[?le 1 of 5] S.L.C. AMENDMENT NO. Calendar No. Purpose: To provide a perfecting amendment. IN THE SENATE OF THE UNITED Cong., Sess. H. R. 1 To provide for reconciliation pursuant to titles 11 and of the concurrent resolution on the budget for fiscal year 2018. Referred to the Committee on and ordered to be printed Ordered to lie on the table and to be printed AMENDMENT intended to be proposed by to the amendment (No. proposed by Viz: 1 Strike all after the first word and insert the following: [?le 2 of 5] S.L.C. 2 TITLE I SEC. 11000. SHORT TITLE, ETC. SHORT title may be cited as the ?Tax Cuts and Jobs Act?. AMENDMENT OF 1986 CODE?Except as other- wise expressly provided, whenever in this title an amend- ment 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 provi- sion of the Internal Revenue Code of 1986. Subtitle A?Individual Tax Reform PART RATE REFORM SEC. 11001. MODIFICATION OF RATES. IN GENERAL. Section 1 is amended by adding at the end the following new subsection: MODIFICATIONS FOR TAXABLE YEARS 2018 THROUGH 2025.? IN the case of a taxable year beginning after December 31, 2017, and before January 1, 2026?? subsection shall not apply, and this section (other than subsection shall be applied as provided in paragraphs (2) through (7). RATE [?le 2 of 5] S.L.C. 3 1 MARRIED INDIVIDUALS FILING JOINT 2 RETURNS AND SURVIVING fol- 3 lowing table Shall be applied in lieu of the table 4 contained in subsection ?If taxable income is: The tax is: Not over $19,050 10% of taxable income. Over $19,050 but not over $77,400 $1,905, plus 12% of the excess over $19,050. Over $77,400 but not over $140,000 $8,907, plus 22% of the excess over $77,400. Over $140,000 but not over $320,000 $22,679, plus 24% of the excess over $140,000. Over $320,000 but not over $400,000 $65,879, plus 32% of the excess over $320,000. Over $400,000 but not over $1,000,000 $91,479, plus 35% of the excess over $400,000. Over $1,000,000 $301,479, plus 38.5% of the excess over $1,000,000. 5 HEADS OF fol- 6 lowing table shall be applied in lieu of the table 7 contained in subsection ?If taxable income is: The tax is: Not over $13,600 10% of taxable income. Over $13,600 but not over $51,800 $1,360, plus 12% of the excess over $13,600. Over $51,800 but not over $70,000 $5,944, plus 22% of the excess over $51,800. Over $70,000 but not over $100,000 $9,948, plus 24% 0f the excess over $70,000. Over $160,000 but not over $200,000 $31,548, plus 32% of the excess over $160,000. Over $200,000 but not over $500,000 $44,348, plus 35% of the excess over $200,000. Over $500,000 $149,348, plus 38.5% of the excess over $500,000. 8 UNMARRIED INDIVIDUALS OTHER 9 THAN SURVIVING SPOUSES AND HEADS OF 10 following table shall be ap? [?le 2 of 5] GUI-PU) 4 plied in lieu of the table contained in subsection ?If taxable income is: The tax is: Not over $9,525 10% of taxable income. Over $9,525 but not over $38,700 $952.50, plus 12% of the excess over $9,525. Over $38,700 but not over $70,000 $4,453.50, plus 22% of the excess over $38,700. Over $70,000 but not over $160,000 $11,339.50, plus 24% of the excess over $70,000. Over $160,000 but not over $200,000 $32,939.50, plus 32% of the excess over $160,000. Over $200,000 but not over $500,000 $45,739.50, plus 35% of the excess over $200,000. Over $500,000 $150,739.50, plus 38.5% of the ex- cess over $500,000. MARRIED INDIVIDUALS FILING SEPA- RATE RETURNS. The following table shall be applied in lieu of the table contained in sub- section ?If taxable income is: The tax is: Not over $9,525 10% of taxable income. Over $9,525 but not over $38,700 $952.50, plus 12% of the excess over $9,525. Over $38,700 but not over $70,000 $4,453.50, plus 22% of the excess over $38,700. Over $70,000 but not over $160,000 $11,339.50, plus 24% of the excess over $70,000. Over $160,000 but not over $200,000 $32,939.50, plus 32% of the excess over $160,000. Over $200,000 but not over $500,000 $45,739.50, plus 35% of the excess over $200,000. Over $500,000 $150,739.50, plus 38.5% of the ex- cess over $500,000. ESTATES AND fol- lowing table shall be applied in lieu of the table contained in subsection [?le 2 of 5] S.L.C. 5 ?If taxable income is: The tax is: Not over $2,550 10% of taxable income. Over $2,550 but not over $9,150 $255, plus 24% of the excess over $2,550. Over $9,150 but not over $12,500 $1,839, plus 35% of the excess over $9,150. Over $12,500 $3,011.50, plus 38.5% of the ex? cess over $12,500. REFERENCES TO RATE TABLES. Any reference in this title to a rate of tax under subsection (0) shall be treated as a reference to the corresponding rate bracket under subpara- graph (G) of this paragraph, except that the reference in section 3402(q)(1) to the third low- est rate of tax applicable under subsection shall be treated as a reference to the fourth lowest rate of tax under subparagraph (C). No ADJUSTMENT IN 2018.?The ta- bles contained in paragraph (2) shall apply without adjustment for taxable years beginning after December 31, 2017, and before January 1, 2019. 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 para- graph (2) in the same manner as under para- [?le 2 of 5] S.L.C. 6 graphs (1) and (2) of subsection except that in prescribing such tables? subsection shall be applied by substituting ?calendar year 2017? for ?calendar year 2016? in subparagraph thereof, subsection shall apply to any unmarried individual other than a surw'ving spouse or head of household, and subsection shall not apply. SPECIAL RULES FOR CERTAIN CHILDREN WITH UNEARNED INCOME. IN the case of a child to whom subsection applies for the taxable year, the rules of subparagraphs (B) and (C) shall apply in lieu of the rule under subsection MODIFICATIONS TO APPLICABLE RATE 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: [?le 2 of 5] Lh-thv??Ocoo?om-PUJNv?KO 7 24-PERCENT maximum taxable income which is taxed at a rate below 24 percent shall not be more than the earned taxable income of such child. 35-FERCEXT maximum taxable income which is taxed at a rate below 35 percent shall not be more than the sum of? the earned taxable income of such child, plus the minimum taxable in- come for the 35-percent bracket in the table under paragraph (as ad- justed under paragraph for the taxable year. 38.5-PERCENT maximum taxable income which is taxed at a rate below 38.5 percent shall not be more than the sum the earned taxable income of such child, plus the minimum taxable in- come for the 38.5-percent bracket in the table under paragraph (as [?le 2 of 5] S.L.C. 8 adjusted under paragraph for the taxable year. COORDINATION WITH CAPITAL GAINS purposes of applying section 1(h) (after the modifications under paragraph the maximum zero rate amount shall not be more than the sum of? the earned taxable income of such child, plus the amount in effect under paragraph for the tax- able year, and the maximum 15-percent rate amount shall not be more than the sum of? the earned taxable income of such child, plus the amount in effect under paragraph for the tax- able year. EARNED TAXABLE 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 [?le 2 of 5] 9 the net unearned income (as de?ned in sub- section of such child. APPLICATION OF CURRENT INCOME TAX BRACKETS TO CAPITAL GAINS IN 1(ll)(1) shall be applied by substituting ?below the max- imum zero rate amount? for ?which would (without regard to this paragraph) be taxed at a rate below 25 percent? in sub- paragraph and by substituting ?below the max- imum 15-pereent rate amount? for ?which would (without regard to this paragraph) be taxed at a rate below 39.6 percent? in subparagraph (C) (ii) (I . MAXIMUM AMOUNTS purposes of applying section 1(h) with the modi?cations described in subparagraph ZERO RATE maximum zero rate amount shall be? in the ease of a joint return or surviving spouse, $77,200, [?le 2 of 5] S.L.C. 10 in the ease of an individual who is a head of household (as de- ?ned in section $51,700, ?(111) in the ease of any other in- dividual (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 in the ease of an estate or trust, $2,600. MAXIMUM 15-PERCENT RATE maximum 15-pereent rate amount shall he? in the ease of a joint return or surviving spouse, $479,000 (1/2 such amount in the ease of a married individual filing a separate return), in the ease of an individual who is the head of a household (as de- fined in section $452,400, ?(111) in the ease of any other in- dividual (other than an estate or trust), $425,800, and in the ease of an estate or trust, $12,700. [?le 2 of 5] S.L.C. 11 v?Ai?asr-dr?t mNr?INFLATION the case of any taxable year beginning after 2018, each of the dollar amounts in clauses and (ii) of subparagraph (B) shall be increased by an amount equal to? such dollar amount, multiplied by the cost-of?living adjustment de- termined under subsection for the calendar year in which the taxable year be- gins, determined by substituting ?calendar year 2017? for ?calendar year 2016? in sub- paragraph thereof. SECTION 15 NOT To APPLY?Section 15 shall not apply to any change in a rate of tax by rea- son of this subsection?. DUE DILIGENCE TAX PREPARER REQUIREMENT WITH RESPECT To HEAD OF HOUSEHOLD FILING STA- TUS?Subsection of section 6695 is amended to read as follows: FAILURE To BE DILIGENT IN DETERMINING 9; 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?? [?le 2 of 5] S.L.eligibility to file as a head of household (as de?ned in section on the return, or 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?. EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 11002. INFLATION ADJUSTMENTS BASED ON CHAINED CPI. IN GENERAL?Subsection of section 1 is amended by striking paragraph (3) and by inserting after paragraph (2) the following new paragraph: COST-OF-LIVING pur- poses of this subsection? IN cost-of-living ad- justment for any calendar year is the percent- age (if any) by which? the C-CPI-U for the preceding calendar year, exceeds the CPI for calendar year 2016, multiplied by the amount determined under subparagraph (B). [file 2 of 5] S.L.C. 13 AMOUNT amount determined under this clause is the amount obtained by dividing? the for calendar year 2016,by the CPI for calendar year 2016. SPECIAL 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 subparagraph (A) shall be applied by substituting ?the C-CPI-U for cal- endar year 2016? for ?the CPI for calendar year 2016? and all that follows in clause (ii) there- Of 77 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: purposes of this sub? section?? IN term means the Chained Consumer Price Index for All Urban Consumers (as published by the Bu- reau of Labor Statistics of the Department of [?le 2 of 5] S.L.C. r?rr?tr?iv?tt?Ar?Ar?tv?soCODE OF 1986 PROVISIONS. 14 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 Bu- reau publishes the initial value Of the Chained Consumer Price Index for All Urban Con- sumers for the month of August for the pre- ceding calendar year. DETERMINATION FOR CALENDAR 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?. APPLICATION TO PERMANENT TAX Section is amended by inserting determined by substituting ?1992? for ?2016? in paragraph APPLICATION TO OTIIER INTERNAL REVENUE (1) The following sections are each amended by striking ?for ?calendar year 1992? in subparagraph and inserting ?for ?calendar year 2016? in sub- paragraph (A) Section [?le 2 of 5] S.L.C. 15 (B) Paragraphs (1 and( )(ii)0 section 25A(h). (C) Section (D) Subsection and clauses (1) and (11) of subsection of section 32. (F) Section (F) Section 41(e (G) Subsections and section 42. (H) Section (I) Section (J) Section (K) Section (L) Section (M) Section (N) Section 137(f)(2). (0) Section (P) Section (Q) Section (R) Section (S) Subsections and (g )of' section 219. (T) Section 220(g (U) Section [?le 2 of 5] S.L.C. 16 (V) Section 22:gS( (W) Section 2)(3 (X) Section (Y) Section (Z) Section (AA) Section (BB) Section (C C) Section 2010(c (DD) Section (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 (JJ) Section 6601(j)( (KK) Section 6651(i (LL) Section 6652(c (MM) Section 6695(11)(1). (NN) Section (00) Section 6699(e)(1). (PP) Section (QQ) Section 6722(f)(1). (RR) )Section (SS) Section 7430(c)(1). (TT) Section 9831(d)(2)(D)(ii)(II). [?le 2 of 5] S.L.(2) Sections and are each amended? (A) by striking and inserting and (B) by striking ?1992? and inserting ?2016?. (3) Section is amended? (A) by striking ?for ?calendar year 1987? in clause and inserting ?for ?calendar year 2016? in subparagraph thereof?, and (B) by striking ?if the CPI for any cal- endar year? and all that follows in clause (ii) and inserting ?if the C-CPI-U for any calendar year (as defined in section 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 In the ease 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 [file 2 of 5] r?Ar?trdv?ir?ar?av?dr?Ar?tv(4) Section is amended by striking ?for ?1992? in subparagraph and inserting ?for ?2016? in subparagraph (5) Section 132(f)(6)(A)(ii) is amended by striking ?for ?calendar year 1992?? and inserting ?for ?calendar year 2016? in subparagraph thereof?. (6) Section 162(o)(8) is amended by striking ?adjusted for changes in the lonsumer Price Index (as defined in section since 1991? and in- serting ?adjusted by increasing any such amount under the 1991 agreement by an amount equal to? such amount, multiplied by the cost-of?living adjustment deter- mined under section for the calendar year in which the taxable year begins, by sub- stituting ?calendar year 1990? for ?calendar year 2016? in subparagraph thereof?. (7) So much of clause (ii) of section 213(d)(10)(B) as precedes the last sentence is amended to read as follows: MEDICAL CARE eos'r purposes of clause the medical care cost adjustment for any cal- [?le 2 of 5] S.L.C. 19 endar year is the percentage (if any) by Which? the medical care component of the (as defined in section for August of the preceding calendar year, exceeds such component of the CPI (as de?ned in section for Au- gust of 1996, multiplied by the amount determined under section (8) Subparagraph (B) of section 280F(d)(7) is amended to read as follows: AUTOMOBILE PRICE INFLATION Al)- purposes of this paragraph? 1N automobile price inflation adjustment for any calendar year is the percentage (if any) by which? the C-CPI-U automobile component for October of the pre? ceding calendar year, exceeds the automobile component of the CPI (as defined in section for October of 1987, multi- [?le 2 of 5] 20 plied by the amount determined under C-CPI-U AUTOMOBILE COMPO- term automobile component? means the automobile compo- nent of the Chained Consumer Price Index for All Urban Consumers (as described in section (9) Section 911(b)(2)(D)(ii)(II) is amended by striking ?for ?1992? in subparagraph and in- serting ?for ?2016? in subparagraph (10) Paragraph (2) of section 1274A(d) is amended to read as follows: ADJUSTMENT 1901: 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? such amount, multiplied by the adjustment deter- mined under section for the calendar year in which the taxable year begins, by sub- stituting ?calendar year 1988? for ?calendar year 2016? in subparagraph thereof. [?le 2 of 5] S.L.C. 21 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 (11) Section is amended by striking ?for ?1992? in subparagraph and serting ?for ?2016? in subparagraph (12) Section is amended by striking ?for ?1992? in subparagraph and inserting ?for ?2016? in subparagraph (13) Section 6039F(d) is amended by striking ?subparagraph (B) thereof shall be applied by sub- stituting ?1995? for ?1992? and inserting ?subpara- graph thereof shall be applied by substituting ?1995? for ?2016??. (14) Section 7 872(g)(5) is amended to read as follows: ADJUSTMENT OF LIMIT FOR 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 such amount, multiplied by the cost-of-liw'ng adjustment deter? mined under section for the calendar year in which the taxable year begins, by sub? [?le 2 of 5] S.L.stituting ?calendar year 1985? for ?calendar year 2016? in subparagraph 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 EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2017. PART FOR QUALIFIED BUSINESS INCOME OF PASS-THRU ENTITIES SEC. 11011. DEDUCTION FOR QUALIFIED BUSINESS IN- COME. IN GENEltui.?Part VI of subchapter of chap- ter 1 is amended by adding at the end the following new section: 199A. QUALIFIED BUSINESS INCOME. IN the case of a taxpayer other than a corporation, there shall be allowed as a deduction for any taxable year an amount equal to the lesser of? the combined qualified business income amount of the taxpayer, or an amount equal to 23 percent of the ex- cess (if any) of? [?le 2 of 5] S.L.C. 23 the taxable income of the taxpayer for the taxable year, over any net capital gain (as defined in section of the taxpayer for the taxable year. COMBINED QUALIFIED BUSINESS INCOME purposes of this section? IN term ?combined quali- fied business income amount? means, with respect to any taxable year, an amount equal to? the sum of the amounts determined under paragraph (2) for each qualified trade or business carried on by the taxpayer, plus 23 percent of the aggregate amount of the qualified REIT dividends and qualified cooperative dividends of the taxpayer for the taxable year. DETERMINATION OF DEDUCTIBLE AMOUNT FOR EACH TRADE OR amount determined under this paragraph With re- spect to any qualified trade or business is the lesser of? 23 percent of the taxpayer?s quali?ed business income with respect to the qualified trade or business, or [?le 2 of 5] S.L.C. 24 50 percent of the wages with re- spect to the qualified trade or business. MODIFICATIONS TO THE WAGE LIMIT BASED ON TAXABLE EXCEPTION FROM WAGE the case of any taxpayer whose taxable income for the taxable year does not exceed the thresh- old amount, paragraph (2) shall be applied without regard tO subparagraph (B). PHASE-IN OF LIMIT FOR CERTAIN TAXPAYE RS. IN the taxable income of a tax- payer 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 the amount determined under paragraph (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 [?le 2 of 5] S.L.under paragraph 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 AMOUNT or amount determined under this subpara- graph is the amount which bears the same ratio to the excess amount as? the amount by which the taxpayer?s taxable income for the tax- able year exceeds the threshold amount, bears to $50,000 ($100,000 in the case of a joint return). pur- poses of clause the excess amount is the excess of? the amount determined under paragraph (determined without regard to this paragraph), [?le 2 of 5] S.L.C. 26 the amount determined under paragraph (determined Without regard to this paragraph). WAGES, IN term wages? means, with respect to any person for any tax? able 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 cal- endar year ending during such taxable year. LIMITATION TO WAGES ATTRIB- TO BUSINESS Such term shall not include any amount which is not properly allocable to qualified business income for purposes of subsection term shall not include any amount which is not prop- erly included in a return filed with the Social Security Administration on or before the 60th day after the due date (including extensions) for such return. ACQUISITIONS, DISPOSITIONS, AND SHORT TAXABLE Secretary Shall provide for the application of this subsection in cases of a Short [?le 2 of 5] S.L.C. 27 taxable year or where the taxpayer acquires, or dis- poses 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. QUALIFIED BUSINESS purposes of this section-? IN term ?qualified busi- ness income? means, for any taxable year, the net amount of qualified items of income, gain, deduc? tion, and loss with respect to any qualified trade or business of the taxpayer. CARRYOVER OF the net amount of qualified income, gain, deduction, and loss with respect to quali?ed trade or businesses of the taxpayer amount for any taxable year is less than zero, such amount Shall be treated as a loss from a qualified trade or business in the succeeding taxable year. QUALIFIED ITEMS OF INCOME, GAIN, DE- DUCTION, sz Loss. For purposes of this sub- section? IN term ?qualifled items of income, gain, deduction, and loss? means items of income, gain, deduction, and loss to the extent such items are? [?le 2 of 5] {a 28 effectively connected with the con- duct of a trade or business within the United States (within the meaning of sec- tion 864(c), determined by substituting ?qualified trade or business (within the meaning of section for ?nonresident alien individual or a foreign corporation? or for ?a foreign corporation? each place it ap- pears), and included or allowed in deter- mining taxable income for the taxable year. following invest- ment items shall not be taken into account as a qualified item of income, gain, deduction, or Any item of short-term capital gain, short-term capital loss, long-term capital gain, or long-term capital loss. Any dividend, income equivalent to a dividend, or payment in lieu of divi- dends described in section Any interest income other than interest income which is properly allocable to a trade or business. [?le 2 of 5] S.L.C. 29 Any item of gain or loss de- scribed in subparagraph (C) or (D) of sec- tion 954(c)(1) (applied by substituting ?qualified trade or business? for ?controlled foreign corporation?). Any item of income, gain, deduc- tion, or loss taken into account under sec- tion 954(c)(1)(F) (determined Without re- gard to clause (ii) thereof and other than items attributable to notional principal contracts entered into in transactions qualifying under section 1221(a)(7)). 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. TREATMENT OF REASONABLE COMPENSA- TION AND GUARANTEED busi- ness income shall not include 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, [file 2 of 5] S.L.C. 30 any guaranteed payment described in section 707(c) paid to a partner for services rendered with respect to the trade or business, and to the extent provided in regulations, any payment described in section 707 to a partner for services rendered with respect to the trade or business. TRADE 0R pur- poses of this section? IN term ?qualified trade or business? means any trade or business other than a specified service trade or business or the trade or business of performing services as an employee. SPECIFIED SERVICE TRADE 0R BUSI- term ?specified service trade or busi- ness? means any trade or business involving the per- formance of services described in section 1202(e)(3)(A), including investing and investment management, trading, or dealing in securities (as de- ?ned in section partnership interests, or commodities (as defined in section EXCEPTION FOR SPECIFIED SERVICE BUSI- NESSES BASED ON INCOME. [?le 2 of 5] S.L.C. WNHOKDOOQQUI-PUJNHO 31 IN 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 re- turn), then? the exception under paragraph (1) shall not apply to specified service trades or businesses of the taxpayer for the taxable year, but only the applicable percentage of qualified items of income, gain, deduction, or loss, and the W-2 wages, of the tax- payer allocable to such specified service trades or businesses shall be taken into ac- count in computing the qualified business income and W-Z wages of the taxpayer for the taxable year for purposes of applying this section. APPLICABLE purposes of subparagraph (A), the term ?appli- cable percentage? means, with respect to any taxable year, 100 percent reduced (not below zero) by the percentage equal to the ratio of? [?le 2 of 5] S.L.C. 32 1 the taxable income of the tax- 2 payer for the taxable year in excess of the 3 threshold amount, bears to 4 $50,000 ($100,000 in the case of 5 a joint return). 6 OTHER purposes of this 7 section? 8 TAXABLE income shall 9 be computed without regard to the deduction allow- 10 able under this section. 11 THRESHOLD 12 IN term ?threshold 13 amount? means $250,000 (200 percent of such 14 amount in the case of a joint return). 15 INFLATION the 16 case of any taxable year beginning after 2018, 17 the dollar amount in paragraph (1) shall be in- 18 creased by an amount equal to? 19 such dollar amount, multiplied by 20 the cost-of-living adjustment de- 21 termined under section for the cal? 22 endar year in which the taxable year be- 23 gins, determined by substituting ?calendar 24 year 2017? for ?calendar year 2016? in sub- 25 paragraph (A) (ii) thereof. [file 2 of 5] S.L.C. 33 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. QUALIFIED REIT term ?qualified REIT dividend? means any dividend from a real estate investment trust received during the taxable year Which? is not a capital gain dividend, as de- fined in section 857(b)(3), and is not qualified dividend income, as defined in section QUALIFIED COOPERATIVE The term ?qualified cooperative dividend? means any patronage diw'dend (as defined in section 1388(a)), any per-unit retain allocation (as defined in section 1388(f)), and any quali?ed ?ritten notice of alloca- tion (as de?ned in section 1388(c)), or any similar amount received from an organization described in subparagraph which? is includible in gross income, and is received from? an organization or corporation de- scribed in section 501(c)(12) or 1381(a), [?le 2 of 5] S.L.C. 34 an organization which is gov- erned under this title by the rules applica- ble to cooperatives under this title before the enactment of subchapter T. SPECIAL APPLICATION TO PARTNERSHIPS AND IN the case of a part- nership or corporation? this section shall be applied at the partner or shareholder level, each partner or shareholder shall take into account such person?s allocable share of each qualified item of income, gain, deduction, and loss, and each partner or shareholder shall be treated for purposes of subsection as having wages for the taxable year in an amount equal to such person?s allocable share of the W-2 wages of the partnership or corporation for the tax- able year (as determined under regulations prescribed by the Secretary). For purposes of clause a partner?s or shareholder?s allocable share of wages shall [?le 2 of 5] S.L.determined in the same manner as the part- ner?s or shareholder?s allocable share of wage expenses. For purposes of this subparagraph, in the case of an corporation, an allocable share shall be the shareholder?s pro rata share of an item. APPLICATION TO TRUSTS AND ES- section shall not apply to any trust or estate. TREATMENT or TRADES OR NESS IN PUERTO 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. SPECIAL RULE FOR APPLYING WAGE the case of any taxpayer described in clause the deter- mination of W-2 wages of such taxpayer with respect to any quali?ed trade or busi- [?le 2 Of 5] S.L. .0 36 ness conducted in Puerto Rico shall be made without regard tO any exclusion under section 3401(a)(8) for remuneration paid for services in l?uerto Rico. COORDINATION WITH purposes Of determining alternative minimum tax- able income under section 55, qualified business in- come shall be determined without regard to any ad- justments under sections 56 through 59. LIMITED TO INCOME deduction under subsection shall only be allowed for purposes Of this chapter. REGULATIONS. The Secretary shall pre? scribe such regulations as are necessary to carry out the purposes of this section, including regulations? for requiring or restricting the alloca- tion Of items and wages under this section and such reporting requirements as the Secretary determines appropriate, and for the application of this section in the case of tiered entities. DEDUCTION ALLOWED TO SPECIFIED TURAL OR HORTICULTURAL IN the case of any taxable year of a specified agricultural or horticultural coop- [?le 2 of 5] {n 37 erative beginning after December 31, 2018, there shall be allowed a deduction in an amount equal to the lesser of? 23 percent of the cooperative?s tax- able income for the taxable year, or 50 percent of the W-Z wages of the cooperative with respect to its trade or busi- ness. SPECIFIED AGRICULTURAL on IIORTI- CULTURAL purposes of this subsection, the term ?specified agricultural or horti- cultural cooperative? means an organization to which part I of subchapter applies which is engaged in? the manufacturing, production, growth, or extraction in whole or signi?cant part of any agricultural or horticultural prod- uct, the marketing of agricultural or hor- ticultural products which its patrons have so manufactured, produced, grown, or extracted, or the provision of supplies, equipment, or services to farmers or to organizations de- scribed in subparagraph (A) or (B). [?le 2 of 5] S.L.C. taxable years beginning after December 31, 2025. . 38 section shall not apply to 7, APPLICATION TO PUBLICLY TRADED PARTNER- (1) IN as added by subsection is amended by striking ?and qualified cooperative dividends? and inserting qualified cooperative dividends, and quali?ed pub- licly traded partnership income?. (2) QUALIFIED PUBLICLY TRADED PARTNER- SHIP INCOME. Section 199A(e), as added by sub- section is amended by adding at the end the fol- lowing new paragraph: QUALIFIED TRADED PARTNER- SHIP term ?qualified publicly traded partnership income? means, with respect to any qualified trade or business of a taxpayer, the sum of? the net amount of such taxpayer?s al- locable share of each qualified item of income, gain, deduction, and loss (as defined in sub- section and determined after the applica- tion of subsection from a publicly traded partnership (as defined in section 7704(a)) [?le 2 of 5] S.L.C. 39 which is not treated as a corporation under sec- tion 7704((2), plus any gain recognized by such taxpayer upon disposition of its interest in such partner- ship to the extent such gain is treated as an amount realized from the sale or exchange of property other than a capital asset under sec- tion (3) CONFORMING 199A(c)(1), as added by subsection is amended by adding at the end the following new sentence: ?Such term shall not include any qualified publicly traded partnership income. ACCURACY-RELATED PENALTY ON DETERMINA- TION OF APPLICABLE 6662(d)(1) is amended by inserting at the end the following new sub- paragraph: CLAIMING SECTION 199A DEDUCTION. In the case of any taxpayer who claims the deduction allowed under section 199A for the taxable year, subparagraph (A) shall be applied by sub- 777 stituting ?5 percent? for ?10 percent . . AME [?(1) Section 17 is amended by strik- ing and? at the end of clause by redesig- nating clause (V) as clause and by inserting after clause (iv) the following new clause: section 199A, and?. (2) Section 172(d) is amended by adding at the end the following new paragraph: QUALIFIED BUSINESS INCOME DEDUC- deduction under section 199A Shall not be allowed?. (3) Section 246(b)(1) is amended by inserting before (4) Section 613(a) is amended by inserting ?and without the deduction under section after ?and without the deduction under section 199?. (5) Section 613A(d)(1) is amended by redesig- nating subparagraphs (C), (D), and (E) as subpara- graphs (D), (E), and (F), respectively, and by in- serting after subparagraph (B), the following new subparagraph: any deduction allowable under section [?le 2 of 5] S.L.(6) The table of sections for part VI of sub- chapter of chapter 1 is amended by inserting at the end the following new item: ?See. 199A. Quali?ed business income?. (0) EFFECTIVE 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. IN GENERAL. Section 461 is amended by adding at the end the following new subsection: LIMITATION ON EXCESS BUSINESS LOSSES OF NONCORPORATE LIMITATION .?In the case of taxable year of a, taxpayer other than a corporation beginning after December 31, 2017, and before January 1, 2026? subsection (relating to limitation on excess farm losses of certain taxpayers) shall not apply, and any excess business loss of the tax- payer for the taxable year shall not be allowed. DISALLOWED LOSS loss which is disallowed under paragraph (1) shall be treated as a, net operating loss carryover to the fol- lowing taxable year under section 172. [?le 2 of 5] S.L.EXCESS BUSINESS purposes of this subsection? IN term ?excess busi- ness loss? means the excess (if any) of? the aggregate deductions of the taxpayer for the taxable year which are at- tributable to trades or businesses of such taxpayer (determined without regard to whether or not such deductions are dis- allowed for such taxable year under para- graph over the sum of? the aggregate gross income or gain of such taxpayer for the tax- able year which is attributable to such trades or businesses, plus $250,000 (200 percent of such amount in the case of a joint re- turn). ADJUSTMENT FOR the case of any taxable year beginning after De? cember 31, 2018, the $250,000 amount in sub- paragraph shall be increased by an amount equal to? such dollar amount, multiplied by [?le 2 of 5] S.L.C. 43 the cost-of-living adjustment de- termined under section for the cal- endar year in which the taxable year be- gins, determined by substituting ?2017? for ?2016? in subparagraph thereof. If any amount as increased under the pre- ceding sentence is not a multiple of $1,000, such amount shall be rounded to the nearest multiple of $1,000. APPLICATION OF SUBSECTION IN CASE OF PARTNERSHIPS AND CORPORATIONS. In the case of a partnership or corporation? this subsection shall be applied at the partner or shareholder level, and each partner?s or shareholder?s allo? cable share of the items of income, gain, deduc- tion, or loss of the partnership or corporation for any taxable year from trades or businesses attributable to the partnership or 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 corporation ends. [?le 2 of 5] S.L.C. NNI?tr?t r?tr?Av? r?t v?t r?tv?t 44 For purposes of this paragraph, in the ease of an corporation, an allocable share shall be the share- holder?s pro rata share of an item. ADDITIONAL Secretary shall prescribe such additional reporting require- ments as the Secretary determines appropriate to carry out the purposes of this subsection. COORDINATION WITH SECTION 469.?This subsection shall be applied after the application Of section 469.?. EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2017. PART BENEFITS FOR FAMILIES AND INDIVIDUALS SEC. 11021. INCREASE IN STANDARD DEDUCTION. IN GENERAL?Subsection of section 63 is amended by adding at the end the following new para- graph: SPECIAL RULES FOR TAXABLE YEARS 2018 THROUGH 2025.?In the ease of a taxable year begin- ning after December 31, 2017, and before January 1, 2026? INCREASE IN STANDARD DEDUC- TION?Paragraph (2) shall be applied? [?le 2 of 5] S.L.C. 23 45 by substituting ?$18,000? for ?$4,400? in subparagraph (B), and by substituting ?$12,000? for ?$3,000? in subparagraph (C). FOR IN GENERAL?Paragraph (4) shall not apply to the dollar amounts con- tained in paragraphs and ADJUSTMENT 010 INCREASED 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? such dollar amount, multi- plied by the cost-of-living adjust- ment determined under section for the calendar year in which the tax- able year begins, determined by sub- stituting ?2017? for ?2016? in subpara- graph thereof?. EFFECTIVE amendment made by 24 this section shall apply to taxable years beginning after 25 December 31, 2017. [?le 2 of 5] S.L.C. 46 1 SEC. 11022. INCREASE IN AND MODIFICATION OF CHILD 2 TAX CREDIT. 3 IN 24 is amended by adding 4 at the end the following new subsection: 5 SPECIAL RULES FOR TAXABLE YEARS 2018 6 THROUGH 2025.? 7 IN the case of a taxable 8 year beginning after December 31, 2017, and before 9 January 1, 2026, this section {sgalk (agplied as 10 provided In paragraphs +14: cw V4 11 CREDIT AMOUNT. ?Subsection ll?- 12 applied by substituting 000? for ?$1,000? 3,3? 13 LIMITATION. ?-In lieu of the amount deter- ?04: A5 FW?hd (MW/ea 14 mined under subsection the threshold amount (4) 15 shall be $500, 000. 16 DEFINITION OF QUALIFYING 17 Paragraph (1) of subsection shall be applied by 18 substituting ?18? for 19 PARTIAL CREDIT ALLOWED FOR CERTAIN 20 OTHER . 21 credit determined 22 under subsection (after the application of 23 paragraph shall be increased by $500 for 24 each dependent of the taxpayer (as de?ned in 25 section 152) other than a qualifying child de- [?le 2 0f 5] S.L.C. 47 scribed in subsection (after the application of paragraph EXCEPTION FOR CERTAIN NONCITI- ZENS.?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?. MAXIMUM AMOUNT or REFUNDABLE IN GENERAL?Subsection shall be applied without regard to paragraphs (2) and (5) of this subsection. ADJUSTMENT FOR the ease of a taxable year beginning after 20177 subsection shall be applied as if the $1,000 amount in subsection were increased (but not to exceed the amount under paragraph (2) of this subsection) by an amount equal to? such dollar amount, multiplied by the cost-of?living adjustment de- termined under section for the cal- endar year in which the taxable year be- gins. [?le 2 of 5] S.L.C. OGOOQGM-PUJNHO 21 48 Any increase determined under the preceding sentence shall be rounded to the next highest multiple of $100. EARNED INCOME THRESHOLD FOR RE- FUNDABLE shall be applied by substituting ?$2,500? for SOCIAL SECURITY NUMBER No credit shall be allowed under subsection 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 Secu- rity Administration, but only if the social security number is issued to a citizen of the United States or is issued pursuant to subclause (I) (or that por- tion of subclause that relates to subclause of section of the Social Security Act?. EFFECTIVE amendment made by 22 this section shall apply to taxable years beginning after 23 December 31, 2017. [?le 2 of 5] S.L.C. 49 1 SEC. 11023. INCREASED LINIITATION FOR CERTAIN CHARIGENERAL. subparagraph: TABLE CONTRIBUTIONS. Section 170(b)(1) is amended by redesignating subparagraph (G) as subparagraph (H) and by inserting after subparagraph (F) the following new INCREASED LIMITATION FOR CASH IN the case of any contribution of cash to an organization de- scribed in subparagraph (A), the total amount of such contributions which may be taken into account under subsection for any taxable year beginning after De- cember 31, 2017, and before January 1, 2026, shall not exceed 60 percent of the taxpayer?s contribution base for such year. the aggregate amount of contributions described in clause exceeds the applicable limitation under clause for any taxable year described in such clause, such excess shall be treated (in a ?manner consistent with the rules of subsection as a charitable contribu- tion to which clause applies in each of the 5 succeeding years in order of time. [?le 2 of 5] S.L.C. 50 TOORDINATION WITH SUBPARA- GRAPHS (A) AND IN tions taken into account under this i subparagraph shall not be taken into account under subparagraph (A). LIMITATION For each taxable year described in clause and each taxable year to which any contribution under this subparagraph is carried over under clause subparagraph (A) shall be applied by reducing (but not below zero) the contribution limitation al- lowed for the taxable year under such subparagraph by the aggregate con- tributions allowed under this subpara- graph for such taxable year, and sub- paragraph (B) shall be applied by treating any reference to subpara- graph (A) as a reference to both sub? paragraph (A) and this subpara- graph?. [?le 2 0f 5] S.L.C. 01 EFFECTIVE amendment made by this section shall apply to contributions in taxable years beginning after December 31, 2017. SEC. 11024. INCREASED CONTRIBUTIONS TO ABLE AC- COUNTS. INCREASE IN LIMITATION FOR CONTRIBUTIONS FROM COMPENSATION OF INDIVIDUALS WITII (1) IN GENERAL. Section is amended to read as follows: except in the case of contributions under subsection 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 the amount in effect under sec- tion 2503(b) for the calendar year in which the taxable year begins, plus in the case of any contribution by a designated beneficiary described in paragraph (7) before January 1, 2026, the lesser of?- compensation (as defined by section 219(f)(1)) includible in the [file 2 of 5] S.L.C. 52 designated beneficiary?s gross income for the taxable year, or an amount equal to the poverty line for a' one-person house- hold, as determined for the calendar year preceding the calendar year in which the taxable year begins?. K??wjm? 1 ?97 . (2) 1712mm FOR CONTRIBUTION LIMITA- TION?Paragraph (2) of section 529A(b) is amend- ed by adding at the end the following: designated beneficiary (or a person acting on behalf 0f such beneficiary) shall maintain adequate records for pur? poses of ensuring, and shall be responsible for ensur- ing, that the requirements of subparagraph are met.? (3) ELIGIBLE DESIGNATED Section 529A(b) is amended by adding at the end the following: SPECIAL RULES RELATED TO CONTRIBU- TION purposes of paragraph DESIGNATED des- ignated beneficiary described in this paragraph is an employee (including an employee within [?le 2 of 5] S.L.C. y?A 53 the meaning of section 401(c)) with respect to Whom? no contribution is made for the taxable year to a de?ned contribution plan (Within the meaning of section 414(i)) With respect to which the requirements of sec- tion 401(a) or 403(a) are met, no contribution is made for the taxable year to an annuity contract de- scribed in section 403(b), and no contribution is made for the taxable year to an eligible deferred com- pensation plan described in section 457 POVERTY term ?poverty line? has the meaning given such termby sec- tion 673 of the Community Services Block Grant Act (42 U.S.C. ALLOWANCE OF CREDIT FOR ABLE CONTRIBUTIONS BY ACCOUNT HOLDER. Section 25B(d)(1) is amended by striking ?and? at the end of sub- paragraph by striking the period at the end of sub- parag?raph (C) and inserting and?, and by inserting at the end the following: the amount of contributions made be- fore January 1, 2026, by such individual to the [?le 2 of 5] S.L.C. 54 1 ABLE account (within the meaning of section 529A) of which such individual is the des- ignated beneficiary?. EFFECTIVE amendments made by this section shall apply to taxable years beginning after 2 3 4 5 6 the date of the enactment of this Act. 7 SEC. 11025. ROLLOVERS TO ABLE PROGRAMS FROM 529 8 PROGRAMS. 9 IN of section 529(c)(3)(C) 10 is amended by striking ?or? at the end of subclause (I), 11 by striking the period at the end of subclause (II) and 12 inserting or?, and by adding at the end the following: 13 before January 1, 2026, to 14 an ABLE account (as defined in sec- 15 tion 529A(e)(6)) of the designated 16 beneficiary or a member of the family 17 of the designated beneficiary. 18 Subclause shall not apply to so much 19 of a distribution which, when added to all 20 other contributions made to the ABLE ac- 21 count for the taxable year, exceeds the lim- 22 itation under section 23 EFFECTIVE amendments made by 24 this section shall apply to distributions after the date of 25 the enactment of this Act. [?le 2 of 5] S.L.C. 1 55 SEC. 11026. TREATMENT OF CERTAIN INDIVIDUALS PER- FORMING SERVICES IN THE SINAI PENIN- SULA OF EGYPT. IN purposes of the following pro? visions 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 (relating to special rule where deceased spouse was in missing status). (2) Section 112 (relating to the exclusion of certain combat pay of members of the Armed Forces). (3) Section 692 (relating to income taxes of members of Armed Forces on death). (4) Section 2201 (relating to members of the Armed Forces dying in combat zone or by reason of combat-zone-incurred wounds, etc.). (5) Section 3401(a)(1) (defining wages relating to combat pay for members of the Armed Forces). (6) Section 4253(d) (relating to the taxation of phone service originating from a combat zone from members of the Armed Forces). (7) Section 6013(f)(1) (relating to joint return where individual is in missing status). [?le 2 of 5] S.L.C. v?tr?tv?Av(8) Section 7508 (relating to time for per- forming certain acts postponed by reason of service in combat zone). QUALIFIED HAZARDOUS DUTY pur- poses 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 (re- lating to special pay; duty subject to hostile fire or immi- nent danger), for services performed in such location. Such term includes such location only during the period such entitlement is in effect. APPLICABLE (1) IN as provided in para- graph (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) the case of subsection the applicable period is? [file 2 0f 5] S.L.C. 57 1 (A) the portion of the first taxable year 2 ending after the date of the enactment of this 3 Act which begins on such date, and 4 (B) any subsequent taxable year beginning 5 before January 1, 2026. 6 EFFECTIVE 7 (1) IN as provided in para- 8 graph (2), the provisions of this section shall take 9 effect on June 9, 2015. 10 (2) shall 11 apply to remuneration paid after the date of the en- 12 actment of this Act. 13 SEC. 11027. EXTENSION OF WAIVER OF LIMITATIONS WITH 14 RESPECT TO EXCLUDING FROM GROSS IN- 15 COME AMOUNTS RECEIVED BY WRONGFULLY 16 INCARCERATED INDIVIDUALS. 17 IN 304((1) of the Protecting 18 Americans from Tax Hikes Act of 2015(26 U.S.C. 139F 19 note) is amended by striking ?1-year? and inserting 20 year?. 21 EFFECTIVE amendments made by 22 this section shall take effect on the date of the enactment U) of this Act. [?le 2 of 5] S.L.C. 58 1 SEC. 11028. TEMPORARY REDUCTION IN MEDICAL EXPENSE 2 DEDUCTION FLOOR. 3 IN GENERAL?Subsection of section 213 is 4 amended to read as follows: 5 SPECIAL RULES FOR 2013 THROUGH 2018.? 6 In the case of any taxable year? 7 beginning after December 31, 2012, and 8 ending before January 1, 2017, in the case of a tax- 9 payer if such taxpayer or such taxpayer?s spouse has 10 attained age 65 before the close of such taxable 11 year, and 12 beginning after December 31, 2016, and 13 ending before January 1, 2019, in the case of any 14 taxpayer, 15 subsection shall be applied with respect to a taxpayer 16 by substituting ?7.5 percent? for ?10 percent?.?. 17 MINIMUM TAX PREFERENCE NOT TO 18 Section is amended by adding at the end the 19 following new sentence:?TlIis subparagraph shall not 20 apply to taxable years beginning after December 31, 2016, 21 and ending before January 1, 2019?. 22 EFFECTIVE amendment made by 23 this section shall apply to taxable years beginning after 24 December 31, 2016. [?le 2 of 5] S.L.C. 1 Hr?tr?tr?t ri-?SEC. 11029. RELIEF FOR 2016 DISASTER AREAS. IN purposes of this section, the term ?2016 disaster area? means any area with respect to which a major disaster has been declared by the Presi- dent under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act during calendar year 2016. SPECIAL RULES FOR USE OF RETIREMENT FUNDS WITH RESPECT To AREAS DAMAGED BY 2016 DISASTERS. (1) TAX-EAVORED WITHDRAWALS FROM RE- TIREMENT (A) IN 72(t) of the In- ternal Revenue Code of 1986 shall not apply to any qualified 2016 disaster distribution. (B) AGGREGATE DOLLAR IN 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 treat- ed as qualified 2016 disaster distribu- [?le 2 0f 5] S.L.C. 60 tions received by such individual for all prior taxable years. (ii) TREATMENT OF PLAN DISTRIBU- a distribution to an individual would (Without regard to clause be a qualified 2016 disaster distribution, a plan shall not be treated as Violating any re- quirement of this title merely because the plan treats such distribution as a qualified 2016 disaster distribution, unless the ag- gregate 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. CONTROLLED pur- poses of clause the term ?controlled group? means any group treated as a sin? gle employer under subsection or of section 414 of the Internal Revenue Code of 1986. (C) AMOUNT DISTRIBUTED MAY BE RE- PAID IN individual Who receives a quali?ed 2016 disaster distribu- [?le 2 of 5] S.L.C. 61 tion 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 ag- gregate amount not to exceed the amount of such distribution to an eligible retire- ment plan of which such individual is a beneficiary and to which a rollover con- tribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(c)(16) of the Internal Revenue Code of 1986, as the case may be. (ii) TREATMENT OF REPAYMENTS OF DISTRIBUTIONS FROM ELIGIBLE RETIRE- MENT PLANS OTHER THAN purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to clause 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 contribu- tion, be treated as having received the qualified 2016 disaster distribution in an [?le 2 of 5] S.L.C. 62 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 With- in 60 days of the distribution. TREATMENT OF REPAYMENTS FOR DISTRIBUTIONS FROM purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to clause with respect to a qualified 2016 disaster distribution from an indi- vidual retirement plan (as defined by sec- tion 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 With- in 60 days of the distribution. (D) purposes of this paragraph? [?le 2 of 5] S.L.C. 63 1 QUALIFIED 2016 DISASTER DIS- 2 as provided in sub- 3 paragraph (B), the term ?qualified 2016 4 disaster distribution? means any distribu- 5 tion from an eligible retirement plan made 6 on or after January 1, 2016, and before 7 January 1, 2018, to an individual whose 8 principal place of abode at any time during 9 calendar year 2016 was located in a dis- 10 aster area described in subsection and 11 who has sustained an economic loss by rea- 12 son of the events giving rise to the Presi- 13 dential declaration described in subsection 14 which was applicable to such area. '15 (ii) ELIGIBLE RETIREMENT 16 The term ?eligible retirement plan? shall 17 have the meaning given such term by sec- 18 tion 402(c)(8)(B) of the Internal Revenue 19 Code of 1986. 