115 HR 1 PCS: Tax Cuts and Jobs Act U.S. House of Representatives text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
II Calendar No. 266115th CONGRESS 1st Session H. R. 1 IN THE SENATE OF THE UNITED STATES November 27, 2017Received; read the first timeNovember 28, 2017Read the second time and placed on the calendarAN ACT To provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.
1.
Short title; etc
(a)
Short title
This Act may be cited as the Tax Cuts and Jobs Act. (b)
Amendment of 1986 Code
Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986. (c)
Table of contents
The table of contents for this Act is as follows: Sec. 1. Short title; etc. Title I—Tax reform for individuals Subtitle A—Simplification and reform of rates, standard deduction, and exemptions Sec. 1001. Reduction and simplification of individual income tax rates. Sec. 1002. Enhancement of standard deduction. Sec. 1003. Repeal of deduction for personal exemptions. Sec. 1004. Maximum rate on business income of individuals. Sec. 1005. Conforming amendments related to simplification of individual income tax rates. Subtitle B—Simplification and reform of family and individual tax credits Sec. 1101. Enhancement of child tax credit and new family tax credit. Sec. 1102. Repeal of nonrefundable credits. Sec. 1103. Refundable credit program integrity. Sec. 1104. Procedures to reduce improper claims of earned income credit. Sec. 1105. Certain income disallowed for purposes of the earned income tax credit. Subtitle C—Simplification and reform of education incentives Sec. 1201. American opportunity tax credit. Sec. 1202. Consolidation of education savings rules. Sec. 1203. Reforms to discharge of certain student loan indebtedness. Sec. 1204. Repeal of other provisions relating to education. Sec. 1205. Rollovers between qualified tuition programs and qualified ABLE programs. Subtitle D—Simplification and reform of deductions Sec. 1301. Repeal of overall limitation on itemized deductions. Sec. 1302. Mortgage interest. Sec. 1303. Repeal of deduction for certain taxes not paid or accrued in a trade or business. Sec. 1304. Repeal of deduction for personal casualty losses. Sec. 1305. Limitation on wagering losses. Sec. 1306. Charitable contributions. Sec. 1307. Repeal of deduction for tax preparation expenses. Sec. 1308. Repeal of medical expense deduction. Sec. 1309. Repeal of deduction for alimony payments. Sec. 1310. Repeal of deduction for moving expenses. Sec. 1311. Termination of deduction and exclusions for contributions to medical savings accounts. Sec. 1312. Denial of deduction for expenses attributable to the trade or business of being an employee. Subtitle E—Simplification and reform of exclusions and taxable compensation Sec. 1401. Limitation on exclusion for employer-provided housing. Sec. 1402. Exclusion of gain from sale of a principal residence. Sec. 1403. Repeal of exclusion, etc., for employee achievement awards. Sec. 1404. Sunset of exclusion for dependent care assistance programs. Sec. 1405. Repeal of exclusion for qualified moving expense reimbursement. Sec. 1406. Repeal of exclusion for adoption assistance programs. Subtitle F—Simplification and reform of savings, pensions, retirement Sec. 1501. Repeal of special rule permitting recharacterization of Roth IRA contributions as traditional IRA contributions. Sec. 1502. Reduction in minimum age for allowable in-service distributions. Sec. 1503. Modification of rules governing hardship distributions. Sec. 1504. Modification of rules relating to hardship withdrawals from cash or deferred arrangements. Sec. 1505. Extended rollover period for the rollover of plan loan offset amounts in certain cases. Sec. 1506. Modification of nondiscrimination rules to protect older, longer service participants. Subtitle G—Estate, gift, and generation-skipping transfer taxes Sec. 1601. Increase in credit against estate, gift, and generation-skipping transfer tax. Sec. 1602. Repeal of estate and generation-skipping transfer taxes. Title II—Alternative Minimum Tax Repeal Sec. 2001. Repeal of alternative minimum tax. Title III—Business tax reform Subtitle A—Tax rates Sec. 3001. Reduction in corporate tax rate. Subtitle B—Cost recovery Sec. 3101. Increased expensing. Subtitle C—Small business reforms Sec. 3201. Expansion of section 179 expensing. Sec. 3202. Small business accounting method reform and simplification. Sec. 3203. Small business exception from limitation on deduction of business interest. Sec. 3204. Modification of treatment of S corporation conversions to C corporations. Subtitle D—Reform of business-related exclusions, deductions, etc. Sec. 3301. Interest. Sec. 3302. Modification of net operating loss deduction. Sec. 3303. Like-kind exchanges of real property. Sec. 3304. Revision of treatment of contributions to capital. Sec. 3305. Repeal of deduction for local lobbying expenses. Sec. 3306. Repeal of deduction for income attributable to domestic production activities. Sec. 3307. Entertainment, etc. expenses. Sec. 3308. Unrelated business taxable income increased by amount of certain fringe benefit expenses for which deduction is disallowed. Sec. 3309. Limitation on deduction for FDIC premiums. Sec. 3310. Repeal of rollover of publicly traded securities gain into specialized small business investment companies. Sec. 3311. Certain self-created property not treated as a capital asset. Sec. 3312. Repeal of special rule for sale or exchange of patents. Sec. 3313. Repeal of technical termination of partnerships. Sec. 3314. Recharacterization of certain gains in the case of partnership profits interests held in connection with performance of investment services. Sec. 3315. Amortization of research and experimental expenditures. Sec. 3316. Uniform treatment of expenses in contingency fee cases. Subtitle E—Reform of business credits Sec. 3401. Repeal of credit for clinical testing expenses for certain drugs for rare diseases or conditions. Sec. 3402. Repeal of employer-provided child care credit. Sec. 3403. Repeal of rehabilitation credit. Sec. 3404. Repeal of work opportunity tax credit. Sec. 3405. Repeal of deduction for certain unused business credits. Sec. 3406. Termination of new markets tax credit. Sec. 3407. Repeal of credit for expenditures to provide access to disabled individuals. Sec. 3408. Modification of credit for portion of employer social security taxes paid with respect to employee tips. Subtitle F—Energy credits Sec. 3501. Modifications to credit for electricity produced from certain renewable resources. Sec. 3502. Modification of the energy investment tax credit. Sec. 3503. Extension and phaseout of residential energy efficient property. Sec. 3504. Repeal of enhanced oil recovery credit. Sec. 3505. Repeal of credit for producing oil and gas from marginal wells. Sec. 3506. Modifications of credit for production from advanced nuclear power facilities. Subtitle G—Bond reforms Sec. 3601. Termination of private activity bonds. Sec. 3602. Repeal of advance refunding bonds. Sec. 3603. Repeal of tax credit bonds. Sec. 3604. No tax exempt bonds for professional stadiums. Subtitle H—Insurance Sec. 3701. Net operating losses of life insurance companies. Sec. 3702. Repeal of small life insurance company deduction. Sec. 3703. Surtax on life insurance company taxable income. Sec. 3704. Adjustment for change in computing reserves. Sec. 3705. Repeal of special rule for distributions to shareholders from pre-1984 policyholders surplus account. Sec. 3706. Modification of proration rules for property and casualty insurance companies. Sec. 3707. Modification of discounting rules for property and casualty insurance companies. Sec. 3708. Repeal of special estimated tax payments. Subtitle I—Compensation Sec. 3801. Modification of limitation on excessive employee remuneration. Sec. 3802. Excise tax on excess tax-exempt organization executive compensation. Sec. 3803. Treatment of qualified equity grants. Title IV—Taxation of foreign income and foreign persons Subtitle A—Establishment of participation exemption system for taxation of foreign income Sec. 4001. Deduction for foreign-source portion of dividends received by domestic corporations from specified 10-percent owned foreign corporations. Sec. 4002. Application of participation exemption to investments in United States property. Sec. 4003. Limitation on losses with respect to specified 10-percent owned foreign corporations. Sec. 4004. Treatment of deferred foreign income upon transition to participation exemption system of taxation. Subtitle B—Modifications related to foreign tax credit system Sec. 4101. Repeal of section 902 indirect foreign tax credits; determination of section 960 credit on current year basis. Sec. 4102. Source of income from sales of inventory determined solely on basis of production activities. Subtitle C—Modification of subpart F provisions Sec. 4201. Repeal of inclusion based on withdrawal of previously excluded subpart F income from qualified investment. Sec. 4202. Repeal of treatment of foreign base company oil related income as subpart F income. Sec. 4203. Inflation adjustment of de minimis exception for foreign base company income. Sec. 4204. Look-thru rule for related controlled foreign corporations made permanent. Sec. 4205. Modification of stock attribution rules for determining status as a controlled foreign corporation. Sec. 4206. Elimination of requirement that corporation must be controlled for 30 days before subpart F inclusions apply. Subtitle D—Prevention of base erosion Sec. 4301. Current year inclusion by United States shareholders with foreign high returns. Sec. 4302. Limitation on deduction of interest by domestic corporations which are members of an international financial reporting group. Sec. 4303. Excise tax on certain payments from domestic corporations to related foreign corporations; election to treat such payments as effectively connected income. Subtitle E—Provisions related to possessions of the United States Sec. 4401. Extension of deduction allowable with respect to income attributable to domestic production activities in Puerto Rico. Sec. 4402. Extension of temporary increase in limit on cover over of rum excise taxes to Puerto Rico and the Virgin Islands. Sec. 4403. Extension of American Samoa economic development credit. Subtitle F—Other international reforms Sec. 4501. Restriction on insurance business exception to passive foreign investment company rules. Title V—Exempt organizations Subtitle A—Unrelated Business Income Tax Sec. 5001. Clarification of unrelated business income tax treatment of entities treated as exempt from taxation under section 501(a). Sec. 5002. Exclusion of research income limited to publicly available research. Subtitle B—Excise Taxes Sec. 5101. Simplification of excise tax on private foundation investment income. Sec. 5102. Private operating foundation requirements relating to operation of art museum. Sec. 5103. Excise tax based on investment income of private colleges and universities. Sec. 5104. Exception from private foundation excess business holding tax for independently-operated philanthropic business holdings. Subtitle C—Requirements for organizations exempt from tax Sec. 5201. 501(c)(3) organizations permitted to make statements relating to political campaign in ordinary course of activities. Sec. 5202. Additional reporting requirements for donor advised fund sponsoring organizations.
<enum>I</enum><header>Tax reform for individuals</header> <subtitle id="H7858CD7EC9814FAA8A47720B928F38E4"><enum>A</enum><header>Simplification and reform of rates, standard deduction, and exemptions</header> <section display-inline="no-display-inline" id="HA585D896042C426B94EDF95943DDBA74" section-type="subsequent-section"><enum>1001.</enum><header>Reduction and simplification of individual income tax rates</header> <subsection id="HE0108C709F234B5ABB4D4970963CBB7B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/1">Section 1</external-xref> is amended by striking subsection (i) and by striking all that precedes subsection (h) and inserting the following:</text> <quoted-block display-inline="no-display-inline" id="HAF02C4AAF83648CD850CDB4C03AFA0B7" style="OLC"> <section id="H1778DF6AC8EB4DF78F276291AE6A0E2C"><enum>1.</enum><header>Tax imposed</header> <subsection commented="no" id="H1CE115A1D70D4DFDA3C25718095E30BE"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">There is hereby imposed on the income of every individual a tax equal to the sum of—</text> <paragraph commented="no" id="HD42685674D054C1D86C7B62E93137BD0"><enum>(1)</enum><header>12 percent bracket</header><text>12 percent of so much of the taxable income as does not exceed the 25-percent bracket threshold amount,</text> </paragraph><paragraph commented="no" id="HEB5661050C8744D58FA0DB9641462F9E"><enum>(2)</enum><header>25 percent bracket</header><text>25 percent of so much of the taxable income as exceeds the 25-percent bracket threshold amount but does not exceed the 35-percent bracket threshold amount, plus</text> </paragraph><paragraph commented="no" id="H38C9DEFF5A8F4F9CBFCB5A3C48087FA8"><enum>(3)</enum><header>35 percent bracket</header><text>35 percent of so much of taxable income as exceeds the 35-percent bracket threshold amount but does not exceed the 39.6 percent bracket threshold amount.</text> </paragraph><paragraph commented="no" id="HCFCEE2EF813844C5A23286E1F8453287"><enum>(4)</enum><header>39.6 percent bracket</header><text>39.6 percent of so much of taxable income as exceeds the 39.6-percent bracket threshold amount.</text> </paragraph></subsection><subsection commented="no" id="H9BE30F1977204158851AB2B21FC18220"><enum>(b)</enum><header>Bracket threshold amounts</header><text>For purposes of this section—</text> <paragraph commented="no" id="HAD3279BBA0CA4AD7BE4D4BA719D12FDC"><enum>(1)</enum><header>25-percent bracket threshold amount</header><text>The term <quote>25-percent bracket threshold amount</quote> means—</text> <subparagraph commented="no" id="HCCAA8964943C4CAFAE5D2290C9F5E616"><enum>(A)</enum><text display-inline="yes-display-inline">in the case of a joint return or surviving spouse, $90,000,</text> </subparagraph><subparagraph commented="no" id="H7B4271B868D147AC99518B99D2EC9F43"><enum>(B)</enum><text>in the case of an individual who is the head of a household (as defined in section 2(b)), $67,500,</text> </subparagraph><subparagraph commented="no" id="H0DFB5EEE11C64E8B9EA77B8A00FEA367"><enum>(C)</enum><text>in the case of any other individual (other than an estate or trust), an amount equal to <fraction>½</fraction> of the amount in effect for the taxable year under subparagraph (A), and</text> </subparagraph><subparagraph commented="no" id="H8523CCE458D5490F8690C6910DB4E696"><enum>(D)</enum><text>in the case of an estate or trust, $2,550.</text> </subparagraph></paragraph><paragraph commented="no" id="H394055FEF2A3405182D0EAABA6D0A57F"><enum>(2)</enum><header>35-percent bracket threshold amount</header><text>The term <quote>35-percent bracket threshold amount</quote> means—</text> <subparagraph commented="no" id="HB67EEB3AC68B49C08283387F83D42D7E"><enum>(A)</enum><text display-inline="yes-display-inline">in the case of a joint return or surviving spouse, $260,000,</text> </subparagraph><subparagraph commented="no" id="HF0E0314DB1F54D398C343A64631AA637"><enum>(B)</enum><text display-inline="yes-display-inline">in the case of a married individual filing a separate return, an amount equal to <fraction>½</fraction> of the amount in effect for the taxable year under subparagraph (A), and</text> </subparagraph><subparagraph commented="no" id="HC55A1800526246A7B381D8FB2A830981"><enum>(C)</enum><text>in the case of any other individual (other than an estate or trust), $200,000, and</text> </subparagraph><subparagraph commented="no" id="HCAB0B33E40F94156AEE209BD2A6C99A6"><enum>(D)</enum><text>in the case of an estate or trust, $9,150.</text> </subparagraph></paragraph><paragraph commented="no" id="HE116986ACD60444DAA4C5CFC642B7A17"><enum>(3)</enum><header>39.6-percent bracket threshold amount</header><text>The term <quote>39.6-percent bracket threshold amount</quote> means—</text> <subparagraph commented="no" id="HED369FC1ED104CA983A449885B785EC8"><enum>(A)</enum><text>in the case of a joint return or surviving spouse, $1,000,000,</text> </subparagraph><subparagraph commented="no" id="H1C28E9408E9F4187A2EE4ABB440E750D"><enum>(B)</enum><text display-inline="yes-display-inline">in the case of any other individual (other than an estate or trust), an amount equal to <fraction>½</fraction> of the amount in effect for the taxable year under subparagraph (A), and</text> </subparagraph><subparagraph commented="no" id="H81AEB9CF030E483F9E36C92C8D87E27C"><enum>(C)</enum><text>in the case of an estate or trust, $12,500.</text> </subparagraph></paragraph></subsection><subsection commented="no" id="H4E6E2AFF163143BF8D11F07D1087BAF0"><enum>(c)</enum><header>Inflation adjustment</header> <paragraph commented="no" id="H83841F8D1FCD4C409A65465CEA998F8C"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any taxable year beginning after 2018, each dollar amount in subsections (b) and (e)(3) (other than any amount determined by reference to such a dollar amount) shall be increased by an amount equal to—</text> <subparagraph commented="no" id="H7D0982E4DF6F45E5A2DF95994B8DACD1"><enum>(A)</enum><text>such dollar amount, multiplied by</text> </subparagraph><subparagraph commented="no" id="H3A025AA4725E4582A03F99D6D0A8E4A6"><enum>(B)</enum><text>the cost-of-living adjustment determined under this subsection for the calendar year in which the taxable year begins by substituting <quote>2017</quote> for <quote>2016</quote> in paragraph (2)(A)(ii).</text> </subparagraph><continuation-text continuation-text-level="paragraph">If any increase determined under the preceding sentence is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.</continuation-text></paragraph><paragraph commented="no" id="H5B45C59C50BC44DA8F217FCE93CB93F6"><enum>(2)</enum><header>Cost-of-living adjustment</header><text display-inline="yes-display-inline">For purposes of this subsection—</text> <subparagraph id="H494B4BCE7EE9486FB17405EE542B46B5"><enum>(A)</enum><header>In general</header><text>The cost-of-living adjustment for any calendar year is the percentage (if any) by which—</text> <clause commented="no" id="H857ABCC9E6404E45AEF551F1B9C8AB2E"><enum>(i)</enum><text>the C-CPI-U for the preceding calendar year, exceeds</text> </clause><clause commented="no" id="HCE200CD37E0943A68FA29C7E97D866B8"><enum>(ii)</enum><text>the normalized CPI for calendar year 2016.</text> </clause></subparagraph><subparagraph id="HC967CE0013AF49698B5A77FA39A306EC"><enum>(B)</enum><header>Special rule for adjustments with a base year after 2016</header><text display-inline="yes-display-inline">For purposes of any provision which provides for the substitution of a year after 2016 for <quote>2016</quote> in subparagraph (A)(ii), subparagraph (A) shall be applied by substituting <quote>C-CPI-U</quote> for <quote>normalized CPI</quote> in clause (ii).</text> </subparagraph></paragraph><paragraph commented="no" id="H56117B0EDFA64F6B90688A7C6A469DE0"><enum>(3)</enum><header>Normalized CPI</header><text>For purposes of this subsection, the normalized CPI for any calendar year is the product of—</text> <subparagraph commented="no" id="H7E97E03FC40D4FD0B70EFEA6B73DA30D"><enum>(A)</enum><text>the CPI for such calendar year, multiplied by</text> </subparagraph><subparagraph commented="no" id="H0504535031FA423381A8945B32E91301"><enum>(B)</enum><text>the C-CPI-U transition multiple.</text> </subparagraph></paragraph><paragraph commented="no" id="HC22FD6DE29844F679F5E6C6E715C05AA"><enum>(4)</enum><header>C-CPI-U transition multiple</header><text>For purposes of this subsection, the term <quote>C-CPI-U transition multiple</quote> means the amount obtained by dividing—</text> <subparagraph commented="no" id="H61F8A78CE7F245CBB8DD246C0233C000"><enum>(A)</enum><text>the C-CPI-U for calendar year 2016, by</text> </subparagraph><subparagraph commented="no" id="HA9FE65D7AB5E4265B27EF21121B5E4E4"><enum>(B)</enum><text>the CPI for calendar year 2016.</text> </subparagraph></paragraph><paragraph commented="no" id="HE69A58B1FB7D432AA15CB61D12123F55"><enum>(5)</enum><header>C-CPI-U</header><text display-inline="yes-display-inline">For purposes of this subsection—</text> <subparagraph commented="no" id="H590EA04989464FBBAD90AEA8DE0C5E40"><enum>(A)</enum><header>In general</header><text>The term <quote>C-CPI-U</quote> means the Chained Consumer Price Index for All Urban Consumers (as published by the Bureau of Labor Statistics of the Department of Labor). The values of the Chained Consumer Price Index for All Urban Consumers taken into account for purposes of determining the cost-of-living adjustment for any calendar year under this subsection shall be the latest values so published as of the date on which such Bureau publishes the initial value of the Chained Consumer Price Index for All Urban Consumers for the month of August for the preceding calendar year.</text> </subparagraph><subparagraph commented="no" id="HA66962204E8F4551AAA550A75DFA4116"><enum>(B)</enum><header>Determination for calendar year</header><text>The C-CPI-U for any calendar year is the average of the C-CPI-U as of the close of the 12-month period ending on August 31 of such calendar year.</text> </subparagraph></paragraph><paragraph commented="no" id="HBEA364A467914A29845BEEF18753F89C"><enum>(6)</enum><header>CPI</header><text display-inline="yes-display-inline">For purposes of this subsection—</text> <subparagraph commented="no" id="H1CEE7DE9D54C43AD9C34644F3A0EB04D"><enum>(A)</enum><header>In general</header><text>The term <quote>Consumer Price Index</quote> means the last Consumer Price Index for All Urban Consumers published by the Department of Labor. For purposes of the preceding sentence, the revision of the Consumer Price Index which is most consistent with the Consumer Price Index for calendar year 1986 shall be used.</text> </subparagraph><subparagraph commented="no" id="H92B47EC6A04C4BC0A84BEA567F753267"><enum>(B)</enum><header>Determination for calendar year</header><text>The CPI for any calendar year is the average of the Consumer Price Index as of the close of the 12-month period ending on August 31 of such calendar year.</text> </subparagraph></paragraph></subsection><subsection id="HD07551F536BD41D1BD4E0A29F7FB2523"><enum>(d)</enum><header>Special rules for certain children with unearned income</header> <paragraph commented="no" id="H2B9689D331A2406FA4E44779969E2A2E"><enum>(1)</enum><header>In general</header><text>In the case of any child to whom this subsection applies for any taxable year—</text> <subparagraph commented="no" id="HCDDBEBD47DE14F2E9DD581C546F5D24B"><enum>(A)</enum><text>the 25-percent bracket threshold amount shall not be more than the taxable income of such child for the taxable year reduced by the net unearned income of such child, and</text> </subparagraph><subparagraph commented="no" id="HC8DA0CF058834B23B950B75079E643AC"><enum>(B)</enum><text>the 35-percent bracket threshold amount shall not be more than the sum of—</text> <clause commented="no" id="H17363A7322E941FCBBE95AC46213E8F9"><enum>(i)</enum><text>the taxable income of such child for the taxable year reduced by the net unearned income of such child, plus</text> </clause><clause commented="no" id="HCA5CC5EC4CDD48EBABFB35FCC9BC61EC"><enum>(ii)</enum><text>the dollar amount in effect under subsection (b)(2)(D) for the taxable year.</text> </clause></subparagraph><subparagraph commented="no" id="H495E6393BE0240549C66B7CDB4F6012F"><enum>(C)</enum><text>the 39.6-percent bracket threshold amount shall not be more than the sum of—</text> <clause commented="no" id="HB832195F361141788B6D6B48D026BE64"><enum>(i)</enum><text>the taxable income of such child for the taxable year reduced by the net unearned income of such child, plus</text> </clause><clause commented="no" id="HB1F937E53C574BE78798653C268B8AC7"><enum>(ii)</enum><text>the dollar amount in effect under subsection (b)(3)(C).</text> </clause></subparagraph></paragraph><paragraph id="H4BCE43AA373146709883AB939710413C"><enum>(2)</enum><header>Child to whom subsection applies</header><text>This subsection shall apply to any child for any taxable year if—</text> <subparagraph id="HF6C4F72F6EEE4C67BCF9E322D921B567"><enum>(A)</enum><text>such child—</text> <clause id="HE75892B742E8407B98F44F9DE268A697"><enum>(i)</enum><text>has not attained age 18 before the close of the taxable year, or</text> </clause><clause id="HFE0050A90EE24313BA18391FAB0DE447"><enum>(ii)</enum><text>has attained age 18 before the close of the taxable year and is described in paragraph (3),</text> </clause></subparagraph><subparagraph id="HD6EE8FE05751490FBF98E4CAB79C76F6"><enum>(B)</enum><text>either parent of such child is alive at the close of the taxable year, and</text> </subparagraph><subparagraph id="H6E67B5C0DBB1441FBB54E1E49B6AA252"><enum>(C)</enum><text>such child does not file a joint return for the taxable year.</text> </subparagraph></paragraph><paragraph id="H36939B4DFAF547DC9BFC649D5E196668"><enum>(3)</enum><header>Certain children whose earned income does not exceed one-half of individual’s support</header><text>A child is described in this paragraph if—</text> <subparagraph id="H93ED327060CD4E44AF536F851262BC63"><enum>(A)</enum><text>such child—</text> <clause id="HA0565561D9244CEEA2ACDD7BEF55F44E"><enum>(i)</enum><text>has not attained age 19 before the close of the taxable year, or</text> </clause><clause id="HEDFE47E439D9405493BA3DF977102A3B"><enum>(ii)</enum><text>is a student (within the meaning of section 7706(f)(2)) who has not attained age 24 before the close of the taxable year, and</text> </clause></subparagraph><subparagraph id="H8FABA68289BD4ED59BCF3B36AEB8EB3F"><enum>(B)</enum><text>such child’s earned income (as defined in section 911(d)(2)) for such taxable year does not exceed one-half of the amount of the individual’s support (within the meaning of section 7706(c)(1)(D) after the application of section 7706(f)(5) (without regard to subparagraph (A) thereof)) for such taxable year.</text> </subparagraph></paragraph><paragraph id="HFC43B905F9584C3A83641D90C74A9BE2"><enum>(4)</enum><header>Net unearned income</header><text>For purposes of this subsection—</text> <subparagraph id="HDD753841EB4A452BB60A2D4BA0B8E672"><enum>(A)</enum><header>In general</header><text>The term <quote>net unearned income</quote> means the excess of—</text> <clause id="H32ED1666B5CC4E91B9502A229ECE7F63"><enum>(i)</enum><text>the portion of the adjusted gross income for the taxable year which is not attributable to earned income (as defined in section 911(d)(2)), over</text> </clause><clause id="HB7FE4FFF2567437C8AF7F0F98EA52C34"><enum>(ii)</enum><text display-inline="yes-display-inline">the sum of—</text> <subclause id="H3B2916D7865448A7A094FDB14DE9A12C"><enum>(I)</enum><text>the amount in effect for the taxable year under section 63(c)(2)(A) (relating to limitation on standard deduction in the case of certain dependents), plus</text> </subclause><subclause id="H4D35A3384D2F47A0B97F853372E73F30"><enum>(II)</enum><text>The greater of the amount described in subclause (I) or, if the child itemizes his deductions for the taxable year, the amount of the itemized deductions allowed by this chapter for the taxable year which are directly connected with the production of the portion of adjusted gross income referred to in clause (i).</text> </subclause></clause></subparagraph><subparagraph id="H86CD1BCE28EC4C5F8B5AAC3334C22241"><enum>(B)</enum><header>Limitation based on taxable income</header><text>The amount of the net unearned income for any taxable year shall not exceed the individual’s taxable income for such taxable year.</text> </subparagraph></paragraph></subsection><subsection id="H8FAD79F2AFA54811A09B3E6CE64BDFEB"><enum>(e)</enum><header>Phaseout of 12-percent rate</header> <paragraph id="HBBFF7C87FFDB44EAAFD33EDA1BE189E7"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The amount of tax imposed by this section (determined without regard to this subsection) shall be increased by 6 percent of the excess (if any) of—</text> <subparagraph id="HDD1E8C0A451E49FBBFEAE8F3DE776A20"><enum>(A)</enum><text>adjusted gross income, over</text> </subparagraph><subparagraph id="H04373F73DE9A4FB187E68C4DEDACED54"><enum>(B)</enum><text>the applicable dollar amount.</text> </subparagraph></paragraph><paragraph id="H6CF2913CEF3542E1B38C169684A0ABB4"><enum>(2)</enum><header>Limitation</header><text>The increase determined under paragraph (1) with respect to any taxpayer for any taxable year shall not exceed 27.6 percent of the lesser of—</text> <subparagraph id="HDD66005BF6B34B1E88D319ADF6A3D8FB"><enum>(A)</enum><text>the taxpayer’s taxable income for such taxable year, or</text> </subparagraph><subparagraph id="H16F3AF5942634123A811E1E698972AD2"><enum>(B)</enum><text>the 25-percent bracket threshold amount in effect with respect to the taxpayer for such taxable year.</text> </subparagraph></paragraph><paragraph id="HADFAD79D2D844E4DB5241898A0CEA4CB"><enum>(3)</enum><header>Applicable dollar amount</header><text>For purposes of this subsection, the term <quote>applicable dollar amount</quote> means—</text> <subparagraph display-inline="no-display-inline" id="HB402F31AA3FA4E0CB13F2CE5A4D3801F"><enum>(A)</enum><text display-inline="yes-display-inline">in the case of a joint return or a surviving spouse, $1,200,000,</text> </subparagraph><subparagraph id="HE884FF4F8D5349348E9AFE47235830B6"><enum>(B)</enum><text display-inline="yes-display-inline">in the case of a married individual filing a separate return, an amount equal to <fraction>1/2</fraction> of the amount in effect for the taxable year under subparagraph (A), and</text> </subparagraph><subparagraph id="H3D473C804A26437A9BE8B7C22276CBEA"><enum>(C)</enum><text>in the case of any other individual, $1,000,000.</text> </subparagraph></paragraph><paragraph id="H8A02731453F74356A963CFBC800E9A97"><enum>(4)</enum><header>Estates and trusts</header><text>Paragraph (1) shall not apply in the case of an estate or trust.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HE7642DCD943C4F5895149D6F6E37CCAD"><enum>(b)</enum><header>Application of current income tax brackets to capital gains brackets</header> <paragraph id="H9F84B52393CD41B28D7E373F125F0673"><enum>(1)</enum><header>In general</header> <subparagraph id="H8F25351BC6894C5A90226D37D9C8A773"><enum>(A)</enum><header><enum-in-header>0</enum-in-header>-percent capital gains bracket</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1">Section 1(h)(1)</external-xref> is amended by striking <quote>which would (without regard to this paragraph) be taxed at a rate below 25 percent</quote> in subparagraph (B)(i) and inserting <quote>below the 15-percent rate threshold</quote>.</text> </subparagraph><subparagraph id="HFABFE20476AE436E9AB363A8915BC303"><enum>(B)</enum><header><enum-in-header>15</enum-in-header>-percent capital gains bracket</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/1">Section 1(h)(1)(C)(ii)(I)</external-xref> is amended by striking <quote>which would (without regard to this paragraph) be taxed at a rate below 39.6 percent</quote> and inserting <quote>below the 20-percent rate threshold</quote>.</text> </subparagraph></paragraph><paragraph commented="no" id="H755B2C2831724AF590E7BA3F81804691"><enum>(2)</enum><header>Rate thresholds defined</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1">Section 1(h)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H314A612277A04EB7BFBA831D92B98CE5" style="OLC"> <paragraph commented="no" id="HF70998B84D5340B9ADF87AA3CA658793"><enum>(12)</enum><header>Rate thresholds defined</header><text display-inline="yes-display-inline">For purposes of this subsection—</text> <subparagraph commented="no" id="H2869080D5597482E8E56F8420FE2DBB6"><enum>(A)</enum><header><enum-in-header>15</enum-in-header>-percent rate threshold</header><text>The 15-percent rate threshold shall be—</text> <clause commented="no" id="H9D8D20310058406FBF6254358A3D8C16"><enum>(i)</enum><text display-inline="yes-display-inline">in the case of a joint return or surviving spouse, $77,200 (<fraction>½</fraction> such amount in the case of a married individual filing a separate return),</text> </clause><clause commented="no" id="H1E12484B31AE4780B56165B82BF55BF4"><enum>(ii)</enum><text>in the case of an individual who is the head of a household (as defined in section 2(b)), $51,700,</text> </clause><clause commented="no" id="HD841653D65AE4C58BF3C7216D5704D7E"><enum>(iii)</enum><text>in the case of any other individual (other than an estate or trust), an amount equal to <fraction>½</fraction> of the amount in effect for the taxable year under clause (i), and</text> </clause><clause commented="no" id="H8922AC97582D4D99AFD07F1D9334F26D"><enum>(iv)</enum><text>in the case of an estate or trust, $2,600.</text> </clause></subparagraph><subparagraph commented="no" id="HEC7A76FE19D24101AC10D9195655750D"><enum>(B)</enum><header><enum-in-header>20</enum-in-header>-percent rate threshold</header><text>The 20-percent rate threshold shall be—</text> <clause commented="no" id="HEC9D875120484BEABBB26A20D489755E"><enum>(i)</enum><text display-inline="yes-display-inline">in the case of a joint return or surviving spouse, $479,000 (<fraction>½</fraction> such amount in the case of a married individual filing a separate return),</text> </clause><clause commented="no" id="HC5168B066FAF4923895B17FEE5DE5C4F"><enum>(ii)</enum><text>in the case of an individual who is the head of a household (as defined in section 2(b)), $452,400,</text> </clause><clause commented="no" id="H7A2FC117EA224F0BBBA95E39B9AB971F"><enum>(iii)</enum><text>in the case of any other individual (other than an estate or trust), $425,800, and</text> </clause><clause commented="no" id="H0893FF31D0D342C29D74178CAE4E650E"><enum>(iv)</enum><text>in the case of an estate or trust, $12,700.</text> </clause></subparagraph><subparagraph commented="no" id="HC372BE338F6F4CD9958BCACAE209E333"><enum>(C)</enum><header>Inflation adjustment</header><text>In the case of any taxable year beginning after 2018, each of the dollar amounts in subparagraphs (A) and (B) shall be increased by an amount equal to—</text> <clause commented="no" id="H18376C44628F4F28B086B9E0E7F591A6"><enum>(i)</enum><text>such dollar amount, multiplied by</text> </clause><clause commented="no" id="H9EE61E193096476BAA263AB957211D1D"><enum>(ii)</enum><text>the cost-of-living adjustment determined under subsection (c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2017</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof.</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H37ADDF86E1F64869BB6C0D554BA62D82"><enum>(c)</enum><header>Application of section <enum-in-header>15</enum-in-header></header> <paragraph id="H6309F41669C74870AD277EE21FC88335"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (a) of <external-xref legal-doc="usc" parsable-cite="usc/26/15">section 15</external-xref> is amended by striking <quote>by this chapter</quote> and inserting <quote>by section 11 (or by reference to any such rates)</quote>.</text> </paragraph><paragraph id="H3640C308460042E3B6AB1556BEBE8D7D"><enum>(2)</enum><header>Conforming amendments</header> <subparagraph id="HCEB5DDA9556D4F6DA7EB72DBB6BD1B70"><enum>(A)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/15">Section 15</external-xref> is amended by striking subsections (d) and (f) and by redesignating subsection (e) as subsection (d).</text> </subparagraph><subparagraph id="H5F6EA74697AB44C6990783404C4020A0"><enum>(B)</enum><text>Section 15(d), as redesignated by subparagraph (A), is amended by striking <quote>section 1 or 11(b)</quote> and inserting <quote>section 11(b)</quote>.</text> </subparagraph><subparagraph id="HC1B2A4CC274D432A9A8C72A218860984"><enum>(C)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6013">Section 6013(c)</external-xref> is amended by striking <quote>sections 15, 443, and 7851(a)(1)(A)</quote> and inserting <quote>sections 443 and 7851(a)(1)(A)</quote>.</text> </subparagraph></paragraph><paragraph id="H8AC73ED8CC20425393F3E5BF15CE5A30"><enum>(3)</enum><header>Application to this Act</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/15">Section 15</external-xref> of the Internal Revenue Code of 1986 shall not apply to any change in a rate of tax imposed by chapter 1 of such Code which occurs by reason of any amendment made by this Act (other than the amendments made by section 3001).</text> </paragraph></subsection><subsection id="HE62C62A4BF204EC7814296F4D653D5A8"><enum>(d)</enum><header>Effective date</header> <paragraph id="H790F178E796640C48E34C294DD82EFD2"><enum>(1)</enum><header>In general</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </paragraph><paragraph id="HD169555957E4428B90170CAD070FDDE5"><enum>(2)</enum><header>Subsection <enum-in-header>(c)</enum-in-header></header><text>The amendments made by subsection (c) shall take effect on the date of the enactment of this Act.</text> </paragraph></subsection></section><section id="H154666B3B54D4F3B8030E6F05BCA4757"><enum>1002.</enum><header>Enhancement of standard deduction</header> <subsection id="H4C16746BF1A14565953512B18E4B10AC"><enum>(a)</enum><header>Increase in standard deduction</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/63">Section 63(c)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H2349A196FEA54266B6B8816644809E6E" style="OLC"> <subsection id="HC1C990E048BF483691A2EA9D3BBDD4BE"><enum>(c)</enum><header>Standard deduction</header><text display-inline="yes-display-inline">For purposes of this subtitle—</text> <paragraph id="H7FD86DF179274A7FB28F201688DC549A"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the term <quote>standard deduction</quote> means—</text> <subparagraph id="H90948966A90849BBA9003D2246BABB57"><enum>(A)</enum><text>$24,400, in the case of a joint return (or a surviving spouse (as defined in section 2(a)),</text> </subparagraph><subparagraph id="HCE763E1F63AE451BB78E3CFF75C89DB3"><enum>(B)</enum><text display-inline="yes-display-inline">three-quarters of the amount in effect under subparagraph (A) for the taxable year, in the case of the head of a household (as defined in section 2(b)), and</text> </subparagraph><subparagraph id="HDDB3AB7B657544C7BDA0117F0DEA8605"><enum>(C)</enum><text>one-half of the amount in effect under subparagraph (A) for the taxable year, in any other case.</text> </subparagraph></paragraph><paragraph id="H3680DDEBDC564A8BAFFED7CF1DC8323C"><enum>(2)</enum><header>Limitation on standard deduction in the case of certain dependents</header><text>In the case of an individual who is a dependent of another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins, the standard deduction applicable to such individual for such individual’s taxable year shall not exceed the greater of—</text> <subparagraph id="H043A06B062AC4E59AD133D2E6685E4F5"><enum>(A)</enum><text>$500, or</text> </subparagraph><subparagraph id="H46B96A0C1AA840D7921B69E5AFE70341"><enum>(B)</enum><text>the sum of $250 and such individual’s earned income (within the means of section 32).</text> </subparagraph></paragraph><paragraph id="H0914DC6CF9E44DD49F07062622651BF5"><enum>(3)</enum><header>Certain individuals, etc., not eligible for standard deduction</header><text>In the case of—</text> <subparagraph id="H24B71C24FDCA489EA8A72D3BAA1CBB41"><enum>(A)</enum><text display-inline="yes-display-inline">a married individual filing a separate return where either spouse itemizes deductions,</text> </subparagraph><subparagraph id="HE28E53E7814B42A6B1F2C64C85DB2C9C"><enum>(B)</enum><text>a nonresident alien individual,</text> </subparagraph><subparagraph id="H58FC05F2F40F4B9C818E2D1A3E129C80"><enum>(C)</enum><text>an individual making a return under section 443(a)(1) for a period of less than 12 months on account of a change in his annual accounting period, or</text> </subparagraph><subparagraph id="H3FBA8D28C3B84FF5B283284CB8AD18A3"><enum>(D)</enum><text>an estate or trust, common trust fund, or partnership,</text> </subparagraph><continuation-text continuation-text-level="paragraph">the standard deduction shall be zero.</continuation-text></paragraph><paragraph id="H32C27C84F8F74739A9A515044652B3C0"><enum>(4)</enum><header>Unmarried individual</header><text>For purposes of this section, the term <quote>unmarried individual</quote> means any individual who—</text> <subparagraph id="H32637CCD80FD4BE88DE6E3EA0B7221A7"><enum>(A)</enum><text>is not married as of the close of the taxable year (as determined by applying section 7703),</text> </subparagraph><subparagraph id="H4A668C51141B40D7A9B1F208AA025B4A"><enum>(B)</enum><text>is not a surviving spouse (as defined in section 2(a)) for the taxable year, and</text> </subparagraph><subparagraph commented="no" id="H3FBC44C921BA43FDAFEFA5912A17107F"><enum>(C)</enum><text display-inline="yes-display-inline">is not a dependent of another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins.</text> </subparagraph></paragraph><paragraph id="H3B0E42B30DCA4CC390F5C739E0FB4EAA"><enum>(5)</enum><header>Inflation adjustments</header> <subparagraph id="H16EF072CAC524854A8D96543B6A41B60"><enum>(A)</enum><header>Standard deduction amount</header><text>In the case of any taxable year beginning after 2019, the dollar amount in paragraph (1)(A) shall be increased by an amount equal to—</text> <clause id="H8FF8AF49ABB3458FB36BB1B226E72CBD"><enum>(i)</enum><text>such dollar amount, multiplied by</text> </clause><clause id="H9EF555D7F6D349B6A9E8AA417F5DF333"><enum>(ii)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2018</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof.</text> </clause></subparagraph><subparagraph id="H6A0EBB90DB0F4EBFA98FCA92E571BD74"><enum>(B)</enum><header>Limitation amount in case of certain dependents</header><text>In the case of any taxable year beginning after 2017, each of the dollar amounts in paragraph (2) shall be increased by an amount equal to—</text> <clause id="HA5CF6B1B0DFB45E5AB8B89949C1749E9"><enum>(i)</enum><text>such dollar amount, multiplied by</text> </clause><clause id="HB447338BB9C1423BB3AB69DA8DA87D49"><enum>(ii)</enum> <subclause commented="no" display-inline="yes-display-inline" id="H9E31B3B712F747F9AF26BBEAE1994751"><enum>(I)</enum><text display-inline="yes-display-inline">in the case of the dollar amount in paragraph (2)(A), under section 1(c)(2)(A) for the calendar year in which the taxable year begins determined by substituting <quote>calendar year 1987</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof, and</text> </subclause><subclause id="H4CF8FDA156164C83BC15F1C8C8C861CD" indent="up1"><enum>(II)</enum><text>in the case of the dollar amount in paragraph (2)(B), under section 1(c)(2)(A) for the calendar year in which the taxable year begins determined by substituting <quote>calendar year 1997</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof.</text> </subclause></clause></subparagraph><continuation-text continuation-text-level="paragraph">If any increase determined under this paragraph is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.</continuation-text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HBE2CA7667ADC4FFB912C698807E60395"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="H279311C9DB6D47F5AF834E3474610041"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/63">Section 63(b)</external-xref> is amended by striking <quote>, minus—</quote> and all that follows and inserting <quote>minus the standard deduction</quote>.</text> </paragraph><paragraph id="HC867791AB9BB49529FD3EEDB421560B1"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/63">Section 63</external-xref> is amended by striking subsections (f) and (g).</text> </paragraph><paragraph id="H8127C183930E4824925934B65CEB16F9"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1398">Section 1398(c)</external-xref> is amended—</text> <subparagraph id="H255A7A68718344C59C23A94F45F80D5E"><enum>(A)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">Basic</header-in-text></quote> in the heading thereof,</text> </subparagraph><subparagraph id="H50936D3D5C434318A31CA1624A27DD57"><enum>(B)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">Basic standard</header-in-text></quote> in the heading of paragraph (3) and inserting <quote><header-in-text level="paragraph" style="OLC">Standard</header-in-text></quote>, and</text> </subparagraph><subparagraph id="HEBAA04A3B1A842D5859D6917D0C567EA"><enum>(C)</enum><text>by striking <quote>basic</quote> in paragraph (3).</text> </subparagraph></paragraph><paragraph id="HAD33003374DF4BEA9C46BE9E9AB10E47"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3402">Section 3402(m)(3)</external-xref> is amended by striking <quote>(including the additional standard deduction under section 63(c)(3) for the aged and blind)</quote>.</text> </paragraph><paragraph id="HB14438ED2CAE47AB9BE6667B1C0ED7C4"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6014">Section 6014(b)(4)</external-xref> is amended by striking <quote>section 63(c)(5)</quote> and inserting <quote>section 63(c)(2)</quote>.</text> </paragraph></subsection><subsection id="H1EB996E156DC48CB84302C19CAC7DBA7"><enum>(c)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H107D17D4BE4445C893BA5A6D009BF266"><enum>1003.</enum><header>Repeal of deduction for personal exemptions</header> <subsection id="H3E7A97AEBD5C4B5FBAC5D8A71A0A1194"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part V of subchapter B of chapter 1 is hereby repealed.</text> </subsection><subsection id="H609BA58C47874B3B96B9A15C090D8E30"><enum>(b)</enum><header>Definition of dependent retained</header><text display-inline="yes-display-inline">Section 152, prior to repeal by subsection (a), is hereby redesignated as section 7706 and moved to the end of chapter 79.</text> </subsection><subsection commented="no" id="H25387EEC17F34E9EA556B857B9B62C47"><enum>(c)</enum><header>Application to estates and trusts</header><text>Subsection (b) of <external-xref legal-doc="usc" parsable-cite="usc/26/642">section 642</external-xref> is amended—</text> <paragraph id="HA0944B8E813B466C860AF4ED4B57710D"><enum>(1)</enum><text>by striking paragraph (2)(C),</text> </paragraph><paragraph id="HD0987A9E71E24BD484767635FA4064E7"><enum>(2)</enum><text>by striking paragraph (3), and</text> </paragraph><paragraph id="H7157051B93094402AC737EC42D688FBC"><enum>(3)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">Deduction for personal exemption</header-in-text></quote> in the heading thereof and inserting <quote><header-in-text level="subsection" style="OLC">Basic deduction</header-in-text></quote>.</text> </paragraph></subsection><subsection id="H239C82C7EDA1493BA7736A2F40B54F8C"><enum>(d)</enum><header>Application to nonresident aliens</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/873">Section 873(b)</external-xref> is amended by striking paragraph (3).</text> </subsection><subsection commented="no" id="H68BE3498C93F48A2AAA966B0CEDDFD31"><enum>(e)</enum><header>Modification of wage withholding rules</header> <paragraph commented="no" id="HD7354E1B4A3540E981EC6EFA3B96A626"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/3402">Section 3402(a)</external-xref> is amended by striking paragraph (2).</text> </paragraph><paragraph commented="no" id="H00C76E09374748AA85199783E6F457EA"><enum>(2)</enum><header>Conforming amendment</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/3402">Section 3402(a)</external-xref> is amended—</text> <subparagraph commented="no" id="HD696EA3878AA469D97A9FFEFE8188E62"><enum>(A)</enum><text>by redesignating subparagraphs (A) and (B) of paragraph (1) as paragraphs (1) and (2) and moving such redesignated paragraphs 2 ems to the left, and</text> </subparagraph><subparagraph commented="no" id="H1132B050565C463C9176B03B89D34E1D"><enum>(B)</enum><text>by striking all that precedes <quote>otherwise provided in this section</quote> and inserting the following:</text> <quoted-block display-inline="no-display-inline" id="HC20178136F404E3B83D7CBD4001720AE" style="OLC"> <subsection commented="no" id="HB8161A0328004E45A13A1326BE421CC3"><enum>(a)</enum><header>Requirement of withholding</header><text display-inline="yes-display-inline">Except as</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph><paragraph commented="no" id="HA4D25B7BC60B4B9DAA5EE595E9045B0A"><enum>(3)</enum><header>Number of exemptions</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/3402">Section 3402(f)(1)</external-xref> is amended—</text> <subparagraph commented="no" id="H4D4549F872204962ADE20DF188FB8DA6"><enum>(A)</enum><text>in subparagraph (A), by striking <quote>an individual described in section 151(d)(2)</quote> and inserting <quote>a dependent of any other taxpayer</quote>, and</text> </subparagraph><subparagraph commented="no" id="HE3563208762A4A09834E3D08F61B479A"><enum>(B)</enum><text>in subparagraph (C), by striking <quote>with respect to whom, on the basis of facts existing at the beginning of such day, there may reasonably be expected to be allowable an exemption under section 151(c)</quote> and inserting <quote>who, on the basis of facts existing at the beginning of such day, is reasonably expected to be a dependent of the employee</quote>.