE: 26 USC 25B.>> is amended by striking
``and'' at the end of subparagraph (B)(ii), by striking the period at
the end of subparagraph (C) and inserting ``, and'', and by inserting at
the end the following:
``(D) the amount of contributions made before
January 1, 2026, by such individual to the ABLE account
(within the meaning of section 529A) of which such
individual is the designated beneficiary.''.
(c) <<NOTE: 26 USC 25B note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after the date of
the enactment of this Act.
SEC. 11025. ROLLOVERS TO ABLE PROGRAMS FROM 529 PROGRAMS.
(a) In General.--Clause (i) of section 529(c)(3)(C) <<NOTE: 26 USC
529.>> is amended by striking ``or'' at the end of subclause (I), by
striking the period at the end of subclause (II) and inserting ``, or'',
and by adding at the end the following:
``(III) before January 1, 2026, to
an ABLE account (as defined in section
529A(e)(6)) of the designated
beneficiary or a member of the family of
the designated beneficiary.
Subclause (III) shall not apply to so much of a
distribution which, when added to all other
contributions made to the ABLE account for the
taxable year, exceeds the limitation under section
529A(b)(2)(B)(i).''.
(b) <<NOTE: 26 USC 529 note.>> Effective Date.--The amendments made
by this section shall apply to distributions after the date of the
enactment of this Act.
SEC. 11026. <<NOTE: 26 USC 112 note.>> TREATMENT OF CERTAIN
INDIVIDUALS PERFORMING SERVICES IN THE
SINAI PENINSULA OF EGYPT.
(a) In General.--For purposes of the following provisions of the
Internal Revenue Code of 1986, with respect to the applicable period, a
qualified hazardous duty area shall be treated in the same manner as if
it were a combat zone (as determined under section 112 of such Code):
(1) Section 2(a)(3) (relating to special rule where deceased
spouse was in missing status).
(2) Section 112 (relating to the exclusion of certain combat
pay of members of the Armed Forces).
(3) Section 692 (relating to income taxes of members of
Armed Forces on death).
(4) Section 2201 (relating to members of the Armed Forces
dying in combat zone or by reason of combat-zone-incurred
wounds, etc.).
(5) Section 3401(a)(1) (defining wages relating to combat
pay for members of the Armed Forces).
[[Page 131 STAT. 2077]]
(6) Section 4253(d) (relating to the taxation of phone
service originating from a combat zone from members of the Armed
Forces).
(7) Section 6013(f)(1) (relating to joint return where
individual is in missing status).
(8) Section 7508 (relating to time for performing certain
acts postponed by reason of service in combat zone).
(b) Qualified Hazardous Duty Area.--For purposes of this section,
the term ``qualified hazardous duty area'' means the Sinai Peninsula of
Egypt, if as of the date of the enactment of this section any member of
the Armed Forces of the United States is entitled to special pay under
section 310 of title 37, United States Code (relating to special pay;
duty subject to hostile fire or imminent danger), for services performed
in such location. Such term includes such location only during the
period such entitlement is in effect.
(c) Applicable Period.--
(1) In general.--Except as provided in paragraph (2), the
applicable period is--
(A) the portion of the first taxable year ending
after June 9, 2015, which begins on such date, and
(B) any subsequent taxable year beginning before
January 1, 2026.
(2) Withholding.--In the case of subsection (a)(5), the
applicable period is--
(A) the portion of the first taxable year ending
after the date of the enactment of this Act which begins
on such date, and
(B) any subsequent taxable year beginning before
January 1, 2026.
(d) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
provisions of this section shall take effect on June 9, 2015.
(2) Withholding.--Subsection (a)(5) shall apply to
remuneration paid after the date of the enactment of this Act.
SEC. 11027. TEMPORARY REDUCTION IN MEDICAL EXPENSE DEDUCTION
FLOOR.
(a) In General.--Subsection (f) of section 213 <<NOTE: 26 USC
213.>> is amended to read as follows:
``(f) Special Rules for 2013 Through 2018.--In the case of any
taxable year--
``(1) beginning after December 31, 2012, and ending before
January 1, 2017, in the case of a taxpayer if such taxpayer or
such taxpayer's spouse has attained age 65 before the close of
such taxable year, and
``(2) beginning after December 31, 2016, and ending before
January 1, 2019, in the case of any taxpayer,
subsection (a) shall be applied with respect to a taxpayer by
substituting `7.5 percent' for `10 percent'.''.
(b) Minimum Tax Preference Not to Apply.--Section 56(b)(1)(B) is
amended by adding at the end the following new sentence: ``This
subparagraph shall not apply to taxable years beginning after December
31, 2016, and ending before January 1, 2019''.
(c) <<NOTE: 26 USC 56 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after December
31, 2016.
[[Page 131 STAT. 2078]]
SEC. 11028. RELIEF FOR 2016 DISASTER AREAS.
(a) In General.--For purposes of this section, the term ``2016
disaster area'' means any area with respect to which a major disaster
has been declared by the President under section 401 of the Robert T.
Stafford Disaster Relief and Emergency Assistance Act during calendar
year 2016.
(b) Special Rules for Use of Retirement Funds With Respect to Areas
Damaged by 2016 Disasters.--
(1) Tax-favored withdrawals from retirement plans.--
(A) In general.--Section 72(t) of the Internal
Revenue Code of 1986 shall not apply to any qualified
2016 disaster distribution.
(B) Aggregate dollar limitation.--
(i) In general.--For purposes of this
subsection, the aggregate amount of distributions
received by an individual which may be treated as
qualified 2016 disaster distributions for any
taxable year shall not exceed the excess (if any)
of--
(I) $100,000, over
(II) the aggregate amounts treated
as qualified 2016 disaster distributions
received by such individual for all
prior taxable years.
(ii) Treatment of plan distributions.--If a
distribution to an individual would (without
regard to clause (i)) be a qualified 2016 disaster
distribution, a plan shall not be treated as
violating any requirement of this title merely
because the plan treats such distribution as a
qualified 2016 disaster distribution, unless the
aggregate amount of such distributions from all
plans maintained by the employer (and any member
of any controlled group which includes the
employer) to such individual exceeds $100,000.
(iii) Controlled group.--For purposes of
clause (ii), the term ``controlled group'' means
any group treated as a single employer under
subsection (b), (c), (m), or (o) of section 414 of
the Internal Revenue Code of 1986.
(C) Amount distributed may be repaid.--
(i) In general.--Any individual who receives a
qualified 2016 disaster distribution may, at any
time during the 3-year period beginning on the day
after the date on which such distribution was
received, make one or more contributions in an
aggregate amount not to exceed the amount of such
distribution to an eligible retirement plan of
which such individual is a beneficiary and to
which a rollover contribution of such distribution
could be made under section 402(c), 403(a)(4),
403(b)(8), 408(d)(3), or 457(e)(16) of the
Internal Revenue Code of 1986, as the case may be.
(ii) Treatment of repayments of distributions
from eligible retirement plans other than iras.--
For purposes of the Internal Revenue Code of 1986,
if a contribution is made pursuant to clause (i)
with respect to a qualified 2016 disaster
distribution from an eligible retirement plan
other than an individual retirement plan, then the
taxpayer shall, to the extent of the amount of the
contribution, be treated as having
[[Page 131 STAT. 2079]]
received the qualified 2016 disaster distribution
in an eligible rollover distribution (as defined
in section 402(c)(4) of the Internal Revenue Code
of 1986) and as having transferred the amount to
the eligible retirement plan in a direct trustee
to trustee transfer within 60 days of the
distribution.
(iii) Treatment of repayments for
distributions from iras.--For purposes of the
Internal Revenue Code of 1986, if a contribution
is made pursuant to clause (i) with respect to a
qualified 2016 disaster distribution from an
individual retirement plan (as defined by section
7701(a)(37) of the Internal Revenue Code of 1986),
then, to the extent of the amount of the
contribution, the qualified 2016 disaster
distribution shall be treated as a distribution
described in section 408(d)(3) of such Code and as
having been transferred to the eligible retirement
plan in a direct trustee to trustee transfer
within 60 days of the distribution.
(D) Definitions.--For purposes of this paragraph--
(i) Qualified 2016 disaster distribution.--
Except as provided in subparagraph (B), the term
``qualified 2016 disaster distribution'' means any
distribution from an eligible retirement plan made
on or after January 1, 2016, and before January 1,
2018, to an individual whose principal place of
abode at any time during calendar year 2016 was
located in a disaster area described in subsection
(a) and who has sustained an economic loss by
reason of the events giving rise to the
Presidential declaration described in subsection
(a) which was applicable to such area.
(ii) Eligible retirement plan.--The term
``eligible retirement plan'' shall have the
meaning given such term by section 402(c)(8)(B) of
the Internal Revenue Code of 1986.
(E) Income inclusion spread over 3-year period.--
(i) In general.--In the case of any qualified
2016 disaster distribution, unless the taxpayer
elects not to have this subparagraph apply for any
taxable year, any amount required to be included
in gross income for such taxable year shall be so
included ratably over the 3-taxable-year period
beginning with such taxable year.
(ii) Special rule.--For purposes of clause
(i), rules similar to the rules of subparagraph
(E) of section 408A(d)(3) of the Internal Revenue
Code of 1986 shall apply.
(F) Special rules.--
(i) Exemption of distributions from trustee to
trustee transfer and withholding rules.--For
purposes of sections 401(a)(31), 402(f), and 3405
of the Internal Revenue Code of 1986, qualified
2016 disaster distribution shall not be treated as
eligible rollover distributions.
(ii) Qualified 2016 disaster distributions
treated as meeting plan distribution
requirements.--For purposes of the Internal
Revenue Code
[[Page 131 STAT. 2080]]
of 1986, a qualified 2016 disaster distribution
shall be treated as meeting the requirements of
sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii),
403(b)(11), and 457(d)(1)(A) of the Internal
Revenue Code of 1986.
(2) Provisions relating to plan amendments.--
(A) In general.--If this paragraph applies to any
amendment to any plan or annuity contract, such plan or
contract shall be treated as being operated in
accordance with the terms of the plan during the period
described in subparagraph (B)(ii)(I).
(B) Amendments to which subsection applies.--
(i) In general.--This paragraph shall apply to
any amendment to any plan or annuity contract
which is made--
(I) pursuant to any provision of
this section, or pursuant to any
regulation under any provision of this
section, and
(II) on or before the last day of
the first plan year beginning on or
after January 1, 2018, or such later
date as the Secretary prescribes.
In the case of a governmental plan (as defined in
section 414(d) of the Internal Revenue Code of
1986), subclause (II) shall be applied by
substituting the date which is 2 years after the
date otherwise applied under subclause (II).
(ii) Conditions.--This paragraph shall not
apply to any amendment to a plan or contract
unless such amendment applies retroactively for
such period, and shall not apply to any such
amendment unless the plan or contract is operated
as if such amendment were in effect during the
period--
(I) beginning on the date that this
section or the regulation described in
clause (i)(I) takes effect (or in the
case of a plan or contract amendment not
required by this section or such
regulation, the effective date specified
by the plan), and
(II) ending on the date described in
clause (i)(II) (or, if earlier, the date
the plan or contract amendment is
adopted).
(c) Special Rules for Personal Casualty Losses Related to 2016 Major
Disaster.--
(1) In general.--If an individual has a net disaster loss
for any taxable year beginning after December 31, 2015, and
before January 1, 2018--
(A) the amount determined under section
165(h)(2)(A)(ii) of the Internal Revenue Code of 1986
shall be equal to the sum of--
(i) such net disaster loss, and
(ii) so much of the excess referred to in the
matter preceding clause (i) of section
165(h)(2)(A) of such Code (reduced by the amount
in clause (i) of this subparagraph) as exceeds 10
percent of the adjusted gross income of the
individual,
(B) section 165(h)(1) of such Code shall be applied
by substituting ``$500'' for ``$500 ($100 for taxable
years beginning after December 31, 2009)'',
[[Page 131 STAT. 2081]]
(C) the standard deduction determined under section
63(c) of such Code shall be increased by the net
disaster loss, and
(D) section 56(b)(1)(E) of such Code shall not apply
to so much of the standard deduction as is attributable
to the increase under subparagraph (C) of this
paragraph.
(2) Net disaster loss.--For purposes of this subsection, the
term ``net disaster loss'' means the excess of qualified
disaster-related personal casualty losses over personal casualty
gains (as defined in section 165(h)(3)(A) of the Internal
Revenue Code of 1986).
(3) Qualified disaster-related personal casualty losses.--
For purposes of this paragraph, the term ``qualified disaster-
related personal casualty losses'' means losses described in
section 165(c)(3) of the Internal Revenue Code of 1986 which
arise in a disaster area described in subsection (a) on or after
January 1, 2016, and which are attributable to the events giving
rise to the Presidential declaration described in subsection (a)
which was applicable to such area.
PART IV--EDUCATION
SEC. 11031. TREATMENT OF STUDENT LOANS DISCHARGED ON ACCOUNT OF
DEATH OR DISABILITY.
(a) In General.--Section 108(f) <<NOTE: 26 USC 108.>> is amended by
adding at the end the following new paragraph:
``(5) Discharges on account of death or disability.--
``(A) In general.--In the case of an individual,
gross income does not include any amount which (but for
this subsection) would be includible in gross income for
such taxable year by reasons of the discharge (in whole
or in part) of any loan described in subparagraph (B)
after December 31, 2017, and before January 1, 2026, if
such discharge was--
``(i) pursuant to subsection (a) or (d) of
section 437 of the Higher Education Act of 1965 or
the parallel benefit under part D of title IV of
such Act (relating to the repayment of loan
liability),
``(ii) pursuant to section 464(c)(1)(F) of
such Act, or
``(iii) otherwise discharged on account of the
death or total and permanent disability of the
student.
``(B) Loans described.--A loan is described in this
subparagraph if such loan is--
``(i) a student loan (as defined in paragraph
(2)), or
``(ii) a private education loan (as defined in
section 140(7) of the Consumer Credit Protection
Act (15 U.S.C. 1650(7))).''.
(b) <<NOTE: 26 USC 108 note.>> Effective Date.--The amendment made
by this section shall apply to discharges of indebtedness after December
31, 2017.
SEC. 11032. 529 ACCOUNT FUNDING FOR ELEMENTARY AND SECONDARY
EDUCATION.
(a) In General.--
(1) In general.--Section 529(c) is amended by adding at the
end the following new paragraph:
[[Page 131 STAT. 2082]]
``(7) Treatment of elementary and secondary tuition.--Any
reference in this subsection to the term `qualified higher
education expense' shall include a reference to expenses for
tuition in connection with enrollment or attendance at an
elementary or secondary public, private, or religious school.''.
(2) Limitation.--Section 529(e)(3)(A) <<NOTE: 26 USC 529.>>
is amended by adding at the end the following: ``The amount of
cash distributions from all qualified tuition programs described
in subsection (b)(1)(A)(ii) with respect to a beneficiary during
any taxable year shall, in the aggregate, include not more than
$10,000 in expenses described in subsection (c)(7) incurred
during the taxable year.''.
(b) <<NOTE: 26 USC 529 note.>> Effective Date.--The amendments made
by this section shall apply to distributions made after December 31,
2017.
PART V--DEDUCTIONS AND EXCLUSIONS
SEC. 11041. SUSPENSION OF DEDUCTION FOR PERSONAL EXEMPTIONS.
(a) In General.--Subsection (d) of section 151 is amended--
(1) by striking ``In the case of'' in paragraph (4) and
inserting ``Except as provided in paragraph (5), in the case
of'', and
(2) by adding at the end the following new paragraph:
``(5) Special rules for taxable years 2018 through 2025.--In
the case of a taxable year beginning after December 31, 2017,
and before January 1, 2026--
``(A) Exemption amount.--The term `exemption amount'
means zero.
``(B) References.--For purposes of any other
provision of this title, the reduction of the exemption
amount to zero under subparagraph (A) shall not be taken
into account in determining whether a deduction is
allowed or allowable, or whether a taxpayer is entitled
to a deduction, under this section.''.
(b) Application to Estates and Trusts.--Section 642(b)(2)(C) is
amended by adding at the end the following new clause:
``(iii) Years when personal exemption amount
is zero.--
``(I) In general.--In the case of
any taxable year in which the exemption
amount under section 151(d) is zero,
clause (i) shall be applied by
substituting `$4,150' for `the exemption
amount under section 151(d)'.
``(II) Inflation adjustment.--In the
case of any taxable year beginning in a
calendar year after 2018, the $4,150
amount in subparagraph (A) shall be
increased in the same manner as provided
in section 6334(d)(4)(C).''.
(c) Modification of Wage Withholding Rules.--
(1) In general.--Section 3402(a)(2) is amended by striking
``means the amount'' and all that follows and inserting ``means
the amount by which the wages exceed the taxpayer's withholding
allowance, prorated to the payroll period.''.
(2) Conforming amendments.--
(A) Section 3401 is amended by striking subsection
(e).
[[Page 131 STAT. 2083]]
(B) Paragraphs (1) and (2) of section
3402(f) <<NOTE: 26 USC 3402.>> are amended to read as
follows:
``(1) In general.--Under rules determined by the Secretary,
an employee receiving wages shall on any day be entitled to a
withholding allowance determined based on--
``(A) whether the employee is an individual for whom
a deduction is allowable with respect to another
taxpayer under section 151;
``(B) if the employee is married, whether the
employee's spouse is entitled to an allowance, or would
be so entitled if such spouse were an employee receiving
wages, under subparagraph (A) or (D), but only if such
spouse does not have in effect a withholding allowance
certificate claiming such allowance;
``(C) the number of individuals with respect to
whom, on the basis of facts existing at the beginning of
such day, there may reasonably be expected to be
allowable a credit under section 24(a) for the taxable
year under subtitle A in respect of which amounts
deducted and withheld under this chapter in the calendar
year in which such day falls are allowed as a credit;
``(D) any additional amounts to which the employee
elects to take into account under subsection (m), but
only if the employee's spouse does not have in effect a
withholding allowance certificate making such an
election;
``(E) the standard deduction allowable to such
employee (one-half of such standard deduction in the
case of an employee who is married (as determined under
section 7703) and whose spouse is an employee receiving
wages subject to withholding); and
``(F) whether the employee has withholding allowance
certificates in effect with respect to more than 1
employer.
``(2) Allowance certificates.--
``(A) On commencement of employment.--On or before
the date of the commencement of employment with an
employer, the employee shall furnish the employer with a
signed withholding allowance certificate relating to the
withholding allowance claimed by the employee, which
shall in no event exceed the amount to which the
employee is entitled.
``(B) Change of status.--If, on any day during the
calendar year, an employee's withholding allowance is in
excess of the withholding allowance to which the
employee would be entitled had the employee submitted a
true and accurate withholding allowance certificate to
the employer on that day, the employee shall within 10
days thereafter furnish the employer with a new
withholding allowance certificate. If, on any day during
the calendar year, an employee's withholding allowance
is greater than the withholding allowance claimed, the
employee may furnish the employer with a new withholding
allowance certificate relating to the withholding
allowance to which the employee is so entitled, which
shall in no event exceed the amount to which the
employee is entitled on such day.
``(C) Change of status which affects next calendar
year.--If on any day during the calendar year the
[[Page 131 STAT. 2084]]
withholding allowance to which the employee will be, or
may reasonably be expected to be, entitled at the
beginning of the employee's next taxable year under
subtitle A is different from the allowance to which the
employee is entitled on such day, the employee shall, in
such cases and at such times as the Secretary shall by
regulations prescribe, furnish the employer with a
withholding allowance certificate relating to the
withholding allowance which the employee claims with
respect to such next taxable year, which shall in no
event exceed the withholding allowance to which the
employee will be, or may reasonably be expected to be,
so entitled.''.
(C) Subsections (b)(1), (b)(2), (f)(3), (f)(4),
(f)(5), (f)(7) (including the heading thereof), (g)(4),
(l)(1), (l)(2), and (n) of section 3402 are each amended
by striking ``exemption'' each place it appears and
inserting ``allowance''.
(D) The heading of section 3402(f) is amended by
striking ``Exemptions'' and inserting ``Allowance''.
(E) Section 3402(m) is amended by striking
``additional withholding allowances or additional
reductions in withholding under this subsection. In
determining the number of additional withholding
allowances'' and inserting ``an additional withholding
allowance or additional reductions in withholding under
this subsection. In determining the additional
withholding allowance''.
(F) Paragraphs (3) and (4) of section 3405(a) (and
the heading for such paragraph (4)) <<NOTE: 26 USC
3405.>> are each amended by striking ``exemption'' each
place it appears and inserting ``allowance''.
(G) Section 3405(a)(4) is amended by striking
``shall be determined'' and all that follows through ``3
withholding exemptions'' and inserting ``shall be
determined under rules prescribed by the Secretary''.
(d) Exception for Determining Property Exempt From Levy.--Section
6334(d) is amended by adding at the end the following new paragraph:
``(4) Years when personal exemption amount is zero.--
``(A) In general.--In the case of any taxable year
in which the exemption amount under section 151(d) is
zero, paragraph (2) shall not apply and for purposes of
paragraph (1) the term `exempt amount' means an amount
equal to--
``(i) the sum of the amount determined under
subparagraph (B) and the standard deduction,
divided by
``(ii) 52.
``(B) Amount determined.--For purposes of
subparagraph (A), the amount determined under this
subparagraph is $4,150 multiplied by the number of the
taxpayer's dependents for the taxable year in which the
levy occurs.
``(C) Inflation adjustment.--In the case of any
taxable year beginning in a calendar year after 2018,
the $4,150 amount in subparagraph (B) shall be increased
by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the calendar
year in which
[[Page 131 STAT. 2085]]
the taxable year begins, determined by
substituting `2017' for `2016' in subparagraph
(A)(ii) thereof.
If any increase determined under the preceding sentence
is not a multiple of $100, such increase shall be
rounded to the next lowest multiple of $100.
``(D) Verified statement.--Unless the taxpayer
submits to the Secretary a written and properly verified
statement specifying the facts necessary to determine
the proper amount under subparagraph (A), subparagraph
(A) shall be applied as if the taxpayer were a married
individual filing a separate return with no
dependents.''.
(e) Persons Required to Make Returns of Income.--Section 6012 is
amended <<NOTE: 26 USC 6012.>> by adding at the end the following new
subsection:
``(f) Special Rule for Taxable Years 2018 Through 2025.--In the case
of a taxable year beginning after December 31, 2017, and before January
1, 2026, subsection (a)(1) shall not apply, and every individual who has
gross income for the taxable year shall be required to make returns with
respect to income taxes under subtitle A, except that a return shall not
be required of--
``(1) an individual who is not married (determined by
applying section 7703) and who has gross income for the taxable
year which does not exceed the standard deduction applicable to
such individual for such taxable year under section 63, or
``(2) an individual entitled to make a joint return if--
``(A) the gross income of such individual, when
combined with the gross income of such individual's
spouse, for the taxable year does not exceed the
standard deduction which would be applicable to the
taxpayer for such taxable year under section 63 if such
individual and such individual's spouse made a joint
return,
``(B) such individual and such individual's spouse
have the same household as their home at the close of
the taxable year,
``(C) such individual's spouse does not make a
separate return, and
``(D) neither such individual nor such individual's
spouse is an individual described in section 63(c)(5)
who has income (other than earned income) in excess of
the amount in effect under section 63(c)(5)(A).''.
(f) <<NOTE: 26 USC 151 note.>> Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2017.
(2) Wage withholding.--The Secretary of the Treasury may
administer section 3402 for taxable years beginning before
January 1, 2019, without regard to the amendments made by
subsections (a) and (c).
SEC. 11042. LIMITATION ON DEDUCTION FOR STATE AND LOCAL, ETC.
TAXES.
(a) In General.--Subsection (b) of section 164 is amended by adding
at the end the following new paragraph:
``(6) Limitation on individual deductions for taxable years
2018 through 2025.--In the case of an individual and a taxable
year beginning after December 31, 2017, and before January 1,
2026--
[[Page 131 STAT. 2086]]
``(A) foreign real property taxes shall not be taken
into account under subsection (a)(1), and
``(B) the aggregate amount of taxes taken into
account under paragraphs (1), (2), and (3) of subsection
(a) and paragraph (5) of this subsection for any taxable
year shall not exceed $10,000 ($5,000 in the case of a
married individual filing a separate return).
The preceding sentence shall not apply to any foreign taxes
described in subsection (a)(3) or to any taxes described in
paragraph (1) and (2) of subsection (a) which are paid or
accrued in carrying on a trade or business or an activity
described in section 212. For purposes of subparagraph (B), an
amount paid in a taxable year beginning before January 1, 2018,
with respect to a State or local income tax imposed for a
taxable year beginning after December 31, 2017, shall be treated
as paid on the last day of the taxable year for which such tax
is so imposed.''.
(b) <<NOTE: 26 USC 164 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after December
31, 2016.
SEC. 11043. LIMITATION ON DEDUCTION FOR QUALIFIED RESIDENCE
INTEREST.
(a) In General.--Section 163(h)(3) <<NOTE: 26 USC 163.>> is amended
by adding at the end the following new subparagraph:
``(F) Special rules for taxable years 2018 through
2025.--
``(i) In general.--In the case of taxable
years beginning after December 31, 2017, and
before January 1, 2026--
``(I) Disallowance of home equity
indebtedness interest.--Subparagraph
(A)(ii) shall not apply.
``(II) Limitation on acquisition
indebtedness.--Subparagraph (B)(ii)
shall be applied by substituting
`$750,000 ($375,000' for `$1,000,000
($500,000'.
``(III) Treatment of indebtedness
incurred on or before december 15,
2017.--Subclause (II) shall not apply to
any indebtedness incurred on or before
December 15, 2017, and, in applying such
subclause to any indebtedness incurred
after such date, the limitation under
such subclause shall be reduced (but not
below zero) by the amount of any
indebtedness incurred on or before
December 15, 2017, which is treated as
acquisition indebtedness for purposes of
this subsection for the taxable year.
``(IV) Binding contract exception.--
In the case of a taxpayer who enters
into a written binding contract before
December 15, 2017, to close on the
purchase of a principal residence before
January 1, 2018, and who purchases such
residence before April 1, 2018,
subclause (III) shall be applied by
substituting `April 1, 2018' for
`December 15, 2017'.
``(ii) Treatment of limitation in taxable
years after december 31, 2025.--In the case of
taxable years
[[Page 131 STAT. 2087]]
beginning after December 31, 2025, the limitation
under subparagraph (B)(ii) shall be applied to the
aggregate amount of indebtedness of the taxpayer
described in subparagraph (B)(i) without regard to
the taxable year in which the indebtedness was
incurred.
``(iii) Treatment of refinancings of
indebtedness.--
``(I) In general.--In the case of
any indebtedness which is incurred to
refinance indebtedness, such refinanced
indebtedness shall be treated for
purposes of clause (i)(III) as incurred
on the date that the original
indebtedness was incurred to the extent
the amount of the indebtedness resulting
from such refinancing does not exceed
the amount of the refinanced
indebtedness.
``(II) Limitation on period of
refinancing.--Subclause (I) shall not
apply to any indebtedness after the
expiration of the term of the original
indebtedness or, if the principal of
such original indebtedness is not
amortized over its term, the expiration
of the term of the 1st refinancing of
such indebtedness (or if earlier, the
date which is 30 years after the date of
such 1st refinancing).
``(iv) Coordination with exclusion of income
from discharge of indebtedness.--Section 108(h)(2)
shall be applied without regard to this
subparagraph.''.
(b) <<NOTE: 26 USC 163 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 11044. MODIFICATION OF DEDUCTION FOR PERSONAL CASUALTY
LOSSES.
(a) In General.--Subsection (h) of section 165 <<NOTE: 26 USC
165.>> is amended by adding at the end the following new paragraph:
``(5) Limitation for taxable years 2018 through 2025.--
``(A) In general.--In the case of an individual,
except as provided in subparagraph (B), any personal
casualty loss which (but for this paragraph) would be
deductible in a taxable year beginning after December
31, 2017, and before January 1, 2026, shall be allowed
as a deduction under subsection (a) only to the extent
it is attributable to a Federally declared disaster (as
defined in subsection (i)(5)).
``(B) Exception related to personal casualty
gains.--If a taxpayer has personal casualty gains for
any taxable year to which subparagraph (A) applies--
``(i) subparagraph (A) shall not apply to the
portion of the personal casualty loss not
attributable to a Federally declared disaster (as
so defined) to the extent such loss does not
exceed such gains, and
``(ii) in applying paragraph (2) for purposes
of subparagraph (A) to the portion of personal
casualty loss which is so attributable to such a
disaster, the amount of personal casualty gains
taken into account under paragraph (2)(A) shall be
reduced by the portion of such gains taken into
account under clause (i).''.
[[Page 131 STAT. 2088]]
(b) <<NOTE: 26 USC 165 note.>> Effective Date.--The amendment made
by this section shall apply to losses incurred in taxable years
beginning after December 31, 2017.
SEC. 11045. SUSPENSION OF MISCELLANEOUS ITEMIZED DEDUCTIONS.
(a) In General.--Section 67 <<NOTE: 26 USC 67.>> is amended by
adding at the end the following new subsection:
``(g) Suspension for Taxable Years 2018 Through 2025.--
Notwithstanding subsection (a), no miscellaneous itemized deduction
shall be allowed for any taxable year beginning after December 31, 2017,
and before January 1, 2026.''.
(b) <<NOTE: 26 USC 67 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 11046. SUSPENSION OF OVERALL LIMITATION ON ITEMIZED
DEDUCTIONS.
(a) In General.--Section 68 is amended by adding at the end the
following new subsection:
``(f) Section Not to Apply.--This section shall not apply to any
taxable year beginning after December 31, 2017, and before January 1,
2026.''.
(b) <<NOTE: 26 USC 68 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 11047. SUSPENSION OF EXCLUSION FOR QUALIFIED BICYCLE
COMMUTING REIMBURSEMENT.
(a) In General.--Section 132(f) is amended by adding at the end the
following new paragraph:
``(8) Suspension of qualified bicycle commuting
reimbursement exclusion.--Paragraph (1)(D) shall not apply to
any taxable year beginning after December 31, 2017, and before
January 1, 2026.''.
(b) <<NOTE: 26 USC 132 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 11048. SUSPENSION OF EXCLUSION FOR QUALIFIED MOVING EXPENSE
REIMBURSEMENT.
(a) In General.--Section 132(g) is amended--
(1) by striking ``For purposes of this section, the term''
and inserting ``For purposes of this section--
``(1) In general.--The term'', and
(2) by adding at the end the following new paragraph:
``(2) Suspension for taxable years 2018 through 2025.--
Except in the case of a member of the Armed Forces of the United
States on active duty who moves pursuant to a military order and
incident to a permanent change of station, subsection (a)(6)
shall not apply to any taxable year beginning after December 31,
2017, and before January 1, 2026.''.
(b) <<NOTE: 26 USC 132 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 11049. SUSPENSION OF DEDUCTION FOR MOVING EXPENSES.
(a) In General.--Section 217 is amended by adding at the end the
following new subsection:
``(k) Suspension of Deduction for Taxable Years 2018 Through 2025.--
Except in the case of an individual to whom subsection (g) applies, this
section shall not apply to any taxable
[[Page 131 STAT. 2089]]
year beginning after December 31, 2017, and before January 1, 2026.''.
(b) <<NOTE: 26 USC 217 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 11050. LIMITATION ON WAGERING LOSSES.
(a) In General.--Section 165(d) <<NOTE: 26 USC 165.>> is amended by
adding at the end the following: ``For purposes of the preceding
sentence, in the case of taxable years beginning after December 31,
2017, and before January 1, 2026, the term `losses from wagering
transactions' includes any deduction otherwise allowable under this
chapter incurred in carrying on any wagering transaction.''.
(b) <<NOTE: 26 USC 165 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 11051. REPEAL OF DEDUCTION FOR ALIMONY PAYMENTS.
(a) In General.--Part VII of subchapter B is amended by striking
section 215 (and by striking the item relating to such section in the
table of sections <<NOTE: 26 USC 211 prec.>> for such subpart).
(b) Conforming Amendments.--
(1) Corresponding repeal of provisions providing for
inclusion of alimony in gross income.--
(A) Subsection (a) of section 61 is amended by
striking paragraph (8) and by redesignating paragraphs
(9) through (15) as paragraphs (8) through (14),
respectively.
(B) Part II of subchapter B of chapter 1 is amended
by striking section 71 (and by striking the item
relating to such section in the table of
sections <<NOTE: 26 USC 71 prec.>> for such part).
(C) Subpart F of part I of subchapter J of chapter 1
is amended by striking section 682 (and by striking the
item relating to such section <<NOTE: 26 USC 681
prec.>> in the table of sections for such subpart).
(2) Related to repeal of section 215.--
(A) Section 62(a) is amended by striking paragraph
(10).
(B) Section 3402(m)(1) is amended by striking
``(other than paragraph (10) thereof)''.
(C) Section 6724(d)(3) is amended by striking
subparagraph (C) and by redesignating subparagraph (D)
as subparagraph (C).
(3) Related to repeal of section 71.--
(A) Section 121(d)(3) is amended--
(i) by striking ``(as defined in section
71(b)(2))'' in subparagraph (B), and
(ii) by adding at the end the following new
subparagraph:
``(C) Divorce or separation instrument.--For
purposes of this paragraph, the term `divorce or
separation instrument' means--
``(i) a decree of divorce or separate
maintenance or a written instrument incident to
such a decree,
``(ii) a written separation agreement, or
``(iii) a decree (not described in clause (i))
requiring a spouse to make payments for the
support or maintenance of the other spouse.''.
(B) Section 152(d)(5) is amended to read as follows:
``(5) Special rules for support.--
``(A) In general.--For purposes of this subsection--
[[Page 131 STAT. 2090]]
``(i) payments to a spouse of alimony or
separate maintenance payments shall not be treated
as a payment by the payor spouse for the support
of any dependent, and
``(ii) in the case of the remarriage of a
parent, support of a child received from the
parent's spouse shall be treated as received from
the parent.
``(B) Alimony or separate maintenance payment.--For
purposes of subparagraph (A), the term `alimony or
separate maintenance payment' means any payment in cash
if--
``(i) such payment is received by (or on
behalf of) a spouse under a divorce or separation
instrument (as defined in section 121(d)(3)(C)),
``(ii) in the case of an individual legally
separated from the individual's spouse under a
decree of divorce or of separate maintenance, the
payee spouse and the payor spouse are not members
of the same household at the time such payment is
made, and
``(iii) there is no liability to make any such
payment for any period after the death of the
payee spouse and there is no liability to make any
payment (in cash or property) as a substitute for
such payments after the death of the payee
spouse.''.
(C) Section 219(f)(1) <<NOTE: 26 USC 219.>> is
amended by striking the third sentence.
(D) Section 220(f)(7) is amended by striking
``subparagraph (A) of section 71(b)(2)'' and inserting
``clause (i) of section 121(d)(3)(C)''.
(E) Section 223(f)(7) is amended by striking
``subparagraph (A) of section 71(b)(2)'' and inserting
``clause (i) of section 121(d)(3)(C)''.
(F) Section 382(l)(3)(B)(iii) is amended by striking
``section 71(b)(2)'' and inserting ``section
121(d)(3)(C)''.
(G) Section 408(d)(6) is amended by striking
``subparagraph (A) of section 71(b)(2)'' and inserting
``clause (i) of section 121(d)(3)(C)''.
(4) Additional conforming amendments.--Section 7701(a)(17)
is amended--
(A) by striking ``sections 682 and 2516'' and
inserting ``section 2516'', and
(B) by striking ``such sections'' each place it
appears and inserting ``such section''.
(c) <<NOTE: 26 USC 61 note.>> Effective Date.--The amendments made
by this section shall apply to--
(1) any divorce or separation instrument (as defined in
section 71(b)(2) of the Internal Revenue Code of 1986 as in
effect before the date of the enactment of this Act) executed
after December 31, 2018, and
(2) any divorce or separation instrument (as so defined)
executed on or before such date and modified after such date if
the modification expressly provides that the amendments made by
this section apply to such modification.
[[Page 131 STAT. 2091]]
PART VI--INCREASE IN ESTATE AND GIFT TAX EXEMPTION
SEC. 11061. INCREASE IN ESTATE AND GIFT TAX EXEMPTION.
(a) In General.--Section 2010(c)(3) <<NOTE: 26 USC 2010.>> is
amended by adding at the end the following new subparagraph:
``(C) Increase in basic exclusion amount.--In the
case of estates of decedents dying or gifts made after
December 31, 2017, and before January 1, 2026,
subparagraph (A) shall be applied by substituting
`$10,000,000' for `$5,000,000'.''.
(b) Conforming Amendment.--Subsection (g) of section 2001 is amended
to read as follows:
``(g) Modifications to Tax Payable.--
``(1) Modifications to gift tax payable to reflect different
tax rates.--For purposes of applying subsection (b)(2) with
respect to 1 or more gifts, the rates of tax under subsection
(c) in effect at the decedent's death shall, in lieu of the
rates of tax in effect at the time of such gifts, be used both
to compute--
``(A) the tax imposed by chapter 12 with respect to
such gifts, and
``(B) the credit allowed against such tax under
section 2505, including in computing--
``(i) the applicable credit amount under
section 2505(a)(1), and
``(ii) the sum of the amounts allowed as a
credit for all preceding periods under section
2505(a)(2).
``(2) Modifications to estate tax payable to reflect
different basic exclusion amounts.--The Secretary shall
prescribe such regulations as may be necessary or appropriate to
carry out this section with respect to any difference between--
``(A) the basic exclusion amount under section
2010(c)(3) applicable at the time of the decedent's
death, and
``(B) the basic exclusion amount under such section
applicable with respect to any gifts made by the
decedent.''.
(c) <<NOTE: 26 USC 2001 note.>> Effective Date.--The amendments
made by this section shall apply to estates of decedents dying and gifts
made after December 31, 2017.
PART VII--EXTENSION OF TIME LIMIT FOR CONTESTING IRS LEVY
SEC. 11071. EXTENSION OF TIME LIMIT FOR CONTESTING IRS LEVY.
(a) Extension of Time for Return of Property Subject to Levy.--
Subsection (b) of section 6343 is amended by striking ``9 months'' and
inserting ``2 years''.
(b) Period of Limitation on Suits.--Subsection (c) of section 6532
is amended--
(1) by striking ``9 months'' in paragraph (1) and inserting
``2 years'', and
(2) by striking ``9-month'' in paragraph (2) and inserting
``2-year''.
[[Page 131 STAT. 2092]]
(c) <<NOTE: 26 USC 6343 note.>> Effective Date.--The amendments
made by this section shall apply to--
(1) levies made after the date of the enactment of this Act,
and
(2) levies made on or before such date if the 9-month period
has not expired under section 6343(b) of the Internal Revenue
Code of 1986 (without regard to this section) as of such date.
PART VIII--INDIVIDUAL MANDATE
SEC. 11081. ELIMINATION OF SHARED RESPONSIBILITY PAYMENT FOR
INDIVIDUALS FAILING TO MAINTAIN
MINIMUM ESSENTIAL COVERAGE.
(a) In General.--Section 5000A(c) <<NOTE: 26 USC 5000A.>> is
amended--
(1) in paragraph (2)(B)(iii), by striking ``2.5 percent''
and inserting ``Zero percent'', and
(2) in paragraph (3)--
(A) by striking ``$695'' in subparagraph (A) and
inserting ``$0'', and
(B) by striking subparagraph (D).
(b) <<NOTE: 26 USC 5000A note.>> Effective Date.--The amendments
made by this section shall apply to months beginning after December 31,
2018.
Subtitle B--Alternative Minimum Tax
SEC. 12001. REPEAL OF TAX FOR CORPORATIONS.
(a) In General.--Section 55(a) is amended by striking ``There'' and
inserting ``In the case of a taxpayer other than a corporation, there''.
(b) Conforming Amendments.--
(1) Section 38(c)(6) is amended by adding at the end the
following new subparagraph:
``(E) Corporations.--In the case of a corporation,
this subsection shall be applied by treating the
corporation as having a tentative minimum tax of
zero.''.
(2) Section 53(d)(2) is amended by inserting ``, except that
in the case of a corporation, the tentative minimum tax shall be
treated as zero'' before the period at the end.
(3)(A) Section 55(b)(1) is amended to read as follows:
``(1) Amount of tentative tax.--
``(A) In general.--The tentative minimum tax for the
taxable year is the sum of--
``(i) 26 percent of so much of the taxable
excess as does not exceed $175,000, plus
``(ii) 28 percent of so much of the taxable
excess as exceeds $175,000.
The amount determined under the preceding sentence shall
be reduced by the alternative minimum tax foreign tax
credit for the taxable year.
``(B) Taxable excess.--For purposes of this
subsection, the term `taxable excess' means so much of
the alternative minimum taxable income for the taxable
year as exceeds the exemption amount.
``(C) Married individual filing separate return.--In
the case of a married individual filing a separate
return,
[[Page 131 STAT. 2093]]
subparagraph (A) shall be applied by substituting 50
percent of the dollar amount otherwise applicable under
clause (i) and clause (ii) thereof. For purposes of the
preceding sentence, marital status shall be determined
under section 7703.''.
(B) Section 55(b)(3) <<NOTE: 26 USC 55.>> is amended by
striking ``paragraph (1)(A)(i)'' and inserting ``paragraph
(1)(A)''.
(C) Section 59(a) is amended--
(i) by striking ``subparagraph (A)(i) or (B)(i) of
section 55(b)(1) (whichever applies) in lieu of the
highest rate of tax specified in section 1 or 11
(whichever applies)'' in paragraph (1)(C) and inserting
``section 55(b)(1) in lieu of the highest rate of tax
specified in section 1'', and
(ii) in paragraph (2), by striking ``means'' and all
that follows and inserting ``means the amount determined
under the first sentence of section 55(b)(1)(A).''.
(D) Section 897(a)(2)(A) is amended by striking ``section
55(b)(1)(A)'' and inserting ``section 55(b)(1)''.
(E) Section 911(f) is amended--
(i) in paragraph (1)(B)--
(I) by striking ``section 55(b)(1)(A)(ii)''
and inserting ``section 55(b)(1)(B)'', and
(II) by striking ``section 55(b)(1)(A)(i)''
and inserting ``section 55(b)(1)(A)'', and
(ii) in paragraph (2)(B), by striking ``section
55(b)(1)(A)(ii)'' each place it appears and inserting
``section 55(b)(1)(B)''.
(4) Section 55(c)(1) is amended by striking ``, the section
936 credit allowable under section 27(b), and the Puerto Rico
economic activity credit under section 30A''.
(5) Section 55(d), as amended by section 11002, is amended--
(A) by striking paragraph (2) and redesignating
paragraphs (3) and (4) as paragraphs (2) and (3),
respectively,
(B) in paragraph (2) (as so redesignated), by
inserting ``and'' at the end of subparagraph (B), by
striking ``, and'' at the end of subparagraph (C) and
inserting a period, and by striking subparagraph (D),
and
(C) in paragraph (3) (as so redesignated)--
(i) by striking ``(b)(1)(A)(i)'' in
subparagraph (B)(i) and inserting ``(b)(1)(A)'',
and
(ii) by striking ``paragraph (3)'' in
subparagraph (B)(iii) and inserting ``paragraph
(2)''.
(6) Section 55 is amended by striking subsection (e).
(7) Section 56(b)(2) is amended by striking subparagraph (C)
and by redesignating subparagraph (D) as subparagraph (C).
(8)(A) Section 56 is amended by striking subsections (c) and
(g).
(B) Section 847 is amended by striking the last sentence of
paragraph (9).
(C) Section 848 is amended by striking subsection (i).
(9) Section 58(a) is amended by striking paragraph (3) and
redesignating paragraph (4) as paragraph (3).
(10) Section 59 is amended by striking subsections (b) and
(f).
[[Page 131 STAT. 2094]]
(11) Section 11(d) <<NOTE: 26 USC 11.>> is amended by
striking ``the taxes imposed by subsection (a) and section 55''
and inserting ``the tax imposed by subsection (a)''.
(12) Section 12 is amended by striking paragraph (7).
(13) Section 168(k) is amended by striking paragraph (4).
(14) Section 882(a)(1) is amended by striking ``, 55,''.
(15) Section 962(a)(1) is amended by striking ``sections 11
and 55'' and inserting ``section 11''.
(16) Section 1561(a) is amended--
(A) by inserting ``and'' at the end of paragraph
(1), by striking ``, and'' at the end of paragraph (2)
and inserting a period, and by striking paragraph (3),
and
(B) by striking the last sentence.
(17) Section 6425(c)(1)(A) is amended to read as follows:
``(A) the tax imposed by section 11 or 1201(a), or
subchapter L of chapter 1, whichever is applicable,
over''.
(18) Section 6655(e)(2) is amended by striking ``and
alternative minimum taxable income'' each place it appears in
subparagraphs (A) and (B)(i).
(19) Section 6655(g)(1)(A) is amended by inserting ``plus''
at the end of clause (i), by striking clause (ii), and by
redesignating clause (iii) as clause (ii).
(c) <<NOTE: 26 USC 11 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 12002. CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY OF
CORPORATIONS.
(a) Credits Treated as Refundable.--Section 53 is amended by adding
at the end the following new subsection:
``(e) Portion of Credit Treated as Refundable.--
``(1) In general.--In the case of any taxable year of a
corporation beginning in 2018, 2019, 2020, or 2021, the
limitation under subsection (c) shall be increased by the AMT
refundable credit amount for such year.
``(2) AMT refundable credit amount.--For purposes of
paragraph (1), the AMT refundable credit amount is an amount
equal to 50 percent (100 percent in the case of a taxable year
beginning in 2021) of the excess (if any) of--
``(A) the minimum tax credit determined under
subsection (b) for the taxable year, over
``(B) the minimum tax credit allowed under
subsection (a) for such year (before the application of
this subsection for such year).
``(3) Credit refundable.--For purposes of this title (other
than this section), the credit allowed by reason of this
subsection shall be treated as a credit allowed under subpart C
(and not this subpart).
``(4) Short taxable years.--In the case of any taxable year
of less than 365 days, the AMT refundable credit amount
determined under paragraph (2) with respect to such taxable year
shall be the amount which bears the same ratio to such amount
determined without regard to this paragraph as the number of
days in such taxable year bears to 365.''.
(b) Treatment of References.--Section 53(d) is amended by adding at
the end the following new paragraph:
``(3) AMT term references.--In the case of a corporation,
any references in this subsection to section 55, 56, or 57 shall
[[Page 131 STAT. 2095]]
be treated as a reference to such section as in effect before
the amendments made by Tax Cuts and Jobs Act.''.
(c) Conforming Amendment.--Section 1374(b)(3)(B) <<NOTE: 26 USC
1374.>> is amended by striking the last sentence thereof.
(d) <<NOTE: 26 USC 53 note.>> Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
(2) Conforming amendment.--The amendment made by subsection
(c) shall apply to taxable years beginning after December 31,
2021.
SEC. 12003. INCREASED EXEMPTION FOR INDIVIDUALS.
(a) In General.--Section 55(d), as amended by the preceding
provisions of this Act, is amended by adding at the end the following
new paragraph:
``(4) Special rule for taxable years beginning after 2017
and before 2026.--
``(A) In general.--In the case of any taxable year
beginning after December 31, 2017, and before January 1,
2026--
``(i) paragraph (1) shall be applied--
``(I) by substituting `$109,400' for
`$78,750' in subparagraph (A), and
``(II) by substituting `$70,300' for
`$50,600' in subparagraph (B), and
``(ii) paragraph (2) shall be applied--
``(I) by substituting `$1,000,000'
for `$150,000' in subparagraph (A),
``(II) by substituting `50 percent
of the dollar amount applicable under
subparagraph (A)' for `$112,500' in
subparagraph (B), and
``(III) in the case of a taxpayer
described in paragraph (1)(D), without
regard to the substitution under
subclause (I).
``(B) Inflation adjustment.--
``(i) In general.--In the case of any taxable
year beginning in a calendar year after 2018, the
amounts described in clause (ii) shall each be
increased by an amount equal to--
``(I) such dollar amount, multiplied
by
``(II) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which the taxable year
begins, determined by substituting
`calendar year 2017' for `calendar year
2016' in subparagraph (A)(ii) thereof.
``(ii) Amounts described.--The amounts
described in this clause are the $109,400 amount
in subparagraph (A)(i)(I), the $70,300 amount in
subparagraph (A)(i)(II), and the $1,000,000 amount
in subparagraph (A)(ii)(I).
``(iii) Rounding.--Any increased amount
determined under clause (i) shall be rounded to
the nearest multiple of $100.
``(iv) Coordination with current
adjustments.--In the case of any taxable year to
which subparagraph (A) applies, no adjustment
shall be made under paragraph (3) to any of the
numbers which
[[Page 131 STAT. 2096]]
are substituted under subparagraph (A) and
adjusted under this subparagraph.''.
(b) <<NOTE: 26 USC 55 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
Subtitle C--Business-related Provisions
PART I--CORPORATE PROVISIONS
SEC. 13001. 21-PERCENT CORPORATE TAX RATE.