20 (E) INCOME INCLUSION SPREAD OVER 3- 21 YEAR 22 IN the case of any 23 qualified 2016 disaster distribution, unless 24 the taxpayer elects not to have this sub- 25 paragraph apply for any taxable year, any [?le 2 of 5] S.L.C. AWNHOCOOQQUIAUJNHO 64 amount required to be included in gross in- come for such taxable year shall be so in? cluded ratably over the 3?taxable-year pe- riod beginning with such taxable year. (ii) SPECIAL purposes of clause rules similar to the rules of sub- paragraph (E) of section 408A(d)(3) of the Internal Revenue Code of 1986 shall apply. (F) SPECIAL (1) EXEMPTION or DISTRIBUTIONS FROM TRUSTEE TO TRUSTEE TRANSFER AND WITHHOLDING purposes of sections 401(a)(31), 402(f), and 3405 of the Internal Revenue Code of 1986, quali- fied 2016 disaster distribution shall not be treated as eligible rollover distributions. (ii) QUALIFIED 2016 DISASTER DIS- TRIBUTIONS TREATED AS MEETING PLAN DISTRIBUTION pur- poses of the Internal Revenue Code of 1986, a qualified 2016 disaster distribu- tion shall be treated as meeting the re- quirements of sections 403(b)(11), and [?le 2 0f 5] S.L.C. 65 1 of the Internal Revenue Code 2 of 1986. 3 (2) PROVISIONS RELATING TO PLAN AMEND- 4 5 (A) IN this paragraph ap- 6 plies to any amendment to any plan or annuity 7 contract, such plan or contract shall be treated 8 as being operated in accordance with the terms 9 of the plan during the period described in sub- 10 paragraph 11 (B) AMENDMENTS TO WHICH SUBSECTION 12 13 IN paragraph 14 shall apply to any amendment to any plan 15 or annuity contract which is made?? 16 (I) pursuant to any provision of 17 this section, or pursuant to any regu- 18 lation under any proxision of this sec- 19 tion; and 20 (II) on or before the last day of 21 the first plan year beginning on or 22 after January 1, 2018, or such later 23 date as the Secretary prescribes. 24 In the case of a governmental plan (as de- 25 fined in section 414(d) of the Internal Rev- [?le 2 of 5] p?A (ii) riod. S.L.C. 66 enue Code of 1986), subclause (11) shall be applied by substituting the date Which is 2 years after the date otherwise applied under subclause (II). paragraph shall not apply to any amendment unless?? (1) during the period? (aa) beginning on the date that this section or the regulation described in clause takes effect (or in the case of a plan or contract amendment not required by this section or such regula- tion, the effective date speci?ed by the plan); and (bb) ending on the date de- scribed in clause (or, if earlier, the date the plan or con? tract amendment is adopted), the plan or contract is operated as if such plan or contract amendment were in effect; and (H) such plan or contract amend- ment applies retroactively for such pe- [?le 2 of 5] 67 1 SPECIAL RULES FOR PERSONAL CASUALTY 2 LOSSES RELATED To 2016 MAJOR 3 (1) IN an individual has a net 4 disaster loss for any taxable year beginning after 5 December 31, 2017, and before January 1, 2026? 6 (A) the amount determined under section 7 165(li)(2)(A)(ii) of the Internal Revenue jode 8 of 1986 shall be equal to the sum of? 9 such net disaster loss, and 10 (ii) so much of the excess referred to 11 in the matter preceding clause of sec- 12 tion 165(h)(2)(A) of such Code (reduced 13 by the amount in clause of this Sub- 14 paragraph) as exceeds 10 percent of the 15 adjusted gross income of the individual, 16 (B) section 165(h)(1) of such Code shall 17 be applied by substituting ?$500? for ?$500 18 ($100 for taxable years beginning after Decem- 19 ber 31, 2009)?, 20 (C) the standard deduction determined 21 under section 63(c) of such Code shall be in- 22 creased by the net disaster loss, and 23 (D) section of such Code shall 24 not apply to so much of the standard deduction [?le 2 of 5] r?Av?tv?tr?tr?Av?ar?tr?Ar?t mqom-war?O 19 go 68 as is attributable to the increase under sub- paragraph (C) of this paragraph. (2) NET DISASTER 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 purposes of this para- graph, 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 on or after January 1, 2016, and which are at? tributable to the events giving rise to the Presi- dential declaration described in subsection which was applicable to such area. PART 20 SEC. 11031. TREATMENT OF STUDENT LOANS DISCHARGED 21 22 ON ACCOUNT OF DEATH OR DISABILITY. IN 108(f) is amended by 23 adding at the end the follovw'ng new paragraph: 24 25 DISCHARGEs ON ACCOUNT OF DEATH OR [?the case of an indi- vidual, gross income for any taxable year begin- ning after December 31, 2017, and before an- uary 1, 2026, does not include any amount which (but for this subsection) would be includ? ible in gross income for such taxable year by reasons of the discharge (in whole or in part) of any loan described in subparagraph (B) if such discharge was?? pursuant to subsection or of section 437 of the Higher Education Act of 1965 or the parallel benefit under part of title IV of such Act (relating to the repayment of loan liability), pursuant to section 464(c)(1)(F) of such Act, or otherwise discharged on account of the death or total and permanent dis- ability of the student. LOANS loan is de- scribed in this subparagraph if such loan is? a student loan (as defined in paragraph or a private education loan (as de- fined in section 140(7) of the Consumer [?le 2 of 5] S.L.C. 70 Credit Protection Act (15 U.S.C. EFFECTIVE amendment made by this section shall apply to discharges of indebtedness after December 31, 2017. SEC. 11032. INCREASE DEDUCTION FOR TEACHER EX- PENSES. IN GENERAL.?Subparagraph (D) of section 62(a)(2) is amended by striking ?$250? and inserting ?$250 ($500 in the case of taxable years beginning after December 31, 2017, and before January 1, 2026)?. EFFECTIVE amendment made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 1 033. DEDUCTION TUITION PAYMENTS OR UALIFIED RELIGIOUS INSTRUCT 5 . IN GENE 'vr .?Section 170 is . ended by redes- ignating subsection . subsec and by inserting after subsection (0) the fol 0' new subsection: TREATME OF CERT TUITION PAYMENTS PAID FOR QU IED RELIGIOUS INST - IN purpose of this sec- tio. 25 percent of any amount describeo in para- graph (2) shall be treated as a charitable con 'bu- tion. [?le 2 of 5] 8.11.AMOUNT purposes of paragraph (1), an amount is described in this para- graph if? such amount would be treated as pay- ent of quali?ed tuition and related expenses urposes, of section 25A(f)(1) but for the fact tha such payment is made to a primary or secondary cational organization described in subparagraph (b rather than an eligi? ble educational instit ion (as de?ned in section such payment ade after Decem- ber 31, 2018, and before such organiza percent of the instruction it provide each aca- demic year consists of qualified religi us in- struction, and such organization has provided th taxpayer a statement which contains the infor- i\ mation required by section 605OZ. QUALIFIED RELIGIOUS For purposes of this subsection, the term ?qualified religious instruction? means academic instruction or training regarding a particular religion (including te- nets, doctrines, beliefs, rituals, customs, and rites) of [?not generally offered in public schol cur- ricula, w'ch is provided by a teacher other in- - had signi?cant structor who 's certified as haVi post-secondary Iigious studi . NO DO deduction shall be allowed -r this subsection for the amount of any ense for hich a deduction, credit, or exclusion allowed to th taxpayer under any other pro on of this chapter.?. MATION IN 0 part of chapter A of chapter 61, as amendeo by sections 13306 and 13518, is amended by adding .3 the end the following new section: . 050Z. RETURNS RELATING TO TUIT FOR QUALI- IED RELIGIOUS EDUC ON. IN GENE w. ??Any oucational institution de- scribed in section 170(p) which meets the require- ments of section 170 sha . make a return with respect to any i avidual from whom it eceives tuition payments ano related expenses, in such ma and at such tim as the Secretary may by regulations pr cribe, whic contains: Shy [?le 2 of 5] S.L.C. 22 73 the name, addr ss, and TIN of the indi- vidual With respect to Wh tuition payments and related expenses are receiv d, the net amoun of payments for tuition and related expenses described in section 17 received vvi respect to the individual during the calendar year, a certi?cation that the institution meets- the requirements of section 17 and such other information as the Secretary may prescribe. STATEMENTS TO BE FURNISHED To INDIVID- UALS WITH RESPECT To INFORMATION Is RE- person required to make a return under subsection shall furnish to each individual Whose name is required to be set forth in such return under subpara? graph a written stateiment showing? the name, address, and phone number of 'the information contact of the person required to make such return, and the information described in subsection 23 The written statement required under the preceding sen- 24 tence shall be furnished or or before January 31 of the [?le 2 of 5] S.L.C. 1 year following the calendar year for whi 74 the return 2 under subsection was required (2) CONFORMING AMENDMEN .?The table of sections for subpart of part II of subchapter A of chapter 61, as amended by 13518, is amended by adding at the end the fol- lowing new item: ?See. 6050Z. Returns relating to tuition for ali?cd religious education?. EXEMPTION FROM SU STANTIATION REQUIRE- MENT.?Section (A) amended by adding at the end the following: ?The pre?c ing sentence shall not apply to any amount treated as a haritable contribution by rea- son of subsection . EFFECTIVE DAT (1) IN GENE this section shall. after December 3 2018. pply to taxable years beginning (2) No INF in the amend- ments made by this section shall create any infer- ence regarding he tax treatment of any other pay- ment for religi us education or training made before, on, or after su date. >.?The amendments made by [?le 2 of 5] SEC. 75 1 PART AND EXCLUSIONS SEC. 11041. SUSPENSION OF DEDUCTION FOR PERSONAL EXEMPTIONS. IN GENERAL?Subsection of section 151 is 2 3 4 5 amended? 6 (1) by striking ?In the case of? in paragraph 7 (4) and inserting ?Except as provided in paragraph 8 (5), in the case of?, and 9 (2) by adding at the end the following new 10 paragraph: 11 SPECIAL RULES FOR TAXABLE YEARS 2018 12 THROUGH 2025.?In the case of a taxable year begin- 13 ning after December 31, 2017, and before January 14 1, 2026? 15 EXEMPTION term ?ex- 16 emption amount? means zero. 17 purposes of any 18 other provision of this title, the reduction of the 19 exemption amount to zero under subparagraph 20 (A) shall not be taken into account in deter- 21 mining whether a deduction is allowed or allow- 22 able, or whether a taxpayer is entitled to a de- 23 duction, under this section?. 24 APPLICATION To ESTATES AND 25 tion 642(b)(2)(C) is amended by adding at the end the 26 following new clause: [?le 2 of 5] S.L.C. 76 1 YEARS WHEN PERSONAL EX- 2 EMPTION AMOUNT IS 3 IN the case 4 of any taxable year in which the ex- 5 emption amount under section 151(d) 6 is zero, clause shall be applied by 7 substituting ?$4,150? for ?the exemp- 8 tion amOunt under section 9 INFLATION 10 the case of any calendar 11 year beginning after 2018, the $4,150 12 amount in subparagraph (A) shall be 13 increased by an amount equal to? 14 such dollar amount, 15 multiplied by 16 the cost-of?living ad- 17 justment determined under sec- 18 tion for the calendar year 19 in Which the taxable year begins, 20 determined by substituting 21 ?2017? for ?2016? in subpara- 22 graph thereof. 23 If any increase determined under the 24 preceding sentence is not a multiple of [?le 2 of 5] S.L.C. 1 2 3 77 $100, such increase shall be rounded to the next lowest multiple of EXCEPTION FOR WAGE WITHHOLDING 4 Section 3402(a) is amended by adding at the end the fol- 5 lowing new paragraphYEARS WHEN PERSONAL EXEMPTION IS IN the case of any taxable year in which the exemption amount under section 151(d) is zero, paragraph (2) shall be applied by substituting ?$4,150? for ?the amount of one personal exemption provided in section INFLATION the case of any calendar year beginning after 2018, the $4,150 amount in subparagraph (A) shall be increased by an amount equal to? such dollar amount, multiplied by the cost-of-liw'ng adjustment de? termined under section for the cal- endar year in which the taxable year be- gins, determined by substituting ?2017? for ?2016? in subparagraph thereof. If any increase determined under the preceding sentence is not a multiple of $100, such in- [?le 2 of 5] S.L.C. EMPT FROM LEVY. 78 crease shall be rounded to the next lowest mul- tiple of EXCEPTION FOR DETERMINING PROPERTY Ex- Section 6334(d) is amended by add- ing at the end the following new paragraph: YEARS WHEN PERSONAL EXEMPTION IS 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? the sum of the amount deter- mined under subparagraph (B) and the standard deduction, divided by 52. AMOUNT pur- poses Of subparagraph (A), the amount deter- mined under this subparagraph is $4,150 multi- plied by the number of the taxpayer?s depend- ents for the taxable year in which the levy oc- curs. INFLATION the case Of any taxable year beginning after 2018, [?le 2 of 5] S.L.C. 24 79 the $4,150 amount in subparagraph (B) shall be increased by an amount equal to? such dollar amount, multiplied by the cost-of-living adjustment de? termined under section for the cal- endar year in which the taxable year be- gins, determined by substituting ?2017? for ?2016? in subparagraph thereof. If any increase determined under the preceding sentence is not a multiple of $100, such in- crease shall be rounded to the next lowest mul- tiple of $100. VERIFIED 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 mar- ried individual filing a separate return with no dependents?. PERSONS REQUIRED TO MAKE RETURNS OF IN- COME?Section 6012 is amended by adding at the end the following new subsection: SPECIAL RULE FOR TAXABLE YEARS 2018 25 THROUGH 2025.?In the case of a taxable year beginning [?le 2 of 5] S.L.C. 80 after December 31, 2017, and before January 1, 2026, subsection 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 sub- title A, except that a return shall not be required of? an individual who is not married (deter- mined 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 an individual entitled to make a joint re- turn if? 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, such individual and such individual?s spouse have the same household as their home at the close of the taxable year, such individual?s spouse does not make a separate return, and [?le 2 of 5] S.L.C. 81 1 neither such individual nor such indi- 2 vidual?s spouse is an individual described in sec- 3 tion 63(c)(5) who has income (other than 4 earned income) in excess of the amount in cf- 5 feet under section 6 EFFECTIVE amendments made by 7 this section shall apply to taxable years beginning after 8 December 31, 2017. 9 SEC. 11042. SUSPENSION OF DEDUCTION FOR STATE AND 10 LOCAL, ETC. TAXES. 11 IN GENERAL?Subsection of section 164 is 12 amended by adding at the end the following new para- 13 graph: 14 SUSPENSION 014? INDIVIDUAL DEDUCTIONS 15 FOR TAXABLE YEARS 2018 THROUGH 2025.?In the 16 case of an indiw'dual and a taxable year beginning 17 after December 31, 2017, and before January 1, 18 2026? 19 foreign real property taxes (other 20 than taxes which are paid or accrued in car- 21 rying on a trade or business or an activity de- 22 scribed in section 212) shall not be taken into 23 account under subsection 24 the aggregate amount of taxes (other 25 than taxes which are paid or accrued in car- [?le 2 of 5] go 82 rying on a. trade or business or an activity de- scribed in section 212) taken into account under subsection for any taxable year shall not exceed $10,000 ($5,000 in the case of a married individual filing a separate return), subsection shall only apply to taxes which are paid or accrued in carrying on a trade or business or an activity described in section 212, subsection shall not apply to State and local taxes, and paragraph (5) shall not apply?. EFFECTIVE amendment made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 11043. SUSPENSION OF DEDUCTION FOR HOME EQ- UITY INTEREST. IN 163(11)(3)(A)(ii) is amended by inserting ?in the case of taxable years begin- ning before January 1, 2018, or after December 31, 2025,? before ?home equity indebtedness?. EFFECTIVE amendment made by this section shall apply to taxable years ending after De- cember 31,2017. [?le 2 of 5] S.L.C. 1 83 SEC. 11044. MODIFICATION OF DEDUCTION FOR PERSONAL CASUALTY LOSSES. IN GENERAL?Subsection of section 165 is amended by adding at the end the following new para- graph: LIMITATION FOR TAXABLE YEARS 2018 THROUGH 2025.?In the case of an indiw'dual, any loss described in subsection which (but for this paragraph) would be deductible in a taxable year beginning after December 31, 2017, and before January 1, 2026, shall be allowed only to the extent it is attributable to a Federally declared disaster (as de?ned in subsection The preceding sentence shall not apply to any deduction under section 172 which is carried to such a taxable year from a tax- able year beginning before January 1, 2018.?. 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. IN 67 is amended by adding at the end the following new subsection: SUSPENSION FOR TAXABLE YEARs 2018 THROUGH 2025.?Notwithstanding subsection no miscellaneous itemized deduction shall be allowed for any [file 2 of 5] 8.11.taxable year beginning after December 31, 2017, and be- fore January 1, 2026.?. 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. IN GENERAL. Section 68 is amended by adding at the end the following new subsection: SECTION NOT To section shall not apply to any taxable year begin?iing after December 31, 2017, and before January 1, 2025.?. EFFECTIVE DATE. The amendments made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 11047. MODIFICATION OF EXCLUSION OF GAIN FROM SALE OF PRINCIPAL RESIDENCE. IN GENERAL. Section 121 is amended by adding at the end the following new subsection: SPECIAL RULES FOR SALES or. EXCHANGES IN TAXABLE YEARS 2018 THROUGH 2025. IN HENERAL. In applying this section with respect to sales or exchanges after December 31, 2017, and before January 1, 2026? [?le 2 of 5] S.L.C. 85 ?8?year? shall be substituted for year? each place it appears in subsections and and para- graphs (7), (9), (10), and (12) of subsection ?5 years? shall be substituted for ?2 years? each place it appears in subsections and and ?5-year? shall be substituted for year? in subsection EXCEPTION FOR BINDING Paragraph (1) shall not apply to any sale or ex? change with respect to which there was a written binding contract in effect before January 1, 2018, and at all times thereafter before the sale or eX- changefh EFFECTIVE DATE. The amendment made by this section shall apply to sales and exchanges after De- cember 31, 2017. SEC. 11048. SUSPENSION OF EXCLUSION FOR QUALIFIED BICYCLE COMMUTING REIMBURSEMENT. IN GENERAL. Section 132(f) is amended by adding at the end the following new paragraph: [?le 2 of 5] S.L.C. 86 SUSPENSION OF QUALIFIED BICYCLE REIMBURSEMENT Shall not apply to any taxable year beginning after December 31, 2017, and before January 1, 2026.?. EFFECTIVE amendment made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 11049. SUSPENSION OF EXCLUSION FOR QUALIFIED MOVING EXPENSE REIMBURSEMENT. IN 132(g) is amended (1) by striking ?For purposes of this section, the term? and inserting ?For purposes of this sec- tion? IN term?, and (2) by adding at the end the following new paragraph: SUSPENSION FOR TAXABLE YEARS 2018 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 in- cident to a permanent change of station, subsection 6) shall not apply to any taxable year beginning after December 31, 2017, and before January 1, 2026.?. [?le 2 of 5] S.L.C. 87 EFFECTIVE DATE. The amendments made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 11050. SUSPENSION OF DEDUCTION FOR MOVING EX- PENSES. IN GENERAL. Section 217 is amended by adding at the end the following new subsection: SUSPENSION OF DEDUCTION FOR TAXABLE YEARS 2018 THROUGH 2025.?Except in the case of an individual to whom subsection applies, this section shall not apply to any taxable year beginning after Decem- ber 31, 2017, and before January 1, 2026.?. EFFECTIVE amendment made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 11051. LIMITATION ON WAGERING LOSSES. IN 165(d) is amended by adding at the end the following: ?For purposes of the pre- ceding 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?. [file 2 of 5] S.L.C. 88 EFFECTIVE DATE. The amendment made by this section shall apply to taxable years beginning after December 31, 2017. PART IN ESTATE AND GIFT TAX EXEMPTION SEC. 11061. INCREASE IN ESTATE AND GIFT TAX EXEMP- TION. IN 2010(c)(3) is amended by adding at the end the following new subparagraph: INCREASE IN BASIC EXCLUSION 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 of section 2001 is amended to read as follows: MODIFICATIONS TO TAX PAYABLE. MODIFICATIONS To GIFT TAX PAYABLE To REFLECT DIFFERENT TAX purposes of applying subsection with respect to 1 or more gifts, the rates of taX under subsection 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? [file 2 of 5] S.L.C. 89 the tax imposed by chapter 12 with respect to such gifts, and the credit allowed against such tax under section 2505, including in computing? the applicable credit amount under section 2505(a)(1), and the sum of the amounts allowed as a credit for all preceding periods under section 2505(a)(2). MODIFICATIONS TO ESTATE TAX PAYABLE TO REFLECT DIFFERENT BASIC EXCLUSION AMOUNTS. The Secretary shall prescribe such regu- lations as may be necessary or appropriate to carry out this section with respect to any difference be- tween? the basic exclusion amount under sec- tion 2010(c)(3) applicable at the time of the de- cedent?s death, and the basic exclusion amount under such section applicable with respect to any gifts made by the decedent?. EFFECTIVE amendments made by this section shall apply to estates of decedents dying and gifts made after December 31, 2017. [?le 2 of 5] S.L.PART RIGHTS AND TAX ADMINISTRATION SEC. 11071. EXTENSION OF TIME LIMIT FOR CONTESTING IRS LEVY. EXTENSION OF TIME FOR RETURN OF PROPERTY SUBJECT TO LEVY?Subsection of section 6343 is amended by striking ?9 months? and inserting ?2 years?. PERIOD OF LIMITATION ON SUITS. Subsection (0) 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?. EFFECTIVE amendments made by this section shall apply to? (1) lew'es 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 jode of 1986 (without re- gard to this section) as of such date. SEC. 11072. MODIFICATION OF USER FEE REQUIREMENTS FOR IN STALLMENT AGREEMENTS. IN 6159 is amended by re- designating subsection as subsection and by insert- ing after subsection the following new subsection: {a [?le 2 of 5] 91 1 INSTALLMENT AGREEMENT 2 LIMITATION ON FEE 3 amount of any fee imposed on an installment agree- 4 ment under this section may not exceed the amount 5 of such fee as in effect on the date of the enactment 6 of this subsection. 7 WAIVER OR the 8 case of any taxpayer with an adjusted gross income, 9 as determined for the most recent year for which 10 such information is available, which does not exceed 11 250 percent of the applicable poverty level (as deter- 12 mined by the Secretary)? 13 if the taxpayer has agreed to make 14 payments under the installment agreement by 15 electronic payment through a debit instrument, 16 no fee shall be imposed on an installment agree? 17 ment under this section, and 18 if the taxpayer is unable to make 19 payments under the installment agreement by 20 electronic payment through a debit instrument, 21 the Secretary shall, upon completion of the ill- 22 stallment agreement, pay the taxpayer an 23 amount equal to any such fees imposed?. 24 EFFECTIVE amendments made by 25 this section shall apply to agreements entered into on or [?le 2 of 5] SEC. 92 1 after the date which is 60 days after the date of the enact- 2 ment of this Act. 3 SEC. 11073. FEES RELATING TO AWARDS TO 4 WHISTLEBLOWERS. 5 1N GENERAL?Paragraph (21) of section 62(a) 6 is amended to read as follows: 7 RELATING To AWARDS 8 To 9 IN GENERAL. Any deduction allow- 10 able under this chapter for attorney fees and 11 court costs paid by, or on behalf of, the tax- 12 payer in connection with any award under? 13 section 7623(b), or 14 any action brought under? 15 section 21F of the Securities 16 Exchange Act of 1934 (15 U.S.C. 17 7811-6), 18 a State false claims act, in- 19 cluding a State false claims act with 20 qui tam provisions, or 21 ?(111) section 23 of the Com- 22 modity Exchange Act (7 .S.C. 26). 23 MAY NOT EXCEED 24 paragraph (A) shall not apply to any deduction 25 in excess of the amount includible in the tax- [?le 2 of 5] S.L.C. term ?proceeds? includes 93 payer?s gross income for the taxable year on ac- count of such award?. EFFECTIVE amendment made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 11074. CLARIFICATION OF WHISTLEBLOWER AWARDS. DEFINITION OF (1) IN 7623 is amended by adding at the end the following new subsection: purposes of this section, the penalties, interest, additions to tax, and additional amounts provided under the internal rev- enue laws, and any proceeds arising from laws for which the Internal Revenue Service is authorized to admin- ister, enforce, or investigate, including? criminal fines and civil forfeitures, and violations of reporting require- ments.?. (2) (1) and of section 7623(b) are each amended by striking ?collected proceeds (including penalties, interest, additions to tax, and additional amounts) [?le 2 of 5] S.L.C. 94 resulting from the action? and inserting ?proceeds collected as a result of the action?. AMOUNT OF PROCEEDS DETERMINED WITHOUT REGARD To (1) and of section 7623(b) are each amended by inserting ?(deter- mined Without regard to whether such proceeds are avail- able to the Secretary)? after ?in response to such action?. (0) DISPUTED 7623(b)(5)(B) is amended by striking ?tax, penalties, in? terest, additions to tax, and additional amounts? and in- serting ?proceeds?. EFFECTIVE amendments made by this section shall apply to information provided before, on, or after the date of the enactment of this Act with respect to which a final determination for an award has not been made before such date of enactment. PART MANDATE SEC. 11081. ELIMINATION OF SHARED RESPONSIBILITY PAYMENT FOR INDIVIDUALS FAILING TO MAINTAIN MININIUM ESSENTIAL COVERAGE. IN GENERAL. Section 5000A(c) is amended (1) in paragraph by striking ?2.5 percent? and inserting ?Zero percent?, and (2) in paragraph (3) [?le 2 of 5] S.L.(striking ?$695? in subparagraph (A) and inserting and (B) by striking subparagraph (D). EFFECTIVE amendments made by this section shall apply to months beginning after Decem- ber 31, 2018. Subtitle B?Alternative Minimum Tax SEC. 12001. INCREASED EXEMPTION FOR INDIVIDUALS. INCREASED 55(d) is amended by adding at the end the following new para? graph: SPECIAL RULE FOR TAXABLE YEARS BE- GINNING AFTER 2017 AND BEFORE 2026.? IN the ease of any I taxable year beginning after December 31, 2017, and before January 1, 2026? paragraph shall be applied?? by substituting ?$109,400? for ?$78,750? in subparagraph (A), and I by substituting ?$70,300? for ?$50,600? in subparagraph (B), and paragraph (3) shall be applied?? [?le 2 of 5] S.L.C. 96 by substituting ?$208,400? for ?$150,000? in subparagraph (A), by substituting ?$156,300? for ?$112,500? in subparagraph (B), and ?(111) in the case of a taxpayer described in paragraph with- out regard to the substitution under subclause (I). INFLATION 1N 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? such dollar amount, multi- plied by the cost-of?living adjust- ment determined under section for the calendar year in which the tax- able year begins, determined by sub- stituting ?calendar year 2017? for ?cal- endar year 2016? in subparagraph (A) (ii) thereof. [file 3 of 5] S.L.C. 97 AMOUNTS amounts described in this clause are the $109,400 amount in subparagraph the $70,300 amount in subpara- graph the $208,400 amount in subparagraph and the $156,300 amount in subparagraph increased amount determined under clause shall be rounded to the nearest multiple of EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2017. Subtitle C?Business-related Provisions PART PROVISIONS SEC. 13001. 20-PERCENT CORPORATE TAX RATE. IN of section 11 is amended to read as follows: AMOUNT OF amount of the tax im- posed by subsection shall be 20 percent of taxable in- come?. CONFORMING [file 3 of 5] S.L.(1) The following sections are each amended by striking ?section and inserting ?section (A) Section 2800(c)(3)(B)(ii)(II). (B) Paragraphs and of section 860E(e). (C) Section 7874(e)(1)(B). Part I of subchapter of chapter 1 is amended by striking section 1201 (and by striking the item relating to such section in the table of sec- tions for such part). (B) Section 12 is amended by striking para- graphs (4) and (6), and by redesignating paragraph (5) as paragraph (4). (C) Section 458A(c)(3) is amended by striking ?or 1201 (whichever is appropriate)?. (D) Section 527 is amended? by striking paragraph (2), and (ii) by striking all that precedes ?is hereby imposed? and inserting: TAX tax?. (E) Sections 594(a) is amended by striking ?taxes imposed by section 11 or 1201(a)? and in- serting ?tax imposed by section 11?. [file 3 of 5] S.L.C. 99 (F) Section 691(c)(4) is amended by striking ?1201/2 (G) Section 801(a) is amended?? by striking paragraph (2), and (ii) by striking all that precedes ?is hereby imposed? and inserting: TAX tax?. (H) Section 831(e) is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively. (1) Sections 832(c)(5) and 834(b)(1)(D) are each amended by striking ?sec. 1201 and fol- lowing,?. (J) Section 852(b)(3)(A) is amended by strik- ing ?section 1201(a)? and inserting ?section (K) Section 857(b)(3) is amended? by striking subparagraph (A) and re- designating subparagraphs (B) through (F) as subparagraphs (A) through (E), respectively, (ii) in subparagraph (C), as so redesig- nated? (I) by striking ?subparagraph in clause thereof and inserting ?para- graph [?le 3 of 5] S.L.C. 100 1 (II) by striking ?the tax imposed by 2 subparagraph in clauses (ii) and 3 (iv) thereof and inserting ?the tax imposed 4 by paragraph (1) on undistributed capital 5 gain?, 6 in subparagraph (E), as so redesig- 7 nated, by striking ?subparagraph (B) or 8 and inserting ?subparagraph (A) or and 9 (iv) by adding at the end the following new 10 subparagraph: 11 UNDISTRIBUTED CAPITAL 12 Fer purposes of this paragraph, the term ?un- 13 distributed capital gain? means the excess of the 14 net capital gain over the deduction for divi- 15 dends paid (as defined in section 561) deter- 16 mined with reference to capital gain dividends 17 only?. 18 (L) Section 882(a)( 1) is amended by striking 19 55, or 1201(a)? and inserting ?or 55?. 20 (M) Section 904(b) is amended? 21 by striking ?or 1201(3)? in paragraph 22 (W0), 23 (ii) by striking paragraph and in- 24 serting the following: [?le 3 of 5] S.L.C. 101 CAPITAL GAIN RATE DIFFEREN- is a capital gain rate differential for any year if subsection of section 1 ap- plies to such taxable year?, and by striking? paragraph and in- serting the following: RATE DIFFERENTIAL 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? the excess the highest rate of tax set forth in subsection or of section 1 (Whichever applies), over the alternative rate of tax determined under section bears to that rate referred to in subclause (N) Section 1374(b) is amended by striking paragraph (4). [?le 3 of 5] S.L.C. 102 (0) Section 1381(b) is amended by striking ?taxes imposed by section 11 or 1201? and inserting ?tax imposed by section 11?. Sections 642 5 1 (A) and 6655(g)(1)(A)(i) are each amended by striking ?or (Q) Section 7 518(g)(6)(A) is amended by strik- ing ?or Section 1445(e)(1) is amended?? by striking ?35 percent? and inserting ?the highest rate of tax in effect for the taxable year under section 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 high- est rate of tax in effect for the taxable year under section 11(b) multiplied by the amount?. (C) Section 1445(e)(6) is amended? by striking ?35 percent? and inserting ?the highest rate of tax in effect for the taxable year under section and (ii) by striking ?of the amount? and in- serting ?multiplied by the amount?. [?le 3 of 5] g0 103 (D) Section 1446(b)(2)(B) is amended by strik- ing ?section and inserting ?section (4) Section 852(b)(1) is amended by striking the last sentence. Part I of subchapter of chapter 5 is amended by striking section 1551 (and by striking the item relating to such section in the table of sec? tions for such part). (B) Section 535(c)(5) is amended to read as follows: CROSS limitation on credit provided in paragraph (2) or (3) in the case of certain controlled corporations, see section 1561.?. Section 1561(a) is amended? by striking paragraph (1) and redesig- nating paragraphs (2) and (3) as paragraphs (1) and (2), respectively, (ii) by striking ?amounts specified in para? graph (1) and the amount specified in para- graph and inserting ?the amount specified in paragraph (2 [?le 3 of 5] S.L.C. 104 by striking ?The amounts specified in 77 paragraph (2) and inserting ?The amounts specified in paragraph (iV) by striking the third sentence in the flush language, and and (V) by striking ?under paragraph (8) inserting ?under paragraph (B) The ?rst sentence of section 1561(b) is amended to read as follows: ?If a corporation has a short taxable year which does not include a Decem- ber 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 cor- poration for such taxable year shall be the amount speci?ed in subsection divided by the number of corporations which are component members of such group on the last day of such taxable year.? (7) Section 7518(g)(6)(A) is amended? (A) by striking ?With respect to the por- tion? and inserting ?In the case of a taxpayer other than a corporation, With respect to the portion?, and [?le 3 of 5] S.L.C. 105 (B) by striking ?(34 percent in the case of a corporation)?. EFFECTIVE (1) IN as otherwise pro- vided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2018. (2) amendments made by subsection shall apply to distributions made after December 31, 2018. (3) CERTAIN amendments made by subsection shall apply to transfers made after December 31, 2018. NORMALIZATION (1) IN 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 re- sults in its regulated books of account, reduces the excess tax reserve more rapidly or to a greater ex- tent than such reserve would be reduced under the average rate assumption method. [?le 3 of 5] S.L.C. 106 (2) ALTERNATIVE METHOD FOR CERTAIN TAX- 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 regu- latory agency to compute depreciation for public utility property 011 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 as- sumption method, the taxpayer Will be treated as using a normalization method of accounting if, with respect to such juris- diction, the taxpayer uses the alternative method for public utility property that is subject to the regu- latory authority of that jurisdiction. (3) purposes of this sub- section?? (A) Excess TAX term ?excess tax reserve? means the excess of? the reserve for deferred taxes (as described in section l68(i)(9)(A)(ii) of the Internal Revenue Code of 1986) as deter? mined under the Internal Revenue Code of [file 3 of 5] S.L.C. 107 1986 as in effect on the day before the date of the enactment of this Act, 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 proxided in this Act were in effect for all prior peri- ods. (B) AVERAGE RATE ASSUMPTION METH- average rate assumption method is the method under which the excess in the re? serve for deferred taxes is reduced over the re- maining lives of the property as used in its reg- ulated books of account which gave rise to the reserve for deferred taxes. Under such method, if timing differences for the property reverse, the amount of the adjustment to the reserve for the deferred taxes is calculated by multi- plying? the ratio of the aggregate deferred taxes for the property to the aggregate timing differences for the property as of the beginning of the period in question, by (ii) the amount of the timing dif- ferences which reverse during such period. [?le 3 of 5] S.L.C. 108 1 (C) ALTERNATIVE ?alter- 2 native method? is the method in which the tax- 3 payer? 4 computes the excess tax reserve on 5 all public utility property included in the 6 plant account on the basis of the weighted 7 average life or composite rate used to com- 8 pute depreciation for regulatory purposes, 9 and 10 (ii) reduces the excess tax reserve rat- 11 ably over the remaining regulatory life of 12 the property. 13 (4) TAX INCREASED FOR NORMALIZATION mo- 14 for any taxable year ending after the 15 date of the enactment of this Act, the taxpayer does 16 not use a normalization method of accounting, the 17 taxpayer?s tax for the taxable year shall be increased 18 by the amount by which it reduces its excess tax re- 19 serve more rapidly than permitted under a normal- 20 ization method of accounting. 21 SEC. 13002. REDUCTION IN DIVIDEND RECEIVED DEDUC- 22 TIONS TO REFLECT LOWER CORPORATE IN- 23 COME RATES. 24 DIVIDENDs RECEIVED BY [?le 3 of 5] S.L.C. 109 1 (1) IN is amend- 2 ed by striking ?70 percent? and inserting ?50 per- 3 cent?. 4 (2) DIVIDENDS ERCM OWNED COR- 5 243(c)(1) is amended? 6 (A) by striking ?80 percent? and inserting 7 ?65 percent?, and 8 (B) by striking ?7 0 percent? and inserting 9 ?50 percent?. 10 (3) CCNECRMING heading 11 for section 243(c) is amended by striking 12 TICN CE 80-PERCENT DIVIDEND RECEIVED DEDUC- 13 and inserting 14 DIVIDENDs RECEIVED FROM FSC. Section 15 245(c)(1)(B) is amended? 16 (1) by striking ?70 percent? and inserting ?50 17 percent?, and 18 (2) by striking ?80 percent? and inserting ?65 19 percent?. 20 LIMITATION ON AGGREGATE AMOUNT OF DEDUC- 21 TIONS. Section 246(b)(3) is amended? I 22 (1) by striking ?80 percent? in subparagraph 23 (A) and inserting ?65 percent?, and 24 (2) by striking ?70 percent? in subparagraph 25 (B) and inserting ?50 percent?. [file 3 of 5] S.L.110 REDUCTION IN DEDUCTION WHERE PORTFOLIO STOCK Is 246A(a)(1) is amended? (1) by striking ?70 percent? and inserting ?50 percent?, and (2) by striking ?80 percent? and inserting ?65 percent?. INCOME FROM SOURCES WITHIN THE UNITED STATES. Section 861(a)(2) is amended? (1) by striking ?100/70th? and inserting ?100/ 50th? in subparagraph (B), and (2) in the flush sentence at the end? (A) by striking ?100/80th? and inserting ?100/65th?, and (B) by striking ?100/70th? and inserting ?100/50th?. EFFECTIVE amendments made by this section shall apply tO taxable years beginning after December 31, 2018. PART BUSINESS REFORMS SEC. 13101. MODIFICATIONS OF RULES FOR EXPENSING DE- PRECIABLE BUSINESS ASSETS. INCREASE IN [?le 3 of 5] S.L.C. 111 (1) DOLLAR LIMITATION. Section 17 is amended by striking ?$500,000? and inserting (2) REDUCTION IN LIMITATION. Section 179(b)(2) is amended by striking ?$2,000,000? and inserting (8) INFLATION (A) IN GENERAL.?Subparagraph (A) of section 179(b)(6), as amended by section 11002(d), is amended? by striking ?2015? and inserting ?2018?,and (ii) in clause by striking ?cal? endar year 2014? and inserting ?calendar year 2017?. (B) SPORT UTILITY VEHICLES. Section 179(b)(6) is amended? in subparagraph (A), by striking ?paragraphs (1) and and inserting ?paragraphs (1), (2), and and (ii) in subparagraph (B), by inserting ?($100 in the case of any increase in the amount under paragraph after ?sioixxyt [file 3 of 5] S.L.112 SECTION 179 PROPERTY TO INCLUDE QUALIFIED REAL (1) IN GENERAL.?Subparagraph (B) of section 179(d)(1) is amended to read as follows: which is? section 1245 property (as defined in section 1245(a)(3)), or at the election of the taxpayer, qualified real property (as defined in sub- section and?. (2) QUALIFIED REAL PROPERTY Subsection of section 179 is amended to read as follows: QUALIFIED REAL purposes of this section, the term ?qualified real property? means? any qualified improvement property de- scribed in section 168(e)(6), and any of the following improvements to non- residential real property placed in service after the date such property was first placed in service: Roofs. Heating, ventilation, and air-condi- tioning property. Fire protection and alarm systems. Security systems?. [?le 3 of 5] S.L.C. 113 REPEAL OF EXCLUSION FOR CERTAIN PROP- last sentence of section 179(d)(1) is amended by inserting ?(other than paragraph (2) thereof)? after ?section EFFECTIVE amendments made by this section shall apply to property placed in service in taxable years beginning after December 31, 2017. SEC. 13102. MODIFICATIONS OF GROSS RECEIPTS TEST FOR USE OF CASH METHOD OF ACCOUNTING BY CORPORATIONS AND PARTNERSHIPS. MODIFICATIONS OF GRoss RECEIPTS (1) IN much of section 448(c) as precedes paragraph (2) is amended to read as fol- lows: GRoss RECEIPTS IN corporation or partner- ship meets the gross receipts test of' this subsection for any taxable year if the average annual gross re- ceipts of such entity for the 3-taxable?year period ending with the taxable year which precedes such taxable year does not exceed the applicable dollar limit?. (2) APPLICABLE DOLLAR LIMIT?Subsection of section 448 is amended by adding at the end the following new paragraph: [file 3 0f 5] S.L.C. Paragraph (7) of section 448(d) is amended 114 APPLICABLE DOLLAR IN applicable dollar limit is $15,000,000. FOR the case of any taxable year beginning after De- cember 31, 2018, the $15,000,000 amount under subparagraph (A) shall be increased by an amount equal to? such dollar amount, multiplied by the cost-of?living adjustment de- termined under section for the cal- endar year in which the taxable year be- gins, by substituting ?calendar year 2017? for ?calendar year 2016? in subparagraph thereof. If any amount as increased under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the next lowest multiple of (3) CHANGE IN METHOD OF (A) by striking ?In the case of? and all that follows up to subparagraph (A) and insert- ing: ?If a taxpayer changes its method of ac- counting because the taxpayer is prohibited [file 3 of 5] S.L.C. 115 from using the cash receipts and disbursement method of accounting by reason of subsection or is no longer prohibited from using such method by reason of such subsection??, and (B) by inserting ?anc at the end of sub- paragraph (A), by striking and? at the end of subparagraph (B) and inserting a period, and by striking subparagraph (C). (4) CONFORMING (3) of section 448(b) is amended to read as follows: ENTITIEs SATISFYING GROSS RECEIPTS TEST.?Paragraphs (1) and (2) of subsection shall not apply to any corporation or partnership for any taxable year if such entity meets the gross re- ceipts test of subsection for the taxable year?. (In) APPLICATION OF MODIFICATIONS TO FARMING (1) IN GENERAL?Paragraph 1) of section 447 is amended to read as follows: IN corporation meets the re- quirements of this subsection for any taxable year With respect to its gross receipts if the corporation meets the gross receipts test of section 448(0) for the taxable year.?. [?le 3 of 5] S.L.116 (2) FAMILY (2) of section 447((1) is amended? (A) by striking subparagraph (A) and in- serting the following: IN the case of a fam- ily corporation, in applying section 448(c) for purposes of paragraph paragraph (1) of section 448(c) shall be applied by substituting the appli- cable family corporation limit for the appli- cable dollar limit, and the rules of subparagraph (B) shall apply in computing gross receipts?, (B) in subparagraph by striking ?the last sentence Of paragraph and insert? ing ?paragraph (2) of section and (C) by adding at the end the following new subparagraph: APPLICABLE FAMILY CORPORATION IN applicable family corporation limit is $25,000,000. ADJUSTMENT FOR In the case of any taxable year beginning after December 31, 2018, the $25,000,000 [?le 3 of 5] g: 117 amount under clause shall be increased by an amount equal to? such dollar amount, multi- plied by the cost-of?living adjust- ment determined under section for the calendar year in which the tax- able year begins, by substituting ?cal? endar year 2017? for ?calendar year 2016? in subparagraph thereof. If any amount as increased under the pre- ceding sentence is not a multiple of $1,000, such amount shall be rounded to the next lowest multiple of (3) EXCEPTION FOR CERTAIN CORPORA- TIONS?Subsection of section 447 is amended by inserting ?for any taxable year? after ?not being a corporation?. (4) CHANGE IN METHOD or ACCOUNTING. Section 447(f) is amended? (A) by striking ?In the case of? and all that follows up to paragraph (1) and inserting the following: ?If a taxpayer changes its method of accounting because the taxpayer is required to use an accrual method of accounting by rea- [?le 3 of 5] S.L.C. 00 118 son of subsection or is no longer required to use such method by reason Of such subsection? and (B) by striking paragraph (2) and insert- ing the following: such change shall be treated as initiated by the taxpayer, and?. EFFECTIVE amendments made by this section shall apply to taxable years beginning after 10 December 31, 2017SEC. 13103. CLARIFICATION OF INVENTORY ACCOUNTING RULES FOR SMALL BUSINESSES. CLARIFICATION OF INVENTORY (1) IN GENE1w1.?Secti0n 471 is amended by redesignating subsection as subsection and by inserting after subsection the follovm?ng new sub- section: SMALL BUSINESS TAXPAYERS NOT REQUIRED TO USE IN qualified taxpayer shall not be required to use inventories under this section for a taxable year. TREATMENT OF TAXPAYERS NOT USING quali?ed taxpayer who is not re- quired under this subsection to use inventories with [file 3 0f 5] {n 119 respect to any property for a taxable year beginning after December 31, 2017, may treat such property?? as a non-incidental material or sup- ply, or in a manner which conforms to the taxpayer?s method for accounting for such prop- erty in? an applicable financial statement (as defined in section or in the case of a taxpayer that does not have an applicable financial state? ment, their books and records used for purposes of determining tax imposed by this title. purposes of this subsection, the term ?qualified taxpayer? means, with respect to any taxable year, a taxpayer who meets the gross receipts test of section 448(c) for the taxable year (or, in the case of a sole proprietor- ship, who would meet such test if such proprietor- ship were a corporation). Such term shall not in- clude a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448 a) (3 [?le 3 of 5] S.L.C. r?lv?th?ir?tr?tr?Ir?Ar?Ir?ar?t 20 120 COORDINATION WITH SECTION 481.?If a taxpayer changes its method of accounting because the taxpayer is not required to use inventories by reason Of paragraph (1) or is required to use inven- tories because such paragraph no longer applies to the taxpayer such change shall be treated as initi- ated by the taxpayer, and such change shall be treated as made with the consent Of the Secretary?. (2) of section 263A is amended by adding at the end the following new paragraph: EXCLUSION FROM INVENTORY Nothing in this section shall require the use Of in- ventories for any taxable year by a qualified tax- payer (Within the meaning of section 471(c)(3)) Who is not required tO use inventories under section 471 for such taxable year?. EFFECTIVE amendments made by 21 this section shall apply to taxable years beginning after 22 December 31, 2017. [file 3 of 5] S.L.C. 121 1 SEC. 13104. MODIFICATION OF RULES FOR UNIFORM CAP- 2 ITALIZATION OF CERTAIN EXPENSES. 3 IN 263A(b) is amended by 4 striking all that follows paragraph (1) and inserting the 5 following new paragraphs: 6 PROPERTY ACQUIRED FOR 7 or personal property described in section 1221(a)(1) 8 which is acquired by the taxpayer for resale. 9 EXCEPTION FOR SMALL 10 This section shall not apply to any taxpayer who 11 meets the gross receipts test under section 448(c) 12 for the taxable year (or, in the case Of' a sole propri- 13 etorship, who would meet such test if such propri- 14 etorship were a corporation), other than a tax shel- 15 ter prohibited from using the cash receipts and dis- 16 bursements method of accounting under section 17 448(a)(3). 18 FILMS, SOUND RECORDINGS, BOOKS, 19 purposes of this subsection, the term 20 ?tangible personal property? shall include a film, 21 sound recording, Video tape, book, or similar prop- 22 erty. 23 COORDINATION WITH SEOTION 481.?If a 24 taxpayer changes its method of accounting because 25 this section does not apply to the taxpayer by reason 26 of the exception under paragraph (3) or this section [file 3 of 5] S.L.122 applies to the taxpayer because such exception no longer applies to the taxpayer? such change shall be treated as initi- ated by the taxpayer, and such change shall be treated as made mm the consent of the Secretary?. EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 13105. INCREASE IN GROSS RECEIPTS TEST FOR CON- STRUCTION CONTRACT EXCEPTION TO PER- CENTAGE OF COMPLETION METHOD. (1) IN GENERAL. Section 460(c)(1)(B) is amended? (A) in the matter preceding clause by inserting ?