</text> </subparagraph></paragraph></subsection><subsection id="H7FAD6A686A354A79BDE90E2E644BEB58"><enum>(f)</enum><header>Modification of return requirement</header> <paragraph id="HEF9997878DF94C7CBEEDED97ACDC7C9E"><enum>(1)</enum><header>In general</header><text>Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/6012">section 6012(a)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H37F8344D61184B97B4A2E5434BD67910" style="OLC"> <paragraph id="HA343454F2F384F048B640091F2D592F2"><enum>(1)</enum><text>Every individual who has gross income for the taxable year, except that a return shall not be required of—</text> <subparagraph id="H954FFD7703544A58AFFE3967E18A1214"><enum>(A)</enum><text>an individual who is not married (determined by applying section 7703) and who has gross income for the taxable year which does not exceed the standard deduction applicable to such individual for such taxable year under section 63, or</text> </subparagraph><subparagraph id="H4E51E2D795244EEDB49127F3BE0AF934"><enum>(B)</enum><text>an individual entitled to make a joint return if—</text> <clause id="HB3360BFDEF0140EEA2937484F94A2D6A"><enum>(i)</enum><text>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,</text> </clause><clause id="HCDD558BE9F414E318FA2E23B5B42A5FA"><enum>(ii)</enum><text>such individual and such individual’s spouse have the same household as their home at the close of the taxable year,</text> </clause><clause id="H0CD021F419B44F5BABDC67C1502E158B"><enum>(iii)</enum><text>such individual’s spouse does not make a separate return, and</text> </clause><clause id="H616A297BCD9644B1A0E8404EABFE797B"><enum>(iv)</enum><text>neither such individual nor such individual’s spouse is an individual described in section 63(c)(2) who has income (other than earned income) in excess of the amount in effect under section 63(c)(2)(A).</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H0519E93AB2EF4F839DA649754117FAAC"><enum>(2)</enum><header>Bankruptcy estates</header><text>Paragraph (8) of <external-xref legal-doc="usc" parsable-cite="usc/26/6012">section 6012(a)</external-xref> is amended by striking <quote>the sum of the exemption amount plus the basic standard deduction under section 63(c)(2)(D)</quote> and inserting <quote>the standard deduction in effect under section 63(c)(1)(B)</quote>.</text> </paragraph></subsection><subsection id="H07E786C9933A47B0A19AAD709BC363AA"><enum>(g)</enum><header>Conforming amendments</header> <paragraph id="HF48FEB3522D14FD89403E8CBBEA63F47"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/2">Section 2(a)(1)(B)</external-xref> is amended by striking <quote>a dependent</quote> and all that follows through <quote>section 151</quote> and inserting <quote>a dependent who (within the meaning of section 7706, determined without regard to subsections (b)(1), (b)(2) and (d)(1)(B) thereof) is a son, stepson, daughter, or stepdaughter of the taxpayer</quote>.</text> </paragraph><paragraph id="H5E29ABDBB54343E29E2196AAFADFB4DA"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/36B">Section 36B(b)(2)(A)</external-xref> is amended by striking <quote>section 152</quote> and inserting <quote>section 7706</quote>.</text> </paragraph><paragraph id="H4EFCD263839E4F819EF0D6D8FA820762"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/36B">Section 36B(b)(3)(B)</external-xref> is amended by striking <quote>unless a deduction is allowed under section 151 for the taxable year with respect to a dependent</quote> in the flush matter at the end and inserting <quote>unless the taxpayer has a dependent for the taxable year</quote>.</text> </paragraph><paragraph id="H6C037E8F8E514CF083FE792011C9BF37"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/36B">Section 36B(c)(1)(D)</external-xref> is amended by striking <quote>with respect to whom a deduction under section 151 is allowable to another taxpayer</quote> and inserting <quote>who is a dependent of another taxpayer</quote>.</text> </paragraph><paragraph id="H6F9C380AE68D458395C645BEDBEB1768"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/36B">Section 36B(d)(1)</external-xref> is amended by striking <quote>equal to the number of individuals for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year</quote> and inserting <quote>the sum of 1 (2 in the case of a joint return) plus the number of the taxpayer’s dependents for the taxable year</quote>.</text> </paragraph><paragraph id="HFE8718557418455FA25895340158712C"><enum>(6)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/36B">Section 36B(e)(1)</external-xref> is amended by striking <quote>1 or more individuals for whom a taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year (including the taxpayer or his spouse)</quote> and inserting <quote>1 or more of the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer</quote>.</text> </paragraph><paragraph id="H661E5400F2E540CFA48FE974125FB20B"><enum>(7)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/42">Section 42(i)(3)(D)(ii)(I)</external-xref> is amended—</text> <subparagraph id="HC54EEB5521944FF68A96F1D067AE02B2"><enum>(A)</enum><text>by striking <quote>section 152</quote> and inserting <quote>section 7706</quote>, and</text> </subparagraph><subparagraph id="H88E09821016741278FA9E333BB4C5232"><enum>(B)</enum><text>by striking the period at the end and inserting a comma.</text> </subparagraph></paragraph><paragraph id="H01BC0C4373AF4FDFBAD798945FA6FC73"><enum>(8)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/72">Section 72(t)(2)(D)(i)(III)</external-xref> is amended by striking <quote>section 152</quote> and inserting <quote>section 7706</quote>.</text> </paragraph><paragraph id="H6F85694956244152A1FE439D6CDF7E78"><enum>(9)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/72">Section 72(t)(7)(A)(iii)</external-xref> is amended by striking <quote>section 152(f)(1)</quote> and inserting <quote>section 7706(f)(1)</quote>.</text> </paragraph><paragraph id="H8A712A8417F945E2B8ACB5C993CAE69B"><enum>(10)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/105">Section 105(b)</external-xref> is amended—</text> <subparagraph id="H309EEBA1D81F41719C7D9ADD2C437662"><enum>(A)</enum><text>by striking <quote>as defined in section 152</quote> and inserting <quote>as defined in section 7706</quote>,</text> </subparagraph><subparagraph id="H6A9E5ACDA52E4D3BAA04DF51501FDFB9"><enum>(B)</enum><text>by striking <quote>section 152(f)(1)</quote> and inserting <quote>section 7706(f)(1)</quote> and</text> </subparagraph><subparagraph id="H8DD0E75482944A85BBA8942C728A1066"><enum>(C)</enum><text>by striking <quote>section 152(e)</quote> and inserting <quote>section 7706(e)</quote>.</text> </subparagraph></paragraph><paragraph id="H900399E562BE47E186DE8971857B8F56"><enum>(11)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/105">Section 105(c)(1)</external-xref> is amended by striking <quote>section 152</quote> and inserting <quote>section 7706</quote>.</text> </paragraph><paragraph id="H83DDA760D76B407FA726C4A014F6563A"><enum>(12)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/125">Section 125(e)(1)(D)</external-xref> is amended by striking <quote>section 152</quote> and inserting <quote>section 7706</quote>.</text> </paragraph><paragraph id="H96B872CC9134436AAFCBF7451381AA76"><enum>(13)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/132">Section 132(h)(2)(B)</external-xref> is amended—</text> <subparagraph id="H31E0912BE0D343A28B90743D505B4983"><enum>(A)</enum><text>by striking <quote>section 152(f)(1)</quote> and inserting <quote>section 7706(f)(1)</quote>, and</text> </subparagraph><subparagraph id="HCC417BD12C644F2FBD059F67C10720A5"><enum>(B)</enum><text>by striking <quote>section 152(e)</quote> and inserting <quote>section 7706(e)</quote>.</text> </subparagraph></paragraph><paragraph id="H8F3E5BD4E07843908CD2D95C5A3E9D64"><enum>(14)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/139D">Section 139D(c)(5)</external-xref> is amended by striking <quote>section 152</quote> and inserting <quote>section 7706</quote>.</text> </paragraph><paragraph id="HFDAF9D8A49D24F62BBD5923819DB366B"><enum>(15)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/162">Section 162(l)(1)(D)</external-xref> is amended by striking <quote>section 152(f)(1)</quote> and inserting <quote>section 7706(f)(1)</quote>.</text> </paragraph><paragraph id="H23CF2CADC82E4C3AAB012F100DD2C1F0"><enum>(16)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/170">Section 170(g)(1)</external-xref> is amended by striking <quote>section 152</quote> and inserting <quote>section 7706</quote>.</text> </paragraph><paragraph id="HDBB04CC0CF934133878E5DC2802B9EC3"><enum>(17)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/170">Section 170(g)(3)</external-xref> is amended by striking <quote>section 152(d)(2)</quote> and inserting <quote>section 7706(d)(2)</quote>.</text> </paragraph><paragraph id="H7B6CD25FCE494B64A9715E8B40B4E116"><enum>(18)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/172">Section 172(d)</external-xref> is amended by striking paragraph (3).</text> </paragraph><paragraph id="HAA024AE766A142DC98D39A23B61EA45A"><enum>(19)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/220">Section 220(b)(6)</external-xref> is amended by striking <quote>with respect to whom a deduction under section 151 is allowable to</quote> and inserting <quote>who is a dependent of</quote>.</text> </paragraph><paragraph commented="no" id="H9438ECF1BDE64F8E9D5A2D3AE34430BA"><enum>(20)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/220">Section 220(d)(2)(A)</external-xref> is amended by striking <quote>section 152</quote> and inserting <quote>section 7706</quote>.</text> </paragraph><paragraph id="HCD6FADC76BA84A83BCB6113A31916E47"><enum>(21)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/223">Section 223(b)(6)</external-xref> is amended by striking <quote>with respect to whom a deduction under section 151 is allowable to</quote> and inserting <quote>who is a dependent of</quote>.</text> </paragraph><paragraph id="H0AA0D1A5A49A4D7192999BFC1811A13F"><enum>(22)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/223">Section 223(d)(2)(A)</external-xref> is amended by striking <quote>section 152</quote> and inserting <quote>section 7706</quote>.</text> </paragraph><paragraph id="H52AF9EBEAD4549D4BAE320AC2B61F72F"><enum>(23)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/401">Section 401(h)</external-xref> is amended by striking <quote>section 152(f)(1)</quote> in the last sentence and inserting <quote>section 7706(f)(1)</quote>.</text> </paragraph><paragraph id="H358B227F3ECF4B3CB5BBA58F0C4530C7"><enum>(24)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/402">Section 402(l)(4)(D)</external-xref> is amended by striking <quote>section 152</quote> and inserting <quote>section 7706</quote>.</text> </paragraph><paragraph id="H417ECA89A2334D1CB57449F6BD87FAB2"><enum>(25)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/409A">Section 409A(a)(2)(B)(ii)(I)</external-xref> is amended by striking <quote>section 152(a)</quote> and inserting <quote>section 7706(a)</quote>.</text> </paragraph><paragraph id="HABCDE8AD2BB44741B1AD9B7181ECBCF4"><enum>(26)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/501">Section 501(c)(9)</external-xref> is amended by striking <quote>section 152(f)(1)</quote> and inserting <quote>section 7706(f)(1)</quote>.</text> </paragraph><paragraph id="HD3993BFA8AC24F178E74309528FEB8C8"><enum>(27)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/529">Section 529(e)(2)(B)</external-xref> is amended by striking <quote>section 152(d)(2)</quote> and inserting <quote>section 7706(d)(2)</quote>.</text> </paragraph><paragraph id="HDAFED1C19AB9491090466D590020858A"><enum>(28)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/703">Section 703(a)(2)</external-xref> is amended by striking subparagraph (A) and by redesignating subparagraphs (B) through (F) as subparagraphs (A) through (E), respectively.</text> </paragraph><paragraph id="H29D912ED2E77495E83566F58CF9AFFB3"><enum>(29)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/874">Section 874</external-xref> is amended by striking subsection (b) and by redesignating subsection (c) as subsection (b).</text> </paragraph><paragraph id="H236CDA833F8B4A3C9B2FA2ADD3D7D935"><enum>(30)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/891">Section 891</external-xref> is amended by striking <quote>under section 151 and</quote>.</text> </paragraph><paragraph id="HF23EA926B74444438D1F9F3B9B3C7583"><enum>(31)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/904">Section 904(b)</external-xref> is amended by striking paragraph (1).</text> </paragraph><paragraph id="H3E506E7703D846A3855FBE372B6D7AEA"><enum>(32)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/931">Section 931(b)(1)</external-xref> is amended by striking <quote>(other than the deduction under section 151, relating to personal exemptions)</quote>.</text> </paragraph><paragraph id="H7CBC0BBD24304C7692BA34287C0306C5"><enum>(33)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/933">Section 933</external-xref> is amended—</text> <subparagraph id="H261049A2F7C246FC90A9DE3F1302D862"><enum>(A)</enum><text>by striking <quote>(other than the deduction under section 151, relating to personal exemptions)</quote> in paragraph (1), and</text> </subparagraph><subparagraph id="HC9B1D847D6EA4F118D69AE13DFFFDC2F"><enum>(B)</enum><text>by striking <quote>(other than the deduction for personal exemptions under section 151)</quote> in paragraph (2).</text> </subparagraph></paragraph><paragraph id="H8C417CABAEB0407ABD313EFAE2F42F24"><enum>(34)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1212">Section 1212(b)(2)(B)(ii)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HA6E053520DD64FBAB1E8DF3C1E175FF8" style="OLC"> <clause id="H548E3E3EE7A840ABBEF062E925608CF9"><enum>(ii)</enum><text display-inline="yes-display-inline">in the case of an estate or trust, the deduction allowed for such year under section 642(b).</text></clause><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H85E2A19AEAE540AFB7AAF555314E8E9B"><enum>(35)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/1361">Section 1361(c)(1)(C)</external-xref> is amended by striking <quote>section 152(f)(1)(C)</quote> and inserting <quote>section 7706(f)(1)(C)</quote>.</text> </paragraph><paragraph id="H2AB8310AD60E42EFA5CBD331D22A560B"><enum>(36)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/1402">Section 1402(a)</external-xref> is amended by striking paragraph (7).</text> </paragraph><paragraph id="HE44A074DB3E24D39B97BA5875E2AAE4F"><enum>(37)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/2032A">Section 2032A(c)(7)(D)</external-xref> is amended by striking <quote>section 152(f)(2)</quote> and inserting <quote>section 7706(f)(2)</quote>.</text> </paragraph><paragraph id="H849469AE980D441398AF877CFEA974CE"><enum>(38)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3402">Section 3402(m)(1)</external-xref> is amended by striking <quote>other than the deductions referred to in section 151 and</quote>.</text> </paragraph><paragraph id="H1BA128FE89474A25A046B477D7226377"><enum>(39)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3402">Section 3402(r)(2)</external-xref> is amended by striking <quote>the sum of—</quote> and all that follows and inserting <quote>the standard deduction in effect under section 63(c)(1)(B).</quote>.</text> </paragraph><paragraph id="H75AC110BB5A54F3AAB35F78B1CFFDF99"><enum>(40)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/5000A">Section 5000A(b)(3)(A)</external-xref> is amended by striking <quote>section 152</quote> and inserting <quote>section 7706</quote>.</text> </paragraph><paragraph id="H17A5EB909A1C49B08E05B5F3C8AC6F37"><enum>(41)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/5000A">Section 5000A(c)(4)(A)</external-xref> is amended by striking <quote>the number of individuals for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year</quote> and inserting <quote>the sum of 1 (2 in the case of a joint return) plus the number of the taxpayer’s dependents for the taxable year</quote>.</text> </paragraph><paragraph id="H675FEFD816ED46BBBC3C6F47AE107176"><enum>(42)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6013">Section 6013(b)(3)(A)</external-xref> is amended—</text> <subparagraph id="H4F92772C141B41DB9753FB6DA9DC239B"><enum>(A)</enum><text>by striking <quote>had less than the exemption amount of gross income</quote> in clause (ii) and inserting <quote>had no gross income</quote>,</text> </subparagraph><subparagraph id="HE71AE523D4024689854292D4D9C1B5F0"><enum>(B)</enum><text>by striking <quote>had gross income of the exemption amount or more</quote> in clause (iii) and inserting <quote>had any gross income</quote>, and</text> </subparagraph><subparagraph id="HC72B7A2A299C428EBC216E2B2911038F"><enum>(C)</enum><text>by striking the flush language following clause (iii).</text> </subparagraph></paragraph><paragraph id="H3EDF0B2845824490BDA451B899E4DD31"><enum>(43)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6103">Section 6103(l)(21)(A)(iii)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HDA685509664E431B9E4EACBA0FFF7ECF" style="OLC"> <clause id="H55ADA68D06844A518B99501326083EF2"><enum>(iii)</enum><text display-inline="yes-display-inline">the number of the taxpayer’s dependents,</text></clause><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HC0052D95D3BC405E902EDF059AF85E49"><enum>(44)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6213">Section 6213(g)(2)</external-xref> is amended by striking subparagraph (H).</text> </paragraph><paragraph id="H31EAF7B409194D01BCA6D9B15AF4BAB7"><enum>(45)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6334">Section 6334(d)(2)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H26F6C8794AD342C4AAD5549BC4C524E4" style="OLC"> <paragraph id="HA6B9BF131C2F407EBE026BB1FF645C4E"><enum>(2)</enum><header>Exempt amount</header> <subparagraph id="HC8330AE55B5D4C989E34EE825EE39476"><enum>(A)</enum><header>In general</header><text>For purposes of paragraph (1), the term <quote>exempt amount</quote> means an amount equal to—</text> <clause id="HBE78E13AAC8143B186EC702A6A580442"><enum>(i)</enum><text>the standard deduction, divided by</text> </clause><clause id="H79138302EEAF459ABBF942C2B37A1BA5"><enum>(ii)</enum><text>52.</text> </clause></subparagraph><subparagraph id="HEAD5E88F30154B42A519CFF0065FC9CA"><enum>(B)</enum><header>Verified statement</header><text>Unless the taxpayer submits to the Secretary a written and properly verified statement specifying the facts necessary to determine the proper amount under subparagraph (A), subparagraph (A) shall be applied as if the taxpayer were a married individual filing a separate return with no dependents.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H8211DC89010D47D3A68BA744A2E400A7"><enum>(46)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/7702B">Section 7702B(f)(2)(C)(iii)</external-xref> is amended by striking <quote>section 152(d)(2)</quote> and inserting <quote>section 7706(d)(2)</quote>.</text> </paragraph><paragraph id="HA947827C1DAE477485C8DB853E68F964"><enum>(47)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/7703">Section 7703(a)</external-xref> is amended by striking <quote>part V of subchapter B of chapter 1 and</quote>.</text> </paragraph><paragraph id="HD2058A4D8A314FFE97EDCB63A5586B37"><enum>(48)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/7703">Section 7703(b)(1)</external-xref> is amended by striking <quote>section 152(f)(1)</quote> and all that follows and inserting <quote>section 7706(f)(1),</quote>.</text> </paragraph><paragraph id="HB948CACABA0E4BAAA1CE47085D91E5BC"><enum>(49)</enum><text>Section 7706(a), as redesignated by this section, is amended by striking <quote>this subtitle</quote> and inserting <quote>subtitle A</quote>.</text> </paragraph><paragraph id="HD6A17352E55E457CB0F16974A6921D03"><enum>(50)</enum> <subparagraph commented="no" display-inline="yes-display-inline" id="H9A0C01814A104FCD9758AB3DEE28DBA5"><enum>(A)</enum><text>Section 7706(d)(1)(B), as redesignated by this section, is amended by striking <quote>the exemption amount (as defined in section 151(d))</quote> and inserting <quote>$4,150</quote>.</text> </subparagraph><subparagraph id="H7EED98BBA16B492AA96E881C067FEF2B" indent="up1"><enum>(B)</enum><text>Section 7706(d), as redesignated by this section, is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H4CB717196FF241B0A424A81A1B9A8BDE" style="OLC"> <paragraph id="HECCB4D495CAF4EE4B3A48B50235FBE24"><enum>(6)</enum><header>Inflation adjustment</header><text>In the case of any calendar year beginning after 2018, the $4,150 amount in paragraph (1)(B) shall be increased by an amount equal to—</text> <subparagraph id="H5428E4022C1F464896244F8FD07CAEED"><enum>(A)</enum><text>such dollar amount, multiplied by</text> </subparagraph><subparagraph id="H355D5E4361414DE19BE397D76C512692"><enum>(B)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year, determined by substituting <quote>calendar year 2017</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof.</text> </subparagraph><continuation-text continuation-text-level="paragraph">If any increase determined under the preceding sentence is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph><paragraph id="HC311EA5CA3B940C882B747D2179CF5C2"><enum>(51)</enum><text>The table of sections for <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/79">chapter 79</external-xref> is amended by adding at the end the following new item:</text> <quoted-block display-inline="no-display-inline" id="HC948F3472C9846CC9C209A6F92BC98AB" style="OLC"> <toc regeneration="no-regeneration"> <toc-entry level="section">Sec. 7706. Dependent defined.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="HF198D0FD8AC34F17BD2075733B1D3914"><enum>(h)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H835C970B62124631A5F6A953EF1B9A96"><enum>1004.</enum><header>Maximum rate on business income of individuals</header> <subsection id="HA3D0B7B1E2754A06908245E218B5A349"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part I of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by inserting after section 3 the following new section:</text> <quoted-block display-inline="no-display-inline" id="H17A319FC521349549ACB00A6114A9C44" style="OLC"> <section id="H2DA27EABFB4F41D5B6E0D669D323D013"><enum>4.</enum><header>25 percent maximum rate on business income of individuals</header> <subsection id="HFFCD786D70F345248C6E6E80969C30D6"><enum>(a)</enum><header>Reduction in tax to achieve 25 percent maximum rate</header><text>The tax imposed by section 1 shall be reduced by the sum of—</text> <paragraph id="HDCB4A4BCB2DA4CFCA25EE6A947910DD8"><enum>(1)</enum><text>10 percent of the lesser of—</text> <subparagraph id="HA0838122C3184000B9EB450D9AAD29F0"><enum>(A)</enum><text>qualified business income, or</text> </subparagraph><subparagraph id="HD7FAEEE4E0834C07B56ED01065C2823D"><enum>(B)</enum><text>the excess (if any) of—</text> <clause id="HB3F346D91E7445B1AED6D6B4E7F09F6E"><enum>(i)</enum><text>taxable income reduced by net capital gain (as defined in section 1(h)(11)(A)), over</text> </clause><clause id="H0F7CF269B7924889948CB4EE4B7DDA55"><enum>(ii)</enum><text>the maximum dollar amount for the 25-percent rate bracket which applies to the taxpayer under section 1 for the taxable year, and</text> </clause></subparagraph></paragraph><paragraph id="H7C3A217436B74928B5556D1492B2F97B"><enum>(2)</enum><text>4.6 percent of the excess (if any) of—</text> <subparagraph id="H5275770FAD8A441FB5C27EB49471804F"><enum>(A)</enum><text>the lesser of—</text> <clause id="H614EE3F17CB842B2B3C4E3DB3741C649"><enum>(i)</enum><text>qualified business income, or</text> </clause><clause id="H1EF99417289B4D78A1D20E147C86B5FA"><enum>(ii)</enum><text>the excess (if any) determined under paragraph (1)(B), over</text> </clause></subparagraph><subparagraph id="HDCE7E20B71F147ADB2956F46294BA5E5"><enum>(B)</enum><text>the excess of—</text> <clause id="HE26FE04CF5CD4F56A30A4FF5BC2B1026"><enum>(i)</enum><text display-inline="yes-display-inline">the maximum dollar amount for the 35-percent rate bracket which applies to the taxpayer under section 1 for the taxable year, over</text> </clause><clause id="HF2CCBC92EEC049E1B56CB8FF7C77D427"><enum>(ii)</enum><text>the maximum dollar amount for the 25-percent rate bracket which applies to the taxpayer under section 1 for the taxable year.</text> </clause></subparagraph></paragraph></subsection><subsection id="HB97AC1A534564882BBE883500D55D7F0"><enum>(b)</enum><header>Qualified business income</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>qualified business income</quote> means the excess (if any) of—</text> <paragraph id="HE92250A9271D40BDA832AF7F14066FD0"><enum>(1)</enum><text>the sum of—</text> <subparagraph id="H7FE0A9DBB19C4D1DB1CC310658B29B26"><enum>(A)</enum><text>100 percent of any net business income derived from any passive business activity, plus</text> </subparagraph><subparagraph id="HC7FA22C4A0E944048B169F56585DC095"><enum>(B)</enum><text>the capital percentage of any net business income derived from any active business activity, over</text> </subparagraph></paragraph><paragraph id="HE1563BC2C8934E179428D160F9BD30DF"><enum>(2)</enum><text>the sum of—</text> <subparagraph id="HF60BA24DAA844C3FAF47B142E94C38B1"><enum>(A)</enum><text>100 percent of any net business loss derived from any passive business activity,</text> </subparagraph><subparagraph id="H490BD275940A4107B3536F8284E3E929"><enum>(B)</enum><text>except as provided in subsection (e)(3)(A), 30 percent of any net business loss derived from any active business activity, plus</text> </subparagraph><subparagraph id="H6694F36E24A74AAB919999BD4D4154F2"><enum>(C)</enum><text>any carryover business loss determined for the preceding taxable year.</text> </subparagraph></paragraph></subsection><subsection id="H8B2238AC0CDF4F439814F3D70550CB3B"><enum>(c)</enum><header>Determination of net business income or loss</header><text display-inline="yes-display-inline">For purposes of this section—</text> <paragraph id="H475E38FC3D314265914699AA0BEC47DA"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Net business income or loss shall be determined with respect to any business activity by appropriately netting items of income, gain, deduction, and loss with respect to such business activity.</text> </paragraph><paragraph id="H8C8C59A0EDDB4445946DEFEE45DEC26C"><enum>(2)</enum><header>Wages, etc</header><text>Any wages (as defined in section 3401), payments described in subsection (a) or (c) of section 707, or directors’ fees received by the taxpayer which are properly attributable to any business activity shall be taken into account under paragraph (1) as an item of income with respect to such business activity.</text> </paragraph><paragraph id="HE34949E4B785416585FC446D738417DD"><enum>(3)</enum><header>Exception for certain investment-related items</header><text>There shall not be taken into account under paragraph (1)—</text> <subparagraph id="HF15F423ABF694FDCB1A72297A23599DC"><enum>(A)</enum><text>any item of short-term capital gain, short-term capital loss, long-term capital gain, or long-term capital loss,</text> </subparagraph><subparagraph id="H29504527553F4A7EAF23E6778E5876D7"><enum>(B)</enum><text>any dividend, income equivalent to a dividend, or payment in lieu of dividends described in section 954(c)(1)(G),</text> </subparagraph><subparagraph id="H3FA7155A648145E58CFC697C71E20D0E"><enum>(C)</enum><text>any interest income other than interest income which is properly allocable to a trade or business,</text> </subparagraph><subparagraph id="HB8005868169E49F18A269362D95B8BF2"><enum>(D)</enum><text>any item of gain or loss described in subparagraph (C) or (D) of section 954(c)(1) (applied by substituting <quote>business activity</quote> for <quote>controlled foreign corporation</quote>),</text> </subparagraph><subparagraph id="H1C1CFB221C1343168E5C178901F84870"><enum>(E)</enum><text>any item of income, gain, deduction, or loss taken into account under section 954(c)(1)(F) (determined without regard to clause (ii) thereof and other than items attributable to notional principal contracts entered into in transactions qualifying under section 1221(a)(7)),</text> </subparagraph><subparagraph id="HB90FA38CF22D4D7280FDD42222228595"><enum>(F)</enum><text>any amount received from an annuity which is not received in connection with the trade or business of the business activity, and</text> </subparagraph><subparagraph id="H507D8465A6164667A62593CF221C5A00"><enum>(G)</enum><text>any item of deduction or loss properly allocable to an amount described in any of the preceding subparagraphs.</text> </subparagraph></paragraph><paragraph id="HCCCD3F04067C43AFB1F7A97191843C5A"><enum>(4)</enum><header>Application of restrictions applicable to determining taxable income</header><text display-inline="yes-display-inline">Net business income or loss shall be appropriately adjusted so as only to take into account any amount of income, gain, deduction, or loss to the extent such amount affects the determination of taxable income for the taxable year.</text> </paragraph><paragraph id="H7F20753ACE6D4052AED981A9A75FEC37"><enum>(5)</enum><header>Carryover business loss</header><text>For purposes of subsection (b)(2)(C), the carryover business loss determined for any taxable year is the excess (if any) of the sum described in subsection (b)(2) over the sum described in subsection (b)(1) for such taxable year.</text> </paragraph></subsection><subsection id="H87E63F1B9E2C4A8CA5DEADA63BEF000A"><enum>(d)</enum><header>Passive and active business activity</header><text>For purposes of this section—</text> <paragraph id="HDA66AED81A6049649508A93479B47581"><enum>(1)</enum><header>Passive business activity</header><text>The term <quote>passive business activity</quote> means any passive activity as defined in section 469(c) determined without regard to paragraphs (3) and (6)(B) thereof.</text> </paragraph><paragraph id="H3B517BBD4BDC429E9BCB535297AA9CF0"><enum>(2)</enum><header>Active business activity</header><text>The term <quote>active business activity</quote> means any business activity which is not a passive business activity.</text> </paragraph><paragraph id="H65BF36B95D1D4CA2A07ADD5A40F12B2E"><enum>(3)</enum><header>Business activity</header><text>The term <quote>business activity</quote> means any activity (within the meaning of section 469) which involves the conduct of any trade or business.</text> </paragraph></subsection><subsection id="H7BE634A6EF6A4BAE8CC85B14412E5269"><enum>(e)</enum><header>Capital percentage</header><text display-inline="yes-display-inline">For purposes of this section—</text> <paragraph id="H785A0CD8D1894678A1D6746CEB934D9F"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except as otherwise provided in this section, the term <quote>capital percentage</quote> means 30 percent.</text> </paragraph><paragraph id="HFE2B444D8D8746C4950C56666E8E1AEF"><enum>(2)</enum><header>Increased percentage for capital-intensive business activities</header><text display-inline="yes-display-inline">In the case of a taxpayer who elects the application of this paragraph with respect to any active business activity (other than a specified service activity), the capital percentage shall be equal to the applicable percentage (as defined in subsection (f)) for each taxable year with respect to which such election applies. Any election made under this paragraph shall apply to the taxable year for which such election is made and each of the 4 subsequent taxable years. Such election shall be made not later than the due date (including extensions) for the return of tax for the taxable year for which such election is made, and, once made, may not be revoked.</text> </paragraph><paragraph id="HA799666B72694850B47C1C1453771C5E"><enum>(3)</enum><header>Treatment of specified service activities</header> <subparagraph id="H45BA39C8A0574C129886E7DBFF623D9B"><enum>(A)</enum><header>In general</header><text>In the case of any active business activity which is a specified service activity—</text> <clause id="H853D632059654F08BBD0C9719FE1DCFE"><enum>(i)</enum><text>the capital percentage shall be 0 percent, and</text> </clause><clause id="H75D958CACFC04C0D97637B3F8D72A727"><enum>(ii)</enum><text>subsection (b)(2)(B) shall be applied by substituting <quote>0 percent</quote> for <quote>30 percent</quote>.</text> </clause></subparagraph><subparagraph id="HE10B3CF5F30240299AD8368B723F70FE"><enum>(B)</enum><header>Exception for capital-intensive specified service activities</header><text>If—</text> <clause id="H3CE63E327A6E4A069CDD1B084C2D1693"><enum>(i)</enum><text>the taxpayer elects the application of this subparagraph with respect to such activity for any taxable year, and</text> </clause><clause id="HA546EA70261A4047B3629678258C4F41"><enum>(ii)</enum><text display-inline="yes-display-inline">the applicable percentage (as defined in subsection (f)) with respect to such activity for such taxable year is at least 10 percent,</text> </clause><continuation-text continuation-text-level="subparagraph">then subparagraph (A) shall not apply and the capital percentage with respect to such activity shall be equal to such applicable percentage.</continuation-text></subparagraph><subparagraph id="H9C2AE78631EC45E5A7073EEC93B790E3"><enum>(C)</enum><header>Specified service activity</header><text display-inline="yes-display-inline">The term <quote>specified service activity</quote> means any activity involving the performance of services described in section 1202(e)(3)(A), including investing, trading, or dealing in securities (as defined in section 475(c)(2)), partnership interests, or commodities (as defined in section 475(e)(2)).</text> </subparagraph></paragraph><paragraph id="H465360176D0C4509995D2A498F997B5F"><enum>(4)</enum><header>Reduction in capital percentage in certain cases</header><text>The capital percentage (determined after the application of paragraphs (2) and (3)) with respect to any active business activity shall not exceed 1 minus the quotient (not greater than 1) of—</text> <subparagraph id="H3B178C0B440A47518B032DF29E044FBA"><enum>(A)</enum><text>any amounts described in subsection (c)(2) which are taken into account in determining the net business income derived from such activity, divided by</text> </subparagraph><subparagraph id="H04DE1B73F24146088FCA891532AC22D8"><enum>(B)</enum><text>such net business income.</text> </subparagraph></paragraph></subsection><subsection id="HDEA6CB5CE5814BD197E984D190CE5B8E"><enum>(f)</enum><header>Applicable percentage</header><text display-inline="yes-display-inline">For purposes of this section—</text> <paragraph id="HE7E3DACCC36A43959D280FA0895E93AD"><enum>(1)</enum><header>In general</header><text>The term <quote>applicable percentage</quote> means, with respect to any active business activity for any taxable year, the quotient (not greater than 1) of—</text> <subparagraph id="HD2AF8111E0BF42FA945E0B2AC7567987"><enum>(A)</enum><text>the specified return on capital with respect to such activity for such taxable year, divided by</text> </subparagraph><subparagraph id="H0CBF9939B81A4474AB9A4FA50A7EC43E"><enum>(B)</enum><text display-inline="yes-display-inline">the taxpayer’s net business income derived from such activity for such taxable year.</text> </subparagraph></paragraph><paragraph id="H34A0542F68CB4A35BFE5DA26CA4F7511"><enum>(2)</enum><header>Specified return on capital</header><text>The term <quote>specified return on capital</quote> means, with respect to any active business activity referred to in paragraph (1), the excess of—</text> <subparagraph id="HA23698AD31284784BE6CC7E6131B532D"><enum>(A)</enum><text>the product of—</text> <clause id="H8C99540AA65D4FF79B02A942548EB46D"><enum>(i)</enum><text>the deemed rate of return for the taxable year, multiplied by</text> </clause><clause id="H084E8C346E8E45518E313B7435DBB046"><enum>(ii)</enum><text display-inline="yes-display-inline">the asset balance with respect to such activity for such taxable year, over</text> </clause></subparagraph><subparagraph id="H3F60DFB4EE484954A13BD6878D9EC5D6"><enum>(B)</enum><text>an amount equal to the interest which is paid or accrued, and for which a deduction is allowed under this chapter, with respect to such activity for such taxable year.</text> </subparagraph></paragraph><paragraph id="H856052E9D64B48BFB0ED11D0860E490F"><enum>(3)</enum><header>Deemed rate of return</header><text>The term <quote>deemed rate of return</quote> means, with respect to any taxable year, the Federal short-term rate (determined under section 1274(d) for the month in which or with which such taxable year ends) plus 7 percentage points.</text> </paragraph><paragraph commented="no" id="H2B50D57D88DD47ADA82B49C79451B8AE"><enum>(4)</enum><header>Asset balance</header> <subparagraph commented="no" id="HFFA5A8B8346341BBA3C1F4F654E0DD89"><enum>(A)</enum><header>In general</header><text>The asset balance with respect to any active business activity referred to in paragraph (1) for any taxable year equals the taxpayer’s adjusted basis of any property described in section 1221(a)(2) which is used in connection with such activity as of the end of the taxable year (determined without regard to sections 168(k) and 179).</text> </subparagraph><subparagraph commented="no" id="H70C3EC8A821C4194A288D2A2C48242F0"><enum>(B)</enum><header>Application to activities carried on through partnerships and S corporations</header><text>In the case of any active business activity carried on through a partnership or S corporation, the taxpayer shall take into account such taxpayer’s distributive or pro rata share (as the case may be) of the asset balance with respect to such activity as determined with respect to such partnership or S corporation under subparagraph (A) (applied by substituting <quote>the partnership’s or S corporation’s adjusted basis</quote> for <quote>the taxpayer’s adjusted basis</quote>).</text> </subparagraph></paragraph></subsection><subsection id="HCEEA704631A745A282537498EB4A6321"><enum>(g)</enum><header>Reduced rate for small businesses with net active business income</header> <paragraph id="HC5EA4FD5C90B44589ADCED809C3B73EB"><enum>(1)</enum><header>In general</header><text>The tax imposed by section 1 shall be reduced by 3 percent of the excess (if any) of—</text> <subparagraph id="H5AEF6EA47EE54D888230FDC82E285288"><enum>(A)</enum><text>the least of—</text> <clause id="H71D72253D5E749BFA6D9A37FF1AF4AD5"><enum>(i)</enum><text>qualified active business income,</text> </clause><clause id="H88F75ED9E1A448CDB00E9D0DFB637B3E"><enum>(ii)</enum><text>taxable income reduced by net capital gain (as defined in section 1(h)(11)(A)), or</text> </clause><clause id="H8A3BF45EB659430A9524ECF827388F82"><enum>(iii)</enum><text>the 9-percent bracket threshold amount, over</text> </clause></subparagraph><subparagraph id="H6039D174BB8A47FEAE2D8BF715F081B0"><enum>(B)</enum><text display-inline="yes-display-inline">the excess (if any) of taxable income over the applicable threshold amount.</text> </subparagraph></paragraph><paragraph id="H89B8C10ED785413698DC958371174663"><enum>(2)</enum><header>Phase-in of rate reduction</header><text display-inline="yes-display-inline">In the case of any taxable year beginning before January 1, 2022, paragraph (1) shall be applied by substituting for <quote>3 percent</quote>—</text> <subparagraph id="H21510658580C42E1B4A96FEB5F76D0A4"><enum>(A)</enum><text>in the case of any taxable year beginning after December 31, 2017, and before January 1, 2020, <quote>1 percent</quote>, and</text> </subparagraph><subparagraph id="H9BE722E7070942CFB0FD295557689DCC"><enum>(B)</enum><text>in the case of any taxable year beginning after December 31, 2019, and before January 1, 2022, <quote>2 percent</quote>.</text> </subparagraph></paragraph><paragraph id="H3E142C3AC79B48898D4836162D418377"><enum>(3)</enum><header>Qualified active business income</header><text>For purposes of this subsection, the term <quote>qualified active business income</quote> means the excess (if any) of—</text> <subparagraph id="H498431797C2949148348D6B749C1DBF0"><enum>(A)</enum><text>any net business income derived from any active business activity, over</text> </subparagraph><subparagraph id="H4A8D449030414E5C98097AE5AA389306"><enum>(B)</enum><text>any net business loss derived from any active business activity.</text> </subparagraph></paragraph><paragraph id="H6D9DCBFBE2154FEF9A3757C8D9FFA450"><enum>(4)</enum><header>9-percent bracket threshold amount</header><text>For purposes of this subsection, the term <quote>9-percent bracket threshold amount</quote> means—</text> <subparagraph id="HF2865BAB86B846EF92875AC59137E916"><enum>(A)</enum><text>in the case of a joint return or surviving spouse, $75,000,</text> </subparagraph><subparagraph id="H649836080F9340D38077B876C9388330"><enum>(B)</enum><text>in the case of an individual who is the head of a household (as defined in section 2(b)), <fraction>3/4</fraction> of the amount in effect for the taxable year under subparagraph (A), and</text> </subparagraph><subparagraph id="HFA4FD23BC71B4EB68866D559CC727597"><enum>(C)</enum><text>in the case of any other individual, <fraction>1/2</fraction> of the amount in effect for the taxable year under subparagraph (A).</text> </subparagraph></paragraph><paragraph id="H9CD2320EEEF24B97A3836047BAD8E0A9"><enum>(5)</enum><header>Applicable threshold amount</header><text>For purposes of this subsection, the term <quote>applicable threshold amount</quote> means—</text> <subparagraph id="H8D614EBE76B2492D9AF437A5E50AEE91"><enum>(A)</enum><text>in the case of a joint return or surviving spouse, $150,000,</text> </subparagraph><subparagraph id="H6EB4153AC3DE4E7893C8BAAB2051C996"><enum>(B)</enum><text>in the case of an individual who is the head of a household (as defined in section 2(b)), <fraction>3/4</fraction> of the amount in effect for the taxable year under subparagraph (A), and</text> </subparagraph><subparagraph id="H7733222335BD4F6CA7018F162D752214"><enum>(C)</enum><text>in the case of any other individual, <fraction>1/2</fraction> of the amount in effect for the taxable year under subparagraph (A).</text> </subparagraph></paragraph><paragraph id="H90D259968C8140098F37642C1136753E"><enum>(6)</enum><header>Estates and trusts</header><text>Paragraph (1) shall not apply to any estate or trust.</text> </paragraph><paragraph commented="no" id="H4AC8821D48B94B34A4F37E672618BE41"><enum>(7)</enum><header>Inflation adjustment</header><text>In the case of any taxable year beginning after 2018, the dollar amounts in paragraphs (4)(A) and (5)(A) shall each be increased by an amount equal to—</text> <subparagraph commented="no" id="H54F15900F4024A3F95A1808230B4805B"><enum>(A)</enum><text>such dollar amount, multiplied by</text> </subparagraph><subparagraph commented="no" id="H93DEF398B4A844ED9F61B93E1073225B"><enum>(B)</enum><text>the cost-of-living adjustment determined under subsection (c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2017</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof.</text> </subparagraph><continuation-text continuation-text-level="paragraph">If any increase determined under the preceding sentence is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.</continuation-text></paragraph></subsection><subsection id="H79F483255C64496E87F2738532DB6E1E"><enum>(h)</enum><header>Regulations</header><text>The Secretary may issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance—</text> <paragraph id="HFF2312CEF4DD40FBAF051BC588FD41A2"><enum>(1)</enum><text display-inline="yes-display-inline">which ensures that no amount is taken into account under subsection (f)(4) with respect to more than one activity, and</text> </paragraph><paragraph id="HAB9A9DF5C40240AFB4B631D233CCCAB4"><enum>(2)</enum><text display-inline="yes-display-inline">which treats all specified service activities of the taxpayer as a single business activity for purposes of this section to the extent that such activities would be treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414.</text> </paragraph></subsection><subsection id="H7B99C46047194A4EBD1F12251BDE5DF4"><enum>(i)</enum><header>References</header><text>Any reference in this title to section 1 shall be treated as including a reference to this section unless the context of such reference clearly indicates otherwise.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H638F72EE4D8E4C8AAD03F0429D8C9E56"><enum>(b)</enum><header>25 percent rate for certain dividends of real estate investment trusts and cooperatives</header><text>Section 1(h), as amended by the preceding provisions of this Act, is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HE3CCE4555F8E47DA9B52BCBE874C3F96" style="OLC"> <paragraph id="H35D5BEF1EE294EF19012B08C25492C15"><enum>(13)</enum><header>25 percent rate for certain dividends of real estate investment trusts and cooperatives</header> <subparagraph id="H18FF187E84C94EEE9AC2C4E120107CF7"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this subsection, net capital gain (as defined in paragraph (11)) and unrecaptured section 1250 gain (as defined in paragraph (6)) shall each be increased by specified dividend income.</text> </subparagraph><subparagraph id="HF0C5A58B91824AAD9815B7F91E901A40"><enum>(B)</enum><header>Specified dividend income</header><text>For purposes of this paragraph, the term <quote>specified dividend income</quote> means—</text> <clause id="HE3A5E7E9406542E6836814B0A68CA049"><enum>(i)</enum><text>in the case of any dividend received from a real estate investment trust, the portion of such dividend which is neither—</text> <subclause id="HB3A9134D34974A24859CEAA61686010F"><enum>(I)</enum><text>a capital gain dividend (as defined in section 852(b)(3)), nor</text> </subclause><subclause id="H5230A666C4B741299A95BDF8B9967FD6"><enum>(II)</enum><text>taken into account in determining qualified dividend income (as defined in paragraph (11)), and</text> </subclause></clause><clause id="H7ED5633827854BC9BC4611EA5C9C2F11"><enum>(ii)</enum><text display-inline="yes-display-inline">any dividend which is includible in gross income and which is received from an organization or corporation described in section 501(c)(12) or 1381(a).</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HF5BF9C94857246839DC931E5A97D2D99"><enum>(c)</enum><header>Clerical amendment</header><text display-inline="yes-display-inline">The table of sections for part I of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by inserting after the item relating to section 3 the following new item:</text> <quoted-block display-inline="no-display-inline" id="H4764A5DD80F74BF2A761FDF170E1B0DD" style="OLC"> <toc container-level="quoted-block-container" idref="H17A319FC521349549ACB00A6114A9C44" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration"> <toc-entry idref="H2DA27EABFB4F41D5B6E0D669D323D013" level="section">Sec. 4. 25 percent maximum rate on business income of individuals.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H16B01B74ADF84D3691526486C0FFEF15"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection><subsection id="HB242E309AE73471492539380D066EAB9"><enum>(e)</enum><header>Transition rule</header><text>In the case of any taxable year which includes December 31, 2017, the amendment made by subsection (a) shall apply with respect to such taxable year adjusted—</text> <paragraph id="H8343F46010A547A6A97E4E3E315A4DBD"><enum>(1)</enum><text>so as to apply with respect to the rates of tax in effect under <external-xref legal-doc="usc" parsable-cite="usc/26/1">section 1</external-xref> of the Internal Revenue Code of 1986 with respect to such taxable year (and so as to achieve a 25 percent effective rate of tax on the business income (determined without regard to paragraph (2)) in the same manner as such amendment applies to taxable years beginning after such date with respect to the rates of tax in effect for such years), and</text> </paragraph><paragraph id="H04340FB4F54A4234A4FCACCEE844BEFB"><enum>(2)</enum><text display-inline="yes-display-inline">by reducing the amount of the reduction in tax (as otherwise determined under paragraph (1)) by the amount which bears the same proportion to the amount of such reduction as the number of days in the taxable year which are before January 1, 2018, bears to the number of days in the entire taxable year.