(a) In General.--Subsection (b) of section 11 <<NOTE: 26 USC 11.>>
is amended to read as follows:
``(b) Amount of Tax.--The amount of the tax imposed by subsection
(a) shall be 21 percent of taxable income.''.
(b) Conforming Amendments.--
(1) The following sections are each amended by striking
``section 11(b)(1)'' and inserting ``section 11(b)'':
(A) Section 280C(c)(3)(B)(ii)(II).
(B) Paragraphs (2)(B) and (6)(A)(ii) of section
860E(e).
(C) Section 7874(e)(1)(B).
(2)(A) Part I of subchapter P of chapter 1 is amended by
striking section 1201 (and by striking the item relating to such
section in the table of sections <<NOTE: 26 USC 1201 prec.>>
for such part).
(B) Section 12 is amended by striking paragraphs (4) and
(6), and by redesignating paragraph (5) as paragraph (4).
(C) Section 453A(c)(3) is amended by striking ``or 1201
(whichever is appropriate)''.
(D) Section 527(b) is amended--
(i) by striking paragraph (2), and
(ii) by striking all that precedes ``is hereby
imposed'' and inserting:
``(b) Tax Imposed.--A tax''.
(E) Sections 594(a) is amended by striking ``taxes imposed
by section 11 or 1201(a)'' and inserting ``tax imposed by
section 11''.
(F) Section 691(c)(4) is amended by striking ``1201,''.
(G) Section 801(a) is amended--
(i) by striking paragraph (2), and
(ii) by striking all that precedes ``is hereby
imposed'' and inserting:
``(a) Tax Imposed.--A tax''.
(H) Section 831(e) is amended by striking paragraph (1) and
by redesignating paragraphs (2) and (3) as paragraphs (1) and
(2), respectively.
(I) Sections 832(c)(5) and 834(b)(1)(D) are each amended by
striking ``sec. 1201 and following,''.
(J) Section 852(b)(3)(A) is amended by striking ``section
1201(a)'' and inserting ``section 11(b)''.
(K) Section 857(b)(3) is amended--
(i) by striking subparagraph (A) and redesignating
subparagraphs (B) through (F) as subparagraphs (A)
through (E), respectively,
(ii) in subparagraph (C), as so redesignated--
(I) by striking ``subparagraph (A)(ii)'' in
clause (i) thereof and inserting ``paragraph
(1)'',
[[Page 131 STAT. 2097]]
(II) by striking ``the tax imposed by
subparagraph (A)(ii)'' in clauses (ii) and (iv)
thereof and inserting ``the tax imposed by
paragraph (1) on undistributed capital gain'',
(iii) in subparagraph (E), as so redesignated, by
striking ``subparagraph (B) or (D)'' and inserting
``subparagraph (A) or (C)'', and
(iv) by adding at the end the following new
subparagraph:
``(F) Undistributed capital gain.--For purposes of
this paragraph, the term `undistributed capital gain'
means the excess of the net capital gain over the
deduction for dividends paid (as defined in section 561)
determined with reference to capital gain dividends
only.''.
(L) Section 882(a)(1), as amended by section
12001, <<NOTE: 26 USC 882.>> is further amended by striking
``or 1201(a)''.
(M) Section 904(b) is amended--
(i) by striking ``or 1201(a)'' in paragraph (2)(C),
(ii) by striking paragraph (3)(D) and inserting the
following:
``(D) Capital gain rate differential.--There is a
capital gain rate differential for any year if
subsection (h) of section 1 applies to such taxable
year.'', and
(iii) by striking paragraph (3)(E) and inserting the
following:
``(E) Rate differential portion.--The rate
differential portion of foreign source net capital gain,
net capital gain, or the excess of net capital gain from
sources within the United States over net capital gain,
as the case may be, is the same proportion of such
amount as--
``(i) the excess of--
``(I) the highest rate of tax set
forth in subsection (a), (b), (c), (d),
or (e) of section 1 (whichever applies),
over
``(II) the alternative rate of tax
determined under section 1(h), bears to
``(ii) that rate referred to in subclause
(I).''.
(N) Section 1374(b) is amended by striking paragraph (4).
(O) Section 1381(b) is amended by striking ``taxes imposed
by section 11 or 1201'' and inserting ``tax imposed by section
11''.
(P) Sections 6425(c)(1)(A), as amended by section 12001, and
6655(g)(1)(A)(i) are each amended by striking ``or 1201(a),''.
(Q) Section 7518(g)(6)(A) is amended by striking ``or
1201(a)''.
(3)(A) Section 1445(e)(1) is amended--
(i) by striking ``35 percent'' and inserting ``the
highest rate of tax in effect for the taxable year under
section 11(b)'', and
(ii) by striking ``of the gain'' and inserting
``multiplied by the gain''.
(B) Section 1445(e)(2) is amended by striking ``35 percent
of the amount'' and inserting ``the highest rate of tax in
effect for the taxable year under section 11(b) multiplied by
the amount''.
(C) Section 1445(e)(6) is amended--
[[Page 131 STAT. 2098]]
(i) by striking ``35 percent'' and inserting ``the
highest rate of tax in effect for the taxable year under
section 11(b)'', and
(ii) by striking ``of the amount'' and inserting
``multiplied by the amount''.
(D) Section 1446(b)(2)(B) <<NOTE: 26 USC 1446.>> is amended
by striking ``section 11(b)(1)'' and inserting ``section
11(b)''.
(4) Section 852(b)(1) is amended by striking the last
sentence.
(5)(A) Part I of subchapter B of chapter 5 is amended by
striking section 1551 (and by striking the item relating to such
section in the table of sections <<NOTE: 26 USC 1551 prec.>>
for such part).
(B) Section 535(c)(5) is amended to read as follows:
``(5) Cross reference.--For limitation on credit provided in
paragraph (2) or (3) in the case of certain controlled
corporations, see section 1561.''.
(6)(A) Section 1561, as amended by section 12001, is amended
to read as follows:
``SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS CREDIT IN THE CASE
OF CERTAIN CONTROLLED CORPORATIONS.
``(a) In General.--The component members of a controlled group of
corporations on a December 31 shall, for their taxable years which
include such December 31, be limited for purposes of this subtitle to
one $250,000 ($150,000 if any component member is a corporation
described in section 535(c)(2)(B)) amount for purposes of computing the
accumulated earnings credit under section 535(c)(2) and (3). Such amount
shall be divided equally among the component members of such group on
such December 31 unless the Secretary prescribes regulations permitting
an unequal allocation of such amount.
``(b) Certain Short Taxable Years.--If a corporation has a short
taxable year which does not include a December 31 and is a component
member of a controlled group of corporations with respect to such
taxable year, then for purposes of this subtitle, the amount to be used
in computing the accumulated earnings credit under section 535(c)(2) and
(3) of such corporation for such taxable year shall be the amount
specified in subsection (a) with respect to such group, divided by the
number of corporations which are component members of such group on the
last day of such taxable year. For purposes of the preceding sentence,
section 1563(b) shall be applied as if such last day were substituted
for December 31.''.
(B) The table of sections for part II of subchapter
B of chapter 5 <<NOTE: 26 USC 1561 prec.>> is amended
by striking the item relating to section 1561 and
inserting the following new item:
``Sec. 1561. Limitation on accumulated earnings credit in the case of
certain controlled corporations.''.
(7) Section 7518(g)(6)(A) is amended--
(A) by striking ``With respect to the portion'' and
inserting ``In the case of a taxpayer other than a
corporation, with respect to the portion'', and
(B) by striking ``(34 percent in the case of a
corporation)''.
(c) <<NOTE: 28 USC 11 note.>> Effective Date.--
[[Page 131 STAT. 2099]]
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by subsections (a) and (b) shall
apply to taxable years beginning after December 31, 2017.
(2) Withholding.--The amendments made by subsection (b)(3)
shall apply to distributions made after December 31, 2017.
(3) Certain transfers.--The amendments made by subsection
(b)(6) shall apply to transfers made after December 31, 2017.
(d) <<NOTE: 26 USC 168 note.>> Normalization Requirements.--
(1) In general.--A normalization method of accounting shall
not be treated as being used with respect to any public utility
property for purposes of section 167 or 168 of the Internal
Revenue Code of 1986 if the taxpayer, in computing its cost of
service for ratemaking purposes and reflecting operating results
in its regulated books of account, reduces the excess tax
reserve more rapidly or to a greater extent than such reserve
would be reduced under the average rate assumption method.
(2) Alternative method for certain taxpayers.--If, as of the
first day of the taxable year that includes the date of
enactment of this Act--
(A) the taxpayer was required by a regulatory agency
to compute depreciation for public utility property on
the basis of an average life or composite rate method,
and
(B) the taxpayer's books and underlying records did
not contain the vintage account data necessary to apply
the average rate assumption method,
the taxpayer will be treated as using a normalization method of
accounting if, with respect to such jurisdiction, the taxpayer
uses the alternative method for public utility property that is
subject to the regulatory authority of that jurisdiction.
(3) Definitions.--For purposes of this subsection--
(A) Excess tax reserve.--The term ``excess tax
reserve'' means the excess of--
(i) the reserve for deferred taxes (as
described in section 168(i)(9)(A)(ii) of the
Internal Revenue Code of 1986) as of the day
before the corporate rate reductions provided in
the amendments made by this section take effect,
over
(ii) the amount which would be the balance in
such reserve if the amount of such reserve were
determined by assuming that the corporate rate
reductions provided in this Act were in effect for
all prior periods.
(B) Average rate assumption method.--The average
rate assumption method is the method under which the
excess in the reserve for deferred taxes is reduced over
the remaining lives of the property as used in its
regulated books of account which gave rise to the
reserve for deferred taxes. Under such method, during
the time period in which the timing differences for the
property reverse, the amount of the adjustment to the
reserve for the deferred taxes is calculated by
multiplying--
(i) the ratio of the aggregate deferred taxes
for the property to the aggregate timing
differences for the property as of the beginning
of the period in question, by
[[Page 131 STAT. 2100]]
(ii) the amount of the timing differences
which reverse during such period.
(C) Alternative method.--The ``alternative method''
is the method in which the taxpayer--
(i) computes the excess tax reserve on all
public utility property included in the plant
account on the basis of the weighted average life
or composite rate used to compute depreciation for
regulatory purposes, and
(ii) reduces the excess tax reserve ratably
over the remaining regulatory life of the
property.
(4) Tax increased for normalization violation.--If, for any
taxable year ending after the date of the enactment of this Act,
the taxpayer does not use a normalization method of accounting
for the corporate rate reductions provided in the amendments
made by this section--
(A) the taxpayer's tax for the taxable year shall be
increased by the amount by which it reduces its excess
tax reserve more rapidly than permitted under a
normalization method of accounting, and
(B) such taxpayer shall not be treated as using a
normalization method of accounting for purposes of
subsections (f)(2) and (i)(9)(C) of section 168 of the
Internal Revenue Code of 1986.
SEC. 13002. REDUCTION IN DIVIDEND RECEIVED DEDUCTIONS TO REFLECT
LOWER CORPORATE INCOME TAX RATES.
(a) Dividends Received by Corporations.--
(1) In general.--Section 243(a)(1) <<NOTE: 26 USC 243.>> is
amended by striking ``70 percent'' and inserting ``50 percent''.
(2) Dividends from 20-percent owned corporations.--Section
243(c)(1) is amended--
(A) by striking ``80 percent'' and inserting ``65
percent'', and
(B) by striking ``70 percent'' and inserting ``50
percent''.
(3) Conforming amendment.--The heading for section 243(c) is
amended by striking ``Retention of 80-percent Dividend Received
Deduction'' and inserting ``Increased Percentage''.
(b) Dividends Received From FSC.--Section 245(c)(1)(B) is amended--
(1) by striking ``70 percent'' and inserting ``50 percent'',
and
(2) by striking ``80 percent'' and inserting ``65 percent''.
(c) Limitation on Aggregate Amount of Deductions.--Section 246(b)(3)
is amended--
(1) by striking ``80 percent'' in subparagraph (A) and
inserting ``65 percent'', and
(2) by striking ``70 percent'' in subparagraph (B) and
inserting ``50 percent''.
(d) Reduction in Deduction Where Portfolio Stock Is Debt-financed.--
Section 246A(a)(1) is amended--
(1) by striking ``70 percent'' and inserting ``50 percent'',
and
(2) by striking ``80 percent'' and inserting ``65 percent''.
(e) Income From Sources Within the United States.--Section 861(a)(2)
is amended--
[[Page 131 STAT. 2101]]
(1) by striking ``100/70th'' and inserting ``100/50th'' in
subparagraph (B), and
(2) in the flush sentence at the end--
(A) by striking ``100/80th'' and inserting ``100/
65th'', and
(B) by striking ``100/70th'' and inserting ``100/
50th''.
(f) <<NOTE: 26 USC 243 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
PART II--SMALL BUSINESS REFORMS
SEC. 13101. MODIFICATIONS OF RULES FOR EXPENSING DEPRECIABLE
BUSINESS ASSETS.
(a) Increase in Limitation.--
(1) Dollar limitation.--Section 179(b)(1) <<NOTE: 26 USC
179.>> is amended by striking ``$500,000'' and inserting
``$1,000,000''.
(2) Reduction in limitation.--Section 179(b)(2) is amended
by striking ``$2,000,000'' and inserting ``$2,500,000''.
(3) Inflation adjustments.--
(A) In general.--Subparagraph (A) of section
179(b)(6), as amended by section 11002(d), is amended--
(i) by striking ``2015'' and inserting
``2018'', and
(ii) in clause (ii), by striking ``calendar
year 2014'' and inserting ``calendar year 2017''.
(B) Sport utility vehicles.--Section 179(b)(6) is
amended--
(i) in subparagraph (A), by striking
``paragraphs (1) and (2)'' and inserting
``paragraphs (1), (2), and (5)(A)'', and
(ii) in subparagraph (B), by inserting ``($100
in the case of any increase in the amount under
paragraph (5)(A))'' after ``$10,000''.
(b) Section 179 Property To Include Qualified Real Property.--
(1) In general.--Subparagraph (B) of section 179(d)(1) is
amended to read as follows:
``(B) which is--
``(i) section 1245 property (as defined in
section 1245(a)(3)), or
``(ii) at the election of the taxpayer,
qualified real property (as defined in subsection
(f)), and''.
(2) Qualified real property defined.--Subsection (f) of
section 179 is amended to read as follows:
``(f) Qualified Real Property.--For purposes of this section, the
term `qualified real property' means--
``(1) any qualified improvement property described in
section 168(e)(6), and
``(2) any of the following improvements to nonresidential
real property placed in service after the date such property was
first placed in service:
``(A) Roofs.
``(B) Heating, ventilation, and air-conditioning
property.
``(C) Fire protection and alarm systems.
``(D) Security systems.''.
[[Page 131 STAT. 2102]]
(c) Repeal of Exclusion for Certain Property.--The last sentence of
section 179(d)(1) <<NOTE: 26 USC 179.>> is amended by inserting
``(other than paragraph (2) thereof)'' after ``section 50(b)''.
(d) <<NOTE: 26 USC 179 note.>> Effective Date.--The amendments made
by this section shall apply to property placed in service in taxable
years beginning after December 31, 2017.
SEC. 13102. SMALL BUSINESS ACCOUNTING METHOD REFORM AND
SIMPLIFICATION.
(a) Modification of Limitation on Cash Method of Accounting.--
(1) Increased limitation.--So much of section 448(c) as
precedes paragraph (2) is amended to read as follows:
``(c) Gross Receipts Test.--For purposes of this section--
``(1) In general.--A corporation or partnership meets the
gross receipts test of this subsection for any taxable year if
the average annual gross receipts of such entity for the 3-
taxable-year period ending with the taxable year which precedes
such taxable year does not exceed $25,000,000.''.
(2) Application of exception on annual basis.--Section
448(b)(3) is amended to read as follows:
``(3) Entities which meet gross receipts test.--Paragraphs
(1) and (2) of subsection (a) shall not apply to any corporation
or partnership for any taxable year if such entity (or any
predecessor) meets the gross receipts test of subsection (c) for
such taxable year.''.
(3) Inflation adjustment.--Section 448(c) is amended by
adding at the end the following new paragraph:
``(4) Adjustment for inflation.--In the case of any taxable
year beginning after December 31, 2018, the dollar amount in
paragraph (1) shall be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the
taxable year begins, by substituting `calendar year
2017' for `calendar year 2016' in subparagraph (A)(ii)
thereof.
If any amount as increased under the preceding sentence is not a
multiple of $1,000,000, such amount shall be rounded to the
nearest multiple of $1,000,000.''.
(4) Coordination with section 481.--Section 448(d)(7) is
amended to read as follows:
``(7) Coordination with section 481.--Any change in method
of accounting made pursuant to this section shall be treated for
purposes of section 481 as initiated by the taxpayer and made
with the consent of the Secretary.''.
(5) Application of exception to corporations engaged in
farming.--
(A) In general.--Section 447(c) is amended--
(i) by inserting ``for any taxable year''
after ``not being a corporation'' in the matter
preceding paragraph (1), and
(ii) by amending paragraph (2) to read as
follows:
``(2) a corporation which meets the gross receipts test of
section 448(c) for such taxable year.''.
(B) Coordination with section 481.--Section 447(f)
is amended to read as follows:
[[Page 131 STAT. 2103]]
``(f) Coordination With Section 481.--Any change in method of
accounting made pursuant to this section shall be treated for purposes
of section 481 as initiated by the taxpayer and made with the consent of
the Secretary.''.
(C) Conforming amendments.--Section 447 <<NOTE: 26
USC 447.>> is amended--
(i) by striking subsections (d), (e), (h), and
(i), and
(ii) by redesignating subsections (f) and (g)
(as amended by subparagraph (B)) as subsections
(d) and (e), respectively.
(b) Exemption From UNICAP Requirements.--
(1) In general.--Section 263A is amended by redesignating
subsection (i) as subsection (j) and by inserting after
subsection (h) the following new subsection:
``(i) Exemption for Certain Small Businesses.--
``(1) In general.--In the case of any taxpayer (other than a
tax shelter prohibited from using the cash receipts and
disbursements method of accounting under section 448(a)(3))
which meets the gross receipts test of section 448(c) for any
taxable year, this section shall not apply with respect to such
taxpayer for such taxable year.
``(2) Application of gross receipts test to individuals,
etc.-- In the case of any taxpayer which is not a corporation or
a partnership, the gross receipts test of section 448(c) shall
be applied in the same manner as if each trade or business of
such taxpayer were a corporation or partnership.
``(3) Coordination with section 481.--Any change in method
of accounting made pursuant to this subsection shall be treated
for purposes of section 481 as initiated by the taxpayer and
made with the consent of the Secretary.''.
(2) Conforming amendment.--Section 263A(b)(2) is amended to
read as follows:
``(2) Property acquired for resale.--Real or personal
property described in section 1221(a)(1) which is acquired by
the taxpayer for resale.''.
(c) Exemption From Inventories.--Section 471 is amended by
redesignating subsection (c) as subsection (d) and by inserting after
subsection (b) the following new subsection:
``(c) Exemption for Certain Small Businesses.--
``(1) In general.--In the case of any taxpayer (other than a
tax shelter prohibited from using the cash receipts and
disbursements method of accounting under section 448(a)(3))
which meets the gross receipts test of section 448(c) for any
taxable year--
``(A) subsection (a) shall not apply with respect to
such taxpayer for such taxable year, and
``(B) the taxpayer's method of accounting for
inventory for such taxable year shall not be treated as
failing to clearly reflect income if such method
either--
``(i) treats inventory as non-incidental
materials and supplies, or
``(ii) conforms to such taxpayer's method of
accounting reflected in an applicable financial
statement of the taxpayer with respect to such
taxable year or, if the taxpayer does not have any
applicable financial statement with respect to
such taxable year,
[[Page 131 STAT. 2104]]
the books and records of the taxpayer prepared in
accordance with the taxpayer's accounting
procedures.
``(2) Applicable financial statement.--For purposes of this
subsection, the term `applicable financial statement' has the
meaning given the term in section 451(b)(3).
``(3) Application of gross receipts test to individuals,
etc.--In the case of any taxpayer which is not a corporation or
a partnership, the gross receipts test of section 448(c) shall
be applied in the same manner as if each trade or business of
such taxpayer were a corporation or partnership.
``(4) Coordination with section 481.--Any change in method
of accounting made pursuant to this subsection shall be treated
for purposes of section 481 as initiated by the taxpayer and
made with the consent of the Secretary.''.
(d) Exemption From Percentage Completion for Long-term Contracts.--
(1) In general.--Section 460(e)(1)(B) <<NOTE: 26 USC 460.>>
is amended--
(A) by inserting ``(other than a tax shelter
prohibited from using the cash receipts and
disbursements method of accounting under section
448(a)(3))'' after ``taxpayer'' in the matter preceding
clause (i), and
(B) by amending clause (ii) to read as follows:
``(ii) who meets the gross receipts test of
section 448(c) for the taxable year in which such
contract is entered into.''.
(2) Conforming amendments.--Section 460(e) is amended by
striking paragraphs (2) and (3), by redesignating paragraphs
(4), (5), and (6) as paragraphs (3), (4), and (5), respectively,
and by inserting after paragraph (1) the following new
paragraph:
``(2) Rules related to gross receipts test.--
``(A) Application of gross receipts test to
individuals, etc.-- For purposes of paragraph
(1)(B)(ii), in the case of any taxpayer which is not a
corporation or a partnership, the gross receipts test of
section 448(c) shall be applied in the same manner as if
each trade or business of such taxpayer were a
corporation or partnership.
``(B) Coordination with section 481.--Any change in
method of accounting made pursuant to paragraph
(1)(B)(ii) shall be treated as initiated by the taxpayer
and made with the consent of the Secretary. Such change
shall be effected on a cut-off basis for all similarly
classified contracts entered into on or after the year
of change.''.
(e) <<NOTE: 26 USC 263A note.>> Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
taxable years beginning after December 31, 2017.
(2) Preservation of suspense account rules with respect to
any existing suspense accounts.--So much of the amendments made
by subsection (a)(5)(C) as relate to section 447(i) of the
Internal Revenue Code of 1986 shall not apply with respect to
any suspense account established under such section before the
date of the enactment of this Act.
(3) Exemption from percentage completion for long-term
contracts.--The amendments made by subsection (d) shall apply to
contracts entered into after December 31, 2017, in taxable years
ending after such date.
[[Page 131 STAT. 2105]]
PART III--COST RECOVERY AND ACCOUNTING METHODS
Subpart A--Cost Recovery
SEC. 13201. TEMPORARY 100-PERCENT EXPENSING FOR CERTAIN BUSINESS
ASSETS.
(a) Increased Expensing.--
(1) In general.--Section 168(k) <<NOTE: 26 USC 168.>> is
amended--
(A) in paragraph (1)(A), by striking ``50 percent''
and inserting ``the applicable percentage'', and
(B) in paragraph (5)(A)(i), by striking ``50
percent'' and inserting ``the applicable percentage''.
(2) Applicable percentage.--Paragraph (6) of section 168(k)
is amended to read as follows:
``(6) Applicable percentage.--For purposes of this
subsection--
``(A) In general.--Except as otherwise provided in
this paragraph, the term `applicable percentage' means--
``(i) in the case of property placed in
service after September 27, 2017, and before
January 1, 2023, 100 percent,
``(ii) in the case of property placed in
service after December 31, 2022, and before
January 1, 2024, 80 percent,
``(iii) in the case of property placed in
service after December 31, 2023, and before
January 1, 2025, 60 percent,
``(iv) in the case of property placed in
service after December 31, 2024, and before
January 1, 2026, 40 percent, and
``(v) in the case of property placed in
service after December 31, 2025, and before
January 1, 2027, 20 percent.
``(B) Rule for property with longer production
periods.--In the case of property described in
subparagraph (B) or (C) of paragraph (2), the term
`applicable percentage' means--
``(i) in the case of property placed in
service after September 27, 2017, and before
January 1, 2024, 100 percent,
``(ii) in the case of property placed in
service after December 31, 2023, and before
January 1, 2025, 80 percent,
``(iii) in the case of property placed in
service after December 31, 2024, and before
January 1, 2026, 60 percent,
``(iv) in the case of property placed in
service after December 31, 2025, and before
January 1, 2027, 40 percent, and
``(v) in the case of property placed in
service after December 31, 2026, and before
January 1, 2028, 20 percent.
``(C) Rule for plants bearing fruits and nuts.--In
the case of a specified plant described in paragraph
(5), the term `applicable percentage' means--
[[Page 131 STAT. 2106]]
``(i) in the case of a plant which is planted
or grafted after September 27, 2017, and before
January 1, 2023, 100 percent,
``(ii) in the case of a plant which is planted
or grafted after December 31, 2022, and before
January 1, 2024, 80 percent,
``(iii) in the case of a plant which is
planted or grafted after December 31, 2023, and
before January 1, 2025, 60 percent,
``(iv) in the case of a plant which is planted
or grafted after December 31, 2024, and before
January 1, 2026, 40 percent, and
``(v) in the case of a plant which is planted
or grafted after December 31, 2025, and before
January 1, 2027, 20 percent.''.
(3) Conforming amendment.--
(A) Paragraph (5) of section 168(k) <<NOTE: 26 USC
168.>> is amended by striking subparagraph (F).
(B) Section 168(k) is amended by adding at the end
the following new paragraph:
``(8) Phase down.--In the case of qualified property
acquired by the taxpayer before September 28, 2017, and placed
in service by the taxpayer after September 27, 2017, paragraph
(6) shall be applied by substituting for each percentage
therein--
``(A) `50 percent' in the case of--
``(i) property placed in service before
January 1, 2018, and
``(ii) property described in subparagraph (B)
or (C) of paragraph (2) which is placed in service
in 2018,
``(B) `40 percent' in the case of--
``(i) property placed in service in 2018
(other than property described in subparagraph (B)
or (C) of paragraph (2)), and
``(ii) property described in subparagraph (B)
or (C) of paragraph (2) which is placed in service
in 2019,
``(C) `30 percent' in the case of--
``(i) property placed in service in 2019
(other than property described in subparagraph (B)
or (C) of paragraph (2)), and
``(ii) property described in subparagraph (B)
or (C) of paragraph (2) which is placed in service
in 2020, and
``(D) `0 percent' in the case of--
``(i) property placed in service after 2019
(other than property described in subparagraph (B)
or (C) of paragraph (2)), and
``(ii) property described in subparagraph (B)
or (C) of paragraph (2) which is placed in service
after 2020.''.
(b) Extension.--
(1) In general.--Section 168(k) is amended--
(A) in paragraph (2)--
(i) in subparagraph (A)(iii), clauses (i)(III)
and (ii) of subparagraph (B), and subparagraph
(E)(i), by striking ``January 1, 2020'' each place
it appears and inserting ``January 1, 2027'', and
(ii) in subparagraph (B)--
[[Page 131 STAT. 2107]]
(I) in clause (i)(II), by striking
``January 1, 2021'' and inserting
``January 1, 2028'', and
(II) in the heading of clause (ii),
by striking ``pre-january 1, 2020'' and
inserting ``pre-january 1, 2027'', and
(B) in paragraph (5)(A), by striking ``January 1,
2020'' and inserting ``January 1, 2027''.
(2) Conforming amendments.--
(A) Clause (ii) of section 460(c)(6)(B) <<NOTE: 26
USC 460.>> is amended by striking ``January 1, 2020
(January 1, 2021'' and inserting ``January 1, 2027
(January 1, 2028''.
(B) The heading of section 168(k) is amended by
striking ``Acquired After December 31, 2007, and Before
January 1, 2020''.
(c) Application to Used Property.--
(1) In general.--Section 168(k)(2)(A)(ii) is amended to read
as follows:
``(ii) the original use of which begins with
the taxpayer or the acquisition of which by the
taxpayer meets the requirements of clause (ii) of
subparagraph (E), and''.
(2) Acquisition requirements.--Section 168(k)(2)(E)(ii) is
amended to read as follows:
``(ii) Acquisition requirements.--An
acquisition of property meets the requirements of
this clause if--
``(I) such property was not used by
the taxpayer at any time prior to such
acquisition, and
``(II) the acquisition of such
property meets the requirements of
paragraphs (2)(A), (2)(B), (2)(C), and
(3) of section 179(d).'',
(3) Anti-abuse rules.--Section 168(k)(2)(E) is further
amended by amending clause (iii)(I) to read as follows:
``(I) property is used by a lessor
of such property and such use is the
lessor's first use of such property,''.
(d) Exception for Certain Property.--Section 168(k), as amended by
this section, is amended by adding at the end the following new
paragraph:
``(9) Exception for certain property.--The term `qualified
property' shall not include--
``(A) any property which is primarily used in a
trade or business described in clause (iv) of section
163(j)(7)(A), or
``(B) any property used in a trade or business that
has had floor plan financing indebtedness (as defined in
paragraph (9) of section 163(j)), if the floor plan
financing interest related to such indebtedness was
taken into account under paragraph (1)(C) of such
section.''.
(e) Special Rule.--Section 168(k), as amended by this section, is
amended by adding at the end the following new paragraph:
``(10) Special rule for property placed in service during
certain periods.--
``(A) In general.--In the case of qualified property
placed in service by the taxpayer during the first
taxable year ending after September 27, 2017, if the
taxpayer elects to have this paragraph apply for such
taxable year,
[[Page 131 STAT. 2108]]
paragraphs (1)(A) and (5)(A)(i) shall be applied by
substituting `50 percent' for `the applicable
percentage'.
``(B) Form of election.--Any election under this
paragraph shall be made at such time and in such form
and manner as the Secretary may prescribe.''.
(f) Coordination With Section 280F.--Clause (iii) of section
168(k)(2)(F) is amended <<NOTE: 26 USC 168.>> by striking ``placed in
service by the taxpayer after December 31, 2017'' and inserting
``acquired by the taxpayer before September 28, 2017, and placed in
service by the taxpayer after September 27, 2017''.
(g) Qualified Film and Television and Live Theatrical Productions.--
(1) In general.--Clause (i) of section 168(k)(2)(A), as
amended by section 13204, is amended--
(A) in subclause (II), by striking ``or'',
(B) in subclause (III), by adding ``or'' after the
comma, and
(C) by adding at the end the following:
``(IV) which is a qualified film or television
production (as defined in subsection (d) of
section 181) for which a deduction would have been
allowable under section 181 without regard to
subsections (a)(2) and (g) of such section or this
subsection, or
``(V) which is a qualified live theatrical
production (as defined in subsection (e) of
section 181) for which a deduction would have been
allowable under section 181 without regard to
subsections (a)(2) and (g) of such section or this
subsection,''.
(2) Production placed in service.--Paragraph (2) of section
168(k) is amended by adding at the end the following:
``(H) Production placed in service.--For purposes of
subparagraph (A)--
``(i) a qualified film or television
production shall be considered to be placed in
service at the time of initial release or
broadcast, and
``(ii) a qualified live theatrical production
shall be considered to be placed in service at the
time of the initial live staged performance.''.
(h) <<NOTE: 26 USC 168 note.>> Effective Date.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall apply to property which--
(A) is acquired after September 27, 2017, and
(B) is placed in service after such date.
For purposes of the preceding sentence, property shall not be
treated as acquired after the date on which a written binding
contract is entered into for such acquisition.
(2) Specified plants.--The amendments made by this section
shall apply to specified plants planted or grafted after
September 27, 2017.
SEC. 13202. MODIFICATIONS TO DEPRECIATION LIMITATIONS ON LUXURY
AUTOMOBILES AND PERSONAL USE PROPERTY.
(a) Luxury Automobiles.--
(1) In general.--280F(a)(1)(A) is amended--
(A) in clause (i), by striking ``$2,560'' and
inserting ``$10,000'',
[[Page 131 STAT. 2109]]
(B) in clause (ii), by striking ``$4,100'' and
inserting ``$16,000'',
(C) in clause (iii), by striking ``$2,450'' and
inserting ``$9,600'', and
(D) in clause (iv), by striking ``$1,475'' and
inserting ``$5,760''.
(2) Conforming amendments.--
(A) Clause (ii) of section 280F(a)(1)(B) <<NOTE: 26
USC 280F.>> is amended by striking ``$1,475'' in the
text and heading and inserting ``$5,760''.
(B) Paragraph (7) of section 280F(d) is amended--
(i) in subparagraph (A), by striking ``1988''
and inserting ``2018'', and
(ii) in subparagraph (B)(i)(II), by striking
``1987'' and inserting ``2017''.
(b) Removal of Computer Equipment From Listed Property.--
(1) In general.--Section 280F(d)(4)(A) is amended--
(A) by inserting ``and'' at the end of clause (iii),
(B) by striking clause (iv), and
(C) by redesignating clause (v) as clause (iv).
(2) Conforming amendment.--Section 280F(d)(4) is amended by
striking subparagraph (B) and by redesignating subparagraph (C)
as subparagraph (B).
(c) <<NOTE: 26 USC 280F note.>> Effective Date.--The amendments
made by this section shall apply to property placed in service after
December 31, 2017, in taxable years ending after such date.
SEC. 13203. MODIFICATIONS OF TREATMENT OF CERTAIN FARM PROPERTY.
(a) Treatment of Certain Farm Property as 5-Year Property.--Clause
(vii) of section 168(e)(3)(B) is amended by striking ``after December
31, 2008, and which is placed in service before January 1, 2010'' and
inserting ``after December 31, 2017''.
(b) Repeal of Required Use of 150-Percent Declining Balance
Method.--Section 168(b)(2) is amended by striking subparagraph (B) and
by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C),
respectively.
(c) <<NOTE: 26 USC 168 note.>> Effective Date.--The amendments made
by this section shall apply to property placed in service after December
31, 2017, in taxable years ending after such date.
SEC. 13204. APPLICABLE RECOVERY PERIOD FOR REAL PROPERTY.
(a) Improvements to Real Property.--
(1) Elimination of qualified leasehold improvement,
qualified restaurant, and qualified retail improvement
property.--Subsection (e) of section 168 is amended--
(A) in subparagraph (E) of paragraph (3)--
(i) by striking clauses (iv), (v), and (ix),
(ii) in clause (vii), by inserting ``and'' at
the end,
(iii) in clause (viii), by striking ``, and''
and inserting a period, and
(iv) by redesignating clauses (vi), (vii), and
(viii), as so amended, as clauses (iv), (v), and
(vi), respectively, and
(B) by striking paragraphs (6), (7), and (8).
[[Page 131 STAT. 2110]]
(2) Application of straight line method to qualified
improvement property.--Paragraph (3) of section 168(b) is
amended--
(A) by striking subparagraphs (G), (H), and (I), and
(B) by inserting after subparagraph (F) the
following new subparagraph:
``(G) Qualified improvement property described in
subsection (e)(6).''.
(3) Alternative depreciation system.--
(A) Electing real property trade or business.--
Subsection (g) of section 168 <<NOTE: 26 USC 168.>> is
amended--
(i) in paragraph (1)--
(I) in subparagraph (D), by striking
``and'' at the end,
(II) in subparagraph (E), by
inserting ``and'' at the end, and
(III) by inserting after
subparagraph (E) the following new
subparagraph:
``(F) any property described in paragraph (8),'',
and
(ii) by adding at the end the following new
paragraph:
``(8) Electing real property trade or business.--The
property described in this paragraph shall consist of any
nonresidential real property, residential rental property, and
qualified improvement property held by an electing real property
trade or business (as defined in 163(j)(7)(B)).''.
(B) Qualified improvement property.--The table
contained in subparagraph (B) of section 168(g)(3) is
amended--
(i) by inserting after the item relating to
subparagraph (D)(ii) the following new item:
``(D)(v)................................................ 20''
, and
(ii) by striking the item relating to
subparagraph (E)(iv) and all that follows through
the item relating to subparagraph (E)(ix) and
inserting the following:
``(E)(iv)............................................... 20
(E)(v).................................................. 30
(E)(vi)................................................. 35''.
(C) Applicable recovery period for residential
rental property.--The table contained in subparagraph
(C) of section 168(g)(2) is amended by striking clauses
(iii) and (iv) and inserting the following:
``(iii) Residential rental property....................30 years
(iv) Nonresidential real property......................40 years
(v) Any railroad grading or tunnel bore or water utility
property.........................................50 years''.
(4) Conforming amendments.--
(A) Clause (i) of section 168(k)(2)(A) is amended--
(i) in subclause (II), by inserting ``or''
after the comma,
(ii) in subclause (III), by striking ``or'' at
the end, and
(iii) by striking subclause (IV).
(B) Section 168 is amended--
(i) in subsection (e), as amended by paragraph
(1)(B), by adding at the end the following:
``(6) Qualified improvement property.--
[[Page 131 STAT. 2111]]
``(A) In general.--The term `qualified improvement
property' means any improvement to an interior portion
of a building which is nonresidential real property if
such improvement is placed in service after the date
such building was first placed in service.
``(B) Certain improvements not included.--Such term
shall not include any improvement for which the
expenditure is attributable to--
``(i) the enlargement of the building,
``(ii) any elevator or escalator, or
``(iii) the internal structural framework of
the building.'', and
(ii) in subsection (k), by striking paragraph
(3).
(b) <<NOTE: 26 USC 168 note.>> Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to property placed
in service after December 31, 2017.
(2) Amendments related to electing real property trade or
business.--The amendments made by subsection (a)(3)(A) shall
apply to taxable years beginning after December 31, 2017.
SEC. 13205. USE OF ALTERNATIVE DEPRECIATION SYSTEM FOR ELECTING
FARMING BUSINESSES.
(a) In General.--Section 168(g)(1), as amended by section 13204, is
amended <<NOTE: 26 USC 168.>> by striking ``and'' at the end of
subparagraph (E), by inserting ``and'' at the end of subparagraph (F),
and by inserting after subparagraph (F) the following new subparagraph:
``(G) any property with a recovery period of 10
years or more which is held by an electing farming
business (as defined in section 163(j)(7)(C)),''.
(b) <<NOTE: 26 USC 168 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 13206. AMORTIZATION OF RESEARCH AND EXPERIMENTAL
EXPENDITURES.
(a) In General.--Section 174 is amended to read as follows:
``SEC. 174. AMORTIZATION OF RESEARCH AND EXPERIMENTAL
EXPENDITURES.
``(a) In General.--In the case of a taxpayer's specified research or
experimental expenditures for any taxable year--
``(1) except as provided in paragraph (2), no deduction
shall be allowed for such expenditures, and
``(2) the taxpayer shall--
``(A) charge such expenditures to capital account,
and
``(B) be allowed an amortization deduction of such
expenditures ratably over the 5-year period (15-year
period in the case of any specified research or
experimental expenditures which are attributable to
foreign research (within the meaning of section
41(d)(4)(F))) beginning with the midpoint of the taxable
year in which such expenditures are paid or incurred.
``(b) Specified Research or Experimental Expenditures.--For purposes
of this section, the term `specified research or experimental
expenditures' means, with respect to any taxable year, research or
experimental expenditures which are paid or incurred
[[Page 131 STAT. 2112]]
by the taxpayer during such taxable year in connection with the
taxpayer's trade or business.
``(c) Special Rules.--
``(1) Land and other property.--This section shall not apply
to any expenditure for the acquisition or improvement of land,
or for the acquisition or improvement of property to be used in
connection with the research or experimentation and of a
character which is subject to the allowance under section 167
(relating to allowance for depreciation, etc.) or section 611
(relating to allowance for depletion); but for purposes of this
section allowances under section 167, and allowances under
section 611, shall be considered as expenditures.
``(2) Exploration expenditures.--This section shall not
apply to any expenditure paid or incurred for the purpose of
ascertaining the existence, location, extent, or quality of any
deposit of ore or other mineral (including oil and gas).
``(3) Software development.--For purposes of this section,
any amount paid or incurred in connection with the development
of any software shall be treated as a research or experimental
expenditure.
``(d) Treatment Upon Disposition, Retirement, or Abandonment.--If
any property with respect to which specified research or experimental
expenditures are paid or incurred is disposed, retired, or abandoned
during the period during which such expenditures are allowed as an
amortization deduction under this section, no deduction shall be allowed
with respect to such expenditures on account of such disposition,
retirement, or abandonment and such amortization deduction shall
continue with respect to such expenditures.''.
(b) <<NOTE: 26 USC 174 note.>> Change in Method of Accounting.--The
amendments made by subsection (a) shall be treated as a change in method
of accounting for purposes of section 481 of the Internal Revenue Code
of 1986 and--
(1) such change shall be treated as initiated by the
taxpayer,
(2) such change shall be treated as made with the consent of
the Secretary, and
(3) such change shall be applied only on a cut-off basis for
any research or experimental expenditures paid or incurred in
taxable years beginning after December 31, 2021, and no
adjustments under section 481(a) shall be made.
(c) Clerical Amendment.--The table of sections for part VI of
subchapter B of chapter 1 <<NOTE: 26 USC prec. 161.>> is amended by
striking the item relating to section 174 and inserting the following
new item:
``Sec. 174. Amortization of research and experimental expenditures.''.
(d) Conforming Amendments.--
(1) Section 41(d)(1)(A) is amended by striking ``expenses
under section 174'' and inserting ``specified research or
experimental expenditures under section 174''.
(2) Subsection (c) of section 280C is amended--
(A) by striking paragraph (1) and inserting the
following:
``(1) In general.--If--
``(A) the amount of the credit determined for the
taxable year under section 41(a)(1), exceeds
[[Page 131 STAT. 2113]]
``(B) the amount allowable as a deduction for such
taxable year for qualified research expenses or basic
research expenses,
the amount chargeable to capital account for the taxable year
for such expenses shall be reduced by the amount of such
excess.'',
(B) by striking paragraph (2),
(C) by redesignating paragraphs (3) (as amended by
this Act) and (4) as paragraphs (2) and (3),
respectively, and
(D) in paragraph (2), as redesignated by
subparagraph (C), by striking ``paragraphs (1) and (2)''
and inserting ``paragraph (1)''.
(e) <<NOTE: 26 USC 41 note.>> Effective Date.--The amendments made
by this section shall apply to amounts paid or incurred in taxable years
beginning after December 31, 2021.
SEC. 13207. EXPENSING OF CERTAIN COSTS OF REPLANTING CITRUS PLANTS
LOST BY REASON OF CASUALTY.
(a) In General.--Section 263A(d)(2) <<NOTE: 26 USC 263A.>> is
amended by adding at the end the following new subparagraph:
``(C) Special temporary rule for citrus plants lost
by reason of casualty.--
``(i) In general.--In the case of the
replanting of citrus plants, subparagraph (A)
shall apply to amounts paid or incurred by a
person (other than the taxpayer described in
subparagraph (A)) if--
``(I) the taxpayer described in
subparagraph (A) has an equity interest
of not less than 50 percent in the
replanted citrus plants at all times
during the taxable year in which such
amounts were paid or incurred and such
other person holds any part of the
remaining equity interest, or
``(II) such other person acquired
the entirety of such taxpayer's equity
interest in the land on which the lost
or damaged citrus plants were located at
the time of such loss or damage, and the
replanting is on such land.
``(ii) Termination.--Clause (i) shall not
apply to any cost paid or incurred after the date
which is 10 years after the date of the enactment
of the Tax Cuts and Jobs Act.''.
(b) <<NOTE: 26 USC 263A note.>> Effective Date.--The amendment made
by this section shall apply to costs paid or incurred after the date of
the enactment of this Act.
Subpart B--Accounting Methods
SEC. 13221. CERTAIN SPECIAL RULES FOR TAXABLE YEAR OF INCLUSION.
(a) Inclusion Not Later Than for Financial Accounting Purposes.--
Section 451 is amended by redesignating subsections (b) through (i) as
subsections (c) through (j), respectively, and by inserting after
subsection (a) the following new subsection:
``(b) Inclusion Not Later Than for Financial Accounting Purposes.--
[[Page 131 STAT. 2114]]
``(1) Income taken into account in financial statement.--
``(A) In general.--In the case of a taxpayer the
taxable income of which is computed under an accrual
method of accounting, the all events test with respect
to any item of gross income (or portion thereof) shall
not be treated as met any later than when such item (or
portion thereof) is taken into account as revenue in--
``(i) an applicable financial statement of the
taxpayer, or
``(ii) such other financial statement as the
Secretary may specify for purposes of this
subsection.
``(B) Exception.--This paragraph shall not apply
to--
``(i) a taxpayer which does not have a
financial statement described in clause (i) or
(ii) of subparagraph (A) for a taxable year, or
``(ii) any item of gross income in connection
with a mortgage servicing contract.
``(C) All events test.--For purposes of this
section, the all events test is met with respect to any
item of gross income if all the events have occurred
which fix the right to receive such income and the
amount of such income can be determined with reasonable
accuracy.
``(2) Coordination with special methods of accounting.--
Paragraph (1) shall not apply with respect to any item of gross
income for which the taxpayer uses a special method of
accounting provided under any other provision of this chapter,
other than any provision of part V of subchapter P (except as
provided in clause (ii) of paragraph (1)(B)).
``(3) Applicable financial statement.--For purposes of this
subsection, the term `applicable financial statement' means--
``(A) a financial statement which is certified as
being prepared in accordance with generally accepted
accounting principles and which is--
``(i) a 10-K (or successor form), or annual
statement to shareholders, required to be filed by
the taxpayer with the United States Securities and
Exchange Commission,
``(ii) an audited financial statement of the
taxpayer which is used for--
``(I) credit purposes,
``(II) reporting to shareholders,
partners, or other proprietors, or to
beneficiaries, or
``(III) any other substantial nontax
purpose,
but only if there is no statement of the taxpayer
described in clause (i), or
``(iii) filed by the taxpayer with any other
Federal agency for purposes other than Federal tax
purposes, but only if there is no statement of the
taxpayer described in clause (i) or (ii),
``(B) a financial statement which is made on the
basis of international financial reporting standards and
is filed by the taxpayer with an agency of a foreign
government which is equivalent to the United States
Securities and Exchange Commission and which has
reporting standards not less stringent than the
standards required by such
[[Page 131 STAT. 2115]]
Commission, but only if there is no statement of the
taxpayer described in subparagraph (A), or
``(C) a financial statement filed by the taxpayer
with any other regulatory or governmental body specified
by the Secretary, but only if there is no statement of
the taxpayer described in subparagraph (A) or (B).
``(4) Allocation of transaction price.--For purposes of this
subsection, in the case of a contract which contains multiple
performance obligations, the allocation of the transaction price
to each performance obligation shall be equal to the amount
allocated to each performance obligation for purposes of
including such item in revenue in the applicable financial
statement of the taxpayer.
``(5) Group of entities.--For purposes of paragraph (1), if
the financial results of a taxpayer are reported on the
applicable financial statement (as defined in paragraph (3)) for
a group of entities, such statement shall be treated as the
applicable financial statement of the taxpayer.''.
(b) Treatment of Advance Payments.--Section 451, as amended by
subsection (a), <<NOTE: 26 USC 451.>> is amended by redesignating
subsections (c) through (j) as subsections (d) through (k),
respectively, and by inserting after subsection (b) the following new
subsection:
``(c) Treatment of Advance Payments.--
``(1) In general.--A taxpayer which computes taxable income
under the accrual method of accounting, and receives any advance
payment during the taxable year, shall--
``(A) except as provided in subparagraph (B),
include such advance payment in gross income for such
taxable year, or
``(B) if the taxpayer elects the application of this
subparagraph with respect to the category of advance
payments to which such advance payment belongs, the
taxpayer shall--
``(i) to the extent that any portion of such
advance payment is required under subsection (b)
to be included in gross income in the taxable year
in which such payment is received, so include such
portion, and
``(ii) include the remaining portion of such
advance payment in gross income in the taxable
year following the taxable year in which such
payment is received.
``(2) Election.--
``(A) In general.--Except as otherwise provided in
this paragraph, the election under paragraph (1)(B)
shall be made at such time, in such form and manner, and
with respect to such categories of advance payments, as
the Secretary may provide.
``(B) Period to which election applies.--An election
under paragraph (1)(B) shall be effective for the
taxable year with respect to which it is first made and
for all subsequent taxable years, unless the taxpayer
secures the consent of the Secretary to revoke such
election. For purposes of this title, the computation of
taxable income under an election made under paragraph
(1)(B) shall be treated as a method of accounting.
``(3) Taxpayers ceasing to exist.--Except as otherwise
provided by the Secretary, the election under paragraph (1)(B)
shall not apply with respect to advance payments received
[[Page 131 STAT. 2116]]
by the taxpayer during a taxable year if such taxpayer ceases to
exist during (or with the close of) such taxable year.
``(4) Advance payment.--For purposes of this subsection--
``(A) In general.--The term `advance payment' means
any payment--
``(i) the full inclusion of which in the gross
income of the taxpayer for the taxable year of
receipt is a permissible method of accounting
under this section (determined without regard to
this subsection),
``(ii) any portion of which is included in
revenue by the taxpayer in a financial statement
described in clause (i) or (ii) of subsection
(b)(1)(A) for a subsequent taxable year, and
``(iii) which is for goods, services, or such
other items as may be identified by the Secretary
for purposes of this clause.