(other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section after ?taxpayer?, and (B) by striking clause (ii) and inserting the following: who meets the gross receipts test of section 448(c) for the taxable year in Which such contract is entered into (or, in [?le 3 of 5] S.L.C. 123 1 the case of a. sole proprietorship, who 2 Would meet such test if such proprietorship 3 were a corporation)?. 4 (2) 5 (A) Section 460(e) is amended by striking 6 paragraphs (2) and (3) and by redesignating 7 paragraphs (4) through (6) as paragraphs (2) 8 through (4), respectively. 9 (B) The last sentence of section 56(a)(3) is 10 amended by striking ?section 460(c)(6)? and 11 inserting ?section 12 WITH SECTION 481.?Section 13 460(e), as amended by subsection is amended by add- 14 ing at the end the following: 15 COORDINATION WITH SECTION 481.?If a 16 taxpayer changes its method of accounting because 17 subsections and do not apply 18 by reason of the exception under paragraph 19 or such subsections apply tO the taxpayer because 20 such exception no longer applies to the taxpayer? 21 such change shall be treated as initi- 22 ated by the taxpayer, 23 such change shall be treated as made 24 With the consent Of the Secretary, and [?le 3 of 5] S.L.C. 124 such change shall be permitted only on a cut-off basis for all similarly classified con- tracts entered into on or after the year of change and no adjustments under section 481(a) shall be made?. EFFECTIVE amendment made by this section shall apply to contracts entered into after De- cember 31, 2017, in taxable years ending after such date. PART RECOVERY AND ACCOUNTING METHODS Subpart A?Cost Recovery SEC. 13201. TEMPORARY EXPENSING FOR CERTAIN BUSINESS ASSETS. INCREASED ed? (1) IN 168(k) is amend- (A) in paragraph by striking ?50 percent? and inserting ?the applicable percent- age?, and (B) in paragraph by striking ?50 percent? and inserting ?the applicable percent- age?. (2) APPLICABLE (6) of section 168(k) is amended to read as follows: [?le 3 of 5] S.L.125 APPLICABLE purposes of this subsection? IN as otherwise prow'ded in this paragraph, the term ?applicable percentage? means?? in the case of property placed in service after September 27, 2017, and be- fore January 1, 2023, 100 percent, in the case of property placed in service after December 31, 2022, and be- fore January 1, 2024, 80 percent, in the case of property placed in service after December 31, 2023, and be- fore January 1, 2025, 60 percent, in the case of property placed in service after December 31, 2024, and be- fore January 1, 2026, 40 percent, and in the case of property placed in service after December 31, 2025, and be- fore January 1, 2027, 20 percent. RULE FOR PROPERTY WITH LONGER PRODUCTION the case of property described in paragraph or (C), the term ?applicable percentage? means? [file 3 of 5] S.L.C. 126 in the case of property placed in service after September 27, 2017, and be- fore January 1, 2024, 100 percent, in the case of property placed in service after December 31, 2023, and be- fore January 1, 2025, 80 percent, in the case of property placed in service after December 31, 2024, and be- fore January 1, 2026, 60 percent, in the case of property placed in service after December 31, 2025, and be- fore January 1, 2027, 40 percent, and in the case of property placed in service after December 31, 2026, and be- fore January 1, 2028, 20 percent. RULE FOR PLANTS BEARING FRUITS AND the case of a speci?ed plant de- scribed in paragraph (5), the term ?applicable percentage? means-? in the case of a plant which is planted or grafted after September 27, 2017, and before January 1, 2023, 100 percent, in the case of a plant which is planted Or grafted after December 31, [?le 3 of 5] S.L.C. 127 2022, and before January 1, 2024, 80 per- cent, in the case of a plant which is planted or grafted after December 31, 2023, and before January 1, 2025, 60 per- cent, in the case of a plant which is planted or grafted after December 31, 2024, and before January 1, 2026, 40 per- cent, and in the case of a plant which is planted or grafted after December 31, 2025, and before January 1, 2027, 20 per- cent?. (3) CONFORMING (5) of section 168(k) is amended by striking subpara- graph (F). ed? (1) IN GENERAL. Section 168(k) is amend- (A) in paragraph in subparagraph clauses and (ii) of subparagraph (B), and subparagraph by striking ?January [?le 3 of 5] S.L.C. 128 1, 2020? eaeh place it appears and insert? ing ?January 1, 2027?, and (ii) in subparagraph (I) in clause by striking ?January 1, 2021? and inserting ?January 1, 2028?, and (II) in the heading of elause by striking 1, 2020? and inserting 1, 2027?, and (B) in paragraph by striking an- uary 1, 2020? and inserting ?January 1, 2027?. (2) EONFORMING (A) Clause (ii) of section 460(c)(6)(B) is amended by striking ?January 1, 2020 (Janu- ary 1, 2021? and inserting ?January 1, 2027 (January 1, 2028?. The heading of section 168(k) is amended by striking AFTER DE- CEMBER 31, 2007, AND BEFORE JANUARY 1, 2020?. EXCEPTION FOR PUBLIC 168(k) is amended by adding at the end the following new paragraph: [file 3 of 5] 23 {n 129 EXCEPTION FOR CERTAIN The term ?qualified property? shall not include any property which is primarily used in a trade or busi- ness described in clause (iv) of section SPECIAL RULE?Section 168(k), as amended by subsection is amended by adding at the end the fol- lowing new paragraph: SPECIAL RULE FOR PROPERTY PLACED IN SERVICE DURING CERTAIN IN the case of quali- fied property placed in service by the taxpayer during the ?rst taxable year ending after Sep? tember 27, 2017, if the taxpayer elects to have this paragraph apply for such taxable year, paragraphs and shall be ap- plied by substituting' ?50 percent? for ?the appli? cable percentage?. FORM OF election under this paragraph shall be made at such time and in such form and manner as the Sec- retary may prescribe.? . COORDINATION WITH SECTION 24 168(k)(2)(F) is amended by striking clause [?130 QUALIFIED FILM AND TELEVISION AND LIVE THEATRICAL IN of section as amended by section 13204, is amended? (A) in subclausc (II), by striking (B) in subclause by adding ?or? after the comma, and (C) by adding at the end the following": which is a qualified ?lm or tele- vision production (as defined in subsection of section 181) for which a deduction would have been allowable under section 181 Without regard to subsections and of such section or this subsection, or which is a qualified live theat- rical production (as defined in subsection of section 181) for which a deduction would have been allowable under section 181 without regard to subsections and of such section or this sub- section,?. [file 3 of 5] S.L.131 (2) PRODUCTION PLACED IN graph (2) of section 168(k) is amended by adding at the end the following: PRODUCTION PLACED IN For purposes of subparagraph a qualified film or television pro- duction shall be considered to be placed in service at the time of initial release or broadcast, and a quali?ed live theatrical produc? tion shall be considered to be placed in service at the time of the initial live staged performance?. EFFECTIVE amendments made by this section shall apply to property placed in service, and specified plants planted or grafted after, after September 27, 2017, in taxable years ending after such date. SEC. 13202. MODIFICATIONS TO DEPRECIATION LIMITA- TIONS ON LUXURY AUTOMOBILES AND PER- SONAL USE PROPERTY. LUXURY (1) IN is amended? (A) in clause by striking ?$2,560? and inserting [?le 3 of 5] S.L.C. 132 1 (B) in clause by striking ?$4,100? 2 and inserting 3 (C) in clause by striking ?$2,450? 4 and inserting and 5 (D) in clause by striking ?$1,475? 6 and inserting 7 (2) CONFORMING 8 (A) Clause (ii) Of section is 9 amended by striking ?$1,475? in the text and 10 heading and inserting 11 (B) Paragraph (7) of section 280F(d) is 12 amended? 13 in subparagraph (A), by striking 14 ?1988? and inserting ?2018?, and 15 (ii) in subparagraph' by 16 striking ?1987? and inserting ?2017?. 17 REMOVAL OF COMPUTER EQUIPMENT FROM 18 LISTED 19 (1) IN is 20 amended? 21 (A) by inserting ?and? at the end Of clause 22 23 (B) by striking clause and 24 (C) by redesignating clause (V) as clause 25 [?le 3 of 5] S.L.C. 133 (2) CONFORMING AMENDMENT. Section 280F(d)(4) is amended by striking subparagraph (B) and by redesignating subparagraph (C) as sub- paragraph (B). EFFECTIVE 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. TREATMENT OF CERTAIN FARM PROPERTY As 5- YEAR (vii) of section 168(c)(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?. REPEAL OF REQUIRED USE OF ISO-PERCENT DECLINING BALANCE 168(b)(2) is amended by striking subparagraph (B) and by redesig- nating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively. EFFECTIVE amendments made by this section shall apply to property placed in service after December 31, 2017, in taxable years ending after such date. [file 3 of 5] S.L.C. 134 1 SEC. 13204. APPLICABLE RECOVERY PERIOD FOR REAL PROPERTY. RESIDENTIAL RENTAL PROPERTY AND NONRESI- DENTIAL REAL (1) REDUCTION OF RECOVERY table contained in section 168(c) is amended? (A) by striking ?27.5 years? and inserting ?25 years?, and (B) by striking ?39 years? and inserting ?25 years?. (2) STATUTORY RECOVERY table contained in section 467(e)(3)(A) is amended? (A) by inserting ?(other than residential rental property and nonresidential real prop- erty)? after ?15-year and 20-year property?, and (B) by striking ?19 years? and inserting ?25 years?. (3) CONFORMING (ii) of section 168(e)(2)(B) is amended by striking ?27.5 years? and inserting ?25 years?. IMPROVEMENTS To REAL (1) QUALIFIED IMPROVE- MENT PROPERTY As 10-YEAR graph (D) of section 168(c)(3) is amended (A) in clause by striking ?and?, [file 3 of 5] SEC. 135 (B) in clause by striking the period and inserting and?, and (C) by adding at the end the following new clause: any qualified improvement prop- erty described in subsection (2) ELIMINATION OF QUALIFIED LEASEHOLD IMPROVE ME NT, QUALIFIED RE STAURANT, AND QUALIFIED RETAIL IMPROVEMENT section (8) of section 168 is amended?- (A) in subparagraph (E) of paragraph by striking clauses and (ii) in clause (vii), by inserting ?and? at the end, in clause by striking and? and inserting a period, and (iv) by redesignating clauses (vii), and as so amended, as clauses and respectively, and (B) by striking paragraphs (6), (7), and [file 3 of 5] S.L.C. 136 (3) APPLICATION OF STRAIGHT LINE METHOD TO QUALIFIED IMPROVEMENT graph (3) Of section 168(b) is amended? (A) by striking subparagraphs (G), (II), and (I), and (B) by inserting after subparagraph (F) the following new subparagraph: Qualified improvement property de- scribed in subsection (4) ALTERNATIVE DEPREOIATION (A) ELECTING REAL PROPERTY TRADE OR BUSINESS?Subsection Of section 168 is amended? in paragraph (I) in subparagraph (D), by striking ?and? at the end, (II) in subparagraph (E), by in- serting ?and? at the end, and by inserting after subpara- graph (E) the following new subpara- graph: any property described in paragraph and (ii) by adding at the end the following new paragraph: [file 3 of 5] S.L.C. r?tr?tid 137 ELECTING REAL PROPERTY TRADE OR property described in this para- graph shall consist of any nonresidential real prop- erty, residential rental property, and qualified im- provement property held by an electing real property trade or business (as defined in (B) QUALIFIED IMPROVEMENT PROP- table contained in subparagraph (B) of section 168(g)(3) is amended by inserting after the item relating to subparagraph the following new item: 20?. and (ii) by striking the item relating to subparagraph and all that follows through the item relating to subparagraph and inserting the following: 20 30 (Ema) 35? (C) APPLICABLE RECOVERY PERIOD FOR RESIDENTIAL RENTAL table contained in subparagraph (C) of section 168(g)(2) is amended by striking clauses and (iv) and inserting the following: Residential rental property 30 years (iv) Nonresidential real property 40 years Any railroad grading or tunnel bore or water utility prop- erty 50 years?. [?le 3 of 5] S.L.C. 138 (5) EONFORMING (A) Clause of section 168(k)(2)(A) is amended? in Subclause (II), by inserting ?or? after the comma, (ii) in subclause by striking ?or? at the end, and by striking subclause (IV). (B) Section 168 is amended? in subsection as amended by paragraph by adding at the end the following: QUALIFIED IMPROVEMENT IN term ?quali?ed improvement property? means any improvement to an. interior portion of a building which is nonresidential real property if such improve- ment is placed in service after the date such building was first placed in service. CERTAIN IMPROVEMENTS NOT IN- term shall not include any im- provement for which the expenditure is attrib- utable to? I the enlargement of the building, ii an elevator or escalator or I [?le 3 of 5] S.L.C. 139 the internal structural frame- work of the building?. (ii) in subsection by striking paragraph (3). EFFECTIVE (1) IN as provided in para- graph (2), the amendments made by this section shall apply to property placed in serxice after De- cember 31, 2017. (2) AMENDMENTS RELATED To ELECTING REAL PROPERTY TRADE 0R amend- ments made by subsection shall apply to taxable years beginning after December 81, 2017. SEC. 13205. USE OF ALTERNATIVE DEPRECIATION SYSTEM FOR ELECTING FARMING BUSINESSES. IN GENERAL. Section 168(g)(1), as amended by section 13204, is amended by striking ?and? at the end of subparagraph (E), by inserting ?and? at the end of subparagraph (F), and by inserting after subparagraph (F) the following new subparagraph: any property with a recovery period of 10 years or more which is held by an electing farming business (as defined in section [?le 3 of 5] 140 EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31,2017. SEC. 13206. AMORTIZATION OF RESEARCH AND EXPERI- MENTAL EXPENDITURES. IN 174 is amended to read as follows: 174. AMORTIZATION OF RESEARCH AND EXPERI- MENTAL IN the case of a taxpayer?s speci- fied research or experimental expenditures for any taxable year? except as provided in paragraph (2), no deduction shall be allowed for such expenditures, and the taxpayer shall? charge such expenditures to capital account, and be allowed an amortization deduction of such expenditures ratably over the 5?year pe- riod (15-year period in the case of any specified research or experimental expenditures which are attributable to foreign research (within the meaning of section beginning [?le 3 of 5] S.L.C. 141 1 m?th the midpoint of the taxable year in which 2 such expenditures are paid or incurred. 3 SPECIFIED RESEARCH OR EXPERIMENTAL Ex- 4 purposes of this section, the term 5 ?specified research or experimental expenditures? means, 6 with respect to any taxable year, research or experimental 7 expenditures which are paid or incurred by the taxpayer 8 during such taxable year in connection with the taxpayer?s 9 trade or business. 10 SPECIAL 11 LAND AND OTHER sec? 12 tion shall not apply to any expenditure for the acqui- 13 sition or improvement of land, or for the acquisition 14 or improvement of property to be used in connection 15 with the research or experimentation and of a char? 16 acter which is subject to the allowance under section 17 167 (relating to allowance for depreciation, etc.) or 18 section 611 (relating to allowance for depletion); but 19 for purposes of this section allowances under section 20 167, and allowances under section 611, shall be con- 21 sidered as expenditures. 22 EXPLORATION sec- 23 tion shall not apply to any expenditure paid or in- 24 curred for the purpose of ascertaining the existence, [?le 3 of 5] {n 142 location, extent, or quality of any deposit of ore or other mineral (including Oil and gas). SOFTWARE purposes of this section, any amount paid or incurred in con- nection with the development Of any software shall be treated as a research or experimental expendi- ture. TREATMENT UPON DISPOSITION, RETIREMENT, OR 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, 110 deduction shall be allowed with respect tO such expenditures on ac- count Of such disposition, retirement, or abandonment and such amortization deduction shall continue with respect to such expenditures.? . CHANGE IN METHOD OF amendments made by subsection shall be treated as a change in method of accounting for purposes of section 481 of the Internal Revenue lode 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 [file 3 of 5] S.L.C. 143 (3) such change shall be applied only on a cut- 2 off basis for any research or experimental expendi? 3 tures paid or incurred in taxable years beginning 4 after December 31, 2025, and no adjustments under 5 section 481(a) shall be made. 6 CLERICAL table of sections 7 for part VI of subchapter of chapter 1 is amended by 8 striking the item relating to section 174 and inserting the 9 following new item: ?See. 174. Amortization of research and experimental expenditures?. 10 CONFORMING 11 (1) Section is amended by striking 12 ?expenses under section 174? and inserting ?speci- 13 fled research or experimental expenditures under 14 section 174?. 15 (2) Subsection (0) of section 2800 is amend- 16 ed? 17 (A) by striking paragraph (1) and insert- 18 ing the following: 19 IN 20 the amount of the credit determined 21 for the taxable year under section ex- 22 ceeds 23 the amount allowable as a deduction 24 for such taxable year for qualified research ex- 25 penses or basic research expenses, [?le 3 of 5] S.L.C. 144 the amount chargeable to capital account for the 2 taxable year for such expenses shall be reduced by 3 the amount of such excess?, 4 (B) by striking paragraph (2), 5 (C) by redesignating paragraphs (3) (as 6 amended by this Act) and (4) as paragraphs (2) 7 and (3), respectively, and 8 (D) in paragraph (2), as redesignated by 9 subparagraph (C), by striking ?paragraphs (1) 10 and and inserting ?paragraph 11 EFFECTIVE amendments made by 12 this section shall apply to amounts paid or incurred in tax- 13 able years beginning after December 31, 2025. 14 SEC. 13207. EXPENSING OF CERTAIN COSTS OF REPLANT- 15 ING CITRUS PLANTS LOST BY REASON OF 16 CASUALTY. 17 IN 263A(d)(2) is amended 18 by adding at the end the following new subparagraph: 19 SPECIAL TEMPORARY RULE FOR CIT- 20 RUS PLANTS LOST BY REASON OF 21 IN the case of the 22 replanting of citrus plants, subparagraph 23 (A) Shall apply to amounts paid or in- 24 curred by a person (other than the tax- 25 payer described in subparagraph if? [?le 3 of 5] S.L.C. 145 1 the taxpayer described in 2 subparagraph (A) has an equity inter- 3 est of not less than 50 percent in the 4 replanted citrus plants at all times 5 during the taxable year in which such 6 amounts were paid or incurred and 7 such other person holds any part of 8 the remaining equity interest, or 9 such other person acquired 10 the entirety of such taxpayer?s equity 11 interest in the land on which the lost 12 or damaged citrus plants were located 13 at the time of such loss or damage, 14 and the replanting is on such land. 15 shall 16 not apply to any cost paid or incurred 17 after the date which is 10 years after the 18 date of the enactment of the Tax Cuts and 19 Jobs Act?. 20 EFFECTIVE amendment made by 21 this section shall apply to costs paid or incurred after the 22 date of the enactment of this Act. [?le 3 of 5] S.L.C. 146 Subpart B?Accounting Methods SEC. 13221. CERTAIN SPECIAL RULES FOR TAXABLE YEAR OF INCLUSION. INCLUSION NOT LATER THAN FOR FINANCIAL ACCOUNTING 451 is amended by re- designating subsections through as subsections through respectively, and by inserting after subsection the following new subsection: INCLUSION NOT LATER THAN FOR FINANCIAL ACCOUNTING INCOME TAKEN INTO ACCOUNT IN FINAN- CIAL IN the case of a tax- payer the taxable income of which is computed under an accrual method Of accounting, the all events test with respect to any item of gross in- come (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? an applicable financial statement of the taxpayer, or such other financial statement as the Secretary may specify for purposes of this subsection. paragraph shall not apply [file 3 of 5] S.L.C. 147 a taxpayer which does not have a financial statement described in clause or (ii) Of subparagraph (A) for a taxable year, or any item Of gross income in con? nection with a mortgage servicing contract. ALL EVENTS purposes Of this section, the all events test is met with re? spect to any item of gross income if all the events have occurred which fix the right tO re- ceive such income and the amount of such in- come can be determined with reasonable accu- racy. COORDINATION WITH SPECIAL METHODS OF (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 Of subchapter (except as provided in clause (ii) Of paragraph APPLICABLE FINANCIAL For purposes Of this subsection, the term ?applicable ?nancial statement? means? [file 3 of 5] S.L.C. 148 a financial statement which is cer- tified as being prepared in accordance with gen- erally accepted accounting principles and Which a (or successor form), or annual statement to shareholders, required to be filed by the taxpayer with the United States Securities and Exchange Commis- sion, an audited financial statement of the taxpayer which is used for? credit purposes, reporting to shareholders, partners, or other proprietors, or to beneficiaries, or ?(111) any other substantial nontax purpose, but only if there is no statement of the taxpayer described in clause or 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 de- scribed in clause or [file 3 of 5] S.L.C. 149 a financial statement which is made on the basis of international financial reporting standards and is ?led by the taxpayer with an agency of a foreign government which is equiva- lent to the United States Securities and Ex- change Commission and which has reporting standards not less stringent than the standards required by such Commission, but only if there is no statement of the taxpayer described in subparagraph (A), or a financial statement filed by the tax- payer with any other regulatory or govern- mental body specified by the Secretary, but only if there is no statement of the taxpayer de- scribed in subparagraph (A) or (B). ALLOCATION OF TRANSACTION For purposes of this subsection, in the case of a con- tract which contains multiple performance obliga- tions, the allocation of the transaction price to each performance obligation shall be equal to the amount allocated to each performance obligation for pur- poses of including such item in revenue in the appli- cable financial statement of the taxpayer. GROUP OF purposes of paragraph (1), if the financial results of a taxpayer {p a [?le 3 of 150 1 are reported on the applicable financial statement 2 (as defined in paragraph for a group of entities, 3 such statement may be treated as the applicable fi- 4 nancial statement of the taxpayer?. 5 TREATMENT OF ADVANCE 6 451, as amended by subsection is amended by redesig- 7 nating subsections through as subsections 8 through respectively, and by inserting after subsection 9 the following new subsection: 10 TREATMENT OF ADVANCE 11 IN taxpayer which computes 12 taxable income under the accrual method of account- 13 ing, and receives any advance payment during the 14 taxable year, shall? 15 except as provided in subparagraph 16 (B), include such advance payment in gross in- 17 come for such taxable year, or 18 if the taxpayer elects the application 19 of this subparagraph with respect to the cat- 20 egory of advance payments to which such ad? 21 vance payment belongs, the taxpayer shall? 22 to the extent that any portion of 23 such advance payment is required under 24 subsection to be included in gross in- 25 come in the taxable year in which such {p [?le 3 of 5] 151 1 payment is received, so include such por? 2 tion, and 3 include the remaining portion of 4 such advance payment in gross income in 5 the taxable year following the taxable year 6 in which such payment is received. 7 8 IN as otherwise 9 prow'ded in this paragraph, the election under 10 paragraph shall be made at such time, 11 in such form and manner, and with respect to 12 such categories of advance payments, as the 13 Secretary may provide. 14 PERIOD TO WHICH ELECTION Al?- 15 election under paragraph 16 shall be effective for the taxable year with re- 17 spect to which it is ?rst made and for all subse- 18 quent taxable years, unless the taxpayer secures 19 the consent of the Secretary to revoke such 20 election. For purposes of this title, the com- 21 putation of taxable income under an election 22 made under paragraph shall be treated 23 as a method of accounting. 24 TAXPAYERS CEASING TO 25 as otherwise provided by the Secretary, the election [?le 3 of 5] S.L.C. 1 under paragraph shall not apply with respect to advance payments received by the taxpayer during a taxable year if such taxpayer ceases to exist during (or with the close of) such taxable year. ADVANCE purposes of this subsection? IN term ?advance payment? means any payment? the full inclusion of which in the gross income of the taxpayer for the tax- able year of receipt is a permissible method of accounting under this section (deter- mined without regard to this subsection), any portion of which is included in revenue by the taxpayer in a financial statement described in clause or (ii) of subsection for a subsequent tax- able year, and which is for goods, services, or such other items as may be identified by the Secretary for purposes of this clause. as othervn'se provided by the Secretary, such term shall not include? rent, [file 3 of 5] S.L.C. 23 153 insurance premiums governed by subchapter L, payments with respect to finan? cial instruments, payments with respect to war- ranty or guarantee contracts under which a third party is the primary obligor, payments subject to section 871(a), 881, 1441, or 1442, payments in property to which section 83 applies, and ?(vii) any other payment identified by the Secretary for purposes of this subpara- graph. purposes of this sub- section, 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 tax- payer. ALLOCATION OF TRANSACTION purposes of this subsection, rules similar to subsection shall apply?. EFFECTIVE amendments made by 24 this section shall apply to taxable years beginning after 25 December 31, 2017. [file 3 of 5] SEC. 154 1 EOORDINATION WITH SECTION 481.? (1) IN the case of any quali?ed change in method of accounting for the taxpayer?s ?rst taxable year beginning after December 31, 2 3 4 5 2017?- 6 (A) such change shall be treated as initi- 7 ated by the taxpayer, and 8 (B) such change shall be treated as made 9 with the consent of the Secretary of the Treas- 10 ury. 11 (2) QUALIFIED CHANGE IN METHOD OF AC- 12 purposes of this subsection, the 13 term ?quali?ed change in method of accounting? 14 means any change in method of accounting which? 15 (A) is required by the amendments made 16 by this section, or 17 (B) was prohibited under the Internal Rev- 18 enue Code of 1986 prior to such amendments 19 and is permitted under such Code after such 20 amendments. 21 SPECIAL RULES FOR ORIGINAL ISSUE DIS- 22 Notwithstanding subsection in the case of 23 income from a debt instrument having original issue dis- 24 count? [file 3 of 5] - S.L.155 (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 ad- justments under section 481 by reason of a qualified change in method of accounting (as de?ned in sub- section shall be 6 years. PART EXCLUSIONS AND DEDUCTION SEC. 13301. LIMITATION ON DEDUCTION FOR INTEREST. IN 163(j) is amended to read as follows: LIMITATION ON BUSINESS IN amount allowed as a deduction under this chapter for any taxable year for business interest shall not exceed the sum of? the business interest income of such taxpayer for such taxable year, plus 30 percent of the adjusted taxable in- come of such taxpayer for such taxable year. The amount determined under subparagraph (B) shall not be less than zero. CARRYFORWARD OF DISALLOWED BUSI- NESS amount of any business in- terest not allowed as a deduction for any taxable [file 3 of 5] S.L.C. 156 year by reason of paragraph (1) shall be treated as business interest paid or accrued in the succeeding taxable year. EXEMPTION FOR CERTAIN SMALL BUSI- the case of any taxpayer (other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under sec- tion 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 cor- poration 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 partner- ship. APPLICATION To PARTNERSHIPS, IN the case of any partnership? this subsection Shall be applied at the partnership level and any deduction for business interest Shall be taken into ac- count in determining the non-separately stated taxable income or loss of the part- nership, and [?le 3 of 5] S.L.C. 157 the adjusted taxable income of each partner of such partnership?? shall be determined Without regard to such partner?s distributive share of any items of income, gain, deduction, or loss of such partnership, and shall be increased by such partner?s distributive share of such partnership?s excess taxable income. For purposes of clause 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 in- come or loss of the partnership. SPECIAL RULES FOR IN amount of any business interest not allowed as a de- duction to a partnership for any taxable year by reason of paragraph (1) for any taxable year? shall not be treated under paragraph (2) as business, interest [?le 3 of 5] go 158 paid or accrued by the partnership in the succeeding taxable year, and shall, subject to clause be treated as excess business interest which is allocated to each partner in the same manner as the non-sepa- rately stated taxable income or loss of the partnership. TREATMENT OF EXCESS BUSI- NESS INTEREST ALLOCATED TO PART- a partner is allocated any excess business interest from a partnership under clause for any taxable year? 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 tax- able income, and any portion of such excess business interest remaining after the application of subclause (1) shall, sub- ject to the limitations of subclause (1), [?treated as business interest paid or accrued in succeeding taxable years. For purposes of applying this paragraph, excess taxable income allocated to a part- ner from a partnership for any taxable year shall not be taken into account under paragraph with respect to any busi- ness interest other than excess business in- terest 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 BASIS IN adjusted basis of a partner in a partnership in- terest shall be reduced (but not below zero) by the amount of excess busi- ness interest allocated to the partner under clause SPECIAL RULE FOR a partner disposes of a partnership interest, the adjusted basis of the partner in the partnership interest shall be increased immediately [file 3 of 5] S.L.C. 160 1 before the disposition by the amount 2 of the excess (if any) of the amount of 3 the basis reduction under subclause 4 (I) over the portion of any excess 5 business interest allocated to the part- 6 ner under clause which has pre- 7 Viously been treated under clause (ii) 8 as business interest paid or accrued 9 by the partner. The preceding sen- 10 tence shall also apply to transfers of 11 the partnership interest (including by 12 reason of death) in a transaction in 13 which gain is not recognized in whole 14 or in part. No deduction shall be al- 15 lowed to the transferor 0r transferee 16 under this chapter for any excess 17 business interest resulting in a basis 18 increase under this subclause. 19 EXCESS TAXABLE 20 term ?excess taxable income? means, with re- 21 spect to any partnership, the amount which 22 I bears the same ratio to the partnership?s ad- 23 justed taxable income as? 24 the excess (if any) of? [file 3 of 5] S.L.C. 161 the amount determined for the partnership under paragraph over the amount (if any) by which the business interest of the partnership exceeds the business in- terest incOme of the partnership, bears to the amount determined for the partnership under paragraph APPLICATION To Rules similar to the rules of subparagraphs (A) and (C) shall apply m'th respect to any cor- poration and its shareholders. BUSINESS purposes of this subsection, the term ?business interest? means any interest paid or accrued on indebtedness prop- erly allocable to a trade or business. Such term Shall not include investment interest (Within the meaning of subsection BUSINESS INTEREST pur? poses 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. [file 3 of 5] S.L.162 Such term shall not include investment income (within the meaning of subsection TRADE OR purposes of this subsection? IN term ?trade or business? shall not include the trade or business of per- forming services as an employee, any electing real property trade or business, any electing farming business, or the trade or business of the fur? nishing or sale of? electrical energy, water, or sewage disposal serw'ces, gas or steam through a local distribution system, or ?(111) 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 [file 3 of 5] S.L.C. 163 public utility commission or other similar body of any State or political subdivision thereof, or by the governing or ratemaking body of an electric cooperative. ELECTING REAL PROPERTY TRADE OR purposes of this paragraph, the term ?electing real property trade or busi- ness? means any trade or business which is de- scribed 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 pre- scribe, and, once made, shall be irrevocable. ELECTING FARMING purposes of this paragraph, the term ?electing farming business? means? a farming business (as defined in section 263A(e)(4)) which makes an elec- tion under this subparagraph, or any trade or business of a speci- fied agricultural or horticultural coopera? tive (as defined in section 199A(g)(2)) with respect to which the cooperative makes an election under this subpara- graph. [?le 3 of 5] S.L.C. income? means the taxable income of the taxpayer 164 Any such election shall be made at such time and in such manner as the Secretary shall pre- scribe, and, once made, shall be irrevocable. ADJUSTED TAXABLE pur- poses of this subsection, the term ?adjusted taxable computed Without regard to? any item of income, gain, deduc- tion, or loss which is not properly allocable to a trade or business, any business interest or business interest income, the amount of any net operating loss deduction under section 172, and the amount of any deduction al- lowed under section 199 or 199A, and computed with such other adjust- ments as prow'ded by the Secretary. Enoss For requirement that an electing real property trade or business use the alternative depreciation system, see section For requirement that an electing farming business use the alternative deprecia- )7 tion system, see section . [file 3 of 5] S.L.C. 165 1 TREATMENT OF CARRYFORWARD OF DIS- 2 ALLOWED BUSINESS INTEREST IN CERTAIN CORPORATE 3 4 (1) IN 381(c) is amended 5 by inserting after paragraph (19) the following new 6 paragraph: 7 CARRYEORWARD OF DISALLOWED BUSI- 8 NESS carryover of disallowed busi- 9 ness interest described in section 1(53(j)(2) to tax- 10 able years ending after the date of distribution or 1 1 transfer?. 12 (2) APPLICATION OF 13 382(d) is amended by adding at the end the fol- 14 lowing new paragraph: 15 APPLICATION To CARRYFORWARD OF DIS- 16 ALLOWED term ?pre-change loss? 17 shall include any carryover of disallowed interest de- 18 scribed in section 163(n) under rules similar to the 19 rules of paragraph 20 (3) CONFORMING 21 382(k)(1) is amended by inserting after the ?rst 22 sentence the following: ?Such term shall include any 23 corporation entitled to use a carryforward of dis- 24 allowed interest described in section [?le 3 of 5] S.L.C. 166 1 EFFECTIVE amendments made by 2 this section shall apply to taxable years beginning after 3 December 31, 2017. 4 SEC. 13302. MODIFICATION OF NET OPERATING LOSS DE- 5 DUCTION. 6 LIMITATION ON 7 (1) IN 172(a) is amended 8 to read as follows: 9 DEDUCTION shall be allowed 10 as a deduction for the taxable year an amount equal to 11 the lesser of? 12 the aggregate of the net operating loss 13 carryovers to such year, plus the net operating loss 14 carrybacks to such year, or I 15 90 percent (80 percent in the case of tax- 16 able years beginning after December 31, 2022) of 17 taxable income computed without regard to the de? 18 duction allowable under this section. 19 For purposes of this subtitle, the term ?net operating loss 20 deduction? means the deduction allowed by this sub- 21 section?. 22 (2) OF LIMITATION WITH 23 CARRYBACKS AND 172(b)(2) 24 is amended by striking ?shall be computed and 25 all that follows and inserting ?shall? [file 3 of 5] S.L.C. #mNr?towoouChUI-h-UJNHO 167 be computed With the modifications specified in subsection other than para- graphs (1), (4), and (5) thereof, and by deter? mining the amount of the net operating loss de- duction vm'thout regard to the net operating loss for the loss year or for any taxable year there- after, not be considered to be less than zero, and not exceed the amount determined under subsection for such prior taxable year?. (3) CONFORMING 17 is amended by striking ?and? at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting and?, and by adding at the end the following new subpara- graph: subsection shall be applied by substituting ?real estate investment trust tax- able income (as de?ned in section 857(b)(2) but Without regard to the deduction for dividends paid (as defined in section 561))? for ?taxable income?.?. [?le 3 of 5] S.L.168 REPEAL OF NET OPERATING Loss INDEFINITE (1) IN 172(b)(1)(A) is amended? (A) by striking ?shall be a net operating loss carryback to each of the 2 taxable years? in clause 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 tax- able year?. (2) CONFORMING AMENDMENT. Section 172(b)(1) is amended by striking subparagraphs (B) through (F). TREATMENT OF FARMING (1) ALLOWANCE OF 172(b)(1), as amended by subsection is amended by adding at the end the following new subparagraph: FARMING IN the ease of any portion of a net operating loss for the tax- able year Which is a farming loss with re- [?le 3 of 5] S.L.C. 169 spect 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. FARMING purposes of i this section, the term ?farming loss? means the lesser Of? the amount which would be the net operating loss for the taxable year if only income and deductions at- tributable to farming businesses (as de?ned in section 263A(e)(4)) are taken into account, or the amount Of the net Oper- ating loss for such taxable year. COORDINATION WITH PARA- GRAPH purposes of applying paragraph (2), a farming loss for any tax- able 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. taxpayer enti- tled to a 2-year carryback under clause [file 3 of 5] S.L.C. 170 1 from any loss year may elect not to have 2 such clause apply to such loss year. Such 3 election shall be made in such manner as 4 prescribed by the Secretary and shall be 5 made by the due date (including extensions 6 of time) for filing the taxpayer?s return for 7 the taxable year of the net operating loss. 8 Such election, once made for any taxable 9 year, shall be irrevocable for such taxable 10 year?. 11 (2) EONFORMING 12 (A) Section 172 is amended by striking 13 subsections and and by redesig- 14 nating subsection as subsection 15 (B) Section 537(b)(4) is amended by in- 16 serting ?(as in effect before the date of enact- 17 ment of the Tax Cuts and Jobs Act)? after ?as 18 defined in section 19 TREATMENT OF CERTAIN INSURANCE 20 (1) TREATMENT OF CARRYFORWARDS AND 21 CARRYBACKS. Section 17 as amended by 22 subsections and is amended by adding 23 at the end the following new subparagraph: 24 INSURANCE the case 25 of an insurance company (as de?ned in section {a [file 3 of 5] 171 1 816(a)) other than a life insurance company, 2 the net operating loss for any taxable year? 3 shall be a net operating loss 4 carryback to each of the 2 taxable years 5 preceding the taxable year of such loss, 6 and 7 shall be a net operating loss car- 8 ryover to each of the 20 taxable years fol- 9 lowing the taxable year of the loss?. 10 (2) EXEMPTION FROM 11 172, as amended by subsection is amend- 12 ed by redesignating subsection as subsection 13 and inserting after subsection the following new 14 subsection: 15 SPECIAL RULE FOR INSURANCE 16 In the case of an insurance company (as defined in section 17 816(a)) other than a life insurance company? 18 the amount of the deduction allowed under 19 subsection shall be the aggregate of the net oper- 20 ating loss carryovers to such year, plus the net oper? 21 ating loss carrybacks to such year, and 22 subparagraph (C) of subsection 23 shall not apply?. 24 EFFECTIVE [?le 3 of 5] S.L.C. 172 (1) NET OPERATING Loss amendments made by subsections and shall apply to losses arising in taxable years begin- ning after December 31, 2017. (2) CARRYFORWARDS AND amendments made by subsections and shall apply to net operating losses arising in taxable years ending after December 31, 2017. SEC. 13303. LIKE-KIND EXCHANGES OF REAL PROPERTY. IN 1031(a)(1) is amended by striking ?property? each place it appears and inserting ?real property?. CONFORMING Paragraph (2) Of section 1031(a) is amended to read as follows: EXCEPTION FOR REAL PROPERTY HELD FOR subsection shall not apply to any exchange of real property held primarily for sale?. (B) Section 1031 is amended by striking sub- section (2) Section 1031 is amended by striking sub- section (3) Section 1031, as amended by paragraph (2), is amended by inserting after subsection (01) the following new subsection: [?le 3 of 5] S.L.C. r?tr?tv?Av?t va?173 APPLICATION TO CERTAIN For purposes of this section, an interest in a partnership which has in effect a valid election under section 761(a) to be excluded from the application of all of subchapter shall be treated as an interest in each of the assets of such partnership and not as an interest in a partnership?. (4) Section 1031(h) is amended to read as fol- lows: SPECIAL RULES FOR FOREIGN REAL Peor- 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 and inserting PROP- (6) The table of sections for part of sub- chapter 0 of chapter 1 is amended by striking the item relating to section 1031 and inserting the fol- lowing new item: ?Sec. 1031. Exchange of real property held for productive use or investment?. EFFECTIVE (1) IN as otherwise pro- vided in this subsection, the amendments made by this section shall apply to exchanges completed after December 31, 2017. [?le 3 of 5] p?A v?tb?Ab?tr?t (plow-174 (2) TRANSITION amendments made by this section shall not apply to any exchange if? (A) the property disposed of by the tax- payer in the exchange is disposed of on or be- fore December 31 2017, or (B) the property received by the taxpayer in the exchange is received on or before Decem- ber 31, 2017. SEC. 13304. LINIITATION ON DEDUCTION BY EMPLOYERS OF EXPENSES FOR FRINGE BENEFITS. No DEDUCTION ALLOWED FOR ENTERTAINMENT (1) IN GENERAL. Section 274(a) is amend- ed? (A) in paragraph by striking ?un- less? 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) EONFORMING AMENDIVIENTS. (A) Section 274(d) is amended? [file 3 of 5] {p 175 by striking paragraph (2) and re- designating paragraphs (3) and (4) as paragraphs (2) and (3), respectively, and (ii) in the flush text following para? graph (3) (as so redesignated)? (I) by striking entertainment, amusement, recreation, or use of the facility or property,? in item (B), and (H) by striking the business relationship to the taxpayer of persons entertained, using the facility or prop- erty, or receiving the gift? and insert- ing the business relationship to the taxpayer of the person receiving the benefit?, (B) Section 274 is amended by striking subsection (1). (C) Section 274(n) is amended by striking in the heading. (D) Section 274(n)(1) is amended to read as follows: IN amount allowable as a deduction under this chapter for any expense for food or beverages shall not exceed 50 percent of the amount of such expense which would (but for this [file 3 of 5] S.L.176 paragraph) be allowable as a, deduction under this chapter. (E) Section 274(n)(2) is amended? in subparagraph (B), by striking ?in the case of an expense for food or bev- erages,?, (ii) by striking subparagraph (0) and redesignating subparagraphs (D) and (E) as subparagraphs (C) and (D), respec- tively, by striking ?of subparagraph the last sentence and inserting ?of subparagraph (D) and (iv) by striking ?in subparagraph in the last sentence and inserting ?in subparagraph (C) (F) Clause (iv) of section 7 701(b)(5)(A) is amended to read as follows: a professional athlete who is temporarily in the United States to com- pete in a sports event? which is organized for the primary purpose of benefiting an or? ganization which is described in sec- [?le 3 of 5] S.L.177 tion 501(c)(3) and exempt from tax under section 501(a), all of the net proceeds of which are contributed to such organi- zation, and, ?(111) which utilizes volunteers for substantially all of the work per- formed in carrying out such event?. ONLY 50 PERCENT OE EXPENSES FOR MEALS PROVIDED ON OR NEAR BUSINESS PREMISES ALLOWED AS (2) of section 274(11), as amended by subsection 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 in the last sentence and inserting ?of subparagraph and (4) by striking ?in subparagraph in the last sentence and inserting ?in subparagraph TREATMENT OF TRANSPORTATION Section 274, as amended by subsection is amended?? (1) in subsection [?le 3 of 5] S.L.C. 178 (A) in the heading, by striking and inserting OR QUALIFIED TRANSPORTATION and (B) by adding at the end the following new paragraph: QUALIFIED TRANSPORTATION 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 em- ployee of the taxpayer?, and (2) by inserting after subsection the fol- lowing new subsection: TRANSPORTATION AND COMMUTING BENE- 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?. ELIMINATION OF DEDUCTION FOR MEALS PRO- VIDED AT CONVENIENCE OF 27 4, as amended by subsection is amended?? (1) by redesignating subsection (0) as sub- section and [?le 3 of 5] S.L.inserting after subsection (11) the fol- lowing new subsection: MEALS PROVIDED AT CONVENIENCE OF EM- deduction shall be allowed under this chap- ter for?- SEC. any expense for the operation of a facility described in section 132(e)(2), and any expense for food or beverages, including under section 182(e)(1), associated with such facility, or any expense for meals described in section EFFECTIVE (1) IN as provided in para- graph (2), the amendments made by this section shall apply to amounts incurred or paid after De- cember 31, 2017. (2) EFFECTIVE DATE FOR ELIMINATION OF DE- DUCTION FOR MEALS PROVIDED AT CONVENIENCE OF amendments made by sub- section shall apply to amounts incurred or paid after December 31, 2025. 13305. REPEAL OF DEDUCTION FOR INCOME ATTRIB- UTABLE TO DOMESTIC PRODUCTION ACTIVI- TIES. [file 3 of 5] S.L.C. 180 (1) TAXPAYERs OTHER THAN CORPORA- TIONS.?Section 199 is amended by adding at the end the following new subsection: PARTIAL TERMINATION EOR OTHER THAN the case of a taxpayer other than a corporation, this section shall not apply to any taxable year beginning after December 31, 2017.?. (2) CERTAIN SPECIAL RULES FOR COOPERA- TIVES.?Section 199(d)(3) is amended by adding at the end the following new subparagraph: PARTIAL graphs (A) and (B) shall not apply to any tax- able year beginning after December 31, 2017.?. (3) TOTAL VI of subchapter of chapter 1, as amended by paragraphs (1) and (2), is amended by striking section 199 (and by striking the item relating to such section in the table of sec- tions for such part). CONFORMING (1) Sections 246(b)(1), and are each amended by striking [?le 3 of 5] S.L.C. 181 (2) Section as amended by sec- tion 11011, is amended by striking clause (iv) and by redesignating clauses (V) and (Vi) as redesig- nating clauses (iv) as clause (V), respectively. (3) Section 172(d) is amended by striking para- graph (7). (4) Section 613(a) is amended by striking ?and Without the deduction under section 199?. (5) Section 613A(d)(1) is amended by striking subparagraph (B) and by redesignating subpara- graphs (C), (D), and (E) as subparagraphs (B), (C), and (D). EFFECTIVE (1) IN as provided in para- graph (2), the amendments made by this section shall apply to taxable years beginning after Decem- ber 31, 2018. (2) EARLIER TERMINATION FOR CERTAIN TAX- amendment made by paragraphs (1) and (2) of subsection shall apply to taxable years beginning after December 31, 2017. SEC. 13306. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES, AND OTHER AMOUNTS. DENIAL OF [?GENERAL?Subsection of section 162 is amended to read as follows: FINES, PENALTIES, AND OTHER IN as provided in the following paragraphs of this subsection, no deduction otherwise allowable shall be allowed under this chap- ter 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 in- quiry by such government or entity into the potential violation of any law. EXCEPTION FOR AMOUNTS CONSTITUTING RESTITUTION OR PAID TO COME INTO COMPLIANCE WITH IN GENERAL?Paragraph (1) shall not apply to any amount that? the taxpayer establishes? constitutes restitution (in- cluding 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 is paid to come into compli- ance with any law which was violated [file 3 of 5] S.L.C. 183 or otherwise involved in the investiga- tion or inquiry described in paragraph (1), 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 in the case of any amount of restitution for failure to pay any tax im- posed 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 re- quired under clause 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. EXCEPTION FOR AMOUNTS PAID OR IN- CURRED AS THE RESULT OF CERTAIN COURT OR- DERS?Paragraph (1) shall not apply to any amount paid or incurred by reason of any order of [?le 3 of 5] S.L.C. 184 a court in a suit in which no government or govern- mental entity is a party. EXCEPTION FOR TAXES DUE?Paragraph (1) shall not apply to any amount paid or incurred as taxes due. TREATMENT OF CERTAIN NONGOVERN- MENTAL REGULATORY purposes of this subsection, the following nongovernmental enti- ties shall be treated as governmental entities: Any nongovernmental entity Which exercises self-regulatory powers (including im? posing sanctions) in connection with a qualified board or exchange (as defined in section 1256(g)(7)). To the extent proxided in regulations, any nongovernmental entity which exercises self-regulatory powers (including imposing sanc- tions) as part of performing an essential gov- ernmental function?. (2) EFFECTIVE amendment made by this subsection shall apply to amounts paid or in- curred 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 ex- [file 3 of 5] S.L.C. 185 ception shall not apply to an order or agreement re- quiring court approval unless the approval was ob- tained before such date. REPORTING or DEDUCTIBLE (1) IN of part of subchapter A of chapter 61 is amended by inserting after section 6050W'the following new section: 6050K. INFORMATION WITH RESPECT TO CERTAIN FINES, PENALTIES, AND OTHER AMOUNTS. REQUIREMENT OF IN 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? the amount required to be paid as a result of the suit or agreement to which para? graph (1) of section 162(f) applies, any amount required to be paid as a result of the suit or agreement which con- stitutes restitution or remediation of property, and any amount required to be paid as a result of the suit or agreement for the purpose [?le 3 of 5] S.L.C. 186 of coming into compliance with any law which was violated or involved in the investigation or inquiry. OR AGREEMENT IN suit or agreement is described in this paragraph if? it is? a suit with respect to a lation of any law over which the gov- ernment or entity has authority and with respect to which there has been a court order, or an agreement which is en- tered into with respect to a \iolation of any law over which the government or entity has authority, or with re- Spect to an investigation or inquiry by the government or entity into the po- tential violation of any law over which such government or entity has author- ity, and the aggregate amount involved in all court orders and agreements with re- spect to the violation, investigation, or in- quiry is $600 or more. [?le 3 of 5] S.L.C. 187 ADJUSTMENT OF REPORTING Secretary shall adjust the $600 amount in subparagraph as nec- essary in order to ensure the efficient adminis? tration of the internal revenue laws. TIME OF return required under this subsection shall be filed at the time the agreement is entered into, as determined by the Sec- retary. STATEMENTs To BE FURNISHED TO INDIVID- UALS INVOLVED IN THE person re- quired to make a return under subsection shall furnish to each person who is a party to the suit or agreement a written statement showing? the name of the government or entity, and the information supplied to the Secretary under subsection (1) . The written statement required under the preceding sen- tence shall be furnished to the person at the same time the government or entity provides the Secretary with the information required under subsection APPROPRIATE OFFICIAL pur- poses of this section, the term ?appropriate official? means the officer or employee having control of the suit, inves- [?le 3 of 5] S.L.C. 188 1 tigation, or inquiry or the person appropriately designated 2 for purposes of this section?. 3 (2) CONFORMING table of 4 sections for subpart of part of subchapter A 5 of chapter 61 is amended by inserting after the item 6 relating to section the following new item: ?Sec. 6050K. Information with respect to certain fines, penalties, and other amounts?. 7 (3) EFFECTIVE amendments made 8 by this subsection shall apply to amounts paid or in? 9 curred on or after the date of the enactment of this 10 Act, except that such amendments shall not apply to 11 amounts paid or incurred under any binding order 12 or agreement entered into before such date. Such ex- 13 ception shall not apply to an order or agreement re- 14 quiring court approval unless the approval was eb- 15 tained before such date. 16 SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS 17 SUBJECT TO NONDISCLOSURE AGREEMENTS 18 PAID IN CONNECTION WITH SEXUAL HARASS- 19 MENTOR SEXUAL ABUSE. 20 DENIAL OF 162 is amend- 21 ed by redesignating subsection as subsection and 22 by inserting after subsection the following new sub- 23 section: [file 3 of 5] S.L.C. 189 1 PAYMENTS RELATED TO SEXUAL HARASSMENT 2 AND SEXUAL deduction shall be allowed 3 under this chapter for?? 4 any settlement or payment related to sex- ual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or attorney?s fees related to such a settlement or payment?. EFFECTIVE amendments made by 10 this section shall apply to amounts paid or incurred after 11 the date of the enactment of this Act. 12 UNIFORM TREATMENT OF EXPENSES IN CON- 13 TINGENCY FEE CASES. 14 IN GENERAL. ??Section 162, as amended by sec? 15 tion 13307, is amended by 1edesignating subsection as 16 subsection (s and by 111se1t1ng after subsection the 17 following new subsection: 18 EXPENSES IN CONTINGENCY FEE CASES. ??No 19 deduction slia??be allowed under subsection to a tax? 20 payer for [any expense? 2 21 paid or incurred in the course of the trade 22 or business of practicing law, and 23/ resulting from a case for which the tax? 24 payer is compensated primarily 011 a contingent 25 basis, [file 3 of 5] sno. 190 JSVIKB until such tin 2 such contingeVlv?d?? EFFECTIVE amendment made by this section shabappl do ?jpenses and costs paid or in- curred in tax years beginnin after the date of the en- actmentp this Act. ., SEC. 13309. REPEAL OF DEDUCTION FOR LOCAL LOBBYING EXPENSES. IN 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. CONFORMING 6083(e)(1)(B)(ii) is amended by striking ?section 1 62 (5) (E) (ii) and inserting ?section EFFECTIVE amendments made by this section shall apply to amounts paid or incurred on or after the date of the enactment of this Act. SEC. 13310. RECHARACTERIZATION OF CERTAIN GAINS IN THE CASE OF PARTNERSHIP PROFITS INTER- ESTS HELD IN CONNECTION WITH PERFORM- ANCE OF INVESTMENT SERVICES. IN IV of subchapter of chap- ter 1 is amended? [file 3 of 5] S.L.redesignating section 1061 as section 1062,and (2) by inserting after section 1060 the following new section: 1061. PARTNERSHIP INTERESTS HELD IN CONNEC- TION WITH PERFORMANCE OF SERVICES. IN one or more applicable part- nership interests are held by a taxpayer at any time during the taxable year, the excess (if any) of? the taxpayer?s net long-term capital gain With respect to such interests for such taxable year, over 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 sec- tions 1222 by substituting ?3 years? for ?1 year?, shall be treated as short-term capital gain, notwith- standing section 83 or any election in effect under section 83(b). SPECIAL the extent provided by the Secretary, subsection shall not apply to income or gain attributable to any asset not held for portfolio investment on behalf of third party investors. APPLICABLE PARTNERSHIP purposes of this section? [file 3 of 5] S.L.provided in this paragraph or paragraph (4), the term ?applicable partnership interest? means any interest in a part? nership which, directly or indirectly, is transferred to (or is held by) the taxpayer in connection with the performance of substantial serxices 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 an- other entity that is conducting a trade or business (other than an applicable trade or business) and only provides services to such other entity. APPLICABLE TRADE OR term ?applicable trade or business? means any activ- ity conducted on a regular, continuous, and substan- tial basis which, regardless of whether the activity is conducted in one or more entities, consists, in whole or in part, of? raising or returning capital, and either? investing in (or disposing of) specified assets (or identifyng speci?ed as- sets for such investing or disposition), or developing speci?ed assets. [file 3 of 5] S.L.C. 193 SPECIFIED term ?speci?ed asset? means securities (as defined in section 475(c)(2) Without regard to the last sentence there- of), commodities (as defined in section 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 pro- portionate interest in any of the foregoing. term ?applicable part- nership interest? shall not include any interest in a partnership directly or indirectly held by a corporation, or any capital interest in the partner- ship which prow'des the taxpayer With a right to share in partnership capital commensurate the amount of capital contributed (determined at the time of receipt of such partnership interest), or the value of such interest subject to tax under section 83 upon the receipt or vesting of such interest. THIRD PARTY term ?third party investor? means a person Who? [?le 3 of 5] S.L.C. 194 holds an interest in the partnership which does not constitute property held in con- nection with an applicable trade or business; and is not (and has not been) actively en- gaged, 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. TRANSFER OF APPLICABLE PARTNERSHIP IN- TEREST TO RELATED PERSON. IN 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? so much of the taxpayer?s long-term capital gains with respect to such interest for such taxable year attributable to the sale or ex- change of any asset held for not more than 3 years as is allocable to such interest, over any amount treated as Short term capital gain under subsection vn'th respect to the transfer of such interest. [?le 3 of 5] S.L.C. 22 23 24 195 RELATED purposes of this paragraph, a person is related to the taxpayer if? the person is a member of the tax- payer?s family within the meaning of section 318(a)(1), or the person performed a service within the current calendar year or the preceding three calendar years in any applicable trade or busi- ness in which or for which the taxpayer per? formed a service. 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. Secretary shall issue such regulations or other guidance as is necessary or appro- priate to carry out the purposes of this section?. CLERICAL table of sections for part IV of subchapter of chapter 1 is amended by striking the item relating to 1061 and inserting the fol- lowing new items: ?Sec. 1061. Partnership interests held in connection m'th performance of serv- ices. ?Sec. 1062. Cross references?. EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2017. [?le 3 of 5] S.L.196 SEC. 13311. PROHIBITION ON CASH, GIFT CARDS, AND OTHER NON-TANGIBLE PERSONAL PROPERTY AS EMPLOYEE ACHIEVEMENT AWARDS. IN GENERAL.?Subparagraph (A) of section 2 74(j (3) is amended? (1) by striking ?The term? and inserting the following: IN GENERAL. The term?. (2) by redesignating clauses and as subclauses (I), (II), and respectively, and con- forming the margins accordingly, and (3) by adding at the end the following new clause: TANGIBLE PERSONAL PROP- purposes of clause the term ?tangible personal property? shall not include? 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 lim- ited array of such items pre-selected or pre-approved by the employer), or vacations, meals, lodging, tickets to theater or sporting events, [file 3 of 5] S.L.C. by section 13301, is amended 197 stocks, bonds, other securities, and other similar items?. EFFECTIVE amendments made by this section shall apply to amounts paid or incurred after December 31, 2017. SEC. 13312. FLOOR PLAN FINANCING. APPLICATION OF INTEREST (1) IN 163(j), as amended (A) in paragraph (1), by striking ?plus? at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and in- serting plus?, and by inserting after subpara- graph (B) the following new subparagraph: the ?oor plan ?nancing interest of such taxpayer for such taxable year.?, and (B) in paragraph by inserting reduced by the floor plan financing interest,? after ?business interest of the partnership?, and (C) by redesignating paragraph (9) as paragraph (10) and inserting after paragraph (8) the following new paragraph: FLOOR PLAN FINANCING INTEREST DE- purposes of this subsection? [?le 3 of 5] S.L.C. 198 IN term ?floor plan financing interest? means interest paid or ac- crued on floor plan financing indebtedness. FLOOR PLAN FINANCING INDEBTED- term ?floor plan financing indebt- edness? means indebtedness?? used to finance the acquisition of motor vehicles held for sale or lease, and secured by the inventory so ac- quired. MOTOR term ?motor vehicle? means a motor vehicle that is any of the following: (4 i) An automobile. 11) A truck. A recreational vehicle. (iv) A v) Any self-propelled vehicle de- signed for transporting persons or property on a public street, highway, or road. A boat. ?(vii) Farm machinery or equip- ment.?. [?le 3 of 5] S.L.C. 199 1 (2) EFFECTIVE amendments made 2 by this subsection shall apply to taxable years begin- 3 ning after December 31, 2017. 4 EXCEPTION FROM 100 PERCENT 5 (1) IN GENERAL.?Paragraph (6) of section 6 168(k), as added by section 13201(a)(4), is amend- 7 ed 8 (A) by striking ?shall not include any 9 property? and inserting ?shall not include-? 10 any property?, and 11 (B) by adding at the end the following new 12 subparagraph: 13 any property used in a trade or busi- 14 ness that has had floor plan financing indebted- 15 ness (as defined in paragraph (9) of section 16 1636)), if the floor plan financing interest re- 17 lated to such indebtedness was taken into ac- 18 count under paragraph of such section?. 19 (2) EFFECTIVE amendments made 20 by this subsection shall apply to property placed in 21 service after September 27, 2017, in taxable years 22 ending after such date. [file 3 of 5] S.L.C. 200 SEC. 13313. ELIMINATION OF DEDUCTION FOR LIVING EX- PENSES INCURRED BY MEMBERS OF CON- GRESS. IN GENERAL?Subsection of section 162 is amended in the matter following paragraph (3) by striking ?in excess of $3,000?. EFFECTIVE amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act. PART CREDITS Subpart A?General Provisions SEC. 13401. MODIFICATION OF ORPHAN DRUG CREDIT. CREDIT RATE?Subsection of section 45C is amended by striking ?50 percent? and inserting ?27.5 percent?. ELECTION OF REDUCED CREDIT?Subsection of section 280C is amended by redesignating para- graph (3) as paragraph (4) and by inserting after para- graph (2) the following new paragraph: ELECTION OF REDUCED IN the case of any taxable year for which an election is made under this paragraph? paragraphs (1) and (2) shall not apply, and [?le 3 of 5] S.L.C. 201 the amount of the credit under section 45C(a) shall be the amount deter- mined under subparagraph (B). AMOUNT OF REDUCED amount of credit determined under this sub- paragraph for any taxable year shall be the amount equal to the excess of? the amount of credit determined under section 450(a) Without regard to this paragraph, over the product of? the amount described in clause and the maximum rate of tax under section 11(b). 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 irrev- ocable.?. [?le 3 of 5] {a 202 EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31,2017. SEC. 13402. REHABILITATION CREDIT LIMITED TO CER- TIFIED HISTORIC STRUCTURES. IN GENERAL?Subsection of section 47 is amended to read as follows: GENERAL IN purposes of section 46, for any taxable year during the 5-year period begin? ning in the taxable year in which a quali?ed reha- bilitated building is placed in service, the rehabilita- tion credit for such year is an amount equal to the ratable share for such year. RATABLE purposes of para- graph (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 rehabili- tation expenditures With respect to the quali?ed re- habilitated building, as allocated ratably to each year during such period. CONFORMING (1) Section 47(c) is amended? (A) in paragraph [?le 3 of 5] S.L.C. 203 in subparagraph (A), by amending clause to read as follows: such building is a certified his- toric structure, and?, (ii) by striking subparagraph (B), and by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively, and (B) in paragraph by amending clause (iv) to read as follows: CERTIFIED HISTORIC STRUC- expenditure attributable to the rehabilitation of a qualified rehabili- tated building unless the rehabilitation is a certi?ed rehabilitation (within the meaning of subparagraph (2) Paragraph (4) of section 145(d) is amend? ed? (A) by striking ?of section each place it appears and inserting ?of section and (B) by striking ?section and inserting ?section EFFECTIVE [?le 3 of 5] S.L.C. 204 (1) IN as provided in para- graph (2), the amendments made by this section shall apply to amounts paid or incurred after De? cember 31, 2017. (2) TRANSITION the case of quali- ?ed rehabilitation expenditures with respect to any building?? (A) owned or leased by the taxpayer dur- ing the entirety of the period after December 31,2017,and (B) with respect to Which the 24-month period selected by the taxpayer under section of the Internal Revenue Code of 1986 (as amended by subsection begins not later than 180 days after the date of the enact- ment 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 re- ferred to in subparag'raph (B) ends. SEC. 13403. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE. IN [file 3 of S.L.C. 205 1 (1) ALLOWANCE OF of 2 part IV of subchapter A of chapter 1 is amended by 3 adding at the end the following new section: 4 45S. EMPLOYER CREDIT FOR PAID FAMILY AND MED- 5 ICAL LEAVE. 6 ESTABLISHMENT OF 7 IN purposes of section 38, 8 in the ease of an eligible employer, the paid family 9 and medical leave credit is an amount equal to the 10 applicable percentage of the amount of wages paid 11 to qualifying employees during any period in which 12 such employees are on family and medical leave. 13 APPLICABLE purposes 14 of paragraph (1), the term ?applicable percentage? 15 means 12.5 percent increased (but not above 25 per- 16 cent) by 0.25 percentage points for each percentage 17 point by which the rate of payment (as described 18 under subsection exceeds 50 percent. 19 2O IN credit allowed under 21 subsection with respect to any employee for any 22 taxable year shall not exceed an amount equal to the 23 product of the normal hourly wage rate of such em? 24 ployee for each hour (or fraction thereof) of actual 25 services performed for the employer and the number [?le 3 of 5] S.L.C. 206 1 of hours (or fraction thereof) for which family and 2 medical leave is taken. 3 NON-HOURLY WAGE purposes 4 of paragraph (1), in the case of any employee who 5 is not paid on an hourly wage rate, the wages of 6 such employee shall be prorated to an hourly wage 7 rate under regulations established by the Secretary. 8 MAXIMUM AMOUNT OF LEAVE SUBJECT TO 9 amount of family and medical leave 10 that may be taken into account with respect to any 11 employee under subsection for any taxable year 12 shall not exceed 12 weeks. 13 ELIGIBLE purposes of this 14 section? 15 IN term ?eligible em- 16 ployer? means any employer who has in place a pol? 17 icy that meets the following requirements: 18 The policy provides?? 19 in the ease of a qualifying em- 20 ployee who is not a part-time employee (as 21 defined in section not 22 less than 2 weeks of annual paid family 23 and medical leave, and 24 in the ease of a qualifying em? 25 ployee who is a part-time employee, an [file 3 of 5] S.L.C. r?ac?AHr?ti?Ar?tv?tb-ar?Av?t 2O 21 22 23 24 207 amount of annual paid family and medical leave that is not less than an amount which bears the same ratio to the amount of annual paid family and medical leave that is provided to a qualifying employee described in clause as? the number of hours the em- ployee is expected to work during any week, bears to the number of hours an equivalent qualifying employee de- scribed in clause is expected to work during the week. The policy requires that the rate of payment under the program is not less than 50 percent of the wages normally paid to such em- ployee for services performed for the employer. SPECIAL RULE FOR CERTAIN EMPLOY- IN added employer shall not be treated as an eligible employer un- less sueh employer provides paid family and medical leave in compliance with a policy Which ensures that the employer [?le 3 of 208 1 will not interfere with, restrain, 2 or deny the exercise of or the attempt to 3 exercise, any right provided under the pol? 4 icy, and 5 Will not discharge or in any other 6 manner discriminate against any individual 7 for opposing any practice prohibited by the 8 policy. 9 ADDED ADDED EM- 10 purposes of this paragraph? 11 ADDED term 12 ?added employee? means a qualifying em- 13 ployee who is not covered by title I of the 14 Family and Medical Leave Act of 1993, as 15 amended. 16 ADDED term 17 ?added employer? means an eligible em- 18 ployer (determined Without regard to this 19 paragraph), whether or not covered by that 20 title I, who offers paid family and medical 21 leave to added employees. 22 AGGREGATION persons which 23 are treated as a single employer under subsections 24 and of section 52 shall be treated as a single 25 taxpayer. [?le 3 of 5] S.L.C. 209 1 TREATMENT OF BENEFITS MANDATED OR 2 PAID FOR BY STATE OR 3 purposes of this section, any leave which is paid by 4 a State or local government or required by State or 5 local law shall not be taken into account in deter? 6 mining the amount of paid family and medical leave 7 provided by the employer. 8 No in this sub- 9 section shall be construed as subjecting an employer 10 to any penalty, liability, or other consequence (other 11 than ineligibility for the credit allowed by reason of 12 subsection or recapturing the benefit of such 13 credit) for failure to comply with the requirements 14 of this subsection. 15 QUALIFYING purposes of 16 this section, the term ?qualifying enIployee? means any em- p?l ployee (as defined in section 3(e) of the Fair Labor Stand- h?i 00 ards Act of 1938, as amended) who? 19 has been employed by the employer for 1 20 year or more, and 21 for the preceding year, had compensation 22 not in excess of an amount equal to 60 percent of 23 the amount applicable for such year under clause 24 of section 25 FAMILY AND MEDICAL [?le 3 of 5] S.L.C. 210 IN as provided in para- graph (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 para- graph (3), of section 102(a) of the Family and Med- ical Leave Act of 1993, as amended, whether the leave is provided under that Act or by a policy of the employer. 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 that paid leave shall not be considered to be family and medical leave under paragraph (1). 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. DETERMINATIONS MADE BY SECRETARY OF purposes of this section, any determina- tion as to Whether an employer or an employee satisfies the applicable requirements for an eligible employer (as described in subsection or qualifying employee (as de- scribed in subsection respectively, shall be made by [?le 3 of 5] S.L.C. 211 the Secretary based on such information, to be provided by the employer, as the Secretary determines to be nec- essary or appropriate. purposes of this section, the term ?wages? has the meaning given such term by subsection of section 3306 (determined without regard to any dol- lar 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 sub- part. ELECTION TO HAVE CREDIT NOT IN taxpayer may elect to have this section not apply for any taxable year. OTHER similar to the rules of paragraphs (2) and (3) of section 51(j) shall apply for purposes of this subsection. section shall not apply to wages paid in taxable years beginning after December 31, 2019.?. CREDIT PART OF GENERAL BUSINESS 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: [file 3 of 5] S.L.C. 212 22 in the case of an eligible employ (as de? fined in section 458(c)), the paid family and medical leave credit determined under section CREDIT ALLOWED AGAINST AMT.?Subpara- graph (B) of section 238(c)(4) is amended by redesignating clauses (ix) through (Xi) as clauses (X) through (xii), re- spectively, and by inserting after clause the following new clause: the credit determined under sec- tion 458,?. EONFORMING (1) DENIAL OF DOUBLE is amended by inserting after (2) ELECTION TO HAVE CREDIT NOT Section 6501(m) is amended by inserting ?45801),? after (3) CLERICAL table of sec? tions for subpart of part IV of subchapter A of chapter 1 is amended by adding at the end the fol- lowing new item: ?Sec. 458. Employer credit for paid family and medical leave?. EFFECTIVE amendments made by 23 this section shall apply to wages paid in taxable years be- 24 ginning after December 31, 2017. [file 3 of 5] S.L.C. 213 Subpart B?Provisions Relating to Low-income Housing Credit SEC. 13411. TREATMENT OF PREFERENCE AS NOT VIOLATING GENERAL PUBLIC USE RE- QUIREMENTS. IN GENERAL.?Subparagraph (C) of section 42(g)(9) is amended to read as follows: who are veterans of the Armed Forces?. EFFECTIVE amendment made by this section shall apply to buildings placed in service be- fore, on, or after the date of the enactment of this Act. SEC. 13412. INCREASE IN CREDIT FOR CERTAIN RURAL HOUSING. IN is amended by adding at the end the following new clause: CERTAIN NEW BUILDINGS IN purposes of clause a building described in subsection which is located in a rural area (as defined in section 520 of the Housing Act of 1949) shall be treated in the same manner as a new building located in a difficult development area which is designated for purposes of this subpara- graph. [file 3 of 5] S.L.C. m-thr??ocooqom-hwwv?o 214 is amended by striking ?130 percent? both places it appears in sub- clauses (I) and (II) and inserting ?125 percent?. EFFECTIVE amendments made by this section shall apply to buildings placed in service after the date of the enactment of this Act. PART 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 IN- TERESTS IN PARTNERSHIPS ENGAGED IN TRADE OR BUSINESS WITHIN THE UNITED STATES. IN 864(c) is amended by adding at the end the following: GAIN OR LOSS OF FOREIGN PERSONS FROM SALE OR EXCHANGE OF CERTAIN PARTNER- IN any other provision of this subtitle, if a nonresident alien individual or foreign corporation owns, di- rectly or indirectly, an interest in a partnership which is engaged in any trade or business with- in the United States, gain or loss on the sale [?le 3 of 5] S.L.C. 215 or exchange of all (or any portion of) such in- terest 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). AMOUNT TREATED AS EFFECTIVELY amount determined under this subparagraph with respect to any partner- ship interest sold or exchanged? in the case of any gain on the sale or exchange of the partnership inter- est, is? 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 zero if no gain on such deemed sale would have been so effec- tively connected, and [?the case of any loss on the 2 sale or exchange of the partnership inter- 3 est, is? 4 the portion of the partner?s 5 distributive share of the amount of 6 loss on the deemed sale described in 7 clause which would have been so 8 effectively connected, or 9 zero if no loss on such 10 deemed sale would be have been so ef- 11 fectively connected. 12 For purposes of this subparagraph, a part- 13 ner?s distributive share of gain or loss on 14 the deemed sale shall be determined in the 15 same manner as such partner?s distributive 16 share of the non-separately stated taxable 17 income or loss of such partnership. 18 COORDINATION WITH UNITED STATES 19 REAL PROPERTY a partnership 20 described in subparagraph (A) holds any United 21 States real property interest (as defined in sec- 22 tion 897(c)) at the time of the sale or exchange 23 of the partnership interest, then the gain or loss 24 treated as effectively connected income under 25 subparagraph (A) shall be reduced by the [?le 3 of 5] S.L.C. 217 1 amount so treated with respect to such United 2 States real property interest under section 897. 3 SALE OR purposes 4 of this paragraph, an individual or corporation 5 shall be treated as having sold or exchanged 6 any interest in a partnership if, under any pro- 7 Vision of this subtitle, gain or loss is realized 8 from the sale or exchange of such interest. 9 SECRETARIAL Sec- 10 retary shall prescribe such regulations as the 11 Secretary determines appropriate for the appli- 12 cation of this paragraph, including regulations 13 which provide that, notwithstanding subpara- 14 graph (D), this paragraph applies in a case 15 even if gain or loss from a sale or exchange 16 would not be realized under any other provision 17 of this subtitle?. 18 WITHHOLDING 1446 19 is amended by redesignating subsection as subsection 20 and by inserting after subsection the following: 21 SPECIAL RULES FOR WITHHOLDING ON SALES 22 OF PARTNERSHIP INTERESTS. 23 IN as provided in this 24 subsection, if any portion of the gain (if any) 011 any 25 disposition of an interest in a partnership would be [file 3 of 5] S.L.C. 218 treated under section 864(c)(8) as effectively con- nected with the conduct of a trade or business with- in 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. EXCEPTION IF NONFOREIGN AFFIDAVIT IN person shall be re- quired to deduct and withhold any amount under paragraph (1) with respect to any dis- position if the transferor furnishes to the trans- feree an af?davit by the transferor stating, under penalty of perjury, the transferor?s United States taxpayer identi?cation number and that the transferor is not a foreign person. AFFIDAVIT.??Subpa.ragraph (A) shall not apply to any disposition if? the transferee has actual knowl- edge that the affidavit is false, or the transferee receives a notice (as described in section l445(d)) from a transferor?s agent or transferee?s agent that such af?davit or statement is false, or the Secretary by regulations re- quires the transferee to furnish a copy of [?le 3 of 5] S.L.C. 219 such affidavit or statement to the Sec- retary 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. RULES FOR rules of section 1445(d) shall apply to a transferor?s agent or transferee?s agent m'th 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 prop- erty interest under such section. AUTHORITY OF SECRETARY TO PRESCRIBE REDUCED the request of the trans- feror or transferee, the Secretary may prescribe a reduced amount to be withheld under this section if the Secretary determines that to substitute such re? duced 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 con- nected with the conduct of a trade or business with in the United States. PARTNERSHIP TO WITHHOLD AMOUNTS NOT WITHHELD BY THE a trans- feree fails to withhold any amount required to be [file 3 of 5] S.L.C. 220 withheld under paragraph (1), the partnership shall be required to deduct and withhold from distribu- tions 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). term used in this sub- section which is also used under section 1445 shall have the same meaning as when used in such sec- tion. Secretary shall pre- scribe such regulations as may be necessary to carry out the purposes of this subsection, including regula- tions providing for exceptions from the provisions of this subsection?. EFFECTIVE amendments made by this section shall apply to sales and exchanges on or after November 27, 2017. SEC. 13502. MODIFY DEFINITION OF SUBSTANTIAL BUILT-IN LOSS IN THE CASE OF TRANSFER OF PART- NERSHIP INTEREST. IN GENERAL.?Paragraph (1) of section 743(d) is to read as follows: IN purposes of this sec- tion, a partnership has a substantial built-in loss [?le 3 of 5] S.L.221 with respect to a transfer of an interest in the part- nership if? the partnership?s adjusted basis in the partnership property exceeds by more than $250,000 the fair market value of such prop- erty, or the transferee partner would be allo- cated a loss of more than $250,000 if the part? nership assets were sold for cash equal to their fair market value immediately after such trans- fer?. EFFECTIVE amendments made by this section shall apply to transfers of partnership inter- ests after DeCember 31, 2017. SEC. 13503. CHARITABLE CONTRIBUTIONS AND FOREIGN TAXES TAKEN INTO ACCOUNT IN DETER- MINING LIMITATION ON ALLOWANCE OF SHARE OF LOSS. IN GENERAL. Subsection of section 704 is amended? (1) by striking partner?s distributive share? and inserting the following: IN partner?s distributive share?, [?le 3 of 5] S.L.C. 18 222 (2) by striking ?Any excess of such loss? and inserting the following: excess of such loss?, and (3) by adding at the end the following new paragraph: SPECIAL RULES. IN determining the amount of any loss under paragraph (1), there shall be taken into account the partner?s dis- tributive share of amounts described in para- graphs (4) and (6) of section 702(a). the case of a chari- table contribution of property whose fair mar- ket value exceeds its adjusted basis, subpara- graph (A) shall not apply to the extent of the partner?s distributive share of such excess?. EFFECTIVE DATE. The amendments made by 19 this section shall apply to partnership taxable years begin- 20 11ng after December 31, 2017. [file 3 of 5] 223 1 Subpart B?Insurance Reforms 2 SEC. 13511. NET OPERATING LOSSES OF LIFE INSURANCE 3 COMPANIES. 4 IN 805(b) is amended by 5 striking paragraph (4) and by redesignating paragraph 6 (5) as paragraph (4). 7 CONFORMING 8 (1) Part I of subchapter of chapter 1 is 9 amended by striking section 810 (and by striking 10 the item relating to such section in the table of sec-' 11 tions for such part). 12 Part of subchapter of chapter 1 is 13 amended by striking section 844 (and by striking 14 the item relating to such section in the table of sec- 15 tions for such part). 16 (B) Section 831(b)(3) is amended by striking 17 ?except as provided in section 844,? 18 (3) Section 381 is amended by striking sub- 19 section 20 (4) Section 805(a)(4)(B)(ii) is amended to read 21 as follows: 22 the deduction allowed under sec- 23 tion 172,?. 24 (5) Section 805(a) is amended by striking para- 25 graph (5). [?le 3 of 5] S.L.C. 224 (6) Section 805(b)(2)(A)(iv) is amended to read as follows: 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: So much of section 805(a)(8) as re- lates to the deduction allowed under section 172.?. (8) Section 1351(i)(3) is amended by striking ?or the operations loss deduction under section 810,?. 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. IN I of subchapter of chapter 1 is amended by striking section 806 (and by striking the item relating to such section in the table of sections for such part). CONFORMING (1) Section 453B(e) is amended? [file 3 of 5] S.L.C. 225 (A) by striking ?(as defined in section in paragraph and (B) by adding at the end the following new paragraph: NONINSURANCE IN purposes of this subsection, the term ?noninsurance business? means any activity which is not an insurance business. 3ERTAIN ACTIVITIES TREATED AS IN- SURANCE purposes of sub- paragraph (A), any activity which is not an in- surance business shall be treated as an insur- ance business if? it is of a type traditionally carried on by life insurance companies for invest- ment 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 it involves the performance of ad- ministrative services in connection with plans providing life insurance, pension, or accident and health benefits?. [?le 3 of 5] S.L.C. 226 (2) Section is amended by striking ?section 806(b)(3)? and inserting ?section (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 as amended by this Act, is amended by striking clause and by redes- ignating clauses and (iv) as clauses and respectively. (6) Section as amended by this Act, is amended by striking clause and by redes- ignating clauses (iv) and as clauses and respectively. (7) Section 842(0) is amended by striking para- graph (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. [file 3 of 5] S.L.227 EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 13513. ADJUSTMENT FOR CHANGE IN COMPUTING RE- SERVES. IN GENERAL?Paragraph (1) of section 807(f) is amended to read as follows: TREATMENT AS CHANGE IN METHOD OF the basis for determining any item referred to in subsection as of the close of any taxable year differs from the basis for such deter- mination as of the close of the preceding taxable year, then so much of the difference between the amount of the item at the close of the taxable year, computed on the new basis, and 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 tax- able 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?. [?le 3 of S.L.C. 228 EFFECTIVE 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 POLICY- HOLDERS SURPLUS ACCOUNT. IN of part I of subchapter is amended by striking section 815 (and by striking the item relating to such section in the table of sections for such subpart). CONFORMING 801 is amended by striking subsection EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2017. I PHASED INCLUSION OF REMAINING BALANCE OF POLICYHOLDERS SURPLUS the case of any stock life insurance company which has a balance (de- termined as of the close of such company?s last taxable year beginning before January 1, 2018) in an existing pol- icyholders 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, [file 3 of 5] S.L.C. 229 1 2017, shall be the amount which would be imposed by 2 such section for such year on the sum of? 3 (1) life insurance company taxable income for 4 such year (Within the meaning of such section 801 5 but not less than zero), plus 6 (2) 1/8 of such balance. ,7 SEC. 13515. MODIFICATION OF PRORATION RULES FOR 8 PROPERTY AND CASUALTY INSURANCE COM- 9 PANIES. 10 IN 832(b)(5)(B) is amend- 11 ed 12 (1) by striking ?15 percent? and inserting ?the 13 applicable percentage?, and 14 (2) by inserting at the end the following new 15 sentence: ?For purposes of this subparagraph, the 16 applicable percentage is 5.25 percent diw'ded by the 17 highest rate in effect under section 18 EFFECTIVE amendments made by 19 this section shall apply to taxable years beginning after 20 December 31, 2017. 21 SEC. 13516. REPEAL OF SPECIAL ESTIMATED TAX PAY- 22 MENTS. 23 IN of subchapter of chap- 24 ter 1 is amended by striking section 847 (and by striking [?le 3 of 5] S.L.C. 230 1 the item relating to such section in the table of sections 2 for such part). 3 EFFECTIVE amendments made by 4 this section shall apply to taxable years beginning after 5 December 31, 2017. 6 SEC. 13517. COMPUTATION OF LIFE INSURANCE TAX RESERVES. IN (1) COMPUTATION OF 807 is amended to read as follows: ITEMS 0mm items re? 12 ferred to in subsections . nd are as follows? The life inSurance reserves (as de?ned in section 816(b)). The unearned premiums and unpaid losses included in total reserves under section 816(c)(2). The amounts (discounted at the appro? priate rate of interest) necessary to satisfy the obli- gations under insurance and annuity contracts, but only if such obligations do not involve (at the time with respect to which the computation is made under this paragraph) life, accident, or health contin- gencies. [?le 3 of SI S.L.C. 231 Dividend accumulations, and other amounts, held at interest in connection with insur- ance and annuity contracts. Premiums received in advance, and liabil? ities for premium deposit funds. Reasonable special contingency reserves under contracts of group term life insurance or group accident and health insurance which are es- tablished and maintained for the provision of insur- ance on retired lives, for premium stabilization, or a combination thereof. For purposes of paragraph (3), the appropriate rate of interest is the highest rate or rates permitted to be used to discount the obligations by the National Association of Insurance Commissioners as of the date the reserve is de- termined. In no case shall the amount determined under paragraph (3) for any contract be less than the net sur- render value of such contract. For purposes of paragraph (2) and section 805(a)(1), the amount of the unpaid losses (other than losses on life insurance contracts) shall be the amount of the discounted unpaid losses as defined in sec- tion 846.?. (2) Section 807(d) is amended? (A) by striking paragraphs (1), (2), (4), and (5), [?le 3 of 5] S.L.C. 232 (B) by redesignating paragraph (6) as paragraph (4), i (C) by inserting before paragraph (3) the following new paragraphs: DETERMINATION OF IN purposes of this part (other than section 816), the amount of the life insurance reserves for any contract (other than a contract to Which subparag'raph (B) applies) shall be the greater of? the net surrender value of such contract, or 92.87 percent of the reserve de- termined under paragraph (2). VARIABLE pur- poses of this part (other than section 816), the amount of the life insurance reserves for a vari- able contract shall be equal to the sum of? the greater of? the net surrender value of such contract, or the portion of the reserve that is separately accounted for under section 817, plus [?le 3 of 5} S.L.C. 233 92.87 percent of the excess (if any) of the reserve determined under para- graph (2) over the amount in clause STATUTORY no event shall the reserves determined under subparagraphs (A) or (B) for any contract as of any time ex- ceed the amount which would be taken into ac- count vm'th respect to such contract as of such time in determining statutory reserves (as de- fined in paragraph AMOUNT OF 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 ?(as of the date of issuance)? in paragraph and in- serting ?(as of the date the reserve is deter- mined)?, (E) by striking ?as of the date of the issuance of? in paragraph and in- serting ?as of the date the reserve is deter- mined for?, (F) by striking ?in effect on the date of the issuance of the contract? in paragraph and inserting ?applicable to the con- [file 3 of 5] S.L.C. 234 tract and in effect as of the date the reserve is determined?, and (G) by striking ?in effect on the date of the issuance of the contract? in paragraph and inserting ?applicable to the con- tract and in effect as of the date the reserve is determined?. (3) Section 807(e) is amended-? (A) by striking paragraphs (2) and (5), (B) by redesignating paragraphs (3), (4), (6), and (7) as paragraphs (2), (3), (4), and (5), respectively, (C) by amending paragraph (2) (as so re- designated) to read as follows: QUALIFIED SUPPLEMENTAL QUALIFIED SUPPLEMENTAL BENE- FITS TREATED purposes of this part, the amount of the life insurance re- serve for any qualified supplemental benefit shall be computed separately as though such benefit were under a separate contract. QUALIFIED SUPPLEMENTAL BEN- purposes of this paragraph, the term ?qualified supplemental benefit? means any [?le 3 of 5] 235 supplemental benefit described in subparagraph (C) if? there is a separately identified premium or charge for such benefit, and any net surrender value under the contract attributable to any other ben- efit is not available to fund such benefit. SUPPLEMENTAL purposes of this paragraph, the supplemental benefits described in this subparagraph are any? guaranteed insurability, accidental death or disability benefit, convertibility, disability waiver benefit, or other benefit prescribed by regu- lations, which is supplemental to a contract for which there is a reserve described in subsection and (D) by adding at the end the following new paragraph: REPORTING Secretary shall require reporting (at such time and in such manner [?le 3 of 5] S.L.C. v?tr?tr?Ar?At?tt?t MAWNHO 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) Section 7702 is amended? (A) by striking clause of subsection and inserting the following: reasonable mortality charges which meet the requirements prescribed in regulations to be promulgated by the Sec- retary or that do not exceed the mortality charges Specified in the prevailing commis- sioners? standard tables as defined in sub- section and (B) by adding at the end of subsection the follovm'ng new paragraph: PREVAILING STANDARD purposes of subsection the term ?prevailing commissioners? standard tables? means the most recent commissioners? standard ta- bles prescribed by the National Association of Insur- ance 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 commis- [?le 3 of 5] S.L.237 sioners? 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 cmnmissioners? standard ta- bles 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 be- ginning on the first day of the year of change?. (In) CONFORMING (1) Section 808 is amended by adding at the end the following new subsection: PREVAILING STATE ASSUMED INTEREST purposes of this subchapter? IN term ?prevailing State assumed interest rate? means, with respect to any contract, the highest assumed interest rate per- mitted to be used in computing life insurance re- serves 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 sen- tence, the effect of nonforfeiture laws of a State on interest rates for reserves shall not be taken into ac- count. [?le 3 of 5] S.L.C. 238 WHEN RATE pre- vailing 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 as- sumed interest rate or applicable Federal interest rate in effect under section 807? and inserting ?the interest rate in effect under section (3) Subparagraph (A) of section 846(f)(6) is amended by striking ?except that? and all that fol- lows and inserting ?except that the limitation of subsection shall apply, and?. (4) Subparagraph (B) of section 954(i)(5) is amended by striking ?shall apply, and?. EFFECTIVE (1) IN amendments made by this section shall apply to taxable years beginning after December 31, 2017. (2) TRANSITION the first taxable year beginning after December 31, 2017, the reserve with respect to any contract (as determined under section 807(d)(2) of the Internal Revenue lode of 1986) at the end of the preceding taxable year shall [?determined as if the amendments made by this section had applied to such reserve in such preceding taxable year. (3) TRANSITION (A) IN the reserve determined under sec- tion 807(d)(2) of the Internal Revenue Code of 1986 (determined Without regard to the amendments made by this section) with respect to any contract as of the close of the year preceding the ?rst 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 and the amount of the reserve described in clause (ii) shall be taken into account under the method provided in subparagraph (B). (B) method provided in this subparagraph is as follows: [?le 3 of 5] S.L.C. 240 If the amount determined under subparagraph exceeds the amount determined under subparagraph 1/ 8 of such excess shall be taken into ac- count, 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 exceeds the amount determined under subparagraph 1/8 of such excess shall be included in gross in- come, 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 INSUR- ANCE PRORATION FOR PURPOSES OF DETER- MINING THE DIVIDENDS RECEIVED DEDUC- TION. IN 812 is amended to read as follows: 812. DEFINITION OF SHARE AND POLICY- SHARE. purposes of section 805(a)(4), the term ?company?s share? means, with respect [?le 3 of 5] S.L.C. 241 to any taxable year beginning after December 31, 2017, 70 percent. purposes of sec- tion 807, the term ?policyholder?s share? means, vm'th re- spect to any taxable year beginning after December 31, 2017, 30 percent?. CONFORMING 817A(e)(2) is amended by striking and 812? and in- serting ?and EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 13519. CAPITALIZATION OF CERTAIN POLICY ACQUISI- TION EXPENSES. IN (1) Section 848(a)(2) is amended by striking ?120-month? and inserting ?180-month?. (2) Section 848(c)(1) is amended by striking ?1.75 percent? and inserting ?2.1 percent?. (3) Section 848(c)(2) is amended by striking ?2.05 percent? and inserting ?2.46 percent?. (4) Section 848(c)(3) is amended by striking ?7.7 percent? and inserting ?9.24 percent?. [file 3 of 5] S.L.C. 242 CONFORMING 848(b)(1) is amended by striking ?120-month? and inserting ?180- month?. EFFECTIVE (1) IN amendments made by this section shall apply to net premiums for taxable years beginning after December 31, 2017. (2) TRANSITION RULE?Specified policy acqui- sition 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. IN of part of sub- chapter A of chapter 61, as amended by section 13306, is amended by adding at the end the following new section: 6050Y. RETURNS RELATING TO CERTAIN LIFE INSUR- ANCE CONTRACT TRANSACTIONS. REQUIREMENT OF REPORTING OF CERTAIN IN person Who acquires a life insurance contract or any interest in a life in- surance contract in a reportable policy sale during [?le 3 of 5] S.L.C. 243 any taxable year shall make a return for such tax- able year (at such time and in such manner as the Secretary shall prescribe) setting forth? the name, address, and TIN of such person, the name, address, and TIN of each recipient of payment in the reportable policy sale, the date of such sale, the name of the issuer of the life in- surance contract sold and the policy number of such contract, and the amount of each payment. STATEMENT To BE FURNISHED To PER- SONS WITH RESPECT TO INFORMATION IS RE- person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such re- turn a written statement showing?? the name, address, and phone num- ber of the information contact of the person re- quired to make such return, and the information required to be shown on such return with respect to such person, ex- cept that in the case of an issuer of a life insur- [?le 3 of 5] SEC. 244 1 ance contract, such statement is not required to 2 include the information specified in paragraph 3 4 REQUIREMENT OF REPORTING 0F 5 BASIS IN LIFE INSURANCE 6 IN receipt of the state- 7 ment required under subsection or upon no? 8 tice of a transfer of a life insurance contract to a 9 foreign person, each issuer of a life insurance con- 10 tract shall make a return (at such time and in such 11 manner as the Secretary shall prescribe) setting 12 forth? 