</text> </paragraph></subsection></section><section id="H6E7B5222ED24478296097CFF8FCDB1DD"><enum>1005.</enum><header>Conforming amendments related to simplification of individual income tax rates</header> <subsection id="HE40C10EEF24F4B0DA2084BB62A15509B"><enum>(a)</enum><header>Amendments related to modification of inflation adjustment</header> <paragraph id="H2BA9E01A93A8467F938F0A85CA8C6C4A"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/32">Section 32(b)(2)(B)(ii)(II)</external-xref> is amended by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins determined by substituting <quote>calendar year 2008</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins determined by substituting <quote>calendar year 2008</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H67ECA7FCF229487ABD70095EE232BEDF"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/32">Section 32(j)(1)(B)</external-xref> is amended—</text> <subparagraph id="H1C1E89D652FE43038A798AD816C33D8B"><enum>(A)</enum><text>in the matter preceding clause (i), by striking <quote>section 1(f)(3)</quote> and inserting <quote>section 1(c)(2)(A)</quote>,</text> </subparagraph><subparagraph id="HE5FA5AEED8834976AE50271659704D62"><enum>(B)</enum><text>in clause (i), by striking <quote>for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>, and</text> </subparagraph><subparagraph id="H77368CE8ABE94A30AAD99D7A935367BC"><enum>(C)</enum><text>in clause (ii), by striking <quote>for <quote>calendar year 1992</quote> in subparagraph (B) of such section 1</quote> and inserting <quote>for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </subparagraph></paragraph><paragraph commented="no" id="H7C21C5D5FCDD45269E1AB7CFC17A44C1"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/36B">Section 36B(b)(3)(A)(ii)(II)</external-xref> is amended by striking <quote>consumer price index</quote> and inserting <quote>C-CPI-U (as defined in section 1(c))</quote>.</text> </paragraph><paragraph id="HD6B5BBF691B946EEA609F9E94A970BDA"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/41">Section 41(e)(5)(C)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HB19DE1216AAF4653A2BD992FF52B8785" style="OLC"> <subparagraph id="HF29B999935814A349D5F724560DA7081"><enum>(C)</enum><header>Cost-of-living adjustment defined</header> <clause id="HDAB2A2E7627E4DC581D0639E9E8C96D8"><enum>(i)</enum><header>In general</header><text display-inline="yes-display-inline">The cost-of-living adjustment for any calendar year is the cost-of-living adjustment for such calendar year determined under section 1(c)(2)(A), by substituting <quote>calendar year 1987</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof.</text> </clause><clause id="H57AED412D6E9429FA0D2E3F42A34CF8C"><enum>(ii)</enum><header>Special rule where base period ends in a calendar year other than 1983 or 1984</header><text>If the base period of any taxpayer does not end in 1983 or 1984, clause (i) shall be applied by substituting the calendar year in which such base period ends for 1987.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HABD9E1E7F1DF4E8E9102E28261BF495A"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/42">Section 42(e)(3)(D)(ii)</external-xref> is amended by striking <quote>section 1(f)(3) for such calendar year by substituting <quote>calendar year 2008</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof </quote> and inserting <quote>section 1(c)(2)(A) for such calendar year by substituting <quote>calendar year 2008</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H9FB1667E793143C982534390B6989F7D"><enum>(6)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/42">Section 42(h)(3)(H)(i)(II)</external-xref> is amended by striking <quote>section 1(f)(3) for such calendar year by substituting <quote>calendar year 2001</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof </quote> and inserting <quote>section 1(c)(2)(A) for such calendar year by substituting <quote>calendar year 2001</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H87847764499E4994B0146D8EBBAAE24C"><enum>(7)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/45R">Section 45R(d)(3)(B)(ii)</external-xref> is amended by striking <quote>section 1(f)(3) for the calendar year, determined by substituting <quote>calendar year 2012</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote><quote>section 1(c)(2)(A) for such calendar year, determined by substituting <quote>calendar year 2012</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote></quote>.</text> </paragraph><paragraph id="HA6B818A4A59245999D24067EB46EE714"><enum>(8)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/125">Section 125(i)(2)</external-xref> is amended—</text> <subparagraph id="H11A1EED1355945CB8EFB2893DAFDC31D"><enum>(A)</enum><text>by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins by substituting <quote>calendar year 2012</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> in subparagraph (B) and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins</quote>, and</text> </subparagraph><subparagraph id="H01C0F378860E4276A66A65D6BA8DBD52"><enum>(B)</enum><text>by striking <quote>$50</quote> both places it appears in the last sentence and inserting <quote>$100</quote>.</text> </subparagraph></paragraph><paragraph id="HCCF3D70F242A4C0DAE652EE1947BD975"><enum>(9)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/162">Section 162(o)(3)</external-xref> is amended by inserting <quote>as in effect before enactment of the <short-title>Tax Cuts and Jobs Act</short-title></quote> after <quote>section 1(f)(5)</quote>.</text> </paragraph><paragraph id="HF7ABC59E41364665A60DBEAD905F7DD4"><enum>(10)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/220">Section 220(g)(2)</external-xref> is amended by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins by substituting <quote>calendar year 1997</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 1997</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H9A278320B8A14739BC368071115EBF73"><enum>(11)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/223">Section 223(g)(1)</external-xref> is amended by striking all that follows subparagraph (A) and inserting the following:</text> <quoted-block display-inline="no-display-inline" id="H66BBEB85911942B4BB34EB1372AEB894" style="OLC"> <subparagraph id="H5AC4FDFCFBF54C8DBFC45A9DFBF021AA"><enum>(B)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined—</text> <clause id="HCE620AB5072C4C0F94750E51BEA2AD63"><enum>(i)</enum><text>by substituting for <quote>calendar year 2016</quote> in clause (ii) thereof—</text> <subclause id="H236D91881F264039B8836F4F403B5C8F"><enum>(I)</enum><text>except as provided in clause (ii), <quote>calendar year 1997</quote>, and</text> </subclause><subclause id="HAD8D0C3F3B2E40B090932D98D10AF9A5"><enum>(II)</enum><text>in the case of each dollar amount in subsection (c)(2)(A), <quote>calendar year 2003</quote>, and</text> </subclause></clause><clause id="HF57695A7B083433F886A15062B402422"><enum>(ii)</enum><text>by substituting <quote>March 31</quote> for <quote>August 31</quote> in paragraphs (5)(B) and (6)(B) of section 1(c).</text> </clause><continuation-text continuation-text-level="subparagraph">The Secretary shall publish the dollar amounts as adjusted under this subsection for taxable years beginning in any calendar year no later than June 1 of the preceding calendar year.</continuation-text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HF814C430EB5247FD8FC44C249C656A44"><enum>(12)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/430">Section 430(c)(7)(D)(vii)(II)</external-xref> is amended by striking <quote>section 1(f)(3) for the calendar year, determined by substituting <quote>calendar year 2009</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year, determined by substituting <quote>calendar year 2009</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H29B0ECCB53CA4EECAF52EC236D44F42C"><enum>(13)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/512">Section 512(d)(2)(B)</external-xref> is amended by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins, by substituting <quote>calendar year 1994</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote>and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 1994</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H9CBBEC58B01C4349B0A76AC02858958C"><enum>(14)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/513">Section 513(h)(2)(C)(ii)</external-xref> is amended by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins by substituting <quote>calendar year 1987</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 1987</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="HCF1012094CE64BA892FB5DF7DAD5CFE7"><enum>(15)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/831">Section 831(b)(2)(D)(ii)</external-xref> is amended by striking <quote>section 1(f)(3) for such calendar year by substituting <quote>calendar year 2013</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for such calendar year by substituting <quote>calendar year 2013</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="HC3A49F04677A4BCB8A07B6B31E2AB323"><enum>(16)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/877A">Section 877A(a)(3)(B)(i)(II)</external-xref> is amended by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins, by substituting <quote>calendar year 2007</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2007</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H2BA2CF335CAD41FF81236EE4FF27F4CE"><enum>(17)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/911">Section 911(b)(2)(D)(ii)(II)</external-xref> is amended by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting <quote>2004</quote> for <quote>1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2004</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H09F88059DFBB4D9EB0E232CF39980A74"><enum>(18)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1274A">Section 1274A(d)(2)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H66190FB9BD094D90B5E546DFB858D3F4" style="OLC"> <paragraph id="H57DB3605EC7C42E89FFD476E92FC04B7"><enum>(2)</enum><header>Inflation adjustment</header> <subparagraph id="H95A1576B42BB44A0BFB5973669E4B16D"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any debt instrument arising out of a sale or exchange during any calendar year after 2018, each adjusted dollar amount shall be increased by an amount equal to—</text> <clause id="H04893D6039DF4F18BEF5AEF891C669D9"><enum>(i)</enum><text>such adjusted dollar amount, multiplied by</text> </clause><clause id="H4A582FAB2A4E46F68DACBAAA424992F8"><enum>(ii)</enum><text display-inline="yes-display-inline">the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year, determined by substituting <quote>calendar year 2017</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof.</text> </clause></subparagraph><subparagraph id="H176D7332217B4444AF6913EE5300C5CB"><enum>(B)</enum><header>Adjusted dollar amounts</header><text>For purposes of this paragraph, the term <quote>adjusted dollar amount</quote> means the dollar amounts in subsections (b) and (c), in each case as in effect for calendar year 2018.</text> </subparagraph><subparagraph id="HBF720344C54F4461B4D616C2EF0CB373"><enum>(C)</enum><header>Rounding</header><text>Any increase under subparagraph (A) shall be rounded to the nearest multiple of $100.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H5142D58426B7407FA8EB9F222766F4F1"><enum>(19)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/2010">Section 2010(c)(3)(B)(ii)</external-xref> is amended by striking <quote>section 1(f)(3) for such calendar year by substituting <quote>calendar year 2010</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for such calendar year, determined by substituting <quote>calendar year 2010</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="HA663C2BF4255425E88074BC5C6E414A7"><enum>(20)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/2032A">Section 2032A(a)(3)(B)</external-xref> is amended by striking <quote>section 1(f)(3) for such calendar year by substituting <quote>calendar year 1997</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for such calendar year, determined by substituting <quote>calendar year 1997</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H49235C5015F64E1BB73CD0558D1E5A24"><enum>(21)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/2503">Section 2503(b)(2)(B)</external-xref> is amended by striking <quote>section 1(f)(3) for such calendar year by substituting <quote>calendar year 1997</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year, determined by substituting <quote>calendar year 1997</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H0E219597A5D7491094C30880039A5206"><enum>(22)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/4161">Section 4161(b)(2)(C)(i)(II)</external-xref> is amended by striking <quote>section 1(f)(3) for such calendar year, determined by substituting <quote>2004</quote> for <quote>1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for such calendar year, determined by substituting <quote>calendar year 2004</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="HAF8DB90E494747E5AE36F3CDDFEAFD24"><enum>(23)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/4261">Section 4261(e)(4)(A)(ii)</external-xref> is amended by striking <quote>section 1(f)(3) for such calendar year by substituting the year before the last nonindexed year for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for such calendar year, determined by substituting the year before the last nonindexed year for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph commented="no" id="H99FEDA93A2CB479DB005DBB902825838"><enum>(24)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/4980I">Section 4980I(b)(3)(C)(v)(II)</external-xref> is amended—</text> <subparagraph commented="no" id="H1D2F4553092E434A9F2302C0AC9A0BD6"><enum>(A)</enum><text>by striking <quote>section 1(f)(3)</quote> and inserting <quote>section 1(c)(2)(A)</quote>,</text> </subparagraph><subparagraph id="H1011EA7ADEA4444AABCD8CEDB9BDD7D3"><enum>(B)</enum><text>by striking <quote>subparagraph (B)</quote> and inserting <quote>clause (ii)</quote>, and</text> </subparagraph><subparagraph commented="no" id="H785F32A37AD14F978D826CB0196BFD14"><enum>(C)</enum><text>by striking <quote>1992</quote> and inserting <quote>2016</quote>.</text> </subparagraph></paragraph><paragraph id="HEBD2AEF0E77049E8ADD22488FD22DE02"><enum>(25)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/5000A">Section 5000A(c)(3)(D)(ii)</external-xref> is amended—</text> <subparagraph id="H41C854D8531943FA9C7CF437C19AD92B"><enum>(A)</enum><text>by striking <quote>section 1(f)(3)</quote> and inserting <quote>section 1(c)(2)(A)</quote>,</text> </subparagraph><subparagraph id="H3792B27B4C444CFB8EDA2F45978BE40B"><enum>(B)</enum><text>by striking <quote>subparagraph (B)</quote> and inserting <quote>clause (ii)</quote>, and</text> </subparagraph><subparagraph id="HDFB5CF459DE74130A10918900F4167F5"><enum>(C)</enum><text>by striking <quote>1992</quote> and inserting <quote>2016</quote>.</text> </subparagraph></paragraph><paragraph id="H1A4628A3098848169530FE5FEAD25EEB"><enum>(26)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/6039F">Section 6039F(d)</external-xref> is amended by striking <quote>section 1(f)(3), except that subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A), except that clause (ii) thereof </quote>.</text> </paragraph><paragraph id="HCE9308CF14EC4165AB4E65F9FB45D698"><enum>(27)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/6323">Section 6323(i)(4)(B)</external-xref> is amended by striking <quote>section 1(f)(3) for the calendar year, determined by substituting <quote>calendar year 1996</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year, determined by substituting <quote>calendar year 1996</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H62CD734365514BAA88086B66EBCF90E1"><enum>(28)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/6334">Section 6334(g)(1)(B)</external-xref> is amended by striking <quote>section 1(f)(3) for such calendar year, by substituting <quote>calendar year 1998</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for such calendar year, determined by substituting <quote>calendar year 1999</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H2F34522D83C24CBB932DC05A3568B669"><enum>(29)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/6601">Section 6601(j)(3)(B)</external-xref> is amended by striking <quote>section 1(f)(3) for such calendar year by substituting <quote>calendar year 1997</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for such calendar year by substituting <quote>calendar year 1997</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H91FD3E64B95C4EF2A04853FC84819FF5"><enum>(30)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6651">Section 6651(i)(1)</external-xref> is amended by striking <quote>section 1(f)(3) determined by substituting <quote>calendar year 2013</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) determined by substituting <quote>calendar year 2013</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H56519314667D4EB1AF69D9B4C357F27C"><enum>(31)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6721">Section 6721(f)(1)</external-xref> is amended—</text> <subparagraph id="HF1470B510ED14A388E67987DF7C817B5"><enum>(A)</enum><text>by striking <quote>section 1(f)(3)</quote> and inserting <quote>section 1(c)(2)(A)</quote>,</text> </subparagraph><subparagraph id="H51335A759E2A41BF8E5C389D7B2B42B0"><enum>(B)</enum><text>by striking <quote>subparagraph (B)</quote> and inserting <quote>clause (ii)</quote>, and</text> </subparagraph><subparagraph id="HF46723CB736245A5A7F670D7C66CA71D"><enum>(C)</enum><text>by striking <quote>1992</quote> and inserting <quote>2016</quote>.</text> </subparagraph></paragraph><paragraph id="HB997DA9A67B246DEAE62060993496B58"><enum>(32)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6722">Section 6722(f)(1)</external-xref> is amended—</text> <subparagraph id="HDF5E71116DBC464E8FB5D5BECE7E298D"><enum>(A)</enum><text>by striking <quote>section 1(f)(3)</quote> and inserting <quote>section 1(c)(2)(A)</quote>,</text> </subparagraph><subparagraph id="H5C69BD2D3E484255B89D71A9C7B5E225"><enum>(B)</enum><text>by striking <quote>subparagraph (B)</quote> and inserting <quote>clause (ii)</quote>, and</text> </subparagraph><subparagraph id="H12E62B0183ED4B749A35F18E0E7C3973"><enum>(C)</enum><text>by striking <quote>1992</quote> and inserting <quote>2016</quote>.</text> </subparagraph></paragraph><paragraph id="HFD23A25A42A744E6AC711AEC98133BEB"><enum>(33)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6652">Section 6652(c)(7)(A)</external-xref> is amended by striking <quote>section 1(f)(3) determined by substituting <quote>calendar year 2013</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) determined by substituting <quote>calendar year 2013</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof </quote>.</text> </paragraph><paragraph id="H2DEFBCD7CC81471D987BD8D4AB7C480F"><enum>(34)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6695">Section 6695(h)(1)</external-xref> is amended by striking <quote>section 1(f)(3) determined by substituting <quote>calendar year 2013</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) determined by substituting <quote>calendar year 2013</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="HE57D95257BF744D5AC89761E94A73FA9"><enum>(35)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6698">Section 6698(e)(1)</external-xref> is amended by striking <quote>section 1(f)(3) determined by substituting <quote>calendar year 2013</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) determined by substituting <quote>calendar year 2013</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="HA3C84F361D9A475B8132CC9AC825A113"><enum>(36)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/6699">Section 6699(e)(1)</external-xref> is amended by striking <quote>section 1(f)(3) determined by substituting <quote>calendar year 2013</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) determined by substituting <quote>calendar year 2013</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="HD9C6CD34F09C479F9F3F014B29D713AA"><enum>(37)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/7345">Section 7345(f)(2)</external-xref> is amended by striking <quote>section 1(f)(3) for the calendar year, determined by substituting <quote>calendar year 2015</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year, determined by substituting <quote>calendar year 2015</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H9119405393C2490089E7824A30B7A5C1"><enum>(38)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/7430">Section 7430(c)(1)</external-xref> is amended by striking <quote>section 1(f)(3) for such calendar year, by substituting <quote>calendar year 1995</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> in the flush text at the end and inserting <quote>section 1(c)(2)(A) for such calendar year, determined by substituting <quote>calendar year 1995</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="H000B9C47E9D049ACBE1263CFD595300D"><enum>(39)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/7872">Section 7872(g)(5)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HA86E9A35480C4EB0960BE6FA9A9A5F6F" style="OLC"> <paragraph id="H911C4AC54CF94F7384A226786FF4F05C"><enum>(5)</enum><header>Inflation adjustment</header> <subparagraph id="H3BFE5E63D1E94C22B3C6DD3673C67C34"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any loan made during any calendar year after 2018 to which paragraph (1) applies, the adjusted dollar amount shall be increased by an amount equal to—</text> <clause id="HC947E8B142AB494BA51792113DA9E7B3"><enum>(i)</enum><text>such adjusted dollar amount, multiplied by</text> </clause><clause id="HEC711B600F9944AF97CE5DCE15C7C180"><enum>(ii)</enum><text display-inline="yes-display-inline">the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year, determined by substituting <quote>calendar year 2017</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof.</text> </clause></subparagraph><subparagraph id="H6284227CA06A46AAA61E03E76C180E5E"><enum>(B)</enum><header>Adjusted dollar amount</header><text>For purposes of this paragraph, the term <quote>adjusted dollar amount</quote> means the dollar amount in paragraph (2) as in effect for calendar year 2018.</text> </subparagraph><subparagraph id="HF80537A1F8F54AB1B42FEC4D5D8564E3"><enum>(C)</enum><header>Rounding</header><text>Any increase under subparagraph (A) shall be rounded to the nearest multiple of $100.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H8766226C3627466599EE7D7A60414DD8"><enum>(40)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/219">Section 219(b)(5)(C)(i)(II)</external-xref> is amended by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2007</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2007</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph><paragraph id="HF28ABD61934B47B0806CF3072D6D156E"><enum>(41)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/219">Section 219(g)(8)(B)</external-xref> is amended by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2005</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2005</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof</quote>.</text> </paragraph></subsection><subsection id="HE8E5FE45390F466FA755FDD3DC6DBB34"><enum>(b)</enum><header>Other conforming amendments</header> <paragraph commented="no" id="H6D94C56412894DBEA36D9B6AB9204342"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/36B">Section 36B(b)(3)(B)(ii)(I)(aa)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H4CF05504CD2D40F7851C36A0E12B7F9E" style="OLC"> <item id="HFC7D1B5A1CD540699F375C1B3AF7C6DC"><enum>(aa)</enum><text display-inline="yes-display-inline">who is described in section 1(b)(1)(B) and who does not have any dependents for the taxable year,</text></item><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HF93797A571B649E3A753511FCA8158E0"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/486B">Section 486B(b)(1)</external-xref> is amended—</text> <subparagraph id="H3A6B44C37F4C4029936B1D219D47069C"><enum>(A)</enum><text>by striking <quote>maximum rate in effect</quote> and inserting <quote>highest rate specified</quote>, and</text> </subparagraph><subparagraph id="H016146953E034A4E9FA6815D3896C2BB"><enum>(B)</enum><text>by striking <quote>section 1(e)</quote> and inserting <quote>section 1</quote>.</text> </subparagraph></paragraph><paragraph id="HA81C4752A8C949259487565A379361FD"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/511">Section 511(b)(1)</external-xref> is amended by striking <quote>section 1(e)</quote> and inserting <quote>section 1</quote>.</text> </paragraph><paragraph id="H2AE812CD75884159B550CC6FB55AF4EE"><enum>(4)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/641">Section 641(a)</external-xref> is amended by striking <quote>section 1(e) shall apply to the taxable income</quote> and inserting <quote>section 1 shall apply to the taxable income</quote>.</text> </paragraph><paragraph commented="no" id="HAAC83C5BA4074B12A2C94079842A2A97"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/641">Section 641(c)(2)(A)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HD460CDD99E2A4C8EA7E8E3F49CBFCB54" style="OLC"> <subparagraph commented="no" id="H416D96AEB39A4D1ABB23124D40695753"><enum>(A)</enum><text display-inline="yes-display-inline">Except to the extent provided in section 1(h), the rate of tax shall be treated as being the highest rate of tax set forth in section 1(a).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H0819F954E67D44729950193AA56924D7"><enum>(6)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/646">Section 646(b)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H9C1B56A2826545BAAAC4DB77B5083BF2" style="OLC"> <subsection id="HC11A84884E104F7DA6977493CF688244"><enum>(b)</enum><header>Taxation of income of trust</header><text display-inline="yes-display-inline">Except as provided in subsection (f)(1)(B)(ii), there is hereby imposed on the taxable income of an electing Settlement Trust a tax at the rate specified in section 1(a)(1). Such tax shall be in lieu of the income tax otherwise imposed by this chapter on such income.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H926D5026ED174E3A9ACF280FB7CE7B1D"><enum>(7)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/685">Section 685(c)</external-xref> is amended by striking <quote>Section 1(e)</quote> and inserting <quote>Section 1</quote>.</text> </paragraph><paragraph id="H1C9F9D9602FB43049A549F2FF195722F"><enum>(8)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/904">Section 904(b)(3)(E)(ii)(I)</external-xref> is amended by striking <quote>set forth in subsection (a), (b), (c), (d), or (e) of section 1 (whichever applies)</quote> and inserting <quote>the highest rate of tax specified in section 1</quote>.</text> </paragraph><paragraph id="H7044BA6E87E645FD85AC4B1855451125"><enum>(9)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1398">Section 1398(c)(2)</external-xref> is amended by striking <quote>subsection (d) of</quote>.</text> </paragraph><paragraph id="HE490C72B6BBC407DA8C595F2F874F109"><enum>(10)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3402">Section 3402(p)(1)(B)</external-xref> is amended by striking <quote>any percentage applicable to any of the 3 lowest income brackets in the table under section 1(c),</quote> and inserting <quote>12 percent, 25 percent,</quote>.</text> </paragraph><paragraph id="H6672FDF594854738A6E5DA8BE8656603"><enum>(11)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3402">Section 3402(q)(1)</external-xref> is amended by striking <quote>the product of third lowest rate of tax applicable under section 1(c) and</quote> and inserting <quote>25 percent of</quote>.</text> </paragraph><paragraph id="H946FF27F046C4880A8885EFC3B70C5FB"><enum>(12)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3402">Section 3402(r)(3)</external-xref> is amended by striking <quote>the amount of tax which would be imposed by section 1(c) (determined without regard to any rate of tax in excess of the fourth lowest rate of tax applicable under section 1(c)) on an amount of taxable income equal to</quote> and inserting <quote>an amount equal to the product of 25 percent multiplied by</quote>.</text> </paragraph><paragraph id="H40B2BD62DD6A438BBFC11B0603897EF0"><enum>(13)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3406">Section 3406(a)(1)</external-xref> is amended by striking <quote>the product of the fourth lowest rate of tax applicable under section 1(c) and</quote> and inserting <quote>25 percent of </quote>.</text> </paragraph><paragraph id="H0A293699712E4A9AAF0AA2B6F72CA1CB"><enum>(14)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6103">Section 6103(e)(1)(A)(iii)</external-xref> is amended by inserting <quote>(as in effect on the day before the date of the enactment of the <short-title>Tax Cuts and Jobs Act</short-title>)</quote> after <quote>section 1(g)</quote>.</text> </paragraph></subsection><subsection id="HDC9667BBB92243DE9FE762F591CA6AF9"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section></subtitle><subtitle id="H154BF1F0193941759CB8231570941058"><enum>B</enum><header>Simplification and reform of family and individual tax credits</header> <section id="H2297144309CA4ECBAC19B9628F19ED52"><enum>1101.</enum><header>Enhancement of child tax credit and new family tax credit</header> <subsection display-inline="no-display-inline" id="H019E1197847546E38003670B6F5E364D"><enum>(a)</enum><header>Increase in credit amount and addition of other dependents</header> <paragraph id="HCCF0E3C03DC048B4A3BC4EB391D9E5C5" indent="up1"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/24">Section 24(a)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H6A57AA195CFD497BB14FB3E4C2F46751" style="OLC"> <subsection id="H61753EDE79E04D8DA0C8490B3D23E9E6"><enum>(a)</enum><header>Allowance of credit</header><text display-inline="yes-display-inline">There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of—</text> <paragraph id="H86F862AE60A347B7935F5B54B465BFD9"><enum>(1)</enum><text>with respect to each qualifying child of the taxpayer, $1,600, and</text> </paragraph><paragraph id="HD747A16B29E141EAA1F24A7CAA38E711"><enum>(2)</enum><text>for taxable years beginning before January 1, 2023, with respect to the taxpayer (each spouse in the case of a joint return) and each dependent of the taxpayer to whom paragraph (1) does not apply, $300.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HD0F8628895ED40BB92CC553F65212519" indent="up1"><enum>(2)</enum><header>Conforming amendments</header> <subparagraph id="H61C885FEF1B04744A8DFA7358D831537"><enum>(A)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/24">Section 24(c)</external-xref> is amended—</text> <clause id="HE1B6276804C145418BB79CF81864C54B"><enum>(i)</enum><text>by redesignating paragraphs (1) and (2) as paragraphs (2) and (3), respectively,</text> </clause><clause id="HB74BA4DA72444FEE9124322C638C2BEA"><enum>(ii)</enum><text>by striking <quote>152(c)</quote> in paragraph (2) (as so redesignated) and inserting <quote>7706(c)</quote>,</text> </clause><clause id="HCBC1C8B9CBC74B0F9AB952593B30DB7A"><enum>(iii)</enum><text>by inserting before paragraph (2) (as so redesignated) the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H4E6CBE7B6BC445ED83A6788D5FEC0856" style="OLC"> <paragraph id="HE98F7327327C4295A828D3B96F9CE6A9"><enum>(1)</enum><header>Dependent</header> <subparagraph id="H3B9FDF2605564464973D7DD6B9804E7F"><enum>(A)</enum><header>In general</header><text>The term <quote>dependent</quote> shall have the meaning given such term by section 7706.</text> </subparagraph><subparagraph id="H7496B7A606C34E6E822E42CF299DF85B"><enum>(B)</enum><header>Certain individuals not treated as dependents</header><text display-inline="yes-display-inline">In the case of an individual with respect to whom a credit under this section is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins, the amount applicable to such individual under subsection (a) for such individual’s taxable year shall be zero.</text></subparagraph></paragraph><after-quoted-block>,</after-quoted-block></quoted-block> </clause><clause id="H51120E56317C4A76A612B24454CC942E"><enum>(iv)</enum><text>in paragraph (3) (as so redesignated)—</text> <subclause id="H39F5CC22347345E5B422DB4E84B45172"><enum>(I)</enum><text>by striking <quote>term <quote>qualifying child</quote></quote> and inserting <quote>terms <quote>qualifying child</quote> and <quote>dependent</quote></quote>, and</text> </subclause><subclause id="H12798A85869B44C292C88A5EB4BBE5BC"><enum>(II)</enum><text>by striking <quote>152(b)(3)</quote> and inserting <quote>7706(b)(3)</quote>, and</text> </subclause></clause><clause id="HAD994329E50E49438F8EFD40212C9774"><enum>(v)</enum><text>in the heading by striking <quote><header-in-text level="subsection" style="OLC">Qualifying</header-in-text></quote> and inserting <quote><header-in-text level="subsection" style="OLC">Dependent; qualifying</header-in-text></quote>.</text> </clause></subparagraph><subparagraph id="HEC327446B4A34025AEE6C9EB18656259"><enum>(B)</enum><text display-inline="yes-display-inline">The heading for <external-xref legal-doc="usc" parsable-cite="usc/26/24">section 24</external-xref> is amended by inserting <quote><header-in-text level="section" style="OLC">and family</header-in-text></quote> after <quote><header-in-text level="section" style="OLC">Child</header-in-text></quote>.</text> </subparagraph><subparagraph id="HC42E5452F81C4DB4960872E577E2E6DD"><enum>(C)</enum><text>The table of sections for subpart A of part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking the item relating to section 24 and inserting the following new item:</text> <quoted-block display-inline="no-display-inline" id="H765C25C51F20459E87741B311134A27A" style="OLC"> <toc regeneration="no-regeneration"> <toc-entry level="section">Sec. 24. Child and family tax credit.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph></subsection><subsection id="HC842EE6256A84ED7AFBC35EA08534968"><enum>(b)</enum><header>Elimination of marriage penalty</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/24">Section 24(b)(2)</external-xref> is amended—</text> <paragraph id="H653D851CA5924EBFB16361997DC19322" indent="up1"><enum>(1)</enum><text>by striking <quote>$110,000</quote> in subparagraph (A) and inserting <quote>$230,000</quote>,</text> </paragraph><paragraph id="H3527645B24EA4205A9C73A23AAF35CD6" indent="up1"><enum>(2)</enum><text>by inserting <quote>and</quote> at the end of subparagraph (A),</text> </paragraph><paragraph id="H751C6BA636EF47FE80891D2EBB94B0BB" indent="up1"><enum>(3)</enum><text display-inline="yes-display-inline">by striking <quote>$75,000 in the case of an individual who is not married</quote> and all that follows through the period at the end and inserting <quote>one-half of the amount in effect under subparagraph (A) for the taxable year in the case of any other individual.</quote>.</text> </paragraph></subsection><subsection commented="no" id="H8526D49D912949F9BE0318B364979A51"><enum>(c)</enum><header>Credit refundable up to $1,000 per child</header> <paragraph id="HB028B9B9F9914A6B82F27768E15E5614" indent="up1"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/24">Section 24(d)(1)(A)</external-xref> is amended by striking all that follows <quote>under this section</quote> and inserting the following:</text> <quoted-block display-inline="yes-display-inline" id="HA99B5DC6E89B4E4C94D614FB78EDD552" style="OLC"> <text>determined—</text><clause commented="no" id="H59171BD9AE0345B8ADF0FB84C5BA6392"><enum>(i)</enum><text display-inline="yes-display-inline">without regard to this subsection and the limitation under section 26(a),</text> </clause><clause commented="no" id="H0E68DB4480B9404999E9CC025D0B6606"><enum>(ii)</enum><text display-inline="yes-display-inline">without regard to subsection (a)(2), and</text> </clause><clause commented="no" id="HAD53627AE1EF40FFBD76BC4BCF1ADD51"><enum>(iii)</enum><text>by substituting <quote>$1,000</quote> for <quote>$1,600</quote> in subsection (a)(1), or</text></clause><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H9EF20E07178947D6A67B88A55F0370A9" indent="up1"><enum>(2)</enum><header>Inflation adjustment</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/24">Section 24(d)</external-xref> is amended by inserting after paragraph (2) the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HC3AE67D6492F42349E5A09DE3F3B84F9" style="OLC"> <paragraph id="HCD331A03D9564053B16D475070864FBD"><enum>(3)</enum><header>Inflation adjustment</header><text display-inline="yes-display-inline">In the case of any taxable year beginning in a calendar year after 2017, the $1,000 amount in paragraph (1)(A)(iii) shall be increased by an amount equal to—</text> <subparagraph id="H5F3DB10DAFC440ADA1EFBE8D2BBAD723"><enum>(A)</enum><text>such dollar amount, multiplied by</text> </subparagraph><subparagraph id="H26ACA60B316446CE9FFEDE7C36C346DE"><enum>(B)</enum><text display-inline="yes-display-inline">the cost-of-living adjustment under section 1(c)(2)(A) for such calendar year.</text> </subparagraph><continuation-text continuation-text-level="paragraph">Any increase determined under the preceding sentence shall be rounded to the next highest multiple of $100 and shall not exceed the amount in effect under subsection (a)(2).</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H9C42E4BE76F14063B0314F6804C13AAB"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="HBC244B533049430B849D40C92AB5BEBC"><enum>1102.</enum><header>Repeal of nonrefundable credits</header> <subsection id="H379C3E06436145F8BC569F11F8D6CEF1"><enum>(a)</enum><header>Repeal of section <enum-in-header>22</enum-in-header></header> <paragraph id="HE816400B9BE74FFA94B015C6C9C3D2C2"><enum>(1)</enum><header>In general</header><text>Subpart A of part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 22 (and by striking the item relating to such section in the table of sections for such subpart).</text> </paragraph><paragraph commented="no" id="H9D3DB5EA32A549A8A6F895D992042837"><enum>(2)</enum><header>Conforming amendment</header> <subparagraph commented="no" id="H89CD3BA1B79245D5A155429994D2998D"><enum>(A)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/86">Section 86(f)</external-xref> is amended by striking paragraph (1) and by redesignating paragraphs (2), (3), and (4) as paragraphs (1), (2), and (3), respectively.</text> </subparagraph><subparagraph commented="no" id="HD14785CD47304B46A1A96FDBCBB0157A"><enum>(B)</enum> <clause commented="no" display-inline="yes-display-inline" id="H2C133440E49443F59DC7A45675EB0DF6"><enum>(i)</enum><text>Subsections (c)(3)(B) and (d)(4)(A) of section 7706, as redesignated by this Act, are each amended by striking <quote>(as defined in section 22(e)(3)</quote>.</text> </clause><clause commented="no" id="H79B1BF672FF9462AB8854C88D178C4A7" indent="up1"><enum>(ii)</enum><text>Section 7706(f), as redesignated by this Act, is amended by redesignating paragraph (7) as paragraph (8) and by inserting after paragraph (6) the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H059AA597ADFC4A9D88E393AA1A46E5DD" style="OLC"> <paragraph commented="no" id="H7F92470120834A29ADDD6E66EF20518F"><enum>(7)</enum><header>Permanent and total disability defined</header><text display-inline="yes-display-inline">An individual is permanently and totally disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An individual shall not be considered to be permanently and totally disabled unless he furnishes proof of the existence thereof in such form and manner, and at such times, as the Secretary may require.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </clause><clause commented="no" id="HE29084572F8448F3B51D2CAACFA541BB" indent="up1"><enum>(iii)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/415">Section 415(c)(3)(C)(i)</external-xref> is amended by striking <quote>22(e)(3)</quote> and inserting <quote>7706(f)(7)</quote>.</text> </clause><clause commented="no" id="H390100DB7ED849DEA0F1AD1B762E7127" indent="up1"><enum>(iv)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/422">Section 422(c)(6)</external-xref> is amended by striking <quote>22(e)(3)</quote> and inserting <quote>7706(f)(7)</quote>.</text> </clause></subparagraph></paragraph></subsection><subsection commented="no" id="H00E3916E3BE34846AAB4AE310BBAE17E"><enum>(b)</enum><header>Termination of section <enum-in-header>25</enum-in-header></header><text display-inline="yes-display-inline">Section 25, as amended by <external-xref legal-doc="usc" parsable-cite="usc/26/3601">section 3601,</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="HCB31BAE91F5E4262AA9A0A6260F8E501" style="OLC"> <subsection commented="no" id="HF11DEA018EA74D42BEB1B0E0459C3F7C"><enum>(k)</enum><header>Termination</header><text display-inline="yes-display-inline">No credit shall be allowed under this section with respect to any mortgage credit certificate issued after December 31, 2017.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H4A2DB89EB9B54DC1AA836F4A7C224244"><enum>(c)</enum><header>Repeal of section <enum-in-header>30D</enum-in-header></header> <paragraph id="HB8020244FDC04648915CC674F99EC6ED"><enum>(1)</enum><header>In general</header><text>Subpart B of part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 30D (and by striking the item relating to such section in the table of sections for such subpart).</text> </paragraph><paragraph id="H447DE529CEC2468AB5BC1E0242D1E3DA"><enum>(2)</enum><header>Conforming amendments</header> <subparagraph id="H939FE8340E354980BDC2DB75157FB2DA"><enum>(A)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/38">Section 38(b)</external-xref> is amended by striking paragraph (35).</text> </subparagraph><subparagraph id="H28CF702E54034C388C5023E300139676"><enum>(B)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1016">Section 1016(a)</external-xref> is amended by striking paragraph (37).</text> </subparagraph><subparagraph id="HA3ED2EE0F3364886A7C9D57996174E37"><enum>(C)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6501">Section 6501(m)</external-xref> is amended by striking <quote>30D(e)(4),</quote>.</text> </subparagraph></paragraph></subsection><subsection id="H82C7D4B75C184CA6AFD9464884E10BCE"><enum>(d)</enum><header>Effective date</header> <paragraph id="HBC6624A76E334FCF8EB85594DFC13F4A"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraphs (2) and (3), the amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </paragraph><paragraph id="HDAD3B9ED933A4DBAB3AADF4D92D5C6D7"><enum>(2)</enum><header>Subsection <enum-in-header>(b)</enum-in-header></header><text>The amendment made by subsection (c) shall apply to taxable years ending after December 31, 2017.</text> </paragraph><paragraph id="H8F964AC79F5942DB92E5D81BC13DF90F"><enum>(3)</enum><header>Subsection <enum-in-header>(c)</enum-in-header></header><text display-inline="yes-display-inline">The amendments made by subsection (d) shall apply to vehicles placed in service in taxable years beginning after December 31, 2017.</text> </paragraph></subsection></section><section id="HA48B3799CEDA45E2AE37C5506CCEC63B"><enum>1103.</enum><header>Refundable credit program integrity</header> <subsection id="H26C0105FFA9E49069DD3E0C0568C584C"><enum>(a)</enum><header>Identification requirements for child and family tax credit</header> <paragraph id="HDEB80DD84614444CA11508A6D45CDE1F"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/24">Section 24(e)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H6A4B44554FAF4F9E91D03D5265E848DF" style="OLC"> <subsection id="HCCD155F783824237982BCA217351141A"><enum>(e)</enum><header>Identification requirements</header> <paragraph id="H30AC574E4D6C4D23AA45B64D37507639"><enum>(1)</enum><header>Requirements for qualifying child</header><text display-inline="yes-display-inline">No credit shall be allowed under this section to a taxpayer with respect to any qualifying child unless the taxpayer includes the name and social security number of such qualifying child on the return of tax for the taxable year. The preceding sentence shall not prevent a qualifying child from being treated as a dependent described in subsection (a)(2).</text> </paragraph><paragraph id="H0736429B5CB3488CB0BB95AE52C102AC"><enum>(2)</enum><header>Other identification requirements</header><text display-inline="yes-display-inline">No credit shall be allowed under this section with respect to any individual unless the taxpayer identification number of such individual is included on the return of tax for the taxable year and such identifying number was issued before the due date for filing the return for the taxable year.</text> </paragraph><paragraph id="H5E1CF16BF6C04B4D98A7C89EDD0DB190"><enum>(3)</enum><header>Social security number</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>social security number</quote> means a social security number issued by the Social Security Administration (but only if the social security number is issued to a citizen of the United States or pursuant to subclause (I) (or that portion of subclause (III) that relates to subclause (I)) of section 205(c)(2)(B)(i) of the Social Security Act)).</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H97603CFCB8C34711810F5862D3B60935"><enum>(2)</enum><header>Omissions treated as mathematical or clerical error</header> <subparagraph id="HBC288E6C7465457A903247A05B817294"><enum>(A)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/6213">Section 6213(g)(2)(I)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HBFFEEBAD884B4DB5B5E9F728D3D93428" style="OLC"> <subparagraph id="H5706A465D4BD43C6B66B93CDE45BA074"><enum>(I)</enum><text display-inline="yes-display-inline">an omission of a correct social security number, or a correct TIN, required under section 24(e) (relating to child tax credit), to be included on a return,</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph></subsection><subsection id="HDF0E27270FE74926BEFEE90E0FA754D0"><enum>(b)</enum><header>Social security number must be provided</header> <paragraph id="H10ECA5AD350F4D33B2AB550F6F281A93"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Section 25A(f)(1)(A), as amended by section 1201 of this Act, is amended by striking <quote>taxpayer identification number</quote> each place it appears and inserting <quote>social security number</quote>.</text> </paragraph><paragraph id="H9197FB75D0DE42D6A3C35F39A7AB0CA2"><enum>(2)</enum><header>Omission treated as mathematical or clerical error</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/6213">Section 6213(g)(2)(J)</external-xref> is amended by striking <quote>TIN</quote> and inserting <quote>social security number and employer identification number</quote>.</text> </paragraph></subsection><subsection id="HB6B67BC687B64A1EA83F8BE773DCDB6F"><enum>(c)</enum><header>Individuals prohibited from engaging in employment in United States not eligible for earned income tax credit</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/32">Section 32(m)</external-xref> is amended—</text> <paragraph id="HB6428CC9688C43F1AF813A575F3B94DB"><enum>(1)</enum><text>by striking <quote>(other than:</quote> and all that follows through <quote>of the Social Security Act)</quote>, and</text> </paragraph><paragraph id="H7B157E9246B34876850650CBD9B164AD"><enum>(2)</enum><text>by inserting before the period at the end the following: <quote>, but only if, in the case of subsection (c)(1)(E), the social security number is issued to a citizen of the United States or pursuant to subclause (I) (or that portion of subclause (III) that relates to subclause (I)) of section 205(c)(2)(B)(i) of the Social Security Act</quote>.</text> </paragraph></subsection><subsection id="H6ADA220998634992AA36FA8152903AD9"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H486FB8B8E14742B18AEDE1FCF05DA8DF"><enum>1104.</enum><header>Procedures to reduce improper claims of earned income credit</header> <subsection id="HC69A72F7E64F4F359C5277178A2DFE88"><enum>(a)</enum><header>Clarification regarding determination of self-employment income which is treated as earned income</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/32">Section 32(c)(2)(B)</external-xref> is amended by striking <quote>and</quote> at the end of clause (v), by striking the period at the end of clause (vi) and inserting <quote>, and</quote>, and by adding at the end the following new clause:</text> <quoted-block display-inline="no-display-inline" id="H7398821020DB4C4D9797372AA3C91BDD" style="OLC"> <clause id="HAA84E421850645908FEC898F3C75EDFE"><enum>(vii)</enum><text display-inline="yes-display-inline">in determining the taxpayer’s net earnings from self-employment under subparagraph (A)(ii) there shall not fail to be taken into account any deduction which is allowable to the taxpayer under this subtitle.