``(B) Exclusions.--Except as otherwise provided by
the Secretary, such term shall not include--
``(i) rent,
``(ii) insurance premiums governed by
subchapter L,
``(iii) payments with respect to financial
instruments,
``(iv) payments with respect to warranty or
guarantee contracts under which a third party is
the primary obligor,
``(v) payments subject to section 871(a), 881,
1441, or 1442,
``(vi) payments in property to which section
83 applies, and
``(vii) any other payment identified by the
Secretary for purposes of this subparagraph.
``(C) Receipt.--For purposes of this subsection, an
item of gross income is received by the taxpayer if it
is actually or constructively received, or if it is due
and payable to the taxpayer.
``(D) Allocation of transaction price.--For purposes
of this subsection, rules similar to subsection (b)(4)
shall apply.''.
(c) <<NOTE: 26 USC 451 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
(d) <<NOTE: 26 USC 451 note.>> Coordination With Section 481.--
(1) In general.--In the case of any qualified change in
method of accounting for the taxpayer's first taxable year
beginning after December 31, 2017--
(A) such change shall be treated as initiated by the
taxpayer, and
(B) such change shall be treated as made with the
consent of the Secretary of the Treasury.
(2) Qualified change in method of accounting.--For purposes
of this subsection, the term ``qualified change in method of
accounting'' means any change in method of accounting which--
(A) is required by the amendments made by this
section, or
[[Page 131 STAT. 2117]]
(B) was prohibited under the Internal Revenue Code
of 1986 prior to such amendments and is permitted under
such Code after such amendments.
(e) <<NOTE: 26 USC 451 note.>> Special Rules for Original Issue
Discount.--Notwithstanding subsection (c), in the case of income from a
debt instrument having original issue discount--
(1) the amendments made by this section shall apply to
taxable years beginning after December 31, 2018, and
(2) the period for taking into account any adjustments under
section 481 by reason of a qualified change in method of
accounting (as defined in subsection (d)) shall be 6 years.
PART IV--BUSINESS-RELATED EXCLUSIONS AND DEDUCTIONS
SEC. 13301. LIMITATION ON DEDUCTION FOR INTEREST.
(a) In General.--Section 163(j) <<NOTE: 26 USC 163.>> is amended to
read as follows:
``(j) Limitation on Business Interest.--
``(1) In general.--The amount allowed as a deduction under
this chapter for any taxable year for business interest shall
not exceed the sum of--
``(A) the business interest income of such taxpayer
for such taxable year,
``(B) 30 percent of the adjusted taxable income of
such taxpayer for such taxable year, plus
``(C) the floor plan financing interest of such
taxpayer for such taxable year.
The amount determined under subparagraph (B) shall not be less
than zero.
``(2) Carryforward of disallowed business interest.--The
amount of any business interest not allowed as a deduction for
any taxable year by reason of paragraph (1) shall be treated as
business interest paid or accrued in the succeeding taxable
year.
``(3) Exemption for certain small businesses.--In the case
of any taxpayer (other than a tax shelter prohibited from using
the cash receipts and disbursements method of accounting under
section 448(a)(3)) which meets the gross receipts test of
section 448(c) for any taxable year, paragraph (1) shall not
apply to such taxpayer for such taxable year. In the case of any
taxpayer which is not a corporation or a partnership, the gross
receipts test of section 448(c) shall be applied in the same
manner as if such taxpayer were a corporation or partnership.
``(4) Application to partnerships, etc.--
``(A) In general.--In the case of any partnership--
``(i) this subsection shall be applied at the
partnership level and any deduction for business
interest shall be taken into account in
determining the non-separately stated taxable
income or loss of the partnership, and
``(ii) the adjusted taxable income of each
partner of such partnership--
``(I) shall be determined without
regard to such partner's distributive
share of any items of income, gain,
deduction, or loss of such partnership,
and
[[Page 131 STAT. 2118]]
``(II) shall be increased by such
partner's distributive share of such
partnership's excess taxable income.
For purposes of clause (ii)(II), a partner's
distributive share of partnership excess taxable
income shall be determined in the same manner as
the partner's distributive share of nonseparately
stated taxable income or loss of the partnership.
``(B) Special rules for carryforwards.--
``(i) In general.--The amount of any business
interest not allowed as a deduction to a
partnership for any taxable year by reason of
paragraph (1) for any taxable year--
``(I) shall not be treated under
paragraph (2) as business interest paid
or accrued by the partnership in the
succeeding taxable year, and
``(II) shall, subject to clause
(ii), be treated as excess business
interest which is allocated to each
partner in the same manner as the non-
separately stated taxable income or loss
of the partnership.
``(ii) Treatment of excess business interest
allocated to partners.--If a partner is allocated
any excess business interest from a partnership
under clause (i) for any taxable year--
``(I) such excess business interest
shall be treated as business interest
paid or accrued by the partner in the
next succeeding taxable year in which
the partner is allocated excess taxable
income from such partnership, but only
to the extent of such excess taxable
income, and
``(II) any portion of such excess
business interest remaining after the
application of subclause (I) shall,
subject to the limitations of subclause
(I), be treated as business interest
paid or accrued in succeeding taxable
years.
For purposes of applying this paragraph, excess
taxable income allocated to a partner from a
partnership for any taxable year shall not be
taken into account under paragraph (1)(A) with
respect to any business interest other than excess
business interest from the partnership until all
such excess business interest for such taxable
year and all preceding taxable years has been
treated as paid or accrued under clause (ii).
``(iii) Basis adjustments.--
``(I) In general.--The adjusted
basis of a partner in a partnership
interest shall be reduced (but not below
zero) by the amount of excess business
interest allocated to the partner under
clause (i)(II).
``(II) Special rule for
dispositions.--If a partner disposes of
a partnership interest, the adjusted
basis of the partner in the partnership
interest shall be increased immediately
before the disposition by the amount of
the excess (if any) of the amount of the
basis reduction under subclause (I) over
the portion of any excess business
[[Page 131 STAT. 2119]]
interest allocated to the partner under
clause (i)(II) which has previously been
treated under clause (ii) as business
interest paid or accrued by the partner.
The preceding sentence shall also apply
to transfers of the partnership interest
(including by reason of death) in a
transaction in which gain is not
recognized in whole or in part. No
deduction shall be allowed to the
transferor or transferee under this
chapter for any excess business interest
resulting in a basis increase under this
subclause.
``(C) Excess taxable income.--The term `excess
taxable income' means, with respect to any partnership,
the amount which bears the same ratio to the
partnership's adjusted taxable income as--
``(i) the excess (if any) of--
``(I) the amount determined for the
partnership under paragraph (1)(B), over
``(II) the amount (if any) by which
the business interest of the
partnership, reduced by the floor plan
financing interest, exceeds the business
interest income of the partnership,
bears to
``(ii) the amount determined for the
partnership under paragraph (1)(B).
``(D) Application to s corporations.--Rules similar
to the rules of subparagraphs (A) and (C) shall apply
with respect to any S corporation and its shareholders.
``(5) Business interest.--For purposes of this subsection,
the term `business interest' means any interest paid or accrued
on indebtedness properly allocable to a trade or business. Such
term shall not include investment interest (within the meaning
of subsection (d)).
``(6) Business interest income.--For purposes of this
subsection, the term `business interest income' means the amount
of interest includible in the gross income of the taxpayer for
the taxable year which is properly allocable to a trade or
business. Such term shall not include investment income (within
the meaning of subsection (d)).
``(7) Trade or business.--For purposes of this subsection--
``(A) In general.--The term `trade or business'
shall not include--
``(i) the trade or business of performing
services as an employee,
``(ii) any electing real property trade or
business,
``(iii) any electing farming business, or
``(iv) the trade or business of the furnishing
or sale of--
``(I) electrical energy, water, or
sewage disposal services,
``(II) gas or steam through a local
distribution system, or
``(III) transportation of gas or
steam by pipeline,
if the rates for such furnishing or sale, as the
case may be, have been established or approved by
a State or political subdivision thereof, by any
agency or instrumentality of the United States, by
a public service or public utility commission or
other similar
[[Page 131 STAT. 2120]]
body of any State or political subdivision
thereof, or by the governing or ratemaking body of
an electric cooperative.
``(B) Electing real property trade or business.--For
purposes of this paragraph, the term `electing real
property trade or business' means any trade or business
which is described in section 469(c)(7)(C) and which
makes an election under this subparagraph. Any such
election shall be made at such time and in such manner
as the Secretary shall prescribe, and, once made, shall
be irrevocable.
``(C) Electing farming business.--For purposes of
this paragraph, the term `electing farming business'
means--
``(i) a farming business (as defined in
section 263A(e)(4)) which makes an election under
this subparagraph, or
``(ii) any trade or business of a specified
agricultural or horticultural cooperative (as
defined in section 199A(g)(2)) with respect to
which the cooperative makes an election under this
subparagraph.
Any such election shall be made at such time and in such
manner as the Secretary shall prescribe, and, once made,
shall be irrevocable.
``(8) Adjusted taxable income.--For purposes of this
subsection, the term `adjusted taxable income' means the taxable
income of the taxpayer--
``(A) computed without regard to--
``(i) any item of income, gain, deduction, or
loss which is not properly allocable to a trade or
business,
``(ii) any business interest or business
interest income,
``(iii) the amount of any net operating loss
deduction under section 172,
``(iv) the amount of any deduction allowed
under section 199A, and
``(v) in the case of taxable years beginning
before January 1, 2022, any deduction allowable
for depreciation, amortization, or depletion, and
``(B) computed with such other adjustments as
provided by the Secretary.
``(9) Floor plan financing interest defined.--For purposes
of this subsection--
``(A) In general.--The term `floor plan financing
interest' means interest paid or accrued on floor plan
financing indebtedness.
``(B) Floor plan financing indebtedness.--The term
`floor plan financing indebtedness' means indebtedness--
``(i) used to finance the acquisition of motor
vehicles held for sale or lease, and
``(ii) secured by the inventory so acquired.
``(C) Motor vehicle.--The term `motor vehicle' means
a motor vehicle that is any of the following:
``(i) Any self-propelled vehicle designed for
transporting persons or property on a public
street, highway, or road.
``(ii) A boat.
[[Page 131 STAT. 2121]]
``(iii) Farm machinery or equipment.
``(10) Cross references.--
``(A) For requirement that an electing real property
trade or business use the alternative depreciation
system, see section 168(g)(1)(F).
``(B) For requirement that an electing farming
business use the alternative depreciation system, see
section 168(g)(1)(G).''.
(b) Treatment of Carryforward of Disallowed Business Interest in
Certain Corporate Acquisitions.--
(1) In general.--Section 381(c) <<NOTE: 26 USC 381.>> is
amended by inserting after paragraph (19) the following new
paragraph:
``(20) Carryforward of disallowed business interest.--The
carryover of disallowed business interest described in section
163(j)(2) to taxable years ending after the date of distribution
or transfer.''.
(2) Application of limitation.--Section 382(d) is amended by
adding at the end the following new paragraph:
``(3) Application to carryforward of disallowed interest.--
The term `pre-change loss' shall include any carryover of
disallowed interest described in section 163(j)(2) under rules
similar to the rules of paragraph (1).''.
(3) Conforming amendment.--Section 382(k)(1) is amended by
inserting after the first sentence the following: ``Such term
shall include any corporation entitled to use a carryforward of
disallowed interest described in section 381(c)(20).''.
(c) <<NOTE: 26 USC 163 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 13302. MODIFICATION OF NET OPERATING LOSS DEDUCTION.
(a) Limitation on Deduction.--
(1) In general.--Section 172(a) is amended to read as
follows:
``(a) Deduction Allowed.--There shall be allowed as a deduction for
the taxable year an amount equal to the lesser of--
``(1) the aggregate of the net operating loss carryovers to
such year, plus the net operating loss carrybacks to such year,
or
``(2) 80 percent of taxable income computed without regard
to the deduction allowable under this section.
For purposes of this subtitle, the term `net operating loss deduction'
means the deduction allowed by this subsection.''.
(2) Coordination of limitation with carrybacks and
carryovers.--Section 172(b)(2) is amended by striking ``shall be
computed--'' and all that follows and inserting ``shall--
``(A) be computed with the modifications specified
in subsection (d) other than paragraphs (1), (4), and
(5) thereof, and by determining the amount of the net
operating loss deduction without regard to the net
operating loss for the loss year or for any taxable year
thereafter,
``(B) not be considered to be less than zero, and
``(C) not exceed the amount determined under
subsection (a)(2) for such prior taxable year.''.
(3) Conforming amendment.--Section 172(d)(6) is amended by
striking ``and'' at the end of subparagraph (A), by striking the
period at the end of subparagraph (B) and
[[Page 131 STAT. 2122]]
inserting ``; and'', and by adding at the end the following new
subparagraph:
``(C) subsection (a)(2) shall be applied by
substituting `real estate investment trust taxable
income (as defined in section 857(b)(2) but without
regard to the deduction for dividends paid (as defined
in section 561))' for `taxable income'.''.
(b) Repeal of Net Operating Loss Carryback; Indefinite
Carryforward.--
(1) In general.--Section 172(b)(1)(A) <<NOTE: 26 USC 172.>>
is amended--
(A) by striking ``shall be a net operating loss
carryback to each of the 2 taxable years'' in clause (i)
and inserting ``except as otherwise provided in this
paragraph, shall not be a net operating loss carryback
to any taxable year'', and
(B) by striking ``to each of the 20 taxable years''
in clause (ii) and inserting ``to each taxable year''.
(2) Conforming amendment.--Section 172(b)(1) is amended by
striking subparagraphs (B) through (F).
(c) Treatment of Farming Losses.--
(1) Allowance of carrybacks.--Section 172(b)(1), as amended
by subsection (b)(2), is amended by adding at the end the
following new subparagraph:
``(B) Farming losses.--
``(i) In general.--In the case of any portion
of a net operating loss for the taxable year which
is a farming loss with respect to the taxpayer,
such loss shall be a net operating loss carryback
to each of the 2 taxable years preceding the
taxable year of such loss.
``(ii) Farming loss.--For purposes of this
section, the term `farming loss' means the lesser
of--
``(I) the amount which would be the
net operating loss for the taxable year
if only income and deductions
attributable to farming businesses (as
defined in section 263A(e)(4)) are taken
into account, or
``(II) the amount of the net
operating loss for such taxable year.
``(iii) Coordination with paragraph (2).--For
purposes of applying paragraph (2), a farming loss
for any taxable year shall be treated as a
separate net operating loss for such taxable year
to be taken into account after the remaining
portion of the net operating loss for such taxable
year.
``(iv) Election.--Any taxpayer entitled to a
2-year carryback under clause (i) from any loss
year may elect not to have such clause apply to
such loss year. Such election shall be made in
such manner as prescribed by the Secretary and
shall be made by the due date (including
extensions of time) for filing the taxpayer's
return for the taxable year of the net operating
loss. Such election, once made for any taxable
year, shall be irrevocable for such taxable
year.''.
(2) Conforming amendments.--
[[Page 131 STAT. 2123]]
(A) Section 172 <<NOTE: 26 USC 172.>> is amended by
striking subsections (f), (g), and (h), and by
redesignating subsection (i) as subsection (f).
(B) Section 537(b)(4) is amended by inserting ``(as
in effect before the date of enactment of the Tax Cuts
and Jobs Act)'' after ``as defined in section 172(f)''.
(d) Treatment of Certain Insurance Losses.--
(1) Treatment of carryforwards and carrybacks.--Section
172(b)(1), as amended by subsections (b)(2) and (c)(1), is
amended by adding at the end the following new subparagraph:
``(C) Insurance companies.--In the case of an
insurance company (as defined in section 816(a)) other
than a life insurance company, the net operating loss
for any taxable year--
``(i) shall be a net operating loss carryback
to each of the 2 taxable years preceding the
taxable year of such loss, and
``(ii) shall be a net operating loss carryover
to each of the 20 taxable years following the
taxable year of the loss.''.
(2) Exemption from limitation.--Section 172, as amended by
subsection (c)(2)(A), is amended by redesignating subsection (f)
as subsection (g) and inserting after subsection (e) the
following new subsection:
``(f) Special Rule for Insurance Companies.--In the case of an
insurance company (as defined in section 816(a)) other than a life
insurance company--
``(1) the amount of the deduction allowed under subsection
(a) shall be the aggregate of the net operating loss carryovers
to such year, plus the net operating loss carrybacks to such
year, and
``(2) subparagraph (C) of subsection (b)(2) shall not
apply.''.
(e) <<NOTE: 26 USC 172 note.>> Effective Date.--
(1) Net operating loss limitation.--The amendments made by
subsections (a) and (d)(2) shall apply to losses arising in
taxable years beginning after December 31, 2017.
(2) Carryforwards and carrybacks.--The amendments made by
subsections (b), (c), and (d)(1) shall apply to net operating
losses arising in taxable years ending after December 31, 2017.
SEC. 13303. LIKE-KIND EXCHANGES OF REAL PROPERTY.
(a) In General.--Section 1031(a)(1) is amended by striking
``property'' each place it appears and inserting ``real property''.
(b) Conforming Amendments.--
(1)(A) Paragraph (2) of section 1031(a) is amended to read
as follows:
``(2) Exception for real property held for sale.--This
subsection shall not apply to any exchange of real property held
primarily for sale.''.
(B) Section 1031 is amended by striking subsection (i).
(2) Section 1031 is amended by striking subsection (e).
(3) Section 1031, as amended by paragraph (2), is amended by
inserting after subsection (d) the following new subsection:
``(e) Application to Certain Partnerships.--For purposes of this
section, an interest in a partnership which has in effect a
[[Page 131 STAT. 2124]]
valid election under section 761(a) to be excluded from the application
of all of subchapter K shall be treated as an interest in each of the
assets of such partnership and not as an interest in a partnership.''.
(4) Section 1031(h) <<NOTE: 26 USC 1031.>> is amended to
read as follows:
``(h) Special Rules for Foreign Real Property.--Real property
located in the United States and real property located outside the
United States are not property of a like kind.''.
(5) The heading of section 1031 is amended by striking
``property'' and inserting ``real property''.
(6) The table of sections for part III of subchapter O of
chapter 1 <<NOTE: 26 USC prec. 1031.>> is amended by striking
the item relating to section 1031 and inserting the following
new item:
``Sec. 1031. Exchange of real property held for productive use or
investment.''.
(c) <<NOTE: 26 USC 1031 note.>> Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
exchanges completed after December 31, 2017.
(2) Transition rule.--The amendments made by this section
shall not apply to any exchange if--
(A) the property disposed of by the taxpayer in the
exchange is disposed of on or before December 31, 2017,
or
(B) the property received by the taxpayer in the
exchange is received on or before December 31, 2017.
SEC. 13304. LIMITATION ON DEDUCTION BY EMPLOYERS OF EXPENSES FOR
FRINGE BENEFITS.
(a) No Deduction Allowed for Entertainment Expenses.--
(1) In general.--Section 274(a) is amended--
(A) in paragraph (1)(A), by striking ``unless'' and
all that follows through ``trade or business,'',
(B) by striking the flush sentence at the end of
paragraph (1), and
(C) by striking paragraph (2)(C).
(2) Conforming amendments.--
(A) Section 274(d) is amended--
(i) by striking paragraph (2) and
redesignating paragraphs (3) and (4) as paragraphs
(2) and (3), respectively, and
(ii) in the flush text following paragraph (3)
(as so redesignated)--
(I) by striking ``, entertainment,
amusement, recreation, or use of the
facility or property,'' in item (B), and
(II) by striking ``(D) the business
relationship to the taxpayer of persons
entertained, using the facility or
property, or receiving the gift'' and
inserting ``(D) the business
relationship to the taxpayer of the
person receiving the benefit'',
(B) Section 274 is amended by striking subsection
(l).
(C) Section 274(n) is amended by striking ``and
Entertainment'' in the heading.
(D) Section 274(n)(1) is amended to read as follows:
``(1) In general.--The amount allowable as a deduction under
this chapter for any expense for food or beverages shall
[[Page 131 STAT. 2125]]
not exceed 50 percent of the amount of such expense which would
(but for this paragraph) be allowable as a deduction under this
chapter.''.
(E) Section 274(n)(2) <<NOTE: 26 USC 274.>> is
amended--
(i) in subparagraph (B), by striking ``in the
case of an expense for food or beverages,'',
(ii) by striking subparagraph (C) and
redesignating subparagraphs (D) and (E) as
subparagraphs (C) and (D), respectively,
(iii) by striking ``of subparagraph (E)'' the
last sentence and inserting ``of subparagraph
(D)'', and
(iv) by striking ``in subparagraph (D)'' in
the last sentence and inserting ``in subparagraph
(C)''.
(F) Clause (iv) of section 7701(b)(5)(A) is amended
to read as follows:
``(iv) a professional athlete who is
temporarily in the United States to compete in a
sports event--
``(I) which is organized for the
primary purpose of benefiting an
organization which is described in
section 501(c)(3) and exempt from tax
under section 501(a),
``(II) all of the net proceeds of
which are contributed to such
organization, and,
``(III) which utilizes volunteers
for substantially all of the work
performed in carrying out such event.''.
(b) Only 50 Percent of Expenses for Meals Provided on or Near
Business Premises Allowed as Deduction.--Paragraph (2) of section
274(n), as amended by subsection (a), is amended--
(1) by striking subparagraph (B),
(2) by redesignating subparagraphs (C) and (D) as
subparagraphs (B) and (C), respectively,
(3) by striking ``of subparagraph (D)'' in the last sentence
and inserting ``of subparagraph (C)'', and
(4) by striking ``in subparagraph (C)'' in the last sentence
and inserting ``in subparagraph (B)''.
(c) Treatment of Transportation Benefits.--Section 274, as amended
by subsection (a), is amended--
(1) in subsection (a)--
(A) in the heading, by striking ``or Recreation''
and inserting ``Recreation, or Qualified Transportation
Fringes'', and
(B) by adding at the end the following new
paragraph:
``(4) Qualified transportation fringes.--No deduction shall
be allowed under this chapter for the expense of any qualified
transportation fringe (as defined in section 132(f)) provided to
an employee of the taxpayer.'', and
(2) by inserting after subsection (k) the following new
subsection:
``(l) Transportation and Commuting Benefits.--
``(1) In general.--No deduction shall be allowed under this
chapter for any expense incurred for providing any
transportation, or any payment or reimbursement, to an employee
of the taxpayer in connection with travel between the employee's
residence and place of employment, except as necessary for
ensuring the safety of the employee.
[[Page 131 STAT. 2126]]
``(2) Exception.--In the case of any qualified bicycle
commuting reimbursement (as described in section 132(f)(5)(F)),
this subsection shall not apply for any amounts paid or incurred
after December 31, 2017, and before January 1, 2026.''.
(d) Elimination of Deduction for Meals Provided at Convenience of
Employer.--Section 274, as amended by subsection (c), is <<NOTE: 26 USC
274.>> amended--
(1) by redesignating subsection (o) as subsection (p), and
(2) by inserting after subsection (n) the following new
subsection:
``(o) Meals Provided at Convenience of Employer.--No deduction shall
be allowed under this chapter for--
``(1) any expense for the operation of a facility described
in section 132(e)(2), and any expense for food or beverages,
including under section 132(e)(1), associated with such
facility, or
``(2) any expense for meals described in section 119(a).''.
(e) <<NOTE: 26 USC 274 note.>> Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to amounts incurred
or paid after December 31, 2017.
(2) Effective date for elimination of deduction for meals
provided at convenience of employer.--The amendments made by
subsection (d) shall apply to amounts incurred or paid after
December 31, 2025.
SEC. 13305. REPEAL OF DEDUCTION FOR INCOME ATTRIBUTABLE TO
DOMESTIC PRODUCTION ACTIVITIES.
(a) In General.--Part VI of subchapter B of chapter 1 is amended by
striking section 199 (and by striking the item relating to such section
in the table of sections <<NOTE: 26 USC prec. 161.>> for such part).
(b) Conforming Amendments.--
(1) Sections 74(d)(2)(B), 86(b)(2)(A), 135(c)(4)(A),
137(b)(3)(A), 219(g)(3)(A)(ii), 221(b)(2)(C), 222(b)(2)(C),
246(b)(1), and 469(i)(3)(F)(iii) are each amended by striking
``199,''.
(2) Section 170(b)(2)(D), as amended by subtitle A, is
amended by striking clause (iv), and by redesignating clauses
(v) and (vi) as clauses (iv) and (v).
(3) Section 172(d) is amended by striking paragraph (7).
(4) Section 613(a), as amended by section 11011, is amended
by striking ``and without the deduction under section 199''.
(5) Section 613A(d)(1), as amended by section 11011, is
amended by striking subparagraph (B) and by redesignating
subparagraphs (C), (D), (E), and (F) as subparagraphs (B), (C),
(D), and (E), respectively.
(c) <<NOTE: 26 USC 74 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 13306. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES, AND
OTHER AMOUNTS.
(a) Denial of Deduction.--
(1) In general.--Subsection (f) of section 162 is amended to
read as follows:
``(f) Fines, Penalties, and Other Amounts.--
``(1) In general.--Except as provided in the following
paragraphs of this subsection, no deduction otherwise allowable
[[Page 131 STAT. 2127]]
shall be allowed under this chapter for any amount paid or
incurred (whether by suit, agreement, or otherwise) to, or at
the direction of, a government or governmental entity in
relation to the violation of any law or the investigation or
inquiry by such government or entity into the potential
violation of any law.
``(2) Exception for amounts constituting restitution or paid
to come into compliance with law.--
``(A) In general.--Paragraph (1) shall not apply to
any amount that--
``(i) the taxpayer establishes--
``(I) constitutes restitution
(including remediation of property) for
damage or harm which was or may be
caused by the violation of any law or
the potential violation of any law, or
``(II) is paid to come into
compliance with any law which was
violated or otherwise involved in the
investigation or inquiry described in
paragraph (1),
``(ii) is identified as restitution or as an
amount paid to come into compliance with such law,
as the case may be, in the court order or
settlement agreement, and
``(iii) in the case of any amount of
restitution for failure to pay any tax imposed
under this title in the same manner as if such
amount were such tax, would have been allowed as a
deduction under this chapter if it had been timely
paid.
The identification under clause (ii) alone shall not be
sufficient to make the establishment required under
clause (i).
``(B) Limitation.--Subparagraph (A) shall not apply
to any amount paid or incurred as reimbursement to the
government or entity for the costs of any investigation
or litigation.
``(3) Exception for amounts paid or incurred as the result
of certain court orders.--Paragraph (1) shall not apply to any
amount paid or incurred by reason of any order of a court in a
suit in which no government or governmental entity is a party.
``(4) Exception for taxes due.--Paragraph (1) shall not
apply to any amount paid or incurred as taxes due.
``(5) Treatment of certain nongovernmental regulatory
entities.--For purposes of this subsection, the following
nongovernmental entities shall be treated as governmental
entities:
``(A) Any nongovernmental entity which exercises
self-regulatory powers (including imposing sanctions) in
connection with a qualified board or exchange (as
defined in section 1256(g)(7)).
``(B) To the extent provided in regulations, any
nongovernmental entity which exercises self-regulatory
powers (including imposing sanctions) as part of
performing an essential governmental function.''.
(2) <<NOTE: 26 USC 162 note.>> Effective date.--The
amendment made by this subsection shall apply to amounts paid or
incurred on or after
[[Page 131 STAT. 2128]]
the date of the enactment of this Act, except that such
amendments shall not apply to amounts paid or incurred under any
binding order or agreement entered into before such date. Such
exception shall not apply to an order or agreement requiring
court approval unless the approval was obtained before such
date.
(b) Reporting of Deductible Amounts.--
(1) In general.--Subpart B of part III of subchapter A of
chapter 61 is amended by inserting after section 6050W the
following new section:
``SEC. 6050X. <<NOTE: 26 USC 6050X.>> INFORMATION WITH RESPECT TO
CERTAIN FINES, PENALTIES, AND OTHER
AMOUNTS.
``(a) Requirement of Reporting.--
``(1) In general.--The appropriate official of any
government or any entity described in section 162(f)(5) which is
involved in a suit or agreement described in paragraph (2) shall
make a return in such form as determined by the Secretary
setting forth--
``(A) the amount required to be paid as a result of
the suit or agreement to which paragraph (1) of section
162(f) applies,
``(B) any amount required to be paid as a result of
the suit or agreement which constitutes restitution or
remediation of property, and
``(C) any amount required to be paid as a result of
the suit or agreement for the purpose of coming into
compliance with any law which was violated or involved
in the investigation or inquiry.
``(2) Suit or agreement described.--
``(A) In general.--A suit or agreement is described
in this paragraph if--
``(i) it is--
``(I) a suit with respect to a
violation of any law over which the
government or entity has authority and
with respect to which there has been a
court order, or
``(II) an agreement which is entered
into with respect to a violation of any
law over which the government or entity
has authority, or with respect to an
investigation or inquiry by the
government or entity into the potential
violation of any law over which such
government or entity has authority, and
``(ii) the aggregate amount involved in all
court orders and agreements with respect to the
violation, investigation, or inquiry is $600 or
more.
``(B) Adjustment of reporting threshold.--The
Secretary shall adjust the $600 amount in subparagraph
(A)(ii) as necessary in order to ensure the efficient
administration of the internal revenue laws.
``(3) Time of filing.--The return required under this
subsection shall be filed at the time the agreement is entered
into, as determined by the Secretary.
``(b) Statements to Be Furnished to Individuals Involved in the
Settlement.--Every person required to make a return
[[Page 131 STAT. 2129]]
under subsection (a) shall furnish to each person who is a party to the
suit or agreement a written statement showing--
``(1) the name of the government or entity, and
``(2) the information supplied to the Secretary under
subsection (a)(1).
The written statement required under the preceding sentence shall be
furnished to the person at the same time the government or entity
provides the Secretary with the information required under subsection
(a).
``(c) Appropriate Official Defined.--For purposes of this section,
the term `appropriate official' means the officer or employee having
control of the suit, investigation, or inquiry or the person
appropriately designated for purposes of this section.''.
(2) Conforming amendment.--The table of sections for subpart
B of part III of subchapter A of chapter 61 <<NOTE: 26 USC prec.
6041.>> is amended by inserting after the item relating to
section 6050W the following new item:
``Sec. 6050X. Information with respect to certain fines, penalties, and
other amounts.''.
(3) <<NOTE: 26 USC 6050X note.>> Effective date.--The
amendments made by this subsection shall apply to amounts paid
or incurred on or after the date of the enactment of this Act,
except that such amendments shall not apply to amounts paid or
incurred under any binding order or agreement entered into
before such date. Such exception shall not apply to an order or
agreement requiring court approval unless the approval was
obtained before such date.
SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS SUBJECT TO
NONDISCLOSURE AGREEMENTS PAID IN
CONNECTION WITH SEXUAL HARASSMENT OR
SEXUAL ABUSE.
(a) Denial of Deduction.--Section 162 is amended by redesignating
subsection (q) as subsection (r) and by inserting after subsection (p)
the following new subsection:
``(q) Payments Related to Sexual Harassment and Sexual Abuse.--No
deduction shall be allowed under this chapter for--
``(1) any settlement or payment related to sexual harassment
or sexual abuse if such settlement or payment is subject to a
nondisclosure agreement, or
``(2) attorney's fees related to such a settlement or
payment.''.
(b) <<NOTE: 26 USC 162 note.>> Effective Date.--The amendments made
by this section shall apply to amounts paid or incurred after the date
of the enactment of this Act.
SEC. 13308. REPEAL OF DEDUCTION FOR LOCAL LOBBYING EXPENSES.
(a) In General.--Section 162(e) is amended by striking paragraphs
(2) and (7) and by redesignating paragraphs (3), (4), (5), (6), and (8)
as paragraphs (2), (3), (4), (5), and (6), respectively.
(b) Conforming Amendment.--Section 6033(e)(1)(B)(ii) is amended by
striking ``section 162(e)(5)(B)(ii)'' and inserting ``section
162(e)(4)(B)(ii)''.
(c) <<NOTE: 26 USC 162 note.>> Effective Date.--The amendments made
by this section shall apply to amounts paid or incurred on or after the
date of the enactment of this Act.
[[Page 131 STAT. 2130]]
SEC. 13309. RECHARACTERIZATION OF CERTAIN GAINS IN THE CASE OF
PARTNERSHIP PROFITS INTERESTS HELD IN
CONNECTION WITH PERFORMANCE OF
INVESTMENT SERVICES.
(a) In General.--Part IV of subchapter O of chapter 1 is amended--
(1) <<NOTE: 26 USC 1061, 1062.>> by redesignating section
1061 as section 1062, and
(2) by inserting after section 1060 the following new
section:
``SEC. 1061. <<NOTE: 26 USC 1061.>> PARTNERSHIP INTERESTS HELD IN
CONNECTION WITH PERFORMANCE OF SERVICES.
``(a) In General.--If one or more applicable partnership interests
are held by a taxpayer at any time during the taxable year, the excess
(if any) of--
``(1) the taxpayer's net long-term capital gain with respect
to such interests for such taxable year, over
``(2) the taxpayer's net long-term capital gain with respect
to such interests for such taxable year computed by applying
paragraphs (3) and (4) of sections 1222 by substituting `3
years' for `1 year',
shall be treated as short-term capital gain, notwithstanding section 83
or any election in effect under section 83(b).
``(b) Special Rule.--To the extent provided by the Secretary,
subsection (a) shall not apply to income or gain attributable to any
asset not held for portfolio investment on behalf of third party
investors.
``(c) Applicable Partnership Interest.--For purposes of this
section--
``(1) In general.--Except as provided in this paragraph or
paragraph (4), the term `applicable partnership interest' means
any interest in a partnership which, directly or indirectly, is
transferred to (or is held by) the taxpayer in connection with
the performance of substantial services by the taxpayer, or any
other related person, in any applicable trade or business. The
previous sentence shall not apply to an interest held by a
person who is employed by another entity that is conducting a
trade or business (other than an applicable trade or business)
and only provides services to such other entity.
``(2) Applicable trade or business.--The term `applicable
trade or business' means any activity conducted on a regular,
continuous, and substantial basis which, regardless of whether
the activity is conducted in one or more entities, consists, in
whole or in part, of--
``(A) raising or returning capital, and
``(B) either--
``(i) investing in (or disposing of) specified
assets (or identifying specified assets for such
investing or disposition), or
``(ii) developing specified assets.
``(3) Specified asset.--The term `specified asset' means
securities (as defined in section 475(c)(2) without regard to
the last sentence thereof), commodities (as defined in section
475(e)(2)), real estate held for rental or investment, cash or
cash equivalents, options or derivative contracts with respect
to any of the foregoing, and an interest in a partnership to the
extent of the partnership's proportionate interest in any of the
foregoing.
[[Page 131 STAT. 2131]]
``(4) Exceptions.--The term `applicable partnership
interest' shall not include--
``(A) any interest in a partnership directly or
indirectly held by a corporation, or
``(B) any capital interest in the partnership which
provides the taxpayer with a right to share in
partnership capital commensurate with--
``(i) the amount of capital contributed
(determined at the time of receipt of such
partnership interest), or
``(ii) the value of such interest subject to
tax under section 83 upon the receipt or vesting
of such interest.
``(5) Third party investor.--The term `third party investor'
means a person who--
``(A) holds an interest in the partnership which
does not constitute property held in connection with an
applicable trade or business; and
``(B) is not (and has not been) actively engaged,
and is (and was) not related to a person so engaged, in
(directly or indirectly) providing substantial services
described in paragraph (1) for such partnership or any
applicable trade or business.
``(d) Transfer of Applicable Partnership Interest to Related
Person.--
``(1) In general.--If a taxpayer transfers any applicable
partnership interest, directly or indirectly, to a person
related to the taxpayer, the taxpayer shall include in gross
income (as short term capital gain) the excess (if any) of--
``(A) so much of the taxpayer's long-term capital
gains with respect to such interest for such taxable
year attributable to the sale or exchange of any asset
held for not more than 3 years as is allocable to such
interest, over
``(B) any amount treated as short term capital gain
under subsection (a) with respect to the transfer of
such interest.
``(2) Related person.--For purposes of this paragraph, a
person is related to the taxpayer if--
``(A) the person is a member of the taxpayer's
family within the meaning of section 318(a)(1), or
``(B) the person performed a service within the
current calendar year or the preceding three calendar
years in any applicable trade or business in which or
for which the taxpayer performed a service.
``(e) Reporting.--The Secretary shall require such reporting (at the
time and in the manner prescribed by the Secretary) as is necessary to
carry out the purposes of this section.
``(f) Regulations.--The Secretary shall issue such regulations or
other guidance as is necessary or appropriate to carry out the purposes
of this section''.
(b) Clerical Amendment.--The table of sections for part IV of
subchapter O of chapter 1 <<NOTE: 16 USC prec. 1051.>> is amended by
striking the item relating to 1061 and inserting the following new
items:
``Sec. 1061. Partnership interests held in connection with performance
of services.
``Sec. 1062. Cross references.''.
(c) <<NOTE: 26 USC 1061 note.>> Effective Date.--The amendments
made by this section shall apply to taxable years beginning after
December 31, 2017.
[[Page 131 STAT. 2132]]
SEC. 13310. PROHIBITION ON CASH, GIFT CARDS, AND OTHER NON-
TANGIBLE PERSONAL PROPERTY AS EMPLOYEE
ACHIEVEMENT AWARDS.
(a) In General.--Subparagraph (A) of section 274(j)(3) <<NOTE: 26
USC 274.>> is amended--
(1) by striking ``The term'' and inserting the following:
``(i) In general.--The term''.
(2) by redesignating clauses (i), (ii), and (iii) as
subclauses (I), (II), and (III), respectively, and conforming
the margins accordingly, and
(3) by adding at the end the following new clause:
``(ii) Tangible personal property.--For
purposes of clause (i), the term `tangible
personal property' shall not include--
``(I) cash, cash equivalents, gift
cards, gift coupons, or gift
certificates (other than arrangements
conferring only the right to select and
receive tangible personal property from
a limited array of such items pre-
selected or pre-approved by the
employer), or
``(II) vacations, meals, lodging,
tickets to theater or sporting events,
stocks, bonds, other securities, and
other similar items.''.
(b) <<NOTE: 26 USC 274 note.>> Effective Date.--The amendments made
by this section shall apply to amounts paid or incurred after December
31, 2017.
SEC. 13311. ELIMINATION OF DEDUCTION FOR LIVING EXPENSES INCURRED
BY MEMBERS OF CONGRESS.
(a) In General.--Subsection (a) of section 162 is amended in the
matter following paragraph (3) by striking ``in excess of $3,000''.
(b) <<NOTE: 26 USC 162 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after the date of
the enactment of this Act.
SEC. 13312. CERTAIN CONTRIBUTIONS BY GOVERNMENTAL ENTITIES NOT
TREATED AS CONTRIBUTIONS TO CAPITAL.
(a) In General.--Section 118 is amended--
(1) by striking subsections (b), (c), and (d),
(2) by redesignating subsection (e) as subsection (d), and
(3) by inserting after subsection (a) the following new
subsections:
``(b) Exceptions.--For purposes of subsection (a), the term
`contribution to the capital of the taxpayer' does not include--
``(1) any contribution in aid of construction or any other
contribution as a customer or potential customer, and
``(2) any contribution by any governmental entity or civic
group (other than a contribution made by a shareholder as such).
``(c) Regulations.--The Secretary shall issue such regulations or
other guidance as may be necessary or appropriate to carry out this
section, including regulations or other guidance for determining whether
any contribution constitutes a contribution in aid of construction.''.
(b) <<NOTE: 26 USC 118 note.>> Effective Date.--
[[Page 131 STAT. 2133]]
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to contributions
made after the date of enactment of this Act.
(2) Exception.--The amendments made by this section shall
not apply to any contribution, made after the date of enactment
of this Act by a governmental entity, which is made pursuant to
a master development plan that has been approved prior to such
date by a governmental entity.
SEC. 13313. REPEAL OF ROLLOVER OF PUBLICLY TRADED SECURITIES GAIN
INTO SPECIALIZED SMALL BUSINESS
INVESTMENT COMPANIES.
(a) In General.--Part III of subchapter O of chapter 1 is amended by
striking section 1044 (and by striking the item <<NOTE: 26 USC prec.
1031.>> relating to such section in the table of sections of such
part).
(b) Conforming Amendments.--Section 1016(a)(23) is amended--
(1) by striking ``1044,'', and
(2) by striking ``1044(d),''.
(c) <<NOTE: 26 USC 1016 note.>> Effective Date.--The amendments
made by this section shall apply to sales after December 31, 2017.
SEC. 13314. CERTAIN SELF-CREATED PROPERTY NOT TREATED AS A CAPITAL
ASSET.
(a) Patents, etc.--Section 1221(a)(3) is amended by inserting ``a
patent, invention, model or design (whether or not patented), a secret
formula or process,'' before ``a copyright''.
(b) Conforming Amendment.--Section 1231(b)(1)(C) is amended by
inserting ``a patent, invention, model or design (whether or not
patented), a secret formula or process,'' before ``a copyright''.
(c) <<NOTE: 26 USC 1221 note.>> Effective Date.--The amendments
made by this section shall apply to dispositions after December 31,
2017.
PART V--BUSINESS CREDITS
SEC. 13401. MODIFICATION OF ORPHAN DRUG CREDIT.
(a) Credit Rate.--Subsection (a) of section 45C is amended by
striking ``50 percent'' and inserting ``25 percent''.
(b) Election of Reduced Credit.--Subsection (b) of section 280C is
amended by redesignating paragraph (3) as paragraph (4) and by inserting
after paragraph (2) the following new paragraph:
``(3) Election of reduced credit.--
``(A) In general.--In the case of any taxable year
for which an election is made under this paragraph--
``(i) paragraphs (1) and (2) shall not apply,
and
``(ii) the amount of the credit under section
45C(a) shall be the amount determined under
subparagraph (B).
``(B) Amount of reduced credit.--The amount of
credit determined under this subparagraph for any
taxable year shall be the amount equal to the excess
of--
``(i) the amount of credit determined under
section 45C(a) without regard to this paragraph,
over
``(ii) the product of--
``(I) the amount described in clause
(i), and
``(II) the maximum rate of tax under
section 11(b).
[[Page 131 STAT. 2134]]
``(C) Election.--An election under this paragraph
for any taxable year shall be made not later than the
time for filing the return of tax for such year
(including extensions), shall be made on such return,
and shall be made in such manner as the Secretary shall
prescribe. Such an election, once made, shall be
irrevocable.''.
(c) <<NOTE: 26 USC 45C note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 13402. REHABILITATION CREDIT LIMITED TO CERTIFIED HISTORIC
STRUCTURES.
(a) In General.--Subsection (a) of section 47 <<NOTE: 26 USC 47.>>
is amended to read as follows:
``(a) General Rule.--
``(1) In general.--For purposes of section 46, for any
taxable year during the 5-year period beginning in the taxable
year in which a qualified rehabilitated building is placed in
service, the rehabilitation credit for such year is an amount
equal to the ratable share for such year.
``(2) Ratable share.--For purposes of paragraph (1), the
ratable share for any taxable year during the period described
in such paragraph is the amount equal to 20 percent of the
qualified rehabilitation expenditures with respect to the
qualified rehabilitated building, as allocated ratably to each
year during such period.''.
(b) Conforming Amendments.--
(1) Section 47(c) is amended--
(A) in paragraph (1)--
(i) in subparagraph (A), by amending clause
(iii) to read as follows:
``(iii) such building is a certified historic
structure, and'',
(ii) by striking subparagraph (B), and
(iii) by redesignating subparagraphs (C) and
(D) as subparagraphs (B) and (C), respectively,
and
(B) in paragraph (2)(B), by amending clause (iv) to
read as follows:
``(iv) Certified historic structure.--Any
expenditure attributable to the rehabilitation of
a qualified rehabilitated building unless the
rehabilitation is a certified rehabilitation
(within the meaning of subparagraph (C)).''.
(2) Paragraph (4) of section 145(d) is amended--
(A) by striking ``of section 47(c)(1)(C)'' each
place it appears and inserting ``of section
47(c)(1)(B)'', and
(B) by striking ``section 47(c)(1)(C)(i)'' and
inserting ``section 47(c)(1)(B)(i)''.
(c) <<NOTE: 26 USC 47 note.>> Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to amounts paid or
incurred after December 31, 2017.
(2) Transition rule.--In the case of qualified
rehabilitation expenditures with respect to any building--
(A) owned or leased by the taxpayer during the
entirety of the period after December 31, 2017, and
(B) with respect to which the 24-month period
selected by the taxpayer under clause (i) of section
47(c)(1)(B) of
[[Page 131 STAT. 2135]]
the Internal Revenue Code (as amended by subsection
(b)), or the 60-month period applicable under clause
(ii) of such section, begins not later than 180 days
after the date of the enactment of this Act,
the amendments made by this section shall apply to such
expenditures paid or incurred after the end of the taxable year
in which the 24-month period, or the 60-month period, referred
to in subparagraph (B) ends.
SEC. 13403. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE.
(a) In General.--
(1) Allowance of credit.--Subpart D of part IV of subchapter
A of chapter 1 is amended by adding at the end the following new
section:
``SEC. 45S. <<NOTE: 26 USC 45S.>> EMPLOYER CREDIT FOR PAID FAMILY
AND MEDICAL LEAVE.
``(a) Establishment of Credit.--
``(1) In general.--For purposes of section 38, in the case
of an eligible employer, the paid family and medical leave
credit is an amount equal to the applicable percentage of the
amount of wages paid to qualifying employees during any period
in which such employees are on family and medical leave.
``(2) Applicable percentage.--For purposes of paragraph (1),
the term `applicable percentage' means 12.5 percent increased
(but not above 25 percent) by 0.25 percentage points for each
percentage point by which the rate of payment (as described
under subsection (c)(1)(B)) exceeds 50 percent.
``(b) Limitation.--
``(1) In general.--The credit allowed under subsection (a)
with respect to any employee for any taxable year shall not
exceed an amount equal to the product of the normal hourly wage
rate of such employee for each hour (or fraction thereof) of
actual services performed for the employer and the number of
hours (or fraction thereof) for which family and medical leave
is taken.
``(2) Non-hourly wage rate.--For purposes of paragraph (1),
in the case of any employee who is not paid on an hourly wage
rate, the wages of such employee shall be prorated to an hourly
wage rate under regulations established by the Secretary.
``(3) Maximum amount of leave subject to credit.--The amount
of family and medical leave that may be taken into account with
respect to any employee under subsection (a) for any taxable
year shall not exceed 12 weeks.
``(c) Eligible Employer.--For purposes of this section--
``(1) In general.--The term `eligible employer' means any
employer who has in place a written policy that meets the
following requirements:
``(A) The policy provides--
``(i) in the case of a qualifying employee who
is not a part-time employee (as defined in section
4980E(d)(4)(B)), not less than 2 weeks of annual
paid family and medical leave, and
``(ii) in the case of a qualifying employee
who is a part-time employee, an amount of annual
paid family and medical leave that is not less
than an amount which bears the same ratio to the
amount of annual
[[Page 131 STAT. 2136]]
paid family and medical leave that is provided to
a qualifying employee described in clause (i) as--
``(I) the number of hours the
employee is expected to work during any
week, bears to
``(II) the number of hours an
equivalent qualifying employee described
in clause (i) is expected to work during
the week.
``(B) The policy requires that the rate of payment
under the program is not less than 50 percent of the
wages normally paid to such employee for services
performed for the employer.
``(2) Special rule for certain employers.--
``(A) In general.--An added employer shall not be
treated as an eligible employer unless such employer
provides paid family and medical leave in compliance
with a written policy which ensures that the employer--
``(i) will not interfere with, restrain, or
deny the exercise of or the attempt to exercise,
any right provided under the policy, and
``(ii) will not discharge or in any other
manner discriminate against any individual for
opposing any practice prohibited by the policy.
``(B) Added employer; added employee.--For purposes
of this paragraph--
``(i) Added employee.--The term `added
employee' means a qualifying employee who is not
covered by title I of the Family and Medical Leave
Act of 1993, as amended.
``(ii) Added employer.--The term `added
employer' means an eligible employer (determined
without regard to this paragraph), whether or not
covered by that title I, who offers paid family
and medical leave to added employees.
``(3) Aggregation rule.--All persons which are treated as a
single employer under subsections (a) and (b) of section 52
shall be treated as a single taxpayer.
``(4) Treatment of benefits mandated or paid for by state or
local governments.--For purposes of this section, any leave
which is paid by a State or local government or required by
State or local law shall not be taken into account in
determining the amount of paid family and medical leave provided
by the employer.
``(5) No inference.--Nothing in this subsection shall be
construed as subjecting an employer to any penalty, liability,
or other consequence (other than ineligibility for the credit
allowed by reason of subsection (a) or recapturing the benefit
of such credit) for failure to comply with the requirements of
this subsection.
``(d) Qualifying Employees.--For purposes of this section, the term
`qualifying employee' means any employee (as defined in section 3(e) of
the Fair Labor Standards Act of 1938, as amended) who--
``(1) has been employed by the employer for 1 year or more,
and
``(2) for the preceding year, had compensation not in excess
of an amount equal to 60 percent of the amount applicable for
such year under clause (i) of section 414(q)(1)(B).