13 the name, address, and TIN of the 14 seller who transfers any interest in such con- 15 tract in such sale, 16 the investment in the contract (as de- 17 fined in section with respect to such 18 seller, and 19 the policy number of such contract. 20 STATEMENT To BE FURNISHED To PER- 21 SONS WITH RESPECT TO WHOM INFORMATION IS RE- 22 person required to make a return 23 under this subsection shall furnish to each person 24 whose name is required to be set forth in such re- 25 turn a written statement showing? [file 3 of 5] S.L.C. 2?15 1 the name, address, and phone num- 2 her of the information contact of the person re? 3 quired to make such return, and 4 the information required to be shown 5 on such return with respect to each seller whose 6 name is required to be set forth in such return. 7 REQUIREMENT OF REPORTING WITH RESPECT 8 To REPORTABLE DEATH 9 person who makes a 10 payment of reportable death benefits during any tax? 11 able year shall make a return for such taxable year 12 (at such time and in such manner as the Secretary 13 shall prescribe) setting forth? 14 the name, address, and TIN of the 15 person making such payment, 16 the name, address, and TIN of each 17 recipient of such payment, 18 the date of each such payment, 19 the gross amount of each such pay- 20 ment, and 21 such person?s estimate of the invest- 22 ment in the contract (as de?ned in section 23 with respect to the buyer. 24 STATEMENT To BE FURNISHED TO PER- LII SONS WITH RESPECT TO WHOM INFORMATION IS RE- [?le 3 of 5] S.L.C. 246 person required to make a return under this subsection shall furnish to each person whose name is required to be set forth in such re- turn a written statement showing? the name, address, and phone num- ber of the information contact of the person re- quired to make such return, and 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. purposes of this section: 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. REPORTABLE POLICY term ?reportable policy sale? has the meaning given such term in section 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 sec- tion. [?term 2-17 REPORTABLE DEATH ?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 re- portable policy sale?. CLERICAL table of sections for subpart of part of subchapter A of chapter 61, as amended by section 13306, is amended by inserting after the item relating to section 6050X the following new item: ?See. 6050Y. Returns relating to certain life insurance contract transactions?. (0) CONFORMING ed? (1) Subsection of section 6724 is amend- (A) by striking ?or? at the end of clause of paragraph by striking ?and? (at the end of clause (XXV) of' such paragraph and inserting and by inserting after such clause (XXV) the following new clause: ?(xxvi) section 6050Y (relating to re- turns relating to certain life insurance con- tract transactions), and?, and (B) by striking ?or? at the end of subpara- graph (HH) of paragraph (2), by striking the period at the end of subparagraph (II) of such paragraph and inserting or and by insert- [?le 3 of 5] S.L.C. CONTRACT TRANSACTIONS. 248 ing after such subparagraph (II) the following new subparagraph: subsection or of section 6050Y (relating to returns relating to certain life insurance contract (2) Section 6047 is amended (A) by redesignating subsection as sub- section (11), (B) by inserting after subsection the following new subsection: INFORMATION RELATING TO LIFE INSURANCE This section shall not apply to any information which is required to be reported under section and (C) by adding at the end of subsection (11), as so the following new para- graph: For provisions requiring reporting of infor- mation relating to certain life insurance contract transactions, see section EFFECTIVE 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 [file 3 of 5] 249 1 (as added by subsection after December 31, 2 2017,and 3 (2) reportable death benefits (as defined in sec- 4 tion 6050Y(d)(4) of such Code (as added by sub- 5 section paid after December 31, 2017. 6 SEC. 13521. CLARIFICATION OF TAX BASIS OF LIFE INSUR- 7 ANCE CONTRACTS. 8 CLARIFICATION WITH RESPECT TO 9 MENTS.?Paragraph (1) of section 1016(a) is amended by 10 striking subparagraph (A) and all that follows and insert- 11 ing the following: 12 for? 13 taxes or other carrying charges 14 described in section 266; or 15 expenditures described in section 16 173 (relating to circulation expenditures), 17 for which deductions have been taken by the 18 taxpayer in determining taxable income for the 19 taxable year or prior taxable years; or 20 for mortality, expense, or other rea- 21 sonable charges incurred under an annuity or 22 life insurance contract;?. 23 EFFECTIVE amendment made by 24 this section shall apply to transactions entered into after 25 August 25, 2009. [?le 3 of 5] S.L.C. 250 1 SEC. 13522. EXCEPTION TO TRANSFER FOR VALUABLE CONGENERAL. SIDERATION RULES. Subsection of section 101 is amended by inserting after paragraph (2) the follovm'ng new paragraph: EXCEPTION TO VALUABLE CONSIDERATION RULES FOR COMMERCIAL The second sentence IN GENERAL. 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. REPORTABLE POLICY purposes of this paragraph, the term ?reportable policy salc? means the acquisition of an interest in a life insurance contract, directly or indi- rectly, if the acquirer has no substantial family, business, or financial relationship with the in- sured apart from the acquirer?s interest in such life insurance contract. For purposes of the pre- ceding sentence, the term ?indirectly? applies to the acquisition of an interest in a partnership, trust, or other entity that holds an interest in the life insurance contract?. [?le 3 of 5] 251 CONFORMING (1) of section 101(a) is amended by striking ?paragraph and inserting ?paragraphs (2) and EFFECTIVE amendments made by this section shall apply to transfers after December 31, 2017. Subpart C?Banks and Financial Instruments SEC. 13531. LIMITATION ON DEDUCTION FOR FDIC PRE- MIUMS. IN 162, as amended by sec- tions 13307 and 13308, is amended by redesignating sub- section as subsection and by inserting after sub- section the following new subsection: DISALLOWANCE OF FDIC PREMIUMS PAID BY CERTAIN LARGE FINANCIAL IN deduction shall be al- lowed for the applicable percentage of any FDIC premium paid or incurred by the taxpayer. EXCEPTION FOR SMALL 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. APPLICABLE purposes of this subsection, the term ?applicable percentage? [?le 3 of 5] 252 means, with respect to any taxpayer for any taxable year, the ratio (expressed as a percentage but not greater than 100 percent) which? the excess Of? the total consolidated assets of such taxpayer (determined as of the close of such taxable year), over $10,000,000,000, bears to $40,000,000,000. FDIC purposes of this subsection, the term premium? means any as- sessment imposed under section of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)). TOTAL CONSOLIDATED pur? poses Of this subsection, the term ?total consolidated assets? has the meaning given such term under sec- tion 165 of the Dodd-Frank \Nall Street Reform and Consumer Protection Act (12 U.S.C. 5365). AGGREGATION IN of an ex- panded affiliated group shall be treated as a. single taxpayer for purposes of applying this subsection. EXPANDED AFFILIATED [?le 3 of 5] S.L.C. 253 1 IN purposes of 2 this paragraph, the term ?expanded affili- 3 ated group? means an affiliated group as 4 defined in section 1504(a), determined 5 by substituting ?more than 6 50 percent? for ?at least 80 percent? 7 each place it appears, and 8 without regard to para- 9 graphs (2) and (3) of section 1504(1)). 10 CONTROL OF NON-CORPORATE 11 partnership or any other en- 12 tity (other than a corporation) shall be 13 treated as a member of an expanded affili- 14 ated group if such entity is controlled 15 (within the meaning of section 954(d)(3)) 16 by members of such group (including any 17 entity treated as a member of such group 18 by reason of this clause)?. 19 EFFECTIVE DATE. The amendments made by 20 this section shall apply to taxable years beginning after 21 December 31, 2017. 22 SEC. 13532. REPEAL OF ADVANCE REFUNDING BONDS. 23 1N GENERAL?Paragraph (1) of section 149(d) 24 is amended by striking ?as part of an issue described in [?le 3 of 5] S.L.254 paragraph (2), (3), or and inserting ?to advance re- fund another bond.?. CONFORMING (1) Section 149((1) is amended by striking para- graphs (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) t0 (xvii) as clauses (xiv) to EFFECTIVE amendments made by this section shall apply to advance refunding bonds issued after December 31, 2017. SEC. 13533. COST BASIS OF SPECIFIED SECURITIES DETER- MINED WITHOUT REGARD TO IDENTIFICA- TION. IN 1012 is amended by add- ing at the end the following new subsection: COST BASIS OF SPECIFIED SECURITIES DETER- MINED WITHOUT REGARD To IN the Secretary per- mits the use of an average basis method for deter- mining cost, in the case of the sale, exchange, or other disposition of a specified security (within the meaning of section the basis (and [?le 3 of 5] S.L.C. 19 255 holding period) of such security shall be determined on a ?rst-in first-out basis. the case of a sale, ex- change, or other disposition of a specified security by a regulated investment company (as defined in section 851(3)), paragraph (1) shall not apply?. CONFORMING (1) Section 1012(c)( 1) is amended by striking ?the conventions prescribed by regulations under this section? and inserting ?the method applicable for determining the cost of such security?. (2) Section 1012(c)(2)(A) is amended by insert- ing ?(as in effect prior to the enactment of the Tax luts and Jobs Act)? after ?this section?. (3) Section is amended by striking ?unless the customer notifies the broker by means of making an adequate identi?cation of the stock sold or transferred?. EFFECTIVE DATE. The amendments made by 20 this section shall apply to sales, exchanges, and other dis- 21 positions after December 31, 2017. [?le 3 of 5] 256 Subpart Corporations SEC. 13541. EXPANSION OF QUALIFYING BENEFICIARIES OF AN ELECTING SMALL BUSINESS TRUST. No LOOK-THROUGH FOR ELIGIBILITY PUR- POSES?Section is amended by adding at the end the following new sentence: ?This clause shall not apply for purposes of subsection EFFECTIVE amendment made by this section shall take effect on January 1, 2018. SEC. 13542. CHARITABLE CONTRIBUTION DEDUCTION FOR ELECTING SMALL BUSINESS TRUSTS. IN 641(c)(2) is amended by inserting after subparagraph (D) the following new sub- paragraph: Section 642(c) shall not apply. For purposes of section adjusted gross income shall be computed in the same manner as in the case of an indixidual, except that the deductions for costs which are paid or incurred in connection with the admin- istration 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 arriv- ing at adjusted gross income?. [file 3 ol' 5] 8.11.0. 257 EFFECTIVE amendment made by this section shall apply to taxable years beginning after December 3 1, 2017. SEC. 13543. MODIFICATION OF TREATMENT OF CORPORA- (a7 0105me Wbmbu TION CONVERSIONS TO CORPORATIONSVW 00 5 I mw/V Hm IN 1371 is amended by add- 677% M70 (mi +0 erpomh'o'n ., 4cm 45 FOLLOWING and?A ?73! ing at the end the following new subsection: NATION TRANSITION NW "4 MHlloin?? WW tion of money by an eligible terminated corpora? {017 Ad )14 yfmw'b tion after the post-termination transition period, the accumulated adjustments account shall be allocated WWZ 4 . [l *lr 'e'ibl? nc?umula ed earnin 'nd 1' fi in cagacoac 1 ga pots, the same ratio as the amount of such accumulated w?u 01 adjustments account bears to the amount of such ac- MWZ cumulated earnings and profits. ELIGIBLE TERMINATED purposes of this subsection, the term ?01- . . . . a IgIble terminated corporation? means any cor? MW poration? IN the case of a distribu- to such distribution, and the distribution shall be Which?? [?le 3 of 5] S.L.corporation on the day before the date of the enactment of the Tax Cuts and Jobs Act, and during the 2-year period begin- ning on the date of such enactment makes a revocation of its election under section 1362(a), and the owners of the stock of which, de- termined on the date such revocation is made, are the same owners (and in identical propor- tions) as on the date of such enactment?. EFFECTIVE amendments made by this section shall apply to distributions after the date of the enactment of this Act. PART Subpart A?Compensation SEC. 13601. MODIFICATION OF LIMITATION ON EXCESSIVE EMPLOYEE REMUNERATION. OF PERFORMANCE-BASED TION AND COMMISSION EXCEPTIONS FOR LIMITATION ON EXCESSIVE EMPLOYEE (1) IN GENERAL?Paragraph (4) of section 162(m) is amended by striking subparagraphs (B) and (C) and by redesignating subparag?raphs (D), [?le 3 of 5] S.L.259 (E), (F), and (G) as subparagraphs (B), (C), (D), and (E), respectively. (2) CONFORMING (A) Paragraphs and Of sec- tion 162(m) are each amended by striking ?subparagraphs (B), (C), and and insert- ing ?subparagraph (B) (B) Paragraphs and Of sec- tion 162(m) are each amended by striking and and inserting and MODIFICATION OF DEFINITION OF COVERED EM- PLOYEES. Paragraph (3) Of section 162(m) is amend- ed? (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 Of?cer or principal financial Officer Of the taxpayer at any time during the taxable year, or was?, (2) in subparagraph (A) by striking and inserting and (B) by striking ?(other than the chief exec- utive Officer)? and inserting ?(other than any individual described in subparagraph and [file 3 of 5] S.L.C. 260 (3) by striking ?or? at the end of subparagraph (A), by striking the period at the end of subpara- graph (B) and inserting or?, and by adding at the end the following: was a covered employee of the tax- payer (or any predecessor) for any preceding taxable year beginning after December 31, 2016.?. EXPANSION or APPLICABLE (1) IN 162(m)(2) is amend- ed to read as follows: PUBLICLY HELD pur- poses of this subsection, the term ?publicly held cor- poration? means any corporation which is an issuer (as defined in section 3 of the Securities Exchange Act of 1934 (15 11.8.0. 78c))? the securities of which are required to be registered under section 12 of such Act (15 U.S.C. 781), or that is required to file reports under section 15(d) of such Act (15 U.S.C. (2) CONFORMING 162(m)(3), as amended by subsection is amend- ed by adding at the end the following flush sentence: [?le 3 of 5] S.L.C. 261 ?Such term shall include any employee who would be described in subparagraph (B) if the reporting de- scribed in such subparagraph were required as so described?. SPECIAL RULE FOR REMUNERATION PAID TO BENEFICIARIES, ETC?Paragraph (4) of section 162(m), as amended by subsection is amended by adding at the end the following new subparagraph: SPECIAL RULE FOR REMUNERATION PAID TO BENEFICIARIES, ETC?Remuneration shall not fail to be applicable employee remu? neration 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?. (0) EFFECTIVE (1) IN as provided in para? graph (2), the amendments made by this section shall apply to taxable years beginning after Decem- ber 31, 2017. (2) EXCEPTION FOR BINDING The amendments made by this section shall not apply to remuneration which is pursuant to a writ? ten binding contract which was in effect on Novem- [file 3 of 5] S.L.2017, and which was not modified in any ma.- terial respect on or after such date. SEC. 13602. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANI- ZATION EXECUTIVE COMPENSATION. IN GENERAL.?Subchapter of chapter 42 is amended by adding at the end the following new section: 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE COMPENSATION. TAX is hereby imposed a tax equal to 20 percent of the sum of? so much of the remuneration paid (other than any excess parachute payment) by an applica- ble tax-exempt organization for the taxable year with respect to employment of any covered employee in excess of $1,000,000, plus 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 of the rights to such remuneration. LIABILITY FOR employer shall be lia- ble for the tax imposed under subsection DEFINITIONS AND SPECIAL pur- poses of this section? [?le 3 of 5] S.L.C. 263 APPLICABLE TAX-EXEMPT ORGANIZA- term ?applicable tax-exempt organiza- tion? means any organization which for the taxable year? is exempt from taxation under section 501(a), is a farmers? cooperative organization described in section 521(b)(1), has income excluded from taxation under section 115(1), or is a political organization described in section 527(c)(1). COVERED purposes of this section, the term ?covered employce? means any employee (including any former employee) of an ap- plicable tax-exempt organization if the employee? is one of the 5 highest compensated employees of the organization for the taxable year, or was a covered employee of the organi- zation (or any predecessor) for any preceding taxable year beginning after December 31, 2016. purposes of this section, the term ?remuneration? means wages (as [file 3 of 5] S.L.C. 264 de?ned 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). FROM RELATED ORGANI- IN GENERAL?Remuneration of a covered employee by an applicable tax-exempt organization shall include any remuneration paid with respect to employment of such em- ployee by any related person or governmental entity. RELATED per- son or governmental entity shall be treated as related to an applicable tax-exempt organization if such person or governmental entity? controls, or is controlled by, the organization, is controlled by one or more per? sons which control the organization, is a supported organization (as defined in section 509(f)(8)) during the taxable year with respect to the organiza- tion, [?le 3 of 5] S.L.C. 265 is a supporting organization de- scribed in section 509(a)(3) during the taxable year with respect to the organiza- tion, or in the case of an organization which is a voluntary employees? beneficiary association described in section 501(c)(9), establishes, maintains, or makes contribu- tions to such voluntary employees? bene- ficiary association. LIABILITY FOR any case in which remuneration from more than one em- ployer is taken into account under this para- graph in determining the tax imposed by sub- section each such employer shall be liable for such tax in an amount which bears the same ratio to the total tax determined under subsection with respect to such remunera- tion as? the amount of remuneration paid by such employer with respect to such em- ployee, bears to the amount of remuneration paid by all such employers to such employee. [?le 3 of 5] S.L.C. 266 EXCESS PARACHUTE pur- poses of determining the tax imposed by subsection IN 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. term ?parachute payment? means any payment in the nature of compensation to (or for the benefit of) a covered employee if? such payment is contingent on such employee?s separation from employ- ment with the employer, and the aggregate present value of the payments in the nature of compensa- tion to (or for the benefit of) such indi- vidual which are contingent on such sepa- ration equals or exceeds an amount equal to 3 times the base amount. Such term does not include any payment de- scribed in section 280G(b)(6) (relating to ex- emption for payments under qualified plans) or any payment made under or to an annuity con- [?le 3 of 5] S.L.C. 23 24 25 267 tract described in section 403(b) or a plan de- scribed in section 457(b). BASE similar to the rules Of 280G(b)(3) shall apply for purposes Of determining the base amount. PROPERTY PRESENT similar tO the rules Of para- graphs (3) and (4) of section 280G(d) shall apply. COORDINATION WITH DEDUCTION LIMITA- TION?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. REGULATIONS. The Secretary shall prescribe such regulations as may be necessary to prevent avoidance of the tax under this section, including regulations pre- venting employees from being misclassified as contractors or from being compensated through a pass-through or other entity tO avoid such tax?. CLERICAL table of sections for subchapter of chapter 42 is amended by adding at the end the following new item: ?See. 4960. Tax on excess tax-exempt organization executive compensation?. EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2017. [file 3 of 5] S.L.C. 268 1 SEC. 13603. TREATMENT OF QUALIFIED EQUITY GRANTSamended by adding at the end the following new subsection: QUALIFIED EQUITY IN purposes of this sub- title? TIMING OF INCLUSION. If qualified stock is transferred to a quali?ed employee who makes an election with respect to such stock under this subsection, subsection 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 TAXABLE YEAR taxable year determined under this subpara- graph is the taxable year of the employee which includes the earliest of? the first date such qualified stock becomes transferable (including, solely for purposes of this clause, becoming transfer- able to the employer), the date the employee first be? comes an excluded employee, [?le 3 of 5] S.L.C. 269 the first date on which any stock of the corporation which issued the quali- fied stock becomes readily tradable on an established securities market (as deter- mined by the Secretary, but not including any market unless such market is recog- nized as an established securities market by the Secretary for purposes of a provi? sion of this title other than this sub- section), the date that is 5 years after the first date the rights of the employee in such stock are transferable or are not sub- ject to a substantial risk of forfeiture, whichever occurs earlier, or 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. QUALIFIED IN purposes of this subsection, the term ?quali?ed stock? means, with respect to any qualified employee, any [?le 3 of 5] S.L.C. 270 stock in a corporation which is the employer of such employee, if? such stock is received?? in connection with the exer- cise of an option, or in settlement of a restricted stock unit, and such option or restricted stock unit was granted by the corporation? in connection with the per- formance of services as an employee, and during a, calendar year in which such corporation was an eligible corporation. term ?quali?ed stock? shall not include any stock if the em- ployee may sell such stock to, or otherwise re- ceive 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 sub- ject to a substantial risk of forfeiture. ELIGIBLE pur? poses of subparagraph [?le 3 of 5] S.L.C. 271 IN term ?eligible corporation? means, with respect to any calendar year, any corporation if? no stock of such corporation (or any predecessor of such corpora- tion) is readily tradable on an estab- lished securities market (as deter- mined under paragraph during any preceding calendar year, and such corporation has a writ- ten plan under which, in such cal- endar 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 op- tions, or restricted stock units, with the same rights and privileges to re- ceive quali?ed stock. SAME RIGHTS AND PRIVI- purposes of clause except as provided in sub- clauses (11) and (111), the determina- tion of rights and privileges with re- [file 3 of 5] S.L.C. 272 spect to stock shall be made in a simi- lar manner as under section employees shall not fail to be treated as having the same rights and privileges to receive qualified stock solely because the number of shares available to all employees is not equal in amount, so long as the num- ber of shares available to each em- ployee is more than a de minimis amount, and ?(111) rights and privileges with respect to the exercise of an option shall not be treated as the same as rights and privileges ?nth respect to the settlement of a restricted stock unit. purposes of clause the term ?employee? shall not include any employee described in section 4980E(d)(4) or any excluded employee. SPECIAL RULE FOR CALENDAR YEARS BEFORE 2018.?1n the case of any calendar year beginning before January 1, [?le 3 of 5] S.L.C. MAWNHOGOOQQMAWNHO 273 2018, clause shall be applied with- out regard to whether the rights and privi- leges with respect to the qualified stock are the same. QUALIFIED EXCLUDED purposes of this subsection? IN term ?quali?ed employee? means any indixidual who? is not an excluded employee, and agrees in the election made under this subsection to meet such require- ments as are determined by the Secretary to be necessary to ensure that the with? holding requirements of the corporation under chapter 24 with respect to the quali- fied stock are met. EXCLUDED term ?excluded employee? means, with respect to any corporation, any individual? who was a l-percent owner (with- in the meaning of section at any time during the 10 preceding cal- endar years, who is or has been at any prior time? [?le 3 of 5] S.L.C. 274 the chief executive officer of such corporation or an individual act- ing in such a capacity, or the chief financial officer of such corporation or an individual act- ing in such a. capacity, who bears a relationship de- scribed in section 318(a)(1) to any indi- vidual described in subclause (1) or (11) of clause pre- ceding taxable years one of the 4 highest compensated officers of such corporation, determined with respect to each such tax- able 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). TIME FOR MAKING 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 em- ployee in such stock are transferable or are not subject to a substantial risk of forfeiture, [file 3 of 5 S.L.C. 27 5 whichever occurs earlier, and shall be made in a manner similar to the manner in which an election is made under subsection LIMITATIONS. No election may be made under this section with respect to any qualified stock if? the qualified employee has made an election under subsection with re? spect to such quali?ed stock, any stock of the corporation which issued the qualified stock is readily tradable on an established securities mar- ket (as determined under paragraph at any time before the election is made, or such corporation purchased any of its outstanding stock in the calendar year preceding the calendar year which in- cludes the first date the rights of the em? ployee in such stock are transferable or are not subject to a substantial risk of for- feiture, unless? not less than 25 percent of the total dollar amount of the stock so purchased is deferral stock, and [?le 3 of 5] S.L.C. TIONS. 276 the determination of which individuals from whom deferral stock is purchased is made on a reasonable basis. DEFINITIONS AND SPECIAL RULES RELATED TO LIMITATION ON STOCK REDEMP- DEFERRAL pur- poses of this paragraph, the term ?deferral stoek? means stock with respect to which an election is in effect under this sub- section. DEFERRAL STOCK WITH RE- SPECT TO ANY INDIVIDUAL NOT TAKEN INTO ACCOIINT IF INDIVIDUAL HOLDS DE- FERRAL STOCK WITH LONGER DEFERRAL purchased by a corpora- tion from any individual shall not be treat- ed as deferral stock for purposes of sub- parag'raph if such individual (im- mediately after such purchase) holds any deferral stock with respect to which an election has been in effect under this sub- section for a longer period than the elec- [?le 3 of 5] S.L.C. 277 tion with respect to the stock so pur- chased. PURCHASE OF ALL OUT- STANDING DEFERRAL re- quirements of subclauses (I) and (II) of subparagraph shall be treated as met if the stock so purchased includes all of the corporation?s outstanding deferral stock. 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 in- clude 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 infor- mation as the Secretary requires for pur- poses of administering this paragraph. CONTROLLED purposes of this subsection, all persons treated as a single eni- ployer under section 414(1)) shall be treated as 1 corporation. [?le 3 of 5] S.L.C. 278 NOTICE corporation which transfers qualified stock to a qualified em- ployee shall, at the time that (or a reasonable period before) an amount attributable to such stock would (but for this subsection) first be ineludible in the gross income of such employee certify to such employee that such stock is quali?ed stock, and notify such employee? that the employee may be eligible to elect to defer income on such stock under this subsection, and that, if the employee makes such an election? the amount of income recog- nized 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 substan- tial risk of forfeiture, notwithstanding whether the value of the stock has de- clined during the deferral period, the amount of such income recognized at the end of the deferral [?le 3 0f 5] S.L.C. 279 period will be subject to withholding under section 3401(i) at the rate de- termined under section 3402(t), and ?(111) the responsibilities of the employee (as determined by the Sec- retary under paragraph with respect to such withholding. RESTRICTED STOCK section (other than this subsection), including any election under subsection shall not apply to restricted stock units?. (1) TIME OF 3401 is amended by adding at the end the following new subsection: QUALIFIED STOCK FOR WHICH AN ELECTION Is IN EFFECT UNDER SECTION purposes of sub- section 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? received on the earliest date described in section and in an amount equal to the amount in? cluded in income under section 83 for the taxable year which includes such date?. [?le 3 of 5] S.L.C. 280 1 (2) AMOUNT OF 3402 2 is amended by adding at the end the following new 3 subsection: 4 RATE OF FOR CERTAIN 5 the case of any qualified stock (as defined in 6 section with respect to which an election is made 7 under section 83(i)? 8 the rate of tax under subsection shall 9 not be less than the maximum rate of tax in effect 10 under section 1, and 11 such stock shall be treated for purposes of 12 section 3501(1)) in the same manner as a non-cash 13 fringe benefit?. 14 COORDINATION WITH OTHER DEFERRED COM- 15 PENSATION 16 (1) ELECTION TO APPLY DEFERRAL TO STATU- 17 TORY OPTIONS. 18 (A) INCENTIVE STOCK OPTIONS. Section 19 422(b) is amended by adding at the end the fol- 20 lowing: ?Such term shall not include any Option 21 if an election is made under section 83(i) with 22 respect to the stock received in connection with 23 the exercise of such option?. 24 (B) EMPLOYEE STOCK PURCHASE LII PLANS?Section 423 is amended? [file 3 of 5] S.L.C. 23 281 by adding at the end of subsection the following flush sentence: ?The preceding sentence shall not apply to any share of stock with respect to which an election is made under sec- tion and (ii) in subsection 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 sec- tion? before the semicolon at the end. (2) EXCLUSION FROM DEFINITION OF NON- DEFERRED COMPENSATION section of section 409A is amended by adding at the end the following new paragraph: TREATMENT OF QUALIFIED arrangement under which an employee may receive qualified stock (as defined in section shall not be treated as a nonqualified deferred compensa- tion plan solely because of an employee?s election, or ability to make an election, to defer recognition of income under section INFORMATION 6051(a) is 24 amended by striking ?and? at the end of paragraph 25 by striking the period at the end of paragraph [file 3 of S.L.282 (15) and inserting a comma, and by inserting after para- graph (15) the following new paragraphs: the amount includible in gross income under subparagraph (A) of section 83(i)(1) with re- spect to an event described in subparagraph (B) of such section which occurs in such calendar year, and 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.?. PENALTY FOR FAILURE OF EMPLOYER To PRO- VIDE NOTICE OF TAX 6652 is amended by adding at the end the following new sub- section: FAILURE TO PROVIDE NOTICE UNDER SECTION the case of each failure to provide a notice as required by section at the time prescribed there- for, unless it is shown that such failure is due to reason- able 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 no- tice, an amount equal to $100 for each such failure, but the total amount imposed on such person for all such fail- ures during any calendar year shall not exceed EFFECTIVE DATES. [file 3 0f 5] S.L.C. 283 (1) IN as provided in para- graph (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 amendments made by subsection shall apply to failures after December 31, 2017. TRANSITION such time as the See- retary (or the Secretary?s delegate) issues regulations or other guidance for purposes of implementing the require- ments of paragraph of section 83(i) of the Internal Revenue Code of 1986 (as added by this section), or the requirements of paragraph of such section, a corporation shall be treated as being in compliance with such requirements (respectively) if such corporation com- plies with a reasonable good faith interpretation of such requirements. SEC. 13604. INCREASE IN EXCISE TAX RATE FOR STOCK COMPENSATION OF INSIDERS IN EXPATRI- ATED CORPORATIONS. IN 4985(a)(1) is amended by striking ?section and inserting ?section [file 3 0f 5] 284 EFFECTIVE amendment made by this section shall apply to corporations first becoming ex- patriated corporations (as defined in section 4985 of the Internal Revenue Code of 1986) after the date of enact- ment of this Act. Subpart B?Retirement Plans SEC. 13611. REPEAL OF SPECIAL RULE PERMITTING RE- CHARACTERIZATION OF ROTH IRA CON- TRIBUTIONS AS TRADITIONAL IRA CON- TRIBUTIONS. IN GENERAL. Section 408A(d) is amended by striking paragraph (6) and by redesignating paragraph (7) as paragraph (6). EFFECTIVE 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. MAXIMUM DEFERRAL (ii) of section 457(e)(11)(B) is amended by striking ?$3,000? and inserting COST OF LIVING ADJUSTMENT.?Subparagraph (B) of section 457(c)(ll) is amended by adding at the end the follovn'ng: [file 3 of 5] S.L.C. r?kv?tb?A NH0 13 285 COST OF LIVING ADJUST- the case of taxable years begin- ning after December 31, 2017, the Sec- retary 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 APPLICATION OF LIMITATION ON 14 Subparagraph (B) of section 457(c)(11), as amended subsection is amended by adding at the end the fol- SPECIAL RULE FOR TION OF LIMITATION ON ACCRUALS FOR CERTAIN the case of a plan de- scribed in subparagraph which is a defined bene?t plan (as defined in section 4140)), the limitation under clause (ii) shall apply to the actuarial present value of the aggregate amount of length of serv- ice awards accruing with respect to any [file 3 of 5] S.L.C. 286 year of service. Such actuarial present value with respect to any year shall be cal- culated using reasonable actuarial assump- tions and methods, assuming payment will be made under the most valuable form of payment under the plan with payment commencing at the later of the earliest age at which unreduced benefits are payable under the plan or the participant?s age at the time of the calculation?. 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. IN GENERAL?Paragraph (3) of section 402(c) is amended by redesignating subparagraph (B) as sub- paragraph (C) and by inserting after subparagraph (A) the following new subparagraph: ROLLOVER or CERTAIN PLAN LOAN OFFSET AMOUNTS. IN the case of an eligible rollover distribution of a quali?ed plan loan offset amount, the requirements of subparagraph (A) shall be treated as [file 3 of 5] S.L. 287 met if such transfer occurs on or before the due date (including extensions) for fil- ing the return of tax for the taxable year in which such amount is treated as distrib- uted from a qualified employer plan. QUALIFIED PLAN LOAN OFFSET purposes of this subpara- graph, 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? the termination of the quali- fied employer plan, or the failure to meet the re- payment terms of the loan from such plan because of the severance from employment of the participant. PLAN LOAN OFFSET For purposes of clause 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. [?le 3 of 5] S.L.C. 288 LIMITATION .?This subpara- graph shall not apply to any plan loan off- set amount unless such plan loan offset amount relates to a loan to which section 7 does not apply by reason of sec- tion QUALIFIED EMPLOYER For purposes of this subsection, the term ?qualified employer plan? has the meaning given such term by section 7 CONFORMING AMENDMENT.?Subparagraph (A) of section 402(c)(3) is amended by striking ?subpara- graph and inserting ?subparagraphs (B) and EFFECTIVE amendments made by this section shall apply to plan loan offset amounts which are treated as distributed in taxable years beginning after December 31, 2017. PART ORGANIZATIONS SEC. 13701. EXCISE TAX BASED ON INVESTNIENT INCOME OF PRIVATE COLLEGES AND UNIVERSITIES. IN 42 is amended by adding at the end the following new subchapter: [?le 3 of 5] S.L.289 ?Subchapter H?Excise Tax Based on Invest- ment Income of Private Colleges and Uni- versities ?Sec. 4968. Excise tax based on investment income of private colleges and uni- versities. 4968. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES AND UNIVERSITIES. TAX 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. APPLICABLE EDUCATIONAL purposes of this subchapter? IN term ?applicable edu- cational institution? means an eligible educational in? stitution (as defined in section which had at least 500 tuition-paying students during the preceding taxable year, which participated in and received funds through a program described in section during the preceding taxable year, which is not described in the first sentence of section 511(a)(2)(B) (relating to State colleges and universities), and the aggregate fair market value of the assets of which at the end of the preceding [?le 3 of 5] S.L.C. 290 1 taxable year (other than those assets which are 2 used directly in carrying out the institution?s 3 exempt purpose) is at least $500,000 per stu? 4 dent of the institution. 5 purposes of paragraph 6 (1), the number of students of an institution shall 7 be based on the daily average number of full-time 8 students attending such institution (with part-time 9 students taken into account on a full-time student 10 equivalent basis). 11 NET INVESTMENT purposes of 12 this section, net investment income shall be determined 13 under rules similar to the rules of section 4940(c). 14 ASSETS AND NET INVESTMENT INCOME or RE- 15 LATED 16 IN purposes of sub- 17 sections and assets and net investment 18 income of any related organization with respect to 19 an educational institution shall be treated as assets 20 and net investment income, respectively, of the edu? 21 eational institution, except that? 22 no such amount shall be taken into 23 account With respect to more than 1 educational 24 institution, and [file 3 of 5] S.L.C. r?Iv?tt?tp?tv?tr?Ir?tp?Ir?tr?t 20 291 unless such organization is controlled by such institution or is described in section 509(a)(3) with respect to such institution for the taxable year, assets and net investment in- come which are not intended or available for the use or benefit of the educational institution shall not be taken into account. RELATED purposes of this subsection, the term ?related organization? means, with respect to an educational institution, any organization which?? controls, or is controlled by, such in? stitution, is controlled by 1 or more persons which also control such institution, or is a supported organization (as de- fined in section or an organization described in section during the tax- able year with respect to such institution?. CLERICAL table of sub- 21 chapters for chapter 42 is amended by adding at the end 22 the follovn'ng new item: TAX BASED ON INVESTMENT INCOME 0F PRIVATE COLLEGES AND [file 3 of 5] S.L.292 EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 13702. UNRELATED BUSINESS TAXABLE INCOME SEPA- RATELY COMPUTED FOR EACH TRADE OR BUSINESS ACTIVITY. IN GENERAL?Subsection of section 512 is amended by adding at the end the following new para- graph: 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? unrelated business taxable income, in- cluding for purposes of determining any net op- erating loss deduction, shall be computed sepa- rately with respect to each such trade or busi- ness and without regard to subsection the unrelated business taxable income of such organization shall be the sum of the un? related business taxable income so computed with respect to each such trade or business, less a specific deduction under subsection and [file 3 of 5] S.L.C. 293 for purposes of subparagraph (B), unrelated business taxable income with respect to any such trade or business shall not be less than zero?. EFFECTIVE (1) IN to the extent pro- vided in paragraph (2), the amendment made by this section shall apply to taxable years beginning after December 31, 2017. (2) CARRYOVERS OF NET OPERATING any net operating loss arising in a tax- able year beginning before January 1, 2018, is car- ried 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 oper- atng less, and (B) the unrelated business taxable income of the organization, after the application of sub- paragraph (B) of such section, shall be reduced by the amount of such net operating loss. [?le 3 of 5] S.L.294 SEC. 13703. REPEAL OF DEDUCTION FOR AMOUNTS PAID IN EXCHANGE FOR COLLEGE ATHLETIC EVENT SEATING RIGHTS. IN 170(1) is amended?? (1) by striking paragraph (1) and inserting the IN deduction shall be al- lowed under this section for any amount described in paragraph and (2) in paragraph by striking ?such amount would be allowable as a deduction under this section but for the fact that?. EFFECTIVE amendments made by this section shall apply to contributions made in taxable years beginning after December 31, 2017. SEC. 13704. REPEAL OF SUBSTANTIATION EXCEPTION IN CASE OF CONTRIBUTIONS REPORTED BY DONEE. IN 170(f)(8) is amended by striking subparagraph (D) and by redesignating subpara- graph (E) as subparagraph (D). EFFECTIVE amendments made by this section shall apply to contributions made in taxable years beginning after December 31, 2016. [file 3 of S.L.C. 2 9 5 PART PROVISIONS Subpart A?Craft Beverage Modernization and Tax Reform SEC. 13801. FOR BEER, WINE, AND DISTILLED SPIRITS. (3) IN 263A(f) is amended? (1) by redesignating paragraph (4) as para- graph (5), and (2) by inserting after paragraph (3) the fol- lowing; new paragraph: EXEMPTION FOR AGING PROCESS OF BEER, AND DISTILLED IN purposes of this subsection, the production period shall not in- clude the aging period for? beer (as de?ned in section 5052(a)), Wine (as described in section 5041(3)), or distilled spirits (as defined in section 5002(a)(8)), except such spirits that are unfit for use for beverage pur- poses. paragraph shall not apply to interest costs paid or accrued after December 31, 2019.?. [file 3 of 5] S.L.C. 296 CONFORMING of section 263A(f), as redesignated by this sec- tion, is amended by inserting ?except as provided in para- graph before ?ending on the date?. EFFECTIVE 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. IN GENEILUl.?Paragraph (1) of section 5051(a) is amended to read as follows: IN IMPOSITION OF tax is here? by imposed on all beer brewed or produced, and removed for consumption or sale, vsu'thin the United States, or imported into the United States. Except as provided in paragraph (2), the rate of such tax shall be the amount deter- mined under this paragraph. RATE?Except as provided in sub- paragraph (C), the rate of tax shall be $18 for per barrel. SPECIAL the case of beer removed after December 31, 2017, and before January 1, 2020, the rate of tax shall be? [file 3 of 5] S.L.C. t?kr?tv?AHy?Ar?tr?Ar?tvthe first 6,000,000 barrels of beer? brewed by the brewer and removed during the calendar year for consumption or sale, or imported by the importer into the United States during the cal- endar year, and $18 on any barrels of beer to which clause does not apply. purposes of this sec- tion, 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 bar- rel.?. REDUCED RATE FOR CERTAIN DOMESTIC DUCTION.??Subparagraph (A) of section 5051(a)(2) is amended (1) in the heading, by striking A and (2) by inserting in the case of beer re- moved after December 31, 2017, and before January 1, 2020)? after [?le 3 of 5] S.L.C. 298 1 APPLICATION OF REDUCED TAX RATE FOR FOR- 2 EIGN MANUFACTURERS AND 3 of section 5051 is amended?? 4 (1) in subparagraph of paragraph (1), 5 as amended by subsection by inserting ?but only 6 if the importer is an electing importer under para- 7 graph (4) and the barrels have been assigned to the 8 importer pursuant to such paragraph? after ?during 9 the calendar year?, and 10 (2) by adding at the end the following new 1 1 paragraph: 12 REDUCED TAX RATE FOR FOREIGN MANU- 13 FACTURERS AND 14 IN the ease of any 15 barrels of beer which have been brewed or pro- 16 duced outside of the United States and im- 17 ported into the United States, the rate of tax 18 applicable under clause of paragraph 19 (referred to in this paragraph as the ?reduced 20 tax rate?) may be assigned by the brewer (pro- 21 Vided that the brewer makes an election de- 22 scribed in subparagraph to any electing 23 importer of such barrels pursuant to the re- 24 quirements established by the Secretary under 25 subparagraph (B). [file 3 of 5] S.L.C. 299 Secretary shall, through such rules, regulations, and procedures as are determined appropriate, establish proce- dures for assignment of the reduced tax rate provided under this paragraph, which shall in- elude? a limitation to ensure that the number of barrels of beer for which the re- duced tax rate has been assigned by a brewer? to any importer does not ex- ceed 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 to all importers does not exceed the 6,000,000 barrels to which the reduced tax rate applies, procedures that allow the election of a brewer to assign and an importer to receive the reduced tax rate provided under this paragraph, requirements that the brewer provide any information as the Secretary [file 3 of 5] S.L.C. i?dy?Av?tr?Ar?tv?tt?tp?tr?I ooqouu-puowv?o 19 300 determines necessary and appropriate for purposes of carrying out this paragraph, and procedures that allow for revoca- tion of eligibility of the brewer and the im- porter for the reduced tax rate provided under this paragraph in the case of any er- roneous or fraudulent information provided under clause which the Secretary deems to be material to qualifying for such reduced rate. CONTROLLED purposes of this section, any importer making an election described in subparagraph shall be deemed to be a member of the controlled group of the brewer, as described under paragraph CONTROLLED GROUP AND SINGLE TAXPAYER RL?LES.?Subsection of section 5051, as amended by 20 this section, is amendedparagraph (A) by striking subparagraph (B), and (B) by redesignating subparagraph (C) as subparagraph (B), and [?le 3 of 5] S.L.adding at the end the following new paragraph: CONTROLLED GROUP AND SINGLE TAX- IN as provided in subparagraph (B), in the case of a controlled group, the 6,000,000 barrel quantity specified in paragraph and the 2,000,000 barrel quantity specified in paragraph shall be applied to the controlled group, and the 6,000,000 barrel quantity specified in para- graph and the 60,000 barrel quantity specified in paragraph shall be appor- tioned 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 as- signed tO it by subsection 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 ap? pears in such subsection. Under regulations prescribed by the Secretary, principles similar to the principles of the preceding two sentences [file 3 0f 5] S.L.C. 302 shall be applied to a group of brewers under common control where one or more of the brew- ers is not a corporation. FOREIGN MANUFACTURERS [an IM- purposes of paragraph (4), in the case of a controlled group, the 6,000,000 barrel quantity specified in paragraph shall be applied to the controlled group and ap- portioned among the members of such group in such manner as the Secretary shall by regula- tions 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 Sec- retary, 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. SINGLE to rules issued by the Secretary, two or more enti- ties (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 pur- poses of the application of this subsection?. [file 3 of 5] S.L.303 EFFECTIVE amendments made by this section shall apply to beer removed after December 31,2017. SEC. 13803. TRANSFER OF BEER BETWEEN BONDED FACILI- TIES. IN GENERAL. Section 5414 is amended (1) by striking ?Beer may be removed? and in- serting IN may be removed?, and (2) by adding at the end the following: TRANSFER OF BEER BETWEEN BONDED FA- 1) IN 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 condi- tions, including payment of the tax, and in such con- tainers, as the Secretary by regulations shall pre- scribe, which shall include any removal from one brewery to an- other brewery belonging to the same brewer, any removal from a brewery owned by one corporation to a brewery owned by an- other corporation when? [file 3 of 5] S.L.C. 304 one such corporation owns the controlling interest in the other such cor- poration, or the controlling interest in each such corporation is owned by the same per- son or persons, and any removal from one brewery to an- other brewery when? the proprietors of transferring and receiving premises are independent of each other and neither has a proprietary interest, directly or indirectly, in the busi- ness of the other, and the transferor has divested itself of all interest in the beer so transferred and the transferee has accepted responsi- bility for payment of the tax. TRANSFER OF LIABILITY FOR purposes of paragraph such relief from liabil- ity 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. subsection shall not apply to any calendar quarter beginning after De- cember 81, 2019.?. [?le 3 of 5] S.L.C. 305 See- REMOVAL FROM BREWERY BY PIPELINE. tion 5412 is amended by inserting ?pursuant to section 5414 or? before ?by pipeline?. EFFECTIVE 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. IN GENERAL. Section 5041(c) is amended by adding at the end the follovm'ng new paragraph: SPECIAL RULE FOR 2018 AND 2019.? IN the case of Wine re- moved 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? $1 per wine gallon on the first 30,000 wine gallons of wine, plus 90 cents per wine gallon on the first 100,000 wine gallons of wine to which clause does not apply, plus [?le 3 of 5] S.L.C. 306 1 53.5 cents per wine gallon on 2 the first 620,000 wine gallons of wine tO 3 which clauses and (ii) do not apply, 4 which are produced by the producer and re- 5 moved during the calendar year for consump- 6 tion or sale, or which are imported by the im- 7 porter into the United States during the cal- 8 endar year. 9 ADJUSTMENT OE CREDIT FOR HARD 10 the case of wine described in sub- 11 section subparagraph (A) of this para? 12 graph shall be applied? 