</text></clause><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H8C8483942E4A41AFB167010B072AB48B"><enum>(b)</enum><header>Required quarterly reporting of wages of employees</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/6011">Section 6011</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="HE308D2B014BD49518AE99B3391D88375" style="OLC"> <subsection id="H5B24D184A74A47DA9DE8190AE1ACF1DC"><enum>(i)</enum><header>Employer reporting of wages</header><text display-inline="yes-display-inline">Every person required to deduct and withhold from an employee a tax under section 3101 or 3402 shall include on each return or statement submitted with respect to such tax, the name and address of such employee and the amount of wages for such employee on which such tax was withheld.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="H58F8FE9A0FF8431ABBF2B69A9237224F"><enum>(c)</enum><header>Effective date</header> <paragraph id="H59DAAEAD904746A48C4CF206962FD7FB"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.</text> </paragraph><paragraph id="HAB2704C331F740D3BD72480A2A4129D6"><enum>(2)</enum><header>Reporting</header><text>The Secretary of the Treasury, or his designee, may delay the application of the amendment made by subsection (b) for such period as such Secretary (or designee) determines to be reasonable to allow persons adequate time to modify electronic (or other) systems to permit such person to comply with the requirements of such amendment.</text> </paragraph></subsection></section><section id="H1621E9B1BBDA4FC0ABE8BE83B893E644"><enum>1105.</enum><header>Certain income disallowed for purposes of the earned income tax credit</header> <subsection id="H6605802B283649DCBB9F8E05BFEF2E8C"><enum>(a)</enum><header>Substantiation requirement</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/32">Section 32</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="HA4AD2E6C0D4D471B9BBE26AA7E42CE94" style="OLC"> <subsection id="HCEB5D9E3E378496CA115E00CF37AE300"><enum>(n)</enum><header>Inconsistent income reporting</header><text display-inline="yes-display-inline">If the earned income of a taxpayer claimed on a return for purposes of this section is not substantiated by statements or returns under sections 6051, 6052, 6041(a), or 6050W with respect to such taxpayer, the Secretary may require such taxpayer to provide books and records to substantiate such income, including for the purpose of preventing fraud.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HBC9DACC41EE74CE1B05F979A276FA357"><enum>(b)</enum><header>Exclusion of unsubstantiated amount from earned income</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/32">Section 32(c)(2)</external-xref> is amended by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="H8FB9D449FDB345B789C3FCEC0FD975F9" style="OLC"> <subparagraph id="HB84E2738319A47709331BC176843074B"><enum>(C)</enum><header>Exclusion</header><text display-inline="yes-display-inline">In the case of a taxpayer with respect to which there is an inconsistency described in subsection (n) who fails to substantiate such inconsistency to the satisfaction of the Secretary, the term <quote>earned income</quote> shall not include amounts to the extent of such inconsistency.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="HD57F360716FD402580BE16BD97ED58D1"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.</text> </subsection></section></subtitle><subtitle commented="no" id="HCA5B60B802D4459AB6D425C8431CA47B"><enum>C</enum><header>Simplification and reform of education incentives</header> <section commented="no" id="HD3B0A6F3E180434B8968E3FCE3667131" section-type="subsequent-section"><enum>1201.</enum><header>American opportunity tax credit</header> <subsection commented="no" id="H099EDEAC6E9748D894C42758EFDE4E31"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/25A">Section 25A</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H75E5C3AEE0204548ACEE86910B835673" style="OLC"> <section commented="no" id="H803B69835A644C09BA78068C885CA4E6"><enum>25A.</enum><header>American opportunity tax credit</header> <subsection commented="no" id="H7BCAFC6835674BF5BC107459DF1D9616"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of—</text> <paragraph commented="no" id="H8B0E91A416974478A80DFFE81B75A60E"><enum>(1)</enum><text display-inline="yes-display-inline">100 percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year (for education furnished to any eligible student for whom an election is in effect under this section for such taxable year during any academic period beginning in such taxable year) as does not exceed $2,000, plus</text> </paragraph><paragraph commented="no" id="H077A6CC4EA0447378ACF7F931550DE2D"><enum>(2)</enum><text>25 percent of so much of such expenses so paid as exceeds the dollar amount in effect under paragraph (1) but does not exceed twice such dollar amount.</text> </paragraph></subsection><subsection commented="no" id="HC6848AAA66CB4798A23E1938E0024A78"><enum>(b)</enum><header>Portion of credit refundable</header><text>40 percent of the credit allowable under subsection (a)(1) (determined without regard to this subsection and section 26(a) and after application of all other provisions of this section) shall be treated as a credit allowable under subpart C (and not under this part). The preceding sentence shall not apply to any taxpayer for any taxable year if such taxpayer is a child to whom section 1(d) applies for such taxable year.</text> </subsection><subsection commented="no" id="HD2B6351AA0AA4B74901EF7F44E0A7923"><enum>(c)</enum><header>Limitation based on modified adjusted gross income</header> <paragraph commented="no" id="HF081C8716D37483B9F9C309BE5A9F4B8"><enum>(1)</enum><header>In general</header><text>The amount allowable as a credit under subsection (a) for any taxable year shall be reduced (but not below zero) by an amount which bears the same ratio to the amount so allowable (determined without regard to this subsection and subsection (b) but after application of all other provisions of this section) as—</text> <subparagraph commented="no" id="H88AB250FE57A4EFEAE1DEADA00079138"><enum>(A)</enum><text>the excess of—</text> <clause commented="no" id="H2FF638B3200241D1A11F682636719CB8"><enum>(i)</enum><text>the taxpayer’s modified adjusted gross income for such taxable year, over</text> </clause><clause commented="no" id="HA7F3DEC4F76F4C03A3EFB1F79A8F2F86"><enum>(ii)</enum><text>$80,000 (twice such amount in the case of a joint return), bears to</text> </clause></subparagraph><subparagraph commented="no" id="H7D58E0077ED248DAB8F257306D726C5E"><enum>(B)</enum><text>$10,000 (twice such amount in the case of a joint return).</text> </subparagraph></paragraph><paragraph commented="no" id="HB1A2034C09A24A4193552B67D50D9D67"><enum>(2)</enum><header>Modified adjusted gross income</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>modified adjusted gross income</quote> means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.</text> </paragraph></subsection><subsection commented="no" id="H2A5F7D5019D54BD2A7B94E908429C995"><enum>(d)</enum><header>Other limitations</header> <paragraph commented="no" id="HD44CC806796A48B5B2BF03DBFCD8B314"><enum>(1)</enum><header>Credit allowed only for 5 taxable years</header><text display-inline="yes-display-inline">An election to have this section apply may not be made for any taxable year if such an election (by the taxpayer or any other individual) is in effect with respect to such student for any 5 prior taxable years.</text> </paragraph><paragraph commented="no" id="H59D041D6E4CB49239763527A4B7CFDA1"><enum>(2)</enum><header>Credit allowed only for first 5 years of postsecondary education</header> <subparagraph commented="no" id="HD6F45A9566514AD38053BF1377BA6BE4"><enum>(A)</enum><header>In general</header><text>No credit shall be allowed under subsection (a) for a taxable year with respect to the qualified tuition and related expenses of an eligible student if the student has completed (before the beginning of such taxable year) the first 5 years of postsecondary education at an eligible educational institution.</text> </subparagraph><subparagraph commented="no" id="HBB13F323E7204658BA0EFE39A5D85AE5"><enum>(B)</enum><header>Fifth year limitations</header><text>In the case of an eligible student with respect to whom an election has been in effect for 4 preceding taxable years for purposes of the fifth taxable year—</text> <clause commented="no" id="H9A259F774D584C7CA42B285D21A462F8"><enum>(i)</enum><text>the amount of the credit allowed under this section for the taxable year shall not exceed an amount equal to 50 percent of the credit otherwise determined with respect to such student under this section (without regard to this subparagraph), and</text> </clause><clause commented="no" id="H23060FC46EC745F5A17E0A0FB11ED5A3"><enum>(ii)</enum><text>the amount of the credit determined under subsection (b) and allowable under subpart C shall not exceed an amount equal to 40 percent of the amount determined with respect to such student under clause (i).</text> </clause></subparagraph></paragraph></subsection><subsection commented="no" id="HDFACE2AB997B4E3C97347E7BF6D4C93B"><enum>(e)</enum><header>Definitions</header><text>For purposes of this section—</text> <paragraph commented="no" id="H548C743D887C4E158D10232AFCF242C2"><enum>(1)</enum><header>Eligible student</header><text display-inline="yes-display-inline">The term <quote>eligible student</quote> means, with respect to any academic period, a student who—</text> <subparagraph commented="no" id="H24A50E15882841E39F98A02E0B44AE99"><enum>(A)</enum><text>meets the requirements of section 484(a)(1) of the Higher Education Act of 1965 (<external-xref legal-doc="usc" parsable-cite="usc/20/1091">20 U.S.C. 1091(a)(1)</external-xref>), as in effect on August 5, 1997, and</text> </subparagraph><subparagraph commented="no" id="H5338060018314169AB0FBDECE588AFEC"><enum>(B)</enum><text>is carrying at least <fraction>½</fraction> the normal full-time work load for the course of study the student is pursuing.</text> </subparagraph></paragraph><paragraph commented="no" id="H2710E7F3FA9B47DC8C38C939430A64F1"><enum>(2)</enum><header>Qualified tuition and related expenses</header> <subparagraph commented="no" id="HA6C8931EA6DA4ECE91DCD36CB2E31B2C"><enum>(A)</enum><header>In general</header><text>The term <quote>qualified tuition and related expenses</quote> means tuition, fees, and course materials, required for enrollment or attendance of—</text> <clause commented="no" id="HC46585497C164016A9D8A0042271DC2E"><enum>(i)</enum><text>the taxpayer,</text> </clause><clause commented="no" id="HECC360B543DD44929E3ADF5EAEBAFC68"><enum>(ii)</enum><text>the taxpayer’s spouse, or</text> </clause><clause commented="no" id="HF21CEC6B21034D449E4AEDF9C73019FF"><enum>(iii)</enum><text display-inline="yes-display-inline">any dependent of the taxpayer,</text> </clause><continuation-text commented="no" continuation-text-level="subparagraph">at an eligible educational institution for courses of instruction of such individual at such institution.</continuation-text></subparagraph><subparagraph commented="no" id="H116C359DD1F04DE68EF1C169AAB66A29"><enum>(B)</enum><header>Exception for education involving sports, etc</header><text display-inline="yes-display-inline">Such term does not include expenses with respect to any course or other education involving sports, games, or hobbies, unless such course or other education is part of the individual’s degree program.</text> </subparagraph><subparagraph commented="no" id="H838B4229B66A4FDF9FC3B6319FF5145E"><enum>(C)</enum><header>Exception for nonacademic fees</header><text display-inline="yes-display-inline">Such term does not include student activity fees, athletic fees, insurance expenses, or other expenses unrelated to an individual's academic course of instruction.</text> </subparagraph></paragraph><paragraph commented="no" id="H87BAC3026AA94BDE9BBF5E851E6F3E06"><enum>(3)</enum><header>Eligible educational institution</header><text>The term <quote>eligible educational institution</quote> means an institution—</text> <subparagraph commented="no" id="HCE8DAE50BF0E45B78C792F2CDC58D5CB"><enum>(A)</enum><text display-inline="yes-display-inline">which is described in section 481 of the Higher Education Act of 1965 (<external-xref legal-doc="usc" parsable-cite="usc/20/1088">20 U.S.C. 1088</external-xref>), as in effect on August 5, 1997, and</text> </subparagraph><subparagraph commented="no" id="HC4E075BE102946C2909F9E145126DB97"><enum>(B)</enum><text>which is eligible to participate in a program under title IV of such Act.</text> </subparagraph></paragraph></subsection><subsection commented="no" id="H53561E5914184AAB898CA57C64AA3A3E"><enum>(f)</enum><header>Special rules</header> <paragraph commented="no" id="H51D25752A05B42688613A3663538B4F2"><enum>(1)</enum><header>Identification requirements</header> <subparagraph id="H6F5C33DC99324F25962B345A5353FCA5"><enum>(A)</enum><header>Student</header><text display-inline="yes-display-inline">No credit shall be allowed under subsection (a) to a taxpayer with respect to the qualified tuition and related expenses of an individual unless the taxpayer includes the name and taxpayer identification number of such individual on the return of tax for the taxable year, and such taxpayer identification number was issued on or before the due date for filing such return.</text> </subparagraph><subparagraph id="H232CB37793534841A6CA5F09F60960C7"><enum>(B)</enum><header>Taxpayer</header><text display-inline="yes-display-inline">No credit shall be allowed under this section if the identifying number of the taxpayer was issued after the due date for filing the return for the taxable year.</text> </subparagraph><subparagraph id="HFDFD3F80AF0443F2A4194B1E325849C4"><enum>(C)</enum><header>Institution</header><text display-inline="yes-display-inline">No credit shall be allowed under this section unless the taxpayer includes the employer identification number of any institution to which qualified tuition and related expenses were paid with respect to the individual.</text> </subparagraph></paragraph><paragraph commented="no" id="HDB14C9FE9AAB497385A9C133ADAB6B83"><enum>(2)</enum><header>Adjustment for certain scholarships, etc</header><text>The amount of qualified tuition and related expenses otherwise taken into account under subsection (a) with respect to an individual for an academic period shall be reduced (before the application of subsection (c)) by the sum of any amounts paid for the benefit of such individual which are allocable to such period as—</text> <subparagraph commented="no" id="H63B78167368349839E75B5E6F2A5AD11"><enum>(A)</enum><text display-inline="yes-display-inline">a qualified scholarship which is excludable from gross income under section 117,</text> </subparagraph><subparagraph commented="no" id="H376D454E1319479E9CBAADCD9C483DC9"><enum>(B)</enum><text>an educational assistance allowance under chapter 30, 31, 32, 34, or 35 of title 38, United States Code, or under <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/10/1606">chapter 1606</external-xref> of title 10, United States Code, and</text> </subparagraph><subparagraph commented="no" id="H5ED4C699E0E94F2BB08579B830E9A7A2"><enum>(C)</enum><text>a payment (other than a gift, bequest, devise, or inheritance within the meaning of section 102(a)) for such individual's educational expenses, or attributable to such individual's enrollment at an eligible educational institution, which is excludable from gross income under any law of the United States.</text> </subparagraph></paragraph><paragraph commented="no" id="H4CBD052B89D64ADC9DC30C61582E2565"><enum>(3)</enum><header>Treatment of expenses paid by dependent</header><text display-inline="yes-display-inline">If an individual is a dependent of another taxpayer for a taxable year beginning in the calendar year in which such individuals taxable year begins—</text> <subparagraph commented="no" id="H678ECEB30BA5494683129D7FD6C2112D"><enum>(A)</enum><text>no credit shall be allowed under subsection (a) to such individual for such individual’s taxable year, and</text> </subparagraph><subparagraph commented="no" id="H2A7B8075E687463C84CB6F449A2D72B2"><enum>(B)</enum><text>qualified tuition and related expenses paid by such individual during such individual’s taxable year shall be treated for purposes of this section as paid by such other taxpayer.</text> </subparagraph></paragraph><paragraph commented="no" id="H8C8B15888E0647EAB6F56811DB07A1A4"><enum>(4)</enum><header>Treatment of certain prepayments</header><text>If qualified tuition and related expenses are paid by the taxpayer during a taxable year for an academic period which begins during the first 3 months following such taxable year, such academic period shall be treated for purposes of this section as beginning during such taxable year.</text> </paragraph><paragraph commented="no" id="H22CF053A1E8645578CDD8BFFC644FB85"><enum>(5)</enum><header>Denial of double benefit</header><text>No credit shall be allowed under this section for any amount for which a deduction is allowed under any other provision of this chapter.</text> </paragraph><paragraph commented="no" id="H47019BF450BF4DD78BFDF6D8F40750A1"><enum>(6)</enum><header>No credit for married individuals filing separate returns</header><text>If the taxpayer is a married individual (within the meaning of section 7703), this section shall apply only if the taxpayer and the taxpayer’s spouse file a joint return for the taxable year.</text> </paragraph><paragraph commented="no" id="H850EA17C016440499FD6CDE085141793"><enum>(7)</enum><header>Nonresident aliens</header><text>If the taxpayer is a nonresident alien individual for any portion of the taxable year, this section shall apply only if such individual is treated as a resident alien of the United States for purposes of this chapter by reason of an election under subsection (g) or (h) of section 6013.</text> </paragraph><paragraph id="H3B549E2C0D1B4EB2B11335C15D31EADE"><enum>(8)</enum><header>Restrictions on taxpayers who improperly claimed credit in prior year</header> <subparagraph id="H759AF65CD4F849329B06D88B05B3F456"><enum>(A)</enum><header>Taxpayers making prior fraudulent or reckless claims</header> <clause id="H94A575C12BA54BA8BB75666DC9C88AA4"><enum>(i)</enum><header>In general</header><text>No credit shall be allowed under this section for any taxable year in the disallowance period.</text> </clause><clause id="HE4C9044B0AD940EAAC609AE991157B65"><enum>(ii)</enum><header>Disallowance period</header><text>For purposes of clause (i), the disallowance period is—</text> <subclause id="H1F8FBC673A8347558328DB3DC30259B3"><enum>(I)</enum><text>the period of 10 taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s claim of credit under this section was due to fraud, and</text> </subclause><subclause id="H11941105A11C4AB591375E1FB1A477BF"><enum>(II)</enum><text>the period of 2 taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s claim of credit under this section was due to reckless or intentional disregard of rules and regulations (but not due to fraud).</text> </subclause></clause></subparagraph><subparagraph id="HE134359E0DD04BC5AB849C12A91403EF"><enum>(B)</enum><header>Taxpayers making improper prior claims</header><text>In the case of a taxpayer who is denied credit under this section for any taxable year as a result of the deficiency procedures under subchapter B of chapter 63, no credit shall be allowed under this section for any subsequent taxable year unless the taxpayer provides such information as the Secretary may require to demonstrate eligibility for such credit.</text> </subparagraph></paragraph></subsection><subsection commented="no" id="HD1269894B8DA493F9ADC3705A05BE92C"><enum>(g)</enum><header>Inflation adjustment</header> <paragraph commented="no" id="H2E564680DA044C44980C408AEE65101D"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a taxable year beginning after 2018, the $80,000 amount in subsection (c)(1)(A)(ii) shall each be increased by an amount equal to—</text> <subparagraph commented="no" id="HD20C1F3214E2497F95D12DB9B27229DD"><enum>(A)</enum><text>such dollar amount, multiplied by</text> </subparagraph><subparagraph commented="no" id="H2B31D76517974311AEB26E12A3999914"><enum>(B)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2017</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof.</text> </subparagraph></paragraph><paragraph commented="no" id="HD9A0D3AC07534D3283E9D61E645BFF79"><enum>(2)</enum><header>Rounding</header><text>If any amount as adjusted under paragraph (1) is not a multiple of $1,000, such amount shall be rounded to the next lowest multiple of $1,000.</text> </paragraph></subsection><subsection commented="no" id="HB481E7D920EB4B809882D6AF2119C246"><enum>(h)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out this section, including regulations providing for a recapture of the credit allowed under this section in cases where there is a refund in a subsequent taxable year of any amount which was taken into account in determining the amount of such credit.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="H5687F0B75FD745D38D9E33678E549A97"><enum>(b)</enum><header>Conforming amendments</header> <paragraph commented="no" id="H2298C7FDFC7C42F8B2E9F5218233191C"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/72">Section 72(t)(7)(B)</external-xref> is amended by striking <quote>section 25A(g)(2)</quote> and inserting <quote>section 25A(f)(2)</quote>.</text> </paragraph><paragraph commented="no" id="H15BB2B351FAF4551BE130AD975D6BB56"><enum>(2)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/529">Section 529(c)(3)(B)(v)(I)</external-xref> is amended by striking <quote>section 25A(g)(2)</quote> and inserting <quote>section 25A(f)(2)</quote>.</text> </paragraph><paragraph commented="no" id="H3F8191B88E3D4D9288B5C594E1B718AA"><enum>(3)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/529">Section 529(e)(3)(B)(i)</external-xref> is amended by striking <quote>section 25A(b)(3)</quote> and inserting <quote>section 25A(d)</quote>.</text> </paragraph><paragraph commented="no" id="H119C659B2F0846798943F3A0C054654F"><enum>(4)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/530">Section 530(d)(2)(C)</external-xref> is amended—</text> <subparagraph commented="no" id="H038EFDAC6A5F4FAFB11955826F984DB9"><enum>(A)</enum><text>by striking <quote>section 25A(g)(2)</quote> in clause (i)(I) and inserting <quote>section 25A(f)(2)</quote>, and</text> </subparagraph><subparagraph commented="no" id="H23E9CD20603B46F3845EC565A93ACCCF"><enum>(B)</enum><text>by striking <quote><header-in-text level="subparagraph" style="OLC">Hope and Lifetime Learning credits</header-in-text></quote> in the heading and inserting <quote><header-in-text level="subparagraph" style="OLC">American opportunity tax credit</header-in-text></quote>.</text> </subparagraph></paragraph><paragraph commented="no" id="H9B5489D0D0F4406BBBD31BE26E08AE40"><enum>(5)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/530">Section 530(d)(4)(B)(iii)</external-xref> is amended by striking <quote>section 25A(g)(2)</quote> and inserting <quote>section 25A(d)(4)(B)</quote>.</text> </paragraph><paragraph commented="no" id="HCDAE87DB990548B0B20344CD84BF58E8"><enum>(6)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/6050S">Section 6050S(e)</external-xref> is amended by striking <quote>subsection (g)(2)</quote> and inserting <quote>subsection (f)(2)</quote>.</text> </paragraph><paragraph commented="no" id="H2EAEF772C98E47C4AB68E42AC7E05774"><enum>(7)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/6211">Section 6211(b)(4)(A)</external-xref> is amended by striking <quote>subsection (i)(6)</quote> and inserting <quote>subsection (b)</quote>.</text> </paragraph><paragraph commented="no" id="H2EA0E93770F6461EA4012B647FE75210"><enum>(8)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/6213">Section 6213(g)(2)(J)</external-xref> is amended by striking <quote>TIN required under section 25A(g)(1)</quote> and inserting <quote>TIN, and employer identification number, required under section 25A(f)(1)</quote>.</text> </paragraph><paragraph id="H8904C402A69546F2B1B46A6CDD244B7B"><enum>(9)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6213">Section 6213(g)(2)(Q)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H093E1F7A170142508761F1EAE45BA7BC" style="OLC"> <subparagraph id="HCB39042C5B6C4D6EB3E5C031876FE0DE"><enum>(Q)</enum><text display-inline="yes-display-inline">an omission of information required by section 25A(f)(8)(B) or an entry on the return claiming the credit determined under section 25A(a) for a taxable year for which the credit is disallowed under section 25A(f)(8)(A).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph commented="no" id="H83973E8682AA4D358C56883B97663A9E"><enum>(10)</enum><text>Section 1004(c) of division B of the American Recovery and Reinvestment Tax Act of 2009 is amended—</text> <subparagraph commented="no" id="H9907E9473F4F4664B8F86A7B9908E84E"><enum>(A)</enum><text>in paragraph (1)—</text> <clause commented="no" id="H1184F034F9B44079805F887F9A8CFAE4"><enum>(i)</enum><text>by striking <quote>section 25A(i)(6)</quote> each place it appears and inserting <quote>section 25A(b)</quote>, and</text> </clause><clause commented="no" id="HB818F66E1D8B4C0BA26CDCE45BB33BDB"><enum>(ii)</enum><text>by striking <quote>with respect to taxable years beginning after 2008 and before 2018</quote> each place it appears and inserting <quote>with respect to each taxable year</quote>,</text> </clause></subparagraph><subparagraph commented="no" id="H9918F51385A14657923952BCE15875B4"><enum>(B)</enum><text>in paragraph (2), by striking <quote>Section 25A(i)(6)</quote> and inserting <quote>Section 25A(b)</quote>, and</text> </subparagraph><subparagraph commented="no" id="HAC138F1F0DFA46A2B4562986902EEFAA"><enum>(C)</enum><text>in paragraph (3)(C), by striking <quote>subsection (i)(6)</quote> and inserting <quote>subsection (b)</quote>.</text> </subparagraph></paragraph><paragraph commented="no" id="H86D1A617A39840569404BEE1A719078C"><enum>(11)</enum><text>The table of sections for subpart A of part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking the item relating to section 25A and inserting the following new item:</text> <quoted-block display-inline="no-display-inline" id="HC516B9A27481484092ACCBA53783AD0B" style="OLC"> <toc container-level="quoted-block-container" idref="H75E5C3AEE0204548ACEE86910B835673" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration"> <toc-entry idref="H803B69835A644C09BA78068C885CA4E6" level="section">Sec. 25A. American opportunity tax credit.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection commented="no" id="HF38934D635B64115B21D3CEC7A291923"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section commented="no" id="HC5027A3B34274FD7A1FDD3C5463B48A8"><enum>1202.</enum><header>Consolidation of education savings rules</header> <subsection commented="no" id="HC85065FEECAA4C2AAA3CCEE93CC8B03A"><enum>(a)</enum><header>No new contributions to Coverdell education savings account</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/530">Section 530(b)(1)(A)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HED9A6770A2A04CC4B2DFB5C28E89D1BD" style="OLC"> <subparagraph commented="no" id="H9C1F2FC2270D4B0CB833B7E70A658411"><enum>(A)</enum><text display-inline="yes-display-inline">Except in the case of rollover contributions, no contribution will be accepted after December 31, 2017.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="H74478627FA3E4DACACAD0DD70B8798AE"><enum>(b)</enum><header>Limited distribution allowed for elementary and secondary tuition</header> <paragraph id="HA9E372FB453046F2BA4345CB4AA22E8B"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/529">Section 529(c)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H09B1B01C83744181AADDF9FC398FBD49" style="OLC"> <paragraph id="H6D53D4DD48DE49A08F9BA69FBCBC3A98"><enum>(7)</enum><header>Treatment of elementary and secondary tuition</header><text display-inline="yes-display-inline">Any reference in this subsection to the term <quote>qualified higher education expense</quote> shall include a reference to expenses for tuition in connection with enrollment at an elementary or secondary school.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HC914D95ADF024D928F98DA0227581769"><enum>(2)</enum><header>Limitation</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/529">Section 529(e)(3)(A)</external-xref> is amended by adding at the end the following: <quote>The amount of cash distributions from all qualified tuition programs described in subsection (b)(1)(A)(ii) with respect to a beneficiary during any taxable year, shall, in the aggregate, include not more than $10,000 in expenses for tuition incurred during the taxable year in connection with the enrollment or attendance of the beneficiary as an elementary or secondary school student at a public, private, or religious school.</quote>.</text> </paragraph></subsection><subsection commented="no" id="H44310DBF127846028A92D4D8577A9B83"><enum>(c)</enum><header>Rollovers to qualified tuition programs permitted</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/530">Section 530(d)(5)</external-xref> is amended by inserting <quote>, or into (by purchase or contribution) a qualified tuition program (as defined in section 529),</quote> after <quote>into another Coverdell education savings account</quote>.</text> </subsection><subsection id="H4CF4A090AD8A481B8CF202386296F88B"><enum>(d)</enum><header>Distributions from qualified tuition programs for certain expenses associated with registered apprenticeship programs</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/529">Section 529(e)(3)</external-xref> is amended by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="H430F7F5BA9694E25836D99BFB18E6423" style="OLC"> <subparagraph id="H34568B5F485C408F8B83C8ACE66269B3"><enum>(C)</enum><header>Certain expenses associated with registered apprenticeship programs</header><text display-inline="yes-display-inline">The term <quote>qualified higher education expenses</quote> shall include books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary in an apprenticeship program registered and certified with the Secretary of Labor under section 1 of the National Apprenticeship Act (<external-xref legal-doc="usc" parsable-cite="usc/29/50">29 U.S.C. 50</external-xref>).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H5307514C599C4E09A5955B59C4846FDB"><enum>(e)</enum><header>Unborn children allowed as account beneficiaries</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/529">Section 529(e)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HE86642CD62A3459EA63432D94DF078BB" style="OLC"> <paragraph id="H70E7E991E77D4F4C972E5964EF1D39BC"><enum>(6)</enum><header>Treatment of unborn children</header> <subparagraph id="HB4246EB7E1874EA5BE79EE9FF0E3F1FD"><enum>(A)</enum><header>In general</header><text>Nothing shall prevent an unborn child from being treated as a designated beneficiary or an individual under this section.</text> </subparagraph><subparagraph id="H51D1E233F8F84D26BE65D9161F75A16F"><enum>(B)</enum><header>Unborn child</header><text display-inline="yes-display-inline">For purposes of this paragraph—</text> <clause id="HB9026A69071C48AEBC542508A3FA2716"><enum>(i)</enum><header>In general</header><text>The term <quote>unborn child</quote> means a child in utero.</text> </clause><clause id="HFCD30604CB6F4309BFC6CF0E73230838"><enum>(ii)</enum><header>Child in utero</header><text>The term <quote>child in utero</quote> means a member of the species homo sapiens, at any stage of development, who is carried in the womb.</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="H8982558243954E77917E6598D82F57FA"><enum>(f)</enum><header>Effective dates</header> <paragraph commented="no" id="H5ED659C46D2B484195C61A1D9E91DB97"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except as otherwise provided in this subsection, the amendments made by this section shall apply to contributions made after December 31, 2017.</text> </paragraph><paragraph commented="no" id="HDDFBB28E1F674A3186136C6E8D74189F"><enum>(2)</enum><header>Rollovers to qualified tuition programs</header><text>The amendments made by subsection (b) shall apply to distributions after December 31, 2017.</text> </paragraph></subsection></section><section commented="no" id="H58C35245C25544099C5CEA1337BE8E9D"><enum>1203.</enum><header>Reforms to discharge of certain student loan indebtedness</header> <subsection commented="no" id="H1FDABAD435264537BF36F3F8AD14B4F0"><enum>(a)</enum><header>Treatment of student loans discharged on account of death or disability</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/108">Section 108(f)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H3014C71D6045486AADBA19D8E129504E" style="OLC"> <paragraph commented="no" id="H221834920E9B4FC2B21A03ADD476661B"><enum>(5)</enum><header>Discharges on account of death or disability</header> <subparagraph commented="no" id="HB72F0B9824E94529949B19365B393F78"><enum>(A)</enum><header>In general</header><text>In the case of an individual, gross income does not include any amount which (but for this subsection) would be includible in gross income by reasons of the discharge (in whole or in part) of any loan described in subparagraph (B) if such discharge was—</text> <clause commented="no" id="HCF1220765ED84EF08C55C582C8835809"><enum>(i)</enum><text>pursuant to subsection (a) or (d) of section 437 of the Higher Education Act of 1965 or the parallel benefit under part D of title IV of such Act (relating to the repayment of loan liability),</text> </clause><clause commented="no" id="HF6F0C3924F28429AA123B5129F6FB53C"><enum>(ii)</enum><text>pursuant to section 464(c)(1)(F) of such Act, or</text> </clause><clause commented="no" id="H25EC17FC45454EEF832E3A5E8856908F"><enum>(iii)</enum><text>otherwise discharged on account of the death or total and permanent disability of the student.</text> </clause></subparagraph><subparagraph commented="no" id="H24956D6A9E804A7FBCA818889D4C7490"><enum>(B)</enum><header>Loans described</header><text>A loan is described in this subparagraph if such loan is—</text> <clause commented="no" id="HB4C545C41BB940BC8C4BF0141EB0586D"><enum>(i)</enum><text>a student loan (as defined in paragraph (2)), or</text> </clause><clause commented="no" id="H8F5B7A18058C497F89394486903BE7F2"><enum>(ii)</enum><text>a private education loan (as defined in section 140(7) of the Consumer Credit Protection Act (<external-xref legal-doc="usc" parsable-cite="usc/15/1650">15 U.S.C. 1650(7)</external-xref>)).</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="HC0369F2F870A4D969ACA7381A409B2B3"><enum>(b)</enum><header>Exclusion from gross income for payments made under indian health service loan repayment program</header> <paragraph commented="no" id="HE6986A1A80F04FE3BA4124EB0D5195C1"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/108">Section 108(f)(4)</external-xref> is amended by inserting <quote>under section 108 of the Indian Health Care Improvement Act,</quote> after <quote>338I of such Act,</quote>.</text> </paragraph><paragraph commented="no" id="H23306DB29ADF4D88A0E1C21853279F31"><enum>(2)</enum><header>Clerical amendment</header><text>The heading for <external-xref legal-doc="usc" parsable-cite="usc/26/108">section 108(f)(4)</external-xref> is amended by striking <quote><header-in-text level="paragraph" style="OLC">and certain</header-in-text></quote> and inserting <quote><header-in-text level="paragraph" style="OLC">, indian health service loan repayment program, and certain</header-in-text></quote>.</text> </paragraph></subsection><subsection commented="no" id="H7C6F05EE5ED34BEDB4B7B5C99F877A92"><enum>(c)</enum><header>Effective dates</header> <paragraph commented="no" id="H3F236C4DA9B548FC92138AAAD3408C4C"><enum>(1)</enum><header>Subsection <enum-in-header>(a)</enum-in-header></header><text display-inline="yes-display-inline">The amendment made by subsection (a)(1) shall apply to discharges of indebtedness after December 31, 2017.</text> </paragraph><paragraph commented="no" id="HA4FC6C34422540F49A3998861EC5EC0A"><enum>(2)</enum><header>Subsection <enum-in-header>(b)</enum-in-header></header><text>The amendments made by subsection (b) shall apply to amounts received in taxable years beginning after December 31, 2017.</text> </paragraph></subsection></section><section commented="no" id="H5F7188823C4742BFA2270A124B86E59F"><enum>1204.</enum><header>Repeal of other provisions relating to education</header> <subsection commented="no" id="HF515DD0384E247319B18715737AD95F1"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended—</text> <paragraph commented="no" id="HA80262BD903941468970B258003680B4"><enum>(1)</enum><text display-inline="yes-display-inline">in part VII by striking sections 221 and 222 (and by striking the items relating to such sections in the table of sections for such part),</text> </paragraph><paragraph commented="no" id="H6092D01F579C4F67A96CC88BC01F6B5E"><enum>(2)</enum><text display-inline="yes-display-inline">in part VII by striking sections 135 and 127 (and by striking the items relating to such sections in the table of sections for such part), and</text> </paragraph><paragraph commented="no" id="H6C44C83EEC704EA8B222B1D15AF9A060"><enum>(3)</enum><text>by striking subsection (d) of section 117.</text> </paragraph></subsection><subsection commented="no" id="H967B96BA99A449D0B819579B7CB97FBE"><enum>(b)</enum><header>Conforming amendment relating to section <enum-in-header>221</enum-in-header></header> <paragraph commented="no" id="H95527C975DD64D86A1003E1F2AB50F47"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/62">Section 62(a)</external-xref> is amended by striking paragraph (17).</text> </paragraph><paragraph id="H00E1CECE8F004920BBFABB32451DEA54"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/74">Section 74(d)</external-xref> is amended by striking <quote>221,</quote>.</text> </paragraph><paragraph id="H4741ED002D4F4023A85D3BC975B27537"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/86">Section 86(b)(2)(A)</external-xref> is amended by striking <quote>221,</quote>.</text> </paragraph><paragraph id="H6C0CA5BD147F4ACAB3FB02323D0CE88D"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/219">Section 219(g)(3)(A)(ii)</external-xref> is amended by striking <quote>221,</quote>.</text> </paragraph><paragraph commented="no" id="H51EA0AA33C5D4D65AB39077E9E96B013"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/163">Section 163(h)(2)</external-xref> is amended by striking subparagraph (F).</text> </paragraph><paragraph id="H3FE3833F79B34BB79D7B209A70078786"><enum>(6)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6050S">Section 6050S(a)</external-xref> is amended—</text> <subparagraph id="HF9BDCC78FEE14E6E95F1A56BD5EF4735"><enum>(A)</enum><text>by inserting <quote>or</quote> at the end of paragraph (1),</text> </subparagraph><subparagraph id="HAB014CC20D9E4E5499BAC17E94FA6C2B"><enum>(B)</enum><text>by striking <quote>or</quote> at the end of paragraph (2), and</text> </subparagraph><subparagraph id="H08D5C4462C854D6EBDA0AA9267297DE0"><enum>(C)</enum><text>by striking paragraph (3).</text> </subparagraph></paragraph><paragraph id="HF7A149B243AD4058BCBCBAD82655FAEB"><enum>(7)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6050S">Section 6050S(e)</external-xref> is amended by striking all that follows <quote>thereof)</quote> and inserting a period.</text> </paragraph></subsection><subsection id="H7D3FBF82150D420B91DF8185FA75295D"><enum>(c)</enum><header>Conforming amendments related to section 222</header> <paragraph id="H4A298E49A701475087445190F4A31EB8"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/62">Section 62(a)</external-xref> is amended by striking paragraph (18).</text> </paragraph><paragraph id="H3F8171C1CA484F2D8B0CE933109285F5"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/74">Section 74(d)(2)(B)</external-xref> is amended by striking <quote>222,</quote>.</text> </paragraph><paragraph id="HE56D4D47735C4EC9BBF069CD6B2B1E5F"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/86">Section 86(b)(2)(A)</external-xref> is amended by striking <quote>222,</quote>.</text> </paragraph><paragraph id="HE5A6FCF2ECF149499A2A3913B41026C2"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/219">Section 219(g)(3)(A)(ii)</external-xref> is amended by striking <quote>222,</quote>.</text> </paragraph></subsection><subsection commented="no" id="H02DFC7A273F740E69DA65F2BF982B526"><enum>(d)</enum><header>Conforming amendments relating to section <enum-in-header>127</enum-in-header></header> <paragraph commented="no" id="HB4ACBDC3988343FC91E4B4DAE8BE490D"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/125">Section 125(f)(1)</external-xref> is amended by striking <quote>127,</quote>.</text> </paragraph><paragraph commented="no" id="HB63F328AE0BE4D3EA5FB2E4F28E4CF5A"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/132">Section 132(j)(8)</external-xref> is amended by striking <quote>which are not excludable from gross income under section 127</quote>.</text> </paragraph><paragraph commented="no" id="HD65AA7077D8343C68F7013F3A88E83AF"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/414">Section 414(n)(3)(C)</external-xref> is amended by striking <quote>127,</quote>.</text> </paragraph><paragraph commented="no" id="H7DEAA9C359984A61BBA09E4C2B0149D3"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/414">Section 414(t)(2)</external-xref> is amended by striking <quote>127,</quote>.</text> </paragraph><paragraph commented="no" id="H005468FEB0AD4998981F486EA85C43BC"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3121">Section 3121(a)(18)</external-xref> is amended by striking <quote>127,</quote>.</text> </paragraph><paragraph commented="no" id="H6148E35D80A3493E83A1716F28B01059"><enum>(6)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3231">Section 3231(e)</external-xref> is amended by striking paragraph (6).</text> </paragraph><paragraph commented="no" id="H8D78AF0739DC4B7D8DF763F00BD3E565"><enum>(7)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/3306">Section 3306(b)(13)</external-xref> is amended by <quote>127,</quote>.</text> </paragraph><paragraph commented="no" id="H722BBE24E33846C1B10989223F13A5AD"><enum>(8)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3401">Section 3401(a)(18)</external-xref> is amended by striking <quote>127,</quote>.</text> </paragraph><paragraph commented="no" id="HDDC1C18774764B5290A20EE935474907"><enum>(9)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6039D">Section 6039D(d)(1)</external-xref> is amended by striking <quote>, 127</quote>.</text> </paragraph></subsection><subsection commented="no" id="H894768D1CB80497D8B8D66C45C712642"><enum>(e)</enum><header>Conforming amendments relating to section <enum-in-header>117(d)</enum-in-header></header> <paragraph commented="no" id="H4DC6DF814BE74D138D2D4C5FF35699F4"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/117">Section 117(c)(1)</external-xref> is amended—</text> <subparagraph commented="no" id="HA71A4158B24A460486144E22406E5DBA"><enum>(A)</enum><text>by striking <quote>subsections (a) and (d)</quote> and inserting <quote>subsection (a)</quote>, and</text> </subparagraph><subparagraph commented="no" id="H6159EEE21BC848129DE688135947668E"><enum>(B)</enum><text>by striking <quote>or qualified tuition reduction</quote>.</text> </subparagraph></paragraph><paragraph commented="no" id="H31E5891124F24412989E3E29D7C6854E"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/414">Section 414(n)(3)(C)</external-xref> is amended by striking <quote>117(d),</quote>.</text> </paragraph><paragraph commented="no" id="HD72F33E7E6D94E77A3BB46D86E2CD009"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/414">Section 414(t)(2)</external-xref> is amended by striking <quote>117(d),</quote>.</text> </paragraph></subsection><subsection id="HD79F95F268D045568996AA5D32814CFA"><enum>(f)</enum><header>Conforming amendments related to section 135</header> <paragraph id="H3E666B1D5852474FA01738FA34D77F70"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/74">Section 74(d)(2)(B)</external-xref> is amended by striking <quote>135,</quote>.</text> </paragraph><paragraph id="HA0134EFEC8874C1AB5BF024159E9D3EF"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/86">Section 86(b)(2)(A)</external-xref> is amended by striking <quote>135,</quote>.</text> </paragraph><paragraph id="HF0EADF149D1A4742AF89D0343903F035"><enum>(3)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/219">Section 219(g)(3)(A)(ii)</external-xref> is amended by striking <quote>135,</quote>.</text> </paragraph></subsection><subsection commented="no" id="H21556EEF8F6F41A7BB19006EBD90858C"><enum>(g)</enum><header>Effective dates</header> <paragraph commented="no" id="HCC7F8F0ADC1C4D9C8202A8258E81BD87"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </paragraph><paragraph commented="no" id="H0B90383BF7484045B810F9F9F99F1C2F"><enum>(2)</enum><header>Amendments relating to section <enum-in-header>117(d)</enum-in-header></header><text>The amendments made by subsections (a)(3) and (e) shall apply to amounts paid or incurred after December 31, 2017.</text> </paragraph></subsection></section><section id="H3045371448A74C32A1229EF7B95B5594"><enum>1205.</enum><header>Rollovers between qualified tuition programs and qualified ABLE programs</header> <subsection id="H41D9393880CC4E6FBF97C6A275586561"><enum>(a)</enum><header>Rollovers from qualified tuition programs to qualified ABLE programs</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/529">Section 529(c)(3)(C)(i)</external-xref> is amended by striking <quote>or</quote> at the end of subclause (I), by striking the period at the end of subclause (II) and inserting <quote>, or</quote>, and by adding at the end the following new subclause:</text> <quoted-block id="H0366BE9CFBA748D4A0B9E86DCA91EC5A" style="OLC"> <subclause id="H9BF360F5C7284267A3EB0529EBA7900E"><enum>(III)</enum><text>to an ABLE account (as defined in section 529A(e)(6)) of the designated beneficiary or a member of the family of the designated beneficiary.</text> </subclause><quoted-block-continuation-text quoted-block-continuation-text-level="clause">Subclause (III) shall not apply to so much of a distribution which, when added to all other contributions made to the ABLE account for the taxable year, exceeds the limitation under section 529A(b)(2)(B).</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HD3139428CCB142FAA3B598EF1ECBC498"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to distributions after December 31, 2017.</text> </subsection></section></subtitle><subtitle id="H7D253016911F4BF5B4660CCD009DA3A0"><enum>D</enum><header>Simplification and reform of deductions</header> <section id="HDEE1FEF792D34504A3FAD11CCE5364E0"><enum>1301.</enum><header>Repeal of overall limitation on itemized deductions</header> <subsection id="HB64679BA96424197AF3454E3401D4C26"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part 1 of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 68 (and the item relating to such section in the table of sections for such part).</text> </subsection><subsection id="HD90BD2F730064B48BEC71C943AA5EF1A"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H27094C9BF5354A2EAE428CBE2A431995"><enum>1302.</enum><header>Mortgage interest</header> <subsection id="HE4BC04EBAD694DA3B91114FC35B0B91C"><enum>(a)</enum><header>Modification of limitations</header> <paragraph id="HFA51D6B22C4A4D56B1BA8AF52CD41101"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/163">Section 163(h)(3)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H7532F66C960441428966DE4C3599DD32" style="OLC"> <paragraph id="H29C6AD93FDEA4E98883E11168D2A2C8B"><enum>(3)</enum><header>Qualified residence interest</header><text display-inline="yes-display-inline">For purposes of this subsection—</text> <subparagraph id="HC4D95B5D05D34AD7A56E71371877EC44"><enum>(A)</enum><header>In general</header><text>The term <quote>qualified residence interest</quote> means any interest which is paid or accrued during the taxable year on indebtedness which—</text> <clause id="HD45D35DF9430413BA8B70C99C05F82FB"><enum>(i)</enum><text>is incurred in acquiring, constructing, or substantially improving any qualified residence (determined as of the time the interest is accrued) of the taxpayer, and</text> </clause><clause id="HA8D844AEDEF24ED7B09F8CB6725D03DF"><enum>(ii)</enum><text>is secured by such residence.