[[Page 131 STAT. 2137]]
``(e) Family and Medical Leave.--
``(1) In general.--Except as provided in paragraph (2), for
purposes of this section, the term `family and medical leave'
means leave for any 1 or more of the purposes described under
subparagraph (A), (B), (C), (D), or (E) of paragraph (1), or
paragraph (3), of section 102(a) of the Family and Medical Leave
Act of 1993, as amended, whether the leave is provided under
that Act or by a policy of the employer.
``(2) Exclusion.--If an employer provides paid leave as
vacation leave, personal leave, or medical or sick leave (other
than leave specifically for 1 or more of the purposes referred
to in paragraph (1)), that paid leave shall not be considered to
be family and medical leave under paragraph (1).
``(3) Definitions.--In this subsection, the terms `vacation
leave', `personal leave', and `medical or sick leave' mean those
3 types of leave, within the meaning of section 102(d)(2) of
that Act.
``(f) Determinations Made by Secretary of Treasury.--For purposes of
this section, any determination as to whether an employer or an employee
satisfies the applicable requirements for an eligible employer (as
described in subsection (c)) or qualifying employee (as described in
subsection (d)), respectively, shall be made by the Secretary based on
such information, to be provided by the employer, as the Secretary
determines to be necessary or appropriate.
``(g) Wages.--For purposes of this section, the term `wages' has the
meaning given such term by subsection (b) of section 3306 (determined
without regard to any dollar limitation contained in such section). Such
term shall not include any amount taken into account for purposes of
determining any other credit allowed under this subpart.
``(h) Election to Have Credit Not Apply.--
``(1) In general.--A taxpayer may elect to have this section
not apply for any taxable year.
``(2) Other rules.--Rules similar to the rules of paragraphs
(2) and (3) of section 51(j) shall apply for purposes of this
subsection.
``(i) Termination.--This section shall not apply to wages paid in
taxable years beginning after December 31, 2019.''.
(b) <<NOTE: 26 USC 38.>> Credit Part of General Business Credit.--
Section 38(b) is amended by striking ``plus'' at the end of paragraph
(35), by striking the period at the end of paragraph (36) and inserting
``, plus'', and by adding at the end the following new paragraph:
``(37) in the case of an eligible employer (as defined in
section 45S(c)), the paid family and medical leave credit
determined under section 45S(a).''.
(c) Credit Allowed Against AMT.--Subparagraph (B) of section
38(c)(4) is amended by redesignating clauses (ix) through (xi) as
clauses (x) through (xii), respectively, and by inserting after clause
(viii) the following new clause:
``(ix) the credit determined under section
45S,''.
(d) Conforming Amendments.--
(1) Denial of double benefit.--Section 280C(a) is amended by
inserting ``45S(a),'' after ``45P(a),''.
(2) Election to have credit not apply.--Section 6501(m) is
amended by inserting ``45S(h),'' after ``45H(g),''.
[[Page 131 STAT. 2138]]
(3) Clerical amendment.--The table of sections for subpart D
of part IV of subchapter A of chapter 1 <<NOTE: 26 USC prec.
38.>> is amended by adding at the end the following new item:
``Sec. 45S. Employer credit for paid family and medical leave.''.
(e) <<NOTE: 26 USC 38 note.>> Effective Date.--The amendments made
by this section shall apply to wages paid in taxable years beginning
after December 31, 2017.
SEC. 13404. REPEAL OF TAX CREDIT BONDS.
(a) In General.--Part IV of subchapter A of chapter 1 <<NOTE: 26 USC
prec. 21, prec. 54, 54, prec. 54A, 54A-54F, prec. 54AA, 54AA.>> is
amended by striking subparts H, I, and J (and by striking the items
relating to such subparts in the table of subparts for such part).
(b) <<NOTE: 26 USC prec. 6411.>> Payments to Issuers.--Subchapter B
of chapter 65 is amended by striking section 6431 (and by striking the
item relating to such section in the table of sections for such
subchapter).
(c) Conforming Amendments.--
(1) Part IV of subchapter U of chapter 1 is amended by
striking section 1397E (and by striking the item <<NOTE: 26
USC prec. 1397E.>> relating to such section in the table of
sections for such part).
(2) Section 54(l)(3)(B) is amended by inserting ``(as in
effect before its repeal by the Tax Cuts and Jobs Act)'' after
``section 1397E(I)''.
(3) Section 6211(b)(4)(A) is amended by striking ``, and
6431'' and inserting ``and'' before ``36B''.
(4) Section 6401(b)(1) is amended by striking ``G, H, I, and
J'' and inserting ``and G''.
(d) <<NOTE: 26 USC 54 note.>> Effective Date.--The amendments made
by this section shall apply to bonds issued after December 31, 2017.
PART VI--PROVISIONS RELATED TO SPECIFIC ENTITIES AND INDUSTRIES
Subpart A--Partnership Provisions
SEC. 13501. TREATMENT OF GAIN OR LOSS OF FOREIGN PERSONS FROM SALE
OR EXCHANGE OF INTERESTS IN
PARTNERSHIPS ENGAGED IN TRADE OR
BUSINESS WITHIN THE UNITED STATES.
(a) Amount Treated as Effectively Connected.--
(1) In general.--Section 864(c) is amended by adding at the
end the following:
``(8) Gain or loss of foreign persons from sale or exchange
of certain partnership interests.--
``(A) In general.--Notwithstanding any other
provision of this subtitle, if a nonresident alien
individual or foreign corporation owns, directly or
indirectly, an interest in a partnership which is
engaged in any trade or business within the United
States, gain or loss on the sale or exchange of all (or
any portion of) such interest shall be treated as
effectively connected with the conduct of such trade or
business to the extent such gain or loss does not exceed
the amount determined under subparagraph (B).
[[Page 131 STAT. 2139]]
``(B) Amount treated as effectively connected.--The
amount determined under this subparagraph with respect
to any partnership interest sold or exchanged--
``(i) in the case of any gain on the sale or
exchange of the partnership interest, is--
``(I) the portion of the partner's
distributive share of the amount of gain
which would have been effectively
connected with the conduct of a trade or
business within the United States if the
partnership had sold all of its assets
at their fair market value as of the
date of the sale or exchange of such
interest, or
``(II) zero if no gain on such
deemed sale would have been so
effectively connected, and
``(ii) in the case of any loss on the sale or
exchange of the partnership interest, is--
``(I) the portion of the partner's
distributive share of the amount of loss
on the deemed sale described in clause
(i)(I) which would have been so
effectively connected, or
``(II) zero if no loss on such
deemed sale would be have been so
effectively connected.
For purposes of this subparagraph, a partner's
distributive share of gain or loss on the deemed
sale shall be determined in the same manner as
such partner's distributive share of the non-
separately stated taxable income or loss of such
partnership.
``(C) Coordination with united states real property
interests.--If a partnership described in subparagraph
(A) holds any United States real property interest (as
defined in section 897(c)) at the time of the sale or
exchange of the partnership interest, then the gain or
loss treated as effectively connected income under
subparagraph (A) shall be reduced by the amount so
treated with respect to such United States real property
interest under section 897.
``(D) Sale or exchange.--For purposes of this
paragraph, the term `sale or exchange' means any sale,
exchange, or other disposition.
``(E) Secretarial authority.--The Secretary shall
prescribe such regulations or other guidance as the
Secretary determines appropriate for the application of
this paragraph, including with respect to exchanges
described in section 332, 351, 354, 355, 356, or 361.''.
(2) Conforming amendments.--Section 864(c)(1) <<NOTE: 26 USC
864.>> is amended--
(A) by striking ``and (7)'' in subparagraph (A), and
inserting ``(7), and (8)'', and
(B) by striking ``or (7)'' in subparagraph (B), and
inserting ``(7), or (8)''.
(b) Withholding Requirements.--Section 1446 is amended by
redesignating subsection (f) as subsection (g) and by inserting after
subsection (e) the following:
``(f) Special Rules for Withholding on Dispositions of Partnership
Interests.--
``(1) In general.--Except as provided in this subsection, if
any portion of the gain (if any) on any disposition of an
[[Page 131 STAT. 2140]]
interest in a partnership would be treated under section
864(c)(8) as effectively connected with the conduct of a trade
or business within the United States, the transferee shall be
required to deduct and withhold a tax equal to 10 percent of the
amount realized on the disposition.
``(2) Exception if nonforeign affidavit furnished.--
``(A) In general.--No person shall be required to
deduct and withhold any amount under paragraph (1) with
respect to any disposition if the transferor furnishes
to the transferee an affidavit by the transferor
stating, under penalty of perjury, the transferor's
United States taxpayer identification number and that
the transferor is not a foreign person.
``(B) False affidavit.--Subparagraph (A) shall not
apply to any disposition if--
``(i) the transferee has actual knowledge that
the affidavit is false, or the transferee receives
a notice (as described in section 1445(d)) from a
transferor's agent or transferee's agent that such
affidavit or statement is false, or
``(ii) the Secretary by regulations requires
the transferee to furnish a copy of such affidavit
or statement to the Secretary and the transferee
fails to furnish a copy of such affidavit or
statement to the Secretary at such time and in
such manner as required by such regulations.
``(C) Rules for agents.--The rules of section
1445(d) shall apply to a transferor's agent or
transferee's agent with respect to any affidavit
described in subparagraph (A) in the same manner as such
rules apply with respect to the disposition of a United
States real property interest under such section.
``(3) Authority of secretary to prescribe reduced amount.--
At the request of the transferor or transferee, the Secretary
may prescribe a reduced amount to be withheld under this section
if the Secretary determines that to substitute such reduced
amount will not jeopardize the collection of the tax imposed
under this title with respect to gain treated under section
864(c)(8) as effectively connected with the conduct of a trade
or business with in the United States.
``(4) Partnership to withhold amounts not withheld by the
transferee.--If a transferee fails to withhold any amount
required to be withheld under paragraph (1), the partnership
shall be required to deduct and withhold from distributions to
the transferee a tax in an amount equal to the amount the
transferee failed to withhold (plus interest under this title on
such amount).
``(5) Definitions.--Any term used in this subsection which
is also used under section 1445 shall have the same meaning as
when used in such section.
``(6) Regulations.--The Secretary shall prescribe such
regulations or other guidance as may be necessary to carry out
the purposes of this subsection, including regulations providing
for exceptions from the provisions of this subsection.''.
(c) Effective Dates.--
[[Page 131 STAT. 2141]]
(1) <<NOTE: 26 USC 864 note.>> Subsection (a).--The
amendments made by subsection (a) shall apply to sales,
exchanges, and dispositions on or after November 27, 2017.
(2) <<NOTE: 26 USC 1446 note.>> Subsection (b).--The
amendment made by subsection (b) shall apply to sales,
exchanges, and dispositions after December 31, 2017.
SEC. 13502. MODIFY DEFINITION OF SUBSTANTIAL BUILT-IN LOSS IN THE
CASE OF TRANSFER OF PARTNERSHIP
INTEREST.
(a) In General.--Paragraph (1) of section 743(d) <<NOTE: 26 USC
743.>> is to read as follows:
``(1) In general.--For purposes of this section, a
partnership has a substantial built-in loss with respect to a
transfer of an interest in the partnership if--
``(A) the partnership's adjusted basis in the
partnership property exceeds by more than $250,000 the
fair market value of such property, or
``(B) the transferee partner would be allocated a
loss of more than $250,000 if the partnership assets
were sold for cash equal to their fair market value
immediately after such transfer.''.
(b) <<NOTE: 26 USC 743 note.>> Effective Date.--The amendments made
by this section shall apply to transfers of partnership interests after
December 31, 2017.
SEC. 13503. CHARITABLE CONTRIBUTIONS AND FOREIGN TAXES TAKEN INTO
ACCOUNT IN DETERMINING LIMITATION ON
ALLOWANCE OF PARTNER'S SHARE OF LOSS.
(a) In General.--Subsection (d) of section 704 is amended--
(1) by striking ``A partner's distributive share'' and
inserting the following:
``(1) In general.--A partner's distributive share'',
(2) by striking ``Any excess of such loss'' and inserting
the following:
``(2) Carryover.--Any excess of such loss'', and
(3) by adding at the end the following new paragraph:
``(3) Special rules.--
``(A) In general.--In determining the amount of any
loss under paragraph (1), there shall be taken into
account the partner's distributive share of amounts
described in paragraphs (4) and (6) of section 702(a).
``(B) Exception.--In the case of a charitable
contribution of property whose fair market value exceeds
its adjusted basis, subparagraph (A) shall not apply to
the extent of the partner's distributive share of such
excess.''.
(b) <<NOTE: 26 USC 704 note.>> Effective Date.--The amendments made
by this section shall apply to partnership taxable years beginning after
December 31, 2017.
SEC. 13504. REPEAL OF TECHNICAL TERMINATION OF PARTNERSHIPS.
(a) In General.--Paragraph (1) of section 708(b) is amended--
(1) by striking ``, or'' at the end of subparagraph (A) and
all that follows and inserting a period, and
(2) by striking ``only if--'' and all that follows through
``no part of any business'' and inserting the following: ``only
if no part of any business''.
(b) Conforming Amendment.--
[[Page 131 STAT. 2142]]
(1) Section 168(i)(7)(B) <<NOTE: 26 USC 168.>> is amended
by striking the second sentence.
(2) Section 743(e) is amended by striking paragraph (4) and
redesignating paragraphs (5), (6), and (7) as paragraphs (4),
(5), and (6).
(c) <<NOTE: 26 USC 168 note.>> Effective Date.--The amendments made
by this section shall apply to partnership taxable years beginning after
December 31, 2017.
Subpart B--Insurance Reforms
SEC. 13511. NET OPERATING LOSSES OF LIFE INSURANCE COMPANIES.
(a) In General.--Section 805(b) is amended by striking paragraph (4)
and by redesignating paragraph (5) as paragraph (4).
(b) Conforming Amendments.--
(1) Part I of subchapter L of chapter 1 is amended by
striking section 810 (and by striking the item <<NOTE: 26
USC prec. 804.>> relating to such section in the table of
sections for such part).
(2)(A) Part III of subchapter L of chapter 1 is amended by
striking section 844 (and by striking the item <<NOTE: 26
USC prec. 841.>> relating to such section in the table of
sections for such part).
(B) Section 831(b)(3) is amended by striking ``except as
provided in section 844,''
(3) Section 381 is amended by striking subsection (d).
(4) Section 805(a)(4)(B)(ii) is amended to read as follows:
``(ii) the deduction allowed under section
172,''.
(5) Section 805(a) is amended by striking paragraph (5).
(6) Section 805(b)(2)(A)(iv) is amended to read as follows:
``(iv) any net operating loss carryback to the
taxable year under section 172, and''.
(7) Section 953(b)(1)(B) is amended to read as follows:
``(B) So much of section 805(a)(8) as relates to the
deduction allowed under section 172.''.
(8) Section 1351(i)(3) is amended by striking ``or the
operations loss deduction under section 810,''.
(c) <<NOTE: 26 USC 381 note.>> Effective Date.--The amendments made
by this section shall apply to losses arising in taxable years beginning
after December 31, 2017.
SEC. 13512. REPEAL OF SMALL LIFE INSURANCE COMPANY DEDUCTION.
(a) In General.--Part I of subchapter L of chapter 1 is amended by
striking section 806 (and by striking the item <<NOTE: 26 USC prec.
804.>> relating to such section in the table of sections for such
part).
(b) Conforming Amendments.--
(1) Section 453B(e) is amended--
(A) by striking ``(as defined in section
806(b)(3))'' in paragraph (2)(B), and
(B) by adding at the end the following new
paragraph:
``(3) Noninsurance business.--
``(A) In general.--For purposes of this subsection,
the term `noninsurance business' means any activity
which is not an insurance business.
``(B) Certain activities treated as insurance
businesses.--For purposes of subparagraph (A), any
activity which is not an insurance business shall be
treated as an insurance business if--
[[Page 131 STAT. 2143]]
``(i) it is of a type traditionally carried on
by life insurance companies for investment
purposes, but only if the carrying on of such
activity (other than in the case of real estate)
does not constitute the active conduct of a trade
or business, or
``(ii) it involves the performance of
administrative services in connection with plans
providing life insurance, pension, or accident and
health benefits.''.
(2) Section 465(c)(7)(D)(v)(II) <<NOTE: 26 USC 465.>> is
amended by striking ``section 806(b)(3)'' and inserting
``section 453B(e)(3)''.
(3) Section 801(a)(2) is amended by striking subparagraph
(C).
(4) Section 804 is amended by striking ``means--'' and all
that follows and inserting ``means the general deductions
provided in section 805.''.
(5) Section 805(a)(4)(B), as amended by this Act, is amended
by striking clause (i) and by redesignating clauses (ii), (iii),
and (iv) as clauses (i), (ii), and (iii), respectively.
(6) Section 805(b)(2)(A), as amended by this Act, is amended
by striking clause (iii) and by redesignating clauses (iv) and
(v) as clauses (iii) and (iv), respectively.
(7) Section 842(c) is amended by striking paragraph (1) and
by redesignating paragraphs (2) and (3) as paragraphs (1) and
(2), respectively.
(8) Section 953(b)(1), as amended by section 13511, is
amended by striking subparagraph (A) and by redesignating
subparagraphs (B) and (C) as subparagraphs (A) and (B),
respectively.
(c) <<NOTE: 26 USC 453B note.>> Effective Date.--The amendments
made by this section shall apply to taxable years beginning after
December 31, 2017.
SEC. 13513. ADJUSTMENT FOR CHANGE IN COMPUTING RESERVES.
(a) In General.--Paragraph (1) of section 807(f) is amended to read
as follows:
``(1) Treatment as change in method of accounting.--If the
basis for determining any item referred to in subsection (c) as
of the close of any taxable year differs from the basis for such
determination as of the close of the preceding taxable year,
then so much of the difference between--
``(A) the amount of the item at the close of the
taxable year, computed on the new basis, and
``(B) the amount of the item at the close of the
taxable year, computed on the old basis,
as is attributable to contracts issued before the taxable year
shall be taken into account under section 481 as adjustments
attributable to a change in method of accounting initiated by
the taxpayer and made with the consent of the Secretary.''.
(b) <<NOTE: 26 USC 807 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 13514. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS TO
SHAREHOLDERS FROM PRE-1984
POLICYHOLDERS SURPLUS ACCOUNT.
(a) In General.--Subpart D of part I of subchapter L is amended by
striking section 815 (and by striking the item <<NOTE: 26 USC prec.
811.>> relating to such section in the table of sections for such
subpart).
(b) Conforming Amendment.--Section 801 is amended by striking
subsection (c).
[[Page 131 STAT. 2144]]
(c) <<NOTE: 26 USC 801 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
(d) <<NOTE: 26 USC 801 note.>> Phased Inclusion of Remaining
Balance of Policyholders Surplus Accounts.--In the case of any stock
life insurance company which has a balance (determined as of the close
of such company's last taxable year beginning before January 1, 2018) in
an existing policyholders surplus account (as defined in section 815 of
the Internal Revenue Code of 1986, as in effect before its repeal), the
tax imposed by section 801 of such Code for the first 8 taxable years
beginning after December 31, 2017, shall be the amount which would be
imposed by such section for such year on the sum of--
(1) life insurance company taxable income for such year
(within the meaning of such section 801 but not less than zero),
plus
(2) \1/8\ of such balance.
SEC. 13515. MODIFICATION OF PRORATION RULES FOR PROPERTY AND
CASUALTY INSURANCE COMPANIES.
(a) In General.--Section 832(b)(5)(B) is amended--
(1) by striking ``15 percent'' and inserting ``the
applicable percentage'', and
(2) by inserting at the end the following new sentence:
``For purposes of this subparagraph, the applicable percentage
is 5.25 percent divided by the highest rate in effect under
section 11(b).''.
(b) <<NOTE: 26 USC 832 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 13516. REPEAL OF SPECIAL ESTIMATED TAX PAYMENTS.
(a) In General.--Part III of subchapter L of chapter 1 is amended by
striking section 847 (and by striking the item <<NOTE: 26 USC prec.
841.>> relating to such section in the table of sections for such
part).
(b) <<NOTE: 26 USC 847 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 13517. COMPUTATION OF LIFE INSURANCE TAX RESERVES.
(a) In General.--
(1) Appropriate rate of interest.--The second sentence of
section 807(c) is amended to read as follows: ``For purposes of
paragraph (3), the appropriate rate of interest is the highest
rate or rates permitted to be used to discount the obligations
by the National Association of Insurance Commissioners as of the
date the reserve is determined.''.
(2) Method of computing reserves.--Section 807(d) is
amended--
(A) by striking paragraphs (1), (2), (4), and (5),
(B) by redesignating paragraph (6) as paragraph (4),
(C) by inserting before paragraph (3) the following
new paragraphs:
``(1) Determination of reserve.--
``(A) In general.--For purposes of this part (other
than section 816), the amount of the life insurance
reserves for any contract (other than a contract to
which subparagraph (B) applies) shall be the greater
of--
``(i) the net surrender value of such
contract, or
``(ii) 92.81 percent of the reserve determined
under paragraph (2).
[[Page 131 STAT. 2145]]
``(B) Variable contracts.--For purposes of this part
(other than section 816), the amount of the life
insurance reserves for a variable contract shall be
equal to the sum of--
``(i) the greater of--
``(I) the net surrender value of
such contract, or
``(II) the portion of the reserve
that is separately accounted for under
section 817, plus
``(ii) 92.81 percent of the excess (if any) of
the reserve determined under paragraph (2) over
the amount in clause (i).
``(C) Statutory cap.--In no event shall the reserves
determined under subparagraphs (A) or (B) for any
contract as of any time exceed the amount which would be
taken into account with respect to such contract as of
such time in determining statutory reserves (as defined
in paragraph (4)).
``(D) No double counting.--In no event shall any
amount or item be taken into account more than once in
determining any reserve under this subchapter.
``(2) Amount of reserve.--The amount of the reserve
determined under this paragraph with respect to any contract
shall be determined by using the tax reserve method applicable
to such contract.''.
(D) by striking ``(other than a qualified long-term
care insurance contract, as defined in section
7702B(b)), a 2-year full preliminary term method'' in
paragraph (3)(A)(iii) and inserting ``, the reserve
method prescribed by the National Association of
Insurance Commissioners which covers such contract as of
the date the reserve is determined'',
(E) by striking ``(as of the date of issuance)'' in
paragraph (3)(A)(iv)(I) and inserting ``(as of the date
the reserve is determined)'',
(F) by striking ``as of the date of the issuance
of'' in paragraph (3)(A)(iv)(II) and inserting ``as of
the date the reserve is determined for'',
(G) by striking ``in effect on the date of the
issuance of the contract'' in paragraph (3)(B)(i) and
inserting ``applicable to the contract and in effect as
of the date the reserve is determined'', and
(H) by striking ``in effect on the date of the
issuance of the contract'' in paragraph (3)(B)(ii) and
inserting ``applicable to the contract and in effect as
of the date the reserve is determined''.
(3) Special rules.--Section 807(e) <<NOTE: 26 USC 807.>> is
amended--
(A) by striking paragraphs (2) and (5),
(B) by redesignating paragraphs (3), (4), (6), and
(7) as paragraphs (2), (3), (4), and (5), respectively,
(C) by amending paragraph (2) (as so redesignated)
to read as follows:
``(2) Qualified supplemental benefits.--
``(A) Qualified supplemental benefits treated
separately.--For purposes of this part, the amount of
the life insurance reserve for any qualified
supplemental
[[Page 131 STAT. 2146]]
benefit shall be computed separately as though such
benefit were under a separate contract.
``(B) Qualified supplemental benefit.--For purposes
of this paragraph, the term `qualified supplemental
benefit' means any supplemental benefit described in
subparagraph (C) if--
``(i) there is a separately identified premium
or charge for such benefit, and
``(ii) any net surrender value under the
contract attributable to any other benefit is not
available to fund such benefit.
``(C) Supplemental benefits.--For purposes of this
paragraph, the supplemental benefits described in this
subparagraph are any--
``(i) guaranteed insurability,
``(ii) accidental death or disability benefit,
``(iii) convertibility,
``(iv) disability waiver benefit, or
``(v) other benefit prescribed by regulations,
which is supplemental to a contract for which there is a
reserve described in subsection (c).'', and
(D) by adding at the end the following new
paragraph:
``(6) Reporting rules.--The Secretary shall require
reporting (at such time and in such manner as the Secretary
shall prescribe) with respect to the opening balance and closing
balance of reserves and with respect to the method of computing
reserves for purposes of determining income.''.
(4) Definition of life insurance contract.--Section 7702
is <<NOTE: 26 USC 7702.>> amended--
(A) by striking clause (i) of subsection (c)(3)(B)
and inserting the following:
``(i) reasonable mortality charges which meet
the requirements prescribed in regulations to be
promulgated by the Secretary or that do not exceed
the mortality charges specified in the prevailing
commissioners' standard tables as defined in
subsection (f)(10),'' and
(B) by adding at the end of subsection (f) the
following new paragraph:
``(10) Prevailing commissioners' standard tables.--For
purposes of subsection (c)(3)(B)(i), the term `prevailing
commissioners' standard tables' means the most recent
commissioners' standard tables prescribed by the National
Association of Insurance Commissioners which are permitted to be
used in computing reserves for that type of contract under the
insurance laws of at least 26 States when the contract was
issued. If the prevailing commissioners' standard tables as of
the beginning of any calendar year (hereinafter in this
paragraph referred to as the `year of change') are different
from the prevailing commissioners' standard tables as of the
beginning of the preceding calendar year, the issuer may use the
prevailing commissioners' standard tables as of the beginning of
the preceding calendar year with respect to any contract issued
after the change and before the close of the 3-year period
beginning on the first day of the year of change.''.
(b) Conforming Amendments.--
[[Page 131 STAT. 2147]]
(1) Section 808 <<NOTE: 26 USC 808.>> is amended by adding
at the end the following new subsection:
``(g) Prevailing State Assumed Interest Rate.--For purposes of this
subchapter--
``(1) In general.--The term `prevailing State assumed
interest rate' means, with respect to any contract, the highest
assumed interest rate permitted to be used in computing life
insurance reserves for insurance contracts or annuity contracts
(as the case may be) under the insurance laws of at least 26
States. For purposes of the preceding sentence, the effect of
nonforfeiture laws of a State on interest rates for reserves
shall not be taken into account.
``(2) When rate determined.--The prevailing State assumed
interest rate with respect to any contract shall be determined
as of the beginning of the calendar year in which the contract
was issued.''.
(2) Paragraph (1) of section 811(d) is amended by striking
``the greater of the prevailing State assumed interest rate or
applicable Federal interest rate in effect under section 807''
and inserting ``the interest rate in effect under section
808(g)''.
(3) Subparagraph (A) of section 846(f)(6) is amended by
striking ``except that'' and all that follows and inserting
``except that the limitation of subsection (a)(3) shall apply,
and''.
(4) Section 848(e)(1)(B)(iii) is amended by striking
``807(e)(4)'' and inserting ``807(e)(3)''.
(5) Subparagraph (B) of section 954(i)(5) is amended by
striking ``shall be substituted for the prevailing State assumed
interest rate,'' and inserting ``shall apply,''.
(c) <<NOTE: 26 USC 807 note.>> Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
(2) Transition rule.--For the first taxable year beginning
after December 31, 2017, the reserve with respect to any
contract (as determined under section 807(d) of the Internal
Revenue Code of 1986) at the end of the preceding taxable year
shall be determined as if the amendments made by this section
had applied to such reserve in such preceding taxable year.
(3) Transition relief.--
(A) In general.--If--
(i) the reserve determined under section
807(d) of the Internal Revenue Code of 1986
(determined after application of paragraph (2))
with respect to any contract as of the close of
the year preceding the first taxable year
beginning after December 31, 2017, differs from
(ii) the reserve which would have been
determined with respect to such contract as of the
close of such taxable year under such section
determined without regard to paragraph (2),
then the difference between the amount of the reserve
described in clause (i) and the amount of the reserve
described in clause (ii) shall be taken into account
under the method provided in subparagraph (B).
(B) Method.--The method provided in this
subparagraph is as follows:
[[Page 131 STAT. 2148]]
(i) If the amount determined under
subparagraph (A)(i) exceeds the amount determined
under subparagraph (A)(ii), 1/8 of such excess
shall be taken into account, for each of the 8
succeeding taxable years, as a deduction under
section 805(a)(2) or 832(c)(4) of such Code, as
applicable.
(ii) If the amount determined under
subparagraph (A)(ii) exceeds the amount determined
under subparagraph (A)(i), 1/8 of such excess
shall be included in gross income, for each of the
8 succeeding taxable years, under section
803(a)(2) or 832(b)(1)(C) of such Code, as
applicable.
SEC. 13518. MODIFICATION OF RULES FOR LIFE INSURANCE PRORATION FOR
PURPOSES OF DETERMINING THE DIVIDENDS
RECEIVED DEDUCTION.
(a) In General.--Section 812 <<NOTE: 26 USC 812.>> is amended to
read as follows:
``SEC. 812. DEFINITION OF COMPANY'S SHARE AND POLICYHOLDER'S
SHARE.
``(a) Company's Share.--For purposes of section 805(a)(4), the term
`company's share' means, with respect to any taxable year beginning
after December 31, 2017, 70 percent.
``(b) Policyholder's Share.--For purposes of section 807, the term
`policyholder's share' means, with respect to any taxable year beginning
after December 31, 2017, 30 percent.''.
(b) Conforming Amendment.--Section 817A(e)(2) is amended by striking
``, 807(d)(2)(B), and 812'' and inserting ``and 807(d)(2)(B)''.
(c) <<NOTE: 26 USC 812 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 13519. CAPITALIZATION OF CERTAIN POLICY ACQUISITION EXPENSES.
(a) In General.--
(1) Section 848(a)(2) is amended by striking ``120-month''
and inserting ``180-month''.
(2) Section 848(c)(1) is amended by striking ``1.75
percent'' and inserting ``2.09 percent''.
(3) Section 848(c)(2) is amended by striking ``2.05
percent'' and inserting ``2.45 percent''.
(4) Section 848(c)(3) is amended by striking ``7.7 percent''
and inserting ``9.2 percent''.
(b) Conforming Amendments.--Section 848(b)(1) is amended by striking
``120-month'' and inserting ``180-month''.
(c) <<NOTE: 26 USC 848 note.>> Effective Date.--
(1) In general.--The amendments made by this section shall
apply to net premiums for taxable years beginning after December
31, 2017.
(2) Transition rule.--Specified policy acquisition expenses
first required to be capitalized in a taxable year beginning
before January 1, 2018, will continue to be allowed as a
deduction ratably over the 120-month period beginning with the
first month in the second half of such taxable year.
SEC. 13520. TAX REPORTING FOR LIFE SETTLEMENT TRANSACTIONS.
(a) In General.--Subpart B of part III of subchapter A of chapter
61, as amended by section 13306, is amended by adding at the end the
following new section:
[[Page 131 STAT. 2149]]
``SEC. 6050Y. <<NOTE: 26 USC 6050Y.>> RETURNS RELATING TO CERTAIN
LIFE INSURANCE CONTRACT TRANSACTIONS.
``(a) Requirement of Reporting of Certain Payments.--
``(1) In general.--Every person who acquires a life
insurance contract or any interest in a life insurance contract
in a reportable policy sale during any taxable year shall make a
return for such taxable year (at such time and in such manner as
the Secretary shall prescribe) setting forth--
``(A) the name, address, and TIN of such person,
``(B) the name, address, and TIN of each recipient
of payment in the reportable policy sale,
``(C) the date of such sale,
``(D) the name of the issuer of the life insurance
contract sold and the policy number of such contract,
and
``(E) the amount of each payment.
``(2) Statement to be furnished to persons with respect to
whom information is required.--Every person required to make a
return under this subsection shall furnish to each person whose
name is required to be set forth in such return a written
statement showing--
``(A) the name, address, and phone number of the
information contact of the person required to make such
return, and
``(B) the information required to be shown on such
return with respect to such person, except that in the
case of an issuer of a life insurance contract, such
statement is not required to include the information
specified in paragraph (1)(E).
``(b) Requirement of Reporting of Seller's Basis in Life Insurance
Contracts.--
``(1) In general.--Upon receipt of the statement required
under subsection (a)(2) or upon notice of a transfer of a life
insurance contract to a foreign person, each issuer of a life
insurance contract shall make a return (at such time and in such
manner as the Secretary shall prescribe) setting forth--
``(A) the name, address, and TIN of the seller who
transfers any interest in such contract in such sale,
``(B) the investment in the contract (as defined in
section 72(e)(6)) with respect to such seller, and
``(C) the policy number of such contract.
``(2) Statement to be furnished to persons with respect to
whom information is required.--Every person required to make a
return under this subsection shall furnish to each person whose
name is required to be set forth in such return a written
statement showing--
``(A) the name, address, and phone number of the
information contact of the person required to make such
return, and
``(B) the information required to be shown on such
return with respect to each seller whose name is
required to be set forth in such return.
``(c) Requirement of Reporting With Respect to Reportable Death
Benefits.--
``(1) In general.--Every person who makes a payment of
reportable death benefits during any taxable year shall make a
return for such taxable year (at such time and in such manner as
the Secretary shall prescribe) setting forth--
[[Page 131 STAT. 2150]]
``(A) the name, address, and TIN of the person
making such payment,
``(B) the name, address, and TIN of each recipient
of such payment,
``(C) the date of each such payment,
``(D) the gross amount of each such payment, and
``(E) such person's estimate of the investment in
the contract (as defined in section 72(e)(6)) with
respect to the buyer.
``(2) Statement to be furnished to persons with respect to
whom information is required.--Every person required to make a
return under this subsection shall furnish to each person whose
name is required to be set forth in such return a written
statement showing--
``(A) the name, address, and phone number of the
information contact of the person required to make such
return, and
``(B) the information required to be shown on such
return with respect to each recipient of payment whose
name is required to be set forth in such return.
``(d) Definitions.--For purposes of this section:
``(1) Payment.--The term `payment' means, with respect to
any reportable policy sale, the amount of cash and the fair
market value of any consideration transferred in the sale.
``(2) Reportable policy sale.--The term `reportable policy
sale' has the meaning given such term in section 101(a)(3)(B).
``(3) Issuer.--The term `issuer' means any life insurance
company that bears the risk with respect to a life insurance
contract on the date any return or statement is required to be
made under this section.
``(4) Reportable death benefits.--The term `reportable death
benefits' means amounts paid by reason of the death of the
insured under a life insurance contract that has been
transferred in a reportable policy sale.''.
(b) Clerical Amendment.--The table of sections for subpart B of part
III of subchapter A of chapter 61, as amended by section 13306, is
amended <<NOTE: 26 USC prec. 6041.>> by inserting after the item
relating to section 6050X the following new item:
``Sec. 6050Y. Returns relating to certain life insurance contract
transactions.''.
(c) Conforming Amendments.--
(1) Subsection (d) of section 6724 <<NOTE: 26 USC 6724.>>
is amended--
(A) by striking ``or'' at the end of clause (xxiv)
of paragraph (1)(B), by striking ``and'' at the end of
clause (xxv) of such paragraph and inserting ``or'', and
by inserting after such clause (xxv) the following new
clause:
``(xxvi) section 6050Y (relating to returns
relating to certain life insurance contract
transactions), and'', and
(B) by striking ``or'' at the end of subparagraph
(HH) of paragraph (2), by striking the period at the end
of subparagraph (II) of such paragraph and inserting ``,
or'', and by inserting after such subparagraph (II) the
following new subparagraph:
``(JJ) subsection (a)(2), (b)(2), or (c)(2) of
section 6050Y (relating to returns relating to certain
life insurance contract transactions).''.
[[Page 131 STAT. 2151]]
(2) Section 6047 <<NOTE: 26 USC 6047.>> is amended--
(A) by redesignating subsection (g) as subsection
(h),
(B) by inserting after subsection (f) the following
new subsection:
``(g) Information Relating to Life Insurance Contract
Transactions.--This section shall not apply to any information which is
required to be reported under section 6050Y.'', and
(C) by adding at the end of subsection (h), as so
redesignated, the following new paragraph:
``(4) For provisions requiring reporting of information
relating to certain life insurance contract transactions, see
section 6050Y.''.
(d) <<NOTE: 26 USC 6047 note.>> Effective Date.--The amendments
made by this section shall apply to--
(1) reportable policy sales (as defined in section
6050Y(d)(2) of the Internal Revenue Code of 1986 (as added by
subsection (a)) after December 31, 2017, and
(2) reportable death benefits (as defined in section
6050Y(d)(4) of such Code (as added by subsection (a)) paid after
December 31, 2017.
SEC. 13521. CLARIFICATION OF TAX BASIS OF LIFE INSURANCE
CONTRACTS.
(a) Clarification With Respect to Adjustments.--Paragraph (1) of
section 1016(a) is amended by striking subparagraph (A) and all that
follows and inserting the following:
``(A) for--
``(i) taxes or other carrying charges
described in section 266; or
``(ii) expenditures described in section 173
(relating to circulation expenditures),
for which deductions have been taken by the taxpayer in
determining taxable income for the taxable year or prior
taxable years; or
``(B) for mortality, expense, or other reasonable
charges incurred under an annuity or life insurance
contract;''.
(b) <<NOTE: 26 USC 1016 note.>> Effective Date.--The amendment made
by this section shall apply to transactions entered into after August
25, 2009.
SEC. 13522. EXCEPTION TO TRANSFER FOR VALUABLE CONSIDERATION
RULES.
(a) In General.--Subsection (a) of section 101 is amended by
inserting after paragraph (2) the following new paragraph:
``(3) Exception to valuable consideration rules for
commercial transfers.--
``(A) In general.--The second sentence of paragraph
(2) shall not apply in the case of a transfer of a life
insurance contract, or any interest therein, which is a
reportable policy sale.
``(B) Reportable policy sale.--For purposes of this
paragraph, the term `reportable policy sale' means the
acquisition of an interest in a life insurance contract,
directly or indirectly, if the acquirer has no
substantial family, business, or financial relationship
with the insured apart from the acquirer's interest in
such life insurance contract. For purposes of the
preceding sentence, the term `indirectly' applies to the
acquisition of an interest in a
[[Page 131 STAT. 2152]]
partnership, trust, or other entity that holds an
interest in the life insurance contract.''.
(b) <<NOTE: 26 USC 101.>> Conforming Amendment.--Paragraph (1) of
section 101(a) is amended by striking ``paragraph (2)'' and inserting
``paragraphs (2) and (3)''.
(c) <<NOTE: 26 USC 101 note.>> Effective Date.--The amendments made
by this section shall apply to transfers after December 31, 2017.
SEC. 13523. MODIFICATION OF DISCOUNTING RULES FOR PROPERTY AND
CASUALTY INSURANCE COMPANIES.
(a) Modification of Rate of Interest Used to Discount Unpaid
Losses.--Paragraph (2) of section 846(c) is amended to read as follows:
``(2) Determination of annual rate.--The annual rate
determined by the Secretary under this paragraph for any
calendar year shall be a rate determined on the basis of the
corporate bond yield curve (as defined in section
430(h)(2)(D)(i), determined by substituting `60-month period'
for `24-month period' therein).''.
(b) Modification of Computational Rules for Loss Payment Patterns.--
Section 846(d)(3) is amended by striking subparagraphs (B) through (G)
and inserting the following new subparagraph:
``(B) Treatment of certain losses.--
``(i) 3-year loss payment pattern.--In the
case of any line of business not described in
subparagraph (A)(ii), losses paid after the 1st
year following the accident year shall be treated
as paid equally in the 2nd and 3rd year following
the accident year.
``(ii) 10-year loss payment pattern.--
``(I) In general.--The period taken
into account under subparagraph (A)(ii)
shall be extended to the extent required
under subclause (II).
``(II) Computation of extension.--
The amount of losses which would have
been treated as paid in the 10th year
after the accident year shall be treated
as paid in such 10th year and each
subsequent year in an amount equal to
the amount of the average of the losses
treated as paid in the 7th, 8th, and 9th
years after the accident year (or, if
lesser, the portion of the unpaid losses
not theretofore taken into account). To
the extent such unpaid losses have not
been treated as paid before the 24th
year after the accident year, they shall
be treated as paid in such 24th year.''.
(c) Repeal of Historical Payment Pattern Election.--Section 846, as
amended by this Act, is amended by striking subsection (e) and by
redesignating subsections (f) and (g) as subsections (e) and (f),
respectively.
(d) <<NOTE: 26 USC 846 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
(e) <<NOTE: 26 USC 846 note.>> Transitional Rule.--For the first
taxable year beginning after December 31, 2017--
(1) the unpaid losses and the expenses unpaid (as defined in
paragraphs (5)(B) and (6) of section 832(b) of the Internal
[[Page 131 STAT. 2153]]
Revenue Code of 1986) at the end of the preceding taxable year,
and
(2) the unpaid losses as defined in sections 807(c)(2) and
805(a)(1) of such Code at the end of the preceding taxable year,
shall be determined as if the amendments made by this section had
applied to such unpaid losses and expenses unpaid in the preceding
taxable year and by using the interest rate and loss payment patterns
applicable to accident years ending with calendar year 2018, and any
adjustment shall be taken into account ratably in such first taxable
year and the 7 succeeding taxable years. For subsequent taxable years,
such amendments shall be applied with respect to such unpaid losses and
expenses unpaid by using the interest rate and loss payment patterns
applicable to accident years ending with calendar year 2018.
Subpart C--Banks and Financial Instruments
SEC. 13531. LIMITATION ON DEDUCTION FOR FDIC PREMIUMS.
(a) In General.--Section 162, <<NOTE: 26 USC 162.>> as amended by
sections 13307, is amended by redesignating subsection (r) as subsection
(s) and by inserting after subsection (q) the following new subsection:
``(r) Disallowance of FDIC Premiums Paid by Certain Large Financial
Institutions.--
``(1) In general.--No deduction shall be allowed for the
applicable percentage of any FDIC premium paid or incurred by
the taxpayer.
``(2) Exception for small institutions.--Paragraph (1) shall
not apply to any taxpayer for any taxable year if the total
consolidated assets of such taxpayer (determined as of the close
of such taxable year) do not exceed $10,000,000,000.
``(3) Applicable percentage.--For purposes of this
subsection, the term `applicable percentage' means, with respect
to any taxpayer for any taxable year, the ratio (expressed as a
percentage but not greater than 100 percent) which--
``(A) the excess of--
``(i) the total consolidated assets of such
taxpayer (determined as of the close of such
taxable year), over
``(ii) $10,000,000,000, bears to
``(B) $40,000,000,000.
``(4) FDIC premiums.--For purposes of this subsection, the
term `FDIC premium' means any assessment imposed under section
7(b) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)).
``(5) Total consolidated assets.--For purposes of this
subsection, the term `total consolidated assets' has the meaning
given such term under section 165 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (12 U.S.C. 5365).
``(6) Aggregation rule.--
``(A) In general.--Members of an expanded affiliated
group shall be treated as a single taxpayer for purposes
of applying this subsection.
``(B) Expanded affiliated group.--
``(i) In general.--For purposes of this
paragraph, the term `expanded affiliated group'
means an affiliated group as defined in section
1504(a), determined--
[[Page 131 STAT. 2154]]
``(I) by substituting `more than 50
percent' for `at least 80 percent' each
place it appears, and
``(II) without regard to paragraphs
(2) and (3) of section 1504(b).
``(ii) Control of non-corporate entities.--A
partnership or any other entity (other than a
corporation) shall be treated as a member of an
expanded affiliated group if such entity is
controlled (within the meaning of section
954(d)(3)) by members of such group (including any
entity treated as a member of such group by reason
of this clause).''.
(b) <<NOTE: 26 USC 162 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 13532. REPEAL OF ADVANCE REFUNDING BONDS.
(a) In General.--Paragraph (1) of section 149(d) <<NOTE: 26 USC
149.>> is amended by striking ``as part of an issue described in
paragraph (2), (3), or (4).'' and inserting ``to advance refund another
bond.''.
(b) Conforming Amendments.--
(1) Section 149(d) is amended by striking paragraphs (2),
(3), (4), and (6) and by redesignating paragraphs (5) and (7) as
paragraphs (2) and (3).
(2) Section 148(f)(4)(C) is amended by striking clause (xiv)
and by redesignating clauses (xv) to (xvii) as clauses (xiv) to
(xvi).
(c) <<NOTE: 26 USC 148 note.>> Effective Date.--The amendments made
by this section shall apply to advance refunding bonds issued after
December 31, 2017.
Subpart D--S Corporations
SEC. 13541. EXPANSION OF QUALIFYING BENEFICIARIES OF AN ELECTING
SMALL BUSINESS TRUST.
(a) No Look-through for Eligibility Purposes.--Section
1361(c)(2)(B)(v) is amended by adding at the end the following new
sentence: ``This clause shall not apply for purposes of subsection
(b)(1)(C).''.
(b) <<NOTE: 26 USC 1361 note.>> Effective Date.--The amendment made
by this section shall take effect on January 1, 2018.
SEC. 13542. CHARITABLE CONTRIBUTION DEDUCTION FOR ELECTING SMALL
BUSINESS TRUSTS.
(a) In General.--Section 641(c)(2) is amended by inserting after
subparagraph (D) the following new subparagraph:
``(E)(i) Section 642(c) shall not apply.
``(ii) For purposes of section 170(b)(1)(G),
adjusted gross income shall be computed in the same
manner as in the case of an individual, except that the
deductions for costs which are paid or incurred in
connection with the administration of the trust and
which would not have been incurred if the property were
not held in such trust shall be treated as allowable in
arriving at adjusted gross income.''.
(b) <<NOTE: 26 USC 641 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after December
31, 2017.
[[Page 131 STAT. 2155]]
SEC. 13543. MODIFICATION OF TREATMENT OF S CORPORATION CONVERSIONS
TO C CORPORATIONS.
(a) Adjustments Attributable to Conversion From S Corporation to C
Corporation.--Section 481 <<NOTE: 26 USC 481.>> is amended by adding at
the end the following new subsection:
``(d) Adjustments Attributable to Conversion From S Corporation to C
Corporation.--
``(1) In general.--In the case of an eligible terminated S
corporation, any adjustment required by subsection (a)(2) which
is attributable to such corporation's revocation described in
paragraph (2)(A)(ii) shall be taken into account ratably during
the 6-taxable year period beginning with the year of change.
``(2) Eligible terminated s corporation.--For purposes of
this subsection, the term `eligible terminated S corporation'
means any C corporation--
``(A) which--
``(i) was an S corporation on the day before
the date of the enactment of the Tax Cuts and Jobs
Act, and
``(ii) during the 2-year period beginning on
the date of such enactment makes a revocation of
its election under section 1362(a), and
``(B) the owners of the stock of which, determined
on the date such revocation is made, are the same owners
(and in identical proportions) as on the date of such
enactment.''.
(b) Cash Distributions Following Post-termination Transition Period
From S Corporation Status.--Section 1371 is amended by adding at the end
the following new subsection:
``(f) Cash Distributions Following Post-termination Transition
Period.--In the case of a distribution of money by an eligible
terminated S corporation (as defined in section 481(d)) after the post-
termination transition period, the accumulated adjustments account shall
be allocated to such distribution, and the distribution shall be
chargeable to accumulated earnings and profits, in the same ratio as the
amount of such accumulated adjustments account bears to the amount of
such accumulated earnings and profits.''.
PART VII--EMPLOYMENT
Subpart A--Compensation
SEC. 13601. MODIFICATION OF LIMITATION ON EXCESSIVE EMPLOYEE
REMUNERATION.
(a) Repeal of Performance-based Compensation and Commission
Exceptions for Limitation on Excessive Employee Remuneration.--
(1) In general.--Paragraph (4) of section 162(m) is amended
by striking subparagraphs (B) and (C) and by redesignating
subparagraphs (D), (E), (F), and (G) as subparagraphs (B), (C),
(D), and (E), respectively.
(2) Conforming amendments.--
(A) Paragraphs (5)(E) and (6)(D) of section 162(m)
are each amended by striking ``subparagraphs (B), (C),
and (D)'' and inserting ``subparagraph (B)''.
[[Page 131 STAT. 2156]]
(B) Paragraphs (5)(G) and (6)(G) of section 162(m)
are each amended by striking ``(F) and (G)'' and
inserting ``(D) and (E)''.
(b) Modification of Definition of Covered Employees.--Paragraph (3)
of section 162(m) <<NOTE: 26 USC 162.>> is amended--
(1) in subparagraph (A), by striking ``as of the close of
the taxable year, such employee is the chief executive officer
of the taxpayer or is'' and inserting ``such employee is the
principal executive officer or principal financial officer of
the taxpayer at any time during the taxable year, or was'',
(2) in subparagraph (B)--
(A) by striking ``4'' and inserting ``3'', and
(B) by striking ``(other than the chief executive
officer)'' and inserting ``(other than any individual
described in subparagraph (A))'', and
(3) by striking ``or'' at the end of subparagraph (A), by
striking the period at the end of subparagraph (B) and inserting
``, or'', and by adding at the end the following:
``(C) was a covered employee of the taxpayer (or any
predecessor) for any preceding taxable year beginning
after December 31, 2016.''.