13 in clause Of such subpara- 14 graph, by substituting ?62 cents? for 15 in clause (ii) of such subpara- 16 graph, by substituting cents? for ?90 17 cents?, and 18 in clause Of such subpara- 19 graph, by substituting ?33 cents? for ?53.5 20 cents?.?, 21 CONTROLLED GROUP AND SINGLE TAXPAYER 22 RULES?Paragraph (4) Of section 5041(c) is amended by 23 striking ?section 5051(a)(2)(B)? and inserting ?section 24 [?le 3 of 5] S.L.307 ALLOWANCE OF CREDIT FOR FOREIGN FACTURERS AND IMPORTERs.?Subsection of section 5041, as-amended by subsection is amended?? (1) in subparagraph (A) of paragraph (8), by inserting ?but only if the importer is an electing im? porter under paragraph (9) and the wine gallons of wine have been assigned to the importer pursuant to such paragraph? after ?into the United States dur- ing the calendar year?, and (2) by adding at the end the following new paragraph: ALLOWANCE OF CREDIT FOR FOREIGN MANUFACTURERS AND 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 to any electing importer of such wine gallons pursuant to the require- [?le 3 of 5] S.L.C. 308 ments established by the Secretary under sub- paragraph (B). Secretary shall, through such rules, regulations, and procedures as are determined appropriate, establish proce- dures for assignment of the tax credit provided under this paragraph, which shall include?? a limitation to ensure that the number of wine gallons of wine for which the tax credit has been assigned by a for- eign producer to any importer does not ex- ceed the number of wine gallons of wine produced by such foreign pro- ducer during the calendar year which were imported into the United States by such importer, and to all importers does not exceed the 750,000 wine gallons of wine to which the tax credit applies, procedures that allow the election of a foreign producer to assign and an im- porter to receive the tax credit provided under this paragraph, [file 3 of 5] 309 1 requirements that the foreign 2 producer provide any information as the 3 Secretary determines necessary and appro- 4 priate for purposes of carrying out this 5 paragraph, and 6 procedures that allow for revoca- 7 tion of eligibility of the foreign producer 8 and the importer for the tax credit pro- 9 vided under this paragraph in the case of 10 any erroneous or fraudulent information 11 provided under clause which the Sec- 12 retary deems to be material to qualifying 13 for such credit. 14 CONTROLLED purposes 15 of this section, any importer making an election 16 described in subparagraph shall be 17 deemed to be a member of the controlled group 18 of the foreign producer, as described under 19 paragraph 20 EFFECTIVE amendments made by 21 this section shall apply to Wine removed after December 22 31, 2017. [?le 3 of 5] S.L.C. 1 310 SEC. 13805. ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR APPLICATION OF EXCISE TAX RATES. IN GENERAL?Paragraphs (1) and (2) of section 5041(b) are each amended by inserting ?(16 percent in the case of wine removed after December 31, 2017, and before January 1, 2020? after ?14 percent?. EFFECTIVE 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. IN 5041 is amended? (1) in subsection by striking ?Still wines? and inserting ?Subject to subsection still wines?, and (2) by adding at the end the following new sub- section: MEAD AND Low ALCOHOL BY VOLUME IN purposes of sub- sections and 1), mead and low alcohol by ume wine shall be deemed to be still wines con- taining not more than 16 percent of alcohol by vol? ume. [file 3 of 5] S.L.311 purposes of this section, the term ?mead? means a wine? containing not more than 0.64 gram of carbon dioxide per hundred milli- liters of wine, except that the Secretary shall by regulations prescribe such toler- ances to this limitation as may be reason- ably necessary in good commercial prac- tice, which is derived solely from honey and water, which contains no fruit product or fruit flavoring, and which contains less than 8.5 per- cent alcohol by volume. Low ALCOHOL BY VOLUME For purposes of this section, the term ?low alco- hol by volume wine? means a wine? containing not more than 0.64 gram of carbon dioxide per hundred milli- liters of wine, except that the Secretary shall by regulations prescribe such toler- ances to this limitation as may be reason- ably necessary in good commercial prac- tice, [file 3 of 5] S.L.C. 312 which is derived primarily from grapes, or from grape juice con- centrate and water, which contains no fruit product or fruit ?avoring other than grape, and which contains less than 8.5 per- cent alcohol by volume. subsection shall not apply to wine removed after December 31, 2019.?. EFFECTIVE amendments made by this section shall apply to wine removed after December 31,2017. SEC. 13807. REDUCED RATE OF EXCISE TAX ON CERTAIN DISTILLED SPIRITS. IN GENERAL. Section 5001 is amended by re- designating subsection as subsection and by insert- ing after subsection the following new subsection: REDUCED RATE FOR 2018 AND 2019.? IN the case of a distilled spirits operation, the otherwise applicable tax rate under subsection shall be? $2.70 per proof gallon on the first 100,000 proof gallons of distilled spirits, and [?le 3 of 5] S.L.C. 00 \1 ON Ulwh 313 $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 oper- ation and removed during the calendar year for con- sumption or sale, or which have been imported by the importer into the United States during the cal- endar year. the case of a con- trolled group, the proof gallon quantities speci- fied under subparagraphs (A) and (B) of para- graph (1) shall be applied to such group and apportioned among the members of such group in such manner as the Secretary or their dele- gate shall by regulations prescribe. purposes of sub- paragraph (A), the term ?controlled group? shall have the meaning given such term by subsection of section 1563, except that ?more than 50 percent? shall be substituted for ?at least 80 percent? each place it appears in such sub- section. RULES FOR Under regulations prescribed by the Secretary, [?le 3 of 5] S.L.C. 314 principles similar to the principles of subpara- graphs (A) and (B) shall be applied to a group under common control where one or more of the persons is not a corporation. SINGLE to rules issued by the Secretary, two or more enti- ties (Whether or not under common control) that produce distilled spirits marketed under a similar brand, license, franchise, or other ar- rangement shall be treated as a single taxpayer for purposes of the application of this sub- section. subsection shall not apply to distilled spirits removed after December 31, 2019.?. CONFORMING 7 is amended by striking ?section 5001(a)(1)? and inserting ?subsection of section 5001, determined as if sub- section of such section did not apply?. APPLICATION OF REDUCED TAX RATE FOR FOR- EIGN MANUFACTURERS AND IMPORTERs.?Subsection of section 5001, as added by subsection is amended? (1) in paragraph 1), by inserting ?but only if the importer is an electing importer under para- graph (3) and the proof gallons of distilled spirits [?le 3 of 5] S.L.C. 315 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 para- graph (4) and by inserting after paragraph (2) the following new paragraph: REDUCED TAX RATE FOR FOREIGN MANY- FACTURERS AND IN the case of any proof gallons of distilled spirits which have been produced outside of the United States and im? ported into the United States, the rate of tax applicable under paragraph (1) (referred to in this paragraph as the ?reduced tax rate?) may be assigned by the distilled sprits operation (provided that such operation makes an election described in snbparagraph to any elect- ing importer of such proof gallons pursuant to the requirements established by the Secretary under subparagraph (B). Secretary shall, through such rules, regulations, and procedures as are determined appropriate, establish proce- dures for assignment of the reduced tax rate [file 3 of 5] S.L.C. 316 1 provided under this paragraph, which shall in- 2 elude-? 3 a limitation to ensure that the 4 number of proof gallons of distilled spirits 5 for which the reduced tax rate has been as? 6 signed by a distilled spirits operation? 7 to any importer does not ex- 8 ceed the number of proof gallons pro- 1 9 duced by such operation during the 10 calendar year which were imported 11 into the United States by such im- 12 porter, and 13 to all importers does not 14 exceed the 22,230,000 proof gallons of 15 distilled spirits to which the reduced 16 tax rate applies, 17 procedures that allow the election 18 of a distilled spirits operation to assign 19 and an importer to receive the reduced tax 20 rate provided under this paragraph, 21 requirements that the distilled 22 spirits operation provide any information 23 as the Secretary determines necessary and 24 appropriate for purposes of carrying out 25 this paragraph, and [?le 3 0f 5] S.L.C. U) 00 \l 4> b3 317 procedures that allow for revoca- tion of eligibility of the distilled spirits op- eration and the importer for the reduced tax rate provided under this paragraph in the case of any erroneous or fraudulent in- formation provided under clause which the Secretary deems to be material to qualifying for such reduced rate. CONTROLLED IN purposes of this section, any importer making an elec- tion described in subparagraph shall be deemed to be a member of the controlled group of the distilled spirits op- eration, as described under paragraph (2). purposes of this paragraph, in the case of a con- trolled group, rules similar to section 5051(a)(5)(B) shall apply?. EFFECTIVE amendments made by this section shall apply to distilled spirits removed after December 31, 2017. SEC. 13808. BULK DISTILLED SPIRITS. IN GENERAL. Section 5212 is amended by add- ing at the end the following sentence: ?In the ease of dis- [?le 3 of 5] S.L.C. 318 tilled spirits transferred in bond after December 31, 2017, and before January 1, 2020, this section shall be applied without regard to whether distilled spirits are bulk dis- tilled spirits?. EFFECTIVE 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. EXCLUSION FOR ANCSA PAYMENTS ASSIGNED T0 ALASKA NATIVE SETTLEMENT (1) IN of subchapter of chapter 1 is amended by inserting before section 140 the following new section: 139G. ASSIGNMENTS TO ALASKA NATIVE SETTLE- MENT TRUSTS. IN the case of a Native Corpora- tion, gross income shall not include the value of any pay- ments that would otherwise be made, or treated as being made, to such Native Corporation pursuant to, or as re- quired by, any provision of the Alaska Native Claims Set? tlement Act (43 U.S.C. 1601 et seq.), including any pay- ment that would otherwise be made to a Village Corpora- [file 3 of 5] S.L.C. 319 1 tion pursuant to section 7(j) of the Alaska Native Claims Settlement Act (43 U.S.C. 16060)), provided that any such payments? are assigned in writing to a Settlement 2 3 4 5 Trust, and 6 were not received by such Native Corpora- 7 tion prior to the assignment described in paragraph 8 (1). 9 INCLUSION IN GROSS the case of 10 a Settlement Trust which has been assigned payments de- 11 scribed in subsection gross income shall include such 12 payments when received by such Settlement Trust pursu- 13 ant to the assignment and shall have the same character 14 as if such payments were received by the Native Corpora- 15 tion. 16 AMOUNT AND SCOPE OF 17 amount and scope of any assignment under subsection 18 shall be described with reasonable particularity and may 19 either be in a percentage of one or more such payments 20 or in a fixed dollar amount. 21 DURATION OF 22 Any assignment under subsection shall specify? 23 a duration either in perpetuity or for a pe- 24 riod Of time, and 25 whether such assignment is revocable. [?le 3 of 5] S.L.PROHIBITION ON standing section 247, no deduction shall be allowed to a Native Corporation for purposes of any amounts described in subsection purposes of this sectionythe terms ?Native Corporation? and ?Settlement Trust? have the same meaning given such terms under section (2) CONFORMING table of sections for part of subchapter of chapter 1 is amended by inserting before the item relating to section 140 the following new item: ?See. 139G. Assignments to Alaska Native Settlement Trusts?. (3) EFFECTIVE amendments made by this subsection shall apply to taxable years begin? ning after December 31, 2016. DEDUCTION OF CONTRIBUTIONS To ALASKA NA- TIVE SETTLEMENT (1) IN of subchapter of chapter ?1 is amended by inserting before section 248 the following new section: 247. CONTRIBUTIONS TO ALASKA NATIVE SETTLE- MENT TRUSTS. IN the case of a Native Corpora? tion, there shall be allowed a deduction for any contribu- tions made by such Native Corporation to a Settlement [?le 3 of 5] S.L.C. 321 Trust (regardless of whether an election under section 646 is in effect for such Settlement Trust) for which the Na- tive Corporation has made an annual election under sub? section AMOUNT OF amount of the deduction under subsection shall be equal to? in the case of a cash contribution (regard- less of the method of payment, including currency, coins, money order, or check), the amount of such contribution, or in the case of a contribution not described in paragraph (1), the lesser of? the Native Corporation?s adjusted basis in the property contributed, or the fair market value of the property contributed. LIMITATION AND IN to paragraph (2), the deduction allowed under subsection 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. the aggregate amount of contributions described in subsection for any tax- [?le 3 of 5] S.L.C. 322 able year exceeds the limitation under paragraph (1), such excess shall be treated as a contribution described in subsection in each of the 15 suc- ceeding years in order of time. purposes of this section, the terms ?Native Corporation? and ?Settlement Trust? have the same meaning given such terms under section 646(h). MANNER OF MAKING IN 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. election made by a Native Corporation pursuant to this subsection may be revoked pursuant to a timely ?led amendment or supplement to the income tax return of such Native jorporation. ADDITIONAL Notwith- EARNINGS AND PROFITS. standing section 646(d)(2), in the case of a Native Corporation which claims a deduction under this sec- tion for an taxable vear the earnin and rotits I l/ [file 3 of 5] S.L.C. meri??ocooqoxun-nwmv??o 323 of such Native Corporation for such taxable year shall be reduced by the amount of such deduction. GAIN OR gain or loss shall be recognized by the Native lorporation with respect to a contribution of property for which a deduction is allowed under this section. to subsection a Set- tlement Trust shall include in income the amount of any deduction allowed under this section in the tax- able year in which the Settlement Trust actually re- ceives such contribution. holding period under sec- tion 1223 of the Settlement Trust shall include the period the property was held by the Native Corpora- tion. BASIS. The basis that a Settlement Trust has for which a deduction is allowed under this sec- tion shall be equal to the lesser of? the adjusted basis of the Native Cor- poration in such property immediately before such contribution, or the fair market value of the property immediately before such contribution. deduction shall be al- lowed under this section with respect to any con- [file 3 of 5] S.L.C. 324 tributions made to a Settlement Trust which are in Violation of subsection or of section 39 of the Alaska Native Claims Settlement Act (43 U.S.C. 1629c). ELECTION BY SETTLEMENT TRUST To DEFER INCOME IN the case of a contribu- tion which consists of property other than cash, a Settlement Trust may elect to defer recognition of 10 any income related to such property until the sale or 11 exchange of such property, in Whole or in part, by 12 the Settlement Trust. 13 the case of property de? 14 scribed in paragraph (1), any income or gain real- 15 ized on the sale or exchange of such property shall 16 be treated as? 17 for such amount of the income or 18 gain as is equal to or less than the amount of 19 income which would be included in income at 20 the time of contribution under subsection 21 but for the taxpayer?s election under this sub- 22 section, ordinary income, and 23 for any amounts of the income or 24 gain which are in excess of the amount of in- LII come which would be included in income at the [file 3 of 3?25 1 time of contribution under subsection but 2 for the taxpayer?s election under this sub- 3 section, having the same character as if this 4 subsection did not apply. 5 6 IN each taxable year, 7 a Settlement Trust may elect to apply this sub- 8 section for any property described in paragraph 9 (1) which was contributed during such year. 10 Any property to which the election applies shall 11 be identified and described with reasonable par- 12 ticularity on the income tax return or an 13 amendment or supplement to the return of the 14 Settlement Trust, with such election to have ef? 15 feet solely for such taxable year. 16 election made by 17 a Settlement Trust pursuant to this subsection 18 may be revoked pursuant to a timely filed 19 amendment or supplement to the income tax re- 20 turn of such Settlement Trust. 21 CERTAIN 22 IN the case of any 23 property for which an election is in effect 24 under this subsection and which is dis- 25 posed of within the first taxable year sub- [?le 3 of S.L.C. 326 sequent to the taxable year in which such property was contributed to the Settlement Trust? this section shall be applied as if the election under this subsection had not been made, any income or gain which would have been included in the year of contribution under subsection but for the taxpayer?s election under this subsection shall be included in in- come for the taxable year of such con- tribution, and ?(111) the Settlement Trust shall pay any increase in tax resulting from such inclusion, including any applica- ble interest, and increased by 10 per- cent of the amount of such increase with interest. ASSESSMEIVE?Notwithstanding section 6501(a), any amount described in subclause (111) of clause may be as- sessed, or a proceeding in court with re- spect to such amount may be initiated without assessment, within 4 years after [?le 3 of 5] S.L.327 the date on which the return making the election under this subsection for such property was filed. (2) CONFORMING table of sections for part of subchapter of chapter 1 is amended by inserting before the item relating to section 248 the following new item: ?Sec. 247. Contributions to Alaska Native Settlement Trusts?. (3) EFFECTIVE (A) IN 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 Rev- enue Code of 1986 has not expired. (B) ONE-YEAR WAIVER OF STATUTE 0F 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. [file 3 of 5] S.L.C. 328 INFORMATION REPORTING FOR DEDUCTIBLE TO ALASKA NATIVE SETTLEMENT (1) IN 6039H is amend- ed? (A) in the heading, by striking and (B) by adding at the end the following new subsection: DEDUCTIBLE CONTRIBUTIONS BY NATIVE COR- PORATIONS TO ALASKA NATIVE SETTLEMENT IN GENERAL. Any Native Corporation (as de?ned in subsection of section 3 of the Alaska Native Claims Settlement Act (43 .S.C. which has made a contribution to a Settlement Trust (as defined in subsection of such section) to which an election under subsection 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. CONTENT OF state- ment described in paragraph (1) shall include? [file 3 of 5] S.L. 329 1 the total amount of contributions to 2 which the election under subsection of sec- 3 tion 247 applies, 4 for each contribution, Whether such 5 contribution was in cash, 6 for each contribution which consists 7 of property other than cash, the date that such 8 property was acquired by the Native Corpora- 9 tion and the adjusted basis and fair market 10 value of such property on the date such prop- 11 erty was contributed to the Settlement Trust, 12 the date on which each contribution 13 was made to the Settlement Trust, and 14 such information as the Secretary de- 15 termines to be necessary or appropriate for the 16 identi?cation of each contribution and the accu? 17 rate inclusion of income relating to such con- 18 tributions by the Settlement Trust?. 19 (2) CONFORMING item re- 20 lating to section 6039H in the table of sections for 21 subpart A of part of subchapter A of chapter 61 22 is amended to read as follows: ?Sec. 6039H. Information With Respect to Alaska Native Settlement Trusts and Native Corporations. [?le 3 of 5] SM). 330 1 (3) EFFECTIVE amendments made 2 by this subsection shall apply to taxable years begin- 3 ning after December 31, 2016. 4 SEC. 13822. AMOUNTS PAID FOR AIRCRAFT MANAGEMENT 5 SERVICES. 6 IN GENERAL?Subsection of section 4261 is 7 amended by adding at the end the following new para- 8 graph: 9 AMOUNTS PAID FOR AIRCRAFT MANAGE- 10 MENT 11 IN tax shall be im- 12 posed by this section or section 4271 on any 13 amounts paid by an aircraft owner for aircraft 14 management services related to? 15 maintenance and support of the 16 aircraft owner?s aircraft, or 17 ?ights on the aircraft owner?s 18 aircraft. 19 AIRCRAFT MANAGEMENT SERV- 20 purposes of subparagraph (A), the 21 term ?aircraft management services? includes-? 22 assisting an aircraft owner with 23 administrative and support services, such 24 as scheduling, flight planning, and weather 25 forecasting, [file 3 of 5] S.L.C. 331 1 obtaining insurance, 2 maintenance, storage and fuel- 3 ing of aircraft, 4 hiring, training, and provision of 5 pilots and crew, 6 establishing and complying with 7 safety standards, and 8 such other services as are nec- 9 essary to support ?ights operated by an' 10 aircraft owner. 11 LESSEE TREATED AS AIRCRAFT 12 13 IN purposes of 14 this paragraph, the term ?aircraft owner? 15 includes a person who leases the aircraft 16 other than under a disqualified lease. 17 DISQUALIFIED pur- 18 poses of clause the term ?disqualified 19 lease? means a lease from a person pro- 20 viding aircraft management services with 21 respect to such aircraft (or a related per- 22 son (within the meaning of section 23 to the person prodding such 24 services), if such lease is for a term of 31 25 days or less. [?le 3 of 5] Sb. r?ar?tv?Ar?tt?tv?t MAWNHO 332 PRO RATA the case of amounts paid to any person which (but for this subsection) are subject to the tax imposed by subsection 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 de- scribed in such subparagraph.?. EFFECTIVE amendment made by this section shall apply to amounts paid after the date of the enactment of this Act. SEC. 13823. OPPORTUNITY ZONES. IN 1 is amended by adding at the end the following?: ?Subchapter Z?Opportunity Zones ?Sec. Designation. ?Sec. Special rules for capital gains invested in opportunity zones. 1400Z-l. DESIGNATION. QUALIFIED OPPORTUNITY ZONE 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 quali- fied opportunity zone. IN purposes of subsection a population census tract that is a low-income [file 3 of 5] S.L.C. community is designated as a qualified opportunity zone if? not later than the end of the deter- mination period, the governor of the State in which the tract is located? nominates the tract for designa- tion as a qualified opportunity zone, and notifies the Secretary in writing of such nomination, and the Secretary certifies such nomina- tion and designates such tract as a qualified op- portunity zone before the end of the consider- ation period. EXTENSION OF Demons?A governor may request that the Secretary extend either the de- termination or consideration period, or both (deter? mined Without regard to this subparagraph), for an additional '30 days. OTHER purposes of this subsection? LOW-INCOME term ?low-income community? has the same meaning as when used in section 45D(e). DEFINITION OF [file 3 of 5] S.L.C. 834 CONSIDERATION term ?consideration period? means the 30-day period beginning on the date on which the Secretary receives notice under subsection as extended under subsection DETERMINATION term ?determination period? means the 90-day period beginning on the date of the enactment of the Tax Cuts and Jobs Act, as extended under sub- section purposes of this section, the term ?State? includes any possession of the United States. NUMBER OF IN 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. 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. [?le 3 of 5] S.L.C. 335 1 DESIGNATION OF TRACTS CONTIGUOUs WITH 2 . 3 IN population census tract 4 that is not a low-income community may be des- 5 ignated as a qualified opportunity zone under this 6 section if? 7 the tract is contiguous with the low- 8 income community that is designated as a 9 qualified opportunity zone, and 10 the median family income of the tract 11 does not exceed 125 percent of the median fam- 12 ily income of the low-income community With 13 which the tract is contiguous. 14 LIMITATION ot more than 5 percent of 15 the population census tracts designated in a State as 16 a qualified opportunity zone may be designated 17 under paragraph (1). 18 PERIOD FOR WHICH DESIGNATION Is IN EF- 19 designation as a qualified opportunity zone 20 shall remain in effect for the period beginning on the date 21 of the designation and ending at the close of the 10th cal- 22 endar year beginning on or after such date of designation. [?le 3 of 5] S.L.C. 336 1 SPECIAL RULES FOR CAPITAL GAINS IN- 2 VESTED IN OPPORTUNITY ZONES. 3 IN the ease of gain from the sale 4 to, or exchange with, an unrelated person of any property 5 held by the taxpayer, at the election of the taxpayer? 6 gross income for the taxable year shall not 7 include so much of such gain as does not exceed the 8 aggregate amount invested by the taxpayer in a 9 qualified opportunity fund during the ISO-day period 10 beginning on the date of such sale or exchange, 11 the amount of gain excluded by paragraph 12 (1) shall be included in gross income as provided by 13 subsection and 14 subsection shall apply. 15 No election may be made under the preceding sentence 16 with respect to a sale or exchange if an election previously 17 made with respect to such sale or exchange is in effect. 18 DEFERRAL OF GAIN INVESTED IN OPPOR- 19 TUNITY ZONE 20 YEAR OF to which sub- 21 section applies shall be included in income in 22 the taxable year which includes the earlier of? 23 the date on which such investment is 24 sold or exchanged, or 25 December 31, 2026. 26 AMOUNT [?le 3 of 5] S.L.C. 337 IN amount of gain included in gross income under subsection shall be the excess of? the lesser of the amount of gain excluded under paragraph (1) or the fair market value of the property as determined as of the date described in paragraph (1), over the taxpayer?s basis in the in- vestment. DETERMINATION OF IN as other- wise provided in this clause or subsection the taxpayer?s basis in the investment shall be zero. INCREASE FOR GAIN RECOG- NIZED UNDER SUBSECTION basis in the investment shall be increased by the amount of gain recognized by rea- son of subsection with respect to such property. INVESTMENTS HELD FOR 5 the case of any investment held for at least 5 years, the basis of such investment shall be increased by an [tile 3 of 5] S.L.C. 338 amount equal to 10 percent of the amount of gain deferred by reason of subsection INVESTMENTS IIELD FOR 7 the case of any investment held by the taxpayer for at least 7 years, in addition to any adjustment made under clause the basis of such property shall be increased by an amount equal to 5 per- cent of the amount of gain deferred by rea- son of subsection SPECIAL RULE FOR INVESTMENTS HELD FOR AT LEAST 10 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. QUALIFIED pur- poses of this section? QUALIFIED OPPORTUNITY term ?qualified opportunity fund? means any invest- ment vehicle which is organized as a corporation or a partnership for the purpose of investing in quali- ?ed opportunity zone property (other than another [?le 3 of 5] S.L.C. 339 qualified opportunity fund) that holds at least 90 percent of its assets in quali?ed opportunity zone property, determined? on the last day of the first 6-month period of the taxable year of the fund, and on the last day of the taxable year of the fund. QUALIFIED OPPORTUNITY ZONE PROP- IN term ?quali?ed opportunity zone property? means property Which is? qualified opportunity zone stock, qualified opportunity zone part- nership interest, or quali?ed opportunity zone busi- ness property. QUALIFIED OPPORTUNITY ZONE IN as pro- vided in clause the term ?quali?ed op- portunity zone stock? means any stock in a domestic corporation if? such stock is acquired by the taxpayer after December 31, 2017, at [?le 3 of 5] S.L.C. 340 its original issue (directly or through an underwriter) from the corporation solely in exchange for cash, 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 op- portunity zone business), and ?(111) during substantially all of the taxpayer?s holding period for such stock, such corporation qualified as a qualified opportunity zone business. rule similar to the rule of section 1202(c)(3) shall apply for purposes of this paragraph. QUALIFIED OPPORTUNITY ZONE PARTNERSHIP term ?qualified opportunity zone partnership interest? means any capital or profits interest in a domestic partnership if? such interest is acquired by the taxpayer after December 31, 2017, from the partnership solely in exchange for cash, [?le 3 of 5] S.L.C. 3-11 as of the time such interest was acquired, such partnership was a quali?ed 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 during substantially all of the taxpayer?s holding period for such interest, such partnership qualified as a qualified opportunity zone business. QUALIFIED OPPORTUNITY ZONE BUSINESS IN term ?quali- ?ed opportunity zone business property? means tangible property used in a trade or business of the taxpayer if? such property was acquired by the taxpayer by purchase (as de? ?ned in section 179(d)(2)) after De- cember 31, 2017, the original use of such property in the quali?ed opportunity zone commences with the taxpayer or the taxpayer substantially improves the property, and [file 3 of 5] S.L.C. 842 ?(111) during substantially all of the taxpayer?s holding period for such property, substantially all of the use of such property was in a qualified op- portunity zone. SUBSTANTIAL For purposes of subparagraph property shall be treated as substantially improved by the taxpayer only if, during any 30-month period beginning after the date of acquisition of such property, addi- tions to basis with respect to such property in the hands of the taxpayer exceed an amount equal to the adjusted basis of such property at the beginning of such 30- Inonth period in the hands of the taxpayer. RELATED pur- poses of subparagraph 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 QUALIFIED OPPORTUNITY ZONE BUSI- [?le 3 of 5] S.L.C. 348 IN terin ?quali?ed opportunity zone business? means a trade or business? in which substantially all of the tangible property owned or leased by the taxpayer is qualified opportunity zone busi- ness property, which satisfies the requirements of paragraphs (2), (4), and (8) of section 1397C(b), and which is not described in section SPECIAL purposes of subparagraph (A), tangible property that ceases to be a qualified opportunity zone business property shall continue to be treated as a quali- fied opportunity zone business property for the lesser of? 5 years after the date on which such tangible property ceases to be so qualified, or the date on which such tangible property is no longer held by the qualified opportunity zone business. APPLICABLE [file 3 of 5] S.L.C. 844 TREATMENT OF INVESTMENTS WITH MIXED 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 is in effect such investment shall be treated as 2 separate investments, consisting of? one investment that only includes amounts to which the election under sub- section applies, and a separate investment consisting of other amounts, and subsections and shall only apply to the investment described in sub- paragraph RELATED purposes of this section, persons are related to each other if such persons are described in section 267(b) or 707(b)(1), determined by substituting ?20 percent? for ?50 per- cent? each place it occurs in such sections. the case of a decedent, amounts recognized under this section shall, if not properly includible in the gross income of the dece- dent, be includible in gross income as provided by section 691. [?le 3 of 5] S.L.C. 345 1 Secretaiy shall pre- 2 scribe such regulations as may be necessary or ap- 3 propriate to carry out the purposes of this section, 4 including? 5 rules for the certification of qualified 6 opportunity ?mds for the purposes of this sec- 7 tion, and 8 rules to prevent abuse. 9 FAILURE OF QUALIFIED OPPORTUNITY FUND 10 To MAINTAIN INVESTMENT 11 IN a qualified opportunity 12 fund fails to meet the SlO-percent requirement of 13 subsection the qualified opportunity fund 14 shall pay a penalty for each month it fails to meet 15 the requirement in an amount equal to the product 16 of? 17 the excess of? 18 the amount equal to 90 percent of 19 its aggregate assets, over 20 the aggregate amount of quali- 21 fied opportunity zone property held by the 22 fund, multiplied by 23 the underpayment rate established 24 under section 6621(a)(2) for such month. [?le 3 of 5] S.L.C. 21 22 23 346 SPECIAL RULE FOR 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 part- nership. REASONABLE CAUSE penalty shall be imposed under this subsection with respect to any failure if it is shown that such failure is due tO reasonable cause?. (In) BASIS 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: to the extent provided in subsections and of section CLERICAL table of sub- chapters for chapter 1 is amended by adding at the end the following new item: z. OPPORTUNITY EFFECTIVE amendments made by this section shall take effect on the date of the enactment Of this Act. [?le 4 of 5] S.L.C. b??V?iD?tO?th?lI?lh??347 Subtitle D?International Tax Provisions PART TRANSACTIONS Subpart A?Establishment of Participation Exemption System for Taxation of Foreign Income SEC. 14101. DEDUCTION FOR FOREIGN-SOURCE PORTION IN of subchapter of OF DIVIDENDS RECEIVED BY DOMESTIC COR- PORATIONS FROM SPECIFIED OWNED FOREIGN CORPORATIONS. chapter 1 is amended by inserting after section 245 the following new section: 245A. DEDUCTION FOR FOREIGN SOURCE-PORTION OF DIVIDENDS RECEIVED BY DOMESTIC COR- PORATIONS FROM SPECIFIED OWNED FOREIGN CORPORATIONS. IN the case of any dividend re- ceived from a speci?ed lO-percent owned foreign corpora- tion 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. SPECIFIED 10-PERCENT OWNED FOREIGN COR- PORATION. For purposes of this section? [?le 4 of 5] S.L.C. 848 1 IN term ?specified 10-per- 2 cent owned foreign corporation? means any foreign 3 corporation with respect to which any domestic cor- 4 poration is a United States shareholder with respect 5 to such corporation. 6 EXCLUSION OF PASSIVE FOREIGN INVEST- 7 MENT term shall not include any 8 corporation which is a passive foreign investment 9 company (as defined in section 1297) with respect to 10 the shareholder and which is not a controlled foreign 1 1 corporation. 12 FOREIGN-SOURCE purposes of 13 this section? 14 IN foreign-source portion 15 of any dividend from a specified 10-percent owned 16 foreign corporation is an amount which bears the 17 same ratio to such dividend as? 18 the undistrihuted foreign earnings of 19 the speci?ed 10-percent owned foreign corpora- 20 tion, bears to 21 the total undistributed earnings of 22 such foreign corporation. 23 UNDISTRIBUTED term 24 ?undistributed earnings? means the amount of the 25 earnings and profits of the specified lO-percent [?le 4 of 5] S.L.349 owned foreign corporation (computed in accordance with sections 964(a) and 986)? as of the close of the taxable year of the specified 10-percent owned foreign corpora- tion in which the dividend is distributed, and vw'thout diminution by reason of divi- dends distributed during such taxable year. UNDISTRIBUTED FOREIGN The term ?undistributcd foreign earnings? means the portion of the undistributed earnings which is attrib- utable to neither income described in subparagraph (A) of section 245(a)(5), nor dividends described in subparagraph (B) of such section (determined without regard to section 245(a)(12)). DISALLOWANCE OF FOREIGN TAX CREDIT, 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 dis- tribution any portion of which constitutes a diw'dend for which a deduction is allowed under this section. DENLAL OF deduction shall be allowed under this chapter for any tax for [?le 4 of 5] S.L.C. 350 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 of subchapter N). SPECIAL RULES FOR HYBRID DIVIDENDS. IN GENERAL?Subsection shall not apply to any dividend received by a United States shareholder from a controlled foreign corporation if the dividend is a hybrid dividend. HYBRID DIVIDENDS OF TIERED CORPORA- a controlled foreign corporation with re- spect 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? the hybrid dividend shall be treated for purposes of section 951(a)(1)(A) as subpart income of the receiving controlled foreign cor- poration for the taxable year of the controlled foreign corporation in which the dividend was received, and the United States shareholder shall include in gross income an amount equal to the [file 4 of 5] S.L.C. 351 1 shareholder?s pro rata share (determined in the 2 same manner as under section 951(a)(2)) of the 3 subpart income described in subparagraph 4 (A). 5 DENIAL OF FOREIGN TAX CREDIT, 6 The rules of subsection shall apply to any hybrid 7 dividend received by, or any amount included under 8 paragraph (2) in the gross income of, a United 9 States shareholder. 10 HYBRID term ?hybrid 11 dividend? means an amount received from a con- 12 trolled foreign corporation? 13 for which a deduction would be al- 14 lowed under subsection but for this sub- 15 section, and 16 for which the controlled foreign cor- 17 poration received a deduction (or other tax ben- 18 efit) from taxes imposed by any foreign coun- 19 try. 20 SPECIAL RULE FOR PURGING DISTRIBUTIONS 21 OF PASSIVE FOREIGN INVESTMENT amount which is treated as a dividend under section NN WM 1291(d)(2)(B) shall not be treated as a dividend for pur- A poses of this section. [?le 4 of 5] S.L.C. 352 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?. APPLICATION OF HOLDING PERIOD REQUIRE- MENT.?Subsection Of section 246 is amended? (1) by striking ?or 245? in paragraph (I) and inserting ?245, or and (2) by adding at the end the following new paragraph: SPECIAL RYLES FOR FOREIGN SOURCE PORTION OF DIVIDENDS RECEIVED FROM SPECIFIED IO-PERCENT OWNED FOREIGN CORPORATIONS. I-YEAR HOLDING PERIOD REQUIRE- purposes of section paragraph shall be ap- plied?? by substituting ?365 days? for ?45 days? each place it appears, and by substituting ?731-day pe- riOd? for ?91-day period?, and paragraph (2) shall not apply. [file -1 of 5] S.L.C. 353 1 STATUS MUST BE MAINTAINED DUR- 2 ING HOLDING purposes of apply- 3 ing paragraph (1) with respect to section 245A, 4 the taxpayer shall be treated as holding the 5 stock referred to in paragraph (1) for any pe- 6 riOd only if? 7 the specified 10?pcrcent owned 8 foreign corporation referred to in section 9 245A(a) is a specified 10-percent owned 10 foreign corporation at all times during 11 such period, and 12 the taxpayer is a United States 13 shareholder with respect to such specified 14 10-pcrcent owned foreign corporation at all 15 times during such period?. 16 APPLICATION OF RULES GENERALLY APPLICA- 17 BLE TO FOR DIVIDENDS 18 (1) TREATMENT OF DIVIDENDS FROM CERTAIN 19 CORPORATIONS. Paragraph (1) of section 246(a) is 20 amended by striking ?and 2-15? and inserting ?245, 21 and 22 (2) ASSETS GENERATING PORTION 23 OF DIVIDEND NOT TAKEN INTO ACCOUNT IN ALLO- 24 CATING AND APPORTIONING EX- 25 PENSES.?Paragraph (3) of section 864(e) is amend- [file 4 of 5] S.L.C. 354 1 ed by striking ?or 245(a)? and inserting 245(a), 2 or 3 (3) COORDINATION WITH SECTION 1059.?Sub- 4 paragraph (B) of section 1059(1))(2) is amended by 5 striking ?or 245? and inserting ?245, or 6 COORDINATION WITH FOREIGN TAX CREDIT 7 of section 904 is amended 8 by adding at the end the following new paragraph: 9 TREATMENT OF DIVIDENDs FOR WHICH 10 DEDUCTION IS ALLOWED UNDER SECTION 11 For purposes of subsection in the case of a do- 12 mestic corporation which is a United States share? 13 holder with respect to a specified 10-percent owned 14 foreign corporation, such domestic corporation?s tax- 15 able income from sources without the United States 16 shall be determined without regard to? 17 the foreign-source portion of any divi- 18 dend received from such foreign corporation, 19 and 20 any deductions properly allocable to 21 such portion. 22 Any term which is used in section 245A and in this 23 paragraph shall have the same meaning for purposes 24 of this paragraph as when used in such section?. 25 CONEORMING [file 4 of 5] S.L.355 (1) Subsection of section 951 is amended by striking ?subpart? and inserting ?title?. (2) Subsection of section 957 is amended by striking ?subpart? in the matter preceding para- graph (1) and inserting ?title?. (3) The table of sections for part of sub- chapter of chapter 1 is amended by inserting after the item relating to section 245 the following new item: ?See. 245A. Dividends received by domestic corporations from certain foreign corporations?. EFFECTIVE amendments made by this section shall apply to taxable years of foreign corpora- tions 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. 14102. SPECIAL RULES RELATING TO SALES OR TRANSFERS INVOLVING SPECIFIED CENT OWNED FOREIGN CORPORATIONS. SALES BY UNITED STATES PERSONS 0F STOCK?Section 1248 is amended by redesignating sub- section as subsection and by inserting after sub- section the following new subsection: COORDINATION WITH DIVIDENDS RECEIVED the case of the sale or exchange by a domestic corporation of stock in a foreign corporation held [?le 4 of 5] S.L.C. 356 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 BASIS IN SPECIFIED 10-PERCENT OWNED FOR- EIGN CORPORATION REDUCED BY NONTAXED PORTION OF DIVIDEND FOR PURPOSES OF DETERMINING (1) IN 961 is amended by adding at the end the following new subsection: BASIS IN SPECIFIED 10-PERCENT OWNED FOR- EIGN CORPORATION REDUCED BY NONTAXED PORTION OF DIVIDEND FOR PURPOSES OF DETERMINING If a domestic corporation receives a dividend from a speci- fied 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 for- eign 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 cor- poration under section 245A with respect to such stock?. (2) EFFECTIVE amendments made by this subsection shall apply to dividends received in taxable years beginning after December 31, 2017. [?le 4 of 5] S.L.C. 1 357 SALE BY A CFC OF A LOWER TIER CFC. Sec- 2 tion 964(e) is amended by adding at the end the following 3 new paragraphCOORDINATION WITH DIVIDENDS RE- CEIVED IN for any taxable year of a controlled foreign corporation begin- ning 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, not- withstanding any other provision Of this title? the foreign-source portion Of such dividend shall be treated for purposes Of section 951(a)(1)(A) as subpart income of the selling controlled foreign corporation for such taxable year, a United States shareholder with respect to the selling controlled foreign cor- poration shall include in gross income for the taxable year of the shareholder with or within which such taxable year of the con- trolled foreign corporation ends an amount equal to the shareholder?s pro rata share [?le 4 of 5] S.L.C. 358 (determined in the same manner as under section 951(a)(2)) of the amount treated as subpart income under clause and the deduction under section 245A(a) shall be allowable to the United States shareholder with respect to the sub- part income included in gross income under clause (ii) in the same manner as if such subpart income were a dividend re- ceived by the shareholder from the selling controlled foreign corporation. EFFECT OF Loss ON EARNINGS AND PROFITS. For purposes of this title, in the case of a sale or exchange by a controlled for- eign corporation of stock in another foreign cor- poration in a taxable year of the selling con- trolled foreign corporation beginning after De- cember 31, 2017, to which this paragraph would apply if gain were recognized, the earn- ings and profits of the selling controlled foreign corporation shall not be reduced by reason of any loss from such sale or exchange. FOREIGN-SOURCE purposes of this paragraph, the foreign-source portion of any amount treated as a dividend [?le 4 of 5] S.L.C. 359 under paragraph (1) shall be determined in the same manner as under section TREATMENT OF FOREIGN BRANCH LOSSES TRANSFERRED TO SPECIFIED OWNED FOR- EIGN CORPORATIONS. (1) IN II Of subchapter of chapter 1 is amended by adding at the end the fol- lowing new section: 91. CERTAIN FOREIGN BRANCH LOSSES TRANS- FERRED TO SPECIFIED OWNED FOREIGN CORPORATIONS. IN a domestic corporation trans- fers substantially all of the assets of a foreign branch (within the meaning of section as in effect before the date of the enactment of the Tax Cuts and Jobs Act) to a specified lO-percent owned foreign corporation (as defined in section 245A) with respect to which it is a United States Shareholder after such transfer, such d0- mestic corporation shall include in gross income for the taxable year which includes such transfer an amount equal to the transferred loss amount ?dth respect to such trans- fer. LIMITATION AND BASED ON FOREIGN-SOURCE DIVIDENDS [file 4 of 5] S.L.C. p?t 360 IN amount included in the gross income of the taxpayer under subsection for any taxable year shall not exceed the amount allowed as a deduction under section 245A for such taxable year (taking into account dividends received from all specified 10-percent owned foreign corpora- tions with respect to which the taxpayer is a United States shareholder). AMOUNTS NOT INCLUDED CARRIED FOR- amount not included in gross income for any taxable year by reason of paragraph (1) shall, subject to the application of paragraph (1) to the succeeding taxable year, be included in gross in? come for the succeeding taxable year. c) Loss ur oses of this section, the term ?transferred loss amount? means, with respect to any transfer of substantially all of the as- sets of a foreign branch, the excess (if any) of? the sum of losses? 