</text> </clause><continuation-text continuation-text-level="subparagraph">Such term also includes interest on any indebtedness secured by such residence resulting from the refinancing of indebtedness meeting the requirements of the preceding sentence (or this sentence); but only to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness.</continuation-text></subparagraph><subparagraph id="H4CC6CE7954444568A268DE5DB57C3BD7"><enum>(B)</enum><header>Limitation</header><text display-inline="yes-display-inline">The aggregate amount of indebtedness taken into account under subparagraph (A) for any period shall not exceed $500,000 (half of such amount in the case of a married individual filing a separate return).</text> </subparagraph><subparagraph id="H68F1D903EE404707A2F854CC97186FD3"><enum>(C)</enum><header>Treatment of indebtedness incurred on or before November 2, 2017</header> <clause id="HFF51B851416E42B19578B11DC7AECA8C"><enum>(i)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any pre-November 2, 2017, indebtedness, this paragraph shall apply as in effect immediately before the enactment of the <short-title>Tax Cuts and Jobs Act</short-title>.</text> </clause><clause id="HDC30B6699ACC463E977DB82B1CCEE6E3"><enum>(ii)</enum><header>Pre-November 2, 2017, indebtedness</header><text>For purposes of this subparagraph, the term <quote>pre-November 2, 2017, indebtedness</quote> means—</text> <subclause id="H0E01E9E301834F868F6A823874A5233D"><enum>(I)</enum><text display-inline="yes-display-inline">any principal residence acquisition indebtedness which was incurred on or before November 2, 2017, or</text> </subclause><subclause id="H1CD8533E99FC49AAA37EC5B3E1139BFC"><enum>(II)</enum><text display-inline="yes-display-inline">any principal residence acquisition indebtedness which is incurred after November 2, 2017, to refinance indebtedness described in clause (i) (or refinanced indebtedness meeting the requirements of this clause) to the extent (immediately after the refinancing) the principal amount of the indebtedness resulting from the refinancing does not exceed the principal amount of the refinanced indebtedness (immediately before the refinancing).</text> </subclause></clause><clause id="HB84D424301CB4CFA9222318DC6AE2733"><enum>(iii)</enum><header>Limitation on period of refinancing</header><text>clause (ii)(II) shall not apply to any indebtedness after—</text> <subclause id="H792E2FADB66E4B3B9D9D6F7D56AF91BD"><enum>(I)</enum><text>the expiration of the term of the original indebtedness, or</text> </subclause><subclause id="H89D7293D00494C7A943D642B55ACA709"><enum>(II)</enum><text>if the principal of such original indebtedness is not amortized over its term, the expiration of the term of the 1st refinancing of such indebtedness (or if earlier, the date which is 30 years after the date of such 1st refinancing).</text> </subclause></clause><clause id="H9BE42F50F5824897B66F4E70B7AF8103"><enum>(iv)</enum><header>Binding contract exception</header><text display-inline="yes-display-inline">In the case of a taxpayer who enters into a written binding contract before November 2, 2017, to close on the purchase of a principal residence before January 1, 2018, and who purchases such residence before April 1, 2018, subparagraphs (A) and (B) shall be applied by substituting <quote>April 1, 2018</quote> for <quote>November 2, 2017</quote>.</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H49975FE05DC6462EB00557F52CEA1958"><enum>(2)</enum><header>Conforming amendments</header> <subparagraph commented="no" id="H110632BD6B884D7494F3F7974EE0A15A"><enum>(A)</enum><text display-inline="yes-display-inline">Section 108(h)(2) is by striking <quote>for <quote>$1,000,000 ($500,000</quote> in clause (ii) thereof</quote> and inserting <quote>for <quote>$500,000 ($250,000</quote> in paragraph (2)(A), and <quote>$1,000,000</quote> for <quote>$500,000</quote> in paragraph (2)(B), thereof</quote>.</text> </subparagraph><subparagraph id="H62A5A850C60D4304B7D7830BF17BD7A7"><enum>(B)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/163">Section 163(h)</external-xref> is amended by striking subparagraphs (E) and (F) in paragraph (4).</text> </subparagraph></paragraph></subsection><subsection id="H647DD28B8F904AF085825A68D62C38B5"><enum>(b)</enum><header>Taxpayers limited to 1 qualified residence</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/163">Section 163(h)(4)(A)(i)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H07F01060003A4CF6AC20553E25F7ED08" style="OLC"> <clause id="HA1F8E29F526F4D26997A06C6EC978732"><enum>(i)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>qualified residence</quote> means the principal residence (within the meaning of section 121) of the taxpayer.</text></clause><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H1C4A5C9E55794243A0E7229E5E9CF8A3"><enum>(c)</enum><header>Effective dates</header> <paragraph id="HECC2D7229A51465DBC988E808ADC324B"><enum>(1)</enum><header>In general</header><text>The amendments made by this section shall apply to interest paid or accrued in taxable years beginning after December 31, 2017, with respect to indebtedness incurred before, on, or after such date.</text> </paragraph><paragraph id="H743D28565C6449EEAD33627EF1D2D032"><enum>(2)</enum><header>Treatment of grandfathered indebtedness</header><text>For application of the amendments made by this section to grandfathered indebtedness, see paragraph (3)(C) of <external-xref legal-doc="usc" parsable-cite="usc/26/163">section 163(h)</external-xref> of the Internal Revenue Code of 1986, as amended by this section.</text> </paragraph></subsection></section><section id="HF5C50CFB476E4016B870FE9502AE2545"><enum>1303.</enum><header>Repeal of deduction for certain taxes not paid or accrued in a trade or business</header> <subsection id="H50D311D0B4BD445B85CDC40E865B2081"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/164">Section 164(b)(5)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HFA50AD3A27CC43DD93EC5A0E44CB6200" style="OLC"> <paragraph id="H943C35BBB6F24F968ECB253CE7897BC7"><enum>(5)</enum><header>Limitation in case of individuals</header><text display-inline="yes-display-inline">In the case of a taxpayer other than a corporation—</text> <subparagraph id="H8762B7CCB0064BBD964D4373750A00B7"><enum>(A)</enum><text display-inline="yes-display-inline">foreign real property taxes (other than taxes which are paid or accrued in carrying on a trade or business or an activity described in section 212) shall not be taken into account under subsection (a)(1),</text> </subparagraph><subparagraph id="HEFD027AB57F040CB8EDFB5723F2213F4"><enum>(B)</enum><text>the aggregate amount of taxes (other than taxes which are paid or accrued in carrying on a trade or business or an activity described in section 212) taken into account under subsection (a)(1) for any taxable year shall not exceed $10,000 ($5,000 in the case of a married individual filing a separate return),</text> </subparagraph><subparagraph id="HDBB07D99ACBB4EF1947969B41980F67E"><enum>(C)</enum><text>subsection (a)(2) shall only apply to taxes which are paid or accrued in carrying on a trade or business or an activity described in section 212, and</text> </subparagraph><subparagraph id="HD3589F8580E946C89444AB1C101927E0"><enum>(D)</enum><text>subsection (a)(3) shall not apply to State and local taxes.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H0247DDECFD52419EA23747A4BF6EEDD0"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section commented="no" id="H4EB3464715A44615987814FE0E08C6CD"><enum>1304.</enum><header>Repeal of deduction for personal casualty losses</header> <subsection commented="no" id="H86EB2B75B13C448590D4914CB49227B7"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/165">Section 165(c)</external-xref> is amended by inserting <quote>and</quote> at the end of paragraph (1), by striking <quote>; and</quote> at the end of paragraph (2) and inserting a period, and by striking paragraph (3).</text> </subsection><subsection commented="no" id="H56BD3C4AAB334D8B92F18E9DA4A8A807"><enum>(b)</enum><header>Conforming amendments</header> <paragraph commented="no" id="H3B27585E481543BC831C981262025359"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/165">Section 165(h)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H7ABC767AF3924EDE9F38161B61B38E4C" style="OLC"> <subsection id="HF744B80B760A41E6804F974FF4C6B05C"><enum>(h)</enum><header>Special rule where personal casualty gains exceed personal casualty losses</header> <paragraph id="H626A64E8EF10470B873EF1FA03CF2536"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">If the personal casualty gains for any taxable year exceed the personal casualty losses for such taxable year—</text> <subparagraph id="H100B7D3DCA3D4428A0A9CA2FCE92AE5C"><enum>(A)</enum><text>all such gains shall be treated as gains from sales or exchanges of capital assets, and</text> </subparagraph><subparagraph id="H2708D18E951041D7B1C92FBE5012C280"><enum>(B)</enum><text>all such losses shall be treated as losses from sales or exchanges of capital assets.</text> </subparagraph></paragraph><paragraph id="H9C0A7F4CC5244518AFC2ECD24FF6FEFF"><enum>(2)</enum><header>Definitions of personal casualty gain and personal casualty loss</header><text display-inline="yes-display-inline">For purposes of this subsection—</text> <subparagraph id="H62D0F7813698496C87B40346BCFC0ABF"><enum>(A)</enum><header>Personal casualty loss</header><text display-inline="yes-display-inline">The term <quote>personal casualty loss</quote> means any loss of property not connected with a trade or business or a transaction entered into for profit, if such loss arises from fire, storm, shipwreck, or other casualty, or from theft.</text> </subparagraph><subparagraph id="H73C1FF8B200148C88F998E64A3D55030"><enum>(B)</enum><header>Personal casualty gain</header><text>The term <quote>personal casualty gain</quote> means the recognized gain from any involuntary conversion of property which is described in subparagraph (A) arising from fire, storm, shipwreck, or other casualty, or from theft.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HAACF62B3049B42AC80276CE9215E5045"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/165">Section 165</external-xref> is amended by striking subsection (k).</text> </paragraph><paragraph commented="no" id="HAAC02D21086A408A98DE871BA4B65C73"><enum>(3)</enum> <subparagraph commented="no" display-inline="yes-display-inline" id="H61B68E83691541C4BD9B28B040946FE9"><enum>(A)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/165">Section 165(l)(1)</external-xref> is amended by striking <quote>a loss described in subsection (c)(3)</quote> and inserting <quote>an ordinary loss described in subsection (c)(2)</quote>.</text> </subparagraph><subparagraph commented="no" id="HA5A92EEB1A504F38AFC3D2452C14C0FC" indent="up1"><enum>(B)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/165">Section 165(l)</external-xref> is amended—</text> <clause commented="no" id="H04414B88127741F5832D8D929CF911D6"><enum>(i)</enum><text>by striking paragraph (5),</text> </clause><clause commented="no" id="H20672B4FC3E24BA0871632C7B49F01F8"><enum>(ii)</enum><text>by redesignating paragraphs (2), (3), and (4) as paragraphs (3), (4), and (5), respectively, and</text> </clause><clause commented="no" id="HC57CABF8DBD24E8E90E0F755EE8EB804"><enum>(iii)</enum><text>by inserting after paragraph (1) the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HD9DB6ED87FD541B9B186F25E864C4E21" style="OLC"> <paragraph commented="no" id="H3347D595DC02411A9BF42742B0E7BCA3"><enum>(2)</enum><header>Limitations</header> <subparagraph commented="no" id="H5E262F8030734F3CA82FB3279C276846"><enum>(A)</enum><header>Deposit may not be federally insured</header><text display-inline="yes-display-inline">No election may be made under paragraph (1) with respect to any loss on a deposit in a qualified financial institution if part or all of such deposit is insured under Federal law.</text> </subparagraph><subparagraph commented="no" id="H4FAF07F8DA834E85B380F4364E1569A7"><enum>(B)</enum><header>Dollar limitation</header><text>With respect to each financial institution, the aggregate amount of losses attributable to deposits in such financial institution to which an election under paragraph (1) may be made by the taxpayer for any taxable year shall not exceed $20,000 ($10,000 in the case of a separate return by a married individual). The limitation of the preceding sentence shall be reduced by the amount of any insurance proceeds under any State law which can reasonably be expected to be received with respect to losses on deposits in such institution.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </clause></subparagraph></paragraph><paragraph commented="no" id="HB741D05C9D9D4000AA7A8964A4541233"><enum>(4)</enum><text>Section 172(b)(1)(E)(ii), prior to amendment under title III, is amended by striking subclause (I) and by redesignating subclauses (II) and (III) as subclauses (I) and (II), respectively.</text> </paragraph><paragraph commented="no" id="H80C1D3E7F028407E85D9A1E9D2ED4AD1"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/172">Section 172(d)(4)(C)</external-xref> is amended by striking <quote>paragraph (2) or (3) of section 165(c)</quote> and inserting <quote>section 165(c)(2)</quote>.</text> </paragraph><paragraph commented="no" id="HE854F685472242C798CA326508E0FB81"><enum>(6)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/274">Section 274(f)</external-xref> is amended by striking <quote><header-in-text level="subsection" style="OLC">casualty losses,</header-in-text></quote> in the heading thereof.</text> </paragraph><paragraph commented="no" id="HCD44D0FFF4894FEE8E3BB937044F9DB0"><enum>(7)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/280A">Section 280A(b)</external-xref> is amended by striking <quote><header-in-text level="subsection" style="OLC">casualty losses,</header-in-text></quote> in the heading thereof.</text> </paragraph><paragraph commented="no" id="H868FA8D7405D489FA6A2ABACEB276725"><enum>(8)</enum><text>Section 873(b), as amended by the preceding provisions of this Act, is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively.</text> </paragraph><paragraph id="H177AD44CB945479AA37F7BB447C62373"><enum>(9)</enum><text>Section 504(b) of the Disaster Tax Relief and Airport and Airway Extension Act of 2017 is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HFE29C4C5D9FA4ACEA406852A8628C944" style="OLC"> <paragraph id="HB79E807D026D4E1EA52116E83CD171E5"><enum>(4)</enum><header>Coordination with Tax Reform</header><text display-inline="yes-display-inline">This subsection shall be applied without regard to the amendments made by section 1304 of the <short-title>Tax Cuts and Jobs Act</short-title>.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection commented="no" id="HA7E3E79398DC4AEB9F0BB27EA24CC5AB"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H6A1782C849E94580AA99958185508634"><enum>1305.</enum><header>Limitation on wagering losses</header> <subsection commented="no" id="H8A846E1597E64C96BEF94649BE060FD4"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/165">Section 165(d)</external-xref> is amended by adding at the end the following: <quote>For purposes of the preceding sentence, the term <quote>losses from wagering transactions</quote> includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction.</quote>.</text> </subsection><subsection id="HB75ABF7E45C0434CB939385A32CF4A09"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H286A3EB7EF6F4551AB7D1F81430B0FFA" section-type="subsequent-section"><enum>1306.</enum><header>Charitable contributions</header> <subsection id="H967001543BBC4665AAE9898C59B20CDD"><enum>(a)</enum><header>Increased limitation for cash contributions</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/170">Section 170(b)(1)</external-xref> is amended by redesignating subparagraph (G) as subparagraph (H) and by inserting after subparagraph (F) the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="H698F613E20CA42F8B44860F68E5F2324" style="OLC"> <subparagraph id="H231C9C38F5894D6E844DA29E53781ABA"><enum>(G)</enum><header>Increased limitation for cash contributions</header> <clause id="H1AECF638E0BA4607A3408FDBC26A41A4"><enum>(i)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any contribution of cash to an organization described in subparagraph (A), the total amount of such contributions which may be taken into account under subsection (a) for any taxable year shall not exceed 60 percent of the taxpayer’s contribution base for such year.</text> </clause><clause id="H186AA00039F04A3AA216236E1A6EC26F"><enum>(ii)</enum><header>Carryover</header><text display-inline="yes-display-inline">If the aggregate amount of contributions described in clause (i) exceeds the applicable limitation under clause (i), such excess shall be treated (in a manner consistent with the rules of subsection (d)(1)) as a charitable contribution to which clause (i) applies in each of the 5 succeeding years in order of time.</text> </clause><clause id="HC5558D17FB5E40FD804A15FB2CB4BBFD"><enum>(iii)</enum><header>Coordination with subparagraphs <enum-in-header>(A)</enum-in-header> and <enum-in-header>(B)</enum-in-header></header> <subclause id="HDA78D581DBE440249533D224B5AF3F46"><enum>(I)</enum><header>In general</header><text display-inline="yes-display-inline">Contributions taken into account under this subparagraph shall not be taken into account under subparagraph (A).</text> </subclause><subclause id="H2B66F293842C4B1BA53E4867C4C95471"><enum>(II)</enum><header>Limitation reduction</header><text display-inline="yes-display-inline">Subparagraphs (A) and (B) shall be applied by reducing (but not below zero) the aggregate contribution limitation allowed for the taxable year under each such subparagraph by the aggregate contributions allowed under this subparagraph for such taxable year.</text></subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H3698DC2545084E6584B4DE7F024C946E"><enum>(b)</enum><header>Denial of deduction for college athletic event seating rights</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/170">Section 170(l)(1)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H57507C2F6394448DA10D65D27ECB2596" style="OLC"> <paragraph id="H9518090386AE41E5895E0BE68D104F83"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">No deduction shall be allowed under this section for any amount described in paragraph (2).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H0592B66EA1624C0F8AD90FECE4797D1C"><enum>(c)</enum><header>Charitable mileage rate adjusted for inflation</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/170">Section 170(i)</external-xref> is amended by striking <quote>shall be 14 cents per mile</quote> and inserting <quote>shall be a rate which takes into account the variable cost of operating an automobile</quote>.</text> </subsection><subsection id="H1C0FD2B9EB1F400AA1AD2D122328B1D5"><enum>(d)</enum><header>Repeal of substantiation exception in case of contributions reported by donee</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/170">Section 170(f)(8)</external-xref> is amended by striking subparagraph (D) and by redesignating subparagraph (E) as subparagraph (D).</text> </subsection><subsection id="H9893EC8DCD3B47D6A42FF1CB6FE32BED"><enum>(e)</enum><header>Effective date</header><text>The amendments made by this section shall apply to contributions made in taxable years beginning after December 31, 2017.</text> </subsection></section><section commented="no" id="HE06160D8DB5847ED8BA884E1C826F1F4"><enum>1307.</enum><header>Repeal of deduction for tax preparation expenses</header> <subsection commented="no" id="H8E4BFDB1430C4DBDA3740919E07FEB03"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/212">Section 212</external-xref> is amended by adding <quote>or</quote> at the end of paragraph (1), by striking <quote>; or</quote> at the end of paragraph (2) and inserting a period, and by striking paragraph (3).</text> </subsection><subsection commented="no" id="HC2816030C67B4A2FAA55F1AEDD5CD7F6"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="HFED032278AA245A49102970494AD18B1"><enum>1308.</enum><header>Repeal of medical expense deduction</header> <subsection commented="no" id="H55B722822D514EEBB0F1C863160BE00F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VII of subchapter B is amended by striking by striking section 213 (and by striking the item relating to such section in the table of sections for such subpart).</text> </subsection><subsection id="HB10ADE8806224D839DABD46AFD9F5DBA"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="HA51AF9D4921447729926374710378D8A"><enum>(1)</enum> <subparagraph commented="no" display-inline="yes-display-inline" id="H23990F5B5EC14895A4A597BDFB687077"><enum>(A)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/105">Section 105(f)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HB57DB89A3C1A4B4697DAF5342B9FBBE2" style="OLC"> <subsection id="H1026A928F01041B7A60D8C7BBE3BF84F"><enum>(f)</enum><header>Medical care</header><text display-inline="yes-display-inline">For purposes of this section—</text> <paragraph id="H2B5E58E039914FD7BF43D4BD843A9810"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>medical care</quote> means amounts paid—</text> <subparagraph id="HA31C7D39575847E29792B76ADFB4E9D3"><enum>(A)</enum><text>for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,</text> </subparagraph><subparagraph id="H947D62A542E04058864FCEA303EE12F4"><enum>(B)</enum><text>for transportation primarily for and essential to medical care referred to in subparagraph (A),</text> </subparagraph><subparagraph id="H5051345BE2404B0BA84B041877159E52"><enum>(C)</enum><text>for qualified long-term care services (as defined in section 7702B(c)), or</text> </subparagraph><subparagraph id="H0A88503670C844D797ED81D1D6532F69"><enum>(D)</enum><text>for insurance (including amounts paid as premiums under part B of title XVIII of the Social Security Act, relating to supplementary medical insurance for the aged) covering medical care referred to in subparagraphs (A) and (B) or for any qualified long-term care insurance contract (as defined in section 7702B(b)).</text> </subparagraph><continuation-text continuation-text-level="paragraph">In the case of a qualified long-term care insurance contract (as defined in section 7702B(b)), only eligible long-term care premiums (as defined in paragraph (7)) shall be taken into account under subparagraph (D).</continuation-text></paragraph><paragraph id="H1BBC90F189964653B0F269E3DA842963"><enum>(2)</enum><header>Amounts paid for certain lodging away from home treated as paid for medical care</header><text display-inline="yes-display-inline">Amounts paid for lodging (not lavish or extravagant under the circumstances) while away from home primarily for and essential to medical care referred to in paragraph (1)(A) shall be treated as amounts paid for medical care if—</text> <subparagraph id="HD83CE7EA2BE841BFBA0E8FD5465BCF7C"><enum>(A)</enum><text>the medical care referred to in paragraph (1)(A) is provided by a physician in a licensed hospital (or in a medical care facility which is related to, or the equivalent of, a licensed hospital), and</text> </subparagraph><subparagraph id="H6BC5545C3601439BB439C103F9594900"><enum>(B)</enum><text>there is no significant element of personal pleasure, recreation, or vacation in the travel away from home.</text> </subparagraph><continuation-text continuation-text-level="paragraph">The amount taken into account under the preceding sentence shall not exceed $50 for each night for each individual.</continuation-text></paragraph><paragraph id="HA593B5C9A995495D96C88CA2E259A859"><enum>(3)</enum><header>Physician</header><text display-inline="yes-display-inline">The term <quote>physician</quote> has the meaning given to such term by section 1861(r) of the Social Security Act (<external-xref legal-doc="usc" parsable-cite="usc/42/1395x">42 U.S.C. 1395x(r)</external-xref>).</text> </paragraph><paragraph id="H9F92EBD9684D48D0B054885CC05876B3"><enum>(4)</enum><header>Contracts covering other than medical care</header><text display-inline="yes-display-inline">In the case of an insurance contract under which amounts are payable for other than medical care referred to in subparagraphs (A), (B) and (C) of paragraph (1)—</text> <subparagraph id="H25E00D3AAA0A4E479353A1F2B1BF9C81"><enum>(A)</enum><text>no amount shall be treated as paid for insurance to which paragraph (1)(D) applies unless the charge for such insurance is either separately stated in the contract, or furnished to the policyholder by the insurance company in a separate statement,</text> </subparagraph><subparagraph id="HF42268EFCCA044E3AC41950FF372484E"><enum>(B)</enum><text>the amount taken into account as the amount paid for such insurance shall not exceed such charge, and</text> </subparagraph><subparagraph id="HE018C34FC0784689987F3652EEF64E02"><enum>(C)</enum><text>no amount shall be treated as paid for such insurance if the amount specified in the contract (or furnished to the policyholder by the insurance company in a separate statement) as the charge for such insurance is unreasonably large in relation to the total charges under the contract.</text> </subparagraph></paragraph><paragraph id="H24946DE5F37942B1ABB1A2EC83CA4B34"><enum>(5)</enum><header>Certain pre-paid contracts</header><text>Subject to the limitations of paragraph (4), premiums paid during the taxable year by a taxpayer before he attains the age of 65 for insurance covering medical care (within the meaning of subparagraphs (A), (B), and (C) of paragraph (1)) for the taxpayer, his spouse, or a dependent after the taxpayer attains the age of 65 shall be treated as expenses paid during the taxable year for insurance which constitutes medical care if premiums for such insurance are payable (on a level payment basis) under the contract for a period of 10 years or more or until the year in which the taxpayer attains the age of 65 (but in no case for a period of less than 5 years).</text> </paragraph><paragraph id="H6CB435A61B3B45FEA03841126BF6B452"><enum>(6)</enum><header>Cosmetic surgery</header> <subparagraph id="H29D863E5342C402FB69870B6D6224E69"><enum>(A)</enum><header>In general</header><text>The term <quote>medical care</quote> does not include cosmetic surgery or other similar procedures, unless the surgery or procedure is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease.</text> </subparagraph><subparagraph id="H8A2485899D7C4EA7ADF60E6D6423BBD2"><enum>(B)</enum><header>Cosmetic surgery defined </header><text>For purposes of this paragraph, the term <quote>cosmetic surgery</quote> means any procedure which is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease.</text> </subparagraph></paragraph><paragraph id="HDB6FB655B340483AA650AC79463FC1F0"><enum>(7)</enum><header>Eligible long-term care premiums</header> <subparagraph id="H5E8830E121E74BF2B26FCBD28C951D47"><enum>(A)</enum><header>In general</header><text>For purposes of this section, the term <quote>eligible long-term care premiums</quote> means the amount paid during a taxable year for any qualified long-term care insurance contract (as defined in section 7702B(b)) covering an individual, to the extent such amount does not exceed the limitation determined under the following table:</text> <table line-rules="all-gen"> <tgroup cols="2"><colspec coldef="txt-no-ldr" colname="col1" min-data-value="1"></colspec><colspec coldef="txt-no-ldr" colname="col2" min-data-value="1"></colspec><thead> <row><entry>In the case of an individual with an attained age before the close of the taxable year of:</entry><entry>The limitation is:</entry></row></thead> <tbody> <row><entry>40 or less</entry><entry>$200</entry></row> <row><entry>More than 40 but not more than 50</entry><entry>$375</entry></row> <row><entry>More than 50 but not more than 60</entry><entry>$750</entry></row> <row><entry>More than 60 but not more than 70</entry><entry>$2,000</entry></row> <row><entry>More than 70</entry><entry>$2,500</entry></row></tbody></tgroup></table> </subparagraph><subparagraph id="HF2A03D0CD7944F579AC7D4BF5BB9650B"><enum>(B)</enum><header>Indexing</header> <clause id="H3DAC43DABAFB4907B464B5E87220ABF7"><enum>(i)</enum><header>In general</header><text>In the case of any taxable year beginning after 1997, each dollar amount in subparagraph (A) shall be increased by the medical care cost adjustment of such amount for such calendar year. Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $10.</text> </clause><clause id="H56AD7B9D553E47A48D3F4A0135134779"><enum>(ii)</enum><header>Medical care cost adjustment</header><text>For purposes of clause (i), the medical care cost adjustment for any calendar year is the adjustment prescribed by the Secretary, in consultation with the Secretary of Health and Human Services, for purposes of such clause. To the extent that CPI (as defined section 1(c)), or any component thereof, is taken into account in determining such adjustment, such adjustment shall be determined by taking into account C-CPI-U (as so defined), or the corresponding component thereof, in lieu of such CPI (or component thereof), but only with respect to the portion of such adjustment which relates to periods after December 31, 2017.</text> </clause></subparagraph></paragraph><paragraph id="H57B9EC40DE2F489D963E23A8D39B4A6F"><enum>(8)</enum><header>Certain payments to relatives treated as not paid for medical care</header><text>An amount paid for a qualified long-term care service (as defined in section 7702B(c)) provided to an individual shall be treated as not paid for medical care if such service is provided—</text> <subparagraph id="H3318C7FBE060496C9052A8B86E2166DF"><enum>(A)</enum><text>by the spouse of the individual or by a relative (directly or through a partnership, corporation, or other entity) unless the service is provided by a licensed professional with respect to such service, or</text> </subparagraph><subparagraph id="HA6F2E50F6E214BBFB83F47B5CEA33037"><enum>(B)</enum><text>by a corporation or partnership which is related (within the meaning of section 267(b) or 707(b)) to the individual.</text> </subparagraph><continuation-text continuation-text-level="paragraph">For purposes of this paragraph, the term <quote>relative</quote> means an individual bearing a relationship to the individual which is described in any of subparagraphs (A) through (G) of section 7706(d)(2). This paragraph shall not apply for purposes of subsection (b) with respect to reimbursements through insurance.</continuation-text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph><subparagraph id="H980AFFD3A13346BA9BC9B55CFD2B6F9D" indent="up1"><enum>(B)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/72">Section 72(t)(2)(D)(i)(III)</external-xref> is amended by striking <quote>section 213(d)(1)(D)</quote> and inserting <quote>section 105(f)(1)(D)</quote>.</text> </subparagraph><subparagraph id="HB24BA4D965684A6AB66761F1F5C48BAA" indent="up1"><enum>(C)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/104">Section 104(a)</external-xref> is amended by striking <quote>section 213(d)(1)</quote> in the last sentence and inserting <quote>section 105(f)(1)</quote>.</text> </subparagraph><subparagraph id="H32E3BC0B14CB4AA79685ECB9D9E51E3F" indent="up1"><enum>(D)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/105">Section 105(b)</external-xref> is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 105(f)</quote>.</text> </subparagraph><subparagraph id="HBC34C73399C64C0B8F1C7AEAE48D3150" indent="up1"><enum>(E)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/139D">Section 139D</external-xref> is amended by striking <quote>section 213</quote> and inserting <quote>section 223</quote>.</text> </subparagraph><subparagraph id="H399CE9623E6E45B5941EBC097554CABF" indent="up1"><enum>(F)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/162">Section 162(l)(2)</external-xref> is amended by striking <quote>section 213(d)(10)</quote> and inserting <quote>section 105(f)(7)</quote>.</text> </subparagraph><subparagraph id="H39F15184993E438E93039A44686ED207" indent="up1"><enum>(G)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/220">Section 220(d)(2)(A)</external-xref> is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 105(f)</quote>.</text> </subparagraph><subparagraph id="H1FC7F73CD7F64BA4B4E8E7CB8F925395" indent="up1"><enum>(H)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/223">Section 223(d)(2)(A)</external-xref> is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 105(f)</quote>.</text> </subparagraph><subparagraph id="HFB8386E680CA47B6A5D73F49150670EA" indent="up1"><enum>(I)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/419A">Section 419A(f)(2)</external-xref> is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 105(f)</quote>.</text> </subparagraph><subparagraph id="H799E083AE9A14AEDA6C1BCE246F6B189" indent="up1"><enum>(J)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/501">Section 501(c)(26)(A)</external-xref> is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 105(f)</quote>.</text> </subparagraph><subparagraph id="H2277FB39F69445F5B6305E82D0616331" indent="up1"><enum>(K)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/2503">Section 2503(e)</external-xref> is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 105(f)</quote>.</text> </subparagraph><subparagraph id="H4E7B7776B3234893800DC92B7A2B53B6" indent="up1"><enum>(L)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/4980B">Section 4980B(c)(4)(B)(i)(I)</external-xref> is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 105(f)</quote>.</text> </subparagraph><subparagraph id="H4CDD4EEC14514E38BCCA8CCC549F6BE1" indent="up1"><enum>(M)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6041">Section 6041(f)</external-xref> is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 105(f)</quote>.</text> </subparagraph><subparagraph id="H36FAC7004EA5496D907110D1493A8009" indent="up1"><enum>(N)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/7702B">Section 7702B(a)(2)</external-xref> is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 105(f)</quote>.</text> </subparagraph><subparagraph id="HED1206CE055744C09BC0D068D7BB0546" indent="up1"><enum>(O)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/7702B">Section 7702B(a)(4)</external-xref> is amended by striking <quote>section 213(d)(1)(D)</quote> and inserting <quote>section 105(f)(1)(D)</quote>.</text> </subparagraph><subparagraph id="HFBE45511244E4A049BBF0652DD324E2E" indent="up1"><enum>(P)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/7702B">Section 7702B(d)(5)</external-xref> is amended by striking <quote>section 213(d)(10)</quote> and inserting <quote>section 105(f)(7)</quote>.</text> </subparagraph><subparagraph id="H9DB174C6A2944106804E5D477C759EED" indent="up1"><enum>(Q)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/9832">Section 9832(d)(3)</external-xref> is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 105(f)</quote>.</text> </subparagraph></paragraph><paragraph id="H545458D759A4497A92246108AF181833"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/72">Section 72(t)(2)(B)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H19E0C009984F4DF7A3C974A2F60CB0BE" style="OLC"> <subparagraph id="H399EB32EE8474813AF810F3D61A79182"><enum>(B)</enum><header>Medical expenses</header><text display-inline="yes-display-inline">Distributions made to an individual (other than distributions described in subparagraph (A), (C), or (D) to the extent such distributions do not exceed the excess of—</text> <clause id="H548C8BBD88D3458DA56026EFC18AD6F5"><enum>(i)</enum><text>the expenses paid by the taxpayer during the taxable year, not compensated for by insurance or otherwise, for medical care (as defined in 105(f)) of the taxpayer, his spouse, or a dependent (as defined in section 7706, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), over</text> </clause><clause id="HAC35C1E7B187420CB39D04BD91522B38"><enum>(ii)</enum><text>10 percent of the taxpayer’s adjusted gross income.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HC7C6039B283E4D15B61B1768E2E6E2B9"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/162">Section 162(l)</external-xref> is amended by striking paragraph (3).</text> </paragraph><paragraph id="H50CDEA03BE034D1CAE147047E9F83D3A"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/402">Section 402(l)</external-xref> is amended by striking paragraph (7) and redesignating paragraph (8) as paragraph (7).</text> </paragraph><paragraph id="H5233DD4A584B426E8B3DAF6B9C373599"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/220">Section 220(f)</external-xref> is amended by striking paragraph (6).</text> </paragraph><paragraph id="H12872631C5D847D4BBA48FB8BE16CEF6"><enum>(6)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/223">Section 223(f)</external-xref> is amended by striking paragraph (6).</text> </paragraph><paragraph id="H99508B78E0DC4D198A44F9917B3F031F"><enum>(7)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/7702B">Section 7702B(e)</external-xref> is amended by striking paragraph (2).</text> </paragraph><paragraph id="H5515DBB829064D86987B1BB48069071F"><enum>(8)</enum><text>Section 7706(f)(7), as redesignated by this Act, is amended by striking <quote>sections 105(b), 132(h)(2)(B), and 213(d)(5)</quote> and inserting <quote>sections 105(b) and 132(h)(2)(B)</quote>.</text> </paragraph></subsection><subsection id="H94DA66FBA04D42E1945BCAAB880B74B8"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H1642B3B2640E4AD8AEC3664F698AAD5C"><enum>1309.</enum><header>Repeal of deduction for alimony payments</header> <subsection id="HF17AC29FE3C141BCA2A43554429FB7B9"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VII of subchapter B is amended by striking by striking section 215 (and by striking the item relating to such section in the table of sections for such subpart).</text> </subsection><subsection id="H29CD67452FB24A43B569EE75212B5D54"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="H8711F03506A3442CB000226C7A788746"><enum>(1)</enum><header>Corresponding repeal of provisions providing for inclusion of alimony in gross income</header> <subparagraph id="HBFF53CDFCC9C47CCA8A1397523D714E9"><enum>(A)</enum><text>Subsection (a) of <external-xref legal-doc="usc" parsable-cite="usc/26/61">section 61</external-xref> is amended by striking paragraph (8) and by redesignating paragraphs (9) through (15) as paragraphs (8) through (14), respectively.</text> </subparagraph><subparagraph id="H44B5776D699A4DD7A527717BAECE3302"><enum>(B)</enum><text>Part II of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 71 (and by striking the item relating to such section in the table of sections for such part).</text> </subparagraph><subparagraph id="H752790B93A1A4F84A19029B6EFDEC448"><enum>(C)</enum><text>Subpart F of part I of subchapter J of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 682 (and by striking the item relating to such section in the table of sections for such subpart).</text> </subparagraph></paragraph><paragraph id="HF775844650E34BAF921ED51458B91465"><enum>(2)</enum><header>Related to repeal of section <enum-in-header>215</enum-in-header></header> <subparagraph id="H58B9ED292F7C459EBDB9471E3831D838"><enum>(A)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/62">Section 62(a)</external-xref> is amended by striking paragraph (10).</text> </subparagraph><subparagraph id="HCA970E80C91641AB93D0EB6B85562EE0"><enum>(B)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3402">Section 3402(m)(1)</external-xref> is amended by striking <quote>(other than paragraph (10) thereof)</quote>.</text> </subparagraph></paragraph><paragraph id="H7A7F25CD49F44E4785219E0B65FB6786"><enum>(3)</enum><header>Related to repeal of section <enum-in-header>71</enum-in-header></header> <subparagraph id="H3FE9A3F707D143E185394D8C2B4F1156"><enum>(A)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/121">Section 121(d)(3)</external-xref> is amended—</text> <clause id="H22ADB8AD33B1439D8A401E9D0545C3DE"><enum>(i)</enum><text>by striking <quote>(as defined in section 71(b)(2))</quote> in subparagraph (B), and</text> </clause><clause id="H8B60E4C535384F10B50BC1C8AD8CEB63"><enum>(ii)</enum><text>by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="H359E9CF4C4724D5D959D76CA4EF263C3" style="OLC"> <subparagraph id="H67246AD2F4464F62B6F010641468602D"><enum>(C)</enum><header>Divorce or separation instrument</header><text display-inline="yes-display-inline">For purposes of this paragraph, the term <quote>divorce or separation instrument</quote> means—</text> <clause id="H9E7E107F441A472FA37F8B957746B650"><enum>(i)</enum><text display-inline="yes-display-inline">a decree of divorce or separate maintenance or a written instrument incident to such a decree,</text> </clause><clause id="H8C9E29C7FBCF4EDCB30B5BFB98FFB908"><enum>(ii)</enum><text>a written separation agreement, or</text> </clause><clause id="H5D5C64A93245459CB8619C2992DFF1EB"><enum>(iii)</enum><text>a decree (not described in clause (i)) requiring a spouse to make payments for the support or maintenance of the other spouse.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </clause></subparagraph><subparagraph id="H4560B93EF152484DB20DF6211387AB91"><enum>(B)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/220">Section 220(f)(7)</external-xref> is amended by striking <quote>subparagraph (A) of section 71(b)(2)</quote> and inserting <quote>clause (i) of section 121(d)(3)(C)</quote>.</text> </subparagraph><subparagraph id="HC52D6542B2804466B9EF0EDF52AB2241"><enum>(C)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/223">Section 223(f)(7)</external-xref> is amended by striking <quote>subparagraph (A) of section 71(b)(2)</quote> and inserting <quote>clause (i) of section 121(d)(3)(C)</quote>.</text> </subparagraph><subparagraph id="H349B00B690BD494E8EC60353417108DF"><enum>(D)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/382">Section 382(l)(3)(B)(iii)</external-xref> is amended by striking <quote>section 71(b)(2)</quote> and inserting <quote>section 121(d)(3)(C)</quote>.</text> </subparagraph><subparagraph id="HA0419D8A9E0242B6B96B074DE87113C2"><enum>(E)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/408">Section 408(d)(6)</external-xref> is amended by striking <quote>subparagraph (A) of section 71(b)(2)</quote> and inserting <quote>clause (i) of section 121(d)(3)(C)</quote>.</text> </subparagraph></paragraph></subsection><subsection id="H58EB40F7CC8C40459DB9145620E0FD73"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to—</text> <paragraph id="HB72568AB03E648CBB5DDEDC6C9F306D3"><enum>(1)</enum><text>any divorce or separation instrument (as defined in <external-xref legal-doc="usc" parsable-cite="usc/26/71">section 71(b)(2)</external-xref> of the Internal Revenue Code of 1986 as in effect before the date of the enactment of this Act) executed after December 31, 2017, and</text> </paragraph><paragraph id="HF8CE3E9AE2634D9A9DEAB0FDDA00A5E2"><enum>(2)</enum><text>any divorce or separation instrument (as so defined) executed on or before such date and modified after such date if the modification expressly provides that the amendments made by this section apply to such modification.</text> </paragraph></subsection></section><section id="H461A9DA422B64573B7C4D0D4FFF66579"><enum>1310.</enum><header>Repeal of deduction for moving expenses</header> <subsection id="H38E6EE01B95143EA84C142147A4188D8"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VII of subchapter B is amended by striking by striking section 217 (and by striking the item relating to such section in the table of sections for such subpart).</text> </subsection><subsection id="HAB8698A7199E483C8FC2AB984CC7CB90"><enum>(b)</enum><header>Retention of moving expenses for members of Armed Forces</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/134">Section 134(b)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HD4EE8A33F8884FA7938D769F96B55722" style="OLC"> <paragraph id="H296C53F49123420395C80E55F1E74527"><enum>(7)</enum><header>Moving expenses</header><text display-inline="yes-display-inline">The term <quote>qualified military benefit</quote> includes any benefit described in section 217(g) (as in effect before the enactment of the Tax Cuts And Jobs Act).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H76BAA75851A14D6383FC82E88ECBEC3A"><enum>(c)</enum><header>Conforming amendments</header> <paragraph id="H4EE77AFC5D1443ACA082022036769A8A"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/62">Section 62(a)</external-xref> is amended by striking paragraph (15).</text> </paragraph><paragraph id="HAD572106D40D41D0B628F4DC047AF7E5"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/274">Section 274(m)(3)</external-xref> is amended by striking <quote>(other than section 217)</quote>.</text> </paragraph><paragraph id="H4422919DAAFC46EA984F83ED70CC9042"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3121">Section 3121(a)</external-xref> is amended by striking paragraph (11).</text> </paragraph><paragraph id="H986154E74B2E4C1DA32B6F5DDF41895C"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3306">Section 3306(b)</external-xref> is amended by striking paragraph (9).</text> </paragraph><paragraph id="HCC49665C2F9E4BADB151B6A6A4292056"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3401">Section 3401(a)</external-xref> is amended by striking paragraph (15).</text> </paragraph><paragraph id="H033C5627CBC54865B6CB62F9CD8734B0"><enum>(6)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/7872">Section 7872(f)</external-xref> is amended by striking paragraph (11).</text> </paragraph></subsection><subsection id="H39D74E39F36D41DC895B1C603B06632F"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section commented="no" id="H7838C3B2C43F4BA28D0464DB81E719C1"><enum>1311.</enum><header>Termination of deduction and exclusions for contributions to medical savings accounts</header> <subsection commented="no" id="H707F1C8AC6DF458DA0607596375E4606"><enum>(a)</enum><header>Termination of income tax deduction</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/220">Section 220</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H66371D781299418D81773F0BC5F2E434" style="OLC"> <subsection commented="no" id="HB7F8B72B0C414A9B8F0079C92BE69E62"><enum>(k)</enum><header>Termination</header><text display-inline="yes-display-inline">No deduction shall be allowed under subsection (a) with respect to any taxable year beginning after December 31, 2017.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="HEE6890DD6F124512B55FD89407BD7A94"><enum>(b)</enum><header>Termination of exclusion for employer-Provided contributions</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/106">Section 106</external-xref> is amended by striking subsection (b).</text> </subsection><subsection commented="no" id="HE84CB9ABDBA6448FAA5746C40CC15A5E"><enum>(c)</enum><header>Conforming amendments</header> <paragraph commented="no" id="HCD200C7F71E44BEAB49A2CD4FDD393EC"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/62">Section 62(a)</external-xref> is amended by striking paragraph (16).</text> </paragraph><paragraph commented="no" id="H99D348CDAB154EF5970215E834D7DEB8"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/106">Section 106(d)</external-xref> is amended by striking paragraph (2), by redesignating paragraph (3) as paragraph (6), and by inserting after paragraph (1) the following new paragraphs:</text> <quoted-block display-inline="no-display-inline" id="HA1B7FB662FE04956AFD597868DC1DF8D" style="OLC"> <paragraph commented="no" id="H292FB366403E4F98B3FBC7AF3B2260BD"><enum>(2)</enum><header>No constructive receipt</header><text display-inline="yes-display-inline">No amount shall be included in the gross income of any employee solely because the employee may choose between the contributions referred to in paragraph (1) and employer contributions to another health plan of the employer.</text> </paragraph><paragraph commented="no" id="HFEFCC02D03CE4405B5428F7A64F590B4"><enum>(3)</enum><header>Special rule for deduction of employer contributions</header><text>Any employer contribution to a health savings account (as so defined), if otherwise allowable as a deduction under this chapter, shall be allowed only for the taxable year in which paid.