(c) Expansion of Applicable Employer.--
(1) In general.--Section 162(m)(2) is amended to read as
follows:
``(2) Publicly held corporation.--For purposes of this
subsection, the term `publicly held corporation' means any
corporation which is an issuer (as defined in section 3 of the
Securities Exchange Act of 1934 (15 U.S.C. 78c))--
``(A) the securities of which are required to be
registered under section 12 of such Act (15 U.S.C. 78l),
or
``(B) that is required to file reports under section
15(d) of such Act (15 U.S.C. 78o(d)).''.
(2) Conforming amendment.--Section 162(m)(3), as amended by
subsection (b), is amended by adding at the end the following
flush sentence:
``Such term shall include any employee who would be
described in subparagraph (B) if the reporting described in such
subparagraph were required as so described.''.
(d) Special Rule for Remuneration Paid to Beneficiaries, etc.--
Paragraph (4) of section 162(m), as amended by subsection (a), is
amended by adding at the end the following new subparagraph:
``(F) Special rule for remuneration paid to
beneficiaries, etc.--Remuneration shall not fail to be
applicable employee remuneration merely because it is
includible in the income of, or paid to, a person other
than the covered employee, including after the death of
the covered employee.''.
(e) <<NOTE: 26 USC 162 note.>> Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2017.
(2) Exception for binding contracts.--The amendments made by
this section shall not apply to remuneration which is provided
pursuant to a written binding contract which was in effect on
November 2, 2017, and which was not modified in any material
respect on or after such date.
[[Page 131 STAT. 2157]]
SEC. 13602. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE
COMPENSATION.
(a) In General.--Subchapter D of chapter 42 is amended by adding at
the end the following new section:
``SEC. 4960. <<NOTE: 26 USC 4960 note.>> TAX ON EXCESS TAX-EXEMPT
ORGANIZATION EXECUTIVE COMPENSATION.
``(a) Tax Imposed.--There is hereby imposed a tax equal to the
product of the rate of tax under section 11 and the sum of--
``(1) so much of the remuneration paid (other than any
excess parachute payment) by an applicable tax-exempt
organization for the taxable year with respect to employment of
any covered employee in excess of $1,000,000, plus
``(2) any excess parachute payment paid by such an
organization to any covered employee.
For purposes of the preceding sentence, remuneration shall be treated as
paid when there is no substantial risk of forfeiture (within the meaning
of section 457(f)(3)(B)) of the rights to such remuneration.
``(b) Liability for Tax.--The employer shall be liable for the tax
imposed under subsection (a).
``(c) Definitions and Special Rules.--For purposes of this section--
``(1) Applicable tax-exempt organization.--The term
`applicable tax-exempt organization' means any organization
which for the taxable year--
``(A) is exempt from taxation under section 501(a),
``(B) is a farmers' cooperative organization
described in section 521(b)(1),
``(C) has income excluded from taxation under
section 115(1), or
``(D) is a political organization described in
section 527(e)(1).
``(2) Covered employee.--For purposes of this section, the
term `covered employee' means any employee (including any former
employee) of an applicable tax-exempt organization if the
employee--
``(A) is one of the 5 highest compensated employees
of the organization for the taxable year, or
``(B) was a covered employee of the organization (or
any predecessor) for any preceding taxable year
beginning after December 31, 2016.
``(3) Remuneration.--For purposes of this section:
``(A) In general.--The term `remuneration' means
wages (as defined in section 3401(a)), except that such
term shall not include any designated Roth contribution
(as defined in section 402A(c)) and shall include
amounts required to be included in gross income under
section 457(f).
``(B) Exception for remuneration for medical
services.--The term `remuneration' shall not include the
portion of any remuneration paid to a licensed medical
professional (including a veterinarian) which is for the
performance of medical or veterinary services by such
professional.
``(4) Remuneration from related organizations.--
``(A) In general.--Remuneration of a covered
employee by an applicable tax-exempt organization shall
include any
[[Page 131 STAT. 2158]]
remuneration paid with respect to employment of such
employee by any related person or governmental entity.
``(B) Related organizations.--A person or
governmental entity shall be treated as related to an
applicable tax-exempt organization if such person or
governmental entity--
``(i) controls, or is controlled by, the
organization,
``(ii) is controlled by one or more persons
which control the organization,
``(iii) is a supported organization (as
defined in section 509(f)(3)) during the taxable
year with respect to the organization,
``(iv) is a supporting organization described
in section 509(a)(3) during the taxable year with
respect to the organization, or
``(v) in the case of an organization which is
a voluntary employees' beneficiary association
described in section 501(c)(9), establishes,
maintains, or makes contributions to such
voluntary employees' beneficiary association.
``(C) Liability for tax.--In any case in which
remuneration from more than one employer is taken into
account under this paragraph in determining the tax
imposed by subsection (a), each such employer shall be
liable for such tax in an amount which bears the same
ratio to the total tax determined under subsection (a)
with respect to such remuneration as--
``(i) the amount of remuneration paid by such
employer with respect to such employee, bears to
``(ii) the amount of remuneration paid by all
such employers to such employee.
``(5) Excess parachute payment.--For purposes of determining
the tax imposed by subsection (a)(2)--
``(A) In general.--The term `excess parachute
payment' means an amount equal to the excess of any
parachute payment over the portion of the base amount
allocated to such payment.
``(B) Parachute payment.--The term `parachute
payment' means any payment in the nature of compensation
to (or for the benefit of) a covered employee if--
``(i) such payment is contingent on such
employee's separation from employment with the
employer, and
``(ii) the aggregate present value of the
payments in the nature of compensation to (or for
the benefit of) such individual which are
contingent on such separation equals or exceeds an
amount equal to 3 times the base amount.
``(C) Exception.--Such term does not include any
payment--
``(i) described in section 280G(b)(6)
(relating to exemption for payments under
qualified plans),
``(ii) made under or to an annuity contract
described in section 403(b) or a plan described in
section 457(b),
``(iii) to a licensed medical professional
(including a veterinarian) to the extent that such
payment is
[[Page 131 STAT. 2159]]
for the performance of medical or veterinary
services by such professional, or
``(iv) to an individual who is not a highly
compensated employee as defined in section 414(q).
``(D) Base amount.--Rules similar to the rules of
280G(b)(3) shall apply for purposes of determining the
base amount.
``(E) Property transfers; present value.--Rules
similar to the rules of paragraphs (3) and (4) of
section 280G(d) shall apply.
``(6) Coordination with deduction limitation.--Remuneration
the deduction for which is not allowed by reason of section
162(m) shall not be taken into account for purposes of this
section.
``(d) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to prevent avoidance of the tax under this section,
including regulations to prevent avoidance of such tax through the
performance of services other than as an employee or by providing
compensation through a pass-through or other entity to avoid such
tax.''.
(b) Clerical Amendment.--The table of sections for subchapter D of
chapter 42 <<NOTE: 26 USC prec. 4958.>> is amended by adding at the end
the following new item:
``Sec. 4960. Tax on excess tax-exempt organization executive
compensation.''.
(c) <<NOTE: 26 USC 4960 note.>> Effective Date.--The amendments
made by this section shall apply to taxable years beginning after
December 31, 2017.
SEC. 13603. TREATMENT OF QUALIFIED EQUITY GRANTS.
(a) In General.--Section 83 <<NOTE: 26 USC 83.>> is amended by
adding at the end the following new subsection:
``(i) Qualified Equity Grants.--
``(1) In general.--For purposes of this subtitle--
``(A) Timing of inclusion.--If qualified stock is
transferred to a qualified employee who makes an
election with respect to such stock under this
subsection, subsection (a) shall be applied by including
the amount determined under such subsection with respect
to such stock in income of the employee in the taxable
year determined under subparagraph (B) in lieu of the
taxable year described in subsection (a).
``(B) Taxable year determined.--The taxable year
determined under this subparagraph is the taxable year
of the employee which includes the earliest of--
``(i) the first date such qualified stock
becomes transferable (including, solely for
purposes of this clause, becoming transferable to
the employer),
``(ii) the date the employee first becomes an
excluded employee,
``(iii) the first date on which any stock of
the corporation which issued the qualified stock
becomes readily tradable on an established
securities market (as determined by the Secretary,
but not including any market unless such market is
recognized as an established securities market by
the Secretary for purposes of a provision of this
title other than this subsection),
[[Page 131 STAT. 2160]]
``(iv) the date that is 5 years after the
first date the rights of the employee in such
stock are transferable or are not subject to a
substantial risk of forfeiture, whichever occurs
earlier, or
``(v) the date on which the employee revokes
(at such time and in such manner as the Secretary
provides) the election under this subsection with
respect to such stock.
``(2) Qualified stock.--
``(A) In general.--For purposes of this subsection,
the term `qualified stock' means, with respect to any
qualified employee, any stock in a corporation which is
the employer of such employee, if--
``(i) such stock is received--
``(I) in connection with the
exercise of an option, or
``(II) in settlement of a restricted
stock unit, and
``(ii) such option or restricted stock unit
was granted by the corporation--
``(I) in connection with the
performance of services as an employee,
and
``(II) during a calendar year in
which such corporation was an eligible
corporation.
``(B) Limitation.--The term `qualified stock' shall
not include any stock if the employee may sell such
stock to, or otherwise receive cash in lieu of stock
from, the corporation at the time that the rights of the
employee in such stock first become transferable or not
subject to a substantial risk of forfeiture.
``(C) Eligible corporation.--For purposes of
subparagraph (A)(ii)(II)--
``(i) In general.--The term `eligible
corporation' means, with respect to any calendar
year, any corporation if--
``(I) no stock of such corporation
(or any predecessor of such corporation)
is readily tradable on an established
securities market (as determined under
paragraph (1)(B)(iii)) during any
preceding calendar year, and
``(II) such corporation has a
written plan under which, in such
calendar year, not less than 80 percent
of all employees who provide services to
such corporation in the United States
(or any possession of the United States)
are granted stock options, or are
granted restricted stock units, with the
same rights and privileges to receive
qualified stock.
``(ii) Same rights and privileges.--For
purposes of clause (i)(II)--
``(I) except as provided in
subclauses (II) and (III), the
determination of rights and privileges
with respect to stock shall be made in a
similar manner as under section
423(b)(5),
``(II) employees shall not fail to
be treated as having the same rights and
privileges to receive qualified stock
solely because the number of shares
[[Page 131 STAT. 2161]]
available to all employees is not equal
in amount, so long as the number of
shares available to each employee is
more than a de minimis amount, and
``(III) rights and privileges with
respect to the exercise of an option
shall not be treated as the same as
rights and privileges with respect to
the settlement of a restricted stock
unit.
``(iii) Employee.--For purposes of clause
(i)(II), the term `employee' shall not include any
employee described in section 4980E(d)(4) or any
excluded employee.
``(iv) Special rule for calendar years before
2018.--In the case of any calendar year beginning
before January 1, 2018, clause (i)(II) shall be
applied without regard to whether the rights and
privileges with respect to the qualified stock are
the same.
``(3) Qualified employee; excluded employee.--For purposes
of this subsection--
``(A) In general.--The term `qualified employee'
means any individual who--
``(i) is not an excluded employee, and
``(ii) agrees in the election made under this
subsection to meet such requirements as are
determined by the Secretary to be necessary to
ensure that the withholding requirements of the
corporation under chapter 24 with respect to the
qualified stock are met.
``(B) Excluded employee.--The term `excluded
employee' means, with respect to any corporation, any
individual--
``(i) who is a 1-percent owner (within the
meaning of section 416(i)(1)(B)(ii)) at any time
during the calendar year or who was such a 1
percent owner at any time during the 10 preceding
calendar years,
``(ii) who is or has been at any prior time--
``(I) the chief executive officer of
such corporation or an individual acting
in such a capacity, or
``(II) the chief financial officer
of such corporation or an individual
acting in such a capacity,
``(iii) who bears a relationship described in
section 318(a)(1) to any individual described in
subclause (I) or (II) of clause (ii), or
``(iv) who is one of the 4 highest compensated
officers of such corporation for the taxable year,
or was one of the 4 highest compensated officers
of such corporation for any of the 10 preceding
taxable years, determined with respect to each
such taxable year on the basis of the shareholder
disclosure rules for compensation under the
Securities Exchange Act of 1934 (as if such rules
applied to such corporation).
``(4) Election.--
``(A) Time for making election.--An election with
respect to qualified stock shall be made under this
subsection no later than 30 days after the first date
the rights of the employee in such stock are
transferable or are not subject to a substantial risk of
forfeiture, whichever occurs earlier, and shall be made
in a manner similar to the
[[Page 131 STAT. 2162]]
manner in which an election is made under subsection
(b).
``(B) Limitations.--No election may be made under
this section with respect to any qualified stock if--
``(i) the qualified employee has made an
election under subsection (b) with respect to such
qualified stock,
``(ii) any stock of the corporation which
issued the qualified stock is readily tradable on
an established securities market (as determined
under paragraph (1)(B)(iii)) at any time before
the election is made, or
``(iii) such corporation purchased any of its
outstanding stock in the calendar year preceding
the calendar year which includes the first date
the rights of the employee in such stock are
transferable or are not subject to a substantial
risk of forfeiture, unless--
``(I) not less than 25 percent of
the total dollar amount of the stock so
purchased is deferral stock, and
``(II) the determination of which
individuals from whom deferral stock is
purchased is made on a reasonable basis.
``(C) Definitions and special rules related to
limitation on stock redemptions.--
``(i) Deferral stock.--For purposes of this
paragraph, the term `deferral stock' means stock
with respect to which an election is in effect
under this subsection.
``(ii) Deferral stock with respect to any
individual not taken into account if individual
holds deferral stock with longer deferral
period.--Stock purchased by a corporation from any
individual shall not be treated as deferral stock
for purposes of subparagraph (B)(iii) if such
individual (immediately after such purchase) holds
any deferral stock with respect to which an
election has been in effect under this subsection
for a longer period than the election with respect
to the stock so purchased.
``(iii) Purchase of all outstanding deferral
stock.--The requirements of subclauses (I) and
(II) of subparagraph (B)(iii) shall be treated as
met if the stock so purchased includes all of the
corporation's outstanding deferral stock.
``(iv) Reporting.--Any corporation which has
outstanding deferral stock as of the beginning of
any calendar year and which purchases any of its
outstanding stock during such calendar year shall
include on its return of tax for the taxable year
in which, or with which, such calendar year ends
the total dollar amount of its outstanding stock
so purchased during such calendar year and such
other information as the Secretary requires for
purposes of administering this paragraph.
``(5) Controlled groups.--For purposes of this subsection,
all persons treated as a single employer under section 414(b)
shall be treated as 1 corporation.
[[Page 131 STAT. 2163]]
``(6) Notice requirement.--Any corporation which transfers
qualified stock to a qualified employee shall, at the time that
(or a reasonable period before) an amount attributable to such
stock would (but for this subsection) first be includible in the
gross income of such employee--
``(A) certify to such employee that such stock is
qualified stock, and
``(B) notify such employee--
``(i) that the employee may be eligible to
elect to defer income on such stock under this
subsection, and
``(ii) that, if the employee makes such an
election--
``(I) the amount of income
recognized at the end of the deferral
period will be based on the value of the
stock at the time at which the rights of
the employee in such stock first become
transferable or not subject to
substantial risk of forfeiture,
notwithstanding whether the value of the
stock has declined during the deferral
period,
``(II) the amount of such income
recognized at the end of the deferral
period will be subject to withholding
under section 3401(i) at the rate
determined under section 3402(t), and
``(III) the responsibilities of the
employee (as determined by the Secretary
under paragraph (3)(A)(ii)) with respect
to such withholding.
``(7) Restricted stock units.--This section (other than this
subsection), including any election under subsection (b), shall
not apply to restricted stock units.''.
(b) Withholding.--
(1) Time of withholding.--Section 3401 <<NOTE: 26 USC
3401.>> is amended by adding at the end the following new
subsection:
``(i) Qualified Stock for Which an Election Is in Effect Under
Section 83(i).--For purposes of subsection (a), qualified stock (as
defined in section 83(i)) with respect to which an election is made
under section 83(i) shall be treated as wages--
``(1) received on the earliest date described in section
83(i)(1)(B), and
``(2) in an amount equal to the amount included in income
under section 83 for the taxable year which includes such
date.''.
(2) Amount of withholding.--Section 3402 is amended by
adding at the end the following new subsection:
``(t) Rate of Withholding for Certain Stock.--In the case of any
qualified stock (as defined in section 83(i)(2)) with respect to which
an election is made under section 83(i)--
``(1) the rate of tax under subsection (a) shall not be less
than the maximum rate of tax in effect under section 1, and
``(2) such stock shall be treated for purposes of section
3501(b) in the same manner as a non-cash fringe benefit.''.
(c) Coordination With Other Deferred Compensation Rules.--
(1) Election to apply deferral to statutory options.--
(A) Incentive stock options.--Section 422(b) is
amended by adding at the end the following: ``Such term
shall not include any option if an election is made
under
[[Page 131 STAT. 2164]]
section 83(i) with respect to the stock received in
connection with the exercise of such option.''.
(B) <<NOTE: 26 USC 423.>> Employee stock purchase
plans.--Section 423 is amended--
(i) in subsection (b)(5), by striking ``and''
before ``the plan'' and by inserting ``, and the
rules of section 83(i) shall apply in determining
which employees have a right to make an election
under such section'' before the semicolon at the
end, and
(ii) by adding at the end the following new
subsection:
``(d) Coordination With Qualified Equity Grants.--An option for
which an election is made under section 83(i) with respect to the stock
received in connection with its exercise shall not be considered as
granted pursuant an employee stock purchase plan.''.
(2) Exclusion from definition of nonqualified deferred
compensation plan.--Subsection (d) of section 409A is amended by
adding at the end the following new paragraph:
``(7) Treatment of qualified stock.--An arrangement under
which an employee may receive qualified stock (as defined in
section 83(i)(2)) shall not be treated as a nonqualified
deferred compensation plan with respect to such employee solely
because of such employee's election, or ability to make an
election, to defer recognition of income under section 83(i).''.
(d) Information Reporting.--Section 6051(a) is amended by striking
``and'' at the end of paragraph (14)(B), by striking the period at the
end of paragraph (15) and inserting a comma, and by inserting after
paragraph (15) the following new paragraphs:
``(16) the amount includible in gross income under
subparagraph (A) of section 83(i)(1) with respect to an event
described in subparagraph (B) of such section which occurs in
such calendar year, and
``(17) the aggregate amount of income which is being
deferred pursuant to elections under section 83(i), determined
as of the close of the calendar year.''.
(e) Penalty for Failure of Employer to Provide Notice of Tax
Consequences.--Section 6652 is amended by adding at the end the
following new subsection:
``(p) Failure to Provide Notice Under Section 83(i).--In the case of
each failure to provide a notice as required by section 83(i)(6), at the
time prescribed therefor, unless it is shown that such failure is due to
reasonable cause and not to willful neglect, there shall be paid, on
notice and demand of the Secretary and in the same manner as tax, by the
person failing to provide such notice, an amount equal to $100 for each
such failure, but the total amount imposed on such person for all such
failures during any calendar year shall not exceed $50,000.''.
(f) <<NOTE: 26 USC 83 note.>> Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to stock
attributable to options exercised, or restricted stock units
settled, after December 31, 2017.
(2) Requirement to provide notice.--The amendments made by
subsection (e) shall apply to failures after December 31, 2017.
(g) <<NOTE: 26 USC 83 note.>> Transition Rule.--Until such time as
the Secretary (or the Secretary's delegate) issues regulations or other
guidance for
[[Page 131 STAT. 2165]]
purposes of implementing the requirements of paragraph (2)(C)(i)(II) of
section 83(i) of the Internal Revenue Code of 1986 (as added by this
section), or the requirements of paragraph (6) of such section, a
corporation shall be treated as being in compliance with such
requirements (respectively) if such corporation complies with a
reasonable good faith interpretation of such requirements.
SEC. 13604. INCREASE IN EXCISE TAX RATE FOR STOCK COMPENSATION OF
INSIDERS IN EXPATRIATED CORPORATIONS.
(a) In General.--Section 4985(a)(1) <<NOTE: 26 USC 4985.>> is
amended by striking ``section 1(h)(1)(C)'' and inserting ``section
1(h)(1)(D)''.
(b) <<NOTE: 26 USC 4985 note.>> Effective Date.--The amendment made
by this section shall apply to corporations first becoming expatriated
corporations (as defined in section 4985 of the Internal Revenue Code of
1986) after the date of enactment of this Act.
Subpart B--Retirement Plans
SEC. 13611. REPEAL OF SPECIAL RULE PERMITTING RECHARACTERIZATION
OF ROTH CONVERSIONS.
(a) In General.--Section 408A(d)(6)(B) is amended by adding at the
end the following new clause:
``(iii) Conversions.--Subparagraph (A) shall
not apply in the case of a qualified rollover
contribution to which subsection (d)(3) applies
(including by reason of subparagraph (C)
thereof).''.
(b) <<NOTE: 26 USC 408A note.>> Effective Date.--The amendments
made by this section shall apply to taxable years beginning after
December 31, 2017.
SEC. 13612. MODIFICATION OF RULES APPLICABLE TO LENGTH OF SERVICE
AWARD PLANS.
(a) Maximum Deferral Amount.--Clause (ii) of section 457(e)(11)(B)
is amended by striking ``$3,000'' and inserting ``$6,000''.
(b) Cost of Living Adjustment.--Subparagraph (B) of section
457(e)(11) is amended by adding at the end the following:
``(iii) Cost of living adjustment.--In the
case of taxable years beginning after December 31,
2017, the Secretary shall adjust the $6,000 amount
under clause (ii) at the same time and in the same
manner as under section 415(d), except that the
base period shall be the calendar quarter
beginning July 1, 2016, and any increase under
this paragraph that is not a multiple of $500
shall be rounded to the next lowest multiple of
$500.''.
(c) Application of Limitation on Accruals.--Subparagraph (B) of
section 457(e)(11), as amended by subsection (b), is amended by adding
at the end the following:
``(iv) Special rule for application of
limitation on accruals for certain plans.--In the
case of a plan described in subparagraph (A)(ii)
which is a defined benefit plan (as defined in
section 414(j)), the limitation under clause (ii)
shall apply to the actuarial present value of the
aggregate amount of length of service awards
accruing with respect to any year of service. Such
actuarial present value with respect to any year
shall be calculated using reasonable actuarial
assumptions and methods, assuming payment will be
[[Page 131 STAT. 2166]]
made under the most valuable form of payment under
the plan with payment commencing at the later of
the earliest age at which unreduced benefits are
payable under the plan or the participant's age at
the time of the calculation.''.
(d) <<NOTE: 26 USC 457 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 13613. EXTENDED ROLLOVER PERIOD FOR PLAN LOAN OFFSET AMOUNTS.
(a) In General.--Paragraph (3) of section 402(c) <<NOTE: 26 USC
402.>> is amended by adding at the end the following new subparagraph:
``(C) Rollover of certain plan loan offset
amounts.--
``(i) In general.--In the case of a qualified
plan loan offset amount, paragraph (1) shall not
apply to any transfer of such amount made after
the due date (including extensions) for filing the
return of tax for the taxable year in which such
amount is treated as distributed from a qualified
employer plan.
``(ii) Qualified plan loan offset amount.--For
purposes of this subparagraph, the term `qualified
plan loan offset amount' means a plan loan offset
amount which is treated as distributed from a
qualified employer plan to a participant or
beneficiary solely by reason of--
``(I) the termination of the
qualified employer plan, or
``(II) the failure to meet the
repayment terms of the loan from such
plan because of the severance from
employment of the participant.
``(iii) Plan loan offset amount.--For purposes
of clause (ii), the term `plan loan offset amount'
means the amount by which the participant's
accrued benefit under the plan is reduced in order
to repay a loan from the plan.
``(iv) Limitation.--This subparagraph shall
not apply to any plan loan offset amount unless
such plan loan offset amount relates to a loan to
which section 72(p)(1) does not apply by reason of
section 72(p)(2).
``(v) Qualified employer plan.--For purposes
of this subsection, the term `qualified employer
plan' has the meaning given such term by section
72(p)(4).''.
(b) Conforming Amendments.--Section 402(c)(3) is amended--
(1) by striking ``Transfer must be made within 60 days of
receipt'' in the heading and inserting ``Time limit on
transfers'', and
(2) by striking ``subparagraph (B)'' in subparagraph (A) and
inserting ``subparagraphs (B) and (C)''.
(c) <<NOTE: 26 USC 402 note.>> Effective Date.--The amendments made
by this section shall apply to plan loan offset amounts which are
treated as distributed in taxable years beginning after December 31,
2017.
[[Page 131 STAT. 2167]]
PART VIII--EXEMPT ORGANIZATIONS
SEC. 13701. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE
COLLEGES AND UNIVERSITIES.
(a) In General.--Chapter 42 is amended by adding at the end the
following new subchapter:
``Subchapter H--Excise Tax <<NOTE: 26 USC prec. 4968.>> Based on
Investment Income of Private Colleges and Universities
``Sec. 4968. Excise tax based on investment income of private colleges
and universities.
``SEC. 4968. <<NOTE: 26 USC 4968.>> EXCISE TAX BASED ON
INVESTMENT INCOME OF PRIVATE COLLEGES
AND UNIVERSITIES.
``(a) Tax Imposed.--There is hereby imposed on each applicable
educational institution for the taxable year a tax equal to 1.4 percent
of the net investment income of such institution for the taxable year.
``(b) Applicable Educational Institution.--For purposes of this
subchapter--
``(1) In general.--The term `applicable educational
institution' means an eligible educational institution (as
defined in section 25A(f)(2))--
``(A) which had at least 500 students during the
preceding taxable year,
``(B) more than 50 percent of the students of which
are located in the United States,
``(C) which is not described in the first sentence
of section 511(a)(2)(B) (relating to State colleges and
universities), and
``(D) the aggregate fair market value of the assets
of which at the end of the preceding taxable year (other
than those assets which are used directly in carrying
out the institution's exempt purpose) is at least
$500,000 per student of the institution.
``(2) Students.--For purposes of paragraph (1), the number
of students of an institution (including for purposes of
determining the number of students at a particular location)
shall be based on the daily average number of full-time students
attending such institution (with part-time students taken into
account on a full-time student equivalent basis).
``(c) Net Investment Income.--For purposes of this section, net
investment income shall be determined under rules similar to the rules
of section 4940(c).
``(d) Assets and Net Investment Income of Related Organizations.--
``(1) In general.--For purposes of subsections (b)(1)(C) and
(c), assets and net investment income of any related
organization with respect to an educational institution shall be
treated as assets and net investment income, respectively, of
the educational institution, except that--
``(A) no such amount shall be taken into account
with respect to more than 1 educational institution, and
``(B) unless such organization is controlled by such
institution or is described in section 509(a)(3) with
respect to such institution for the taxable year, assets
and net
[[Page 131 STAT. 2168]]
investment income which are not intended or available
for the use or benefit of the educational institution
shall not be taken into account.
``(2) Related organization.--For purposes of this
subsection, the term `related organization' means, with respect
to an educational institution, any organization which--
``(A) controls, or is controlled by, such
institution,
``(B) is controlled by 1 or more persons which also
control such institution, or
``(C) is a supported organization (as defined in
section 509(f)(3)), or an organization described in
section 509(a)(3), during the taxable year with respect
to such institution.''.
(b) Clerical Amendment.--The table of subchapters for chapter
42 <<NOTE: 26 USC prec. 4940.>> is amended by adding at the end the
following new item:
``subchapter h--excise tax based on investment income of private
colleges and universities''.
(c) <<NOTE: 26 USC 4968 note.>> Effective Date.--The amendments
made by this section shall apply to taxable years beginning after
December 31, 2017.
SEC. 13702. UNRELATED BUSINESS TAXABLE INCOME SEPARATELY COMPUTED
FOR EACH TRADE OR BUSINESS ACTIVITY.
(a) In General.--Subsection (a) of section 512 <<NOTE: 26 USC
512.>> is amended by adding at the end the following new paragraph:
``(6) Special rule for organization with more than 1
unrelated trade or business.--In the case of any organization
with more than 1 unrelated trade or business--
``(A) unrelated business taxable income, including
for purposes of determining any net operating loss
deduction, shall be computed separately with respect to
each such trade or business and without regard to
subsection (b)(12),
``(B) the unrelated business taxable income of such
organization shall be the sum of the unrelated business
taxable income so computed with respect to each such
trade or business, less a specific deduction under
subsection (b)(12), and
``(C) for purposes of subparagraph (B), unrelated
business taxable income with respect to any such trade
or business shall not be less than zero.''.
(b) <<NOTE: 26 USC 512 note.>> Effective Date.--
(1) In general.--Except to the extent provided in paragraph
(2), the amendment made by this section shall apply to taxable
years beginning after December 31, 2017.
(2) Carryovers of net operating losses.--If any net
operating loss arising in a taxable year beginning before
January 1, 2018, is carried over to a taxable year beginning on
or after such date--
(A) subparagraph (A) of section 512(a)(6) of the
Internal Revenue Code of 1986, as added by this Act,
shall not apply to such net operating loss, and
(B) the unrelated business taxable income of the
organization, after the application of subparagraph (B)
of such section, shall be reduced by the amount of such
net operating loss.
[[Page 131 STAT. 2169]]
SEC. 13703. UNRELATED BUSINESS TAXABLE INCOME INCREASED BY AMOUNT
OF CERTAIN FRINGE BENEFIT EXPENSES FOR
WHICH DEDUCTION IS DISALLOWED.
(a) In General.--Section 512(a), <<NOTE: 26 USC 512.>> as amended
by this Act, is further amended by adding at the end the following new
paragraph:
``(7) Increase in unrelated business taxable income by
disallowed fringe.--Unrelated business taxable income of an
organization shall be increased by any amount for which a
deduction is not allowable under this chapter by reason of
section 274 and which is paid or incurred by such organization
for any qualified transportation fringe (as defined in section
132(f)), any parking facility used in connection with qualified
parking (as defined in section 132(f)(5)(C)), or any on-premises
athletic facility (as defined in section 132(j)(4)(B)). The
preceding sentence shall not apply to the extent the amount paid
or incurred is directly connected with an unrelated trade or
business which is regularly carried on by the organization. The
Secretary shall issue such regulations or other guidance as may
be necessary or appropriate to carry out the purposes of this
paragraph, including regulations or other guidance providing for
the appropriate allocation of depreciation and other costs with
respect to facilities used for parking or for on-premises
athletic facilities.''.
(b) <<NOTE: 26 USC 512 note.>> Effective Date.--The amendment made
by this section shall apply to amounts paid or incurred after December
31, 2017.
SEC. 13704. REPEAL OF DEDUCTION FOR AMOUNTS PAID IN EXCHANGE FOR
COLLEGE ATHLETIC EVENT SEATING RIGHTS.
(a) In General.--Section 170(l) is amended--
(1) by striking paragraph (1) and inserting the following:
``(1) In general.--No deduction shall be allowed under this
section for any amount described in paragraph (2).'', and
(2) in paragraph (2)(B), by striking ``such amount would be
allowable as a deduction under this section but for the fact
that''.
(b) <<NOTE: 26 USC 170 note.>> Effective Date.--The amendments made
by this section shall apply to contributions made in taxable years
beginning after December 31, 2017.
SEC. 13705. REPEAL OF SUBSTANTIATION EXCEPTION IN CASE OF
CONTRIBUTIONS REPORTED BY DONEE.
(a) In General.--Section 170(f)(8) is amended by striking
subparagraph (D) and by redesignating subparagraph (E) as subparagraph
(D).
(b) <<NOTE: 26 USC 170 note.>> Effective Date.--The amendments made
by this section shall apply to contributions made in taxable years
beginning after December 31, 2016.
PART IX--OTHER PROVISIONS
Subpart A--Craft Beverage Modernization and Tax Reform
SEC. 13801. PRODUCTION PERIOD FOR BEER, WINE, AND DISTILLED
SPIRITS.
(a) In General.--Section 263A(f) is amended--
(1) by redesignating paragraph (4) as paragraph (5), and
[[Page 131 STAT. 2170]]
(2) by inserting after paragraph (3) the following new
paragraph:
``(4) Exemption for aging process of beer, wine, and
distilled spirits.--
``(A) In general.--For purposes of this subsection,
the production period shall not include the aging period
for--
``(i) beer (as defined in section 5052(a)),
``(ii) wine (as described in section 5041(a)),
or
``(iii) distilled spirits (as defined in
section 5002(a)(8)), except such spirits that are
unfit for use for beverage purposes.
``(B) Termination.--This paragraph shall not apply
to interest costs paid or accrued after December 31,
2019.''.
(b) Conforming Amendment.--Paragraph (5)(B)(ii) of section 263A(f),
as redesignated by this section, <<NOTE: 26 USC 263A.>> is amended by
inserting ``except as provided in paragraph (4),'' before ``ending on
the date''.
(c) <<NOTE: 26 USC 263A note.>> Effective Date.--The amendments
made by this section shall apply to interest costs paid or accrued in
calendar years beginning after December 31, 2017.
SEC. 13802. REDUCED RATE OF EXCISE TAX ON BEER.
(a) In General.--Paragraph (1) of section 5051(a) is amended to read
as follows:
``(1) In general.--
``(A) Imposition of tax.--A tax is hereby imposed on
all beer brewed or produced, and removed for consumption
or sale, within the United States, or imported into the
United States. Except as provided in paragraph (2), the
rate of such tax shall be the amount determined under
this paragraph.
``(B) Rate.--Except as provided in subparagraph (C),
the rate of tax shall be $18 for per barrel.
``(C) Special rule.--In the case of beer removed
after December 31, 2017, and before January 1, 2020, the
rate of tax shall be--
``(i) $16 on the first 6,000,000 barrels of
beer--
``(I) brewed by the brewer and
removed during the calendar year for
consumption or sale, or
``(II) imported by the importer into
the United States during the calendar
year, and
``(ii) $18 on any barrels of beer to which
clause (i) does not apply.
``(D) Barrel.--For purposes of this section, a
barrel shall contain not more than 31 gallons of beer,
and any tax imposed under this section shall be applied
at a like rate for any other quantity or for fractional
parts of a barrel.''.
(b) Reduced Rate for Certain Domestic Production.--Subparagraph (A)
of section 5051(a)(2) is amended--
(1) in the heading, by striking ``$7 a barrel'', and
(2) by inserting ``($3.50 in the case of beer removed after
December 31, 2017, and before January 1, 2020)'' after ``$7''.
(c) Application of Reduced Tax Rate for Foreign Manufacturers and
Importers.--Subsection (a) of section 5051 is amended--
(1) in subparagraph (C)(i)(II) of paragraph (1), as amended
by subsection (a), by inserting ``but only if the importer is
[[Page 131 STAT. 2171]]
an electing importer under paragraph (4) and the barrels have
been assigned to the importer pursuant to such paragraph'' after
``during the calendar year'', and
(2) by adding at the end the following new paragraph:
``(4) Reduced tax rate for foreign manufacturers and
importers.--
``(A) In general.--In the case of any barrels of
beer which have been brewed or produced outside of the
United States and imported into the United States, the
rate of tax applicable under clause (i) of paragraph
(1)(C) (referred to in this paragraph as the `reduced
tax rate') may be assigned by the brewer (provided that
the brewer makes an election described in subparagraph
(B)(ii)) to any electing importer of such barrels
pursuant to the requirements established by the
Secretary under subparagraph (B).
``(B) Assignment.--The Secretary shall, through such
rules, regulations, and procedures as are determined
appropriate, establish procedures for assignment of the
reduced tax rate provided under this paragraph, which
shall include--
``(i) a limitation to ensure that the number
of barrels of beer for which the reduced tax rate
has been assigned by a brewer--
``(I) to any importer does not
exceed the number of barrels of beer
brewed or produced by such brewer during
the calendar year which were imported
into the United States by such importer,
and
``(II) to all importers does not
exceed the 6,000,000 barrels to which
the reduced tax rate applies,
``(ii) procedures that allow the election of a
brewer to assign and an importer to receive the
reduced tax rate provided under this paragraph,
``(iii) requirements that the brewer provide
any information as the Secretary determines
necessary and appropriate for purposes of carrying
out this paragraph, and
``(iv) procedures that allow for revocation of
eligibility of the brewer and the importer for the
reduced tax rate provided under this paragraph in
the case of any erroneous or fraudulent
information provided under clause (iii) which the
Secretary deems to be material to qualifying for
such reduced rate.
``(C) Controlled group.--For purposes of this
section, any importer making an election described in
subparagraph (B)(ii) shall be deemed to be a member of
the controlled group of the brewer, as described under
paragraph (5).''.
(d) Controlled Group and Single Taxpayer Rules.--Subsection (a) of
section 5051, as amended by this section, <<NOTE: 26 USC 5051.>> is
amended--
(1) in paragraph (2)--
(A) by striking subparagraph (B), and
(B) by redesignating subparagraph (C) as
subparagraph (B), and
(2) by adding at the end the following new paragraph:
``(5) Controlled group and single taxpayer rules.--
[[Page 131 STAT. 2172]]
``(A) In general.--Except as provided in
subparagraph (B), in the case of a controlled group, the
6,000,000 barrel quantity specified in paragraph
(1)(C)(i) and the 2,000,000 barrel quantity specified in
paragraph (2)(A) shall be applied to the controlled
group, and the 6,000,000 barrel quantity specified in
paragraph (1)(C)(i) and the 60,000 barrel quantity
specified in paragraph (2)(A) shall be apportioned among
the brewers who are members of such group in such manner
as the Secretary or their delegate shall by regulations
prescribe. For purposes of the preceding sentence, the
term `controlled group' has the meaning assigned to it
by subsection (a) of section 1563, except that for such
purposes the phrase `more than 50 percent' shall be
substituted for the phrase `at least 80 percent' in each
place it appears in such subsection. Under regulations
prescribed by the Secretary, principles similar to the
principles of the preceding two sentences shall be
applied to a group of brewers under common control where
one or more of the brewers is not a corporation.
``(B) Foreign manufacturers and importers.--For
purposes of paragraph (4), in the case of a controlled
group, the 6,000,000 barrel quantity specified in
paragraph (1)(C)(i) shall be applied to the controlled
group and apportioned among the members of such group in
such manner as the Secretary shall by regulations
prescribe. For purposes of the preceding sentence, the
term `controlled group' has the meaning given such term
under subparagraph (A). Under regulations prescribed by
the Secretary, principles similar to the principles of
the preceding two sentences shall be applied to a group
of brewers under common control where one or more of the
brewers is not a corporation.
``(C) Single taxpayer.--Pursuant to rules issued by
the Secretary, two or more entities (whether or not
under common control) that produce beer marketed under a
similar brand, license, franchise, or other arrangement
shall be treated as a single taxpayer for purposes of
the application of this subsection.''.
(e) <<NOTE: 26 USC 5051 note.>> Effective Date.--The amendments
made by this section shall apply to beer removed after December 31,
2017.
SEC. 13803. TRANSFER OF BEER BETWEEN BONDED FACILITIES.
(a) In General.--Section 5414 <<NOTE: 26 USC 5414.>> is amended--
(1) by striking ``Beer may be removed'' and inserting ``(a)
In General.--Beer may be removed'', and
(2) by adding at the end the following:
``(b) Transfer of Beer Between Bonded Facilities.--
``(1) In general.--Beer may be removed from one bonded
brewery to another bonded brewery, without payment of tax, and
may be mingled with beer at the receiving brewery, subject to
such conditions, including payment of the tax, and in such
containers, as the Secretary by regulations shall prescribe,
which shall include--
``(A) any removal from one brewery to another
brewery belonging to the same brewer,
``(B) any removal from a brewery owned by one
corporation to a brewery owned by another corporation
when--
[[Page 131 STAT. 2173]]
``(i) one such corporation owns the
controlling interest in the other such
corporation, or
``(ii) the controlling interest in each such
corporation is owned by the same person or
persons, and
``(C) any removal from one brewery to another
brewery when--
``(i) the proprietors of transferring and
receiving premises are independent of each other
and neither has a proprietary interest, directly
or indirectly, in the business of the other, and
``(ii) the transferor has divested itself of
all interest in the beer so transferred and the
transferee has accepted responsibility for payment
of the tax.
``(2) Transfer of liability for tax.--For purposes of
paragraph (1)(C), such relief from liability shall be effective
from the time of removal from the transferor's bonded premises,
or from the time of divestment of interest, whichever is later.
``(3) Termination.--This subsection shall not apply to any
calendar quarter beginning after December 31, 2019.''.
(b) Removal From Brewery by Pipeline.--Section 5412 <<NOTE: 26 USC
5412.>> is amended by inserting ``pursuant to section 5414 or'' before
``by pipeline''.
(c) <<NOTE: 26 USC 5412 note.>> Effective Date.--The amendments
made by this section shall apply to any calendar quarters beginning
after December 31, 2017.
SEC. 13804. REDUCED RATE OF EXCISE TAX ON CERTAIN WINE.
(a) In General.--Section 5041(c) is amended by adding at the end the
following new paragraph:
``(8) Special rule for 2018 and 2019.--
``(A) In general.--In the case of wine removed after
December 31, 2017, and before January 1, 2020,
paragraphs (1) and (2) shall not apply and there shall
be allowed as a credit against any tax imposed by this
title (other than chapters 2, 21, and 22) an amount
equal to the sum of--
``(i) $1 per wine gallon on the first 30,000
wine gallons of wine, plus
``(ii) 90 cents per wine gallon on the first
100,000 wine gallons of wine to which clause (i)
does not apply, plus
``(iii) 53.5 cents per wine gallon on the
first 620,000 wine gallons of wine to which
clauses (i) and (ii) do not apply,
which are produced by the producer and removed during
the calendar year for consumption or sale, or which are
imported by the importer into the United States during
the calendar year.
``(B) Adjustment of credit for hard cider.--In the
case of wine described in subsection (b)(6),
subparagraph (A) of this paragraph shall be applied--
``(i) in clause (i) of such subparagraph, by
substituting `6.2 cents' for `$1',
``(ii) in clause (ii) of such subparagraph, by
substituting `5.6 cents' for `90 cents', and
``(iii) in clause (iii) of such subparagraph,
by substituting `3.3 cents' for `53.5 cents'.'',
[[Page 131 STAT. 2174]]
(b) Controlled Group and Single Taxpayer Rules.--Paragraph (4) of
section 5041(c) <<NOTE: 26 USC 5041.>> is amended by striking ``section
5051(a)(2)(B)'' and inserting ``section 5051(a)(5)''.
(c) Allowance of Credit for Foreign Manufacturers and Importers.--
Subsection (c) of section 5041, as amended by subsection (a), is
amended--
(1) in subparagraph (A) of paragraph (8), by inserting ``but
only if the importer is an electing importer under paragraph (9)
and the wine gallons of wine have been assigned to the importer
pursuant to such paragraph'' after ``into the United States
during the calendar year'', and
(2) by adding at the end the following new paragraph:
``(9) Allowance of credit for foreign manufacturers and
importers.--
``(A) In general.--In the case of any wine gallons
of wine which have been produced outside of the United
States and imported into the United States, the credit
allowable under paragraph (8) (referred to in this
paragraph as the `tax credit') may be assigned by the
person who produced such wine (referred to in this
paragraph as the `foreign producer'), provided that such
person makes an election described in subparagraph
(B)(ii), to any electing importer of such wine gallons
pursuant to the requirements established by the
Secretary under subparagraph (B).
``(B) Assignment.--The Secretary shall, through such
rules, regulations, and procedures as are determined
appropriate, establish procedures for assignment of the
tax credit provided under this paragraph, which shall
include--
``(i) a limitation to ensure that the number
of wine gallons of wine for which the tax credit
has been assigned by a foreign producer--
``(I) to any importer does not
exceed the number of wine gallons of
wine produced by such foreign producer
during the calendar year which were
imported into the United States by such
importer, and
``(II) to all importers does not
exceed the 750,000 wine gallons of wine
to which the tax credit applies,
``(ii) procedures that allow the election of a
foreign producer to assign and an importer to
receive the tax credit provided under this
paragraph,
``(iii) requirements that the foreign producer
provide any information as the Secretary
determines necessary and appropriate for purposes
of carrying out this paragraph, and
``(iv) procedures that allow for revocation of
eligibility of the foreign producer and the
importer for the tax credit provided under this
paragraph in the case of any erroneous or
fraudulent information provided under clause (iii)
which the Secretary deems to be material to
qualifying for such credit.
``(C) Controlled group.--For purposes of this
section, any importer making an election described in
subparagraph (B)(ii) shall be deemed to be a member of
the controlled
[[Page 131 STAT. 2175]]
group of the foreign producer, as described under
paragraph (4).''.
(d) <<NOTE: 26 USC 5401 note.>> Effective Date.--The amendments
made by this section shall apply to wine removed after December 31,
2017.
SEC. 13805. ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR APPLICATION OF
EXCISE TAX RATES.
(a) In General.--Paragraphs (1) and (2) of section <<NOTE: 26 USC
5041.>> 5041(b) are each amended by inserting ``(16 percent in the case
of wine removed after December 31, 2017, and before January 1, 2020''
after ``14 percent''.
(b) <<NOTE: 26 USC 5401 note.>> Effective Date.--The amendments
made by this section shall apply to wine removed after December 31,
2017.
SEC. 13806. DEFINITION OF MEAD AND LOW ALCOHOL BY VOLUME WINE.
(a) In General.--Section 5041 is amended--
(1) in subsection (a), by striking ``Still wines'' and
inserting ``Subject to subsection (h), still wines'', and
(2) by adding at the end the following new subsection:
``(h) Mead and Low Alcohol by Volume Wine.--
``(1) In general.--For purposes of subsections (a) and
(b)(1), mead and low alcohol by volume wine shall be deemed to
be still wines containing not more than 16 percent of alcohol by
volume.
``(2) Definitions.--
``(A) Mead.--For purposes of this section, the term
`mead' means a wine--
``(i) containing not more than 0.64 gram of
carbon dioxide per hundred milliliters of wine,
except that the Secretary shall by regulations
prescribe such tolerances to this limitation as
may be reasonably necessary in good commercial
practice,
``(ii) which is derived solely from honey and
water,
``(iii) which contains no fruit product or
fruit flavoring, and
``(iv) which contains less than 8.5 percent
alcohol by volume.
``(B) Low alcohol by volume wine.--For purposes of
this section, the term `low alcohol by volume wine'
means a wine--
``(i) containing not more than 0.64 gram of
carbon dioxide per hundred milliliters of wine,
except that the Secretary shall by regulations
prescribe such tolerances to this limitation as
may be reasonably necessary in good commercial
practice,
``(ii) which is derived--
``(I) primarily from grapes, or
``(II) from grape juice concentrate
and water,
``(iii) which contains no fruit product or
fruit flavoring other than grape, and
``(iv) which contains less than 8.5 percent
alcohol by volume.
``(3) Termination.--This subsection shall not apply to wine
removed after December 31, 2019.''.
(b) <<NOTE: 26 USC 5401 note.>> Effective Date.--The amendments
made by this section shall apply to wine removed after December 31,
2017.
[[Page 131 STAT. 2176]]
SEC. 13807. REDUCED RATE OF EXCISE TAX ON CERTAIN DISTILLED
SPIRITS.
(a) In General.--Section 5001 <<NOTE: 26 USC 5001.>> is amended by
redesignating subsection (c) as subsection (d) and by inserting after
subsection (b) the following new subsection:
``(c) Reduced Rate for 2018 and 2019.--
``(1) In general.--In the case of a distilled spirits
operation, the otherwise applicable tax rate under subsection
(a)(1) shall be--
``(A) $2.70 per proof gallon on the first 100,000
proof gallons of distilled spirits, and
``(B) $13.34 per proof gallon on the first
22,130,000 of proof gallons of distilled spirits to
which subparagraph (A) does not apply,
which have been distilled or processed by such operation and
removed during the calendar year for consumption or sale, or
which have been imported by the importer into the United States
during the calendar year.
``(2) Controlled groups.--
``(A) In general.--In the case of a controlled
group, the proof gallon quantities specified under
subparagraphs (A) and (B) of paragraph (1) shall be
applied to such group and apportioned among the members
of such group in such manner as the Secretary or their
delegate shall by regulations prescribe.
``(B) Definition.--For purposes of subparagraph (A),
the term `controlled group' shall have the meaning given
such term by subsection (a) of section 1563, except that
`more than 50 percent' shall be substituted for `at
least 80 percent' each place it appears in such
subsection.
``(C) Rules for non-corporations.--Under regulations
prescribed by the Secretary, principles similar to the
principles of subparagraphs (A) and (B) shall be applied
to a group under common control where one or more of the
persons is not a corporation.
``(D) Single taxpayer.--Pursuant to rules issued by
the Secretary, two or more entities (whether or not
under common control) that produce distilled spirits
marketed under a similar brand, license, franchise, or
other arrangement shall be treated as a single taxpayer
for purposes of the application of this subsection.