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 the sum of? [file 4 of 5] S.L.C. 361 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 any amount which is recognized under section 904(f)(3) on account of the trans- fer. REDUCTION FOR RECOGNIZED 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 SOURCE OF included in gross income under this section shall be treated as derived from sources within the United States. BASIS with such regulations or other guidance as the Secretary shall pre- scribe, proper adjustments shall be made in the adjusted basis of the taxpayer?s stock in the specified lO-percent owned foreign corporation to which the transfer is made, and in the transferee?s adjusted basis in the property transferred, to re?ect amounts included in gross income under this section?. (2) CLERICAL table of sec- tions for part II of subchapter of chapter 1 is [?le 4 of 5] S.L.362 amended by adding at the end the following new item: ?Sec. 91. Certain foreign branch losses transferred to speci?ed 10-percent owned foreign corporations?. (3) EFFECTIVE amendments made by this subsection shall apply to transfers after De- cember 31, 2017. REPEAL OF ACTIVE TRADE OR BUSINESS EXCEP- TION UNDER SECTION 367 (1) IN GENERAL. Section 367(a) is amended by striking paragraph (3) and redesignating para? graphs (4), (5), and (6) as paragraphs (3), (4), and (5), respectively (2) CONFORMING 367(a)(4), as redesignated by paragraph (1), is amended? (A) by striking ?Paragraphs (2) and and inserting ?Paragraph and (B) by striking (2) AND in the heading and inserting (3) EFFECTIVE amendments made by this subsection Shall apply to transfers after De- cember 31, 2017. [?le 4 of 5] S.363 SEC. 14103. TREATMENT OF DEFERRED FOREIGN INCOME UPON TRANSITION TO PARTICIPATION EX- EMPTION SYSTEM OF TAXATION. IN 965 is amended to read as follows: 965. TREATMENT OF DEFERRED FOREIGN INCOME UPON TRANSITION TO PARTICIPATION EX- EMPTION SYSTEM OF TAXATION. TREATMENT OF DEFERRED FOREIGN INCOME AS SUBPART the case of the last taxable year of a deferred income corporation which begins before January 1, 2018, the subpart income of such foreign corporation (as otherwise determined for such taxable year under section 952) shall be increased by the greater of? the accumulated post-1986 deferred for- eign income of such corporation determined as of November 9, 2017, or the accumulated post-1986 deferred for- eign income of such corporation determined as Of December 31, 2017. REDUCTION IN AMOUNTs INCLUDED IN GRoss INCOME OF UNITED STATEs SHAREHOLDERS OE SPECI- FIED FOREIGN CORPORATIONS WITH DEFICITS IN EARN- INGS AND IN the case of a taxpayer Which is a United States shareholder with respect to [file 4 of 5] S.L.C. 364 at least one deferred foreign income corporation and at least one deficit foreign corporation, the amount which would (but for this subsection) be taken into account under section 951(a)(1) by rea- son of subsection as such United States share- holder?s pro rata share of the subpart income of each deferred foreign income corporation shall be re- duced by the amount of such United States share? holder?s aggregate foreign deficit which is allo- cated under paragraph (2) to such deferred foreign income corporation. ALLOCATION OF AGGREGATE FOREIGN aggregate foreign 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? such United States shareholder?s pro rata share of the accumulated post-1986 de- ferred foreign income of each such deferred for- eign income corporation, bears to the aggregate of such United States shareholder?s pro rata share of the accumulated post-1986 deferred foreign income of all de- [?le 4 of 5] S.L.C. 365 ferred foreign income corporations of such United States shareholder. DEFINITIONS RELATED TO DEFI- purposes of this subsection? AGGREGATE FOREIGN DEF- IN term ?aggre- gate foreign deficit? means, with re- spect to any nited States shareholder, the lesser of? the aggregate of such share- holder?s pro rata shares of the speci- fied deficits of the de?cit foreign corporations of such share- holder, or the amount determined under paragraph (2 (B). ALLOCATION OF the amount described in clause is less than the amount described in clause then the shareholder shall designate, in such form and manner as the Secretary determines? the amount of the specified deficit which is to be taken into [file 4 of 5] g0 366 account for each deficit corpora- tion with respect to the taxpayer, and in the case of an def- icit corporation which has a qualified de?cit (as defined in section 952), the portion (if any) of the deficit taken into account under subclause (I) which is attributable to a qualified de?cit, including the qualified activi- ties to which such portion is attrib- utable. DEFICIT FOREIGN CORPORA- term deficit foreign corpora? tion? means, with respect to any taxpayer, any specified foreign corporation with respect to which such taxpayer is a United States share- holder, if? such specified foreign corporation has a deficit in post-1986 earnings and profits, and as of November 9, 2017? such corporation was a spec- ified foreign corporation, and [?le 4 of 5] S.L.C. 367 such taxpayer was a United States shareholder of such corpora- tion. SPECIFIED term ?specified deficit? means, with respect to any deficit foreign corporation, the amount of the deficit referred to in subpara- graph (B). TREATMENT OF EARNINGS AND PROFITS IN FUTURE REDUCED EARNINGS AND PROFITS TREATED AS PREVIOUSLY TAXED INCOME WHEN purposes of apply- ing section 959 in any taxable year beginning after December 31, 2017, with respect to any United States shareholder of a deferred foreign income corporation, an amount equal to such shareholder?s reduction under paragraph (1) which is allocated to such deferred foreign in- come 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). purposes of this title, a United States shareholder?s pro rata [?le 4 of 5] S.L.368 share of the earnings and profits of any speci? fied deficit foreign corporation under this subsection shall be increased by the amount of the specified E&l? 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 de?cit so taken into ac- count was attributable. APPLICATION OF PARTICIPATION EXEMPTION To INCLUDED IN the case of a United States shareholder of a deferred foreign income cor- poration, 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? 78.6 percent of the excess (if any) of? the amount so included as gross income, over the amount of such United States shareholder?s aggregate foreign cash position, plus [?le 4 of 5] S.L.369 58.6 percent of so much of the amount described in subparagraph as does not exceed the amount described in sub- paragraph AGGREGATE FOREIGN CASH For purposes of this subsection? IN term ?aggregate foreign cash position? means, m'th respect to any United States shareholder, the greater the aggregate of such United States shareholder?s pro rata share of the cash position of each specified foreign cor? poration of such United States shareholder determined as of the close of the last tax- able year of such specified foreign corpora- tion which begins before January 1, 2018, or one half of the sum of? the aggregate described in clause determined as of the close of the last taxable year of each such specified foreign corporation which ends before November 9, 2017, plus the aggregate described in clause determined as of the close of [file 4 of 5] S.L.C. 370 the taxable year of each such specified foreign corporation which precedes the taxable year referred to in subclause (1). CASH purposes of this paragraph, the cash position of any speci- fied foreign corporation is the sum of? cash and foreign currency held by such foreign corporation, the net accounts receivable of such foreign corporation, plus the fair market value of the fol- lowing assets held by such corporation: Personal property which is of a type that is actively traded and for which there is an established fi- nancial market (other than stock in the specified foreign corporation). Commercial paper, certifi- cates of deposit, the securities of the Federal government and of any State or foreign government. ?(111) Any obligation with a. term of less than one year. [?le 4 of 5] S.L.C. 371 Any asset which the Sec- retary identi?es as being economically equivalent to any asset described in this subparagraph. NET ACCOUNTS purposes of this paragraph, the term ?net ac- counts receivable? means, with respect to any specified foreign corporation, the excess (if any) of? such corporation?s accounts re- ceivable, over such corporation?s accounts pay- able (determined consistent with the rules of section 461). PREVENTION OF DOUBLE COUNT- positions of a specified foreign cor- poration described in clause (ii) or of subparagraph (B) shall not be taken into ac- count 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. [file 4 of 5] S.L.C. 372 CASH POSITIONS OF CERTAIN NON- CORPORATE ENTITIES TAIGEN INTO An entity shall be treated as a specified foreign corporation of a United States shareholder for purposes of determining such United States shareholder?s aggregate foreign cash position if? such entity is a foreign entity which would be a specified foreign corpora- tion of such United States shareholder if such entity were a corporation, or any interest in such entity is held by a speci?ed foreign corporation of such United States shareholder (determined after application of clause and such en- tity would be a specified foreign corpora- tion of such United States shareholder if such entity were a foreign corporation. the Secretary deter? mines that a principal purpose of any trans- action was to reduce the aggregate foreign cash position taken into account under this sub- section, such transaction shall be disregarded for purposes of this subsection. [file 4 of 5] S.L.C. 1 373 DEFERRED FOREIGN INCOME CORPORATION- 7 2 ACCUMULATED POST-1986 DEFERRED FOREIGN IN- 3 purposes of this sectionDEFERRED FOREIGN INCOME CORPORA- term ?deferred foreign income corpora- tion? means, with respect to any United States shareholder, any specified foreign corporation of such United States shareholder which has accumu- lated post-1986 deferred foreign income (as of the close of the taxable year referred to in subsection greater than zero. ACCUMULATED POST-1986 DEFERRED FOR- EIGN term ?accumulated post-1986 deferred foreign income? means the post-1986 earn- ings and profits except to the extent such earnings? are attributable to income of the specified foreign corporation which is effectively connected With the conduct of a trade or busi- ness within the United States and subject to tax under this chapter, or in the case of a controlled foreign corporation, if distributed, would be excluded from the gross income of a United States share- holder under section 959. [file 4 of 5] {a 374 To the extent provided in regulations or other guid- ance prescribed by the Secretary, in the case Of any controlled foreign corporation which has share- holders 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. POST-1986 EARNINGS AND term ?post-1986 earnings and profits? means the earnings and profits of the foreign corporation (com- puted in accordance with sections 964(a) and 986, and by only taking into account periods when the foreign corporation was a specified foreign corpora- tion) accumulated in taxable years beginning after December 31, 1986, and determined? as Of the date Of the taxable year re- ferred to in paragraph (1) or (2) of subsection whichever is applicable with respect tO such foreign corporation, and without diminution by reason of divi- dends distributed during the taxable year end- ing with or including such date. SPECIFIED FOREIGN CORPORATION. [?le 4 of 5] S.L.purposes Of this sec- tion, the term ?specified foreign corporation? means? any controlled foreign corporation, and any section 902 corporation (as de- ?ned in section 909(d)(5) as in effect before the date Of the enactment Of the Tax Cuts and Jobs Act). APPLICATION TO SECTION 902 CORPORA- purposes of sections 951 and 961, a section 902 corporation (as so defined) shall be treated as a controlled foreign corporation solely for purposes Of taking into account the subpart in- come Of such corporation under subsection (and for purposes of applying subsection EXCLUSION OF PASSIVE FOREIGN INVEST- MENT 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. DETERMINATIONS OF PRO RATA 24 purposes Of this section, the determination Of any United 25 States shareholder?s pro rata share of any amount with [?le 4 of' 5] S.L.C. 376 I respect to any specified foreign corporation shall be deter- mined under rules similar to the rules of section 951(a)(2) by treating such amount in the same manner as subpart income (and by treating such speci?ed foreign corpora- 2 3 4 5 tion as a controlled foreign corporation). 6 DISALLOWANCE OF FOREIGN TAX CREDIT, 7 8 IN credit shall be allowed 9 under section 901 for the applicable percentage of 10 any taxes paid or accrued (or treated as paid or ac- 11 crued) with respect to any amount for which a de- 12 duction is allowed under this section. 13 APPLICABLE PERCENTAGE. For purposes 14 of this subsection, the term ?applicable percentage? 15 means the amount (expressed as a percentage) equal 16 to the sum of? 17 0.786 multiplied by the ratio of? 18 the excess to which subsection 19 applies, divided by 20 the sum of such excess plus the 21 amount to which subsection ap- 22 plies, plus 23 0.586 multiplied by the ratio of? 24 the amount to which subsection 25 applies, divided by [file 4 of 5] S.L.C. 377 the sum described in subpara- graph DENIAL OF 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 of subcliapter N). COORDINATION WITII SECTION 78.?Sec- tion 78 shall not apply to any tax for which credit is not allowable under section 901 by reason of para- graph (1). ELECTION TO PAY LIABILITY IN INSTALL- the case of a United States shareholder of a deferred foreign income cor- poration, such United States shareholder may elect to pay the net tax liability under this section in 8 installments of the following amounts: 8 percent of the net tax liability in the case of each of the first 5 of such install- ments, 15 percent of the net tax liability in the case of the 6th such installment, [file 4 of 5] S.L.C. 378 20 percent of the net tax liability in the case of the 7th such installment, and 25 percent of the net tax liability in the case of the 8th such installment. DATE FOR PAYMENT OF If an election is made under paragraph (1), the first installment shall be paid on the due date (deter- mined Without regard to any extension of time for ?ling the return) for the return of tax for the tax- able year described in subsection and each suc- ceeding installment shall be paid on the due date (as so determined) for the return of tax for the taxable year the taxable year with respect to which the precedng installment was made. ACCELERATION OF there is an addition to tax for failure to timely pay any in- stallment required under this subsection, a liquida- tion or sale of substantially all the assets of the tax- payer (including in a title 11 or similar case), a ces- sation of business by the taxpayer, or any similar circumstance, then the unpaid portion of all remain- ing 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 [file 4 of 5] S.L.379 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 install- ments due under this subsection in the same manner as if such buyer were the taxpayer. PRORATION 0F DEFICIENCY TO INSTALL- an election is made under paragraph (1) to pay the net tax liability under this section in in- stallments and a deficiency has been assessed with respect to such net tax liability, the deficiency shall be prorated to the installments payable under para,- graph (1). The part of the deficiency so prorated to any installment the date for payment of which has not arrived shall be collected at the same time as, and as a part of, such installment. The part of the deficiency so prorated to any installment the date for payment of which has arrived shall be paid upon notice and demand from the Secretary. This sub- section shall not apply if the deficiency is due to negligence, to intentional disregard of rules and reg- ulations, or to fraud with intent to evade tax. election under paragraph (1) shall be made not later than the due date for the return of tax for the taxable year described in sub- [?le 4 of 5] S.L.380 section and shall be made in such manner as the Secretary shall provide. NET TAX LIABILITY UNDER THIs SEC- purposes of this subsection? IN net tax liability under this section with respect to any United States shareholder is the excess (if any) of? 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 such taxpayer?s net income tax for such taxable year determined? without regard to this sec- tion, and without regard to any in- come or deduction properly attrib- utable to a dividend received by such United States shareholder from any deferred foreign income corporation. NET INCOME term ?net income taX? means the regular tax liability re- duced by the credits allowed under subparts A, B, and of part IV of subchapter A. [file 4 of 5] S.L.C. 381 SPECIAL RULES FOR EORPORATION SHARE- IN the case of any cor- poration which is a United States shareholder of a deferred foreign income corporation, each share- holder of such corporation may elect to defer pay- ment of such shareholder?s net tax liability under this section with respect to such 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 re- turn of tax as an addition to tax in the shareholder?s taxable year which includes such triggering event. TRIGGERING IN the case of any shareholder?s net tax liability under this section with respect to any corporation, the trig- gering event with respect to such liability is whichever of the following occurs first: Such corporation ceases to be an corporation (determined as of the first day of the first taxable year that such cor- poration is not an corporation). [?le 4 of 5] S.L.C. m-mev??ODoo?oxul-lkri??O 382 A liquidation or sale of substan- tially all the assets of such corporation (including in a title 11 or similar case), a cessation of business by such corpora- tion, such corporation ceases to exist, or any similar circumstance. A transfer of any share of stock in such corporation by the taxpayer (in- cluding by reason of death, or otherwise). PARTIAL TRANSFERS OF the case of a transfer of less than all of the tax- payer?s shares of stock in the 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 corporation as is properly allocable to such stock. TRANSFER OF trans- fer described in clause 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. [file 4 of 5] S.L.C. 383 NET TAX shareholder?s net tax liability under this section with respect to any corporation is the net tax liability under this section which would be determined under subsection if the only subpart income taken into account by such shareholder by reason of this section were allo- cations from such corporation. ELECTION TO PAY DEFERRED LIABILITY IN the case of a taxpayer which elects to defer payment under paragraph subsection shall be applied sepa- rately with respect to the liability to which such election applies, an election under subsection with respect to such liability shall be treated as time- ly 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 liabil- ity occurs, the first installment under subsection with respect to such liability shall be paid not later than such due date (but determined without regard to any extension of time for ing the return), and [?le 4 of 5] S.L.C. 384 if the triggering event with respect to any net tax liability is described in paragraph an election under subsection (11) with respect to such liability may be made only with the consent of the Secretary. JOINT AND SEVERAL LIABILITY OF COR- any shareholder of an corporation elects to defer payment under paragraph 1), such corporation shall be jointly and severally liable for such payment and any penalty, addition to tax, or additional amount attributable thereto. EXTENSION OF LIMITATION ON COLLEC- limitation on the time period for the col- lection 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. ANNUAL REPORTING OF NET TAX LIABIL- IN shareholder of an 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 re- turn of' tax for each taxable year thereafter [?le 4 of 5] pp 385 until such amount has been fully assessed on such returns. DEFERRED NET TAX For purposes of this paragraph, the term ?de- ferred 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. FAILURE TO 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. election under paragraph shall be made by the shareholder of the corporation not later than the due date for such shareholder?s return of tax for the tax- able year which includes the close of the taxable year of such corporation in which the amount described in subsection is taken into ac- count, and [?le 4 of 5] S.L.C. 386 shall be made in such manner as the Secretary shall provide. REPORTING BY cor? poration which is a United States shareholder of a speci- fied 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 Any copy provided to a shareholder under section 6037(1)) shall include a statement of such shareholder?s pro rata share of such amounts. EXTENSION OF LIMITATION ON Notwithstanding section 6501, the limitation on the time period for the assessment of the net taX liability under this section (as defined in subsection shall not ex- pire before the date that is 6 years after the return for the taxable year described in such subsection was filed. RECAPTURE FOR EXPATRIATED IN a deduction is allowed under subsection to a United States shareholder and such shareholder first becomes an expatriatcd entity at any time during the 10-year period begin- ning on the date of the enactment of the Tax Cuts and Jobs Act, then? [?le 4 of 5] S.L.C. 387 1 the tax imposed by this chapter shall 2 be increased for the first taxable year in which 3 such taxpayer becomes an expatriated entity by 4 an amount equal to 35 percent of the amount 5 of the deduction allowed to the specified foreign 6 corporation under subsection and 7 no credits shall be allowed against 8 the increase in tax under subparagraph (A). 9 EXPATRIATED purposes of 10 this subsection, the term ?expatriated entity? has the 11 same meaning given such term under section 12 7874(a)(2), except that such term shall not include 13 an entity if the surrogate foreign corporation with 14 respect to the entity is treated as a domestic cor- 15 poration under section 7 874(b). 16 SPECIAL RULES FOR UNITED STATES SHARE- 17 HOLDERS WHICH ARE REAL ESTATE INVESTMENT 18 19 IN a real estate investment 20 trust is a United States Shareholder in 1 or more de- 21 ferred foreign income corporations? 22 any amount required to be taken into 23 account under section 951(a)(1) by reason of 24 this section shall not be taken into account as 25 gross income of the real estate investment trust [file 4 of 5] S.L.C. 388 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 sec- tion 951(a)(1), and if the real estate investment trust elects the application of this subparagraph, not- withstanding subsection any amount re- quired 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 be in? cluded in gross income as follows: 8 percent of such amount in the case of each of the taxable years in the 5- taxable year period beginning with the tax- able year in which such amount would oth- erwise be included. 15 percent of such amount in the case of the 1st taxable year following such period. 20 percent of such amount in the case of the 2nd taxable year following; such period. [file 4 of 5] S.L.C. 389 25 percent of such amount in the case of the 3rd taxable year following such period. RULES FOR TRUSTS ELECTING DEFERRED election under paragraph shall be made not later than the due date for the first taxable year in the 5- taxable year period described in clause of paragraph and shall be made in such manner as the Secretary shall provide. SPECIAL an election under paragraph is in effect with respect to any real estate investment trust, the fol- lowing rules shall apply: APPLICATION OF PARTICIPATION purposes of subsection the aggregate amount to which subparagraph (A) or (B) of subsection applies shall be de- termined without regard to the elec- tion, each such aggregate amount shall be allocated to each tax- [file 4 of 5] S.L.C. 890 able year described in paragraph 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. ?(111) No INSTALLMENT PAY- real estate investment trust may not make an election under subsection for any taxable year de- scribed in paragraph ACCELERATION OF If there is a liquidation or sale of substan- tially all the assets of the real estate in- vestment 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 shall be in- cluded in gross income as of the day before the date of the event and the unpaid por- tion 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 [?le 4 of 5] S.L.C. 391 1 similar case, the day before the petition is 2 filed). 3 ELECTION NOT TO APPLY NET OPERATING 4 Loss 5 IN a United States share- 6 holder of a deferred foreign income corporation 7 elects the application of this subsection for the tax- 8 able year described in subsection then the 9 amount described in paragraph (2) shall not be 10 taken into account? 11 in determining the amount of the net 12 operating loss deduction under section 172 of 13 such shareholder for such taxable year, or 14 in determining the amount Of taxable 15 income for such taxable year which may be re- 16 duced by net operating loss carryovers or 17 carrybacks to such taxable year under section 18 172. 19 AMOUNT amount de- 20 scribed in this paragraph is the sum Of? 21 the amount required to be taken into 22 account under section 951(a)(1) by reason of 23 this section (determined after the application of 24 subsection plus [file 4 of 5] S.L.the case of a domestic corporation which chooses to have the benefits of subpart A of part of subchapter for the taxable year, the taxes deemed to be paid by such cor- poration under subsections and of sec- tion 960 for such taxable year with respect to the amount described in subparagraph (A) which are treated as a dividends under section 78. election under this sub- section shall be made not later than the due date (including extensions) for ?ling the return of tax for the taxable year and shall be made in such manner as the Secretary shall prescribe. Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section or to prevent the avoidance of the purposes of this section, including through a reduction in earnings and profits through changes in entity classification, changes in ac- counting methods, or otherwise. CLERICAL table of sections for subpart of part of subchapter of chapter 1 is amended by striking the item relating to section 965 and inserting the following: [?le 4 of 5] S.L.C. 393 ?Sec. 965. Treatment of deferred foreign income upon transition to participa- tion exemption system of taxation?. Subpart B?Rules Related to Passive and Mobile Income CHAPTER OF FOREIGN-DE- RIVED INTANGIBLE INCOME AND GLOBAL INTANGIBLE LOW-TAXED IN- COME SEC. 14201. CURRENT YEAR INCLUSION OF GLOBAL INTAN- GIBLE LOW-TAXED INCOME BY UNITED STATES SHAREHOLDERS. IN of part of sub- chapter of chapter 1 is amended by inserting after sec- tion 951 the following new section: 951A. GLOBAL INTANGIBLE LOW-TAXED INCOME IN- CLUDED IN GROSS INCOME OF UNITED STATES SHAREHOLDERS. IN 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 in- tangible low-taxed income for such taxable year. GLOBAL INTANGIBLE For purposes of this section? IN term ?global intangible low-taxed income? means, with respect to any United [file 4 of 5] {n 394 States shareholder for any taxable year of such United States shareholder, the excess (if any) of? such shareholder?s net CFC tested in- come for such taxable year, over such shareholder?s net deemed tan- gible income return for such taxable year. NET DEEMED TANGIBLE INCOME RE- term ?net deemed tangible income re- turn? means, with respect to any United States shareholder for any taxable year, an amount equal to 10 percent of the aggregate of such shareholder?s pro rata share of the qualified business asset invest- ment of each controlled foreign corporation with re- spect 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). NET CFC TESTED purposes of 20 this section? 21 22 23 24 IN term ?net CFC tested income? means, with respect to any United States shareholder for any taxable year of such United States shareholder, the excess (if any) of? [file 4 of 5] S.L.C. 395 the aggregate of such shareholder?s pro rata share of the tested income of each con? trolled 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 the aggregate of such shareholder?s pro rata share of the tested loss of each con- trolled 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). TESTED TESTED pur- poses of this section? TESTED 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? [?le 4 of 5] S.L.C. 396 the gross income of such corpora- tion determined Without regard to? any item of income described in section 952(b), any gross income taken into account in determining the subpart income of such corporation, ?(111) any gross income excluded from the foreign base company income (as defined in section 954) and the in- surance income (as defined in section 953) of such corporation by reason of section 954(b)(4), any dividend received from a related person (as defined in section and any foreign oil and gas ex- traction income (as defined in section 907(c)(1)) of such corporation, over the deductions (including taxes) properly allocable to such gross income under rules similar to the rules of section 954(b)(5). TESTED [file 4 of 5] S.L. .0 397 IN term ?tested loss? means, with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation, the ex- cess (if any) of the amount described in subparagraph over the amount de- scribed in subparagraph COORDINATION WITH SUBPART TO DENY DOUBLE BENEFIT OF 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. QUALIFIED BUSINESS ASSET For purposes of this section? IN term ?qualified busi- ness asset investment? means, With respect to any corporation for any taxable year of such controlled foreign corporation, the average of the aggregate Of the corporation?s adjusted bases as of the close of each quarter of such taxable year in specified tan- gible property used in a trade or business of the corporation, and [?le 4 of 5] S.L.C. 398 of a type with respect to which a de- duction is allowable under section 167. SPECIFIED TANGIBLE IN term ?specificd tangible property? means, except as prow'ded in subparagraph (B), any tangible property used in the production of tested income. DUAL USE the case of property used both in the production of test- ed income and income which is not tested in- come, such property shall be treated as speci- fied tangible property in the same proportion that the gross income described in subsection produced with respect to such prop- erty bears to the total gross income produced with respect to such property. DETERMINATION OF ADJUSTED For purposes of this subsection, notwithstanding any provision of this title (or any other provision of law) which is enacted after the date of the enactment of this section, the adjusted basis in any property shall be determined using the alternative depreciation sys- tem under section 168(g). Secretary shall issue such regulations or other guidance as the Secretary [?le 4 of 5] S.L. .0 399 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? such property is transferred, or held, temporarily, or the avoidance of the purposes of this paragraph is a factor in the transfer or holding of such property. DETERMINATION OF PR0 RATA SHARE, ETC. For purposes of this section?? IN pro rata shares re- ferred to in subsections and respectively, shall be determined under the rules of section 951(a)(2) in the same manner as such sec- tion applies to subpart 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. TREATMENT AS UNITED STATES SHARE- purposes of paragraph (1), a person shall be treated as a United States shareholder of a controlled foreign corporation for any taxable year only if such person owns (within the meaning of sec- tion 958(a)) stock in such foreign corporation on the [?le 4 of 5] S.L.C. 400 last day, in such year, on which such foreign cor- poration is a controlled foreign corporation. TREATMENT AS CONTROLLED FOREIGN CORPORATION foreign corporation shall be treat- ed as a controlled foreign corporation for any tax- able year if such foreign corporation is a controlled foreign corporation at any time during such taxable year. TREATMENT AS INCOME FOR CER- TAIN IN as provided in subparagraph (B), any global intangible low? taxed income included in gross income under subsection shall be treated in the same manner as an amount included under section 951(a)(1)(A) for purposes Of applying sections 535(b)(10), 851(b), 904(li)(1), 959, 961, 962(c), 962(d), 996(f)(1), 1248(b)(1), 1248(d)(1), 6501(e)(1)(C), 6654(d)(2)(D), and 6655(e)(4). Secretary shall prow'de rules for the application of subpara- graph (A) to other provisions of this title in any case in which the determination of subpart [file 4 of 5] S.L.401 income is required to be made at the level of the controlled foreign corporation. ALLOCATION OF GLOBAL INTANGIBLE LOW-TAXED INCOME TO CONTROLLED FOREIGN COR- 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 in- tangible low-taxed income included in gross income of a United States shareholder under subsection the portion of such global intangible low-taxed in- come which is treated as being with respect to such controlled foreign corporation is? in the case of a controlled foreign corporation with no tested income, zero, and 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? such United States shareholder?s pro rata amount of the tested income of such controlled foreign corporation, bears to [file 4 of 5] S.L.402 the aggregate amount described in subsection with respect to such United States shareholder.?. FOREIGN TAX (1) APPLICATION OF DEEMED PAID FOREIGN TAX 960 is amended adding at the end the following new subsection: DEEMED PAID CREDIT EOR TAXES PROPERLY ATTRIBUTABLE TO TESTED IN purposes of this sub- 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? such domestic corporation?s inclusion percentage, multiplied by the aggregate tested foreign income taxes paid or accrued by controlled foreign cor- porations. INCLUSION purposes of paragraph (1), the term ?inclusion percentage? means, m?th respect to any domestic corporation, the ratio (expressed as a percentage) [file 4 of 5] S.L.C. 403 1 such corporation?s global intangible 2 low-taxed income (as de?ned in section 3 951A(b)), divided by 4 the aggregate amount described in 5 section with respect to such cor- 6 poration. 7 TESTED FOREIGN INCOME 8 purposes of paragraph 1), the term ?tested foreign 9 income taxes? means, with respect to any domestic 1O corporation which is a United States shareholder of 11 a controlled foreign corporation, the foreign income 12 taxes paid or accrued by such foreign corporation 13 which are properly attributable to the tested income 14 Of such foreign corporation taken into account by 15 such domestic corporation under section 16 (2) APPLICATION OF FOREIGN TAX CREDIT 17 18 (A) SEPARATE BASKET FOR GLOBAL IN- 19 TANGIBLE LOW-TAXED INCOME. Section 20 904(d)(1) is amended by redesignating subpara- 21 graphs (A) and (B) as subparagraphs (B) and 22 (C), respectively, and by inserting before sub- 23 paragraph (B) (as so redesignated) the fol- 24 lowing new subparagraph: [?le 4 of 5] S.L.404 any amount includible in gross in- come under section 951A (other than passive category (B) EXCLUSION FROM GENERAL CAT- EGORY 904(d)(2)(A)(ii) is amended by inserting ?income described in paragraph and? before ?passive category income?. (C) CARRYOVER on CARRYBACK OF Ex- CESS TAXES?Section 904(c) is amended by adding at the end the following: ?This sub- section shall not apply to taxes paid or accrued with respect to amounts described in subsection CLERICAL AMENDMENT .?The table of sections for subpart of part of subchapter of chapter 1 is amended by inserting after the item relating to section 951 the following new item: ?See. 951A. Global intangible low-taxed income included in gross income of United States shareholders?. EFFECTIVE amendments made by this section shall apply to taxable years of foreign corpora- tions 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. [?le 4 of 5] S.L.C. 24 25 405 SEC. 14202. DEDUCTION FOR FOREIGN-DERIVED INTAN- GIBLE INCOME AND GLOBAL INTANGIBLE LOW-TAXED INCOME. IN of subchapter of chapter 1 is amended by adding at the end the following new section: 250. FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL INTANGIBLE LOW-TAXED INCOME. ALLOWANCE OF IN the case of a domestic corporation for any taxable year, there shall be al- lowed as a deduction an amount equal to the sum of? 37.5 percent of the foreign-derived in- tangible income of such domestic corporation for such taxable year, plus 50 percent of the global intangible low?taxed income amount (if any) which is in- cluded in the gross income of such domestic corporation under section 951A for such taxable year. LIMITATION BASED ON TAXABLE IN- IN for any taxable year? [?le 4 of 5] S.L.C. 406 the sum of the foreign-derived in- tangible income and the global intangible low-taxed income amount otherwise taken into account by the domestic corporation under paragraph (1), exceeds the taxable income of the domes- tic corporation (determined without regard to this section), then the amount of the foreign-derived intan- gible income and the global intangible low?taxed income amount so taken into account shall be reduced as provided in subparagraph (B). purposes of sub- paragraph 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 de- scribed in subparagraph and the global intangible low-taxed income amount shall be reduced by the re- mainder of such excess. REDUCTION IN DEDUCTION FOR TAXABLE YEARs AFTER 2025.?In the case of any taxable year [?le 4 of 5] S.L.C. 407 beginning after December 31, 2025, paragraph (1) shall be applied by substituting? ?21.875 percent? for ?37.5 percent? in subparagraph (A), and ?37.5 percent? for ?50 percent? in sub- paragraph (B). FOREIGN-DERIVED INTANGIBLE purposes of this section? IN foreign-derived intan- gible income of any domestic corporation is the amount which bears the same ratio to the deemed intangible income of such corporation as? the foreign-derived deduction eligible income of such corporation, bears to the deduction eligible income of such corporation. DEEMED INTANGIBLE pur- poses of this subsection? IN term ?deemed in- tangible income? means the excess (if any) of? the deduction eligible income of the domestic corporation, over the deemed tangible income re- turn of the corporation. [?le 4 of 5] S.L.C. NN AU.) 408 DEEMED TANGIBLE INCOME RE- term ?deemed tangible income re- turn? means, with respect to any corporation, an amount equal to 10 percent of the corpora- tion?s quali?ed business asset investment (as defined in section 951A(d), determined by sub- stituting ?deduction eligible income? for ?tested income? in paragraph (2) thereof). DEDUCTION ELIGIBLE IN term ?deduetion eligible income? means, with respect to any do- mestic corporation, the excess (if any) of? gross income of such corporation determined without regard to? the subpart income of such corporation determined under section 951, the global intangible low- taxed income determined under sec- tion 951A, ?(111) any financial services in- come (as defined in section of such corporation which is not described in clause [?le 4 of 5] 409 any dividend received from a corporation which is a controlled foreign corporation of such domestic corporation, any domestic Oil and gas ex? traction income of such corporation, and any foreign branch income (as defined in section over the deductions (including taxes) properly allocable to such gross income under rules similar to the rules Of section 954(b)(5). DOMESTIC OIL AND GAS EXTRACTION purposes of subparagraph (A), the term ?domestic oil and gas extraction in- come? means income described in section 907(c)(1), determined by substituting ?Within the United States? for ?Without the United States?. FOREIGN-DERIVED DEDUCTION ELIGIBLE term ?foreign-derived deduction eligi- ble income? means, with respect to any taxpayer for [?le 4 of 5] S.L.C. 410 any taxable year, any deduction eligible income of such taxpayer which is derived in connection with? property which is sold by the taxpayer to any person who is not a United States per- son, and which the taxpayer establishes to the satisfaction Of the Secretary is for a foreign use, or services provided by the taxpayer which the taxpayer establishes to the satisfac- tion of the Secretary are provided to any per- son, or with respect to property, not located within the United States. RULEs RELATING TO FOREIGN USE PROP- ERTY 0R purposes of this sub- section? FOREIGN term ?foreign use? means any use, consumption, or disposition which is not within the United States. PROPERTY OR SERWOES PROVIDED TO DOMESTIC a taxpayer sells property to another person (other than a related party) for further manufacture or [file 4 of S.L.C. 411 other modi?cation 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. a taxpayer pro- vides services to another person (other than a related party) located within the United States, such senices shall not be treated as described in paragraph even if such other person uses such serv- ices in providing services which are so de- scribed. SPECIAL RULES WITH RESPECT TO RELATED PARTY SALES TO RELATED 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 un- less? such property is ultimately sold by a related party, or used by a related party in connection with prop- erty which is sold or the provision of services, to another person who is an [?le 4 of 5] S.L.C. 412 unrelated party Who is not a United States person, and 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 prop- erty shall be treated as a sale of each of the components thereof. SERVICE PROVIDED TO RELATED a service is provided to a re- lated party who is not located in the United States, such service shall not be treated described in subparagraph unless the taxpayer established to the sat? isfaction of the Secretary that such service is not substantially similar to services pro- vided by such related party to persons lo- cated Within the United States. RELATED purposes of this paragraph, the term ?related party? means any member of an affiliated group as defined in section 1504(a), determined? by substituting ?more than 50 percent? for ?at least 80 percent? each place it appears, and [?le 4 of 5] S.L.C. CONFORMING AMENDMENTS. 413 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 per- son is controlled by members of such group (in- cluding any entity treated as a member of such group by reason of this sentence) or controls any such member. For purposes of the pre- ceding sentence, control shall be determined under the rules of section 954(d)(3). purposes of this sub- section, the terms ?sold?, ?sells?, and ?sale? shall include any lease, license, exchange, or other disposition. Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the pro?sions of this section?. (1) Section 172(d), as amended by section 13011, is amended by adding at the end the fol- lowing new paragraph: FOR FOREIGN-DERIVED IN- TANGIBLE deduction under section 250 shall not be allowed?. (2) Section 246(b)(1) is amended? [?le 4 of 5] S.L.C. p?Av?tr?Av?t tutorstriking ?and subsection and of section 245? the first place it appears and inserting subsection and of section 245, and section 250?, (B) by striking ?and subsection and of section 245? the second place it appears and inserting ?subsection and of section 245, and 250?. (3) Section is amended by striking ?and 222? and inserting ?222, and 250?. (4) The table of sections for part of sub- chapter of chapter 1 is amended by adding at the end the new item: ?See. 250. Foreign-derived intangible income and global intangible low-taxed income?. EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 14203. SPECIAL RULES FOR TRANSFERS OF INTAN- GIBLE PROPERTY FROM CONTROLLED FOR- EIGN CORPORATIONS TO UNITED STATES SHAREHOLDERS. IN of part of sub- chapter of chapter 1 is amended by adding at the end the following new section: [file 4 of 5] gp 415 966. TRANSFERS OF INTANGIBLE PROPERTY TO UNITED STATES SHAREHOLDERS. IN the ease of any distribution of intangible property which is held by a controlled foreign corporation on the date of enactment of this section and which is described in subsection for purposes of part I of subchapter and any other provision of this title specified by the Sec- retary, the fair market value of such property on the date of such distribution shall be treated as not ex- ceeding the adjusted basis of such property imme- diately before such distribution, and if the distribution is to a United States shareholder and is not a dividend? the United States shareholder?s ad- justed basis in the stock of the controlled for- eign corporation with respect to Which such dis- tribution is made shall be increased by the amount (if any) of such distribution which would (but for this subsection) be includible in gross income, and the adjusted basis of such property in the hands of such United States shareholder immediately after such distribution shall be such adjusted basis immediately before such [file 4 of 5] S.L.C. 416 i?d distribution reduced by the amount of the in- crease described in subparagraph (A). distribution is described in this section if the distribution is? received by a domestic corporation from a controlled foreign corporation with respect to which such corporation is a United States shareholder, and made by the controlled foreign corporation before the last day of the third taxable year of the 10 controlled foreign corporation beginning after De- 11 cember 31, 2017. 12 INTANGIBLE purposes of this 13 subsection, the term ?intangible property? has the meaning 14 given such term by section 936(li)(3)(B) or which is com- 15 puter software described in section 16 CONFORMING AMENDMENTS. 17 (1) Section is amended by in? 18 serting after 19 (2) The table of sections for subpart of part 20 of subchapter of chapter 1 is amended by add- 21 ing at the end the following new item: ?See. 966. Transfers of intangible property to United States shareholders?. 22 EFFECTIVE amendments made by 23 this section shall apply to distributions made in taxable 24 years of foreign corporations beginning after December 25 31, 2017, and to taxable years of United States share- [file 4 of 5] S.L.C. 417 holders in Which or with which such taxable years of for- eign corporations end. CHAPTER MODIFICATIONS OF SUBPART PROVISIONS SEC. 14211. ELIMINATION OF INCLUSION OF FOREIGN BASE COMPANY OIL RELATED INCOME. REPEAL.?Subsection of section 954 is amended? (1) by inserting ?and? at the end of paragraph (2), (2) by striking the comma at the end of para- graph (3) and inserting a period, and (3) by striking paragraph (5). CONFORMING AMENDMENTS. (1) Section is amended by striking subclause (I) and redesignating subclauses (II) through (V) as subclauses (I) through (IV), re- spectively. (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 insert- [file 1 of 5] S.L.AVUJ 418 ing ?and the foreign base company services in- come?, and (C) by striking paragraph (6). (3) Section 954 is amended by striking sub- section EFFECTIVE amendments made by this section shall apply to taxable years of foreign corpora- tions 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. INFLATION ADJUSTMENT OF DE MININIIS EX- CEPTION FOR FOREIGN BASE COMPANY IN- COME. IN GENERAL. Section 954(b)(3) is amended by adding at the end the following new subparagraph: INFLATION the case of any taxable year beginning after 2017, the dollar amount in subparagraph shall be increased by an amount equal to? such dollar amount, multiplied by the cost-of-living adjustment de- termined under section for the cal- endar year in which the taxable year be- gins. [file ?1 0f 5] S.L.C. 419 Any increase determined under the preceding sentence shall be rounded to the nearest mul- tiple of EFFECTIVE amendments made by this section shall apply to taxable years of foreign corpora- tions 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. REPEAL OF INCLUSION BASED ON WITH- DRAWAL OF PREVIOUSLY EXCLUDED SUB- PART INCOME FROM QUALIFIED INVEST- MENT. IN of part of sub- chaptcr of chapter 1 is amended by striking section 955. CONFORMING AMENDMENTS. Section 951(a)(1)(A) is amended to read as follows: his pro rata share (determined under paragraph of the corporation?s subpart income for such year, and?. (B) Section 851(b) is amended by striking ?sec? tion in the ?ush language at the end and inserting ?section [?le 4 of 5] S.L.C. 420 1 (C) Section is amended by 2 striking ?section and inserting 3 ?section 4 (D) Section 953(c)(1)(C) is amended by strik? 5 ing ?section and inserting ?section 6 7 (2) Section 951(a) is amended by striking para? 8 graph (3). 9 (3) Section is amended by 10 striking ?or amounts referred to in clause (ii) or 11 of section 12 (4) Section 964(b) is amended by striking 13 955/1 14 (5) Section 970 is amended by striking sub- 15 section 16 (6) The table of sections for subpart of part 17 of subchapter of chapter 1 is amended by 18 striking the item relating to section 955. 19 EFFECTIVE amendments made by 20 this section shall apply to taxable years of foreign corpora- 21 tions beginning after December 31, 2017, and to taxable 22 years of United States shareholders in which or with which 23 such taxable years of foreign corporations end. [file 4 of 5] S.L.421 SEC. 14214. MODIFICATION OF STOCK ATTRIBUTION RULES FOR DETERMINING STATUS AS A CON- TROLLED FOREIGN CORPORATION. IN 958(b) is amended? 1) by striking paragraph (4), and (2) by striking ?Paragraphs (1) and in the last sentence and inserting ?Paragraph EFFECTIVE amendments made by this section shall apply to? (1) the last taxable year of foreign corporations beginning before January 1, 2018, and each subse- quent 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. 