</text> </paragraph><paragraph commented="no" id="HE6563C2FAFF6481B9B384973C62D1C1A"><enum>(4)</enum><header>Employer health savings account contribution required to be shown on return</header><text>Every individual required to file a return under section 6012 for the taxable year shall include on such return the aggregate amount contributed by employers to the health savings accounts (as so defined) of such individual or such individual’s spouse for such taxable year.</text> </paragraph><paragraph commented="no" id="H86D8C0E2CFD3414B9C858EB7A76D7979"><enum>(5)</enum><header>Health savings account contributions not part of COBRA coverage</header><text>Paragraph (1) shall not apply for purposes of section 4980B.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph commented="no" id="H6B8BD0731A5347E3B1324DEE10BDF453"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/223">Section 223(b)(4)</external-xref> is amended by striking subparagraph (A), by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively, and by striking the second sentence thereof.</text> </paragraph><paragraph id="H213CD944A78E4BA6B05F935747C1825A"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/223">Section 223(b)(5)</external-xref> is amended by striking <quote>under paragraph (3))</quote> and all that follows through <quote>shall be divided equally between them</quote> and inserting the following: <quote>under paragraph (3)) shall be divided equally between the spouses</quote>.</text> </paragraph><paragraph id="H154CB70E65E14B50861B7EB706D62CE9"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/223">Section 223(c)</external-xref> is amended by striking paragraph (5).</text> </paragraph><paragraph commented="no" id="HDF74913C8AF54352A49482AD1084A283"><enum>(6)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3231">Section 3231(e)</external-xref> is amended by striking paragraph (10).</text> </paragraph><paragraph commented="no" id="H2D3BCBADB427466EBA7D06556768E662"><enum>(7)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3306">Section 3306(b)</external-xref> is amended by striking paragraph (17).</text> </paragraph><paragraph commented="no" id="H784A3BEA1C7749D8AC5DD2590FAF0A72"><enum>(8)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3401">Section 3401(a)</external-xref> is amended by striking paragraph (21).</text> </paragraph><paragraph commented="no" id="HC91E7ACF22134AD2806293B0E0B75433"><enum>(9)</enum><text><external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/43">Chapter 43</external-xref> is amended by striking section 4980E (and by striking the item relating to such section in the table of sections for such chapter).</text> </paragraph><paragraph commented="no" id="H5C0C260F09AF47BD8CDA7864DDC449D1"><enum>(10)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/4980G">Section 4980G</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H62FB99CAC7704C4685E8F20B49D09C49" style="OLC"> <section commented="no" id="H852E8850552F40CB8B0AE769E2AF2BE8"><enum>4980G.</enum><header>Failure of employer to make comparable health savings account contributions</header> <subsection commented="no" id="H9FE09CAC313D4EF18CC57EBFF79AFB2D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of an employer who makes a contribution to the health savings account of any employee during a calendar year, there is hereby imposed a tax on the failure of such employer to meet the requirements of subsection (d) for such calendar year.</text> </subsection><subsection commented="no" id="H257BFB0CDC1740818229C186204D0F57"><enum>(b)</enum><header>Amount of tax</header><text>The amount of the tax imposed by subsection (a) on any failure for any calendar year is the amount equal to 35 percent of the aggregate amount contributed by the employer to health savings accounts of employees for taxable years of such employees ending with or within such calendar year.</text> </subsection><subsection commented="no" id="H5FFDAD0BB28E440796F8AD28B77A99A1"><enum>(c)</enum><header>Waiver by Secretary</header><text>In the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive relative to the failure involved.</text> </subsection><subsection commented="no" id="H36EE457AAC02432EAB6AF4650C5816C2"><enum>(d)</enum><header>Employer required To make comparable health savings account contributions for all participating employees</header> <paragraph commented="no" id="HD9355D43522A43559CF991829853AE95"><enum>(1)</enum><header>In general</header><text>An employer meets the requirements of this subsection for any calendar year if the employer makes available comparable contributions to the health savings accounts of all comparable participating employees for each coverage period during such calendar year.</text> </paragraph><paragraph commented="no" id="H7E50D53DCFA6408EA8B4711D2B7792D9"><enum>(2)</enum><header>Comparable contributions</header> <subparagraph commented="no" id="H1C813A084ECF41AB91665CA8C73CFE4C"><enum>(A)</enum><header>In general</header><text>For purposes of paragraph (1), the term <quote>comparable contributions</quote> means contributions—</text> <clause commented="no" id="H4E57BA9BFE86449EBB1B19B0015BBA6D"><enum>(i)</enum><text>which are the same amount, or</text> </clause><clause commented="no" id="HCA378DB27D124470AC4BC624E2738FC8"><enum>(ii)</enum><text>which are the same percentage of the annual deductible limit under the high deductible health plan covering the employees.</text> </clause></subparagraph><subparagraph commented="no" id="HFDD91C43F65F462AA8C64C7CFF80062A"><enum>(B)</enum><header>Part-year employees</header><text>In the case of an employee who is employed by the employer for only a portion of the calendar year, a contribution to the health savings account of such employee shall be treated as comparable if it is an amount which bears the same ratio to the comparable amount (determined without regard to this subparagraph) as such portion bears to the entire calendar year.</text> </subparagraph></paragraph><paragraph commented="no" id="H92F64924863C46F290A32E6C3DEC4BC2"><enum>(3)</enum><header>Comparable participating employees</header> <subparagraph commented="no" id="H6C9B751FBE5D4E6ABDECFE216AA463E9"><enum>(A)</enum><header>In general</header><text>For purposes of paragraph (1), the term <quote>comparable participating employees</quote> means all employees—</text> <clause commented="no" id="H9382C9D7C9D3404CBA11A9A728A114C0"><enum>(i)</enum><text>who are eligible individuals covered under any high deductible health plan of the employer, and</text> </clause><clause commented="no" id="HC46977151277479F9E5BC95310CA32B1"><enum>(ii)</enum><text>who have the same category of coverage.</text> </clause></subparagraph><subparagraph commented="no" id="HD88D2EDA814F4A8D9BFAE41D9B5F1938"><enum>(B)</enum><header>Categories of coverage</header><text>For purposes of subparagraph (B), the categories of coverage are self-only and family coverage.</text> </subparagraph></paragraph><paragraph commented="no" id="H08D09F2449B84A9B97270896408EF8E4"><enum>(4)</enum><header>Part-time employees</header> <subparagraph commented="no" id="H1A9E3A9FCD63483197CA81C49D067CB0"><enum>(A)</enum><header>In general </header><text>Paragraph (3) shall be applied separately with respect to part-time employees and other employees.</text> </subparagraph><subparagraph commented="no" id="H1E606F6571CB44129FF255EE9B450F94"><enum>(B)</enum><header>Part-time employee</header><text>For purposes of subparagraph (A), the term <quote>part-time employee</quote> means any employee who is customarily employed for fewer than 30 hours per week.</text> </subparagraph></paragraph><paragraph commented="no" id="HE24162576BD340FE8F355FEA6F80EA9B"><enum>(5)</enum><header>Special rule for non-highly compensated employees</header><text display-inline="yes-display-inline">For purposes of applying this section to a contribution to a health savings account of an employee who is not a highly compensated employee (as defined in section 414(q)), highly compensated employees shall not be treated as comparable participating employees.</text> </paragraph></subsection><subsection commented="no" id="HEFB1EA4BCB2E4AB7B133DD7C1F928B2F"><enum>(e)</enum><header>Controlled groups</header><text>For purposes of this section, all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as 1 employer.</text> </subsection><subsection commented="no" id="H38651F2B047D4FF3B374B8E1F243E831"><enum>(f)</enum><header>Definitions</header><text>Terms used in this section which are also used in section 223 have the respective meanings given such terms in section 223.</text> </subsection><subsection commented="no" id="HCB2CF47E1B0B4FC18188DA8C99D0BFB4"><enum>(g)</enum><header>Regulations</header><text>The Secretary shall issue regulations to carry out the purposes of this section.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph commented="no" id="H2B1367B7E6F449D8AFF07C96FB32D274"><enum>(11)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6051">Section 6051(a)</external-xref> is amended by striking paragraph (11).</text> </paragraph><paragraph commented="no" id="HABC46917B68F48F891147197A01D0217"><enum>(12)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6051">Section 6051(a)(14)(A)</external-xref> is amended by striking <quote>paragraphs (11) and (12)</quote> and inserting <quote>paragraph (12)</quote>.</text> </paragraph></subsection><subsection commented="no" id="H537C04D39ED54A87B1BA6793128E538A"><enum>(d)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H712602A6067D49AFBBA5CE776A9CE74B"><enum>1312.</enum><header>Denial of deduction for expenses attributable to the trade or business of being an employee</header> <subsection id="HFA54C8AB50A846EA9979B6FEBBCB4B4C"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part IX of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by inserting after the item relating to section 262 the following new item:</text> <quoted-block display-inline="no-display-inline" id="HB5EB9259E1A64CE4B1FB862B68327B6B" style="OLC"> <section id="HB4951F00BAC543568C9DBC370943A3F9"><enum>262A.</enum><header>Expenses attributable to being an employee</header> <subsection id="H6E3CF78D4EE24C44B248A52551B88DB4"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Except as otherwise provided in this section, no deduction shall be allowed with respect to any trade or business of the taxpayer which consists of the performance of services by the taxpayer as an employee.</text> </subsection><subsection id="H19633013CB0B40C6945B81BFBC586F6E"><enum>(b)</enum><header>Exception for above-the-line deductions</header><text>Subsection (a) shall not apply to any deduction allowable (determined without regard to subsection (a)) in determining adjusted gross income.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HC7EB8156750C42BF994875538AD7EE6A"><enum>(b)</enum><header>Repeal of certain above-the-line trade and business deductions of employees</header> <paragraph id="H2351C9E8197A46CBB6984CF1B9B64261"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/62">Section 62(a)(2)</external-xref> is amended—</text> <subparagraph id="H0374CCF5A4F14C7D8682540839903054"><enum>(A)</enum><text>by striking subparagraphs (B), (C), and (D), and</text> </subparagraph><subparagraph id="H0841DE552AB845F4805559EE38C49115"><enum>(B)</enum><text>by redesignating subparagraph (E) as subparagraph (B).</text> </subparagraph></paragraph><paragraph id="H82FFDB161A3143C59996964F9CDD08B0"><enum>(2)</enum><header>Conforming amendments</header> <subparagraph id="H57C58AE5831D4FA8AF3EC4E46D2F3D5A"><enum>(A)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/62">Section 62</external-xref> is amended by striking subsections (b) and (d) and by redesignating subsections (c) and (e) as subsections (b) and (c), respectively.</text> </subparagraph><subparagraph id="H31668171EE044249B348554BED976DD5"><enum>(B)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/62">Section 62(a)(20)</external-xref> is amended by striking <quote>subsection (e)</quote> and inserting <quote>subsection (c)</quote>.</text> </subparagraph></paragraph></subsection><subsection id="H0F3081D7623A4485AF4E6ECC48C9A312"><enum>(c)</enum><header>Continued exclusion of working condition fringe benefits</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/132">Section 132(d)</external-xref> is amended by inserting <quote>(determined without regard to section 262A)</quote> after <quote>section 162</quote>.</text> </subsection><subsection id="HC16ED9B674C84486921FBDD8DA862CC6"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section></subtitle><subtitle id="H5DB260CCA5F54FABA68AD1826627C029"><enum>E</enum><header>Simplification and reform of exclusions and taxable compensation</header> <section id="H8B8D26D4503C4E63884EED5528570705"><enum>1401.</enum><header>Limitation on exclusion for employer-provided housing</header> <subsection id="H76450871437443C1A53785BD79999A24"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/119">Section 119</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H73EE5FE9589D434ABE07625FB3CB452C" style="OLC"> <subsection id="H116CDCA147804B9D98AE53D87FC3317E"><enum>(e)</enum><header>Limitation on exclusion of lodging</header> <paragraph id="H79649849532E44BDB79417F5DC39ED1C"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The aggregate amount excluded from gross income of the taxpayer under subsections (a) and (d) with respect to lodging for any taxable year shall not exceed $50,000 (half such amount in the case of a married individual filing a separate return).</text> </paragraph><paragraph id="HA739B748C66A450786A92294F93C6C18"><enum>(2)</enum><header>Limitation to 1 home</header><text display-inline="yes-display-inline">Subsections (a) and (d) (separately and in combination) shall not apply with respect to more than 1 residence of the taxpayer at any given time. In the case of a joint return, the preceding sentence shall apply separately to each spouse for any period during which each spouse resides separate from the other spouse in a residence which is provided in connection with the employment of each spouse, respectively.</text> </paragraph><paragraph id="H872D6142DDE94A9892D8D854BEDBDD4B"><enum>(3)</enum><header>Limitation for highly compensated employees</header> <subparagraph id="H86908A25896848DB95E425ECC83FA186"><enum>(A)</enum><header>Reduced for excess compensation</header><text display-inline="yes-display-inline">In the case of an individual whose compensation for the taxable year exceeds the amount in effect under section 414(q)(1)(B)(i) for the calendar in which such taxable year begins, the $50,000 amount under paragraph (1) shall be reduced (but not below zero) by an amount equal to 50 percent of such excess. For purposes of the preceding sentence, the term <quote>compensation</quote> means wages (as defined in section 3121(a) (without regard to the contribution and benefit base limitation in section 3121(a)(1)).</text> </subparagraph><subparagraph id="H6E2A6CD1657C4A78B24AF0E3434BBD62"><enum>(B)</enum><header>Exclusion denied for 5-percent owners</header><text>In the case of an individual who is a 5-percent owner (as defined in section 416(i)(1)(B)(i)) of the employer at any time during the taxable year, the amount under paragraph (1) shall be zero.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HABB08B05AB404AF4AD6716399B73D4A1"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H01FD74DA2EF1454BB67F6C76C924DE50"><enum>1402.</enum><header>Exclusion of gain from sale of a principal residence</header> <subsection id="H2A731E8F49E94529B6AF0E01F09268D9"><enum>(a)</enum><header>Requirement that residence be principal residence for 5 years during 8-year period</header><text display-inline="yes-display-inline">Subsection (a) of <external-xref legal-doc="usc" parsable-cite="usc/26/121">section 121</external-xref> is amended—</text> <paragraph id="HF51B27DD601E40F79CAB1492C44378CD"><enum>(1)</enum><text>by striking <quote>5-year period</quote> and inserting <quote>8-year period</quote>, and</text> </paragraph><paragraph id="H97F2652F44634475A136B10B0A971579"><enum>(2)</enum><text>by striking <quote>2 years</quote> and inserting <quote>5 years</quote>.</text> </paragraph></subsection><subsection id="HD696B71B255043DFAAEBAC77EA9510EB"><enum>(b)</enum><header>Application to only 1 sale or exchange every 5 years</header><text>Paragraph (3) of <external-xref legal-doc="usc" parsable-cite="usc/26/121">section 121(b)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H80F7F59C75154C07A4B7D8F5291A3598" style="OLC"> <paragraph id="HD012198E27594488BDB9DD887CAE1EEF"><enum>(3)</enum><header>Application to only 1 sale or exchange every 5 years</header><text display-inline="yes-display-inline">Subsection (a) shall not apply to any sale or exchange by the taxpayer if, during the 5-year period ending on the date of such sale or exchange, there was any other sale or exchange by the taxpayer to which subsection (a) applied.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H6C74AF1A94674203B498F33265AA575D"><enum>(c)</enum><header>Phaseout based on modified adjusted gross income</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/121">Section 121</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H587B35BE4C394AA79613344B5BF81B9E" style="OLC"> <subsection id="HC9650B16C8044FBAA00DC3453A6FE8DB"><enum>(h)</enum><header>Phaseout based on modified adjusted gross income</header> <paragraph id="H86B412B2FF4B4C5DBF28B1D8C9EBC81D"><enum>(1)</enum><header>In general</header><text>If the average modified adjusted gross income of the taxpayer for the taxable year and the 2 preceding taxable years exceeds $250,000 (twice such amount in the case of a joint return), the amount which would (but for this subsection) be excluded from gross income under subsection (a) for such taxable year shall be reduced (but not below zero) by the amount of such excess.</text> </paragraph><paragraph commented="no" id="H98FEB222A4024D748DF695F6DCF4E7D1"><enum>(2)</enum><header>Modified adjusted gross income</header><text>For purposes of this subsection, the term <quote>modified adjusted gross income</quote> means, with respect to any taxable year, adjusted gross income determined after application of this section (but without regard to subsection (b)(1) and this subsection).</text> </paragraph><paragraph commented="no" id="H39CDB10A9861427DB256210FA26F819A"><enum>(3)</enum><header>Special rule for joint returns</header><text>In the case of a joint return, the average modified adjusted gross income of the taxpayer shall be determined without regard to any taxable year with respect to which the taxpayer did not file a joint return.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H51B61EE0C0EB4AE49926D678438DC5C6"><enum>(d)</enum><header>Conforming amendments</header> <paragraph id="H1E2984EC39544A2E93F6CADA0BD266CB"><enum>(1)</enum><text>The following provisions of section 121 are each amended by striking <quote>5-year period</quote> each place it appears therein and inserting <quote>8-year period</quote>:</text> <subparagraph id="H03B855A2D88A4AD9A54DA2CBF70AFE2C"><enum>(A)</enum><text>Subsection (b)(5)(C)(ii)(I).</text> </subparagraph><subparagraph id="H8A2722C1554748A799F3B429C43B98D5"><enum>(B)</enum><text>Subsection (c)(1)(B)(i)(I).</text> </subparagraph><subparagraph id="H6E29D4FE5FC84453B09665A39DE4A4F3"><enum>(C)</enum><text>Subsection (d)(7)(B).</text> </subparagraph><subparagraph id="HB96BD9B379BE4FEC81651BDA5EB1BC10"><enum>(D)</enum><text>Subparagraphs (A) and (B) of subsection (d)(9).</text> </subparagraph><subparagraph id="HB572E22F1DB84D98B1F2AA4E6C0C7142"><enum>(E)</enum><text>Subsection (d)(10).</text> </subparagraph><subparagraph id="H61E614F964AB40238DF071873DF8EDC4"><enum>(F)</enum><text>Subsection (d)(12)(A).</text> </subparagraph></paragraph><paragraph id="HD4DCBA7DEF1241FA8BBA73F52EACAC7B"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/121">Section 121(c)(1)(B)(ii)</external-xref> is amended by striking <quote>2 years</quote> and inserting <quote>5 years</quote>:</text> </paragraph></subsection><subsection id="HB1D2F450712641389B834A7B6738F776"><enum>(e)</enum><header>Effective date</header><text>The amendments made by this section shall apply to sales and exchanges after December 31, 2017.</text> </subsection></section><section id="H458FCABFDBD3419EB158F3D9FD370FD8"><enum>1403.</enum><header>Repeal of exclusion, etc., for employee achievement awards</header> <subsection id="H5558B1685EAF49CA925B470486F6F5C4"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/74">Section 74</external-xref> is amended by striking subsection (c).</text> </subsection><subsection id="HE3F13AA0966E4394A8ACC9EC82B00F99"><enum>(b)</enum><header>Repeal of limitation on deduction</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/274">Section 274</external-xref> is amended by striking subsection (j).</text> </subsection><subsection id="HCCF91738DC23452097F0301633D82275"><enum>(c)</enum><header>Conforming amendments</header> <paragraph id="HA17847AC943743ADB1EE8E7AE44288A7"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/102">Section 102(c)(2)</external-xref> is amended by striking the first sentence.</text> </paragraph><paragraph id="H16DE359742844B36BA89A06F9FA0D8EA"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/414">Section 414(n)(3)(C)</external-xref> is amended by striking <quote>274(j),</quote>.</text> </paragraph><paragraph id="H73D69A83084B4CE78432C91C975C9EE1"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/414">Section 414(t)(2)</external-xref> is amended by striking <quote>274(j),</quote>.</text> </paragraph><paragraph id="H63E8BF78E50D4659B70FC31E3E3C1E4D"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3121">Section 3121(a)(20)</external-xref> is amended by striking <quote>74(c)</quote>.</text> </paragraph><paragraph id="H9ED52796D89247AB9F2DD2BA69C9CCA0"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/3231">Section 3231(e)(5)</external-xref> is amended by striking <quote>74(c),</quote>.</text> </paragraph><paragraph id="H83B20C02CB6949A5A34BC7C8E023FAF8"><enum>(6)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/3306">Section 3306(b)(16)</external-xref> is amended by striking <quote>74(c),</quote>.</text> </paragraph><paragraph id="H52F7F59AF4184D10A9EDE615DB152114"><enum>(7)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/3401">Section 3401(a)(19)</external-xref> is amended by striking <quote>74(c),</quote>.</text> </paragraph></subsection><subsection id="H1A22F2EC9C864B609BBF8A1496B92537"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H54A97ECF3C2143F08AB848735A873290"><enum>1404.</enum><header>Sunset of exclusion for dependent care assistance programs</header> <subsection id="HAB24106A47634D8B88A950F608D3EB16"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/129">Section 129</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H698C9B39C0074ACBB3EFD5EA36969B65" style="OLC"> <subsection id="HD367CC0007E04359A12ACCD97FF84D0E"><enum>(f)</enum><header>Termination</header><text display-inline="yes-display-inline">Subsection (a) shall not apply to taxable years beginning after December 31, 2022.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H3486C2EC9E5049AC947ECE2C0D56A8BA"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall take effect on the date of the enactment of this Act.</text> </subsection></section><section id="H163417E739FF4574BB8B52BB494BF864"><enum>1405.</enum><header>Repeal of exclusion for qualified moving expense reimbursement</header> <subsection id="HE1CBD7DFB80F4761B82695B4AA99181B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/132">Section 132(a)</external-xref> is amended by striking paragraph (6).</text> </subsection><subsection id="HAB3CD9F606FC4CFCA72124DA0162170D"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="HCB65627787E34F3588C0C2EF4FCB4B7D"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/82">Section 82</external-xref> is amended by striking <quote>Except as provided in section 132(a)(6), there</quote> and inserting <quote>There</quote>.</text> </paragraph><paragraph id="HCAEEF03467924F7E92BF0652BFFBA72A"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/132">Section 132</external-xref> is amended by striking subsection (g).</text> </paragraph><paragraph commented="no" display-inline="no-display-inline" id="H1D09924FA6CB476384218C60F2D1AF95"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/132">Section 132(l)</external-xref> is amended by striking by striking <quote>subsections (e) and (g)</quote> and inserting <quote>subsection (e)</quote>.</text> </paragraph></subsection><subsection id="HAD16545C243F41C69AE4C16EB3141915"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="HC75B42AAEBB249D78109483532645B3F"><enum>1406.</enum><header>Repeal of exclusion for adoption assistance programs</header> <subsection id="H9A00FFED93394DDB8CA541D74710579B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part III of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 137 (and by striking the item relating to such section in the table of sections for such part).</text> </subsection><subsection id="HBBA778D5E3D9485885299BC83DE469AC"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="H8CB1D0724C284D8891644D9D6549F1FC"><enum>(1)</enum><text display-inline="yes-display-inline">Sections 414(n)(3)(C), 414(t)(2), 74(d)(2)(B), 86(b)(2)(A), 219(g)(3)(A)(ii) are each amended by striking <quote>, 137</quote>.</text> </paragraph><paragraph id="HE64013321ECE4796B9EE95E6238F163E"><enum>(2)</enum><text>Section 1016(a), as amended by the preceding provision of this Act, is amended by striking paragraph (26).</text> </paragraph><paragraph id="H54C89DCC75C9457F969CCDBAB796FC31"><enum>(3)</enum><text display-inline="yes-display-inline">Section 6039D(d)(1), as amended by the preceding provisions of this Act, is amended—</text> <subparagraph id="HF0678273001A48AC8BCAF2768903CAB7"><enum>(A)</enum><text>by striking <quote>, or 137</quote>, and</text> </subparagraph><subparagraph id="HCC549EAFC72C4F19976E1BACEFA8F5EB"><enum>(B)</enum><text>by inserting <quote>or</quote> before <quote>125</quote>.</text> </subparagraph></paragraph></subsection><subsection id="H0875CAC8D21D4357AC54173AED4E9248"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section></subtitle><subtitle id="H0A5250B5C8C648DA8960604D310257C5"><enum>F</enum><header>Simplification and reform of savings, pensions, retirement</header> <section id="H3F7C47CC603E4985891A560ABAC8EEDB"><enum>1501.</enum><header>Repeal of special rule permitting recharacterization of Roth IRA contributions as traditional IRA contributions</header> <subsection id="HA5AE4AB1025744A79C9DC39D8771E6C8"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/408A">Section 408A(d)</external-xref> is amended by striking paragraph (6) and by redesignating paragraph (7) as paragraph (6).</text> </subsection><subsection id="H04096CD7551841FEA77C3C58770D39D4"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="HABF9A9762FB34FCE912C27A0AF3CDC9A"><enum>1502.</enum><header>Reduction in minimum age for allowable in-service distributions</header> <subsection id="H7363CF990D3C49ED8872155FF686C3A6"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/401">Section 401(a)(36)</external-xref> is amended by striking <quote>age 62</quote> and inserting <quote>age 59 <fraction>½</fraction></quote>.</text> </subsection><subsection id="HBF33A34935FA430FB5E972D6DAD0E054"><enum>(b)</enum><header>Application to governmental section <enum-in-header>457(b)</enum-in-header> plans</header><text display-inline="yes-display-inline">Clause (i) of <external-xref legal-doc="usc" parsable-cite="usc/26/457">section 457(d)(1)(A)</external-xref> is amended by inserting <quote>(in the case of a plan maintained by an employer described in subsection (e)(1)(A), age 59 <fraction>½</fraction>)</quote> before the comma at the end.</text> </subsection><subsection id="H904E02C42D324BE8A5E3D2BA7D5616E8"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to plan years beginning after December 31, 2017.</text> </subsection></section><section commented="no" display-inline="no-display-inline" id="H16F6AC0738414E88B3793DD16208A16F"><enum>1503.</enum><header>Modification of rules governing hardship distributions</header> <subsection id="H08ABCBDB75FB41CB941DFF8193BB5793"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Not later than 1 year after the date of the enactment of this Act, the Secretary of the Treasury shall modify Treasury Regulation section 1.401(k)–1(d)(3)(iv)(E) to—</text> <paragraph commented="no" display-inline="no-display-inline" id="H8E6B86758D7C41899DD1F92F864EFE01"><enum>(1)</enum><text display-inline="yes-display-inline">delete the 6-month prohibition on contributions imposed by paragraph (2) thereof, and</text> </paragraph><paragraph commented="no" display-inline="no-display-inline" id="H527159E04C64498B80A3D11FB488DF7E"><enum>(2)</enum><text>make any other modifications necessary to carry out the purposes of <external-xref legal-doc="usc" parsable-cite="usc/26/401">section 401(k)(2)(B)(i)(IV)</external-xref> of the Internal Revenue Code of 1986.</text> </paragraph></subsection><subsection id="H3C666672CE454808A3B1AB54012BAB60"><enum>(b)</enum><header>Effective date</header><text>The revised regulations under this section shall apply to plan years beginning after December 31, 2017.</text> </subsection></section><section id="HC8DC311024B1433B8D2911FCD6790DB5"><enum>1504.</enum><header>Modification of rules relating to hardship withdrawals from cash or deferred arrangements</header> <subsection id="H0EFA60CD29444345A387A081F7334848"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/401">Section 401(k)</external-xref> is amended by adding at the end the following:</text> <quoted-block id="HD78A978816FB4103BBB970F8EF1B65E5" style="OLC"> <paragraph id="HDB887ACD9AA24E68A08C08D7A51EDE6D"><enum>(14)</enum><header>Special rules relating to hardship withdrawals</header><text>For purposes of paragraph (2)(B)(i)(IV)—</text> <subparagraph id="HF5A2FF7A539B4974974FF54EFECDD7F8"><enum>(A)</enum><header>Amounts which may be withdrawn</header><text>The following amounts may be distributed upon hardship of the employee:</text> <clause id="HB9A77C4740884BB79E07D07892CC077E"><enum>(i)</enum><text>Contributions to a profit-sharing or stock bonus plan to which section 402(e)(3) applies.</text> </clause><clause id="H386E3D87827645E08B81E81B3531CB9B"><enum>(ii)</enum><text>Qualified nonelective contributions (as defined in subsection (m)(4)(C)).</text> </clause><clause id="H4E5139CCA6A741C895C013D5BF053CE6"><enum>(iii)</enum><text>Qualified matching contributions described in paragraph (3)(D)(ii)(I).</text> </clause><clause id="HEB40BC6F93F1468789C0CD477D2F83EA"><enum>(iv)</enum><text>Earnings on any contributions described in clause (i), (ii), or (iii).</text> </clause></subparagraph><subparagraph id="HDD9C706A23CF40A0B0F845861C4C81E6"><enum>(B)</enum><header>No requirement to take available loan</header><text>A distribution shall not be treated as failing to be made upon the hardship of an employee solely because the employee does not take any available loan under the plan.".</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H03EBDD35EE2B450A8404E83A5ECBDAF4"><enum>(b)</enum><header>Conforming amendment</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/401">Section 401(k)(2)(B)(i)(IV)</external-xref> is amended to read as follows:</text> <quoted-block id="H8EEC0359F2A54B82ACB86C6778AC2061" style="OLC"> <subclause id="H42F4F91E504046E88143FAAE4C256F4C"><enum>(IV)</enum><text>subject to the provisions of paragraph (14), upon hardship of the employee, or".</text></subclause><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H4883C4EA464E45338795D43F9AB47DEB"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to plan years beginning after December 31, 2017.</text> </subsection></section><section commented="no" display-inline="no-display-inline" id="H79F8D99FDFDA4415A32CAB0E67DF8397"><enum>1505.</enum><header>Extended rollover period for the rollover of plan loan offset amounts in certain cases</header> <subsection commented="no" display-inline="no-display-inline" id="H7CDC269872F241AE944F9983A85289A0"><enum>(a)</enum><header>In general</header><text>Paragraph (3) of <external-xref legal-doc="usc" parsable-cite="usc/26/402">section 402(c)</external-xref> is amended by adding at the end the following new subparagraph:</text> <quoted-block act-name="" id="H1DDEB88790D74FA4999A62036D7579C6" style="OLC"> <subparagraph id="HDF8336AF71F3413085559DC47ABAB4AA"><enum>(C)</enum><header>Rollover of certain plan loan offset amounts</header> <clause id="HF7B00CF3BACD4284B4AB2BF27BBF188F"><enum>(i)</enum><header>In general</header><text>In the case of a qualified plan loan offset amount, paragraph (1) shall not apply to any transfer of such amount made after the due date (including extensions) for filing the return of tax for the taxable year in which such amount is treated as distributed from a qualified employer plan.</text> </clause><clause id="H93FBE17FEE3D405FA5D76A9BB21AB718"><enum>(ii)</enum><header>Qualified plan loan offset amount</header><text>For purposes of this subparagraph, the term <term>qualified plan loan offset amount</term> 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—</text> <subclause commented="no" display-inline="no-display-inline" id="HA8D452B30A5443FBAE17C41F639CA224"><enum>(I)</enum><text>the termination of the qualified employer plan, or</text> </subclause><subclause commented="no" display-inline="no-display-inline" id="H3C602ABEA3C24C0C900083FAEC51A44A"><enum>(II)</enum><text>the failure to meet the repayment terms of the loan from such plan because of the separation from service of the participant (whether due to layoff, cessation of business, termination of employment, or otherwise).</text> </subclause></clause><clause commented="no" display-inline="no-display-inline" id="H499FFB7CDB3E4CF6A5BBA5DA7DA9A3AD"><enum>(iii)</enum><header>Plan loan offset amount</header><text>For purposes of clause (ii), the term <term>plan loan offset amount</term> means the amount by which the participant's accrued benefit under the plan is reduced in order to repay a loan from the plan.</text> </clause><clause commented="no" display-inline="no-display-inline" id="H8FD9E68DEF384C278E310C202457ADF7"><enum>(iv)</enum><header>Limitation</header><text>This subparagraph shall not apply to any plan loan offset amount unless such plan loan offset amount relates to a loan to which section 72(p)(1) does not apply by reason of section 72(p)(2).</text> </clause><clause commented="no" display-inline="no-display-inline" id="H01BF24EB00884A1FA7B4DBAD651E7D41"><enum>(v)</enum><header display-inline="yes-display-inline">Qualified employer plan</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <term>qualified employer plan</term> has the meaning given such term by section 72(p)(4).</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" display-inline="no-display-inline" id="HF19E693230804C59809DC7599D54F5AF"><enum>(b)</enum><header>Conforming amendment</header><text>Subparagraph (A) of <external-xref legal-doc="usc" parsable-cite="usc/26/402">section 402(c)(3)</external-xref> is amended by striking <quote>subparagraph (B)</quote> and inserting <quote>subparagraphs (B) and (C)</quote>.</text> </subsection><subsection commented="no" display-inline="no-display-inline" id="H4321EC0561564DAEA1BEC755BB4B769F"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H0258F7B170724FB4A7EBAFC9CC7C76B8"><enum>1506.</enum><header>Modification of nondiscrimination rules to protect older, longer service participants</header> <subsection id="H15F325CDEBBA44B59BED0238FB20E65E"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/401">Section 401</external-xref> is amended—</text> <paragraph id="H37F7CE297C3B45599197D334EF999F56"><enum>(1)</enum><text>by redesignating subsection (o) as subsection (p), and</text> </paragraph><paragraph id="HB8E43318386A45CA8CEE98C17A5B8714"><enum>(2)</enum><text>by inserting after subsection (n) the following new subsection:</text> <quoted-block id="H5291FD66F696409AA5A665D5F3E3DB45" style="OLC"> <subsection id="H3A8F716EC5204119A22DCAEC8CF40E64"><enum>(o)</enum><header>Special rules for applying nondiscrimination rules to protect older, longer service and grandfathered participants</header> <paragraph id="H7D437E29D98442E288DFA09484A84C4A"><enum>(1)</enum><header>Testing of defined benefit plans with closed classes of participants</header> <subparagraph id="HDDF006025D3F432483F370A5B7993866"><enum>(A)</enum><header>Benefits, rights, or features provided to closed classes</header><text>A defined benefit plan which provides benefits, rights, or features to a closed class of participants shall not fail to satisfy the requirements of subsection (a)(4) by reason of the composition of such closed class or the benefits, rights, or features provided to such closed class, if—</text> <clause id="H590BE2F25C9A4953B8F01580DE5A1A0E"><enum>(i)</enum><text>for the plan year as of which the class closes and the 2 succeeding plan years, such benefits, rights, and features satisfy the requirements of subsection (a)(4) (without regard to this subparagraph but taking into account the rules of subparagraph (I)),</text> </clause><clause id="H3CE14E3105294EB3BAD2289E910410D9"><enum>(ii)</enum><text>after the date as of which the class was closed, any plan amendment which modifies the closed class or the benefits, rights, and features provided to such closed class does not discriminate significantly in favor of highly compensated employees, and</text> </clause><clause id="H4D78DFCC10FA480B98E62A3049E37A7D"><enum>(iii)</enum><text>the class was closed before April 5, 2017, or the plan is described in subparagraph (C).</text> </clause></subparagraph><subparagraph id="H5BA1E046665848299D74DF9FC7921EFF"><enum>(B)</enum><header>Aggregate testing with defined contribution plans permitted on a benefits basis</header> <clause id="H3A661B0E2B7E4BBBB65ECB3EFE3DF9D6"><enum>(i)</enum><header>In general</header><text>For purposes of determining compliance with subsection (a)(4) and section 410(b), a defined benefit plan described in clause (iii) may be aggregated and tested on a benefits basis with 1 or more defined contribution plans, including with the portion of 1 or more defined contribution plans which—</text> <subclause id="HE3EC9E4DA1644F4B83B043078B83B051"><enum>(I)</enum><text>provides matching contributions (as defined in subsection (m)(4)(A)),</text> </subclause><subclause id="H98B173A15BE44BEE934A7F44446044B9"><enum>(II)</enum><text>provides annuity contracts described in section 403(b) which are purchased with matching contributions or nonelective contributions, or</text> </subclause><subclause id="HAB34A64B75D049F79D607BBA4807D6DC"><enum>(III)</enum><text>consists of an employee stock ownership plan (within the meaning of section 4975(e)(7)) or a tax credit employee stock ownership plan (within the meaning of section 409(a)).</text> </subclause></clause><clause id="H05C66A3EF58A47D0BF64974C2B94222D"><enum>(ii)</enum><header>Special rules for matching contributions</header><text>For purposes of clause (i), if a defined benefit plan is aggregated with a portion of a defined contribution plan providing matching contributions—</text> <subclause id="HFFF20DD58D324DF3969FEF5DBAB10B03"><enum>(I)</enum><text>such defined benefit plan must also be aggregated with any portion of such defined contribution plan which provides elective deferrals described in subparagraph (A) or (C) of section 402(g)(3), and</text> </subclause><subclause id="HDE04984335D54946A9AF07EFE83E2AD9"><enum>(II)</enum><text>such matching contributions shall be treated in the same manner as nonelective contributions, including for purposes of applying the rules of subsection (l).</text> </subclause></clause><clause id="H5BA17E6AA6D34FCA8640AB4D879C1DDB"><enum>(iii)</enum><header>Plans described</header><text>A defined benefit plan is described in this clause if—</text> <subclause id="H3CB413103B3F409E84B7F097B5789E11"><enum>(I)</enum><text>the plan provides benefits to a closed class of participants,</text> </subclause><subclause id="H95AE088917DC4D67AD236345E073EED4"><enum>(II)</enum><text>for the plan year as of which the class closes and the 2 succeeding plan years, the plan satisfies the requirements of section 410(b) and subsection (a)(4) (without regard to this subparagraph but taking into account the rules of subparagraph (I)),</text> </subclause><subclause id="H2AED71EAFDCB423B8D1C1028472E938A"><enum>(III)</enum><text>after the date as of which the class was closed, any plan amendment which modifies the closed class or the benefits provided to such closed class does not discriminate significantly in favor of highly compensated employees, and</text> </subclause><subclause id="H4433CC1C45D9460BB6B05B110D64DB2D"><enum>(IV)</enum><text>the class was closed before April 5, 2017, or the plan is described in subparagraph (C).</text> </subclause></clause></subparagraph><subparagraph id="HEA81C2DC061B4A1FA604804776DD9278"><enum>(C)</enum><header>Plans described</header><text>A plan is described in this subparagraph if, taking into account any predecessor plan—</text> <clause id="HB7965348ACFA4B2A914D2755E02F8CDE"><enum>(i)</enum><text>such plan has been in effect for at least 5 years as of the date the class is closed, and</text> </clause><clause id="H6E708CCA6CFF4E7C9128C3DA121F8C9A"><enum>(ii)</enum><text>during the 5-year period preceding the date the class is closed, there has not been a substantial increase in the coverage or value of the benefits, rights, or features described in subparagraph (A) or in the coverage or benefits under the plan described in subparagraph (B)(iii) (whichever is applicable).</text> </clause></subparagraph><subparagraph id="HD876C28151E94AB9A78B031D4B455847"><enum>(D)</enum><header>Determination of substantial increase for benefits, rights, and features</header><text>In applying subparagraph (C)(ii) for purposes of subparagraph (A)(iii), a plan shall be treated as having had a substantial increase in coverage or value of the benefits, rights, or features described in subparagraph (A) during the applicable 5-year period only if, during such period—</text> <clause id="H18A9C15C920847A2A42EFB3475ECC3E5"><enum>(i)</enum><text>the number of participants covered by such benefits, rights, or features on the date such period ends is more than 50 percent greater than the number of such participants on the first day of the plan year in which such period began, or</text> </clause><clause id="HEB20EF60146F49B982DA66544D03FBDA"><enum>(ii)</enum><text>such benefits, rights, and features have been modified by 1 or more plan amendments in such a way that, as of the date the class is closed, the value of such benefits, rights, and features to the closed class as a whole is substantially greater than the value as of the first day of such 5-year period, solely as a result of such amendments.</text> </clause></subparagraph><subparagraph id="H9A5D7628A4F04176801E296F1E702443"><enum>(E)</enum><header>Determination of substantial increase for aggregate testing on benefits basis</header><text>In applying subparagraph (C)(ii) for purposes of subparagraph (B)(iii)(IV), a plan shall be treated as having had a substantial increase in coverage or benefits during the applicable 5-year period only if, during such period—</text> <clause id="H438F8B23768A4FEBA01CD2492EA8013E"><enum>(i)</enum><text>the number of participants benefitting under the plan on the date such period ends is more than 50 percent greater than the number of such participants on the first day of the plan year in which such period began, or</text> </clause><clause id="HC3F58AADDD6B4F6C89767CA9890F5063"><enum>(ii)</enum><text>the average benefit provided to such participants on the date such period ends is more than 50 percent greater than the average benefit provided on the first day of the plan year in which such period began.</text> </clause></subparagraph><subparagraph id="HE8DD6D96F905412FB99090FFABCA13AB"><enum>(F)</enum><header>Certain employees disregarded</header><text>For purposes of subparagraphs (D) and (E), any increase in coverage or value or in coverage or benefits, whichever is applicable, which is attributable to such coverage and value or coverage and benefits provided to employees—</text> <clause id="H2FA97915CFC548AFB1D54D6A799E12D9"><enum>(i)</enum><text>who became participants as a result of a merger, acquisition, or similar event which occurred during the 7-year period preceding the date the class is closed, or</text> </clause><clause id="H845F3C331ECE488F88E7C51085E046C5"><enum>(ii)</enum><text>who became participants by reason of a merger of the plan with another plan which had been in effect for at least 5 years as of the date of the merger,</text> </clause><continuation-text continuation-text-level="subparagraph">shall be disregarded, except that clause (ii) shall apply for purposes of subparagraph (D) only if, under the merger, the benefits, rights, or features under 1 plan are conformed to the benefits, rights, or features of the other plan prospectively.</continuation-text></subparagraph><subparagraph id="H45DF51E799FC41B6A3EF53526CBFDCCE"><enum>(G)</enum><header>Rules relating to average benefit</header><text>For purposes of subparagraph (E)—</text> <clause id="HBC1AD0EE50D8405DA40E071BAA8B4F84"><enum>(i)</enum><text>the average benefit provided to participants under the plan will be treated as having remained the same between the 2 dates described in subparagraph (E)(ii) if the benefit formula applicable to such participants has not changed between such dates, and</text> </clause><clause id="HD53703B4744D42CC960895C4EBC27EDD"><enum>(ii)</enum><text>if the benefit formula applicable to 1 or more participants under the plan has changed between such 2 dates, then the average benefit under the plan shall be considered to have increased by more than 50 percent only if—</text> <subclause id="HA8F6715645FD437BBF0B5F081277D59D"><enum>(I)</enum><text>the total amount determined under section 430(b)(1)(A)(i) for all participants benefitting under the plan for the plan year in which the 5-year period described in subparagraph (E) ends, exceeds</text> </subclause><subclause id="H0AEB03DFFBBC45FBB7A97C5555577FA1"><enum>(II)</enum><text>the total amount determined under section 430(b)(1)(A)(i) for all such participants for such plan year, by using the benefit formula in effect for each such participant for the first plan year in such 5-year period, by more than 50 percent.</text> </subclause><continuation-text continuation-text-level="clause">In the case of a CSEC plan (as defined in section 414(y)), the normal cost of the plan (as determined under section 433(j)(1)(B)) shall be used in lieu of the amount determined under section 430(b)(1)(A)(i).</continuation-text></clause></subparagraph><subparagraph id="HC347427E10A54664845B1EBD6F381DC7"><enum>(H)</enum><header>Treatment as single plan</header><text>For purposes of subparagraphs (E) and (G), a plan described in section 413(c) shall be treated as a single plan rather than as separate plans maintained by each participating employer.</text> </subparagraph><subparagraph id="H677F2A05A1E548A390FF95F6A405E596"><enum>(I)</enum><header>Special rules</header><text>For purposes of subparagraphs (A)(i) and (B)(iii)(II), the following rules shall apply:</text> <clause id="HD00CE5E3CA864B26B68932B40E9C5E5A"><enum>(i)</enum><text>In applying section 410(b)(6)(C), the closing of the class of participants shall not be treated as a significant change in coverage under section 410(b)(6)(C)(i)(II).</text> </clause><clause id="H5D7305072D924BB9B7A5A36B3164B82A"><enum>(ii)</enum><text>2 or more plans shall not fail to be eligible to be aggregated and treated as a single plan solely by reason of having different plan years.</text> </clause><clause id="HA36EE1E060194D13B848413010AF68A0"><enum>(iii)</enum><text>Changes in the employee population shall be disregarded to the extent attributable to individuals who become employees or cease to be employees, after the date the class is closed, by reason of a merger, acquisition, divestiture, or similar event.</text> </clause><clause id="H0AAAE9556F414747A8E27714321BEC31"><enum>(iv)</enum><text>Aggregation and all other testing methodologies otherwise applicable under subsection (a)(4) and section 410(b) may be taken into account.</text> </clause><continuation-text continuation-text-level="subparagraph">The rule of clause (ii) shall also apply for purposes of determining whether plans to which subparagraph (B)(i) applies may be aggregated and treated as 1 plan for purposes of determining whether such plans meet the requirements of subsection (a)(4) and section 410(b).