``(3) Termination.--This subsection shall not apply to
distilled spirits removed after December 31, 2019.''.
(b) Conforming Amendment.--Section 7652(f)(2) is amended by striking
``section 5001(a)(1)'' and inserting ``subsection (a)(1) of section
5001, determined as if subsection (c)(1) of such section did not
apply''.
(c) Application of Reduced Tax Rate for Foreign Manufacturers and
Importers.--Subsection (c) of section 5001, as added by subsection (a),
is amended--
(1) in paragraph (1), by inserting ``but only if the
importer is an electing importer under paragraph (3) and the
proof gallons of distilled spirits have been assigned to the
importer pursuant to such paragraph'' after ``into the United
States during the calendar year'', and
(2) by redesignating paragraph (3) as paragraph (4) and by
inserting after paragraph (2) the following new paragraph:
[[Page 131 STAT. 2177]]
``(3) Reduced tax rate for foreign manufacturers and
importers.--
``(A) In general.--In the case of any proof gallons
of distilled spirits which have been produced outside of
the United States and imported into the United States,
the rate of tax applicable under paragraph (1) (referred
to in this paragraph as the `reduced tax rate') may be
assigned by the distilled spirits operation (provided
that such operation makes an election described in
subparagraph (B)(ii)) to any electing importer of such
proof gallons pursuant to the requirements established
by the Secretary under subparagraph (B).
``(B) Assignment.--The Secretary shall, through such
rules, regulations, and procedures as are determined
appropriate, establish procedures for assignment of the
reduced tax rate provided under this paragraph, which
shall include--
``(i) a limitation to ensure that the number
of proof gallons of distilled spirits for which
the reduced tax rate has been assigned by a
distilled spirits operation--
``(I) to any importer does not
exceed the number of proof gallons
produced by such operation during the
calendar year which were imported into
the United States by such importer, and
``(II) to all importers does not
exceed the 22,230,000 proof gallons of
distilled spirits to which the reduced
tax rate applies,
``(ii) procedures that allow the election of a
distilled spirits operation to assign and an
importer to receive the reduced tax rate provided
under this paragraph,
``(iii) requirements that the distilled
spirits operation provide any information as the
Secretary determines necessary and appropriate for
purposes of carrying out this paragraph, and
``(iv) procedures that allow for revocation of
eligibility of the distilled spirits operation and
the importer for the reduced tax rate provided
under this paragraph in the case of any erroneous
or fraudulent information provided under clause
(iii) which the Secretary deems to be material to
qualifying for such reduced rate.
``(C) Controlled group.--
``(i) In general.--For purposes of this
section, any importer making an election described
in subparagraph (B)(ii) shall be deemed to be a
member of the controlled group of the distilled
spirits operation, as described under paragraph
(2).
``(ii) Apportionment.--For purposes of this
paragraph, in the case of a controlled group,
rules similar to section 5051(a)(5)(B) shall
apply.''.
(d) <<NOTE: 26 USC 5001 note.>> Effective Date.--The amendments
made by this section shall apply to distilled spirits removed after
December 31, 2017.
SEC. 13808. BULK DISTILLED SPIRITS.
(a) In General.--Section 5212 <<NOTE: 26 USC 5212.>> is amended by
adding at the end the following sentence: ``In the case of distilled
spirits transferred in bond after December 31, 2017, and before January
1,
[[Page 131 STAT. 2178]]
2020, this section shall be applied without regard to whether distilled
spirits are bulk distilled spirits.''.
(b) <<NOTE: 26 USC 5212 note.>> Effective Date.--The amendments
made by this section shall apply distilled spirits transferred in bond
after December 31, 2017.
Subpart B--Miscellaneous Provisions
SEC. 13821. MODIFICATION OF TAX TREATMENT OF ALASKA NATIVE
CORPORATIONS AND SETTLEMENT TRUSTS.
(a) Exclusion for ANCSA Payments Assigned to Alaska Native
Settlement Trusts.--
(1) In general.--Part III of subchapter B of chapter 1 is
amended by inserting before section 140 the following new
section:
``SEC. 139G. <<NOTE: 26 USC 139G.>> ASSIGNMENTS TO ALASKA NATIVE
SETTLEMENT TRUSTS.
``(a) In General.--In the case of a Native Corporation, gross income
shall not include the value of any payments that would otherwise be
made, or treated as being made, to such Native Corporation pursuant to,
or as required by, any provision of the Alaska Native Claims Settlement
Act (43 U.S.C. 1601 et seq.), including any payment that would otherwise
be made to a Village Corporation pursuant to section 7(j) of the Alaska
Native Claims Settlement Act (43 U.S.C. 1606(j)), provided that any such
payments--
``(1) are assigned in writing to a Settlement Trust, and
``(2) were not received by such Native Corporation prior to
the assignment described in paragraph (1).
``(b) Inclusion in Gross Income.--In the case of a Settlement Trust
which has been assigned payments described in subsection (a), gross
income shall include such payments when received by such Settlement
Trust pursuant to the assignment and shall have the same character as if
such payments were received by the Native Corporation.
``(c) Amount and Scope of Assignment.--The amount and scope of any
assignment under subsection (a) shall be described with reasonable
particularity and may either be in a percentage of one or more such
payments or in a fixed dollar amount.
``(d) Duration of Assignment; Revocability.--Any assignment under
subsection (a) shall specify--
``(1) a duration either in perpetuity or for a period of
time, and
``(2) whether such assignment is revocable.
``(e) Prohibition on Deduction.--Notwithstanding section 247, no
deduction shall be allowed to a Native Corporation for purposes of any
amounts described in subsection (a).
``(f) Definitions.--For purposes of this section, the terms `Native
Corporation' and `Settlement Trust' have the same meaning given such
terms under section 646(h).''.
(2) Conforming amendment.--The table of sections for part
III of subchapter B of chapter 1 <<NOTE: 26 USC prec. 101.>> is
amended by inserting before the item relating to section 140 the
following new item:
``Sec. 139G. Assignments to Alaska Native Settlement Trusts.''.
(3) <<NOTE: 26 USC 139G note.>> Effective date.--The
amendments made by this subsection shall apply to taxable years
beginning after December 31, 2016.
[[Page 131 STAT. 2179]]
(b) Deduction of Contributions to Alaska Native Settlement Trusts.--
(1) In general.--Part VIII of subchapter B of chapter 1 is
amended by inserting before section 248 the following new
section:
``SEC. 247. <<NOTE: 26 USC 247.>> CONTRIBUTIONS TO ALASKA NATIVE
SETTLEMENT TRUSTS.
``(a) In General.--In the case of a Native Corporation, there shall
be allowed a deduction for any contributions made by such Native
Corporation to a Settlement Trust (regardless of whether an election
under section 646 is in effect for such Settlement Trust) for which the
Native Corporation has made an annual election under subsection (e).
``(b) Amount of Deduction.--The amount of the deduction under
subsection (a) shall be equal to--
``(1) in the case of a cash contribution (regardless of the
method of payment, including currency, coins, money order, or
check), the amount of such contribution, or
``(2) in the case of a contribution not described in
paragraph (1), the lesser of--
``(A) the Native Corporation's adjusted basis in the
property contributed, or
``(B) the fair market value of the property
contributed.
``(c) Limitation and Carryover.--
``(1) In general.--Subject to paragraph (2), the deduction
allowed under subsection (a) for any taxable year shall not
exceed the taxable income (as determined without regard to such
deduction) of the Native Corporation for the taxable year in
which the contribution was made.
``(2) Carryover.--If the aggregate amount of contributions
described in subsection (a) for any taxable year exceeds the
limitation under paragraph (1), such excess shall be treated as
a contribution described in subsection (a) in each of the 15
succeeding years in order of time.
``(d) Definitions.--For purposes of this section, the terms `Native
Corporation' and `Settlement Trust' have the same meaning given such
terms under section 646(h).
``(e) Manner of Making Election.--
``(1) In general.--For each taxable year, a Native
Corporation may elect to have this section apply for such
taxable year on the income tax return or an amendment or
supplement to the return of the Native Corporation, with such
election to have effect solely for such taxable year.
``(2) Revocation.--Any election made by a Native Corporation
pursuant to this subsection may be revoked pursuant to a timely
filed amendment or supplement to the income tax return of such
Native Corporation.
``(f) Additional Rules.--
``(1) Earnings and profits.--Notwithstanding section
646(d)(2), in the case of a Native Corporation which claims a
deduction under this section for any taxable year, the earnings
and profits of such Native Corporation for such taxable year
shall be reduced by the amount of such deduction.
``(2) Gain or loss.--No gain or loss shall be recognized by
the Native Corporation with respect to a contribution of
property for which a deduction is allowed under this section.
[[Page 131 STAT. 2180]]
``(3) Income.--Subject to subsection (g), a Settlement Trust
shall include in income the amount of any deduction allowed
under this section in the taxable year in which the Settlement
Trust actually receives such contribution.
``(4) Period.--The holding period under section 1223 of the
Settlement Trust shall include the period the property was held
by the Native Corporation.
``(5) Basis.--The basis that a Settlement Trust has for
which a deduction is allowed under this section shall be equal
to the lesser of--
``(A) the adjusted basis of the Native Corporation
in such property immediately before such contribution,
or
``(B) the fair market value of the property
immediately before such contribution.
``(6) Prohibition.--No deduction shall be allowed under this
section with respect to any contributions made to a Settlement
Trust which are in violation of subsection (a)(2) or (c)(2) of
section 39 of the Alaska Native Claims Settlement Act (43 U.S.C.
1629e).
``(g) Election by Settlement Trust to Defer Income Recognition.--
``(1) In general.--In the case of a contribution which
consists of property other than cash, a Settlement Trust may
elect to defer recognition of any income related to such
property until the sale or exchange of such property, in whole
or in part, by the Settlement Trust.
``(2) Treatment.--In the case of property described in
paragraph (1), any income or gain realized on the sale or
exchange of such property shall be treated as--
``(A) for such amount of the income or gain as is
equal to or less than the amount of income which would
be included in income at the time of contribution under
subsection (f)(3) but for the taxpayer's election under
this subsection, ordinary income, and
``(B) for any amounts of the income or gain which
are in excess of the amount of income which would be
included in income at the time of contribution under
subsection (f)(3) but for the taxpayer's election under
this subsection, having the same character as if this
subsection did not apply.
``(3) Election.--
``(A) In general.--For each taxable year, a
Settlement Trust may elect to apply this subsection for
any property described in paragraph (1) which was
contributed during such year. Any property to which the
election applies shall be identified and described with
reasonable particularity on the income tax return or an
amendment or supplement to the return of the Settlement
Trust, with such election to have effect solely for such
taxable year.
``(B) Revocation.--Any election made by a Settlement
Trust pursuant to this subsection may be revoked
pursuant to a timely filed amendment or supplement to
the income tax return of such Settlement Trust.
``(C) Certain dispositions.--
``(i) In general.--In the case of any property
for which an election is in effect under this
subsection and which is disposed of within the
first taxable year
[[Page 131 STAT. 2181]]
subsequent to the taxable year in which such
property was contributed to the Settlement Trust--
``(I) this section shall be applied
as if the election under this subsection
had not been made,
``(II) any income or gain which
would have been included in the year of
contribution under subsection (f)(3) but
for the taxpayer's election under this
subsection shall be included in income
for the taxable year of such
contribution, and
``(III) the Settlement Trust shall
pay any increase in tax resulting from
such inclusion, including any applicable
interest, and increased by 10 percent of
the amount of such increase with
interest.
``(ii) Assessment.--Notwithstanding section
6501(a), any amount described in subclause (III)
of clause (i) may be assessed, or a proceeding in
court with respect to such amount may be initiated
without assessment, within 4 years after the date
on which the return making the election under this
subsection for such property was filed.''.
(2) Conforming amendment.--The table of sections for part
VIII of subchapter B of chapter 1 <<NOTE: 26 USC prec. 241.>>
is amended by inserting before the item relating to section 248
the following new item:
``Sec. 247. Contributions to Alaska Native Settlement Trusts.''.
(3) <<NOTE: 26 USC 247 note.>> Effective date.--
(A) In general.--The amendments made by this
subsection shall apply to taxable years for which the
period of limitation on refund or credit under section
6511 of the Internal Revenue Code of 1986 has not
expired.
(B) One-year waiver of statute of limitations.--If
the period of limitation on a credit or refund resulting
from the amendments made by paragraph (1) expires before
the end of the 1-year period beginning on the date of
the enactment of this Act, refund or credit of such
overpayment (to the extent attributable to such
amendments) may, nevertheless, be made or allowed if
claim therefor is filed before the close of such 1-year
period.
(c) Information Reporting for Deductible Contributions to Alaska
Native Settlement Trusts.--
(1) In general.--Section 6039H <<NOTE: 26 USC 6039H.>> is
amended--
(A) in the heading, by striking ``sponsoring'', and
(B) by adding at the end the following new
subsection:
``(e) Deductible Contributions by Native Corporations to Alaska
Native Settlement Trusts.--
``(1) In general.--Any Native Corporation (as defined in
subsection (m) of section 3 of the Alaska Native Claims
Settlement Act (43 U.S.C. 1602(m))) which has made a
contribution to a Settlement Trust (as defined in subsection (t)
of such section) to which an election under subsection (e) of
section 247 applies shall provide such Settlement Trust with a
statement regarding such election not later than January 31 of
the calendar year subsequent to the calendar year in which the
contribution was made.
``(2) Content of statement.--The statement described in
paragraph (1) shall include--
[[Page 131 STAT. 2182]]
``(A) the total amount of contributions to which the
election under subsection (e) of section 247 applies,
``(B) for each contribution, whether such
contribution was in cash,
``(C) for each contribution which consists of
property other than cash, the date that such property
was acquired by the Native Corporation and the adjusted
basis and fair market value of such property on the date
such property was contributed to the Settlement Trust,
``(D) the date on which each contribution was made
to the Settlement Trust, and
``(E) such information as the Secretary determines
to be necessary or appropriate for the identification of
each contribution and the accurate inclusion of income
relating to such contributions by the Settlement
Trust.''.
(2) Conforming amendment.--The item relating to section
6039H in the table of sections for subpart A of part III of
subchapter A of chapter 61 <<NOTE: 26 USC prec. 6031.>> is
amended to read as follows:
``Sec. 6039H. Information With Respect to Alaska Native Settlement
Trusts and Native Corporations.''.
(3) <<NOTE: 26 USC 6039H note.>> Effective date.--The
amendments made by this subsection shall apply to taxable years
beginning after December 31, 2016.
SEC. 13822. AMOUNTS PAID FOR AIRCRAFT MANAGEMENT SERVICES.
(a) In General.--Subsection (e) of section 4261 <<NOTE: 26 USC
4261.>> is amended by adding at the end the following new paragraph:
``(5) Amounts paid for aircraft management services.--
``(A) In general.--No tax shall be imposed by this
section or section 4271 on any amounts paid by an
aircraft owner for aircraft management services related
to--
``(i) maintenance and support of the aircraft
owner's aircraft, or
``(ii) flights on the aircraft owner's
aircraft.
``(B) Aircraft management services.--For purposes of
subparagraph (A), the term `aircraft management
services' includes--
``(i) assisting an aircraft owner with
administrative and support services, such as
scheduling, flight planning, and weather
forecasting,
``(ii) obtaining insurance,
``(iii) maintenance, storage and fueling of
aircraft,
``(iv) hiring, training, and provision of
pilots and crew,
``(v) establishing and complying with safety
standards, and
``(vi) such other services as are necessary to
support flights operated by an aircraft owner.
``(C) Lessee treated as aircraft owner.--
``(i) In general.--For purposes of this
paragraph, the term `aircraft owner' includes a
person who leases the aircraft other than under a
disqualified lease.
``(ii) Disqualified lease.--For purposes of
clause (i), the term `disqualified lease' means a
lease from a person providing aircraft management
services with respect to such aircraft (or a
related person (within
[[Page 131 STAT. 2183]]
the meaning of section 465(b)(3)(C)) to the person
providing such services), if such lease is for a
term of 31 days or less.
``(D) Pro rata allocation.--In the case of amounts
paid to any person which (but for this subsection) are
subject to the tax imposed by subsection (a), a portion
of which consists of amounts described in subparagraph
(A), this paragraph shall apply on a pro rata basis only
to the portion which consists of amounts described in
such subparagraph.''.
(b) <<NOTE: 26 USC 4261 note.>> Effective Date.--The amendment made
by this section shall apply to amounts paid after the date of the
enactment of this Act.
SEC. 13823. OPPORTUNITY ZONES.
(a) In General.--Chapter 1 is amended by adding at the end the
following:
``Subchapter <<NOTE: 26 USC prec. 1400Z-1.>> Z--Opportunity Zones
``Sec. 1400Z-1. Designation.
``Sec. 1400Z-2. Special rules for capital gains invested in opportunity
zones.
``SEC. 1400Z-1. <<NOTE: 26 USC 1400Z-1.>> DESIGNATION.
``(a) Qualified Opportunity Zone Defined.--For the purposes of this
subchapter, the term `qualified opportunity zone' means a population
census tract that is a low-income community that is designated as a
qualified opportunity zone.
``(b) Designation.--
``(1) In general.--For purposes of subsection (a), a
population census tract that is a low-income community is
designated as a qualified opportunity zone if--
``(A) not later than the end of the determination
period, the chief executive officer of the State in
which the tract is located--
``(i) nominates the tract for designation as a
qualified opportunity zone, and
``(ii) notifies the Secretary in writing of
such nomination, and
``(B) the Secretary certifies such nomination and
designates such tract as a qualified opportunity zone
before the end of the consideration period.
``(2) Extension of periods.--A chief executive officer of a
State may request that the Secretary extend either the
determination or consideration period, or both (determined
without regard to this subparagraph), for an additional 30 days.
``(c) Other Definitions.--For purposes of this subsection--
``(1) Low-income communities.--The term `low-income
community' has the same meaning as when used in section 45D(e).
``(2) Definition of periods.--
``(A) Consideration period.--The term `consideration
period' means the 30-day period beginning on the date on
which the Secretary receives notice under subsection
(b)(1)(A)(ii), as extended under subsection (b)(2).
``(B) Determination period.--The term `determination
period' means the 90-day period beginning on the date
[[Page 131 STAT. 2184]]
of the enactment of the Tax Cuts and Jobs Act, as
extended under subsection (b)(2).
``(3) State.--For purposes of this section, the term `State'
includes any possession of the United States.
``(d) Number of Designations.--
``(1) In general.--Except as provided by paragraph (2), the
number of population census tracts in a State that may be
designated as qualified opportunity zones under this section may
not exceed 25 percent of the number of low-income communities in
the State.
``(2) Exception.--If the number of low-income communities in
a State is less than 100, then a total of 25 of such tracts may
be designated as qualified opportunity zones.
``(e) Designation of Tracts Contiguous With Low-income
Communities.--
``(1) In general.--A population census tract that is not a
low-income community may be designated as a qualified
opportunity zone under this section if--
``(A) the tract is contiguous with the low-income
community that is designated as a qualified opportunity
zone, and
``(B) the median family income of the tract does not
exceed 125 percent of the median family income of the
low-income community with which the tract is contiguous.
``(2) Limitation.--Not more than 5 percent of the population
census tracts designated in a State as a qualified opportunity
zone may be designated under paragraph (1).
``(f) Period for Which Designation Is in Effect.--A designation as a
qualified opportunity zone shall remain in effect for the period
beginning on the date of the designation and ending at the close of the
10th calendar year beginning on or after such date of designation.
``SEC. 1400Z-2. <<NOTE: 26 USC 1400Z-2.>> SPECIAL RULES FOR
CAPITAL GAINS INVESTED IN
OPPORTUNITY ZONES.
``(a) In General.--
``(1) Treatment of gains.--In the case of gain from the sale
to, or exchange with, an unrelated person of any property held
by the taxpayer, at the election of the taxpayer--
``(A) gross income for the taxable year shall not
include so much of such gain as does not exceed the
aggregate amount invested by the taxpayer in a qualified
opportunity fund during the 180-day period beginning on
the date of such sale or exchange,
``(B) the amount of gain excluded by subparagraph
(A) shall be included in gross income as provided by
subsection (b), and
``(C) subsection (c) shall apply.
``(2) Election.--No election may be made under paragraph
(1)--
``(A) with respect to a sale or exchange if an
election previously made with respect to such sale or
exchange is in effect, or
``(B) with respect to any sale or exchange after
December 31, 2026.
``(b) Deferral of Gain Invested in Opportunity Zone Property.--
[[Page 131 STAT. 2185]]
``(1) Year of inclusion.--Gain to which subsection (a)(1)(B)
applies shall be included in income in the taxable year which
includes the earlier of--
``(A) the date on which such investment is sold or
exchanged, or
``(B) December 31, 2026.
``(2) Amount includible.--
``(A) In general.--The amount of gain included in
gross income under subsection (a)(1)(A) shall be the
excess of--
``(i) the lesser of the amount of gain
excluded under paragraph (1) or the fair market
value of the investment as determined as of the
date described in paragraph (1), over
``(ii) the taxpayer's basis in the investment.
``(B) Determination of basis.--
``(i) In general.--Except as otherwise
provided in this clause or subsection (c), the
taxpayer's basis in the investment shall be zero.
``(ii) Increase for gain recognized under
subsection (a)(1)(B).--The basis in the investment
shall be increased by the amount of gain
recognized by reason of subsection (a)(1)(B) with
respect to such property.
``(iii) Investments held for 5 years.--In the
case of any investment held for at least 5 years,
the basis of such investment shall be increased by
an amount equal to 10 percent of the amount of
gain deferred by reason of subsection (a)(1)(A).
``(iv) Investments held for 7 years.--In the
case of any investment held by the taxpayer for at
least 7 years, in addition to any adjustment made
under clause (iii), the basis of such property
shall be increased by an amount equal to 5 percent
of the amount of gain deferred by reason of
subsection (a)(1)(A).
``(c) Special Rule for Investments Held for at Least 10 Years.--In
the case of any investment held by the taxpayer for at least 10 years
and with respect to which the taxpayer makes an election under this
clause, the basis of such property shall be equal to the fair market
value of such investment on the date that the investment is sold or
exchanged.
``(d) Qualified Opportunity Fund.--For purposes of this section--
``(1) In general.--The term `qualified opportunity fund'
means any investment vehicle which is organized as a corporation
or a partnership for the purpose of investing in qualified
opportunity zone property (other than another qualified
opportunity fund) that holds at least 90 percent of its assets
in qualified opportunity zone property, determined by the
average of the percentage of qualified opportunity zone property
held in the fund as measured--
``(A) on the last day of the first 6-month period of
the taxable year of the fund, and
``(B) on the last day of the taxable year of the
fund.
``(2) Qualified opportunity zone property.--
``(A) In general.--The term `qualified opportunity
zone property' means property which is--
[[Page 131 STAT. 2186]]
``(i) qualified opportunity zone stock,
``(ii) qualified opportunity zone partnership
interest, or
``(iii) qualified opportunity zone business
property.
``(B) Qualified opportunity zone stock.--
``(i) In general.--Except as provided in
clause (ii), the term `qualified opportunity zone
stock' means any stock in a domestic corporation
if--
``(I) such stock is acquired by the
qualified opportunity fund after
December 31, 2017, at its original issue
(directly or through an underwriter)
from the corporation solely in exchange
for cash,
``(II) as of the time such stock was
issued, such corporation was a qualified
opportunity zone business (or, in the
case of a new corporation, such
corporation was being organized for
purposes of being a qualified
opportunity zone business), and
``(III) during substantially all of
the qualified opportunity fund's holding
period for such stock, such corporation
qualified as a qualified opportunity
zone business.
``(ii) Redemptions.--A rule similar to the
rule of section 1202(c)(3) shall apply for
purposes of this paragraph.
``(C) Qualified opportunity zone partnership
interest.--The term `qualified opportunity zone
partnership interest' means any capital or profits
interest in a domestic partnership if--
``(i) such interest is acquired by the
qualified opportunity fund after December 31,
2017, from the partnership solely in exchange for
cash,
``(ii) as of the time such interest was
acquired, such partnership was a qualified
opportunity zone business (or, in the case of a
new partnership, such partnership was being
organized for purposes of being a qualified
opportunity zone business), and
``(iii) during substantially all of the
qualified opportunity fund's holding period for
such interest, such partnership qualified as a
qualified opportunity zone business.
``(D) Qualified opportunity zone business
property.--
``(i) In general.--The term `qualified
opportunity zone business property' means tangible
property used in a trade or business of the
qualified opportunity fund if--
``(I) such property was acquired by
the qualified opportunity fund by
purchase (as defined in section
179(d)(2)) after December 31, 2017,
``(II) the original use of such
property in the qualified opportunity
zone commences with the qualified
opportunity fund or the qualified
opportunity fund substantially improves
the property, and
[[Page 131 STAT. 2187]]
``(III) during substantially all of
the qualified opportunity fund's holding
period for such property, substantially
all of the use of such property was in a
qualified opportunity zone.
``(ii) Substantial improvement.--For purposes
of subparagraph (A)(ii), property shall be treated
as substantially improved by the qualified
opportunity fund only if, during any 30-month
period beginning after the date of acquisition of
such property, additions to basis with respect to
such property in the hands of the qualified
opportunity fund exceed an amount equal to the
adjusted basis of such property at the beginning
of such 30-month period in the hands of the
qualified opportunity fund.
``(iii) Related party.--For purposes of
subparagraph (A)(i), the related person rule of
section 179(d)(2) shall be applied pursuant to
paragraph (8) of this subsection in lieu of the
application of such rule in section 179(d)(2)(A).
``(3) Qualified opportunity zone business.--
``(A) In general.--The term `qualified opportunity
zone business' means a trade or business--
``(i) in which substantially all of the
tangible property owned or leased by the taxpayer
is qualified opportunity zone business property
(determined by substituting `qualified opportunity
zone business' for `qualified opportunity fund'
each place it appears in paragraph (2)(D)),
``(ii) which satisfies the requirements of
paragraphs (2), (4), and (8) of section 1397C(b),
and
``(iii) which is not described in section
144(c)(6)(B).
``(B) Special rule.--For purposes of subparagraph
(A), tangible property that ceases to be a qualified
opportunity zone business property shall continue to be
treated as a qualified opportunity zone business
property for the lesser of--
``(i) 5 years after the date on which such
tangible property ceases to be so qualified, or
``(ii) the date on which such tangible
property is no longer held by the qualified
opportunity zone business.
``(e) Applicable Rules.--
``(1) Treatment of investments with mixed funds.--In the
case of any investment in a qualified opportunity fund only a
portion of which consists of investments of gain to which an
election under subsection (a) is in effect--
``(A) such investment shall be treated as 2 separate
investments, consisting of--
``(i) one investment that only includes
amounts to which the election under subsection (a)
applies, and
``(ii) a separate investment consisting of
other amounts, and
``(B) subsections (a), (b), and (c) shall only apply
to the investment described in subparagraph (A)(i).
``(2) Related persons.--For purposes of this section,
persons are related to each other if such persons are described
[[Page 131 STAT. 2188]]
in section 267(b) or 707(b)(1), determined by substituting `20
percent' for `50 percent' each place it occurs in such sections.
``(3) Decedents.--In the case of a decedent, amounts
recognized under this section shall, if not properly includible
in the gross income of the decedent, be includible in gross
income as provided by section 691.
``(4) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this section, including--
``(A) rules for the certification of qualified
opportunity funds for the purposes of this section,
``(B) rules to ensure a qualified opportunity fund
has a reasonable period of time to reinvest the return
of capital from investments in qualified opportunity
zone stock and qualified opportunity zone partnership
interests, and to reinvest proceeds received from the
sale or disposition of qualified opportunity zone
property, and
``(C) rules to prevent abuse.
``(f) Failure of Qualified Opportunity Fund to Maintain Investment
Standard.--
``(1) In general.--If a qualified opportunity fund fails to
meet the 90-percent requirement of subsection (c)(1), the
qualified opportunity fund shall pay a penalty for each month it
fails to meet the requirement in an amount equal to the product
of--
``(A) the excess of--
``(i) the amount equal to 90 percent of its
aggregate assets, over
``(ii) the aggregate amount of qualified
opportunity zone property held by the fund,
multiplied by
``(B) the underpayment rate established under
section 6621(a)(2) for such month.
``(2) Special rule for partnerships.--In the case that the
qualified opportunity fund is a partnership, the penalty imposed
by paragraph (1) shall be taken into account proportionately as
part of the distributive share of each partner of the
partnership.
``(3) Reasonable cause exception.--No penalty shall be
imposed under this subsection with respect to any failure if it
is shown that such failure is due to reasonable cause.''.
(b) Basis Adjustments.--Section 1016(a) is amended by striking
``and'' at the end of paragraph (36), by striking the period at the end
of paragraph (37) and inserting ``, and'', and by inserting after
paragraph (37) the following:
``(38) to the extent provided in subsections (b)(2) and (c)
of section 1400Z-2.''.
(c) Clerical Amendment.--The table of subchapters for chapter
1 <<NOTE: 26 USC prec. 1.>> is amended by adding at the end the
following new item:
``subchapter z. opportunity zones''.
(d) <<NOTE: 26 USC 1016 note.>> Effective Date.--The amendments
made by this section shall take effect on the date of the enactment of
this Act.
[[Page 131 STAT. 2189]]
Subtitle D--International Tax Provisions
PART I--OUTBOUND TRANSACTIONS
Subpart A--Establishment of Participation Exemption System for Taxation
of Foreign Income
SEC. 14101. DEDUCTION FOR FOREIGN-SOURCE PORTION OF DIVIDENDS
RECEIVED BY DOMESTIC CORPORATIONS FROM
SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.
(a) In General.--Part VIII of subchapter B of chapter 1 is amended
by inserting after section 245 the following new section:
``SEC. 245A. <<NOTE: 26 USC 245A.>> DEDUCTION FOR FOREIGN SOURCE-
PORTION OF DIVIDENDS RECEIVED BY
DOMESTIC CORPORATIONS FROM SPECIFIED 10-
PERCENT OWNED FOREIGN CORPORATIONS.
``(a) In General.--In the case of any dividend received from a
specified 10-percent owned foreign corporation by a domestic corporation
which is a United States shareholder with respect to such foreign
corporation, there shall be allowed as a deduction an amount equal to
the foreign-source portion of such dividend.
``(b) Specified 10-percent Owned Foreign Corporation.--For purposes
of this section--
``(1) In general.--The term `specified 10-percent owned
foreign corporation' means any foreign corporation with respect
to which any domestic corporation is a United States shareholder
with respect to such corporation.
``(2) Exclusion of passive foreign investment companies.--
Such term shall not include any corporation which is a passive
foreign investment company (as defined in section 1297) with
respect to the shareholder and which is not a controlled foreign
corporation.
``(c) Foreign-source Portion.--For purposes of this section--
``(1) In general.--The foreign-source portion of any
dividend from a specified 10-percent owned foreign corporation
is an amount which bears the same ratio to such dividend as--
``(A) the undistributed foreign earnings of the
specified 10-percent owned foreign corporation, bears to
``(B) the total undistributed earnings of such
foreign corporation.
``(2) Undistributed earnings.--The term `undistributed
earnings' means the amount of the earnings and profits of the
specified 10-percent owned foreign corporation (computed in
accordance with sections 964(a) and 986)--
``(A) as of the close of the taxable year of the
specified 10-percent owned foreign corporation in which
the dividend is distributed, and
``(B) without diminution by reason of dividends
distributed during such taxable year.
``(3) Undistributed foreign earnings.--The term
`undistributed foreign earnings' means the portion of the
undistributed earnings which is attributable to neither--
[[Page 131 STAT. 2190]]
``(A) income described in subparagraph (A) of
section 245(a)(5), nor
``(B) dividends described in subparagraph (B) of
such section (determined without regard to section
245(a)(12)).
``(d) Disallowance of Foreign Tax Credit, etc.--
``(1) In general.--No credit shall be allowed under section
901 for any taxes paid or accrued (or treated as paid or
accrued) with respect to any dividend for which a deduction is
allowed under this section.
``(2) Denial of deduction.--No deduction shall be allowed
under this chapter for any tax for which credit is not allowable
under section 901 by reason of paragraph (1) (determined by
treating the taxpayer as having elected the benefits of subpart
A of part III of subchapter N).
``(e) Special Rules for Hybrid Dividends.--
``(1) In general.--Subsection (a) shall not apply to any
dividend received by a United States shareholder from a
controlled foreign corporation if the dividend is a hybrid
dividend.
``(2) Hybrid dividends of tiered corporations.--If a
controlled foreign corporation with respect to which a domestic
corporation is a United States shareholder receives a hybrid
dividend from any other controlled foreign corporation with
respect to which such domestic corporation is also a United
States shareholder, then, notwithstanding any other provision of
this title--
``(A) the hybrid dividend shall be treated for
purposes of section 951(a)(1)(A) as subpart F income of
the receiving controlled foreign corporation for the
taxable year of the controlled foreign corporation in
which the dividend was received, and
``(B) the United States shareholder shall include in
gross income an amount equal to the shareholder's pro
rata share (determined in the same manner as under
section 951(a)(2)) of the subpart F income described in
subparagraph (A).
``(3) Denial of foreign tax credit, etc.--The rules of
subsection (d) shall apply to any hybrid dividend received by,
or any amount included under paragraph (2) in the gross income
of, a United States shareholder.
``(4) Hybrid dividend.--The term `hybrid dividend' means an
amount received from a controlled foreign corporation--
``(A) for which a deduction would be allowed under
subsection (a) but for this subsection, and
``(B) for which the controlled foreign corporation
received a deduction (or other tax benefit) with respect
to any income, war profits, or excess profits taxes
imposed by any foreign country or possession of the
United States.
``(f) Special Rule for Purging Distributions of Passive Foreign
Investment Companies.--Any amount which is treated as a dividend under
section 1291(d)(2)(B) shall not be treated as a dividend for purposes of
this section.
``(g) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary or appropriate to carry out the
provisions of this section, including regulations for the treatment of
United States shareholders owning stock of a specified 10 percent owned
foreign corporation through a partnership.''.
[[Page 131 STAT. 2191]]
(b) Application of Holding Period Requirement.--Subsection (c) of
section 246 <<NOTE: 26 USC 246.>> is amended--
(1) by striking ``or 245'' in paragraph (1) and inserting
``245, or 245A'', and
(2) by adding at the end the following new paragraph:
``(5) Special rules for foreign source portion of dividends
received from specified 10-percent owned foreign corporations.--
``(A) 1-year holding period requirement.--For
purposes of section 245A--
``(i) paragraph (1)(A) shall be applied--
``(I) by substituting `365 days' for
`45 days' each place it appears, and
``(II) by substituting `731-day
period' for `91-day period', and
``(ii) paragraph (2) shall not apply.
``(B) Status must be maintained during holding
period.--For purposes of applying paragraph (1) with
respect to section 245A, the taxpayer shall be treated
as holding the stock referred to in paragraph (1) for
any period only if--
``(i) the specified 10-percent owned foreign
corporation referred to in section 245A(a) is a
specified 10-percent owned foreign corporation at
all times during such period, and
``(ii) the taxpayer is a United States
shareholder with respect to such specified 10-
percent owned foreign corporation at all times
during such period.''.
(c) Application of Rules Generally Applicable to Deductions for
Dividends Received.--
(1) Treatment of dividends from certain corporations.--
Paragraph (1) of section 246(a) is amended by striking ``and
245'' and inserting ``245, and 245A''.
(2) Coordination with section 1059.--Subparagraph (B) of
section 1059(b)(2) is amended by striking ``or 245'' and
inserting ``245, or 245A''.
(d) Coordination With Foreign Tax Credit Limitation.--Subsection (b)
of section 904 is amended by adding at the end the following new
paragraph:
``(5) Treatment of dividends for which deduction is allowed
under section 245a.--For purposes of subsection (a), in the case
of a domestic corporation which is a United States shareholder
with respect to a specified 10-percent owned foreign
corporation, such shareholder's taxable income from sources
without the United States (and entire taxable income) shall be
determined without regard to--
``(A) the foreign-source portion of any dividend
received from such foreign corporation, and
``(B) any deductions properly allocable or
apportioned to--
``(i) income (other than amounts includible
under section 951(a)(1) or 951A(a)) with respect
to stock of such specified 10-percent owned
foreign corporation, or
``(ii) such stock to the extent income with
respect to such stock is other than amounts
includible under section 951(a)(1) or 951A(a).
[[Page 131 STAT. 2192]]
Any term which is used in section 245A and in this paragraph
shall have the same meaning for purposes of this paragraph as
when used in such section.''.
(e) Conforming Amendments.--
(1) Subsection (b) of section 951 <<NOTE: 26 USC 951.>> is
amended by striking ``subpart'' and inserting ``title''.
(2) Subsection (a) of section 957 is amended by striking
``subpart'' in the matter preceding paragraph (1) and inserting
``title''.
(3) The table of sections for part VIII of subchapter B of
chapter 1 <<NOTE: 26 USC 241 prec.>> is amended by inserting
after the item relating to section 245 the following new item:
``Sec. 245A. Deduction for foreign source-portion of dividends received
by domestic corporations from certain 10-percent owned
foreign corporations.''.
(f) <<NOTE: 26 USC 245A note.>> Effective Date.--The amendments
made by this section shall apply to distributions made after (and, in
the case of the amendments made by subsection (d), deductions with
respect to taxable years ending after) December 31, 2017.
SEC. 14102. SPECIAL RULES RELATING TO SALES OR TRANSFERS INVOLVING
SPECIFIED 10-PERCENT OWNED FOREIGN
CORPORATIONS.
(a) Sales by United States Persons of Stock.--
(1) In general.--Section 1248 is amended by redesignating
subsection (j) as subsection (k) and by inserting after
subsection (i) the following new subsection:
``(j) Coordination With Dividends Received Deduction.--In the case
of the sale or exchange by a domestic corporation of stock in a foreign
corporation held for 1 year or more, any amount received by the domestic
corporation which is treated as a dividend by reason of this section
shall be treated as a dividend for purposes of applying section 245A.''.
(2) <<NOTE: 26 USC 1248 note.>> Effective date.--The
amendments made by this subsection shall apply to sales or
exchanges after December 31, 2017.
(b) Basis in Specified 10-percent Owned Foreign Corporation Reduced
by Nontaxed Portion of Dividend for Purposes of Determining Loss.--
(1) In general.--Section 961 is amended by adding at the end
the following new subsection:
``(d) Basis in Specified 10-percent Owned Foreign Corporation
Reduced by Nontaxed Portion of Dividend for Purposes of Determining
Loss.--If a domestic corporation received a dividend from a specified
10-percent owned foreign corporation (as defined in section 245A) in any
taxable year, solely for purposes of determining loss on any disposition
of stock of such foreign corporation in such taxable year or any
subsequent taxable year, the basis of such domestic corporation in such
stock shall be reduced (but not below zero) by the amount of any
deduction allowable to such domestic corporation under section 245A with
respect to such stock except to the extent such basis was reduced under
section 1059 by reason of a dividend for which such a deduction was
allowable.''.
(2) <<NOTE: 26 USC 961 note.>> Effective date.--The
amendments made by this subsection shall apply to distributions
made after December 31, 2017.
(c) Sale by a CFC of a Lower Tier CFC.--
[[Page 131 STAT. 2193]]
(1) In general.--Section 964(e) <<NOTE: 26 USC 964.>> is
amended by adding at the end the following new paragraph:
``(4) Coordination with dividends received deduction.--
``(A) In general.--If, for any taxable year of a
controlled foreign corporation beginning after December
31, 2017, any amount is treated as a dividend under
paragraph (1) by reason of a sale or exchange by the
controlled foreign corporation of stock in another
foreign corporation held for 1 year or more, then,
notwithstanding any other provision of this title--
``(i) the foreign-source portion of such
dividend shall be treated for purposes of section
951(a)(1)(A) as subpart F income of the selling
controlled foreign corporation for such taxable
year,
``(ii) a United States shareholder with
respect to the selling controlled foreign
corporation shall include in gross income for the
taxable year of the shareholder with or within
which such taxable year of the controlled foreign
corporation ends an amount equal to the
shareholder's pro rata share (determined in the
same manner as under section 951(a)(2)) of the
amount treated as subpart F income under clause
(i), and
``(iii) the deduction under section 245A(a)
shall be allowable to the United States
shareholder with respect to the subpart F income
included in gross income under clause (ii) in the
same manner as if such subpart F income were a
dividend received by the shareholder from the
selling controlled foreign corporation.
``(B) Application of basis or similar adjustment.--
For purposes of this title, in the case of a sale or
exchange by a controlled foreign corporation of stock in
another foreign corporation in a taxable year of the
selling controlled foreign corporation beginning after
December 31, 2017, rules similar to the rules of section
961(d) shall apply.
``(C) Foreign-source portion.--For purposes of this
paragraph, the foreign-source portion of any amount
treated as a dividend under paragraph (1) shall be
determined in the same manner as under section
245A(c).''.
(2) <<NOTE: 26 USC 964 note.>> Effective date.--The
amendments made by this subsection shall apply to sales or
exchanges after December 31, 2017.
(d) Treatment of Foreign Branch Losses Transferred to Specified 10-
percent Owned Foreign Corporations.--
(1) In general.--Part II of subchapter B of chapter 1 is
amended by adding at the end the following new section:
``SEC. 91. <<NOTE: 26 USC 91.>> CERTAIN FOREIGN BRANCH LOSSES
TRANSFERRED TO SPECIFIED 10-PERCENT OWNED
FOREIGN CORPORATIONS.
``(a) In General.--If a domestic corporation transfers substantially
all of the assets of a foreign branch (within the meaning of section
367(a)(3)(C), as in effect before the date of the enactment of the Tax
Cuts and Jobs Act) to a specified 10-percent owned foreign corporation
(as defined in section 245A) with respect to which it is a United States
shareholder after such transfer, such domestic corporation shall include
in gross income for the taxable
[[Page 131 STAT. 2194]]
year which includes such transfer an amount equal to the transferred
loss amount with respect to such transfer.
``(b) Transferred Loss Amount.--For purposes of this section, the
term `transferred loss amount' means, with respect to any transfer of
substantially all of the assets of a foreign branch, the excess (if any)
of--
``(1) the sum of losses--
``(A) which were incurred by the foreign branch
after December 31, 2017, and before the transfer, and
``(B) with respect to which a deduction was allowed
to the taxpayer, over
``(2) the sum of--
``(A) any taxable income of such branch for a
taxable year after the taxable year in which the loss
was incurred and through the close of the taxable year
of the transfer, and
``(B) any amount which is recognized under section
904(f)(3) on account of the transfer.
``(c) Reduction for Recognized Gains.--The transferred loss amount
shall be reduced (but not below zero) by the amount of gain recognized
by the taxpayer on account of the transfer (other than amounts taken
into account under subsection (b)(2)(B)).
``(d) Source of Income.--Amounts included in gross income under this
section shall be treated as derived from sources within the United
States.
``(e) Basis Adjustments.--Consistent with such regulations or other
guidance as the Secretary shall prescribe, proper adjustments shall be
made in the adjusted basis of the taxpayer's stock in the specified 10-
percent owned foreign corporation to which the transfer is made, and in
the transferee's adjusted basis in the property transferred, to reflect
amounts included in gross income under this section.''.
(2) Clerical amendment.--The table of sections for part II
of subchapter B of chapter 1 <<NOTE: 26 USC 71 prec.>> is
amended by adding at the end the following new item:
``Sec. 91. Certain foreign branch losses transferred to specified 10-
percent owned foreign corporations.''.
(3) <<NOTE: 26 USC 91 note.>> Effective date.--The
amendments made by this subsection shall apply to transfers
after December 31, 2017.
(4) <<NOTE: 26 USC 91 note.>> Transition rule.--The amount
of gain taken into account under section 91(c) of the Internal
Revenue Code of 1986, as added by this subsection, shall be
reduced by the amount of gain which would be recognized under
section 367(a)(3)(C) (determined without regard to the
amendments made by subsection (e)) with respect to losses
incurred before January 1, 2018.
(e) Repeal of Active Trade or Business Exception Under Section
367.--
(1) In general.--Section 367(a) <<NOTE: 26 USC 367.>> is
amended by striking paragraph (3) and redesignating paragraphs
(4), (5), and (6) as paragraphs (3), (4), and (5), respectively.
(2) Conforming amendments.--Section 367(a)(4), as
redesignated by paragraph (1), is amended--
(A) by striking ``Paragraphs (2) and (3)'' and
inserting ``Paragraph (2)'', and
[[Page 131 STAT. 2195]]
(B) by striking ``Paragraphs (2) and (3)'' in the
heading and inserting ``Paragraph (2)''.
(3) <<NOTE: 26 USC 367 note.>> Effective date.--The
amendments made by this subsection shall apply to transfers
after December 31, 2017.
SEC. 14103. TREATMENT OF DEFERRED FOREIGN INCOME UPON TRANSITION
TO PARTICIPATION EXEMPTION SYSTEM OF
TAXATION.
(a) In General.--Section 965 <<NOTE: 26 USC 965.>> is amended to
read as follows:
``SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME UPON TRANSITION
TO PARTICIPATION EXEMPTION SYSTEM OF
TAXATION.
``(a) Treatment of Deferred Foreign Income as Subpart F Income.--In
the case of the last taxable year of a deferred foreign income
corporation which begins before January 1, 2018, the subpart F income of
such foreign corporation (as otherwise determined for such taxable year
under section 952) shall be increased by the greater of--
``(1) the accumulated post-1986 deferred foreign income of
such corporation determined as of November 2, 2017, or
``(2) the accumulated post-1986 deferred foreign income of
such corporation determined as of December 31, 2017.
``(b) Reduction in Amounts Included in Gross Income of United States
Shareholders of Specified Foreign Corporations With Deficits in Earnings
and Profits.--
``(1) In general.--In the case of a taxpayer which is a
United States shareholder with respect to at least one deferred
foreign income corporation and at least one E&P deficit foreign
corporation, the amount which would (but for this subsection) be
taken into account under section 951(a)(1) by reason of
subsection (a) as such United States shareholder's pro rata
share of the subpart F income of each deferred foreign income
corporation shall be reduced by the amount of such United States
shareholder's aggregate foreign E&P deficit which is allocated
under paragraph (2) to such deferred foreign income corporation.
``(2) Allocation of aggregate foreign e&p deficit.--The
aggregate foreign E&P deficit of any United States shareholder
shall be allocated among the deferred foreign income
corporations of such United States shareholder in an amount
which bears the same proportion to such aggregate as--
``(A) such United States shareholder's pro rata
share of the accumulated post-1986 deferred foreign
income of each such deferred foreign income corporation,
bears to
``(B) the aggregate of such United States
shareholder's pro rata share of the accumulated post-
1986 deferred foreign income of all deferred foreign
income corporations of such United States shareholder.
``(3) Definitions related to e&p deficits.--For purposes of
this subsection--
``(A) Aggregate foreign e&p deficit.--
``(i) In general.--The term `aggregate foreign
E&P deficit' means, with respect to any United
States shareholder, the lesser of--
``(I) the aggregate of such
shareholder's pro rata shares of the
specified E&P deficits of the
[[Page 131 STAT. 2196]]
E&P deficit foreign corporations of such
shareholder, or
``(II) the amount determined under
paragraph (2)(B).
``(ii) Allocation of deficit.--If the amount
described in clause (i)(II) is less than the
amount described in clause (i)(I), then the
shareholder shall designate, in such form and
manner as the Secretary determines--
``(I) the amount of the specified
E&P deficit which is to be taken into
account for each E&P deficit corporation
with respect to the taxpayer, and
``(II) in the case of an E&P deficit
corporation which has a qualified
deficit (as defined in section 952), the
portion (if any) of the deficit taken
into account under subclause (I) which
is attributable to a qualified deficit,
including the qualified activities to
which such portion is attributable.
``(B) E&P deficit foreign corporation.--The term
`E&P deficit foreign corporation' means, with respect to
any taxpayer, any specified foreign corporation with
respect to which such taxpayer is a United States
shareholder, if, as of November 2, 2017--
``(i) such specified foreign corporation has a
deficit in post-1986 earnings and profits,
``(ii) such corporation was a specified
foreign corporation, and
``(iii) such taxpayer was a United States
shareholder of such corporation.
``(C) Specified e&p deficit.--The term `specified
E&P deficit' means, with respect to any E&P deficit
foreign corporation, the amount of the deficit referred
to in subparagraph (B).
``(4) Treatment of earnings and profits in future years.--
``(A) Reduced earnings and profits treated as
previously taxed income when distributed.--For purposes
of applying section 959 in any taxable year beginning
with the taxable year described in subsection (a), with
respect to any United States shareholder of a deferred
foreign income corporation, an amount equal to such
shareholder's reduction under paragraph (1) which is
allocated to such deferred foreign income corporation
under this subsection shall be treated as an amount
which was included in the gross income of such United
States shareholder under section 951(a).