14215. MODIFICATION OF DEFINITION OF UNITED STATES SHAREHOLDER. IN 951(1)) is amended by in- serting or 10 percent or more of the total value of shares of all classes of stock of such foreign corporation? after ?such foreign corporation?. EFFECTIVE amendment made by this section shall apply to taxable years of foreign corpora- tions beginning after December 31, 2017, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end. [file 4 of 5] S.L.C. 422 SEC. 14216. ELIMINATION OF REQUIREMENT THAT COR- PORATION MUST BE CONTROLLED FOR 30 DAYS BEFORE SUBPART INCLUSIONS APPLY. IN 951(a)(1) is amended by striking ?for an uninterrupted period of 30 days or more? and inserting ?at any time?. EFFECTIVE amendment made by this section shall apply to taxable years of foreign corpora- tions 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. 14217. LOOK-THRU RULE FOR RELATED CONTROLLED FOREIGN CORPORATIONS MADE PERMA- NENT. IN GENERAL?Paragraph (6) of section 954(c) is amended by striking subparagraph (C). EFFECTIVE amendments made by this section shall apply to taxable years of foreign corpora- tions 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. [?le 4 of 5] S.L.C. 23 24 25 26 423 SEC. 14218. CORPORATIONS ELIGIBLE FOR DEDUCTION FOR DIVIDENDS FROM CONTROLLED FOR- EIGN CORPORATIONS EXEMPT FROM SUB- PART INCLUSION FOR INVESTMENT IN UNITED STATES PROPERTY. IN 956(a) is amended by in- serting ?(other than a corporation)? after ?United States shareholder? in the matter preceding- paragraph (1). EFFECTIVE amendment made by this section shall apply to taxable years of controlled for- eign corporations ending after December 31, 2017, and to taxable years of' United States shareholders with or within which such taxable years of controlled foreign cor- porations end. CHAPTER OF BASE EROSION SEC. 14221. DENIAL OF DEDUCTION FOR INTEREST EX- PENSE OF UNITED STATES SHAREHOLDERS WHICH ARE MEMBERS OF WORLDWIDE AF- FILIATED GROUPS WITH EXCESS DOMESTIC INDEBTEDNESS. IN 163 is amended by redes? ignating? subsection as subsection (0) and by inserting after subsection the following new subsection: DISALLOWANCE OF DEDUCTION FOR INTEREST EXPENSE OF UNITED STATES SHAREHOLDERS WHICH [?le 4 of S.L.C. 424 1 ARE MEMBERS OF WORLDWIDE AFFILIATED GROUPS 2 WITH DOMESTIC the case of any domestic corporation which is a member of a worldwide affili- ated group, the deduction allowed under this chapter for interest paid or accrued by such domestic cor- poration during the taxable year shall be reduced by the product of? the net interest expense of such do? mestic corporation, multiplied by the debt-to?equity differential per- centage of such worldwide affiliated group. amount disallowed under paragraph (1) for any taxable year shall be treated as interest paid or accrued in the succeeding taxable year. DEBT-TO-EQUITY DIFFERENTIAL PER- IN purposes of this subsection, the term ?debt-to-equity differential percentage? means, with respect to any world- wide affiliated group, the percentage which the excess domestic indebtedness of such group bears to the total indebtedness of the domestic corporations which are members of such group. [file 4 0f 5] S.L.C. 425 EXCESS DOMESTIC INDEBTED- purposes of subparagraph (A), the term ?excess domestic indebtedness? means, with respect to any worldwide affiliated group, the excess (if any) of? the total indebtedness of the do- mestic corporations which are members of such group, over 110 percent of the amount which the total indebtedness of such domestic corporations would be if the ratio of such indebtedness to the total equity of such do- mestic corporations equaled the ratio Which? the total indebtedness of such group, bears to the total equity of such group. TOTAL Horny?For purposes of subparagraph (B), the term ?total equity? means, with respect to one or more corpora? tions, an amount equal to? the sum of the money and all other assets of such corporations, reduced (but not below one) by [?le 4 of 5] S.L.C. 426 1 the total indebtedness of such 2 corporations. 3 SPECIAL RULES FOR DETERMINING 4 DEBT AND 5 IN purposes of 6 this paragraph? 7 the amount taken into ac- 8 count with respect to any asset shall 9 be the adjusted basis thereof for pur- 10 poses of determining gain, 11 the amount taken into ac- 12 count with respect to any indebted- 13 ness With original issue discount shall 14 be its issue price plus the portion of 15 the original issue discount previously 16 accrued as determined under the rules 17 of section 1272 (determined without 18 regard to subsection or 19 thereof), and 20 ?(111) there shall be such other 21 adjustments as the Secretary shall by 22 regulations prescribe. 23 INTRAGROITP DEBT AND EQUITY 24 INTERESTS purposes 25 of this paragraph, the total indebtedness, [file 4 of 5] S.L.C. r?AI?tp?Ap-ar?tv?tr?Av?Av?A 19 20 21 22 427 and the assets, of any group of corpora- tions shall be determined by treating all members of such group as one corporation. DETERMINATION OF ASSETS 0E DOMESTIC purposes of this paragraph, the assets of the domestic cor- porations which are members of any world- wide affiliated group shall be determined by disregarding any interest held by any such domestic corporation in any foreign corporation which is a member of such group. PHASE IN OF PERCENTAGE USED IN DETERMINING EXCESS the case of any taxable year beginning in a calendar year before 2022, the following percentages shall be substituted for ?110 percent? in apply- ing subparagraph (B) ?In the case of a taxable year begin- The percentage is' ning in: 2018 130 2019 125 2020 120 2021 115 OTHER purposes of this subsection? WORLDWIDE AFFILIATED The term ?worldwide affiliated group? means a [file 4 of 5] S.L.C. 428 group consisting of the includible members of an affiliated group, as defined in section 1504(a), determined? by substituting ?more than 50 percent? for ?at least 80 percent? each place it appears in such section, and without regard to paragraphs (2), (3), and (4) of section 1504(b). NET INTEREST term ?net interest expense? means the excess (if any) of the interest paid or accrued by the taxpayer during the taxable year, over the amount of interest includible in the gross income of such taxpayer for such taxable year. The Secretary shall by regulations provide for adjustments in determining the amount of net interest expense if necessary. TREATMENT OF AFFILIATED snore?For purposes of this subsection, all members of the same affiliated group (?dthin the meaning of section 1504(a) applied by substituting ?more than 50 per- cent? for ?at least 80 percent? each place it appears) shall be treated as one taxpayer. [?le 4 of 5] S.L.C. 429 1 Secretary shall pre? 2 scribe such regulations or other guidance as may be 3 appropriate to carry out the purposes of this sub- 4 section, including regulations or other guidance?? 5 to prevent the avoidance of the pur- 6 poses of this subsection, 7 providing such adjustments in the 8 case Of corporations which are members Of an 9 affiliated group as may be appropriate to carry 10 out the purposes of this subsection, 11 providing for the coordination of this 12 subsection with section 884, 13 providing for the reallocation of 14 shares of partnership indebtedness, or distribu- 15 tive shares of the partnership?s interest income 16 or interest expense, and 17 providing for the coordination with 18 the limitation under subsection 19 EFFECTIVE amendments made by 20 this section shall apply to taxable years beginning after 21 December 31, 2017. 22 SEC. 14222. LIMITATIONS ON INCOME SHIFTING THROUGH 23 INTANGIBLE PROPERTY TRANSFERS. 24 DEFINITION OF INTANGIBLE ASSET?Section 25 936(h)(3)(B) is amended? [?le 4 of 5] S.L.C. 430 1 (1) by striking ?or? at the end of clause 2 (2) by striking clause (vi) and inserting the fol- 3 lowing: 4 any goodwill, going concern 5 value, or workforce in place (including its 6 composition and terms and conditions 7 (contractual or otherwise) of its employ- 8 ment); or 9 ?(vii) any other item the value or po? 10 tential value of which is not attributable to 11 tangible property or the services of any in- 12 dividual.?, and 13 (3) by striking the ?ush language after clause 14 (vii), as added by paragraph (2). 15 CLARIFICATION ALLOWABLE VALUATION 16 17 (1) FOREIGN 18 367(d)(2) is amended by adding at the end the fol- 19 lowing new subparagraph: 20 REGULATORY pur? 21 poses of the last sentence of subparagraph (A), 22 the Secretary shall require? 23 the valuation of transfers Of in- 24 tangible property, including intangible [file 4 of 5] S.L.C. 431 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?. (2) ALLOCATION AMONG 482 is amended by adding at the end the following: ?For purposes of this section, the Secretary shall re? quire the valuation of transfers of intangible prop- erty (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 Sec- retary determines that such basis is the most reli- able means of valuation of such transfers?. EFFECTIVE DATE. (1) IN amendments made by this section shall apply to transfers in taxable years beginning after December 31, 2017. (2) No in the amend- ment made by subsection shall be construed to create any inference with respect to the application [file 4 of S.L.C. 482 of section 936(11)(3) of the Internal Revenue Code of 1986, or the authority of the Secretary of the Treas- ury to provide regulations for such application, with respect to taxable years beginning before January 1, 2018. SEC. 14223. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED IN HYBRID TRANSACTIONS OR WITH HYBRID ENTITIES. IN IX of subchapter of chap- ter 1 is amended by inserting after section 267 the fol- lowing: 267A. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED IN HYBRID TRANSACTIONS OR WITH HYBRID ENTITIES. IN 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. DISQUALIFIED RELATED PARTY purposes of this section? DISQUALIFIED RELATED PARTY term ?disquali?ed related party amount? means any interest or royalty paid or ac- crued to a related party to the extent that? [?le 4 of 5] S.L.C. 433 1 such amount is not included in the 2 income of such related party under the tax law 3 of the country of which such related party is a 4 resident for tax purposes or is subject to tax, 5 0r 6 such related party is allowed a deduc- 7 tion with respect to such amount under the tax 8 law of such country. 9 Such term shall not include any payment to the ex- 10 tent such payment is included in the gross income 11 of a United States shareholder under section 951(a). 12 RELATED term ?related 13 party? means a related person as defined in section 14 954(d)(3), except that such section shall be applied 15 with respect to the person making the payment de- 16 scribed in paragraph (1) in lieu of the controlled for- 17 eign corporation otherwise referred to in such sec- 18 tion. 19 HYBRID purposes of this 20 section, the term ?hybrid transaction? means any trans- 21 action, series of transactions, agreement, or instrument 22 one or more payments with respect to which are treated 23 as interest or royalties for purposes of this chapter and 24 which are not so treated for purposes the tax law of the [file 4 0f 5] S.L.C. 484 1 foreign country of which the recipient of such payment 2 is resident for tax purposes or is subject to tax. 3 4 the term ?h brid entity? means any entit which is either . .. HYBRID purposes of this section, 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 treated as fiscally transparent for purposes of such tax law but not so treated for purposes of this chapter. Secretary shall issue such regulations or other guidance as may be necessary or ap- 14 propriate to carry out the purposes of this section, including regulations or other guidance providing for? rules for treating certain conduit arrange? ments which involve a hybrid transaction or a hybrid entity as subject to subsection rules for the application of this section to foreign branches, rules for treating certain structured trans- actions as subject to subsection rules for treating a tax preference as an exclusion from income for purposes of applying sub- section if such tax preference has the effect [?le 4 of 5] S.L.C. 435 of reducing the generally applicable statutory rate by 25 percent or more, rules for treating the entire amount of in- terest or royalty paid or accrued to a related party as a disquali?ed related party amount if such amount is subject to a participation exemption sys- tem or other system which provides for the exclusion or deduction of a substantial portion of such amount, 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 coun- try, exceptions from subsection with respect to? cases in which the disqualified related party amount is taxed under the laws of a for- eign country other than the country of which the related party is a resident for tax purposes, and other cases which the Secretary de- termines do not present a risk of eroding the Federal tax base, [file 436 requirements for record keeping and infor- mation reporting in addition to any requirements imposed by section CONFORMING table of sec- tions for part IX of subchapter of chapter 1 is amended by inserting after the item relating to section 267 the fol- lowing new item: ?Sec. 267A. Certain related )arty amounts )aid or accrued in hybrid trans- . . actions or with hybrid entities?. EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 14224. SHAREHOLDERS OF SURROGATE FOREIGN COR- PORATIONS NOT ELIGIBLE FOR REDUCED RATE ON DIVIDENDS. IN is amend- ed? (1) by striking ?shall not include any foreign corporation? and inserting ?shall not include? any foreign corporation?, (2) by striking the period at the end and insert- ing and?, and (8) by adding at the end the following new sub- clause: any corporation which is a surrogate foreign corporation (as de- [?le 4 of 5] S.L.C. Hr?tp?tI?tI?sr?Av?tI?tr?tr?a? 20 21 22 437 ?ned in section 7874(a)(2)(B)) other than a foreign corporation which is treated as a domestic corporation under section EFFECTIVE amendments made by this section shall apply to dividends paid in taxable years beginning after December 31, 2017. Subpart C?Modi?cations Related to Foreign Tax Credit System SEC. 14301. REPEAL OF SECTION 902 INDIRECT FOREIGN TAX DETERMINATION OF SECTION 960 CREDIT ON CURRENT YEAR BASIS. REPEAL OF SECTION 902 INDIRECT FOREIGN TAX A of part Of subchapter of chapter 1 is amended by striking section 902. DETERMINATION OF SECTION 960 CREDIT ON CURRENT YEAR BASIS?Section 960, as amended by sec- tion 14201, is amended? (1) by striking subsection by redesignating subsection as subsection by striking all that precedes subsection (as so redesignated) and in- serting the following: [file 4 of 5] S.L.C. 438 960. DEEMED PAID CREDIT FOR SUBPART INCLU- SIONS. IN purposes of this subpart, if there is included in the gross income of a domestic cor- poration 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. SPECIAL RULES FOR DISTRIBUTIONS FROM PREVIOUSLY TAXED EARNINGS AND pur? poses of this subpart? IN any portion of a dis- tribution from a controlled foreign corporation to a domestic corporation which is a United States share- holder with respect to such controlled foreign cor- poration 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? are properly attributable to such por- tion, and have not?been deemed to have to been paid by such domestic corporation under this [file 4 of 5] S.L.C. 439 section for the taxable year or any prior taxable year. TIERED CONTROLLED FOREIGN CORPORA- section 959(b) applies tO any portion Of a distribution from a controlled foreign corporation to another controlled foreign corporation, such c011- trolled foreign corporation shall be deemed to have paid so much Of such other controlled foreign cor- poration?s foreign income taxes as? are properly attributable to such por- tion, and have not been deemed to have been paid by a domestic corporation under this sec- tion for any prior taxable year?, (2) and by adding after subsection (as added by section 14201) the following new sub? sections: 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. Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate tO carry out the provisions Of this section?. CONEORMING AMENDMENTS. [?le 4 of 5} S.L.4-10 (1) Section 78 is amended to read as follows: 78. GROSS UP FOR DEEMED PAID FOREIGN TAX CREDIT. ?If a domestic corporation chooses to have the bene- fits of subpart A of part of subchapter (relating to foreign tax credit) for any taxable year? an amount equal to the taxes deemed to be paid by such corporation under subsections and of section 960 for such taxable year shall be treated for purposes of this title (other than section 960) as an item of income required to be included in the gross income of such domestic corporation under section 951(a), and an amount equal to the aggregate tested foreign income taxes deemed paid by such corpora- tion under section 960((1) (determined Without re- gard to the phrase ?80 percent of? in paragraph (1) thereof) shall be treated for purposes of this title (other than section 960) as an addition to the global intangible low-taxed income of such domestic cor- poration under section 951A(a) for such taxable year?. (2) Paragraph (4) of section 245(a) is amended to read as follows: [?le 4 of 5] {n 441 POST-1986 UNDISTRIBUTED The term ?post-1986 undistributed earnings? means the amount of the earnings and profits of the for- eign corporation (computed in accordance with sec- tions 964(a) and 986) accumulated in taxable years beginning after December 31, 1986? as of the close of the taxable year of the foreign corporation in which the dividend is distributed, and without diminution by reason of divi- dends distributed during such taxable year?. (3) Section 245(a)(10)(C) is amended by strik- ing ?902, 907, and 960? and inserting ?907 and 960?. (4) Sections 535(b)(1) and 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 in- come? and inserting the following: TREATMENT OF FOREIGN (6) Section is amended by strik- ing ?902, 907,? and inserting ?907?. [file 4 of 5] S.L.C. 442 (7) Section 901(a) is amended by striking ?sec- tions 902 and 960? and inserting ?section 960?. (8) Section 901(c)(2) is amended by striking 7 ?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 ?sec- tions 902 and 960? and inserting ?section 960?. (10) Section 901(j)(1)(A) is amended by strik- ing ?902 or?. (11) Section 901(j)(1)(B) is amended by strik- ing ?sections 902 and 960? and inserting ?section 960?. (12) Section 901(k)(2) is amended by striking 902,?. (13) Section 901(k)(6) is amended by striking ?902 or?. (14) Section 901(m)(1) is amended by striking ?relevant foreign assets?? and all that follows and inserting ?relevant foreign assets shall not be taken into account in determining the credit allowed under subsection (15) Section 904(d)(6)(A) is amended by strik- ing ?902, 907,? and inserting ?907?. [?le 4 of 5] S.L.443 (16) Section is amended by striking ?sections 902, 907, and 960? and inserting ?sections 907 and 960?. (17) Section 904(k) is amended to read as fol- lows: CROSS increase of limita- tion under subsection 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 corpora? tion, see section (18) Section 905(c)(1) is amended by striking the last sentence. (19) Section is amended to read as follows: shall be taken into account for the taxable year to which such taxes relate, ant (20) Section 906(a) is amended by striking ?(or deemed, under section 902, paid or accrued during the taxable year)?. (21) Section 906(b) is amended by striking paragraphs (4) and (5). (22) Section 907(b)(2)(B) is amended by strik- ing ?902 or?. [?le 4 of 5] S.L.4?14 (23) Section 907(c)(3) is amended (A) by striking subparagraph (A) and re- designating subparagraphs (B) and (C) as sub- paragraphs (A) and (B), respectively, and (B) by striking ?section 960(a)? in sub- paragraph (A) (as so redesignatcd) and insert- ing ?section 960?. (24) Section 907(c)(5) is amended by striking ?902 or?. (25) Section is amended by striking ?902 or?. (26) Section 908(a) is amended by striking ?902 or?. (27) Section 909(b) is amended? (A) by striking ?section 902 corporation? in the matter preceding paragraph (1) and in- serting ?specified 10-percent owned foreign cor- poration (as defined in section (B) by striking ?902 or? in paragraph (1), (C) by striking ?by such section 902 cor- poration? and all that follows in the matter fol- lowing paragraph (2) and inserting ?by such specified lO-percent owned foreign corporation or a domestic corporation which is a United States shareholder with respect to such speci- [?le 4 of 5] S.L.C. 445 fied 10-percent owned foreign corporation?, and (D) by striking 902 CORPORA- in the heading thereof and inserting OWNED FOREIGN (28) Section 909(d) is amended by striking paragraph (5). (29) Section 958(a)(1) is amended by striking and inserting ?960?. (30) Section 959(d) is amended by striking ?Except as provided in section 960(a)(3), any? and inserting ?Any?. (31) Section 959(9) is amended by striking ?section 960(b)? and inserting ?section (32) Section 1291(g)(2)(A) is amended by striking ?any distribution?? and all that follows through ?but only if? and inserting ?any distribu- tion, any withholding tax imposed with respect to such distribution, but only if?. (33) Section 6038(c)(1)(B) is amended by striking ?sections 902 (relating to foreign tax credit for corporate stockholder in foreign corporation) and 960 (relating to special rules for foreign tax credit)? and inserting ?section 960?. [?le 4 of 5] S.L.446 (34) Section 6038(c)(4) is amended by striking subparagraph (C). (35) The table of sections for subpart A of part of subchapter of chapter 1 is amended by striking the item relating to section 902. (36) The table of sections for subpart of part of subchapter of chapter 1 is amended by striking the item relating to section 960 and insert- ing the following: ?See. 960. Deemed paid credit for subpart inclusions?. EFFECTIVE amendments made by this section shall apply to taxable years of foreign corpora- tions 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 LHVIITATION BASKET FOR FOREIGN BRANCH INCOME. IN 904(d)(1), as amended by section 14201, is amended by redesignating subpara- graphs (B) and (C) as subparagraphs (C) and (D), respec- tively, and by inserting after subparagraph (A) the fol- lowing new subparagraph: foreign branch income,?. FOREIGN BRANCH [file 4 of 5] S.L.904(d)(2) is amend- ed by inserting after subparagraph (I) the following new subparagraph: (2) FOREIGN BRANCH IN term ?foreign branch income? means the business pro?ts of such United States person which are at- tributable 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. term shall not include any income which is passive category income?. CONFORMING as amended by section 14201, is amended by striking ?income described in paragraph and? and inserting ?income described in paragraph foreign branch income, and?. EFFECTIVE amendments made by 24 this section shall apply to taxable years beginning after 25 December 31, 2017. [file 4 of 5] S.L.448 SEC. 14303. ACCELERATION OF ELECTION TO ALLOCATE IN- TEREST, ETC., ON A WORLDWIDE BASIS. IN 864(f)(6) is amended by striking ?December 31, 2020? and inserting ?December 31,2017?. EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 14304. SOURCE OF INCOME FROM SALES OF INVEN- TORY DETERMINED SOLELY ON BASIS OF PRODUCTION ACTIVITIES. IN 863(b) is amended by adding at the end the following: ?Gains, profits, and in- come from the sale or exchange of inventory property de- scribed in paragraph (2) shall be allocated and appor- tioned between sources within and without the United States solely on the basis of the production activities with respect to the property?. EFFECTIVE DATE. The amendment made by this section shall apply to taxable years beginning after December 31, 2017. [file 4 of 5] S.L.C. 449 SEC. 14305. ELECTION TO INCREASE PERCENTAGE OF DO- MESTIC TAXABLE INCOME OFFSET BY OVER- ALL DOMESTIC LOSS TREATED AS FOREIGN SOURCE. IN 904(g) is amended by adding at the end the following new paragraph: ELECTION TO INCREASE PERCENTAGE OF TAXABLE INCOME TREATED AS FOREIGN IN any un- used overall domestic loss is taken into account under paragraph (1) for any applicable taxable year, the taxpayer may elect to have such para? graph 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. FEE-2018 OVERALL DOMES- TIC purposes of this paragraph, the term ?pre?2018 unused overall domestic loss? means any overall domestic loss which? arises in a qualified taxable year beginning before January 1, 2018, and has not been used under para- graph (1) for any taxable year beginning before such date. [file 4 of 5] S.L.C. r?tr?Ar?tr-d 03101450 APPLICABLE TAXABLE purposes of this paragraph, the term ?applicable taxable year? means any taxable year of the tax- payer beginning after December 31, 2017, and before January 1, 2028.?. EFFECTIVE amendment made by this section shall apply to taxable years beginning after December 31, 2017. PART TRANSACTIONS SEC. 14401. BASE EROSION AND ANTI-ABUSE TAX. IMPOSITION OF TAX?Subchapter A of chapter 1 is amended by adding at the end the following new part: EROSION AND ANTI-ABUSE TAX ?Sec. 59A. Tax on base erosion payments of taxpayers with substantial gross receipts. 59A. TAX ON BASE EROSION PAYMENTS OF TAX- PAYERS WITH SUBSTANTIAL GROSS RE- CEIPTS. 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. BASE EROSION MINIMUM TAX purposes of this section? [?le 4 of S.L.C. 451 1 IN as provided in para.- 2 graphs (2) and (3), the term ?base erosion minimum 3 tax amount? means, with respect to any applicable 4 taxpayer for any taxable year, the excess (if any) 5 of? 6 an amount equal to 10 percent of the 7 modi?ed taxable income of such taxpayer for 8 the taxable year, over 9 an amount equal to the regular tax li- 10 ability (as defined in section 26(b)) of the tax- 11 payer for the taxable year, reduced (but not 12 below zero) by the excess (if any) of? 13 the credits allowed under this 14 chapter against such regular tax liability, 15 over 16 the credit allowed under section 17 38 for the taxable year which is properly 18 allocable to the research credit determined 19 under section 41(a). 20 MODIFICATIONS FOR TAXABLE YEARS BE- 21 GINNING AFTER 2025.?In the case of any taxable 22 year beginning after December 31, 2025, paragraph 23 (1) shall be applied-? 24 by substituting ?12.5 percent? for ?10 25 percent? in subparagraph (A) thereof, and [?le 4 of S.reducing (but not below zero) the regular tax liability (as de?ned in section 26(b)) for purposes of subparagraph (B) there- of by the aggregate amount of the credits al- lowed under this chapter against such regular tax liability rather than the excess described in such subparagraph. INCREASED RATE FOR CERTAIN BANKS AND SECURITIES IN the case of an ap- plicable taxpayer described in subparagraph (B) for any taxable year? paragraphs and shall each be applied by substituting ?11 percent? for ?10 percent?, and paragraph shall be applied by substituting ?13.5 percent? for ?12.5 percent?. TAXPAYER applica? ble taxpayer is described in this subparagraph if such taxpayer is a member of an af?liated group (as defined in section 1504(a)(1)) which includes? a bank (as defined in section 581),or [?le 4 of S.L.C. 453 a registered securities dealer under section 15(a) of the Securities Ex- change Act of 1934. MODIFIED TAXABLE purposes of this section? IN term ?modified taxable income? means the taxable income of the taxpayer computed under this chapter for the taxable year, determined Without regard tO? any base erosion tax benefit with re- spect to any base erosion payment, or the base erosion percentage of any net operating loss deduction allowed under sec- tion 172 for the taxable year. BASE EROSION TAX IN term ?base ero- sion tax bene?t? means?? any deduction described in sub- section which is allowed under this chapter for the taxable year with respect to any base erosion payment, in the case of a base erosion pay- ment described in subsection any deduction allowed under this chapter for the taxable year for depreciation (or amor- [?le 4 of 5] S.L.C. 454 tization in lieu of depreciation) with re- spect to the property acquired with such payment, and in the case of a base erosion payment described in subsection any reduction in gross receipts with re- spect to such payment in computing gross income of the taxpayer for the taxable year for purposes of this chapter. TAX BENEFITS DISREGARDED IF TAX ON BASE EROSION IN as pro- vided in clause any base erosion tax benefit attributable to any base erosion payment? on which tax is imposed by section 871 or 881, and with respect to which tax has been deducted and Withheld under section 1441 or 1442, shall not be taken into account in com- puting modi?ed taxable income under paragraph or the base erosion per- centage under paragraph (4). [?le 4 of 5] S.L.C. 455 amount not taken into account in computing modified taxable income by reason of clause shall be reduced under rules similar to the rules under section 163(j)(5)(B) (as in effect be- fore the date of the enactment of the Tax Cuts and Jobs Act). SPECIAL FOR DETERMINING EST FOR WHICH DEDUCTION pur- poses of applying paragraph (1), in the case of a taxpayer to which subsection or of section 163 applies for the taxable year, the reduction in the amount of interest for which a deduction is allowed by reason of such subsection shall be treated as allo- cable first to interest paid or accrued to persons who are not related parties with respect to the taxpayer and then to such related parties. BASE EROSION PERCENTAGE. For pur- poses of paragraph IN term ?base ero- sion percentage? means, for any taxable year, the percentage determined by dividing? the aggregate amount of base erosion tax bene?ts of the taxpayer for the taxable year, by [file 4 of 5] S.L.C. 24 25 456 the aggregate amount of the de- ductions allowable to the taxpayer under this chapter for the taxable year. SPECIAL amount under subparagraph shall be determined? by taking into account base ero- sion tax benefits described in clauses and (ii) of paragraph and by not taking into account any deduction allowed under section 172, 245A, or 250 for the taxable year. BASE EROSION purposes of this section? IN 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 deduc- tion is allowable under this chapter. PURCHASE or Such term shall also include any amount paid or ac- crued by the taxpayer to a foreign person which is a related party of the taxpayer in connection with the acquisition by the taxpayer from such person of property of a character subject to the allowance of depreciation (or amortization in lieu of depreciation). [file 4 of 5] S.L.457 CERTAIN PAYMENTS TO EXPATRIATED EN- TITIES. IN term shall also include any amount paid or accrued by the tax- payer with respect to a person described in sub- paragraph (B) which results in a reduction of the gross receipts of the taxpayer. PERSON person is described in this subparagraph if such person is a? surrogate foreign corporation which is a related party of the taxpayer, but only if such person first became a sur? rogate foreign corporation after November 9, 2017, or foreign person which is a mem- ber of the same expanded affiliated group as the surrogate foreign corporation. purposes of this paragraph? SURROGATE FOREIGN CORPORA- term ?surrogate foreign cor- poration? has the meaning given such term by section 7874(a)(2) but does not include [?le 4 of 5] S.L.C. 458 1 a foreign corporation treated as a domestic 2 corporation under section 7874(b). 3 EXPANDED AFFILIATED 4 term ?expanded affiliated 5 group? has the meaning given such term by 6 section 7874(c)(1). 7 EXCEPTION FOR CERTAIN AMOUNTS WITH 8 RESPECT TO (1) shall not 9 apply to any amount paid or accrued by a taxpayer 10 for services if? 11 such services are services which meet 12 the requirements for eligibility for use of the 13 services cost method under section 482 (deter- 14 mined without regard to the requirement that 15 the services not contribute signi?cantly to fun? 16 damental risks of business success or failure), 17 and 18 such amount constitutes the total 19 services cost with no markup. 20 APPLICABLE purposes of this 21 section? 22 IN term ?applicable tax- 23 payer? means, with respect to any taxable year, a 24 taxpayer [?le 4 of 5] S.L.C. 459 which is a corporation other than a regulated investment company, a real estate in- vestment trust, or an corporation, the average annual gross receipts of whiCh for the B-taxable-year period ending with the preceding taxable year are at least $500,000,000, and the base erosion percentage (as deter? mined under subsection of which for the taxable year is 4 percent or higher. GROSS SPECIAL RULE FOR FOREIGN PER- the case of a foreign person the gross receipts of which are taken into account for purposes of paragraph only gross re- ceipts which are taken into account in deter- mining income which is effectively connected m'th 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 per- son, 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). [?le ?1 of 5] S.L.C. t?df??D460 OTHER RULES MADE 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. AGGREGATION persons treat- ed as a single employer under subsection of sec- tion 52 shall be treated as 1 person for purposes of this subsection and subsection 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. FOREIGN purposes of this sec- tion, the term ?foreign person? has the meaning given such term by section 6038A(c)(3). RELATED purposes of this sec- tion? IN term ?related party? means, with respect to any applicable taxpayer any 25-percent owner of the taxpayer, any person who is related (within the meaning of section 267(1)) or 707(b)(1)) to the taxpayer or any 25-percent owner of the tax? payer, and [?le 4 of 5] gr. 461 any other person who is related (with- in the meaning of section 482) to the taxpayer. 25-PERCENT term ?25-per- cent owner? means, with respect tO any corporation, any person who owns at least 25 percent Of? the total voting power of all classes of stock of a corporation entitled to vote, or the total value Of all classes Of stock Of such corporation. SECTION 318 TO APPLY?Section 318 shall apply for purposes of paragraphs (1) and (2), except that? ?10 percent? shall be substituted for ?50 percent? in section and i 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. EXCEPTION FOR CERTAIN PAYMENTS MADE IN THE ORDINARY COURSE OF TRADE OR purposes of this section? IN as provided in para- graph (3), any qualified derivative payment shall not be treated as a base erosion payment. [file 4 of 5] S.L.C. 462 QUALIFIED DERIVATIVE IN term ?quali?ed derivative payment? means any payment made by a taxpayer pursuant to a derivative with re- spect to which the taxpayer? recognizes gain or loss as if such derivative were sold for its fair market value on the last business day of the tax- able year (and such additional times as re- quired by this title or the taxpayer?s meth- od of accounting), treats any gain or loss so recog- nized as ordinary, and treats the character of all items of income, deduction, gain, or loss with re- spect to a payment pursuant to the deriva- tive as ordinary. REPORTING payments shall be treated as qualified derivative payments under subparagraph (A) for any tax? able year unless the taxpayer includes in the in- formation 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 infor- [?le 4 of 5] S.L.C. 463 1 mation as the Secretary determines necessary 2 to carry out the provisions of this subsection. 3 EXCEPTIONS FOR PAYMENTS OTHERWISE 4 TREATED AS BASE EROSION sub- 5 section shall not apply to any qualified derivative 6 payment if? 7 the payment would be treated as a 8 base erosion payment if it were not made pur- 9 suant to a derivative, including any interest, 10 royalty, or service payment, or 11 in the case Of a. contract which has 12 derivative and nonderivative components, the 13 payment is properly allocable to the nonderiva- 14 tive component. 15 DERIVATIVE purposes of 16 this subsection? 17 IN term ?derivative? 18 means any contract (including any option, for- 19 ward contract, futures contract, short position, 20 swap, or similar contract) the value of which, or 21 any payment or other transfer with respect to 22 which, is (directly or indirectly) determined by 23 reference to one or more Of the following: 24 Any share Of stock in a corpora- 25 tion. [file 4 of 5] S.L.C. quNHoemsaaxss:s 464 Any evidence of indebtedness. Any commodity Which is actively traded. Any currency. Any rate, price, amount, index, formula, or algorithm. Win regulations pr scfbed, by the\SRreta to piev 1e avoidance of the partpsu h- tgerm shall not in- //iy item described in clausNoigh TREATMENT OF AMERICAN DEPOSI- TORY RECEIPTS AND SIMILAR 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. Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section, including regulations?? providing for such adjustments to the ap- plication of this section as are necessary to prevent [file 4 of 5] S.L.465 the avoidance of the purposes of this section, includ- ing through? the use of unrelated persons, conduit transactions, or other intermediaries, or transactions or arrangements de- signed, in Whole or in part? to characterize payments other- wise subject to this section as payments not subject to this section, or to substitute payments not sub- ject to this section for payments otherwise subject to this section and for the application of subsection in- cluding rules to prevent the avoidance of the excep- tions under subsection REPORTING REQUIREMENTS AND (1) IN GENERAL?Subsection of section 6038A is amended to read as follows: REQUIRED IN purposes of subsection the information described in this subsection is such information as the Secretary prescribes by reg? ulations relating to? the name, principal place of business, nature of business, and country or countries in [?le 4 of 5] S.L.C. 466 which organized or resident, of each person which? is a related party to the reporting corporation, and had any transaction with the re- porting corporation during its taxable year, the manner in which the reporting corporation is related to each person referred tO in subparagraph (A), and transactions between the reporting corporation and each foreign person which is a related party to the reporting corporation. ADDITIONAL INFORMATION REGARDING BASE EROSION purposes of sub- section and section 60380, if the reporting cor- poration or the foreign corporation to whom section 6038C applies is an applicable taxpayer, the infor- mation described in this subsection shall include? such information as the Secretary de- termines necessary to determine the base erO- sion minimum tax amount, base erosion pay- ments, and base erosion tax benefits Of the tax- payer for purposes Of section 59A for the tax- able year, and [?le 4 of 5] S.L.C. 467 1 such other information as the Sec? 2 retary determines necessary to carry out such 3 section. 4 For purposes of this paragraph, any term used in ?5 this paragraph which is also used in section 59A 6 shall have the same meaning as when used in such 7 section? 8 (2) INCREASE IN PENALTY?Paragraphs (1) 9 and (2) of section 6038A(d) are each amended by 10 striking ?$10,000? and inserting 11 DISALLOWANCE OF CREDITS AGAINST BASE 12 EROSION TAX?Paragraph of section 26(1)) is amend- 13 ed by inserting after subparagraph (A) the following new 14 subparagraph: 15 section 59A (relating to base erosion 16 and anti-abuse 17 EONFORMING 18 (1) The table of parts for subchapter A of chap- 19 ter 1 is amended by adding after the item relating 20 to part VI the following new item: ?Part VII. Base erosion and anti-abuse tax?. 21 (2) Paragraph 1) of section 882(a), as amend- 22 ed by this Act, is amended by inserting or 23 after ?section [?le 4 of 5] S.L.C. 468 (3) Subparagraph (A) of section 6425(c)(1), as amended by section 13001, is amended to read as follows: the sum of? the tax imposed by section 11, or subchapter of chapter 1, whichever is applicable, plus the tax imposed by section 59A, over?. Subparagraph (A) of section 6655(g)(1), as amended by section 13001, is amended by strik- ing ?plus? at the end of clause by redesignating clause (ii) as clause and by inserting after clause the following new clause: the tax imposed by section 59A, plus?. (B) Subparagraphs and of section 6655(e)(2), as amended by section 13001, are each amended by inserting ?and modified taxable income? after ?taxable income?. (C) Subparagraph (B) of section 6655(e)(2) is amended by adding at the end the following new clause: MODIFIED TAXABLE The term ?modified taxable income? has the [file 4 of 5] S.L.C. 469 meaning given such term by section EFFECTIVE amendments made by this section shall apply to base erosion payments (as de- fined 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 PROVISIONS SEC. 14501. RESTRICTION ON INSURANCE BUSINESS EXCEP- TION TO PASSIVE FOREIGN INVESTMENT COMPANY RULES. IN 1297(b)(2)(B) is amend- ed to read as follows: derived in the active conduct of an in- surance business by a qualifying insurance cor- poration (as defined in subsection QUALIFYING INSURANCE CORPORATION DE- FINED?Section 1297 is amended by adding at the end the following new subsection: QUALIFYING purposes of subsection IN term ?qualifying insur- ance corporation? means, with respect to any taxable year, a foreign corporation? [?le 4 of 5] S.L.C. 470 1 which would be subject to tax under 2 subchapter if such corporation were a domes- 3 tie corporation, and 4 the applicable insurance liabilities of 5 which constitute more than 25 percent of its 6 total assets, determined on the basis of such li? 7 abilities and assets as reported on the corpora- 8 tion?s applicable financial statement for the last 9 year ending with or within the taxable year. 10 ALTERNATIVE FACTS AND CIR- 11 CUMSTANCES TEST FOR CERTAIN 12 If a corporation fails to qualify as a qualified insur- 13 ance corporation under paragraph (1) solely because 14 the percentage determined under paragraph 15 is 25 percent or less, a United States person that 16 owns stock in such corporation may elect to treat 17 such stock as stock of a qualifying insurance cor- 18 poration if? 19 the percentage so determined for the 20 corporation is at least 10 percent, and 21 under regulations provided by the 22 Secretary, based on the applicable facts and cir- 23 cumstances? 24 the corporation is predominantly 25 engaged in an insurance business, and [?le 4 of 5] S.L.C. 471 such failure is due solely to run- off-related or rating-related circumstances involving such insurance business. APPLICABLE INSURANCE For purposes of this subsection? IN term ?applicable insurance liabilities? means, with respect to any life or property and casualty insurance busi- ness? loss and loss adjustment ex- penses, and reserves (other than deficiency, contingency, or unearned premium re- serves) for life and health insurance risks and life and health insurance claims with respect to contracts providing coverage for mortality or morbidity risks. LIMITATIONS ON AMOUNT OF LIABIL- amount determined under clause or (ii) of subparagraph (A) shall not exceed the lesser of such amount?? as reported to the applicable in- surance regulatory body in the applicable financial statement described in paragraph [?le 4 of 5] S.L.C. COOQONM-PUJNH 47 2 (or, if less, the amount required by applicable law or regulation), or as determined under regulations prescribed by the Secretary. OTHER DEFINITIONS AND purposes of this subsection? APPLICABLE FINANCIAL STATE- term ?applicable financial state- ment? means a statement for financial reporting purposes which? is made on the basis of generally accepted accounting principles, is made on the basis of inter- national financial reporting standards, but only if there is no statement that meets the requirement of clause or 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 or APPLICABLE INSURANCE REGU- LATORY term ?applicable insurance [?le 4 of 5] S.L.C. 473 regulatory body? means, ?dth respect to any ill- surance business, the entity established by law to license, authorize, or regulate such business and to which the statement described in sub? paragraph (A) is provider EFFECTIVE 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. IN GENERAL?Paragraph (2) of section 864(c) is amended to read as follows: GRoss INCOME AND FAIR MARKET VALUE METHODS MAY NOT BE USED FOR allocations and apportionments of interest expense shall be determined using the adjusted bases of as- sets rather than on the basis of the fair market value of the assets or gross income?. EFFECTIVE amendment made by this section shall apply to taxable years beginning after December 31, 2017. SEC. 14503. MODIFICATION TO SOURCE RULES INVOLVING POSSESSIONS. IN GENERAL. Subsection of Section 937 of the Internal Revenue lode of 1986 is amended by in? [?le 5 0f 5] S.L.C. 474 sorting but only to the extent such income is attrib- utable to an of?ce or fixed place of business within the United States (determined under the rules of Section before the period at the end. SOURCE RULES FOR PERSONAL PROPERTY SALES?Subsection of section 865 of the Internal Revenue Code of 1986 is amended by inserting ?932,? after EFFECTIVE amendments made by this section shall apply to taxable years beginning after December 31, 2018. TITLE II SEC. 20001. OIL AND GAS PROGRAM. this section: (1) COASTAL term ?Coastal Plain? means the area identified as the 1002 Area on the plates prepared by the United States Geologi- cal Survey entitled Map - Plate 1? and Map Plate 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) term ?Secretary? means the Secretary of the Interior, acting through the B11- reau of Land Management. [?le 5 of 5] S.L.1003 of the Alaska 3 National Interest Lands Conservation Act (16 4 U.S.C. 3143) shall not apply to the Coastal Plain. 5 (2) 6 (A) IN Secretary shall es- ?7 tablish and administer a competitive oil and gas 8 program for the leasing, development, produc- 9 tion, and transportation from the Coastal Plain. 11 (B) PURPOSES. Section of the 12 Alaska National Interest Lands Conservation 13 Act (Public Law 96?487; 94 Stat. 2390) is 14 amended? 15 in clause by striking ?and? at 16 the end; 17 (ii) in clause by striking the pe- 18 riod at the end and inserting am and 19 by adding at the end the fol- 20 lowing: 21 to provide for an oil and gas pro- 22 gram on the Coastal Plain?. 23 (3) as otherwise pro- 24 vided in this section, the Secretary shall manage the 25 oil and gas program on the Coastal Plain in a man- [?le 5 of 5] {p 476 nor similar to the administration of lease sales under the Naval Petroleum Reserves Production Act of 1976 (42 U.S.C. 6501 et seq.) (including regula- tions). (4) the Mineral Leasing Act (30 181 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 .S.C. 181 et seq.), of the amount of adjusted bonus, rental, and royalty receipts de- rived 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. 2 LEASE SALES WITHIN 10 YEARS. (1) (A) IN to subpara- graph (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. [?le 5 of 5] S.L.C. 477 1 (B) SALE 2 Secretary shall 3 offer for lease under the oil and gas pro- 4 gram under this section? 5 (I) not fewer than 400,000 acres 6 area-wide in each lease sale; and 7 (II) those areas that have the 8 highest potential for the discovery of 9 hydrocarbons. 10 (ii) Secretary shall 11 offer 12 (I) the initial lease sale under the 13 oil and gas program under this sec- 14 tion not later than 4 years after the 15 date of enactment of this Act; and 16 (II) a second lease sale under the 17 oil and gas program under this sec- 1 18 tion not later than 7 years after the 1 19 date of enactment of this Act. 20 (2) Secretary shall issue 21 any rights-of?way or easements across the Coastal 22 Plain for the exploration, development, production, 23 or transportation necessary to carry out this section. 24 (3) SURFACE admin- 25 istering this section, the Secretary shall authorize up [?le 5 of 5] S.L.C. 478 to 2,000 surface acres of Federal land on the Coast- al Plain to be covered by production and support fa- cilities (including airstrips and any area covered by gravel berms or piers for support of pipelines) dur- ing the term of the leases under the oil and gas pro- gram 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 Secu- rity Act of 2006 (43 U.S.C. 1331 note; Public Law 109? 432) is amended by striking ?exceed $500,000,000 for 77 each of fiscal years 2016 through 2055. and inserting the following: ?exceed $500,000,000 for each of fiscal years 2016 through 2019; $650,000,000 for each of fiscal years 2020 and 2021; and $500,000,000 for each of fiscal years 2022 through 2055.?. SEC. 20003. STRATEGIC PETROLEUM RESERVE DRAWDOWN AND SALE. DRAWDOWN AND (1) IN GEXERAL.?Notwithstanding section 161 of the Energy Policy and Conservation Act (42 [?le 5 of 5] S.L.C. 479 .S.C. 6241), except as provided in subsections and 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 ?scal years 2026 through 2027. (2) DEPOSIT OF AMOUNTS RECEIVED FROM SALE?Amounts received from a sale under para- graph 1) shall be deposited in the general fund of the Treasury during the fiscal year in which the sale occurs. (In) EMERGENCY Secretary of Energy shall not draw down and sell crude oil under sub- section in a quantity that would limit the authority to sell petroleum products under subsection of section 161 of the Energy Policy and Conservation Act (42 U.S.C. 6241) in the full quantity authorized by that subsection. Secretary of Energy shall not drawdown or conduct sales of crude oil under subsection 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.