</continuation-text></subparagraph><subparagraph id="HD8E43FAACAD74AA98B882D1925A8A4DD"><enum>(J)</enum><header>Spun-off plans</header><text>For purposes of this paragraph, if a portion of a defined benefit plan described in subparagraph (A) or (B)(iii) is spun off to another employer and the spun-off plan continues to satisfy the requirements of—</text> <clause id="H54FE1AA02296468C8A92E33C82080015"><enum>(i)</enum><text>subparagraph (A)(i) or (B)(iii)(II), whichever is applicable, if the original plan was still within the 3-year period described in such subparagraph at the time of the spin off, and</text> </clause><clause id="HEB4A00D2A0A44E56957841423136086D"><enum>(ii)</enum><text>subparagraph (A)(ii) or (B)(iii)(III), whichever is applicable,</text> </clause><continuation-text continuation-text-level="subparagraph">the treatment under subparagraph (A) or (B) of the spun-off plan shall continue with respect to such other employer.</continuation-text></subparagraph></paragraph><paragraph id="H2C90A7C6D3CA45E6910798629CED2D61"><enum>(2)</enum><header>Testing of defined contribution plans</header> <subparagraph id="H626EF971927E42BFAF369AB9E5A2556A"><enum>(A)</enum><header>Testing on a benefits basis</header><text>A defined contribution plan shall be permitted to be tested on a benefits basis if—</text> <clause id="H78A9CBD1F2D04E2A9432EEEC71128500"><enum>(i)</enum><text>such defined contribution plan provides make-whole contributions to a closed class of participants whose accruals under a defined benefit plan have been reduced or eliminated,</text> </clause><clause id="H164FDDC0C3824E629F3011E124BA6A62"><enum>(ii)</enum><text>for the plan year of the defined contribution plan as of which the class eligible to receive such make-whole contributions closes and the 2 succeeding plan years, such closed class of participants satisfies the requirements of section 410(b)(2)(A)(i) (determined by applying the rules of paragraph (1)(I)),</text> </clause><clause id="HAC5595569A824D41831B66A6D6C725E4"><enum>(iii)</enum><text>after the date as of which the class was closed, any plan amendment to the defined contribution plan which modifies the closed class or the allocations, benefits, rights, and features provided to such closed class does not discriminate significantly in favor of highly compensated employees, and</text> </clause><clause id="H6C2A22B0C36B4C9DA342675513A189A7"><enum>(iv)</enum><text>the class was closed before April 5, 2017, or the defined benefit plan under clause (i) is described in paragraph (1)(C) (as applied for purposes of paragraph (1)(B)(iii)(IV)).</text> </clause></subparagraph><subparagraph id="HD85A66E47FED4629BC37E6CD8C95AACD"><enum>(B)</enum><header>Aggregation with plans including matching contributions</header> <clause id="H047EB41E290C473486574C4DCE6BC52F"><enum>(i)</enum><header>In general</header><text>With respect to 1 or more defined contribution plans described in subparagraph (A), for purposes of determining compliance with subsection (a)(4) and section 410(b), the portion of such plans which provides make-whole contributions or other nonelective contributions may be aggregated and tested on a benefits basis with the portion of 1 or more other defined contribution plans which—</text> <subclause id="H1AE6CDED053740A6A025B16E1389087C"><enum>(I)</enum><text>provides matching contributions (as defined in subsection (m)(4)(A)),</text> </subclause><subclause id="HAEE6ECD9E2904275A5916A0A2B7E501B"><enum>(II)</enum><text>provides annuity contracts described in section 403(b) which are purchased with matching contributions or nonelective contributions, or</text> </subclause><subclause id="HF1CDC1410EE04375A5A59EDDEE4C6743"><enum>(III)</enum><text>consists of an employee stock ownership plan (within the meaning of section 4975(e)(7)) or a tax credit employee stock ownership plan (within the meaning of section 409(a)).</text> </subclause></clause><clause id="H1C9650D6C7C64A0C97622E3777AC354E"><enum>(ii)</enum><header>Special rules for matching contributions</header><text>Rules similar to the rules of paragraph (1)(B)(ii) shall apply for purposes of clause (i).</text> </clause></subparagraph><subparagraph id="H20B6A01B5137439AA8D87B1EFEDB2820"><enum>(C)</enum><header>Special rules for testing defined contribution plan features providing matching contributions to certain older, longer service participants</header><text>In the case of a defined contribution plan which provides benefits, rights, or features to a closed class of participants whose accruals under a defined benefit plan have been reduced or eliminated, the plan shall not fail to satisfy the requirements of subsection (a)(4) solely by reason of the composition of the closed class or the benefits, rights, or features provided to such closed class if the defined contribution plan and defined benefit plan otherwise meet the requirements of subparagraph (A) but for the fact that the make-whole contributions under the defined contribution plan are made in whole or in part through matching contributions.</text> </subparagraph><subparagraph id="HA0E3574B80F94DB7B5C00515FC023933"><enum>(D)</enum><header>Spun-off plans</header><text>For purposes of this paragraph, if a portion of a defined contribution plan described in subparagraph (A) or (C) is spun off to another employer, the treatment under subparagraph (A) or (C) of the spun-off plan shall continue with respect to the other employer if such plan continues to comply with the requirements of clauses (ii) (if the original plan was still within the 3-year period described in such clause at the time of the spin off) and (iii) of subparagraph (A), as determined for purposes of subparagraph (A) or (C), whichever is applicable.</text> </subparagraph></paragraph><paragraph id="HDFF0ACE2526A42C9974B8C82E9CFF039"><enum>(3)</enum><header>Definitions</header><text>For purposes of this subsection—</text> <subparagraph id="H7BF6746ABC8841E6A0849D6612DF1431"><enum>(A)</enum><header>Make-whole contributions</header><text>Except as otherwise provided in paragraph (2)(C), the term <quote>make-whole contributions</quote> means nonelective allocations for each employee in the class which are reasonably calculated, in a consistent manner, to replace some or all of the retirement benefits which the employee would have received under the defined benefit plan and any other plan or qualified cash or deferred arrangement under subsection (k)(2) if no change had been made to such defined benefit plan and such other plan or arrangement. For purposes of the preceding sentence, consistency shall not be required with respect to employees who were subject to different benefit formulas under the defined benefit plan.</text> </subparagraph><subparagraph id="HA030075C82DE4EBCB1E61EB52F65DF6F"><enum>(B)</enum><header>References to closed class of participants</header><text>References to a closed class of participants and similar references to a closed class shall include arrangements under which 1 or more classes of participants are closed, except that 1 or more classes of participants closed on different dates shall not be aggregated for purposes of determining the date any such class was closed.</text> </subparagraph><subparagraph id="H87004FC7147F4CDEB6123693B5F97B06"><enum>(C)</enum><header>Highly compensated employee</header><text>The term <quote>highly compensated employee</quote> has the meaning given such term in section 414(q).".</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="HC6A0A794DB9C4F42A6687ABC342A405B"><enum>(b)</enum><header>Participation requirements</header><text>Paragraph (26) of <external-xref legal-doc="usc" parsable-cite="usc/26/401">section 401(a)</external-xref> is amended by adding at the end the following new subparagraph:</text> <quoted-block id="HBA3A3908FAD04AF4A28153760706CC3C" style="OLC"> <subparagraph id="H38D140676FD44970A7D210DC8DC9008E"><enum>(I)</enum><header>Protected participants</header> <clause id="HC31C476D63144980A9CE7B27589B90B6"><enum>(i)</enum><header>In general</header><text>A plan shall be deemed to satisfy the requirements of subparagraph (A) if—</text> <subclause id="HD8EEA72CE10143DE82E26D2955C8B6CE"><enum>(I)</enum><text>the plan is amended—</text> <item id="H09E7048D2A5146D89376F8EDE9C4A805"><enum>(aa)</enum><text>to cease all benefit accruals, or</text> </item><item id="HC851C33B845E4DBB92756F7BFAB1F919"><enum>(bb)</enum><text>to provide future benefit accruals only to a closed class of participants,</text> </item></subclause><subclause id="HE3E42300A1FE4703AAC9D65B38A1C6B9"><enum>(II)</enum><text>the plan satisfies subparagraph (A) (without regard to this subparagraph) as of the effective date of the amendment, and</text> </subclause><subclause id="H40AF5DC2B3174D91960F512F6EB64346"><enum>(III)</enum><text>the amendment was adopted before April 5, 2017, or the plan is described in clause (ii).</text> </subclause></clause><clause id="HFA49271BD2EF46DDA76FEED0C384766E"><enum>(ii)</enum><header>Plans described</header><text>A plan is described in this clause if the plan would be described in subsection (o)(1)(C), as applied for purposes of subsection (o)(1)(B)(iii)(IV) and by treating the effective date of the amendment as the date the class was closed for purposes of subsection (o)(1)(C).</text> </clause><clause id="H417D05B6AF3743B2951C5F72AF34D7AA"><enum>(iii)</enum><header>Special rules</header><text>For purposes of clause (i)(II), in applying section 410(b)(6)(C), the amendments described in clause (i) shall not be treated as a significant change in coverage under section 410(b)(6)(C)(i)(II).</text> </clause><clause id="HE7B3C3C7DCC140E9AEB4DC167DEBEA3D"><enum>(iv)</enum><header>Spun-off plans</header><text>For purposes of this subparagraph, if a portion of a plan described in clause (i) is spun off to another employer, the treatment under clause (i) of the spun-off plan shall continue with respect to the other employer.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H8125F858C186479C8C6D9F61F639B869"><enum>(c)</enum><header>Effective date</header> <paragraph id="H9DB66617B23248869F67E326CD4BE04E"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraph (2), the amendments made by this section shall take effect on the date of the enactment of this Act, without regard to whether any plan modifications referred to in such amendments are adopted or effective before, on, or after such date of enactment.</text> </paragraph><paragraph id="HCCFA09BA17E2495895F516469B5C24CF"><enum>(2)</enum><header>Special rules</header> <subparagraph id="H27B9ABF4391A4EA98CA19A336295456D"><enum>(A)</enum><header>Election of earlier application</header><text>At the election of the plan sponsor, the amendments made by this section shall apply to plan years beginning after December 31, 2013.</text> </subparagraph><subparagraph id="HD98DFA84169A4586B5454997D3ED375D"><enum>(B)</enum><header>Closed classes of participants</header><text>For purposes of paragraphs (1)(A)(iii), (1)(B)(iii)(IV), and (2)(A)(iv) of <external-xref legal-doc="usc" parsable-cite="usc/26/401">section 401(o)</external-xref> of the Internal Revenue Code of 1986 (as added by this section), a closed class of participants shall be treated as being closed before April 5, 2017, if the plan sponsor’s intention to create such closed class is reflected in formal written documents and communicated to participants before such date.</text> </subparagraph><subparagraph id="H8176C33F29254B9BA4DC6FBF0929352B"><enum>(C)</enum><header>Certain post-enactment plan amendments</header><text>A plan shall not be treated as failing to be eligible for the application of section 401(o)(1)(A), 401(o)(1)(B)(iii), or 401(a)(26) of such Code (as added by this section) to such plan solely because in the case of—</text> <clause id="HC4E8A837D5F5494F9FF1C930715C058C"><enum>(i)</enum><text>such section 401(o)(1)(A), the plan was amended before the date of the enactment of this Act to eliminate 1 or more benefits, rights, or features, and is further amended after such date of enactment to provide such previously eliminated benefits, rights, or features to a closed class of participants, or</text> </clause><clause id="H276078726863420781F3D92E077FC236"><enum>(ii)</enum><text>such section 401(o)(1)(B)(iii) or section 401(a)(26), the plan was amended before the date of the enactment of this Act to cease all benefit accruals, and is further amended after such date of enactment to provide benefit accruals to a closed class of participants. Any such section shall only apply if the plan otherwise meets the requirements of such section and in applying such section, the date the class of participants is closed shall be the effective date of the later amendment.</text> </clause></subparagraph></paragraph></subsection></section></subtitle><subtitle id="H383DCDA0933D44339E2EF2883F0677DC"><enum>G</enum><header>Estate, gift, and generation-skipping transfer taxes</header> <section id="HB4CCE1D16BF3434ABF8CE9B56FDBDF7E"><enum>1601.</enum><header>Increase in credit against estate, gift, and generation-skipping transfer tax</header> <subsection id="H7656F6ADA6A44A24A57743A6C05D4248"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/2010">Section 2010(c)(3)</external-xref> is amended by striking <quote>$5,000,000</quote> and inserting <quote>$10,000,000</quote>.</text> </subsection><subsection id="HDBCFDF791B0047AE9642A366E2196BF7"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to estates of decedents dying, generation-skipping transfers, and gifts made, after December 31, 2017.</text> </subsection></section><section id="HC269FC6A529141E5A7590CE5EC0431B4" section-type="subsequent-section"><enum>1602.</enum><header>Repeal of estate and generation-skipping transfer taxes</header> <subsection id="HFAC74589945C4AFE81F87C9C051DEFB8"><enum>(a)</enum><header>Estate tax repeal</header> <paragraph id="H1BAE02A2C60C4E76894CDEC264D171F5"><enum>(1)</enum><header>In general</header><text>Subchapter C of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/11">chapter 11</external-xref> is amended by adding at the end the following new section:</text> <quoted-block display-inline="no-display-inline" id="H51F2D0092BAA427780444EEE575A7EA0" style="OLC"> <section id="HE41FD4D60CD54967AF072D3985810BBB"><enum>2210.</enum><header>Termination</header> <subsection id="HAB1A06A382BE4EDBA571DED05E23469D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Except as provided in subsection (b), this chapter shall not apply to the estates of decedents dying after December 31, 2024.</text> </subsection><subsection id="HE9042F2C98A345529DF461EE42E2D20A"><enum>(b)</enum><header>Certain Distributions From Qualified Domestic Trusts</header><text>In applying section 2056A with respect to the surviving spouse of a decedent dying on or before December 31, 2024—</text> <paragraph id="H63F99A9658E0424DB493E07513A5D431"><enum>(1)</enum><text>section 2056A(b)(1)(A) shall not apply to distributions made after the 10-year period beginning on such date, and</text> </paragraph><paragraph id="H9FD83F346C1E42EC947D1996D642FD0B"><enum>(2)</enum><text>section 2056A(b)(1)(B) shall not apply after such date.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HA5A744080A9D4B75A1175070383CC326"><enum>(2)</enum><header>Conforming amendments</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1014">Section 1014(b)</external-xref> is amended—</text> <subparagraph id="H19960756B17F42A195B3FA71B8485ED0"><enum>(A)</enum><text>in paragraph (6), by striking <quote>was includible in determining</quote> and all that follows through the end and inserting <quote>was includible (or would have been includible without regard to section 2210) in determining the value of the decedent’s gross estate under chapter 11 of subtitle B</quote> ,</text> </subparagraph><subparagraph id="H4B1EEE87DA7748B28D00ACAEFB5C2440"><enum>(B)</enum><text>in paragraph (9), by striking <quote>required to be included</quote> through <quote>Code of 1939</quote> and inserting <quote>required to be included (or would have been required to be included without regard to section 2210) in determining the value of the decedent’s gross estate under chapter 11 of subtitle B</quote>, and</text> </subparagraph><subparagraph id="H9375330C2181472EAE1A34513003E347"><enum>(C)</enum><text>in paragraph (10), by striking <quote>Property includible in the gross estate</quote> and inserting <quote>Property includible (or which would have been includible without regard to section 2210) in the gross estate</quote>.</text> </subparagraph></paragraph><paragraph id="H30E502D094804A05BF243EF2574CE0FA"><enum>(3)</enum><header>Clerical amendment</header><text>The table of sections for subchapter C of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/11">chapter 11</external-xref> is amended by adding at the end the following new item:</text> <quoted-block display-inline="no-display-inline" id="H2FB48EC989B2430A911BEA813B4389E3" style="OLC"> <toc regeneration="no-regeneration"> <toc-entry level="section">Sec. 2210. Termination.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H14C50E7158E14E0BB942AC3BDD21200F"><enum>(b)</enum><header>Generation-skipping transfer tax repeal</header> <paragraph id="HC2E8AD2200284FF598D749D020DD5A5F"><enum>(1)</enum><header>In general</header><text>Subchapter G of chapter 13 of subtitle B of such Code is amended by adding at the end the following new section:</text> <quoted-block display-inline="no-display-inline" id="H3244502D47524971AAB022F98CDE6E5B" style="OLC"> <section id="H25D8A0E4D4444FE3A947E767E50E534F"><enum>2664.</enum><header>Termination</header><text display-inline="no-display-inline">This chapter shall not apply to generation-skipping transfers after December 31, 2024.</text></section><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H4CA39E4539CF42D1925E90A69173500C"><enum>(2)</enum><header>Clerical amendment</header><text>The table of sections for subchapter G of chapter 13 of such Code is amended by adding at the end the following new item:</text> <quoted-block display-inline="no-display-inline" id="H43337D607B6F4B178B83778BA0AAC29E" style="OLC"> <toc regeneration="no-regeneration"> <toc-entry level="section">Sec. 2664. Termination.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="HF6D2C4F693284B2086401D23A1BF20AA"><enum>(c)</enum><header>Conforming amendments related to gift tax</header> <paragraph id="H40D084EF05464318B82F18BD5A03D4CA"><enum>(1)</enum><header>Computation of gift tax</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/2502">Section 2502</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H0CBC7F8EA3C54045ACC4953935E6C926" style="OLC"> <subsection id="HB65ADEE3277C45D4B1EF60C860F42349"><enum>(d)</enum><header>Gifts made after 2024</header> <paragraph id="HCA6B0DBB0E2E4DE2AECC99C758E05B49"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a gift made after December 31, 2024, subsection (a) shall be applied by substituting <quote>subsection (d)(2)</quote> for <quote>section 2001(c)</quote> and <quote>such subsection</quote> for <quote>such section</quote>.</text> </paragraph><paragraph id="H2892922438744674868B6812E842702F"><enum>(2)</enum><header>Rate schedule</header> <table align-to-level="section" blank-lines-before="1" colsep="0" frame="none" line-rules="no-gen" rowsep="0" rule-weights="0.0.0.0.0.0" table-template-name="Entry: 2 text, bold hds" table-type=""> <tgroup cols="2" grid-typeface="1.1" rowsep="0" thead-tbody-ldg-size="0.10.12"><colspec coldef="txt" colname="column1" colsep="0" colwidth="246pts" min-data-value="190" rowsep="0"></colspec><colspec coldef="txt-no-ldr-no-spread" colname="column2" colsep="0" colwidth="260pts" min-data-value="95" rowsep="0"></colspec> <tbody> <row><entry colname="column1" morerows="0" namest="column1" rowsep="0"><bold>If the amount with respect to which the tentative tax to be computed is:</bold></entry><entry colname="column2" morerows="0" namest="column2" rowsep="0"><bold>The tentative tax is:</bold></entry></row> <row><entry colname="column1" leader-modify="force-ldr-bottom" rowsep="0" stub-definition="txt-ldr">Not over $10,000</entry><entry colname="column2" leader-modify="force-ldr-bottom" rowsep="0">18% of such amount.</entry></row> <row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $10,000 but not over $20,000</entry><entry colname="column2" rowsep="0">$1,800, plus 20% of the excess over $10,000.</entry></row> <row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $20,000 but not over $40,000</entry><entry colname="column2" rowsep="0">$3,800, plus 22% of the excess over $20,000.</entry></row> <row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $40,000 but not over $60,000</entry><entry colname="column2" rowsep="0">$8,200, plus 24% of the excess over $40,000.</entry></row> <row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $60,000 but not over $80,000</entry><entry colname="column2" rowsep="0">$13,000, plus 26% of the excess over $60,000.</entry></row> <row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $80,000 but not over $100,000</entry><entry colname="column2" rowsep="0">$18,200, plus 28% of the excess over $80,000.</entry></row> <row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $100,000 but not over $150,000</entry><entry colname="column2" rowsep="0">$23,800, plus 30% of the excess over $100,000.</entry></row> <row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $150,000 but not over $250,000</entry><entry colname="column2" rowsep="0">$38,800, plus 32% of the excess of $150,000.</entry></row> <row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $250,000 but not over $500,000</entry><entry colname="column2" rowsep="0">$70,800, plus 34% of the excess over $250,000.</entry></row> <row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $500,000</entry><entry colname="column2" rowsep="0">$155,800, plus 35% of the excess of $500,000.</entry></row></tbody></tgroup></table></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H355A23552A084FE989EE6B0DCAD2A4C9"><enum>(2)</enum><header>Lifetime gift exemption</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/2505">Section 2505</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="HC99E50C5D84640DEBAD239D8CDF18A7F" style="OLC"> <subsection id="HD70EBD2FC60741CE9F4D6AD2AF3AE52B"><enum>(d)</enum><header>Gifts made after 2024</header> <paragraph id="H88C74E288A154657A46266A7FE21125A"><enum>(1)</enum><header>In general</header><text>In the case of a gift made after December 31, 2024, subsection (a)(1) shall be applied by substituting <quote>the amount of the tentative tax which would be determined under the rate schedule set forth in section 2502(a)(2) if the amount with respect to which such tentative tax is to be computed were $10,000,000</quote> for <quote>the applicable credit amount in effect under section 2010(c) which would apply if the donor died as of the end of the calendar year</quote>.</text> </paragraph><paragraph display-inline="no-display-inline" id="H96809F7CC5F1421BBD49057B149BCB40"><enum>(2)</enum><header>Inflation adjustment</header> <subparagraph id="H026879B8A6E44B4397A3F6D12DB65C56"><enum>(A)</enum><header>In general</header><text>In the case of any calendar year after 2024, the dollar amount in subsection (a)(1) (after application of this subsection) shall be increased by an amount equal to—</text> <clause id="H5DCA28B3190445718DB18921D804A6AE"><enum>(i)</enum><text>such dollar amount, multiplied by</text> </clause><clause id="H0DF172A3E9384D3799B154A18E1A5C0C"><enum>(ii)</enum><text display-inline="yes-display-inline">the cost-of-living adjustment determined under section 1(c)(2)(A) of such calendar year by substituting <quote>calendar year 2011</quote> for <quote>calendar year 2016</quote> in clause (ii) thereof.</text> </clause></subparagraph><subparagraph id="HC55DD385D90C4E5595F49F3B547A25D3"><enum>(B)</enum><header>Rounding</header><text>If any amount as adjusted under paragraph (1) is not a multiple of $10,000, such amount shall be rounded to the nearest multiple of $10,000.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H3682DFA2072049799248148A5262387C"><enum>(3)</enum><header>Other conforming amendments related to gift tax</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/2801">Section 2801</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="HDAEA56DF12D94ED78323522EE4A1430B" style="OLC"> <subsection id="H8AD35D51756A44DF985B6FD21AD28C44"><enum>(g)</enum><header>Gifts received after 2024</header><text display-inline="yes-display-inline">In the case of a gift received after December 31, 2024, subsection (a)(1) shall be applied by substituting <quote>section 2502(a)(2)</quote> for <quote>section 2001(c) as in effect on the date of such receipt</quote>.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H709883C38B4D4274B39E3B0F124BEFC9"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to estates of decedents dying, generation-skipping transfers, and gifts made, after December 31, 2024.</text> </subsection></section></subtitle><enum>II</enum><header>Alternative Minimum Tax Repeal</header> <section id="HA026B6579C29440186CD2E941AEC8FF1"><enum>2001.</enum><header>Repeal of alternative minimum tax</header> <subsection commented="no" id="HC44F07B41C82406287AA807878E9F791"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking part VI (and by striking the item relating to such part in the table of parts for subchapter A).</text> </subsection><subsection id="H53FBCAC162DC4123A39354D9D88FEF40"><enum>(b)</enum><header>Credit for prior year minimum tax liability</header> <paragraph id="H77C9DC8FB1454B2CA890939B96156443"><enum>(1)</enum><header>Limitation</header><text>Subsection (c) of <external-xref legal-doc="usc" parsable-cite="usc/26/53">section 53</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H0BAFA1A432434219AEF4331C7CA3BBE9" style="OLC"> <subsection id="HB7D318E77DF74AB181EEBB80213C9AD0"><enum>(c)</enum><header>Limitation</header><text>The credit allowable under subsection (a) shall not exceed the regular tax liability of the taxpayer reduced by the sum of the credits allowed under subparts A, B, and D.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H7F4E1A0F915E4E3AAA32B21D8E20599E"><enum>(2)</enum><header>Credits treated as refundable</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/53">Section 53</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="HA4B62607707E4732A178CACF324C7590" style="OLC"> <subsection id="H2CC12268174040F29E31372E3CC34D37"><enum>(e)</enum><header>Portion of credit treated as refundable</header> <paragraph id="H40B0D572518840848ECA50532DF538C5"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any taxable year beginning in 2019, 2020, 2021, or 2022, the limitation under subsection (c) shall be increased by the AMT refundable credit amount for such year.</text> </paragraph><paragraph id="H2AF2B01CF22249B6BD22BCAD61A33A54"><enum>(2)</enum><header>AMT refundable credit amount</header><text>For purposes of paragraph (1), the AMT refundable credit amount is an amount equal to 50 percent (100 percent in the case of a taxable year beginning in 2022) of the excess (if any) of—</text> <subparagraph id="HF4DB5A4974514BC290BF65CC4B835FC2"><enum>(A)</enum><text>the minimum tax credit determined under subsection (b) for the taxable year, over</text> </subparagraph><subparagraph id="HD13946888A924B0481EB5A9DA6BA2C9C"><enum>(B)</enum><text>the minimum tax credit allowed under subsection (a) for such year (before the application of this subsection for such year).</text> </subparagraph></paragraph><paragraph id="H1F527D3F2412453E9D199874070C7509"><enum>(3)</enum><header>Credit refundable</header><text>For purposes of this title (other than this section), the credit allowed by reason of this subsection shall be treated as a credit allowed under subpart C (and not this subpart).</text> </paragraph><paragraph id="HB22A2F79D3B24286AA3DC6CE06A930DB"><enum>(4)</enum><header>Short taxable years</header><text>In the case of any taxable year of less than 365 days, the AMT refundable credit amount determined under paragraph (2) with respect to such taxable year shall be the amount which bears the same ratio to such amount determined without regard to this paragraph as the number of days in such taxable year bears to 365.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H381EA41283E746ADAF9192B51B4CF5C5"><enum>(3)</enum><header>Treatment of references</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/53">Section 53(d)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H14CCA6F417D94EE08D87476AD09554DB" style="OLC"> <paragraph id="HFA0E1D511FB74ECBB6826D699EB4EE3D"><enum>(3)</enum><header>AMT term references</header><text display-inline="yes-display-inline">Any references in this subsection to section 55, 56, or 57 shall be treated as a reference to such section as in effect before its repeal by the <short-title>Tax Cuts and Jobs Act</short-title>.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection commented="no" id="HD15496BC583C49BD9F4FA5125D1E16DE"><enum>(c)</enum><header>Conforming amendments related to AMT repeal</header> <paragraph commented="no" id="H2C6FF7112EA04F4C9A30D790F3DE0924"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/2">Section 2(d)</external-xref> is amended by striking <quote>sections 1 and 55</quote> and inserting <quote>section 1</quote>.</text> </paragraph><paragraph commented="no" id="H93A95F2FA5664DCB8D65ADBC4D749C63"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/5">Section 5(a)</external-xref> is amended by striking paragraph (4).</text> </paragraph><paragraph commented="no" id="H2D375AEE4F05493DBFE057C451140CA4"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/11">Section 11(d)</external-xref> is amended by striking <quote>the taxes imposed by subsection (a) and section 55</quote> and inserting <quote>the tax imposed by subsection (a)</quote>.</text> </paragraph><paragraph commented="no" id="HC246FEB99F354AF5AD24AE1441CF7F38"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/12">Section 12</external-xref> is amended by striking paragraph (7).</text> </paragraph><paragraph commented="no" id="H4F67690024014900AA521BFE969CA6D3"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/26">Section 26(a)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H4EA595BEC23E43259356442AC56A5C32" style="OLC"> <subsection commented="no" id="HD46B7EEA9E0B4FC091756B10994FD235"><enum>(a)</enum><header>Limitation based on amount of tax</header><text display-inline="yes-display-inline">The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the taxpayer’s regular tax liability for the taxable year.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph commented="no" id="H143613697BAA4409B02DB8BF69F92AB1"><enum>(6)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/26">Section 26(b)(2)</external-xref> is amended by striking subparagraph (A).</text> </paragraph><paragraph commented="no" id="HFBF97879D2094ABB8781EC7A90389EC8"><enum>(7)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/26">Section 26</external-xref> is amended by striking subsection (c).</text> </paragraph><paragraph commented="no" id="H45E0FB14D04246BC98FE87D7C83764ED"><enum>(8)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/38">Section 38(c)</external-xref> is amended—</text> <subparagraph commented="no" id="H54F09CCBCCD548EEB9591C0F0597357A"><enum>(A)</enum><text>by striking paragraphs (1) through (5),</text> </subparagraph><subparagraph commented="no" id="HBD72044BC5AC490389EFD61FC8275656"><enum>(B)</enum><text>by redesignating paragraph (6) as paragraph (2),</text> </subparagraph><subparagraph commented="no" id="H617B21AC200B43B49106489F8E348EA6"><enum>(C)</enum><text>by inserting before paragraph (2) (as so redesignated) the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H0D554F34609444C39F8F8882DD1BBDD7" style="OLC"> <paragraph commented="no" id="H40D783CAE3E14C98B4023069CA9E5815"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The credit allowed under subsection (a) for any taxable year shall not exceed the excess (if any) of—</text> <subparagraph commented="no" id="H06C651F203094818B7F601AD1755C5CD"><enum>(A)</enum><text>the sum of—</text> <clause commented="no" id="H7BDED6870B5E4419BB9EEB5EFE7CFB48"><enum>(i)</enum><text>so much of the regular tax liability as does not exceed $25,000, plus</text> </clause><clause commented="no" id="H3BB40EC6E7C247988C5FD1841AB5C790"><enum>(ii)</enum><text>75 percent of so much of the regular tax liability as exceeds $25,000, over</text> </clause></subparagraph><subparagraph commented="no" id="H9B13315536734862917BFD66D4240F33"><enum>(B)</enum><text>the sum of the credits allowable under subparts A and B of this part.</text></subparagraph></paragraph><after-quoted-block>, and</after-quoted-block></quoted-block> </subparagraph><subparagraph commented="no" id="HD4304D24328E406D94FD7A3F31F2854B"><enum>(D)</enum><text>by striking <quote>subparagraph (B) of paragraph (1)</quote> each place it appears in paragraph (2) (as so redesignated) and inserting <quote>clauses (i) and (ii) of paragraph (1)(A)</quote>.</text> </subparagraph></paragraph><paragraph id="H1E7A1908BAE6448E94AD3701B2B25D82"><enum>(9)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/39">Section 39(a)</external-xref> is amended—</text> <subparagraph id="HDCA3D29C3FC44B9EB23F2CC38DDD1A47"><enum>(A)</enum><text>by striking <quote>or the eligible small business credits</quote> in paragraph (3)(A), and</text> </subparagraph><subparagraph id="HEFDE6C93F76746168E01B98001CA5FB7"><enum>(B)</enum><text>by striking paragraph (4).</text> </subparagraph></paragraph><paragraph commented="no" id="H2AD9A8791E104DBD9F055D7557008747"><enum>(10)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/45D">Section 45D(g)(4)(B)</external-xref> is amended by striking <quote>or for purposes of section 55</quote>.</text> </paragraph><paragraph commented="no" id="HA1B4974370F64E81A5A45883DA16965A"><enum>(11)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/54">Section 54(c)(1)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H3EBCC4F440D64040A349536C1FDA7CF6" style="OLC"> <paragraph commented="no" id="H7A69CA749D4F47BE98EB17620C21B2AE"><enum>(1)</enum><text display-inline="yes-display-inline">regular tax liability (as defined in section 26(b)), over</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph commented="no" id="HBBF5FC94BEB74B2D96CAECF132165F6C"><enum>(12)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/54A">Section 54A(c)(1)(A)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H33191D8BC23346B189052866C14F1549" style="OLC"> <subparagraph commented="no" id="H7059C4A11B1940F88C4FE7D344D06CC0"><enum>(A)</enum><text display-inline="yes-display-inline">regular tax liability (as defined in section 26(b)), over</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H8E391FFC37454060ACC272EDB0D5B799"><enum>(13)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/148">Section 148(b)(3)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H6CF7060B78454E598D0BAA887390937F" style="OLC"> <paragraph id="HE7BD53578A1F4CCEB5788D1E1C94DFF6"><enum>(3)</enum><header>Tax-exempt bonds not treated as investment property</header><text display-inline="yes-display-inline">The term <quote>investment property</quote> does not include any tax-exempt bond.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph commented="no" id="H705525F1DB0F45C4A7844D442888E11D"><enum>(14)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/168">Section 168(k)(2)</external-xref> is amended by striking subparagraph (G).</text> </paragraph><paragraph id="HD69579FDAB864DEB9E1B4380EF70407B"><enum>(15)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/168">Section 168(k)</external-xref> is amended by striking paragraph (4).</text> </paragraph><paragraph id="HFC51699E9DB547A3A1CA09178BED1487"><enum>(16)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/168">Section 168(k)(5)</external-xref> is amended by striking subparagraph (E).</text> </paragraph><paragraph id="HF89FA53F1A2C4D9EBF88D7F8400719A6"><enum>(17)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/168">Section 168(m)(2)(B)(i)</external-xref> is amended by striking <quote>(determined without regard to paragraph (4) thereof)</quote>.</text> </paragraph><paragraph id="H2BCA507B995848FDA1DCD69675F93832"><enum>(18)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/168">Section 168(m)(2)</external-xref> is amended by striking subparagraph (D).</text> </paragraph><paragraph commented="no" id="HDE0C8354F8EE4A28BECEA410B7EE86C8"><enum>(19)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/173">Section 173</external-xref> is amended by striking subsection (b).</text> </paragraph><paragraph id="HA1B6FEAE010F4A45ACF32C7529370D0E"><enum>(20)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/263">Section 263(c)</external-xref> is amended by striking <quote>section 59(e) or 291</quote> and inserting <quote>section 291</quote>.</text> </paragraph><paragraph commented="no" id="HA82D28D128A24518AA8B542870D0F390"><enum>(21)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/263A">Section 263A(c)</external-xref> is amended by striking paragraph (6) and by redesignating paragraph (7) (as amended) as paragraph (6).</text> </paragraph><paragraph commented="no" id="HA55B18B3C6144031BF137005E370CEDD"><enum>(22)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/382">Section 382(l)</external-xref> is amended by striking paragraph (7) and by redesignating paragraph (8) as paragraph (7).</text> </paragraph><paragraph commented="no" id="H1D6B8EA09427425DA667B8533883AE8F"><enum>(23)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/443">Section 443</external-xref> is amended by striking subsection (d) and by redesignating subsection (e) as subsection (d).</text> </paragraph><paragraph id="HC18A77E4140242448EA3FEEB40B3CC13"><enum>(24)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/616">Section 616</external-xref> is amended by striking subsection (e).</text> </paragraph><paragraph id="H175B77A11BF84575B1AD536E483430D7"><enum>(25)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/617">Section 617</external-xref> is amended by striking subsection (i).</text> </paragraph><paragraph commented="no" id="H6719C6D64FBD415A8694C5A3BC4CC8B0"><enum>(26)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/641">Section 641(c)</external-xref> is amended—</text> <subparagraph commented="no" id="H5661A098097448AFA4FE78999E0A67DD"><enum>(A)</enum><text>in paragraph (2) by striking subparagraph (B) and by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively, and</text> </subparagraph><subparagraph commented="no" id="H59F4C4AEA34140FE9DC54603D45C0412"><enum>(B)</enum><text>in paragraph (3), by striking <quote>paragraph (2)(C)</quote> and inserting <quote>paragraph (2)(B)</quote>.</text> </subparagraph></paragraph><paragraph commented="no" id="H94AE1D545CE94C50B03DEE5FB2ED695B"><enum>(27)</enum><text>Subsections (b) and (c) of section 666 are each amended by striking <quote>(other than the tax imposed by section 55)</quote>.</text> </paragraph><paragraph commented="no" id="H9D032E6F1A0D4EA5A6CAA1BF7B4E2D18"><enum>(28)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/848">Section 848</external-xref> is amended by striking subsection (i).</text> </paragraph><paragraph commented="no" id="HE33A190FE380473D9C889547FBEA57C7"><enum>(29)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/860E">Section 860E(a)</external-xref> is amended by striking paragraph (4).</text> </paragraph><paragraph commented="no" id="H71EEF3F70FF4429883B1EBAA45D2C24D"><enum>(30)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/871">Section 871(b)(1)</external-xref> is amended by striking <quote>or 55</quote>.</text> </paragraph><paragraph commented="no" id="H7A92F387825F4D759F5944D1BAA7FB50"><enum>(31)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/882">Section 882(a)(1)</external-xref> is amended by striking <quote>55,</quote>.</text> </paragraph><paragraph commented="no" id="HF8A8CDA69D23489A9DA39A645824A39E"><enum>(32)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/897">Section 897(a)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HE27CE569CA2845959C4C97DFD58A9280" style="OLC"> <subsection commented="no" id="HF9A6FE78903C4D648969CB99C98C7490"><enum>(a)</enum><header>Treatment as effectively connected with united states trade or business</header><text display-inline="yes-display-inline">For purposes of this title, gain or loss of a nonresident alien individual or a foreign corporation from the disposition of a United States real property interest shall be taken into account—</text> <paragraph commented="no" id="H26C470CBFBF444AB86F394160022D6A5"><enum>(1)</enum><text>in the case of a nonresident alien individual, under section 871(b)(1), or</text> </paragraph><paragraph commented="no" id="HD48C13F74D804DAAAED870DB037A9494"><enum>(2)</enum><text>in the case of a foreign corporation, under section 882(a)(1),</text> </paragraph><continuation-text continuation-text-level="subsection">as if the taxpayer were engaged in a trade or business within the United States during the taxable year and as if such gain or loss were effectively connected with such trade or business.</continuation-text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph commented="no" id="H229F6F6BDFBE4F0C93BA3B402A76004B"><enum>(33)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/904">Section 904(k)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HFCECA4F9F36C47DD96720BBF05B77276" style="OLC"> <subsection commented="no" id="H43536604EB3441DA89218E6522F62154"><enum>(k)</enum><header>Cross reference</header><text display-inline="yes-display-inline">For increase of limitation under subsection (a) for taxes paid with respect to amounts received which were included in the gross income of the taxpayer for a prior taxable year as a United States shareholder with respect to a controlled foreign corporation, see section 960(b).</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph commented="no" id="H93DC5441408848A8AE11AAB65CCB224E"><enum>(34)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/911">Section 911(f)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H8A7D280FC0A54CACAB0FB708D217BEB0" style="OLC"> <subsection commented="no" id="HEA49DF5161A74CB58E00ECADCBC772C7"><enum>(f)</enum><header>Determination of tax liability</header> <paragraph id="H19FF30A84D5240289D73FCF062075B3F"><enum>(1)</enum><header>In general</header><text>If, for any taxable year, any amount is excluded from gross income of a taxpayer under subsection (a), then, notwithstanding section 1, if such taxpayer has taxable income for such taxable year, the tax imposed by section 1 for such taxable year shall be equal to the excess (if any) of—</text> <subparagraph commented="no" id="HB8E8BBDD78854CAC9F5704C845E656E5"><enum>(A)</enum><text>the tax which would be imposed by section 1 for such taxable year if the taxpayer’s taxable income were increased by the amount excluded under subsection (a) for such taxable year, over</text> </subparagraph><subparagraph commented="no" id="H05A88551058740989D5E4A85BEB384A2"><enum>(B)</enum><text>the tax which would be imposed by section 1 for such taxable year if the taxpayer’s taxable income were equal to the amount excluded under subsection (a) for such taxable year.</text> </subparagraph><continuation-text continuation-text-level="paragraph">For purposes of this paragraph, the amount excluded under subsection (a) shall be reduced by the aggregate amount of any deductions or exclusions disallowed under subsection (d)(6) with respect to such excluded amount.</continuation-text></paragraph><paragraph id="HF24FDFB0653B422581E663FA79BC1548"><enum>(2)</enum><header>Treatment of capital gain excess</header> <subparagraph id="HED32498E12A94B29993DBFAB85C55FD4"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">In applying section 1(h) for purposes of determining the tax under paragraph (1)(A) for any taxable year in which, without regard to this subsection, the taxpayer’s net capital gain exceeds taxable income (hereafter in this subparagraph referred to as the capital gain excess)—</text> <clause id="HAFDA5E219DD9448FB7AF8C437CD2BAB5"><enum>(i)</enum><text>the taxpayer’s net capital gain (determined without regard to section 1(h)(11)) shall be reduced (but not below zero) by such capital gain excess,</text> </clause><clause id="H635D4B9F022B4FB0ACAE82525769BE73"><enum>(ii)</enum><text>the taxpayer’s qualified dividend income shall be reduced by so much of such capital gain excess as exceeds the taxpayer’s net capital gain (determined without regard to section 1(h)(11) and the reduction under clause (i)), and</text> </clause><clause id="HBD26CBDF3A764A56B3B91500B3A0851B"><enum>(iii)</enum><text>adjusted net capital gain, unrecaptured section 1250 gain, and 28-percent rate gain shall each be determined after increasing the amount described in section 1(h)(4)(B) by such capital gain excess.</text> </clause></subparagraph><subparagraph id="HD3401688E3C3461991B130D739865182"><enum>(B)</enum><header>Definitions</header><text display-inline="yes-display-inline">Terms used in this paragraph which are also used in section 1(h) shall have the respective meanings given such terms by section 1(h).</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph commented="no" id="H8C18646F8DD64A32BDA2E2538853D8A5"><enum>(35)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/962">Section 962(a)(1)</external-xref> is amended—</text> <subparagraph commented="no" id="H21E0061E23A14C489DDCF81F232A1468"><enum>(A)</enum><text>by striking <quote>sections 1 and 55</quote> and inserting <quote>section 1</quote>, and</text> </subparagraph><subparagraph commented="no" id="H411A3F2708234A23B0517EE209520527"><enum>(B)</enum><text>by striking <quote>sections 11 and 55</quote> and inserting <quote>section 11</quote>.</text> </subparagraph></paragraph><paragraph commented="no" id="H34E6CA3B4F2646CCA2F3C30E4C0AD11F"><enum>(36)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1016">Section 1016(a)</external-xref> is amended by striking paragraph (20).</text> </paragraph><paragraph id="H84B86785894E4C54A5E453E83A37EC4B"><enum>(37)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1202">Section 1202(a)(4)</external-xref> is amended by inserting <quote>and</quote> at the end of subparagraph (A), by striking <quote>, and</quote> and inserting a period at the end of subparagraph (B), and by striking subparagraph (C).</text> </paragraph><paragraph commented="no" id="HFDB07426921C4181801C3979646F254F"><enum>(38)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1374">Section 1374(b)(3)(B)</external-xref> is amended by striking the last sentence thereof.</text> </paragraph><paragraph commented="no" id="H2655B1C48B8F473F9B53E03F4C4F74F0"><enum>(39)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1561">Section 1561(a)</external-xref> is amended—</text> <subparagraph id="H64DA98D50F2744EF84A2D72C2C9B081A"><enum>(A)</enum><text>by inserting <quote>and</quote> at the end of paragraph (1), by striking <quote>, and</quote> at the end of paragraph (2) and inserting a period, and by striking paragraph (3), and</text> </subparagraph><subparagraph id="H16CE71F32C26422BA799BFD02B47D68D"><enum>(B)</enum><text>by striking the last sentence.</text> </subparagraph></paragraph><paragraph commented="no" id="H56109FEAE26947C8A897CB23085243E0"><enum>(40)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6015">Section 6015(d)(2)(B)</external-xref> is amended by striking <quote>or 55</quote>.</text> </paragraph><paragraph commented="no" id="HD2F0E9A7899146E6B592CC2947208A22"><enum>(41)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6211">Section 6211(b)(4)(A)</external-xref> is amended by striking<quote>, 168(k)(4)</quote>.</text> </paragraph><paragraph commented="no" id="H2670AC88843843EE9AC330DA03B17D16"><enum>(42)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6425">Section 6425(c)(1)(A)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H79B2216A539349BB9B3518D4EAC82D0C" style="OLC"> <subparagraph id="HA094431CC5DE4227B08164B838C8D15C"><enum>(A)</enum><text display-inline="yes-display-inline">the tax imposed under section 11 or subchapter L of chapter 1, whichever is applicable, over</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph commented="no" id="H4E3D492FC1394FA1817675530CFD551D"><enum>(43)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6654">Section 6654(d)(2)</external-xref> is amended—</text> <subparagraph commented="no" id="H4858D0FC4EB1487A9A5A6DBF6B1E23CE"><enum>(A)</enum><text>in clause (i) of subparagraph (B), by striking <quote>, alternative minimum taxable income,</quote>, and</text> </subparagraph><subparagraph commented="no" id="HA5A945905DA84E0D9890E982E5CF3702"><enum>(B)</enum><text>in clause (i) of subparagraph (C), by striking <quote>, alternative minimum taxable income,</quote>.</text> </subparagraph></paragraph><paragraph commented="no" id="H90C45A560051416B8B6641C09680B967"><enum>(44)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6655">Section 6655(e)(2)(B)(i)</external-xref> is amended by striking <quote>The taxable income and alternative minimum taxable income shall</quote> and inserting <quote>Taxable income shall</quote>.