``(B) E&P deficits.--For purposes of this title,
with respect to any taxable year beginning with the
taxable year described in subsection (a), a United
States shareholder's pro rata share of the earnings and
profits of any E&P deficit foreign corporation under
this subsection shall be increased by the amount of the
specified E&P deficit of such corporation taken into
account by such shareholder under paragraph (1), and,
for purposes of section 952, such increase shall be
attributable to the same activity to which the deficit
so taken into account was attributable.
[[Page 131 STAT. 2197]]
``(5) Netting among united states shareholders in same
affiliated group.--
``(A) In general.--In the case of any affiliated
group which includes at least one E&P net surplus
shareholder and one E&P net deficit shareholder, the
amount which would (but for this paragraph) be taken
into account under section 951(a)(1) by reason of
subsection (a) by each such E&P net surplus shareholder
shall be reduced (but not below zero) by such
shareholder's applicable share of the affiliated group's
aggregate unused E&P deficit.
``(B) E&P net surplus shareholder.--For purposes of
this paragraph, the term `E&P net surplus shareholder'
means any United States shareholder which would
(determined without regard to this paragraph) take into
account an amount greater than zero under section
951(a)(1) by reason of subsection (a).
``(C) E&P net deficit shareholder.--For purposes of
this paragraph, the term `E&P net deficit shareholder'
means any United States shareholder if--
``(i) the aggregate foreign E&P deficit with
respect to such shareholder (as defined in
paragraph (3)(A) without regard to clause (i)(II)
thereof), exceeds
``(ii) the amount which would (but for this
subsection) be taken into account by such
shareholder under section 951(a)(1) by reason of
subsection (a).
``(D) Aggregate unused e&p deficit.--For purposes of
this paragraph--
``(i) In general.--The term `aggregate unused
E&P deficit' means, with respect to any affiliated
group, the lesser of--
``(I) the sum of the excesses
described in subparagraph (C),
determined with respect to each E&P net
deficit shareholder in such group, or
``(II) the amount determined under
subparagraph (E)(ii).
``(ii) Reduction with respect to e&p net
deficit shareholders which are not wholly owned by
the affiliated group.--If the group ownership
percentage of any E&P net deficit shareholder is
less than 100 percent, the amount of the excess
described in subparagraph (C) which is taken into
account under clause (i)(I) with respect to such
E&P net deficit shareholder shall be such group
ownership percentage of such amount.
``(E) Applicable share.--For purposes of this
paragraph, the term `applicable share' means, with
respect to any E&P net surplus shareholder in any
affiliated group, the amount which bears the same
proportion to such group's aggregate unused E&P deficit
as--
``(i) the product of--
``(I) such shareholder's group
ownership percentage, multiplied by
``(II) the amount which would (but
for this paragraph) be taken into
account under section 951(a)(1) by
reason of subsection (a) by such
shareholder, bears to
[[Page 131 STAT. 2198]]
``(ii) the aggregate amount determined under
clause (i) with respect to all E&P net surplus
shareholders in such group.
``(F) Group ownership percentage.--For purposes of
this paragraph, the term `group ownership percentage'
means, with respect to any United States shareholder in
any affiliated group, the percentage of the value of the
stock of such United States shareholder which is held by
other includible corporations in such affiliated group.
Notwithstanding the preceding sentence, the group
ownership percentage of the common parent of the
affiliated group is 100 percent. Any term used in this
subparagraph which is also used in section 1504 shall
have the same meaning as when used in such section.
``(c) Application of Participation Exemption to Included Income.--
``(1) In general.--In the case of a United States
shareholder of a deferred foreign income corporation, there
shall be allowed as a deduction for the taxable year in which an
amount is included in the gross income of such United States
shareholder under section 951(a)(1) by reason of this section an
amount equal to the sum of--
``(A) the United States shareholder's 8 percent rate
equivalent percentage of the excess (if any) of--
``(i) the amount so included as gross income,
over
``(ii) the amount of such United States
shareholder's aggregate foreign cash position,
plus
``(B) the United States shareholder's 15.5 percent
rate equivalent percentage of so much of the amount
described in subparagraph (A)(ii) as does not exceed the
amount described in subparagraph (A)(i).
``(2) 8 and 15.5 percent rate equivalent percentages.--For
purposes of this subsection--
``(A) 8 percent rate equivalent percentage.--The
term `8 percent rate equivalent percentage' means, with
respect to any United States shareholder for any taxable
year, the percentage which would result in the amount to
which such percentage applies being subject to a 8
percent rate of tax determined by only taking into
account a deduction equal to such percentage of such
amount and the highest rate of tax specified in section
11 for such taxable year. In the case of any taxable
year of a United States shareholder to which section 15
applies, the highest rate of tax under section 11 before
the effective date of the change in rates and the
highest rate of tax under section 11 after the effective
date of such change shall each be taken into account
under the preceding sentence in the same proportions as
the portion of such taxable year which is before and
after such effective date, respectively.
``(B) 15.5 percent rate equivalent percentage.--The
term `15.5 percent rate equivalent percentage' means,
with respect to any United States shareholder for any
taxable year, the percentage determined under
subparagraph (A) applied by substituting `15.5 percent
rate of tax' for `8 percent rate of tax'.
[[Page 131 STAT. 2199]]
``(3) Aggregate foreign cash position.--For purposes of this
subsection--
``(A) In general.--The term `aggregate foreign cash
position' means, with respect to any United States
shareholder, the greater of--
``(i) the aggregate of such United States
shareholder's pro rata share of the cash position
of each specified foreign corporation of such
United States shareholder determined as of the
close of the last taxable year of such specified
foreign corporation which begins before January 1,
2018, or
``(ii) one half of the sum of--
``(I) the aggregate described in
clause (i) determined as of the close of
the last taxable year of each such
specified foreign corporation which ends
before November 2, 2017, plus
``(II) the aggregate described in
clause (i) determined as of the close of
the taxable year of each such specified
foreign corporation which precedes the
taxable year referred to in subclause
(I).
``(B) Cash position.--For purposes of this
paragraph, the cash position of any specified foreign
corporation is the sum of--
``(i) cash held by such foreign corporation,
``(ii) the net accounts receivable of such
foreign corporation, plus
``(iii) the fair market value of the following
assets held by such corporation:
``(I) Personal property which is of
a type that is actively traded and for
which there is an established financial
market.
``(II) Commercial paper,
certificates of deposit, the securities
of the Federal government and of any
State or foreign government.
``(III) Any foreign currency.
``(IV) Any obligation with a term of
less than one year.
``(V) Any asset which the Secretary
identifies as being economically
equivalent to any asset described in
this subparagraph.
``(C) Net accounts receivable.--For purposes of this
paragraph, the term `net accounts receivable' means,
with respect to any specified foreign corporation, the
excess (if any) of--
``(i) such corporation's accounts receivable,
over
``(ii) such corporation's accounts payable
(determined consistent with the rules of section
461).
``(D) Prevention of double counting.--Cash positions
of a specified foreign corporation described in clause
(ii), (iii)(I), or (iii)(IV) of subparagraph (B) shall
not be taken into account by a United States shareholder
under subparagraph (A) to the extent that such United
States shareholder demonstrates to the satisfaction of
the Secretary that such amount is so taken into account
by such United States shareholder with respect to
another specified foreign corporation.
[[Page 131 STAT. 2200]]
``(E) Cash positions of certain non-corporate
entities taken into account.--An entity (other than a
corporation) shall be treated as a specified foreign
corporation of a United States shareholder for purposes
of determining such United States shareholder's
aggregate foreign cash position if any interest in such
entity is held by a specified foreign corporation of
such United States shareholder (determined after
application of this subparagraph) and such entity would
be a specified foreign corporation of such United States
shareholder if such entity were a foreign corporation.
``(F) Anti-abuse.--If the Secretary determines that
a principal purpose of any transaction was to reduce the
aggregate foreign cash position taken into account under
this subsection, such transaction shall be disregarded
for purposes of this subsection.
``(d) Deferred Foreign Income Corporation; Accumulated Post-1986
Deferred Foreign Income.--For purposes of this section--
``(1) Deferred foreign income corporation.--The term
`deferred foreign income corporation' means, with respect to any
United States shareholder, any specified foreign corporation of
such United States shareholder which has accumulated post-1986
deferred foreign income (as of the date referred to in paragraph
(1) or (2) of subsection (a)) greater than zero.
``(2) Accumulated post-1986 deferred foreign income.--The
term `accumulated post-1986 deferred foreign income' means the
post-1986 earnings and profits except to the extent such
earnings--
``(A) are attributable to income of the specified
foreign corporation which is effectively connected with
the conduct of a trade or business within the United
States and subject to tax under this chapter, or
``(B) in the case of a controlled foreign
corporation, if distributed, would be excluded from the
gross income of a United States shareholder under
section 959.
To the extent provided in regulations or other guidance
prescribed by the Secretary, in the case of any controlled
foreign corporation which has shareholders which are not United
States shareholders, accumulated post-1986 deferred foreign
income shall be appropriately reduced by amounts which would be
described in subparagraph (B) if such shareholders were United
States shareholders.
``(3) Post-1986 earnings and profits.--The term `post-1986
earnings and profits' means the earnings and profits of the
foreign corporation (computed in accordance with sections 964(a)
and 986, and by only taking into account periods when the
foreign corporation was a specified foreign corporation)
accumulated in taxable years beginning after December 31, 1986,
and determined--
``(A) as of the date referred to in paragraph (1) or
(2) of subsection (a), whichever is applicable with
respect to such foreign corporation, and
``(B) without diminution by reason of dividends
distributed during the taxable year described in
subsection (a) other than dividends distributed to
another specified foreign corporation.
[[Page 131 STAT. 2201]]
``(e) Specified Foreign Corporation.--
``(1) In general.--For purposes of this section, the term
`specified foreign corporation' means--
``(A) any controlled foreign corporation, and
``(B) any foreign corporation with respect to which
one or more domestic corporations is a United States
shareholder.
``(2) Application to certain foreign corporations.--For
purposes of sections 951 and 961, a foreign corporation
described in paragraph (1)(B) shall be treated as a controlled
foreign corporation solely for purposes of taking into account
the subpart F income of such corporation under subsection (a)
(and for purposes of applying subsection (f)).
``(3) Exclusion of passive foreign investment companies.--
Such term shall not include any corporation which is a passive
foreign investment company (as defined in section 1297) with
respect to the shareholder and which is not a controlled foreign
corporation.
``(f) Determinations of Pro Rata Share.--
``(1) In general.--For purposes of this section, the
determination of any United States shareholder's pro rata share
of any amount with respect to any specified foreign corporation
shall be determined under rules similar to the rules of section
951(a)(2) by treating such amount in the same manner as subpart
F income (and by treating such specified foreign corporation as
a controlled foreign corporation).
``(2) Special rules.--The portion which is included in the
income of a United States shareholder under section 951(a)(1) by
reason of subsection (a) which is equal to the deduction allowed
under subsection (c) by reason of such inclusion--
``(A) shall be treated as income exempt from tax for
purposes of sections 705(a)(1)(B) and 1367(a)(1)(A), and
``(B) shall not be treated as income exempt from tax
for purposes of determining whether an adjustment shall
be made to an accumulated adjustment account under
section 1368(e)(1)(A).
``(g) Disallowance of Foreign Tax Credit, etc.--
``(1) In general.--No credit shall be allowed under section
901 for the applicable percentage of any taxes paid or accrued
(or treated as paid or accrued) with respect to any amount for
which a deduction is allowed under this section.
``(2) Applicable percentage.--For purposes of this
subsection, the term `applicable percentage' means the amount
(expressed as a percentage) equal to the sum of--
``(A) 0.771 multiplied by the ratio of--
``(i) the excess to which subsection (c)(1)(A)
applies, divided by
``(ii) the sum of such excess plus the amount
to which subsection (c)(1)(B) applies, plus
``(B) 0.557 multiplied by the ratio of--
``(i) the amount to which subsection (c)(1)(B)
applies, divided by
``(ii) the sum described in subparagraph
(A)(ii).
``(3) Denial of deduction.--No deduction shall be allowed
under this chapter for any tax for which credit is not allowable
under section 901 by reason of paragraph (1) (determined by
[[Page 131 STAT. 2202]]
treating the taxpayer as having elected the benefits of subpart
A of part III of subchapter N).
``(4) Coordination with section 78.--With respect to the
taxes treated as paid or accrued by a domestic corporation with
respect to amounts which are includible in gross income of such
domestic corporation by reason of this section, section 78 shall
apply only to so much of such taxes as bears the same proportion
to the amount of such taxes as--
``(A) the excess of--
``(i) the amounts which are includible in
gross income of such domestic corporation by
reason of this section, over
``(ii) the deduction allowable under
subsection (c) with respect to such amounts, bears
to
``(B) such amounts.
``(h) Election To Pay Liability in Installments.--
``(1) In general.--In the case of a United States
shareholder of a deferred foreign income corporation, such
United States shareholder may elect to pay the net tax liability
under this section in 8 installments of the following amounts:
``(A) 8 percent of the net tax liability in the case
of each of the first 5 of such installments,
``(B) 15 percent of the net tax liability in the
case of the 6th such installment,
``(C) 20 percent of the net tax liability in the
case of the 7th such installment, and
``(D) 25 percent of the net tax liability in the
case of the 8th such installment.
``(2) Date for payment of installments.--If an election is
made under paragraph (1), the first installment shall be paid on
the due date (determined without regard to any extension of time
for filing the return) for the return of tax for the taxable
year described in subsection (a) and each succeeding installment
shall be paid on the due date (as so determined) for the return
of tax for the taxable year following the taxable year with
respect to which the preceding installment was made.
``(3) Acceleration of payment.--If there is an addition to
tax for failure to timely pay any installment required under
this subsection, a liquidation or sale of substantially all the
assets of the taxpayer (including in a title 11 or similar
case), a cessation of business by the taxpayer, or any similar
circumstance, then the unpaid portion of all remaining
installments shall be due on the date of such event (or in the
case of a title 11 or similar case, the day before the petition
is filed). The preceding sentence shall not apply to the sale of
substantially all the assets of a taxpayer to a buyer if such
buyer enters into an agreement with the Secretary under which
such buyer is liable for the remaining installments due under
this subsection in the same manner as if such buyer were the
taxpayer.
``(4) Proration of deficiency to installments.--If an
election is made under paragraph (1) to pay the net tax
liability under this section in installments and a deficiency
has been assessed with respect to such net tax liability, the
deficiency shall be prorated to the installments payable under
paragraph (1). The part of the deficiency so prorated to any
installment the date for payment of which has not arrived shall
be collected
[[Page 131 STAT. 2203]]
at the same time as, and as a part of, such installment. The
part of the deficiency so prorated to any installment the date
for payment of which has arrived shall be paid upon notice and
demand from the Secretary. This subsection shall not apply if
the deficiency is due to negligence, to intentional disregard of
rules and regulations, or to fraud with intent to evade tax.
``(5) Election.--Any election under paragraph (1) shall be
made not later than the due date for the return of tax for the
taxable year described in subsection (a) and shall be made in
such manner as the Secretary shall provide.
``(6) Net tax liability under this section.--For purposes of
this subsection--
``(A) In general.--The net tax liability under this
section with respect to any United States shareholder is
the excess (if any) of--
``(i) such taxpayer's net income tax for the
taxable year in which an amount is included in the
gross income of such United States shareholder
under section 951(a)(1) by reason of this section,
over
``(ii) such taxpayer's net income tax for such
taxable year determined--
``(I) without regard to this
section, and
``(II) without regard to any income
or deduction properly attributable to a
dividend received by such United States
shareholder from any deferred foreign
income corporation.
``(B) Net income tax.--The term `net income tax'
means the regular tax liability reduced by the credits
allowed under subparts A, B, and D of part IV of
subchapter A.
``(i) Special Rules for S Corporation Shareholders.--
``(1) In general.--In the case of any S corporation which is
a United States shareholder of a deferred foreign income
corporation, each shareholder of such S corporation may elect to
defer payment of such shareholder's net tax liability under this
section with respect to such S corporation until the
shareholder's taxable year which includes the triggering event
with respect to such liability. Any net tax liability payment of
which is deferred under the preceding sentence shall be assessed
on the return of tax as an addition to tax in the shareholder's
taxable year which includes such triggering event.
``(2) Triggering event.--
``(A) In general.--In the case of any shareholder's
net tax liability under this section with respect to any
S corporation, the triggering event with respect to such
liability is whichever of the following occurs first:
``(i) Such corporation ceases to be an S
corporation (determined as of the first day of the
first taxable year that such corporation is not an
S corporation).
``(ii) A liquidation or sale of substantially
all the assets of such S corporation (including in
a title 11 or similar case), a cessation of
business by such S corporation, such S corporation
ceases to exist, or any similar circumstance.
[[Page 131 STAT. 2204]]
``(iii) A transfer of any share of stock in
such S corporation by the taxpayer (including by
reason of death, or otherwise).
``(B) Partial transfers of stock.--In the case of a
transfer of less than all of the taxpayer's shares of
stock in the S corporation, such transfer shall only be
a triggering event with respect to so much of the
taxpayer's net tax liability under this section with
respect to such S corporation as is properly allocable
to such stock.
``(C) Transfer of liability.--A transfer described
in clause (iii) of subparagraph (A) shall not be treated
as a triggering event if the transferee enters into an
agreement with the Secretary under which such transferee
is liable for net tax liability with respect to such
stock in the same manner as if such transferee were the
taxpayer.
``(3) Net tax liability.--A shareholder's net tax liability
under this section with respect to any S corporation is the net
tax liability under this section which would be determined under
subsection (h)(6) if the only subpart F income taken into
account by such shareholder by reason of this section were
allocations from such S corporation.
``(4) Election to pay deferred liability in installments.--
In the case of a taxpayer which elects to defer payment under
paragraph (1)--
``(A) subsection (h) shall be applied separately
with respect to the liability to which such election
applies,
``(B) an election under subsection (h) with respect
to such liability shall be treated as timely made if
made not later than the due date for the return of tax
for the taxable year in which the triggering event with
respect to such liability occurs,
``(C) the first installment under subsection (h)
with respect to such liability shall be paid not later
than such due date (but determined without regard to any
extension of time for filing the return), and
``(D) if the triggering event with respect to any
net tax liability is described in paragraph (2)(A)(ii),
an election under subsection (h) with respect to such
liability may be made only with the consent of the
Secretary.
``(5) Joint and several liability of s corporation.--If any
shareholder of an S corporation elects to defer payment under
paragraph (1), such S corporation shall be jointly and severally
liable for such payment and any penalty, addition to tax, or
additional amount attributable thereto.
``(6) Extension of limitation on collection.--Any limitation
on the time period for the collection of a liability deferred
under this subsection shall not be treated as beginning before
the date of the triggering event with respect to such liability.
``(7) Annual reporting of net tax liability.--
``(A) In general.--Any shareholder of an S
corporation which makes an election under paragraph (1)
shall report the amount of such shareholder's deferred
net tax liability on such shareholder's return of tax
for the taxable year for which such election is made and
on the return of tax for each taxable year thereafter
until such amount has been fully assessed on such
returns.
[[Page 131 STAT. 2205]]
``(B) Deferred net tax liability.--For purposes of
this paragraph, the term `deferred net tax liability'
means, with respect to any taxable year, the amount of
net tax liability payment of which has been deferred
under paragraph (1) and which has not been assessed on a
return of tax for any prior taxable year.
``(C) Failure to report.--In the case of any failure
to report any amount required to be reported under
subparagraph (A) with respect to any taxable year before
the due date for the return of tax for such taxable
year, there shall be assessed on such return as an
addition to tax 5 percent of such amount.
``(8) Election.--Any election under paragraph (1)--
``(A) shall be made by the shareholder of the S
corporation not later than the due date for such
shareholder's return of tax for the taxable year which
includes the close of the taxable year of such S
corporation in which the amount described in subsection
(a) is taken into account, and
``(B) shall be made in such manner as the Secretary
shall provide.
``(j) Reporting by S Corporation.--Each S corporation which is a
United States shareholder of a specified foreign corporation shall
report in its return of tax under section 6037(a) the amount includible
in its gross income for such taxable year by reason of this section and
the amount of the deduction allowable by subsection (c). Any copy
provided to a shareholder under section 6037(b) shall include a
statement of such shareholder's pro rata share of such amounts.
``(k) Extension of Limitation on Assessment.--Notwithstanding
section 6501, the limitation on the time period for the assessment of
the net tax liability under this section (as defined in subsection
(h)(6)) shall not expire before the date that is 6 years after the
return for the taxable year described in such subsection was filed.
``(l) Recapture for Expatriated Entities.--
``(1) In general.--If a deduction is allowed under
subsection (c) to a United States shareholder and such
shareholder first becomes an expatriated entity at any time
during the 10-year period beginning on the date of the enactment
of the Tax Cuts and Jobs Act (with respect to a surrogate
foreign corporation which first becomes a surrogate foreign
corporation during such period), then--
``(A) the tax imposed by this chapter shall be
increased for the first taxable year in which such
taxpayer becomes an expatriated entity by an amount
equal to 35 percent of the amount of the deduction
allowed under subsection (c), and
``(B) no credits shall be allowed against the
increase in tax under subparagraph (A).
``(2) Expatriated entity.--For purposes of this subsection,
the term `expatriated entity' has the same meaning given such
term under section 7874(a)(2), except that such term shall not
include an entity if the surrogate foreign corporation with
respect to the entity is treated as a domestic corporation under
section 7874(b).
[[Page 131 STAT. 2206]]
``(3) Surrogate foreign corporation.--For purposes of this
subsection, the term `surrogate foreign corporation' has the
meaning given such term in section 7874(a)(2)(B).
``(m) Special Rules for United States Shareholders Which Are Real
Estate Investment Trusts.--
``(1) In general.--If a real estate investment trust is a
United States shareholder in 1 or more deferred foreign income
corporations--
``(A) any amount required to be taken into account
under section 951(a)(1) by reason of this section shall
not be taken into account as gross income of the real
estate investment trust for purposes of applying
paragraphs (2) and (3) of section 856(c) to any taxable
year for which such amount is taken into account under
section 951(a)(1), and
``(B) if the real estate investment trust elects the
application of this subparagraph, notwithstanding
subsection (a), any amount required to be taken into
account under section 951(a)(1) by reason of this
section shall, in lieu of the taxable year in which it
would otherwise be included in gross income (for
purposes of the computation of real estate investment
trust taxable income under section 857(b)), be included
in gross income as follows:
``(i) 8 percent of such amount in the case of
each of the taxable years in the 5-taxable year
period beginning with the taxable year in which
such amount would otherwise be included.
``(ii) 15 percent of such amount in the case
of the 1st taxable year following such period.
``(iii) 20 percent of such amount in the case
of the 2nd taxable year following such period.
``(iv) 25 percent of such amount in the case
of the 3rd taxable year following such period.
``(2) Rules for trusts electing deferred inclusion.--
``(A) Election.--Any election under paragraph (1)(B)
shall be made not later than the due date for the first
taxable year in the 5-taxable year period described in
clause (i) of paragraph (1)(B) and shall be made in such
manner as the Secretary shall provide.
``(B) Special rules.--If an election under paragraph
(1)(B) is in effect with respect to any real estate
investment trust, the following rules shall apply:
``(i) Application of participation
exemption.--For purposes of subsection (c)(1)--
``(I) the aggregate amount to which
subparagraph (A) or (B) of subsection
(c)(1) applies shall be determined
without regard to the election,
``(II) each such aggregate amount
shall be allocated to each taxable year
described in paragraph (1)(B) in the
same proportion as the amount included
in the gross income of such United
States shareholder under section
951(a)(1) by reason of this section is
allocated to each such taxable year.
``(III) No installment payments.--
The real estate investment trust may not
make an election under subsection (g)
for any taxable year described in
paragraph (1)(B).
[[Page 131 STAT. 2207]]
``(ii) Acceleration of inclusion.--If there is
a liquidation or sale of substantially all the
assets of the real estate investment trust
(including in a title 11 or similar case), a
cessation of business by such trust, or any
similar circumstance, then any amount not yet
included in gross income under paragraph (1)(B)
shall be included in gross income as of the day
before the date of the event and the unpaid
portion of any tax liability with respect to such
inclusion shall be due on the date of such event
(or in the case of a title 11 or similar case, the
day before the petition is filed).
``(n) Election Not To Apply Net Operating Loss Deduction.--
``(1) In general.--If a United States shareholder of a
deferred foreign income corporation elects the application of
this subsection for the taxable year described in subsection
(a), then the amount described in paragraph (2) shall not be
taken into account--
``(A) in determining the amount of the net operating
loss deduction under section 172 of such shareholder for
such taxable year, or
``(B) in determining the amount of taxable income
for such taxable year which may be reduced by net
operating loss carryovers or carrybacks to such taxable
year under section 172.
``(2) Amount described.--The amount described in this
paragraph is the sum of--
``(A) the amount required to be taken into account
under section 951(a)(1) by reason of this section
(determined after the application of subsection (c)),
plus
``(B) in the case of a domestic corporation which
chooses to have the benefits of subpart A of part III of
subchapter N for the taxable year, the taxes deemed to
be paid by such corporation under subsections (a) and
(b) of section 960 for such taxable year with respect to
the amount described in subparagraph (A) which are
treated as a dividends under section 78.
``(3) Election.--Any election under this subsection shall be
made not later than the due date (including extensions) for
filing the return of tax for the taxable year and shall be made
in such manner as the Secretary shall prescribe.
``(o) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary or appropriate to carry out the
provisions of this section, including--
``(1) regulations or other guidance to provide appropriate
basis adjustments, and
``(2) regulations or other guidance to prevent the avoidance
of the purposes of this section, including through a reduction
in earnings and profits, through changes in entity
classification or accounting methods, or otherwise.''.
[[Page 131 STAT. 2208]]
(b) Clerical Amendment.--The table of sections for subpart F of part
III of subchapter N of chapter 1 <<NOTE: 26 USC 951 prec.>> is amended
by striking the item relating to section 965 and inserting the
following:
``Sec. 965. Treatment of deferred foreign income upon transition to
participation exemption system of taxation.''.
Subpart B--Rules Related to Passive and Mobile Income
CHAPTER 1--TAXATION OF FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL
INTANGIBLE LOW-TAXED INCOME
SEC. 14201. CURRENT YEAR INCLUSION OF GLOBAL INTANGIBLE LOW-TAXED
INCOME BY UNITED STATES SHAREHOLDERS.
(a) In General.--Subpart F of part III of subchapter N of chapter 1
is amended by inserting after section 951 the following new section:
``SEC. 951A. <<NOTE: 26 USC 951A.>> GLOBAL INTANGIBLE LOW-TAXED
INCOME INCLUDED IN GROSS INCOME OF
UNITED STATES SHAREHOLDERS.
``(a) In General.--Each person who is a United States shareholder of
any controlled foreign corporation for any taxable year of such United
States shareholder shall include in gross income such shareholder's
global intangible low-taxed income for such taxable year.
``(b) Global Intangible Low-taxed Income.--For purposes of this
section--
``(1) In general.--The term `global intangible low-taxed
income' means, with respect to any United States shareholder for
any taxable year of such United States shareholder, the excess
(if any) of--
``(A) such shareholder's net CFC tested income for
such taxable year, over
``(B) such shareholder's net deemed tangible income
return for such taxable year.
``(2) Net deemed tangible income return.--The term `net
deemed tangible income return' means, with respect to any United
States shareholder for any taxable year, the excess of--
``(A) 10 percent of the aggregate of such
shareholder's pro rata share of the qualified business
asset investment of each controlled foreign corporation
with respect to which such shareholder is a United
States shareholder for such taxable year (determined for
each taxable year of each such controlled foreign
corporation which ends in or with such taxable year of
such United States shareholder), over
``(B) the amount of interest expense taken into
account under subsection (c)(2)(A)(ii) in determining
the shareholder's net CFC tested income for the taxable
year to the extent the interest income attributable to
such expense is not taken into account in determining
such shareholder's net CFC tested income.
``(c) Net CFC Tested Income.--For purposes of this section--
``(1) In general.--The term `net CFC tested income' means,
with respect to any United States shareholder for any taxable
[[Page 131 STAT. 2209]]
year of such United States shareholder, the excess (if any) of--
``(A) the aggregate of such shareholder's pro rata
share of the tested income of each controlled foreign
corporation with respect to which such shareholder is a
United States shareholder for such taxable year of such
United States shareholder (determined for each taxable
year of such controlled foreign corporation which ends
in or with such taxable year of such United States
shareholder), over
``(B) the aggregate of such shareholder's pro rata
share of the tested loss of each controlled foreign
corporation with respect to which such shareholder is a
United States shareholder for such taxable year of such
United States shareholder (determined for each taxable
year of such controlled foreign corporation which ends
in or with such taxable year of such United States
shareholder).
``(2) Tested income; tested loss.--For purposes of this
section--
``(A) Tested income.--The term `tested income'
means, with respect to any controlled foreign
corporation for any taxable year of such controlled
foreign corporation, the excess (if any) of--
``(i) the gross income of such corporation
determined without regard to--
``(I) any item of income described
in section 952(b),
``(II) any gross income taken into
account in determining the subpart F
income of such corporation,
``(III) any gross income excluded
from the foreign base company income (as
defined in section 954) and the
insurance income (as defined in section
953) of such corporation by reason of
section 954(b)(4),
``(IV) any dividend received from a
related person (as defined in section
954(d)(3)), and
``(V) any foreign oil and gas
extraction income (as defined in section
907(c)(1)) of such corporation, over
``(ii) the deductions (including taxes)
properly allocable to such gross income under
rules similar to the rules of section 954(b)(5)
(or to which such deductions would be allocable if
there were such gross income).
``(B) Tested loss.--
``(i) In general.--The term `tested loss'
means, with respect to any controlled foreign
corporation for any taxable year of such
controlled foreign corporation, the excess (if
any) of the amount described in subparagraph
(A)(ii) over the amount described in subparagraph
(A)(i).
``(ii) Coordination with subpart f to deny
double benefit of losses.--Section 952(c)(1)(A)
shall be applied by increasing the earnings and
profits of the controlled foreign corporation by
the tested loss of such corporation.
``(d) Qualified Business Asset Investment.--For purposes of this
section--
[[Page 131 STAT. 2210]]
``(1) In general.--The term `qualified business asset
investment' means, with respect to any controlled foreign
corporation for any taxable year, the average of such
corporation's aggregate adjusted bases as of the close of each
quarter of such taxable year in specified tangible property--
``(A) used in a trade or business of the
corporation, and
``(B) of a type with respect to which a deduction is
allowable under section 167.
``(2) Specified tangible property.--
``(A) In general.--The term `specified tangible
property' means, except as provided in subparagraph (B),
any tangible property used in the production of tested
income.
``(B) Dual use property.--In the case of property
used both in the production of tested income and income
which is not tested income, such property shall be
treated as specified tangible property in the same
proportion that the gross income described in subsection
(c)(1)(A) produced with respect to such property bears
to the total gross income produced with respect to such
property.
``(3) Determination of adjusted basis.--For purposes of this
subsection, notwithstanding any provision of this title (or any
other provision of law) which is enacted after the date of the
enactment of this section, the adjusted basis in any property
shall be determined--
``(A) by using the alternative depreciation system
under section 168(g), and
``(B) by allocating the depreciation deduction with
respect to such property ratably to each day during the
period in the taxable year to which such depreciation
relates.
``(3) Partnership property.--For purposes of this
subsection, if a controlled foreign corporation holds an
interest in a partnership at the close of such taxable year of
the controlled foreign corporation, such controlled foreign
corporation shall take into account under paragraph (1) the
controlled foreign corporation's distributive share of the
aggregate of the partnership's adjusted bases (determined as of
such date in the hands of the partnership) in tangible property
held by such partnership to the extent such property--
``(A) is used in the trade or business of the
partnership,
``(B) is of a type with respect to which a deduction
is allowable under section 167, and
``(C) is used in the production of tested income
(determined with respect to such controlled foreign
corporation's distributive share of income with respect
to such property).
For purposes of this paragraph, the controlled foreign
corporation's distributive share of the adjusted basis of any
property shall be the controlled foreign corporation's
distributive share of income with respect to such property.
``(4) Regulations.--The Secretary shall issue such
regulations or other guidance as the Secretary determines
appropriate to prevent the avoidance of the purposes of this
subsection, including regulations or other guidance which
provide for the treatment of property if--
``(A) such property is transferred, or held,
temporarily, or
[[Page 131 STAT. 2211]]
``(B) the avoidance of the purposes of this
paragraph is a factor in the transfer or holding of such
property.
``(e) Determination of Pro Rata Share, etc.--For purposes of this
section--
``(1) In general.--The pro rata shares referred to in
subsections (b), (c)(1)(A), and (c)(1)(B), respectively, shall
be determined under the rules of section 951(a)(2) in the same
manner as such section applies to subpart F income and shall be
taken into account in the taxable year of the United States
shareholder in which or with which the taxable year of the
controlled foreign corporation ends.
``(2) Treatment as united states shareholder.--A person
shall be treated as a United States shareholder of a controlled
foreign corporation for any taxable year of such person only if
such person owns (within the meaning of section 958(a)) stock in
such foreign corporation on the last day in the taxable year of
such foreign corporation on which such foreign corporation is a
controlled foreign corporation.
``(3) Treatment as controlled foreign corporation.--A
foreign corporation shall be treated as a controlled foreign
corporation for any taxable year if such foreign corporation is
a controlled foreign corporation at any time during such taxable
year.
``(f) Treatment as Subpart F Income for Certain Purposes.--
``(1) In general.--
``(A) Application.--Except as provided in
subparagraph (B), any global intangible low-taxed income
included in gross income under subsection (a) shall be
treated in the same manner as an amount included under
section 951(a)(1)(A) for purposes of applying sections
168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 961,
962, 993(a)(1)(E), 996(f)(1), 1248(b)(1), 1248(d)(1),
6501(e)(1)(C), 6654(d)(2)(D), and 6655(e)(4).
``(B) Exception.--The Secretary shall provide rules
for the application of subparagraph (A) to other
provisions of this title in any case in which the
determination of subpart F income is required to be made
at the level of the controlled foreign corporation.
``(2) Allocation of global intangible low-taxed income to
controlled foreign corporations.--For purposes of the sections
referred to in paragraph (1), with respect to any controlled
foreign corporation any pro rata amount from which is taken into
account in determining the global intangible low-taxed income
included in gross income of a United States shareholder under
subsection (a), the portion of such global intangible low-taxed
income which is treated as being with respect to such controlled
foreign corporation is--
``(A) in the case of a controlled foreign
corporation with no tested income, zero, and
``(B) in the case of a controlled foreign
corporation with tested income, the portion of such
global intangible low-taxed income which bears the same
ratio to such global intangible low-taxed income as--
``(i) such United States shareholder's pro
rata amount of the tested income of such
controlled foreign corporation, bears to
[[Page 131 STAT. 2212]]
``(ii) the aggregate amount described in
subsection (c)(1)(A) with respect to such United
States shareholder.''.
(b) Foreign Tax Credit.--
(1) Application of deemed paid foreign tax credit.--Section
960 <<NOTE: 26 USC 960.>> is amended adding at the end the
following new subsection:
``(d) Deemed Paid Credit for Taxes Properly Attributable to Tested
Income.--
``(1) In general.--For purposes of subpart A of this part,
if any amount is includible in the gross income of a domestic
corporation under section 951A, such domestic corporation shall
be deemed to have paid foreign income taxes equal to 80 percent
of the product of--
``(A) such domestic corporation's inclusion
percentage, multiplied by
``(B) the aggregate tested foreign income taxes paid
or accrued by controlled foreign corporations.
``(2) Inclusion percentage.--For purposes of paragraph (1),
the term `inclusion percentage' means, with respect to any
domestic corporation, the ratio (expressed as a percentage) of--
``(A) such corporation's global intangible low-taxed
income (as defined in section 951A(b)), divided by
``(B) the aggregate amount described in section
951A(c)(1)(A) with respect to such corporation.
``(3) Tested foreign income taxes.--For purposes of
paragraph (1), the term `tested foreign income taxes' means,
with respect to any domestic corporation which is a United
States shareholder of a controlled foreign corporation, the
foreign income taxes paid or accrued by such foreign corporation
which are properly attributable to the tested income of such
foreign corporation taken into account by such domestic
corporation under section 951A.''.
(2) Application of foreign tax credit limitation.--
(A) Separate basket for global intangible low-taxed
income.--Section 904(d)(1) is amended by redesignating
subparagraphs (A) and (B) as subparagraphs (B) and (C),
respectively, and by inserting before subparagraph (B)
(as so redesignated) the following new subparagraph:
``(A) any amount includible in gross income under
section 951A (other than passive category income),''.
(B) Exclusion from general category income.--Section
904(d)(2)(A)(ii) is amended by inserting ``income
described in paragraph (1)(A) and'' before ``passive
category income''.
(C) No carryover or carryback of excess taxes.--
Section 904(c) is amended by adding at the end the
following: ``This subsection shall not apply to taxes
paid or accrued with respect to amounts described in
subsection (d)(1)(A).''.
[[Page 131 STAT. 2213]]
(c) Clerical Amendment.--The table of sections for subpart F of part
III of subchapter N of chapter 1 <<NOTE: 26 USC 951 prec.>> is amended
by inserting after the item relating to section 951 the following new
item:
``Sec. 951A. Global intangible low-taxed income included in gross income
of United States shareholders.''.
(d) <<NOTE: 26 USC 904 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end.
SEC. 14202. DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME AND
GLOBAL INTANGIBLE LOW-TAXED INCOME.
(a) In General.--Part VIII of subchapter B of chapter 1 is amended
by adding at the end the following new section:
``SEC. 250. <<NOTE: 26 USC 250.>> FOREIGN-DERIVED INTANGIBLE
INCOME AND GLOBAL INTANGIBLE LOW-TAXED
INCOME.
``(a) Allowance of Deduction.--
``(1) In general.--In the case of a domestic corporation for
any taxable year, there shall be allowed as a deduction an
amount equal to the sum of--
``(A) 37.5 percent of the foreign-derived intangible
income of such domestic corporation for such taxable
year, plus
``(B) 50 percent of--
``(i) the global intangible low-taxed income
amount (if any) which is included in the gross
income of such domestic corporation under section
951A for such taxable year, and
``(ii) the amount treated as a dividend
received by such corporation under section 78
which is attributable to the amount described in
clause (i).
``(2) Limitation based on taxable income.--
``(A) In general.--If, for any taxable year--
``(i) the sum of the foreign-derived
intangible income and the global intangible low-
taxed income amount otherwise taken into account
by the domestic corporation under paragraph (1),
exceeds
``(ii) the taxable income of the domestic
corporation (determined without regard to this
section),
then the amount of the foreign-derived intangible income
and the global intangible low-taxed income amount so
taken into account shall be reduced as provided in
subparagraph (B).
``(B) Reduction.--For purposes of subparagraph (A)--
``(i) foreign-derived intangible income shall
be reduced by an amount which bears the same ratio
to the excess described in subparagraph (A) as
such foreign-derived intangible income bears to
the sum described in subparagraph (A)(i), and
``(ii) the global intangible low-taxed income
amount shall be reduced by the remainder of such
excess.
``(3) Reduction in deduction for taxable years after 2025.--
In the case of any taxable year beginning after December 31,
2025, paragraph (1) shall be applied by substituting--
[[Page 131 STAT. 2214]]
``(A) `21.875 percent' for `37.5 percent' in
subparagraph (A), and
``(B) `37.5 percent' for `50 percent' in
subparagraph (B).
``(b) Foreign-derived Intangible Income.--For purposes of this
section--
``(1) In general.--The foreign-derived intangible income of
any domestic corporation is the amount which bears the same
ratio to the deemed intangible income of such corporation as--
``(A) the foreign-derived deduction eligible income
of such corporation, bears to
``(B) the deduction eligible income of such
corporation.
``(2) Deemed intangible income.--For purposes of this
subsection--
``(A) In general.--The term `deemed intangible
income' means the excess (if any) of--
``(i) the deduction eligible income of the
domestic corporation, over
``(ii) the deemed tangible income return of
the corporation.
``(B) Deemed tangible income return.--The term
`deemed tangible income return' means, with respect to
any corporation, an amount equal to 10 percent of the
corporation's qualified business asset investment (as
defined in section 951A(d), determined by substituting
`deduction eligible income' for `tested income' in
paragraph (2) thereof and without regard to whether the
corporation is a controlled foreign corporation).
``(3) Deduction eligible income.--
``(A) In general.--The term `deduction eligible
income' means, with respect to any domestic corporation,
the excess (if any) of--
``(i) gross income of such corporation
determined without regard to--
``(I) any amount included in the
gross income of such corporation under
section 951(a)(1),
``(II) the global intangible low-
taxed income included in the gross
income of such corporation under section
951A,
``(III) any financial services
income (as defined in section
904(d)(2)(D)) of such corporation,
``(IV) any dividend received from a
corporation which is a controlled
foreign corporation of such domestic
corporation,
``(V) any domestic oil and gas
extraction income of such corporation,
and
``(VI) any foreign branch income (as
defined in section 904(d)(2)(J)), over
``(ii) the deductions (including taxes)
properly allocable to such gross income.
``(B) Domestic oil and gas extraction income.--For
purposes of subparagraph (A), the term `domestic oil and
gas extraction income' means income described in section
907(c)(1), determined by substituting `within the United
States' for `without the United States'.
[[Page 131 STAT. 2215]]
``(4) Foreign-derived deduction eligible income.--The term
`foreign-derived deduction eligible income' means, with respect
to any taxpayer for any taxable year, any deduction eligible
income of such taxpayer which is derived in connection with--
``(A) property--
``(i) which is sold by the taxpayer to any
person who is not a United States person, and
``(ii) which the taxpayer establishes to the
satisfaction of the Secretary is for a foreign
use, or
``(B) services provided by the taxpayer which the
taxpayer establishes to the satisfaction of the
Secretary are provided to any person, or with respect to
property, not located within the United States.
``(5) Rules relating to foreign use property or services.--
For purposes of this subsection--
``(A) Foreign use.--The term `foreign use' means any
use, consumption, or disposition which is not within the
United States.
``(B) Property or services provided to domestic
intermediaries.--
``(i) Property.--If a taxpayer sells property
to another person (other than a related party) for
further manufacture or other modification within
the United States, such property shall not be
treated as sold for a foreign use even if such
other person subsequently uses such property for a
foreign use.
``(ii) Services.--If a taxpayer provides
services to another person (other than a related
party) located within the United States, such
services shall not be treated as described in
paragraph (4)(B) even if such other person uses
such services in providing services which are so
described.
``(C) Special rules with respect to related party
transactions.--
``(i) Sales to related parties.--If property
is sold to a related party who is not a United
States person, such sale shall not be treated as
for a foreign use unless--
``(I) such property is ultimately
sold by a related party, or used by a
related party in connection with
property which is sold or the provision
of services, to another person who is an
unrelated party who is not a United
States person, and
``(II) the taxpayer establishes to
the satisfaction of the Secretary that
such property is for a foreign use.
For purposes of this clause, a sale of property
shall be treated as a sale of each of the
components thereof.
``(ii) Service provided to related parties.--
If a service is provided to a related party who is
not located in the United States, such service
shall not be treated described in subparagraph
(A)(ii) unless the taxpayer established to the
satisfaction of the Secretary that such service is
not substantially similar to services provided by
such related party to persons located within the
United States.
[[Page 131 STAT. 2216]]
``(D) Related party.--For purposes of this
paragraph, the term `related party' means any member of
an affiliated group as defined in section 1504(a),
determined--
``(i) by substituting `more than 50 percent'
for `at least 80 percent' each place it appears,
and
``(ii) without regard to paragraphs (2) and
(3) of section 1504(b).
Any person (other than a corporation) shall be treated
as a member of such group if such person is controlled
by members of such group (including any entity treated
as a member of such group by reason of this sentence) or
controls any such member. For purposes of the preceding
sentence, control shall be determined under the rules of
section 954(d)(3).
``(E) Sold.--For purposes of this subsection, the
terms `sold', `sells', and `sale' shall include any
lease, license, exchange, or other disposition.
``(c) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary or appropriate to carry out the
provisions of this section.''.
(b) Conforming Amendments.--
(1) Section 172(d), as amended by this Act, <<NOTE: 26 USC
172.>> is amended by adding at the end the following new
paragraph:
``(9) Deduction for foreign-derived intangible income.--The
deduction under section 250 shall not be allowed.''.
(2) Section 246(b)(1) is amended--
(A) by striking ``and subsection (a) and (b) of
section 245'' the first place it appears and inserting
``, subsection (a) and (b) of section 245, and section
250'',
(B) by striking ``and subsection (a) and (b) of
section 245'' the second place it appears and inserting
``subsection (a) and (b) of section 245, and 250''.
(3) Section 469(i)(3)(F)(iii) is amended by striking ``and
222'' and inserting ``222, and 250''.
(4) The table of sections for part VIII of subchapter B of
chapter 1 <<NOTE: 26 USC 241 prec.>> is amended by adding at
the end the following new item:
``Sec. 250. Foreign-derived intangible income and global intangible low-
taxed income.''.
(c) <<NOTE: 26 USC 172 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
CHAPTER 2--OTHER MODIFICATIONS OF SUBPART F PROVISIONS
SEC. 14211. ELIMINATION OF INCLUSION OF FOREIGN BASE COMPANY OIL
RELATED INCOME.
(a) Repeal.--Subsection (a) of section 954 is amended--
(1) by inserting ``and'' at the end of paragraph (2),
(2) by striking the comma at the end of paragraph (3) and
inserting a period, and
(3) by striking paragraph (5).
(b) Conforming Amendments.--
[[Page 131 STAT. 2217]]
(1) Section 952(c)(1)(B)(iii) <<NOTE: 26 USC 952.>> is
amended by striking subclause (I) and redesignating subclauses
(II) through (V) as subclauses (I) through (IV), respectively.
(2) Section 954(b) is amended--
(A) by striking the second sentence of paragraph
(4),
(B) by striking ``the foreign base company services
income, and the foreign base company oil related
income'' in paragraph (5) and inserting ``and the
foreign base company services income'', and
(C) by striking paragraph (6).
(3) Section 954 is amended by striking subsection (g).
(c) <<NOTE: 26 USC 952 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of United States
shareholders with or within which such taxable years of foreign
corporations end.
SEC. 14212. REPEAL OF INCLUSION BASED ON WITHDRAWAL OF PREVIOUSLY
EXCLUDED SUBPART F INCOME FROM
QUALIFIED INVESTMENT.
(a) In General.--Subpart F of part III of subchapter N of chapter 1
is amended by striking section 955.
(b) Conforming Amendments.--
(1)(A) Section 951(a)(1)(A) is amended to read as follows:
``(A) his pro rata share (determined under paragraph
(2)) of the corporation's subpart F income for such
year, and''.
(B) Section 851(b) is amended by striking ``section
951(a)(1)(A)(i)'' in the flush language at the end and inserting
``section 951(a)(1)(A)''.
(C) Section 952(c)(1)(B)(i) is amended by striking ``section
951(a)(1)(A)(i)'' and inserting ``section 951(a)(1)(A)''.
(D) Section 953(c)(1)(C) is amended by striking ``section
951(a)(1)(A)(i)'' and inserting ``section 951(a)(1)(A)''.
(2) Section 951(a) is amended by striking paragraph (3).
(3) Section 953(d)(4)(B)(iv)(II) is amended by striking ``or
amounts referred to in clause (ii) or (iii) of section
951(a)(1)(A)''.
(4) Section 964(b) is amended by striking ``, 955,''.
(5) Section 970 is amended by striking subsection (b).
(6) The table of sections for subpart F of part III of
subchapter N of chapter 1 <<NOTE: 26 USC 951 prec.>> is amended
by striking the item relating to section 955.
(c) <<NOTE: 26 USC 851 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end.
SEC. 14213. MODIFICATION OF STOCK ATTRIBUTION RULES FOR
DETERMINING STATUS AS A CONTROLLED
FOREIGN CORPORATION.
(a) In General.--Section 958(b) is amended--
(1) by striking paragraph (4), and
(2) by striking ``Paragraphs (1) and (4)'' in the last
sentence and inserting ``Paragraph (1)''.
(b) <<NOTE: 26 USC 958 note.>> Effective Date.--The amendments made
by this section shall apply to--
[[Page 131 STAT. 2218]]
(1) the last taxable year of foreign corporations beginning
before January 1, 2018, and each subsequent taxable year of such
foreign corporations, and
(2) taxable years of United States shareholders in which or
with which such taxable years of foreign corporations end.
SEC. 14214. MODIFICATION OF DEFINITION OF UNITED STATES
SHAREHOLDER.
(a) In General.--Section 951(b) <<NOTE: 26 USC 951.>> is amended by
inserting ``, or 10 percent or more of the total value of shares of all
classes of stock of such foreign corporation'' after ``such foreign
corporation''.
(b) <<NOTE: 26 USC 951 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of United States
shareholders with or within which such taxable years of foreign
corporations end.
SEC. 14215. ELIMINATION OF REQUIREMENT THAT CORPORATION MUST BE
CONTROLLED FOR 30 DAYS BEFORE SUBPART
F INCLUSIONS APPLY.
(a) In General.--Section 951(a)(1) is amended by striking ``for an
uninterrupted period of 30 days or more'' and inserting ``at any time''.
(b) <<NOTE: 26 USC 951 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of United States
shareholders with or within which such taxable years of foreign
corporations end.
CHAPTER 3--PREVENTION OF BASE EROSION
SEC. 14221. LIMITATIONS ON INCOME SHIFTING THROUGH INTANGIBLE
PROPERTY TRANSFERS.
(a) Definition of Intangible Asset.--Section 936(h)(3)(B) is
amended--
(1) by striking ``or'' at the end of clause (v),
(2) by striking clause (vi) and inserting the following:
``(vi) any goodwill, going concern value, or
workforce in place (including its composition and
terms and conditions (contractual or otherwise) of
its employment); or
``(vii) any other item the value or potential
value of which is not attributable to tangible
property or the services of any individual.'', and
(3) by striking the flush language after clause (vii), as
added by paragraph (2).
(b) Clarification of Allowable Valuation Methods.--
(1) Foreign corporations.--Section 367(d)(2) is amended by
adding at the end the following new subparagraph:
``(D) Regulatory authority.--For purposes of the
last sentence of subparagraph (A), the Secretary shall
require--
``(i) the valuation of transfers of intangible
property, including intangible property
transferred with other property or services, on an
aggregate basis, or
``(ii) the valuation of such a transfer on the
basis of the realistic alternatives to such a
transfer,
if the Secretary determines that such basis is the most
reliable means of valuation of such transfers.''.
[[Page 131 STAT. 2219]]
(2) Allocation among taxpayers.--Section 482 <<NOTE: 26 USC
482.>> is amended by adding at the end the following: ``For
purposes of this section, the Secretary shall require the
valuation of transfers of intangible property (including
intangible property transferred with other property or services)
on an aggregate basis or the valuation of such a transfer on the
basis of the realistic alternatives to such a transfer, if the
Secretary determines that such basis is the most reliable means
of valuation of such transfers.''.
(c) Effective Date.--
(1) <<NOTE: 26 USC 367 note.>> In general.--The amendments
made by this section shall apply to transfers in taxable years
beginning after December 31, 2017.
(2) <<NOTE: 26 USC 963 note.>> No inference.--Nothing in
the amendment made by subsection (a) shall be construed to
create any inference with respect to the application of section
936(h)(3) of the Internal Revenue Code of 1986, or the authority
of the Secretary of the Treasury to provide regulations for such
application, with respect to taxable years beginning before
January 1, 2018.
SEC. 14222. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED IN
HYBRID TRANSACTIONS OR WITH HYBRID
ENTITIES.
(a) In General.--Part IX of subchapter B of chapter 1 is amended by
inserting after section 267 the following:
``SEC. 267A. <<NOTE: 26 USC 267A.>> CERTAIN RELATED PARTY AMOUNTS
PAID OR ACCRUED IN HYBRID TRANSACTIONS
OR WITH HYBRID ENTITIES.
``(a) In General.--No deduction shall be allowed under this chapter
for any disqualified related party amount paid or accrued pursuant to a
hybrid transaction or by, or to, a hybrid entity.
``(b) Disqualified Related Party Amount.--For purposes of this
section--
``(1) Disqualified related party amount.--The term
`disqualified related party amount' means any interest or
royalty paid or accrued to a related party to the extent that--
``(A) such amount is not included in the income of
such related party under the tax law of the country of
which such related party is a resident for tax purposes
or is subject to tax, or
``(B) such related party is allowed a deduction with
respect to such amount under the tax law of such
country.
Such term shall not include any payment to the extent such
payment is included in the gross income of a United States
shareholder under section 951(a).
``(2) Related party.--The term `related party' means a
related person as defined in section 954(d)(3), except that such
section shall be applied with respect to the person making the
payment described in paragraph (1) in lieu of the controlled
foreign corporation otherwise referred to in such section.
``(c) Hybrid Transaction.--For purposes of this section, the term
`hybrid transaction' means any transaction, series of transactions,
agreement, or instrument one or more payments with respect to which are
treated as interest or royalties for purposes of this chapter and which
are not so treated for purposes the tax law of the foreign country of
which the recipient of such payment is resident for tax purposes or is
subject to tax.
``(d) Hybrid Entity.--For purposes of this section, the term `hybrid
entity' means any entity which is either--
[[Page 131 STAT. 2220]]
``(1) treated as fiscally transparent for purposes of this
chapter but not so treated for purposes of the tax law of the
foreign country of which the entity is resident for tax purposes
or is subject to tax, or
``(2) treated as fiscally transparent for purposes of such
tax law but not so treated for purposes of this chapter.
``(e) Regulations.--The Secretary shall issue such regulations or
other guidance as may be necessary or appropriate to carry out the
purposes of this section, including regulations or other guidance
providing for--
``(1) rules for treating certain conduit arrangements which
involve a hybrid transaction or a hybrid entity as subject to
subsection (a),
``(2) rules for the application of this section to branches
or domestic entities,
``(3) rules for treating certain structured transactions as
subject to subsection (a),
``(4) rules for treating a tax preference as an exclusion
from income for purposes of applying subsection (b)(1) if such
tax preference has the effect of reducing the generally
applicable statutory rate by 25 percent or more,
``(5) rules for treating the entire amount of interest or
royalty paid or accrued to a related party as a disqualified
related party amount if such amount is subject to a
participation exemption system or other system which provides
for the exclusion or deduction of a substantial portion of such
amount,
``(6) rules for determining the tax residence of a foreign
entity if the entity is otherwise considered a resident of more
than one country or of no country,
``(7) exceptions from subsection (a) with respect to--
``(A) cases in which the disqualified related party
amount is taxed under the laws of a foreign country
other than the country of which the related party is a
resident for tax purposes, and
``(B) other cases which the Secretary determines do
not present a risk of eroding the Federal tax base,
``(8) requirements for record keeping and information
reporting in addition to any requirements imposed by section
6038A.''.
(b) Conforming Amendment.--The table of sections for part IX of
subchapter B of chapter 1 <<NOTE: 26 USC 261 prec.>> is amended by
inserting after the item relating to section 267 the following new item:
``Sec. 267A. Certain related party amounts paid or accrued in hybrid
transactions or with hybrid entities.''.
(c) <<NOTE: 26 USC 267A note.>> Effective Date.--The amendments
made by this section shall apply to taxable years beginning after
December 31, 2017.
SEC. 14223. SHAREHOLDERS OF SURROGATE FOREIGN CORPORATIONS NOT
ELIGIBLE FOR REDUCED RATE ON
DIVIDENDS.
(a) In General.--Section 1(h)(11)(C)(iii) <<NOTE: 26 USC 1.>> is
amended--
(1) by striking ``shall not include any foreign
corporation'' and inserting ``shall not include--
``(I) any foreign corporation'',
(2) by striking the period at the end and inserting ``,
and'', and
(3) by adding at the end the following new subclause:
[[Page 131 STAT. 2221]]
``(II) any corporation which first
becomes a surrogate foreign corporation
(as defined in section 7874(a)(2)(B))
after the date of the enactment of this
subclause, other than a foreign
corporation which is treated as a
domestic corporation under section
7874(b).''.
(b) <<NOTE: 26 USC 1 note.>> Effective Date.--The amendments made
by this section shall apply to dividends received after the date of the
enactment of this Act.
Subpart C--Modifications Related to Foreign Tax Credit System
SEC. 14301. REPEAL OF SECTION 902 INDIRECT FOREIGN TAX CREDITS;
DETERMINATION OF SECTION 960 CREDIT ON
CURRENT YEAR BASIS.
(a) Repeal of Section 902 Indirect Foreign Tax Credits.--Subpart A
of part III of subchapter N of chapter 1 <<NOTE: 26 USC 902.>> is
amended by striking section 902.
(b) Determination of Section 960 Credit on Current Year Basis.--
Section 960, as amended by section 14201, is amended--
(1) by striking subsection (c), by redesignating subsection
(b) as subsection (c), by striking all that precedes subsection
(c) (as so redesignated) and inserting the following:
``SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLUSIONS.
``(a) In General.--For purposes of subpart A of this part, if there
is included in the gross income of a domestic corporation any item of
income under section 951(a)(1) with respect to any controlled foreign
corporation with respect to which such domestic corporation is a United
States shareholder, such domestic corporation shall be deemed to have
paid so much of such foreign corporation's foreign income taxes as are
properly attributable to such item of income.
``(b) Special Rules for Distributions From Previously Taxed Earnings
and Profits.--For purposes of subpart A of this part--
``(1) In general.--If any portion of a distribution from a
controlled foreign corporation to a domestic corporation which
is a United States shareholder with respect to such controlled
foreign corporation is excluded from gross income under section
959(a), such domestic corporation shall be deemed to have paid
so much of such foreign corporation's foreign income taxes as--
``(A) are properly attributable to such portion, and
``(B) have not been deemed to have to been paid by
such domestic corporation under this section for the
taxable year or any prior taxable year.
``(2) Tiered controlled foreign corporations.--If section
959(b) applies to any portion of a distribution from a
controlled foreign corporation to another controlled foreign
corporation, such controlled foreign corporation shall be deemed
to have paid so much of such other controlled foreign
corporation's foreign income taxes as--
``(A) are properly attributable to such portion, and
[[Page 131 STAT. 2222]]
``(B) have not been deemed to have been paid by a
domestic corporation under this section for the taxable
year or any prior taxable year.'',
(2) and by adding after subsection (d) (as added by section
14201) the following new subsections:
``(e) Foreign Income Taxes.--The term `foreign income taxes' means
any income, war profits, or excess profits taxes paid or accrued to any
foreign country or possession of the United States.
``(f) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary or appropriate to carry out the
provisions of this section.''.
(c) Conforming Amendments.--
(1) Section 78 <<NOTE: 26 USC 78.>> is amended to read as
follows:
``SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX CREDIT.
``If a domestic corporation chooses to have the benefits of subpart
A of part III of subchapter N (relating to foreign tax credit) for any
taxable year, an amount equal to the taxes deemed to be paid by such
corporation under subsections (a), (b), and (d) of section 960
(determined without regard to the phrase `80 percent of' in subsection
(d)(1) thereof) for such taxable year shall be treated for purposes of
this title (other than sections 245 and 245A) as a dividend received by
such domestic corporation from the foreign corporation.''.
(2) Paragraph (4) of section 245(a) is amended to read as
follows:
``(4) Post-1986 undistributed earnings.--The term `post-1986
undistributed earnings' means the amount of the earnings and
profits of the foreign corporation (computed in accordance with
sections 964(a) and 986) accumulated in taxable years beginning
after December 31, 1986--
``(A) as of the close of the taxable year of the
foreign corporation in which the dividend is
distributed, and
``(B) without diminution by reason of dividends
distributed during such taxable year.''.
(3) Section 245(a)(10)(C) is amended by striking ``902, 907,
and 960'' and inserting ``907 and 960''.
(4) Sections 535(b)(1) and 545(b)(1) are each amended by
striking ``section 902(a) or 960(a)(1)'' and inserting ``section
960''.
(5) Section 814(f)(1) is amended--
(A) by striking subparagraph (B), and
(B) by striking all that precedes ``No income'' and
inserting the following:
``(1) Treatment of foreign taxes.--''.
(6) Section 865(h)(1)(B) is amended by striking ``902,
907,'' and inserting ``907''.
(7) Section 901(a) is amended by striking ``sections 902 and
960'' and inserting ``section 960''.
(8) Section 901(e)(2) is amended by striking ``but is not
limited to--'' and all that follows through ``that portion'' and
inserting ``but is not limited to that portion''.
(9) Section 901(f) is amended by striking ``sections 902 and
960'' and inserting ``section 960''.
(10) Section 901(j)(1)(A) is amended by striking ``902 or''.
(11) Section 901(j)(1)(B) is amended by striking ``sections
902 and 960'' and inserting ``section 960''.
[[Page 131 STAT. 2223]]
(12) Section 901(k)(2) <<NOTE: 26 USC 901.>> is amended by
striking ``, 902,''.
(13) Section 901(k)(6) is amended by striking ``902 or''.
(14) Section 901(m)(1)(B) is amended to read as follows:
``(B) in the case of a foreign income tax paid by a
foreign corporation, shall not be taken into account for
purposes of section 960.''.
(15) Section 904(d)(2)(E) is amended--
(A) by amending clause (i) to read as follows:
``(i) Noncontrolled 10-percent owned foreign
corporation.--The term `noncontrolled 10-percent
owned foreign corporation' means any foreign
corporation which is--
``(I) a specified 10-percent owned
foreign corporation (as defined in
section 245A(b)), or
``(II) a passive foreign investment
company (as defined in section 1297(a))
with respect to which the taxpayer meets
the stock ownership requirements of
section 902(a) (or, for purposes of
applying paragraphs (3) and (4), the
requirements of section 902(b)).
A controlled foreign corporation shall not be
treated as a noncontrolled 10-percent owned
foreign corporation with respect to any
distribution out of its earnings and profits for
periods during which it was a controlled foreign
corporation. Any reference to section 902 in this
clause shall be treated as a reference to such
section as in effect before its repeal.'', and
(B) by striking ``non-controlled section 902
corporation'' in clause (ii) and inserting
``noncontrolled 10-percent owned foreign corporation''.
(16) Section 904(d)(4) is amended--
(A) by striking ``noncontrolled section 902
corporation'' each place it appears and inserting
``noncontrolled 10-percent owned foreign corporation'',
(B) by striking ``noncontrolled section 902
corporations'' in the heading thereof and inserting
``noncontrolled 10-percent owned foreign corporations''.
(17) Section 904(d)(6)(A) is amended by striking ``902,
907,'' and inserting ``907''.
(18) Section 904(h)(10)(A) is amended by striking ``sections
902, 907, and 960'' and inserting ``sections 907 and 960''.
(19) Section 904(k) is amended to read as follows:
``(k) Cross References.--For increase of limitation under subsection
(a) for taxes paid with respect to amounts received which were included
in the gross income of the taxpayer for a prior taxable year as a United
States shareholder with respect to a controlled foreign corporation, see
section 960(c).''.
(20) Section 905(c)(1) is amended by striking the last
sentence.
(21) Section 905(c)(2)(B)(i) is amended to read as follows:
``(i) shall be taken into account for the
taxable year to which such taxes relate, and''.
(22) Section 906(a) is amended by striking ``(or deemed,
under section 902, paid or accrued during the taxable year)''.
(23) Section 906(b) is amended by striking paragraphs (4)
and (5).
(24) Section 907(b)(2)(B) is amended by striking ``902 or''.
[[Page 131 STAT. 2224]]
(25) Section 907(c)(3)(A) <<NOTE: 26 USC 907.>> is
amended--
(A) by striking subparagraph (A) and inserting the
following:
``(A) interest, to the extent the category of income
of such interest is determined under section
904(d)(3),'', and
(B) by striking ``section 960(a)'' in subparagraph
(B) and inserting ``section 960''.
(26) Section 907(c)(5) is amended by striking ``902 or''.
(27) Section 907(f)(2)(B)(i) is amended by striking ``902
or''.
(28) Section 908(a) is amended by striking ``902 or''.
(29) Section 909(b) is amended--
(A) by striking ``section 902 corporation'' in the
matter preceding paragraph (1) and inserting ``specified
10-percent owned foreign corporation (as defined in
section 245A(b) without regard to paragraph (2)
thereof)'',
(B) by striking ``902 or'' in paragraph (1),
(C) by striking ``by such section 902 corporation''
and all that follows in the matter following paragraph
(2) and inserting ``by such specified 10-percent owned
foreign corporation or a domestic corporation which is a
United States shareholder with respect to such specified
10-percent owned foreign corporation.'', and
(D) by striking ``Section 902 Corporations'' in the
heading thereof and inserting ``Specified 10-percent
Owned Foreign Corporations''.
(30) Section 909(d) is amended by striking paragraph (5).
(31) Section 958(a)(1) is amended by striking ``960(a)(1)''
and inserting ``960''.
(32) Section 959(d) is amended by striking ``Except as
provided in section 960(a)(3), any'' and inserting ``Any''.
(33) Section 959(e) is amended by striking ``section
960(b)'' and inserting ``section 960(c)''.
(34) Section 1291(g)(2)(A) is amended by striking ``any
distribution--'' and all that follows through ``but only if''
and inserting ``any distribution, any withholding tax imposed
with respect to such distribution, but only if''.
(35) Section 1293(f) is amended by striking ``and'' at the
end of paragraph (1), by striking the period at the end of
paragraph (2) and inserting ``, and'', and by adding at the end
the following new paragraph:
``(3) a domestic corporation which owns (or is treated under
section 1298(a) as owning) stock of a qualified electing fund
shall be treated in the same manner as a United States
shareholder of a controlled foreign corporation (and such
qualified electing fund shall be treated in the same manner as
such controlled foreign corporation) if such domestic
corporation meets the stock ownership requirements of subsection
(a) or (b) of section 902 (as in effect before its repeal) with
respect to such qualified electing fund.''.
(36) Section 6038(c)(1)(B) is amended by striking ``sections
902 (relating to foreign tax credit for corporate stockholder in
foreign corporation) and 960 (relating to special rules for
foreign tax credit)'' and inserting ``section 960''.
(37) Section 6038(c)(4) is amended by striking subparagraph
(C).
[[Page 131 STAT. 2225]]
(38) The table of sections for subpart A of part III of
subchapter N of chapter 1 <<NOTE: 26 USC 901 prec.>> is amended
by striking the item relating to section 902.
(39) The table of sections for subpart F of part III of
subchapter N of chapter 1 <<NOTE: 26 USC 951 prec.>> is amended
by striking the item relating to section 960 and inserting the
following:
``Sec. 960. Deemed paid credit for subpart F inclusions.''.
(d) <<NOTE: 26 USC 78 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years of foreign corporations
beginning after December 31, 2017, and to taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end.
SEC. 14302. SEPARATE FOREIGN TAX CREDIT LIMITATION BASKET FOR
FOREIGN BRANCH INCOME.
(a) In General.--Section 904(d)(1), as amended by section 14201,
is <<NOTE: 26 USC 904.>> amended by redesignating subparagraphs (B) and
(C) as subparagraphs (C) and (D), respectively, and by inserting after
subparagraph (A) the following new subparagraph:
``(B) foreign branch income,''.
(b) Foreign Branch Income.--
(1) In general.--Section 904(d)(2) is amended by inserting
after subparagraph (I) the following new subparagraph:
``(J) Foreign branch income.--
``(i) In general.--The term `foreign branch
income' means the business profits of such United
States person which are attributable to 1 or more
qualified business units (as defined in section
989(a)) in 1 or more foreign countries. For
purposes of the preceding sentence, the amount of
business profits attributable to a qualified
business unit shall be determined under rules
established by the Secretary.
``(ii) Exception.--Such term shall not include
any income which is passive category income.''.
(2) Conforming amendment.--Section 904(d)(2)(A)(ii), as
amended by section 14201, is amended by striking ``income
described in paragraph (1)(A) and'' and inserting ``income
described in paragraph (1)(A), foreign branch income, and''.
(c) <<NOTE: 26 USC 904 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 14303. SOURCE OF INCOME FROM SALES OF INVENTORY DETERMINED
SOLELY ON BASIS OF PRODUCTION
ACTIVITIES.
(a) In General.--Section 863(b) is amended by adding at the end the
following: ``Gains, profits, and income from the sale or exchange of
inventory property described in paragraph (2) shall be allocated and
apportioned between sources within and without the United States solely
on the basis of the production activities with respect to the
property.''.
(b) <<NOTE: 26 USC 863 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after December
31, 2017.
SEC. 14304. ELECTION TO INCREASE PERCENTAGE OF DOMESTIC TAXABLE
INCOME OFFSET BY OVERALL DOMESTIC LOSS
TREATED AS FOREIGN SOURCE.
(a) In General.--Section 904(g) is amended by adding at the end the
following new paragraph:
[[Page 131 STAT. 2226]]
``(5) Election to increase percentage of taxable income
treated as foreign source.--
``(A) In general.--If any pre-2018 unused overall
domestic loss is taken into account under paragraph (1)
for any applicable taxable year, the taxpayer may elect
to have such paragraph applied to such loss by
substituting a percentage greater than 50 percent (but
not greater than 100 percent) for 50 percent in
subparagraph (B) thereof.
``(B) Pre-2018 unused overall domestic loss.--For
purposes of this paragraph, the term `pre-2018 unused
overall domestic loss' means any overall domestic loss
which--
``(i) arises in a qualified taxable year
beginning before January 1, 2018, and
``(ii) has not been used under paragraph (1)
for any taxable year beginning before such date.
``(C) Applicable taxable year.--For purposes of this
paragraph, the term `applicable taxable year' means any
taxable year of the taxpayer beginning after December
31, 2017, and before January 1, 2028.''.
(b) <<NOTE: 26 USC 904 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after December
31, 2017.
PART II--INBOUND TRANSACTIONS
SEC. 14401. BASE EROSION AND ANTI-ABUSE TAX.
(a) Imposition of Tax.--Subchapter A of chapter 1 <<NOTE: 26 USC 59A
prec.>> is amended by adding at the end the following new part:
``PART VII--BASE EROSION AND ANTI-ABUSE TAX
``Sec. 59A. Tax on base erosion payments of taxpayers with substantial
gross receipts.
``SEC. 59A. <<NOTE: 26 USC 59A.>> TAX ON BASE EROSION PAYMENTS OF
TAXPAYERS WITH SUBSTANTIAL GROSS RECEIPTS.
``(a) Imposition of Tax.--There is hereby imposed on each applicable
taxpayer for any taxable year a tax equal to the base erosion minimum
tax amount for the taxable year. Such tax shall be in addition to any
other tax imposed by this subtitle.
``(b) Base Erosion Minimum Tax Amount.--For purposes of this
section--
``(1) In general.--Except as provided in paragraphs (2) and
(3), the term `base erosion minimum tax amount' means, with
respect to any applicable taxpayer for any taxable year, the
excess (if any) of--
``(A) an amount equal to 10 percent (5 percent in
the case of taxable years beginning in calendar year
2018) of the modified taxable income of such taxpayer
for the taxable year, over
``(B) an amount equal to the regular tax liability
(as defined in section 26(b)) of the taxpayer for the
taxable year, reduced (but not below zero) by the excess
(if any) of--
``(i) the credits allowed under this chapter
against such regular tax liability, over
[[Page 131 STAT. 2227]]
``(ii) the sum of--
``(I) the credit allowed under
section 38 for the taxable year which is
properly allocable to the research
credit determined under section 41(a),
plus
``(II) the portion of the applicable
section 38 credits not in excess of 80
percent of the lesser of the amount of
such credits or the base erosion minimum
tax amount (determined without regard to
this subclause).
``(2) Modifications for taxable years beginning after
2025.--In the case of any taxable year beginning after December
31, 2025, paragraph (1) shall be applied--
``(A) by substituting `12.5 percent' for `10
percent' in subparagraph (A) thereof, and
``(B) by reducing (but not below zero) the regular
tax liability (as defined in section 26(b)) for purposes
of subparagraph (B) thereof by the aggregate amount of
the credits allowed under this chapter against such
regular tax liability rather than the excess described
in such subparagraph.
``(3) Increased rate for certain banks and securities
dealers.--
``(A) In general.--In the case of a taxpayer
described in subparagraph (B) who is an applicable
taxpayer for any taxable year, the percentage otherwise
in effect under paragraphs (1)(A) and (2)(A) shall each
be increased by one percentage point.
``(B) Taxpayer described.--A taxpayer is described
in this subparagraph if such taxpayer is a member of an
affiliated group (as defined in section 1504(a)(1))
which includes--
``(i) a bank (as defined in section 581), or
``(ii) a registered securities dealer under
section 15(a) of the Securities Exchange Act of
1934.
``(4) Applicable section 38 credits.--For purposes of
paragraph (1)(B)(ii)(II), the term `applicable section 38
credits' means the credit allowed under section 38 for the
taxable year which is properly allocable to--
``(A) the low-income housing credit determined under
section 42(a),
``(B) the renewable electricity production credit
determined under section 45(a), and
``(C) the investment credit determined under section
46, but only to the extent properly allocable to the
energy credit determined under section 48.
``(c) Modified Taxable Income.--For purposes of this section--
``(1) In general.--The term `modified taxable income' means
the taxable income of the taxpayer computed under this chapter
for the taxable year, determined without regard to--
``(A) any base erosion tax benefit with respect to
any base erosion payment, or
``(B) the base erosion percentage of any net
operating loss deduction allowed under section 172 for
the taxable year.
``(2) Base erosion tax benefit.--
[[Page 131 STAT. 2228]]
``(A) In general.--The term `base erosion tax
benefit' means--
``(i) any deduction described in subsection
(d)(1) which is allowed under this chapter for the
taxable year with respect to any base erosion
payment,
``(ii) in the case of a base erosion payment
described in subsection (d)(2), any deduction
allowed under this chapter for the taxable year
for depreciation (or amortization in lieu of
depreciation) with respect to the property
acquired with such payment,
``(iii) in the case of a base erosion payment
described in subsection (d)(3)--
``(I) any reduction under section
803(a)(1)(B) in the gross amount of
premiums and other consideration on
insurance and annuity contracts for
premiums and other consideration arising
out of indemnity insurance, and
``(II) any deduction under section
832(b)(4)(A) from the amount of gross
premiums written on insurance contracts
during the taxable year for premiums
paid for reinsurance, and
``(iv) in the case of a base erosion payment
described in subsection (d)(4), any reduction in
gross receipts with respect to such payment in
computing gross income of the taxpayer for the
taxable year for purposes of this chapter.
``(B) Tax benefits disregarded if tax withheld on
base erosion payment.--
``(i) In general.--Except as provided in
clause (ii), any base erosion tax benefit
attributable to any base erosion payment--
``(I) on which tax is imposed by
section 871 or 881, and
``(II) with respect to which tax has
been deducted and withheld under section
1441 or 1442,
shall not be taken into account in computing
modified taxable income under paragraph (1)(A) or
the base erosion percentage under paragraph (4).
``(ii) Exception.--The amount not taken into
account in computing modified taxable income by
reason of clause (i) shall be reduced under rules
similar to the rules under section 163(j)(5)(B)
(as in effect before the date of the enactment of
the Tax Cuts and Jobs Act).
``(3) Special rules for determining interest for which
deduction allowed.--For purposes of applying paragraph (1), in
the case of a taxpayer to which section 163(j) applies for the
taxable year, the reduction in the amount of interest for which
a deduction is allowed by reason of such subsection shall be
treated as allocable first to interest paid or accrued to
persons who are not related parties with respect to the taxpayer
and then to such related parties.
``(4) Base erosion percentage.--For purposes of paragraph
(1)(B)--
``(A) In general.--The term `base erosion
percentage' means, for any taxable year, the percentage
determined by dividing--
[[Page 131 STAT. 2229]]
``(i) the aggregate amount of base erosion tax
benefits of the taxpayer for the taxable year, by
``(ii) the sum of--
``(I) the aggregate amount of the
deductions (including deductions
described in clauses (i) and (ii) of
paragraph (2)(A)) allowable to the
taxpayer under this chapter for the
taxable year, plus
``(II) the base erosion tax benefits
described in clauses (iii) and (iv) of
paragraph (2)(A) allowable to the
taxpayer for the taxable year.
``(B) Certain items not taken into account.--The
amount under subparagraph (A)(ii) shall be determined by
not taking into account--
``(i) any deduction allowed under section 172,
245A, or 250 for the taxable year,
``(ii) any deduction for amounts paid or
accrued for services to which the exception under
subsection (d)(5) applies, and
``(iii) any deduction for qualified derivative
payments which are not treated as a base erosion
payment by reason of subsection (h).
``(d) Base Erosion Payment.--For purposes of this section--
``(1) In general.--The term `base erosion payment' means any
amount paid or accrued by the taxpayer to a foreign person which
is a related party of the taxpayer and with respect to which a
deduction is allowable under this chapter.
``(2) Purchase of depreciable property.--Such term shall
also include any amount paid or accrued by the taxpayer to a
foreign person which is a related party of the taxpayer in
connection with the acquisition by the taxpayer from such person
of property of a character subject to the allowance for
depreciation (or amortization in lieu of depreciation).
``(3) Reinsurance payments.--Such term shall also include
any premium or other consideration paid or accrued by the
taxpayer to a foreign person which is a related party of the
taxpayer for any reinsurance payments which are taken into
account under sections 803(a)(1)(B) or 832(b)(4)(A).
``(4) Certain payments to expatriated entities.--
``(A) In general.--Such term shall also include any
amount paid or accrued by the taxpayer with respect to a
person described in subparagraph (B) which results in a
reduction of the gross receipts of the taxpayer.
``(B) Person described.--A person is described in
this subparagraph if such person is a--
``(i) surrogate foreign corporation which is a
related party of the taxpayer, but only if such
person first became a surrogate foreign
corporation after November 9, 2017, or
``(ii) foreign person which is a member of the
same expanded affiliated group as the surrogate
foreign corporation.
``(C) Definitions.--For purposes of this paragraph--
``(i) Surrogate foreign corporation.--The term
`surrogate foreign corporation' has the meaning
given such term by section 7874(a)(2)(B) but does
not include a foreign corporation treated as a
domestic corporation under section 7874(b).
[[Page 131 STAT. 2230]]
``(ii) Expanded affiliated group.--The term
`expanded affiliated group' has the meaning given
such term by section 7874(c)(1).
``(5) Exception for certain amounts with respect to
services.--Paragraph (1) shall not apply to any amount paid or
accrued by a taxpayer for services if--
``(A) such services are services which meet the
requirements for eligibility for use of the services
cost method under section 482 (determined without regard
to the requirement that the services not contribute
significantly to fundamental risks of business success
or failure), and
``(B) such amount constitutes the total services
cost with no markup component.
``(e) Applicable Taxpayer.--For purposes of this section--
``(1) In general.--The term `applicable taxpayer' means,
with respect to any taxable year, a taxpayer--
``(A) which is a corporation other than a regulated
investment company, a real estate investment trust, or
an S corporation,
``(B) the average annual gross receipts of which for
the 3-taxable-year period ending with the preceding
taxable year are at least $500,000,000, and
``(C) the base erosion percentage (as determined
under subsection (c)(4)) of which for the taxable year
is 3 percent (2 percent in the case of a taxpayer
described in subsection (b)(3)(B)) or higher.
``(2) Gross receipts.--
``(A) Special rule for foreign persons.--In the case
of a foreign person the gross receipts of which are
taken into account for purposes of paragraph (1)(B),
only gross receipts which are taken into account in
determining income which is effectively connected with
the conduct of a trade or business within the United
States shall be taken into account. In the case of a
taxpayer which is a foreign person, the preceding
sentence shall not apply to the gross receipts of any
United States person which are aggregated with the
taxpayer's gross receipts by reason of paragraph (3).
``(B) Other rules made applicable.--Rules similar to
the rules of subparagraphs (B), (C), and (D) of section
448(c)(3) shall apply in determining gross receipts for
purposes of this section.
``(3) Aggregation rules.--All persons treated as a single
employer under subsection (a) of section 52 shall be treated as
1 person for purposes of this subsection and subsection (c)(4),
except that in applying section 1563 for purposes of section 52,
the exception for foreign corporations under section
1563(b)(2)(C) shall be disregarded.
``(f) Foreign Person.--For purposes of this section, the term
`foreign person' has the meaning given such term by section 6038A(c)(3).
``(g) Related Party.--For purposes of this section--
``(1) In general.--The term `related party' means, with
respect to any applicable taxpayer--
``(A) any 25-percent owner of the taxpayer,
[[Page 131 STAT. 2231]]
``(B) any person who is related (within the meaning
of section 267(b) or 707(b)(1)) to the taxpayer or any
25-percent owner of the taxpayer, and
``(C) any other person who is related (within the
meaning of section 482) to the taxpayer.
``(2) 25-percent owner.--The term `25-percent owner' means,
with respect to any corporation, any person who owns at least 25
percent of--
``(A) the total voting power of all classes of stock
of a corporation entitled to vote, or
``(B) the total value of all classes of stock of
such corporation.
``(3) Section 318 to apply.--Section 318 shall apply for
purposes of paragraphs (1) and (2), except that--
``(A) `10 percent' shall be substituted for `50
percent' in section 318(a)(2)(C), and
``(B) subparagraphs (A), (B), and (C) of section
318(a)(3) shall not be applied so as to consider a
United States person as owning stock which is owned by a
person who is not a United States person.
``(h) Exception for Certain Payments Made in the Ordinary Course of
Trade or Business.--For purposes of this section--
``(1) In general.--Except as provided in paragraph (3), any
qualified derivative payment shall not be treated as a base
erosion payment.
``(2) Qualified derivative payment.--
``(A) In general.--The term `qualified derivative
payment' means any payment made by a taxpayer pursuant
to a derivative with respect to which the taxpayer--
``(i) recognizes gain or loss as if such
derivative were sold for its fair market value on
the last business day of the taxable year (and
such additional times as required by this title or
the taxpayer's method of accounting),
``(ii) treats any gain or loss so recognized
as ordinary, and
``(iii) treats the character of all items of
income, deduction, gain, or loss with respect to a
payment pursuant to the derivative as ordinary.
``(B) Reporting requirement.--No payments shall be
treated as qualified derivative payments under
subparagraph (A) for any taxable year unless the
taxpayer includes in the information required to be
reported under section 6038B(b)(2) with respect to such
taxable year such information as is necessary to
identify the payments to be so treated and such other
information as the Secretary determines necessary to
carry out the provisions of this subsection.
``(3) Exceptions for payments otherwise treated as base
erosion payments.--This subsection shall not apply to any
qualified derivative payment if--
``(A) the payment would be treated as a base erosion
payment if it were not made pursuant to a derivative,
including any interest, royalty, or service payment, or
``(B) in the case of a contract which has derivative
and nonderivative components, the payment is properly
allocable to the nonderivative component.
[[Page 131 STAT. 2232]]
``(4) Derivative defined.--For purposes of this subsection--
``(A) In general.--The term `derivative' means any
contract (including any option, forward contract,
futures contract, short position, swap, or similar
contract) the value of which, or any payment or other
transfer with respect to which, is (directly or
indirectly) determined by reference to one or more of
the following:
``(i) Any share of stock in a corporation.
``(ii) Any evidence of indebtedness.
``(iii) Any commodity which is actively
traded.
``(iv) Any currency.
``(v) Any rate, price, amount, index, formula,
or algorithm.
Such term shall not include any item described in
clauses (i) through (v).
``(B) Treatment of american depository receipts and
similar instruments.--Except as otherwise provided by
the Secretary, for purposes of this part, American
depository receipts (and similar instruments) with
respect to shares of stock in foreign corporations shall
be treated as shares of stock in such foreign
corporations.
``(C) Exception for certain contracts.--Such term
shall not include any insurance, annuity, or endowment
contract issued by an insurance company to which
subchapter L applies (or issued by any foreign
corporation to which such subchapter would apply if such
foreign corporation were a domestic corporation).
``(i) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary or appropriate to carry out the
provisions of this section, including regulations--
``(1) providing for such adjustments to the application of
this section as are necessary to prevent the avoidance of the
purposes of this section, including through--
``(A) the use of unrelated persons, conduit
transactions, or other intermediaries, or
``(B) transactions or arrangements designed, in
whole or in part--
``(i) to characterize payments otherwise
subject to this section as payments not subject to
this section, or
``(ii) to substitute payments not subject to
this section for payments otherwise subject to
this section and
``(2) for the application of subsection (g), including rules
to prevent the avoidance of the exceptions under subsection
(g)(3).''.
(b) Reporting Requirements and Penalties.--
(1) In general.--Subsection (b) of section 6038A <<NOTE: 26
USC 6038A.>> is amended to read as follows:
``(b) Required Information.--
``(1) In general.--For purposes of subsection (a), the
information described in this subsection is such information as
the Secretary prescribes by regulations relating to--
``(A) the name, principal place of business, nature
of business, and country or countries in which organized
or resident, of each person which--
[[Page 131 STAT. 2233]]
``(i) is a related party to the reporting
corporation, and
``(ii) had any transaction with the reporting
corporation during its taxable year,
``(B) the manner in which the reporting corporation
is related to each person referred to in subparagraph
(A), and
``(C) transactions between the reporting corporation
and each foreign person which is a related party to the
reporting corporation.
``(2) Additional information regarding base erosion
payments.--For purposes of subsection (a) and section 6038C, if
the reporting corporation or the foreign corporation to whom
section 6038C applies is an applicable taxpayer, the information
described in this subsection shall include--
``(A) such information as the Secretary determines
necessary to determine the base erosion minimum tax
amount, base erosion payments, and base erosion tax
benefits of the taxpayer for purposes of section 59A for
the taxable year, and
``(B) such other information as the Secretary
determines necessary to carry out such section.
For purposes of this paragraph, any term used in this paragraph
which is also used in section 59A shall have the same meaning as
when used in such section.''.
(2) Increase in penalty.--Paragraphs (1) and (2) of section
6038A(d) are <<NOTE: 26 USC 6038A.>> each amended by striking
``$10,000'' and inserting ``$25,000''.
(c) Disallowance of Credits Against Base Erosion Tax.--Paragraph (2)
of section 26(b) is amended by inserting after subparagraph (A) the
following new subparagraph:
``(B) section 59A (relating to base erosion and
anti-abuse tax),''.
(d) Conforming Amendments.--
(1) The table of parts for subchapter A of chapter
1 <<NOTE: 26 USC 1 prec.>> is amended by adding after the item
relating to part VI the following new item:
``Part VII. Base Erosion and Anti-abuse Tax''.
(2) Paragraph (1) of section 882(a), as amended by this Act,
is amended by inserting ``or 59A,'' after ``section 11,''.
(3) Subparagraph (A) of section 6425(c)(1), as amended by
section 13001, is amended to read as follows:
``(A) the sum of--
``(i) the tax imposed by section 11, or
subchapter L of chapter 1, whichever is
applicable, plus
``(ii) the tax imposed by section 59A, over''.
(4)(A) Subparagraph (A) of section 6655(g)(1), as amended by
sections 12001 and 13001, is amended by striking ``plus'' at the
end of clause (i), by redesignating clause (ii) as clause (iii),
and by inserting after clause (i) the following new clause:
``(ii) the tax imposed by section 59A, plus''.
(B) Subparagraphs (A)(i) and (B)(i) of section 6655(e)(2),
as amended by sections 12001 and 13001, are each amended by
inserting ``and modified taxable income'' after ``taxable
income''.
[[Page 131 STAT. 2234]]
(C) Subparagraph (B) of section 6655(e)(2) is amended by
adding at the end the following new clause:
``(iii) Modified taxable income.--The term
`modified taxable income' has the meaning given
such term by section 59A(c)(1).''.
(e) <<NOTE: 26 USC 26 note.>> Effective Date.--The amendments made
by this section shall apply to base erosion payments (as defined in
section 59A(d) of the Internal Revenue Code of 1986, as added by this
section) paid or accrued in taxable years beginning after December 31,
2017.
PART III--OTHER PROVISIONS
SEC. 14501. RESTRICTION ON INSURANCE BUSINESS EXCEPTION TO PASSIVE
FOREIGN INVESTMENT COMPANY RULES.
(a) In General.--Section 1297(b)(2)(B) <<NOTE: 26 USC 1297.>> is
amended to read as follows:
``(B) derived in the active conduct of an insurance
business by a qualifying insurance corporation (as
defined in subsection (f)),''.
(b) Qualifying Insurance Corporation Defined.--Section 1297 is
amended by adding at the end the following new subsection:
``(f) Qualifying Insurance Corporation.--For purposes of subsection
(b)(2)(B)--
``(1) In general.--The term `qualifying insurance
corporation' means, with respect to any taxable year, a foreign
corporation--
``(A) which would be subject to tax under subchapter
L if such corporation were a domestic corporation, and
``(B) the applicable insurance liabilities of which
constitute more than 25 percent of its total assets,
determined on the basis of such liabilities and assets
as reported on the corporation's applicable financial
statement for the last year ending with or within the
taxable year.
``(2) Alternative facts and circumstances test for certain
corporations.--If a corporation fails to qualify as a qualified
insurance corporation under paragraph (1) solely because the
percentage determined under paragraph (1)(B) is 25 percent or
less, a United States person that owns stock in such corporation
may elect to treat such stock as stock of a qualifying insurance
corporation if--
``(A) the percentage so determined for the
corporation is at least 10 percent, and
``(B) under regulations provided by the Secretary,
based on the applicable facts and circumstances--
``(i) the corporation is predominantly engaged
in an insurance business, and
``(ii) such failure is due solely to runoff-
related or rating-related circumstances involving
such insurance business.
``(3) Applicable insurance liabilities.--For purposes of
this subsection--
``(A) In general.--The term `applicable insurance
liabilities' means, with respect to any life or property
and casualty insurance business--
``(i) loss and loss adjustment expenses, and
[[Page 131 STAT. 2235]]
``(ii) reserves (other than deficiency,
contingency, or unearned premium reserves) for
life and health insurance risks and life and
health insurance claims with respect to contracts
providing coverage for mortality or morbidity
risks.
``(B) Limitations on amount of liabilities.--Any
amount determined under clause (i) or (ii) of
subparagraph (A) shall not exceed the lesser of such
amount--
``(i) as reported to the applicable insurance
regulatory body in the applicable financial
statement described in paragraph (4)(A) (or, if
less, the amount required by applicable law or
regulation), or
``(ii) as determined under regulations
prescribed by the Secretary.
``(4) Other definitions and rules.--For purposes of this
subsection--
``(A) Applicable financial statement.--The term
`applicable financial statement' means a statement for
financial reporting purposes which--
``(i) is made on the basis of generally
accepted accounting principles,
``(ii) is made on the basis of international
financial reporting standards, but only if there
is no statement that meets the requirement of
clause (i), or
``(iii) except as otherwise provided by the
Secretary in regulations, is the annual statement
which is required to be filed with the applicable
insurance regulatory body, but only if there is no
statement which meets the requirements of clause
(i) or (ii).
``(B) Applicable insurance regulatory body.--The
term `applicable insurance regulatory body' means, with
respect to any insurance business, the entity
established by law to license, authorize, or regulate
such business and to which the statement described in
subparagraph (A) is provided.''.
(c) <<NOTE: 26 USC 1297 note.>> Effective Date.--The amendments
made by this section shall apply to taxable years beginning after
December 31, 2017.
SEC. 14502. REPEAL OF FAIR MARKET VALUE METHOD OF INTEREST EXPENSE
APPORTIONMENT.
(a) In General.--Paragraph (2) of section 864(e) <<NOTE: 26 USC
864.>> is amended to read as follows:
``(2) Gross income and fair market value methods may not be
used for interest.--All allocations and apportionments of
interest expense shall be determined using the adjusted bases of
assets rather than on the basis of the fair market value of the
assets or gross income.''.
(b) <<NOTE: 26 USC 864 note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after December
31, 2017.
TITLE II
SEC. 20001. <<NOTE: 26 USC 3143 note.>> OIL AND GAS PROGRAM.
(a) Definitions.--In this section:
(1) Coastal plain.--The term ``Coastal Plain'' means the
area identified as the 1002 Area on the plates prepared by
[[Page 131 STAT. 2236]]
the United States Geological Survey entitled ``ANWR Map - Plate
1'' and ``ANWR Map - Plate 2'', dated October 24, 2017, and on
file with the United States Geological Survey and the Office of
the Solicitor of the Department of the Interior.
(2) Secretary.--The term ``Secretary'' means the Secretary
of the Interior, acting through the Bureau of Land Management.
(b) Oil and Gas Program.--
(1) In general.--Section 1003 of the Alaska National
Interest Lands Conservation Act (16 U.S.C. 3143) shall not apply
to the Coastal Plain.
(2) Establishment.--
(A) In general.--The Secretary shall establish and
administer a competitive oil and gas program for the
leasing, development, production, and transportation of
oil and gas in and from the Coastal Plain.
(B) Purposes.--Section 303(2)(B) of the Alaska
National Interest Lands Conservation Act (Public Law 96-
487; 94 Stat. 2390) <<NOTE: 16 USC 668dd note.>> is
amended--
(i) in clause (iii), by striking ``and'' at
the end;
(ii) in clause (iv), by striking the period at
the end and inserting ``; and''; and
(iii) by adding at the end the following:
``(v) to provide for an oil and gas program on
the Coastal Plain.''.
(3) Management.--Except as otherwise provided in this
section, the Secretary shall manage the oil and gas program on
the Coastal Plain in a manner similar to the administration of
lease sales under the Naval Petroleum Reserves Production Act of
1976 (42 U.S.C. 6501 et seq.) (including regulations).
(4) Royalties.--Notwithstanding the Mineral Leasing Act (30
U.S.C. 181 et seq.), the royalty rate for leases issued pursuant
to this section shall be 16.67 percent.
(5) Receipts.--Notwithstanding the Mineral Leasing Act (30
U.S.C. 181 et seq.), of the amount of adjusted bonus, rental,
and royalty receipts derived from the oil and gas program and
operations on Federal land authorized under this section--
(A) 50 percent shall be paid to the State of Alaska;
and
(B) the balance shall be deposited into the Treasury
as miscellaneous receipts.
(c) 2 Lease Sales Within 10 Years.--
(1) Requirement.--
(A) In general.--Subject to subparagraph (B), the
Secretary shall conduct not fewer than 2 lease sales
area-wide under the oil and gas program under this
section by not later than 10 years after the date of
enactment of this Act.
(B) Sale acreages; schedule.--
(i) Acreages.--The Secretary shall offer for
lease under the oil and gas program under this
section--
(I) not fewer than 400,000 acres
area-wide in each lease sale; and
(II) those areas that have the
highest potential for the discovery of
hydrocarbons.
(ii) Schedule.--The Secretary shall offer--
[[Page 131 STAT. 2237]]
(I) the initial lease sale under the
oil and gas program under this section
not later than 4 years after the date of
enactment of this Act; and
(II) a second lease sale under the
oil and gas program under this section
not later than 7 years after the date of
enactment of this Act.
(2) Rights-of-way.--The Secretary shall issue any rights-of-
way or easements across the Coastal Plain for the exploration,
development, production, or transportation necessary to carry
out this section.
(3) Surface development.--In administering this section, the
Secretary shall authorize up to 2,000 surface acres of Federal
land on the Coastal Plain to be covered by production and
support facilities (including airstrips and any area covered by
gravel berms or piers for support of pipelines) during the term
of the leases under the oil and gas program under this section.
SEC. 20002. LIMITATIONS ON AMOUNT OF DISTRIBUTED QUALIFIED OUTER
CONTINENTAL SHELF REVENUES.
Section 105(f)(1) of the Gulf of Mexico Energy Security Act of 2006
(43 U.S.C. 1331 note; Public Law 109-432) is amended by striking
``exceed $500,000,000 for each of fiscal years 2016 through 2055.'' and
inserting the following: ``exceed--
``(A) $500,000,000 for each of fiscal years 2016
through 2019;
``(B) $650,000,000 for each of fiscal years 2020 and
2021; and
``(C) $500,000,000 for each of fiscal years 2022
through 2055.''.
SEC. 20003. <<NOTE: 42 USC 6241 note.>> STRATEGIC PETROLEUM
RESERVE DRAWDOWN AND SALE.
(a) Drawdown and Sale.--
(1) In general.--Notwithstanding section 161 of the Energy
Policy and Conservation Act (42 U.S.C. 6241), except as provided
in subsections (b) and (c), the Secretary of Energy shall draw
down and sell from the Strategic Petroleum Reserve 7,000,000
barrels of crude oil during the period of fiscal years 2026
through 2027.
(2) Deposit of amounts received from sale.--Amounts received
from a sale under paragraph (1) shall be deposited in the
general fund of the Treasury during the fiscal year in which the
sale occurs.
(b) Emergency Protection.--The Secretary of Energy shall not draw
down and sell crude oil under subsection (a) in a quantity that would
limit the authority to sell petroleum products under subsection (h) of
section 161 of the Energy Policy and Conservation Act (42 U.S.C. 6241)
in the full quantity authorized by that subsection.
[[Page 131 STAT. 2238]]
(c) Limitation.--The Secretary of Energy shall not drawdown or
conduct sales of crude oil under subsection (a) after the date on which
a total of $600,000,000 has been deposited in the general fund of the
Treasury from sales authorized under that subsection.
Approved December 22, 2017.
LEGISLATIVE HISTORY--H.R. 1 (S. 1):
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HOUSE REPORTS: Nos. 115-409 (Comm. on Ways and Means) and 115-466 (Comm.
of Conference).
CONGRESSIONAL RECORD, Vol. 163 (2017):
Nov. 15, 16, considered and passed House.
Nov. 29-Dec. 1, considered and passed Senate, amended.
Dec. 19, House agreed to conference report. Senate sustained
point of order against conference report; receded from
its amendment and concurred with an amendment.
Dec. 20, House concurred in Senate amendment.
DAILY COMPILATION OF PRESIDENTIAL DOCUMENTS (2017):
Dec. 22, Presidential remarks.
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