</text> </paragraph><paragraph commented="no" id="H4738D980F07A453FA8598007B922AC9C"><enum>(45)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6655">Section 6655(g)(1)(A)</external-xref> is amended by adding <quote>plus</quote> at the end of clause (i), by striking clause (ii), and by redesignating clause (iii) as clause (ii).</text> </paragraph><paragraph commented="no" id="H9A2551F02FDB4023BE583146F07F9241"><enum>(46)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6662">Section 6662(e)(3)(C)</external-xref> is amended by striking <quote>the regular tax (as defined in section 55(c))</quote> and inserting <quote>the regular tax liability (as defined in section 26(b))</quote>.</text> </paragraph></subsection><subsection display-inline="no-display-inline" id="HBA468C688C544A0EADEA4BEC191C26FA"><enum>(d)</enum><header>Effective dates</header> <paragraph id="HE9E2216233A64E74A4BB41A9F5A8C346"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </paragraph><paragraph id="H6A20DF799E5E4918936DCC2E6B6283BD"><enum>(2)</enum><header>Prior elections with respect to certain tax preferences</header><text>So much of the amendment made by subsection (a) as relates to the repeal of <external-xref legal-doc="usc" parsable-cite="usc/26/59">section 59(e)</external-xref> of the Internal Revenue Code of 1986 shall apply to amounts paid or incurred after December 31, 2017.</text> </paragraph><paragraph id="HEB721A503DCD4522A97A8C6DDC02062D"><enum>(3)</enum><header>Treatment of net operating loss carrybacks</header><text>For purposes of <external-xref legal-doc="usc" parsable-cite="usc/26/56">section 56(d)</external-xref> of the Internal Revenue Code of 1986 (as in effect before its repeal), the amount of any net operating loss which may be carried back from a taxable year beginning after December 31, 2017, to taxable years beginning before January 1, 2018, shall be determined without regard to any adjustments under section 56(d)(2)(A) of such Code (as so in effect).</text> </paragraph></subsection></section><enum>III</enum><header>Business tax reform</header> <subtitle id="HF2CF69F569504559871BF72B073AAA54"><enum>A</enum><header>Tax rates</header> <section commented="no" id="H4823ED1B90E44CBCBEE89F7626C9E14E"><enum>3001.</enum><header>Reduction in corporate tax rate</header> <subsection commented="no" id="HE3443A85C7954741A45823D87A120274"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/11">Section 11(b)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HDCFC2D01F4C44E1580CD3AA35F5F85E1" style="OLC"> <subsection commented="no" id="H838E81D5A8EA4548803699AFB2B7AC5A"><enum>(b)</enum><header>Amount of tax</header> <paragraph id="H53F1674AAFB248E49F164E13EDD4ED5B"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amount of the tax imposed by subsection (a) shall be 20 percent of taxable income.</text> </paragraph><paragraph id="H52FF721645D34A96988C6444AAD7ABD9"><enum>(2)</enum><header>Special rule for personal service corporations</header> <subparagraph id="H822EDA675CCF4E7BACE2955823660AA9"><enum>(A)</enum><header>In general</header><text>In the case of a personal service corporation (as defined in section 448(d)(2)), the amount of the tax imposed by subsection (a) shall be 25 percent of taxable income.</text> </subparagraph><subparagraph id="H739B640749164F45828F708F85955103"><enum>(B)</enum><header>References to corporate rate</header><text>Any reference to the rate imposed under this section or to the highest rate in effect under this section (or any similar reference) shall be determined without regard to the rate imposed with respect to personal service corporations (as so defined).</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="H037092C0E9B84E13BCB973B8FA937AAD"><enum>(b)</enum><header>Conforming amendments</header> <paragraph commented="no" display-inline="no-display-inline" id="H2D2D25FA04B64F928F22BAA2CEB1EF1A"><enum>(1)</enum> <subparagraph commented="no" display-inline="yes-display-inline" id="H804DB0256BB74319A8449A82B745B291"><enum>(A)</enum><text>Part I of subchapter P of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 1201 (and by striking the item relating to such section in the table of sections for such part).</text> </subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H16674A79F5C541179035259B60513A24" indent="up1"><enum>(B)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/12">Section 12</external-xref> is amended by striking paragraph (4).</text> </subparagraph><subparagraph commented="no" id="H93F238036A2D43C09CBB76E54DD185F1" indent="up1"><enum>(C)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/527">Section 527(b)</external-xref> is amended—</text> <clause commented="no" id="H4C7484702512418FBEFB0803421BC5F1"><enum>(i)</enum><text>by striking paragraph (2), and</text> </clause><clause commented="no" id="H8BE33FFE914D41229745D31D9752D869"><enum>(ii)</enum><text>by striking all that precedes <quote>is hereby imposed</quote> and inserting:</text> <quoted-block display-inline="no-display-inline" id="H2EEA82AD9ECF415BA1B6A019282DA44F" style="OLC"> <subsection commented="no" id="HDD5A80FA25094A1B97786AA8DF694129"><enum>(b)</enum><header>Tax imposed</header><text display-inline="yes-display-inline">A tax</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </clause></subparagraph><subparagraph commented="no" id="H9462F8F4D1DA4EB5BA7A1138D83D3816" indent="up1"><enum>(D)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/594">Section 594(a)</external-xref> is amended by striking <quote>taxes imposed by section 11 or 1201(a)</quote> and inserting <quote>tax imposed by section 11</quote>.</text> </subparagraph><subparagraph commented="no" id="H6A53D0436A2D4A5CB7CFA4E268D40567" indent="up1"><enum>(E)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/691">Section 691(c)(4)</external-xref> is amended by striking <quote>1201,</quote>.</text> </subparagraph><subparagraph commented="no" id="H5B06147CBBDB49DC9AEF2A691CCC7105" indent="up1"><enum>(F)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/801">Section 801(a)</external-xref> is amended—</text> <clause commented="no" id="HA2E01B79739B468EBFEF973581C05B8A"><enum>(i)</enum><text>by striking paragraph (2), and</text> </clause><clause commented="no" id="H55B67151F8994672B722540A4AB9385F"><enum>(ii)</enum><text>by striking all that precedes <quote>is hereby imposed</quote> and inserting:</text> <quoted-block display-inline="no-display-inline" id="HDD57653417A6420F9319CAAF7C5CDE8C" style="OLC"> <subsection commented="no" id="H851F7457FD7748319BFAD18CEE780F05"><enum>(a)</enum><header>Tax imposed</header><text display-inline="yes-display-inline">A tax</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </clause></subparagraph><subparagraph commented="no" id="H716747E7045647F5A702A0240936DC20" indent="up1"><enum>(G)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/831">Section 831(e)</external-xref> is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively.</text> </subparagraph><subparagraph commented="no" id="H5275606FAD5245B69D8CAC876962C33B" indent="up1"><enum>(H)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/832">Sections 832(c)(5)</external-xref> and <external-xref legal-doc="usc" parsable-cite="usc/26/834"> 834(b)(1)(D)</external-xref> are each amended by striking <quote>sec. 1201 and following,</quote>.</text> </subparagraph><subparagraph commented="no" id="H6C84525CB3D847F989085915FBA74B2F" indent="up1"><enum>(I)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/852">Section 852(b)(3)(A)</external-xref> is amended by striking <quote>section 1201(a)</quote> and inserting <quote>section 11(b)(1)</quote>.</text> </subparagraph><subparagraph id="HBA50D196B6CD4AB2A342E8F78CDEA28D" indent="up1"><enum>(J)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/857">Section 857(b)(3)</external-xref> is amended—</text> <clause id="HA8F038CE34824DD1935C1658D845A881"><enum>(i)</enum><text>by striking subparagraph (A) and redesignating subparagraphs (B) through (F) as subparagraphs (A) through (E), respectively,</text> </clause><clause id="HFB51E96400A54CDFBFB59198C05A2759"><enum>(ii)</enum><text>in subparagraph (C), as so redesignated—</text> <subclause id="H96D77A93FB68416E9F0CC54E8133CF85"><enum>(I)</enum><text>by striking <quote>subparagraph (A)(ii)</quote> in clause (i) thereof and inserting <quote>paragraph (1)</quote>,</text> </subclause><subclause id="H786E9013A1564487AE00C6D78097D1DB"><enum>(II)</enum><text>by striking <quote>the tax imposed by subparagraph (A)(ii)</quote> in clauses (ii) and (iv) thereof and inserting <quote>the tax imposed by paragraph (1) on undistributed capital gain</quote>,</text> </subclause></clause><clause id="H99CCE6F5C9824C1FA069010E20596A69"><enum>(iii)</enum><text>in subparagraph (E), as so redesignated, by striking <quote>subparagraph (B) or (D)</quote> and inserting <quote>subparagraph (A) or (C)</quote>, and</text> </clause><clause id="HE23495B952EE4766AA9F128D6B3314C1"><enum>(iv)</enum><text>by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="H9AD05ED7AB514583BB4F06E6DC155DEB" style="OLC"> <subparagraph id="H3886940DF6E14E319B1CB0460128062B"><enum>(F)</enum><header>Undistributed capital gain</header><text display-inline="yes-display-inline">For purposes of this paragraph, the term <quote>undistributed capital gain</quote> means the excess of the net capital gain over the deduction for dividends paid (as defined in section 561) determined with reference to capital gain dividends only.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </clause></subparagraph><subparagraph commented="no" id="H4B8426A0063C45D68EB26C977EE97A71" indent="up1"><enum>(K)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/882">Section 882(a)(1)</external-xref> is amended by striking <quote>, or 1201(a)</quote>.</text> </subparagraph><subparagraph commented="no" id="H3B9267E62D594BCBA8F0B3B35091E880" indent="up1"><enum>(L)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1374">Section 1374(b)</external-xref> is amended by striking paragraph (4).</text> </subparagraph><subparagraph commented="no" id="H69CFFA89CC7F43ABA37D53316F1B8496" indent="up1"><enum>(M)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1381">Section 1381(b)</external-xref> is amended by striking <quote>taxes imposed by section 11 or 1201</quote> and inserting <quote>tax imposed by section 11</quote>.</text> </subparagraph><subparagraph commented="no" id="HE85C70AE0217435690EFFB32E7D001E7" indent="up1"><enum>(N)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/6655">Section 6655(g)(1)(A)(i)</external-xref> is amended by striking <quote>or 1201(a),</quote>.</text> </subparagraph><subparagraph id="H6C2928121D8A46858763247D5E8DD60F" indent="up1"><enum>(O)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/7518">Section 7518(g)(6)(A)</external-xref> is amended by striking <quote>or 1201(a)</quote>.</text> </subparagraph></paragraph><paragraph id="HF00D736592A64A9D944495D03B1230A9"><enum>(2)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/1445">Section 1445(e)(1)</external-xref> is amended by striking <quote>35 percent (or, to the extent provided in regulations, 20 percent)</quote> and inserting <quote>20 percent</quote>.</text> </paragraph><paragraph id="H981ADB629BF543F996CBE2DF5C9A4199"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1445">Section 1445(e)(2)</external-xref> is amended by striking <quote>35 percent</quote> and inserting <quote>20 percent</quote>.</text> </paragraph><paragraph id="HE09175733F9645F488EB064169D6D843"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1445">Section 1445(e)(6)</external-xref> is amended by striking <quote>35 percent (or, to the extent provided in regulations, 20 percent)</quote> and inserting <quote>20 percent</quote>.</text> </paragraph><paragraph commented="no" id="H4F9769EA92014033A4BFCA2D8C27942F"><enum>(5)</enum> <subparagraph commented="no" display-inline="yes-display-inline" id="H5223E3DD0896409CAF31B9DFDDEDD17C"><enum>(A)</enum><text>Part I of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/5">chapter 5</external-xref> is amended by striking section 1551 (and by striking the item relating to such section in the table of sections for such part).</text> </subparagraph><subparagraph id="H5ED6DD6BB6A049E0981650822F8A41ED" indent="up1"><enum>(B)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/12">Section 12</external-xref> is amended by striking paragraph (6).</text> </subparagraph><subparagraph id="HDE4611271F4645E9B0664618D3D58BDA" indent="up1"><enum>(C)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/535">Section 535(c)(5)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H02DFFB81BA2B43C6A37022EF10BBFA14" style="OLC"> <paragraph id="H8D9CBA43CF804925AA9D9106A1287958"><enum>(5)</enum><header>Cross reference</header><text display-inline="yes-display-inline">For limitation on credit provided in paragraph (2) or (3) in the case of certain controlled corporations, see section 1561.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph><paragraph commented="no" id="H56BD5938E1C247AA8945A5E0B8FC04E6"><enum>(6)</enum> <subparagraph commented="no" display-inline="yes-display-inline" id="H12800288F2C34F84AAC294FA45996D23"><enum>(A)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1561">Section 1561</external-xref>, as amended by the preceding provisions of this Act, is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H98B39C915F334E1195897DD5031F1D57" style="OLC"> <section commented="no" id="H7DE62F296EF341D9B8369AE3A96F0C7C"><enum>1561.</enum><header>Limitation on accumulated earnings credit in the case of certain controlled corporations</header> <subsection commented="no" id="H62A83881F6F44F9F8B5ACEE67BA420F5"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">The component members of a controlled group of corporations on a December 31 shall, for their taxable years which include such December 31, be limited for purposes of this subtitle to one $250,000 ($150,000 if any component member is a corporation described in section 535(c)(2)(B)) amount for purposes of computing the accumulated earnings credit under section 535(c)(2) and (3). Such amount shall be divided equally among the component members of such group on such December 31 unless the Secretary prescribes regulations permitting an unequal allocation of such amount.</text> </subsection><subsection commented="no" id="HF535644C9D884702BC537D753177E72C"><enum>(b)</enum><header>Certain short taxable years</header><text>If a corporation has a short taxable year which does not include a December 31 and is a component member of a controlled group of corporations with respect to such taxable year, then for purposes of this subtitle, the amount to be used in computing the accumulated earnings credit under section 535(c)(2) and (3) of such corporation for such taxable year shall be the amount specified in subsection (a) with respect to such group, divided by the number of corporations which are component members of such group on the last day of such taxable year. For purposes of the preceding sentence, section 1563(b) shall be applied as if such last day were substituted for December 31.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph><subparagraph commented="no" id="HEA60AC97D9C34FCFBA51E021097823F7" indent="up1"><enum>(B)</enum><text>The table of sections for part II of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/5">chapter 5</external-xref> is amended by striking the item relating to section 1561 and inserting the following new item:</text> <quoted-block display-inline="no-display-inline" id="H4448379D58574729A81CA24CD0327D90" style="OLC"> <toc container-level="quoted-block-container" idref="H98B39C915F334E1195897DD5031F1D57" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration"> <toc-entry idref="H7DE62F296EF341D9B8369AE3A96F0C7C" level="section">Sec. 1561. Limitation on accumulated earnings credit in the case of certain controlled corporations.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph><paragraph id="H137ED01B07BF4DE48826029BE9C7E4A1"><enum>(7)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/7518">Section 7518(g)(6)(A)</external-xref> is amended—</text> <subparagraph id="H9C4146A7A5394EDF9164C6D44ACD1BC7"><enum>(A)</enum><text display-inline="yes-display-inline">by striking <quote>With respect to the portion</quote> and inserting <quote>In the case of a taxpayer other than a corporation, with respect to the portion</quote>, and</text> </subparagraph><subparagraph id="H871AE319337244C7AAEE557901E81CDC"><enum>(B)</enum><text display-inline="yes-display-inline">by striking <quote>(34 percent in the case of a corporation)</quote>.</text> </subparagraph></paragraph></subsection><subsection id="H5FF07A2884744EB9B06FF80FC152FCE3"><enum>(c)</enum><header>Reduction in dividend received deductions to reflect lower corporate income tax rates</header> <paragraph id="HF5A4C81DADE1481B8D767FEFFF532D4F"><enum>(1)</enum><header>Dividends received by corporations</header> <subparagraph id="HC8DEC60348DB419E919E2B711BFF2D30"><enum>(A)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/243">Section 243(a)(1)</external-xref> is amended by striking <quote>70 percent</quote> and inserting <quote>50 percent</quote>.</text> </subparagraph><subparagraph id="H7B031C42CE934EB88F499D00B27DC0C7"><enum>(B)</enum><header>Dividends from 20-percent owned corporations</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/243">Section 243(c)(1)</external-xref> is amended—</text> <clause id="H1CBEA928315A49EB9CD19D8B596B6CAF"><enum>(i)</enum><text>by striking <quote>80 percent</quote> and inserting <quote>65 percent</quote>, and</text> </clause><clause id="H8B61D4DF4CE948DB9DD4B9F5C8BF34F4"><enum>(ii)</enum><text>by striking <quote>70 percent</quote> and inserting <quote>50 percent</quote>.</text> </clause></subparagraph><subparagraph id="H6F04496DF807474C963D145FBF8C35E3"><enum>(C)</enum><header>Conforming amendment</header><text>The heading for <external-xref legal-doc="usc" parsable-cite="usc/26/243">section 243(c)</external-xref> is amended by striking <quote><header-in-text level="subsection" style="OLC">Retention of 80-percent dividend received deduction</header-in-text></quote> and inserting <quote><header-in-text level="subsection" style="OLC">Increased percentage</header-in-text></quote>.</text> </subparagraph></paragraph><paragraph id="HB5C6952CE6154CFCA6A8F340134F35F8"><enum>(2)</enum><header>Dividends received from FSC</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/245">Section 245(c)(1)(B)</external-xref> is amended—</text> <subparagraph id="HB0D8E1825172480AB342465F7EEC3A9C"><enum>(A)</enum><text>by striking <quote>70 percent</quote> and inserting <quote>50 percent</quote>, and</text> </subparagraph><subparagraph id="HC6787AB6A25A4374A5E2890046452C55"><enum>(B)</enum><text>by striking <quote>80 percent</quote> and inserting <quote>65 percent</quote>.</text> </subparagraph></paragraph><paragraph id="HFCAA5F8CFF1E436F9877A09AE82B2D93"><enum>(3)</enum><header>Limitation on aggregate amount of deductions</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/246">Section 246(b)(3)</external-xref> is amended—</text> <subparagraph id="H05D2D294EC294C0B8E44F9F8AFA4AB20"><enum>(A)</enum><text>by striking <quote>80 percent</quote> in subparagraph (A) and inserting <quote>65 percent</quote>, and</text> </subparagraph><subparagraph id="H3ABFA901299842F48157CDD694D6D182"><enum>(B)</enum><text>by striking <quote>70 percent</quote> in subparagraph (B) and inserting <quote>50 percent</quote>.</text> </subparagraph></paragraph><paragraph id="H84C6CD74FBB84763B8364F5C2EFF2ABA"><enum>(4)</enum><header>Reduction in deduction where portfolio stock is debt-financed</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/246A">Section 246A(a)(1)</external-xref> is amended—</text> <subparagraph id="HCE547654785F45AE8A6A096C97128F97"><enum>(A)</enum><text>by striking <quote>70 percent</quote> and inserting <quote>50 percent</quote>, and</text> </subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H8214FBF2549048D38ACD36EF8AAE3AA7"><enum>(B)</enum><text>by striking <quote>80 percent</quote> and inserting <quote>65 percent</quote>.</text> </subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H3B736EF3F7134DF58C8016EB201A0E4F"><enum>(5)</enum><header>Income from sources within the United States</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/861">Section 861(a)(2)</external-xref> is amended—</text> <subparagraph commented="no" display-inline="no-display-inline" id="H950AA7BD9ED1420385F9DAB8976AAF30"><enum>(A)</enum><text>by striking <quote>100/70th</quote> and inserting <quote>100/50th</quote> in subparagraph (B), and</text> </subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HB3C55C0615C0474E9348A65B0F3DDD4A"><enum>(B)</enum><text>in the flush sentence at the end—</text> <clause commented="no" display-inline="no-display-inline" id="HB96ACCDC68D9444AA3ABE4007C32D501"><enum>(i)</enum><text>by striking <quote>100/80th</quote> and inserting <quote>100/65th</quote>, and</text> </clause><clause commented="no" display-inline="no-display-inline" id="HF4D533BABD8D4C658569E6B582ED7CDD"><enum>(ii)</enum><text>by striking <quote>100/70th</quote> and inserting <quote>100/50th</quote>.</text> </clause></subparagraph></paragraph></subsection><subsection commented="no" id="H4F37533F4D574F02A537ED921B2F95B2"><enum>(d)</enum><header>Effective date</header> <paragraph commented="no" id="H4F6CB765E7284BD4AE4C0EFF930C8DE9"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </paragraph><paragraph commented="no" id="H1438E9C458D34195BA0310095F87E40F"><enum>(2)</enum><header>Certain conforming amendments</header><text>The amendments made by paragraphs (2), (3), and (4) of subsection (b) shall apply to distributions after December 31, 2017.</text> </paragraph></subsection><subsection id="H6A6C3E850BA645D488D00E64C8F048FA"><enum>(e)</enum><header>Normalization requirements</header> <paragraph id="HD5ACCDB1C6254D1C8BC4070E14137C55"><enum>(1)</enum><header>In general</header><text>A normalization method of accounting shall not be treated as being used with respect to any public utility property for purposes of section 167 or 168 of the Internal Revenue Code of 1986 if the taxpayer, in computing its cost of service for ratemaking purposes and reflecting operating results in its regulated books of account, reduces the excess tax reserve more rapidly or to a greater extent than such reserve would be reduced under the average rate assumption method.</text> </paragraph><paragraph id="HDF27462C481840E3964D77B6046A2D77"><enum>(2)</enum><header>Alternative Method for Certain Taxpayers</header><text>If, as of the first day of the taxable year that includes the date of enactment of this Act—</text> <subparagraph id="HC593A9EE554A4C9FA0AAEC764425A85E"><enum>(A)</enum><text>the taxpayer was required by a regulatory agency to compute depreciation for public utility property on the basis of an average life or composite rate method, and</text> </subparagraph><subparagraph id="H3FDF61DB68494622AADCB41B3B51D565"><enum>(B)</enum><text>the taxpayer’s books and underlying records did not contain the vintage account data necessary to apply the average rate assumption method,</text> </subparagraph><continuation-text continuation-text-level="paragraph">the taxpayer will be treated as using a normalization method of accounting if, with respect to such jurisdiction, the taxpayer uses the alternative method for public utility property that is subject to the regulatory authority of that jurisdiction.</continuation-text></paragraph><paragraph id="H9E72917165A44F669D9EB815E215A0D5"><enum>(3)</enum><header>Definitions</header><text>For purposes of this subsection—</text> <subparagraph id="HF6D1C0890F1B4EA4AFF73B6BCC3803A8"><enum>(A)</enum><header>Excess tax reserve</header><text>The term <quote>excess tax reserve</quote> means the excess of—</text> <clause id="HB401A3FF5B46415E9D134DB540B6C202"><enum>(i)</enum><text>the reserve for deferred taxes (as described in <external-xref legal-doc="usc" parsable-cite="usc/26/168">section 168(i)(9)(A)(ii)</external-xref> of the Internal Revenue Code of 1986 as in effect on the day before the date of the enactment of this Act), over</text> </clause><clause id="H964A67960F2041CCBA3EB57325EE4D6F"><enum>(ii)</enum><text>the amount which would be the balance in such reserve if the amount of such reserve were determined by assuming that the corporate rate reductions provided in this Act were in effect for all prior periods.</text> </clause></subparagraph><subparagraph id="H52F0BF1D18B84C329BECA372D9D27B6B"><enum>(B)</enum><header>Average rate assumption method</header><text>The average rate assumption method is the method under which the excess in the reserve for deferred taxes is reduced over the remaining lives of the property as used in its regulated books of account which gave rise to the reserve for deferred taxes. Under such method, if timing differences for the property reverse, the amount of the adjustment to the reserve for the deferred taxes is calculated by multiplying—</text> <clause id="H36E85DD526CF47FE83C72F1392845DB5"><enum>(i)</enum><text>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</text> </clause><clause id="H5F8E7ACADCEB4FE5BE759E1DC111DAC3"><enum>(ii)</enum><text>the amount of the timing differences which reverse during such period.</text> </clause></subparagraph><subparagraph id="H5AD4A036916842EFAC95C18EE811A4A5"><enum>(C)</enum><header>Alternative method</header><text display-inline="yes-display-inline">The <quote>alternative method</quote> is the method in which the taxpayer—</text> <clause id="H475FC37D26C041529177499FF313D93D"><enum>(i)</enum><text>computes the excess tax reserve on all public utility property included in the plant account on the basis of the weighted average life or composite rate used to compute depreciation for regulatory purposes, and</text> </clause><clause id="HFFB162719BA147BF8AA0147083BCC1EF"><enum>(ii)</enum><text>reduces the excess tax reserve ratably over the remaining regulatory life of the property.</text> </clause></subparagraph></paragraph><paragraph id="H0D5B9A232A704A5CBB3623D936AE98AA"><enum>(4)</enum><header>Tax increased for normalization violation</header><text>If, for any taxable year ending after the date of the enactment of this Act, the taxpayer does not use a normalization method of accounting, the taxpayer’s tax for the taxable year shall be increased by the amount by which it reduces its excess tax reserve more rapidly than permitted under a normalization method of accounting.</text> </paragraph></subsection></section></subtitle><subtitle commented="no" id="HD5348F33886B492ABE033498FA652CF4"><enum>B</enum><header>Cost recovery</header> <section id="HC704A3222CE649B683A2595EF47CE06A"><enum>3101.</enum><header>Increased expensing</header> <subsection id="H849109FBC98448F294F090F2B593D851"><enum>(a)</enum><header>100 percent expensing</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/168">Section 168(k)(1)(A)</external-xref> is amended by striking <quote>50 percent</quote> and inserting <quote>100 percent</quote>.</text> </subsection><subsection id="H053160B6C94647A28F81544CCC5507BA"><enum>(b)</enum><header>Extension through January 1, 2023</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/168">Section 168(k)(2)</external-xref> is amended—</text> <paragraph id="H60D3EEC6BE2744D4B23F184F49749C4D"><enum>(1)</enum><text>in subparagraph (A)(iii), by striking <quote>January 1, 2020</quote> and inserting <quote>January 1, 2023</quote>,</text> </paragraph><paragraph id="HEA67A5C0702045A69AF00B51A2CF6C7E"><enum>(2)</enum><text display-inline="yes-display-inline">in subparagraph (B)(i)(II), by striking <quote>January 1, 2021</quote> and inserting <quote>January 1, 2024</quote>,</text> </paragraph><paragraph id="H92332F5276E44F73AC388CA6A9033370"><enum>(3)</enum><text display-inline="yes-display-inline">in subparagraph (B)(i)(III), by striking <quote>January 1, 2020</quote> and inserting <quote>January 1, 2023</quote>,</text> </paragraph><paragraph id="HDD082CC52D7B4EE49E46801E97464168"><enum>(4)</enum><text>in subparagraph (B)(ii), by striking <quote>January 1, 2020</quote> in each place it appears and inserting <quote>January 1, 2023</quote>, and</text> </paragraph><paragraph id="H90F87ACC3E88490CBAFD2FD5318FC05F"><enum>(5)</enum><text>in subparagraph (E)(i), by striking <quote>January 1, 2020</quote> and replacing it with <quote>January 1, 2023</quote>.</text> </paragraph></subsection><subsection id="H8CB5E7DBA68E4B74A6C125F17CAD7EE0"><enum>(c)</enum><header>Application to used property</header> <paragraph commented="no" id="H83CD138468744AC48031DB0159024B7E"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/168">Section 168(k)(2)(A)(ii)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HEBA8D92930F0479D805823760304EEF1" style="OLC"> <clause commented="no" id="HF0F8619E9A6742B5A61150143B8291AF"><enum>(ii)</enum><text display-inline="yes-display-inline">the original use of which begins with the taxpayer or the acquisition of which by the taxpayer meets the requirements of clause (ii) of subparagraph (E), and</text></clause><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H1C9479BDC4AD48239DD7624CA3593FBD"><enum>(2)</enum><header>Acquisition requirements</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/168">Section 168(k)(2)(E)(ii)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H2A0E198DD25F4A3B80CBAE8943927749" style="OLC"> <clause commented="no" id="HFBD97B1CB6404AADA82E2B088B479348"><enum>(ii)</enum><header>Acquisition requirements</header><text display-inline="yes-display-inline">An acquisition of property meets the requirements of this clause if—</text> <subclause commented="no" id="H90B975F6E72E4781844DB9B927139789"><enum>(I)</enum><text>such property was not used by the taxpayer at any time prior to such acquisition, and</text> </subclause><subclause commented="no" id="H25B5CF84E3BB4E26BAB42CB60A5B19A7"><enum>(II)</enum><text>the acquisition of such property meets the requirements of paragraphs (2)(A), (2)(B), (2)(C), and (3) of section 179(d).</text></subclause></clause><after-quoted-block>,</after-quoted-block></quoted-block> </paragraph><paragraph commented="no" id="H4977C98B904E473C9B96E4779DF69FD5"><enum>(3)</enum><header>Anti-abuse rules</header><text>Section 168(k)(2)(E) is further amended by amending clause (iii)(I) to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HB3041FAFC0CD41F69F117801EA9A6CA7" style="OLC"> <subclause commented="no" id="H23E6F9D681184AAE9E92BB9D2C9F2736"><enum>(I)</enum><text display-inline="yes-display-inline">property is used by a lessor of such property and such use is the lessor’s first use of such property,</text></subclause><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection commented="no" id="HFFFDD3902252422F93969369C74E744F"><enum>(d)</enum><header>Exception for certain trades and businesses not subject to limitation on interest expense</header><text>Section 168(k)(2), as amended by <external-xref legal-doc="usc" parsable-cite="usc/26/2001">section 2001,</external-xref> is amended by inserting after subparagraph (F) the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="H485C2A65F93A429C8C4C80CE088596B8" style="OLC"> <subparagraph commented="no" id="HD7155466C8F0416BB5DB69E18C01FCD1"><enum>(G)</enum><header>Exception for property of certain businesses not subject to limitation on interest expense</header><text display-inline="yes-display-inline">The term <quote>qualified property</quote> shall not include any property used in—</text> <clause id="H3161979A2EDB4ACE9223260C45F58187"><enum>(i)</enum><text>a trade or business described in subparagraph (B) or (C) of section 163(j)(7), or</text> </clause><clause id="HBFE6C4D62DCF45AD9B9A3023F5840704"><enum>(ii)</enum><text>a trade or business that has had floor plan financing indebtedness (as defined in paragraph (9) of section 163(j)), if the floor plan financing interest related to such indebtedness was taken into account under paragraph (1)(C) of such section.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HB12C6DEE5B734027B36CB4E64A2BAA50"><enum>(e)</enum><header>Coordination with section 280F</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/168">Section 168(k)(2)(F)</external-xref> is amended—</text> <paragraph id="H608AB9F40FBF40178C0A75F2D0282132"><enum>(1)</enum><text>by striking <quote>$8,000</quote> in clauses (i) and (iii) and inserting <quote>$16,000</quote>, and</text> </paragraph><paragraph id="HD562898571B54F1FAD04EFB8AA2B4925"><enum>(2)</enum><text>in clause (iii)—</text> <subparagraph id="H9709BD67A3C34DA6A26CDAAEEE9A7C4D"><enum>(A)</enum><text>by striking <quote>placed in service by the taxpayer after December 31, 2017</quote> and inserting <quote>acquired by the taxpayer before September 28, 2017, and placed in service by the taxpayer after September 27, 2017</quote>, and</text> </subparagraph><subparagraph id="HF0187163E94149C2B6DEFFC63B280BC4"><enum>(B)</enum><text>by redesignating subclauses (I) and (II) as subclauses (II) and (III) respectively, and inserting before clause (II), as so redesignated, the following new subclause:</text> <quoted-block display-inline="no-display-inline" id="H84ECFFB5696E45E68C7CBFB875DA82D5" style="OLC"> <subclause id="H2760A7675EF54FEB81D5611C2929CDED"><enum>(I)</enum><text display-inline="yes-display-inline">in the case of a passenger automobile placed in service before January 1, 2018, <quote>$8,000</quote>,</text></subclause><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph></subsection><subsection id="H2A7D183BEE714391A66C30C0BB83B8E9"><enum>(f)</enum><header>Conforming amendments</header> <paragraph id="HE24295B87697409B888D19041E34A511"><enum>(1)</enum><text display-inline="yes-display-inline">Section 168(k)(2)(B)(i)(III), as amended, is amended by inserting <quote>binding</quote> before <quote>contract</quote>.</text> </paragraph><paragraph id="H27E84A8304C944B5AC5BD4EFE5AE4A57"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/168">Section 168(k)(5)</external-xref> is amended by—</text> <subparagraph id="H55B0E879328B4B319C168646F23A79FD"><enum>(A)</enum><text>by striking <quote>January 1, 2020</quote> in subparagraph (A) and inserting <quote>January 1, 2023</quote>,</text> </subparagraph><subparagraph id="HFA09A91DCC00480E8171270537C046CE"><enum>(B)</enum><text>by striking <quote>50 percent</quote> in subparagraph (A)(i) and inserting <quote>100 percent</quote>, and</text> </subparagraph><subparagraph id="H2F9E0C14F79D42D99010AD7809E8B450"><enum>(C)</enum><text>by striking subparagraph (F).</text> </subparagraph></paragraph><paragraph id="H8CE7D9FD462740F0AED72D90383CF013"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/168">Section 168(k)(6)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H79886C8B396143BEB263B8E773D9BF29" style="OLC"> <paragraph id="H294335611F054FA69C3AB7C4952E16EE"><enum>(6)</enum><header>Phase Down</header><text display-inline="yes-display-inline">In the case of qualified property acquired by the taxpayer before September 28, 2017, and placed in service by the taxpayer after September 27, 2017, paragraph (1)(A) shall be applied by substituting for <quote>100 percent</quote>—</text> <subparagraph id="H78E13A450BAC40B3AEB43471DDDD5DB9"><enum>(A)</enum><text><quote>50 percent</quote> in the case of—</text> <clause id="H49B8727FEE5F424F846BFCC54D6D2E89"><enum>(i)</enum><text>property placed in service before January 1, 2018, and</text> </clause><clause id="H5AFECB740EB541F3A69FAA50109EE322"><enum>(ii)</enum><text>property described in subparagraph (B) or (C) of paragraph (2) which is placed in service in 2018,</text> </clause></subparagraph><subparagraph id="H70CAA548A84B446B9C4076C4C5810C42"><enum>(B)</enum><text><quote>40 percent</quote> in the case of—</text> <clause id="H2CC2F11C8F7E4828BD906E7BDADC98BA"><enum>(i)</enum><text>property placed in service in 2018 (other than property described in subparagraph (B) or (C) of paragraph (2)), and</text> </clause><clause id="H3F88DA5EF0B54D1A9A21A55BCFD6C387"><enum>(ii)</enum><text>property described in subparagraph (B) or (C) of paragraph (2) which is placed in service in 2019, and</text> </clause></subparagraph><subparagraph id="HFFA81019EE7743DA9951BBA5B2FCD49C"><enum>(C)</enum><text><quote>30 percent</quote> in the case of—</text> <clause id="H2F1574DC9C1D425481903F8A7CECFBE1"><enum>(i)</enum><text>property placed in service in 2019 (other than property described in subparagraph (B) or (C) of paragraph (2)), and</text> </clause><clause id="H317FDFB6F8C541E7913B14C9B2CD4FE6"><enum>(ii)</enum><text>property described in subparagraph (B) or (C) of paragraph (2) which is placed in service in 2020.</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H25C0C30DB5C446ADAEA698A608ADD4CD"><enum>(4)</enum><text>The heading of <external-xref legal-doc="usc" parsable-cite="usc/26/168">section 168(k)</external-xref> is amended by striking <quote><header-in-text level="subsection" style="OLC">Special allowance for certain property acquired after December 31, 2007, and before January 1, 2020</header-in-text></quote> and inserting <quote><header-in-text level="subsection" style="OLC">Full expensing of certain property</header-in-text></quote>.</text> </paragraph><paragraph id="HCC488D07E5BD43CC80F56D1F53A72A6C"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/460">Section 460(c)(6)(B)(ii)</external-xref> is amended by striking <quote>January 1, 2020 (January 1, 2021 in the case of property described in section 168(k)(2)(B))</quote> and inserting <quote>January 1, 2023 (January 1, 2024 in the case of property described in section 168(k)(2)(B))</quote>.</text> </paragraph></subsection><subsection id="H8E7EDEEC9CA848D59923F99139A62E18"><enum>(g)</enum><header>Effective date</header> <paragraph id="HB506C76C6CC24228BD39CC19D54E95F7"><enum>(1)</enum><header>In general</header><text>Except at provided by paragraph (2), the amendments made by this section shall apply to property which—</text> <subparagraph id="HAF824DB42FEC4A7983481F350E577586"><enum>(A)</enum><text>is acquired after September 27, 2017, and</text> </subparagraph><subparagraph id="HDDC68C3B39814559B5E198510B5FF0C8"><enum>(B)</enum><text>is placed in service after such date.</text> </subparagraph><continuation-text continuation-text-level="paragraph">For purposes of the preceding sentence, property shall not be treated as acquired after the date on which a written binding contract is entered into for such acquisition.</continuation-text></paragraph><paragraph id="H94C0ED41463F498AB23BF660744254A1"><enum>(2)</enum><header>Specified plants</header><text display-inline="yes-display-inline">The amendments made by subsection (f)(2) shall apply to specified plants planted or grafted after September 27, 2017.</text> </paragraph><paragraph id="HB49BF26DD8174EB993C04A6628D5703E"><enum>(3)</enum><header>Transition rule</header><text>In the case of any taxpayer’s first taxable year ending after September 27, 2017, the taxpayer may elect (at such time and in such form and manner as the Secretary of the Treasury, or his designee, may provide) to apply <external-xref legal-doc="usc" parsable-cite="usc/26/168">section 168</external-xref> of the Internal Revenue Code of 1986 without regard to the amendments made by this section.</text> </paragraph><paragraph id="H68089409332C48C8B6B7435B2BE5E80D"><enum>(4)</enum><header>Limitation on net operating loss carrybacks attributable to full expensing</header><text display-inline="yes-display-inline">In the case of any taxable year which includes any portion of the period beginning on September 28, 2017, and ending on December 31, 2017, the amount of any net operating loss for such taxable year which may be treated as a net operating loss carryback (including any such carryback attributable to any specified liability loss under section 172(b)(1)(C), any corporate equity reduction interest loss under section 172(b)(1)(D), any eligible loss under section 172(b)(1)(E), and any farming loss under section 172(b)(1)(F)) shall be determined without regard to the amendments made by this section. For purposes of this paragraph, terms which are used in <external-xref legal-doc="usc" parsable-cite="usc/26/172">section 172</external-xref> of the Internal Revenue Code of 1986 (determined without regard to the amendments made by section 3302) shall have the same meaning as when used in such section.</text> </paragraph></subsection></section></subtitle><subtitle id="H4A7E043B24D64AAF95138F92CF76D985"><enum>C</enum><header>Small business reforms</header> <section id="HFF438EC6AED44A4BA1A7D4034EF913AF"><enum>3201.</enum><header>Expansion of section 179 expensing</header> <subsection id="H6CF940A46F8F4D02986A75C2DAB59B5B"><enum>(a)</enum><header>Increased dollar limitations</header> <paragraph id="H749D86B4CF764D7E8D6E7F18D0241FDD"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/179">Section 179(b)</external-xref> is amended—</text> <subparagraph id="H362E9CAADCB14BBEB0ED7387979A9B70"><enum>(A)</enum><text>by inserting <quote>($5,000,000, in the case of taxable years beginning before January 1, 2023)</quote> after <quote>$500,000</quote> in paragraph (1), and</text> </subparagraph><subparagraph id="HC00AC6B9A65A4E74B12A9A867881F8DD"><enum>(B)</enum><text>by inserting <quote>($20,000,000, in the case of taxable years beginning before January 1, 2023)</quote> after <quote>$2,000,000</quote> in paragraph (2).</text> </subparagraph></paragraph><paragraph id="HD5866B75B6CB471CBB4A3F521C936AAF"><enum>(2)</enum><header>Inflation adjustment</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/179">Section 179(b)(6)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H0BE5F168E99A48A28F350FDB81AA3611" style="OLC"> <paragraph id="H69CE3C6237764D01A6826C928D862397"><enum>(6)</enum><header>Inflation adjustment</header> <subparagraph id="HE4136C06DC4A42ABA72CD74521D8A730"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a taxable year beginning after 2015 (2018 in the case of the $5,000,000 and $20,000,000 amounts in subsection (b)), each dollar amount in subsection (b) shall be increased by an amount equal to such dollar amount multiplied by—</text> <clause id="H23D7E19603EB4F08B58AAE6B15567233"><enum>(i)</enum><text>in the case of the $500,000 and $2,000,000 amounts in subsection (b), the cost-of-living adjustment determined under section 1(c)(2) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2014</quote> for <quote>calendar year 2016</quote> in subparagraph (A)(ii) thereof, and</text> </clause><clause id="H7BFA7C2E06C848A59A95ED3CFDBDC327"><enum>(ii)</enum><text display-inline="yes-display-inline">in the case of the $5,000,000 and $20,000,000 amounts in subsection (b), the cost-of-living adjustment determined under section 1(c)(2) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2017</quote> for <quote>calendar year 2016</quote> in subparagraph (A)(ii) thereof.</text> </clause></subparagraph><subparagraph id="HDE6E639784334D2BAA578C9883CD96F8"><enum>(B)</enum><header>Rounding</header><text display-inline="yes-display-inline">The amount of any increase under subparagraph (A) shall be rounded to the nearest multiple of $10,000 ($100,000 in the case of the $5,000,000 and $20,000,000 amounts in subsection (b)).</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H604915A495074CD48EEC71508B75BACF"><enum>(b)</enum><header>Application to qualified energy efficient heating and air-conditioning property</header> <paragraph id="H7E8F5B445321462E83527AD6918ACC6A"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/179">Section 179(f)(2)</external-xref> is amended by striking <quote>and</quote> at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting <quote>, and</quote>, and by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="H63F9B899B03B496C9A5C4271B831642E" style="OLC"> <subparagraph id="HCC15151D727D4D53AD562EA827CB54A0"><enum>(D)</enum><text display-inline="yes-display-inline">qualified energy efficient heating and air-conditioning property.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H02882C2F345044B3B1D230726D64EDD3"><enum>(2)</enum><header>Qualified energy efficient heating and air-conditioning property</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/179">Section 179(f)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H4D109C2BF4774F1DBD8D02F171CA66A6" style="OLC"> <paragraph id="H11C60D1B48644B4E9D129A523D0AB1F1"><enum>(3)</enum><header>Qualified energy efficient heating and air-conditioning property</header><text display-inline="yes-display-inline">For purposes of this subsection—</text> <subparagraph id="H885F63D8828741BE9C58119072E32F5A"><enum>(A)</enum><header>In general</header><text>The term <term>qualified energy efficient heating and air-conditioning property</term> means any section 1250 property—</text> <clause commented="no" id="HBEB477EE94A14B259A2757EE3FA4E102"><enum>(i)</enum><text>with respect to which depreciation (or amortization in lieu of depreciation) is allowable,</text> </clause><clause id="H735539A93C4C4197A481A8F8A5269173"><enum>(ii)</enum><text display-inline="yes-display-inline">which is installed as part of a building’s heating, cooling, ventilation, or hot water system, and</text> </clause><clause id="H19A9B378B1754E479D022016486EB351"><enum>(iii)</enum><text>which is within the scope of Standard 90.1–2007 or any successor standard.</text> </clause></subparagraph><subparagraph id="H20397A98680741BC9E757A748FDC66B9"><enum>(B)</enum><header>Standard 90.1–2007</header><text>The term <term>Standard 90.1–2007</term> means Standard 90.1–2007 of the American Society of Heating, Refrigerating and Air-Conditioning Engineers and the Illuminating Engineering Society of North America (as in effect on the day before the date of the adoption of Standard 90.1–2010 of such Societies).</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H14B4C3141F2444F8AAD64D108922A9C1"><enum>(c)</enum><header>Effective date</header> <paragraph id="H5EDB1D2C54DC451EB8FF4632DA8C2472"><enum>(1)</enum><header>Increased dollar limitations</header><text>The amendments made by subsection (a) shall apply to taxable years beginning after December 31, 2017.</text> </paragraph><paragraph id="HFDA29F2DDC5F4960A9AA415239B8BC93"><enum>(2)</enum><header>Application to qualified energy efficient heating and air-conditioning property</header><text>The amendments made by subsection (b) shall apply to property acquired and placed in service after November 2, 2017. For purposes of the preceding sentence, property shall not be treated as acquired after the date on which a written binding contract is entered into for such acquisition.</text> </paragraph></subsection></section><section id="H39362BF6D7154A08BB828937C4256CEC"><enum>3202.</enum><header>Small business accounting method reform and simplification</header> <subsection id="H68B81B0015B24AA58B4F55CC9797063D"><enum>(a)</enum><header>Modification of limitation on cash method of accounting</header> <paragraph id="HA7862E3CA95041F1A2A3CAE8BE9EA335"><enum>(1)</enum><header>Increased limitation</header><text display-inline="yes-display-inline">So much of section 448(c) as precedes paragraph (2) is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HBED28CC5BBB5455FA6339C0AD4A60DE1" style="OLC"> <subsection id="H40FD83218CD64128A7C88E6AB53B2A8D"><enum>(c)</enum><header>Gross receipts test</header><text display-inline="yes-display-inline">For purposes of this section—</text> <paragraph id="HC117CB3DB14445CFB1B7F374435F097A"><enum>(1)</enum><header>In general</header><text>A corporation or partnership meets the gross receipts test of this subsection for any taxable year if the average annual gross receipts of such entity for the 3-taxable-year period ending with the taxable year which precedes such taxable year does not exceed $25,000,000.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H3F077ABF4DD54CB29173B5A2AAD84941"><enum>(2)</enum><header>Application of exception on annual basis</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/448">Section 448(b)(3)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H54595CECCCE64A458EA74984B8A05908" style="OLC"> <paragraph id="H4C57828C8FB640B692BB957F9FD620D4"><enum>(3)</enum><header>Entities which meet gross receipts test</header><text display-inline="yes-display-inline">Paragraphs (1) and (2) of subsection (a) shall not apply to any corporation or partnership for any taxable year if such entity (or any predecessor) meets the gross receipts test of subsection (c) for such taxable year.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H74F1806B9F6341C59D3FEA6A08B1A892"><enum>(3)</enum><header>Inflation adjustment</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/448">Section 448(c)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H616E4767D76349688B65625CD936A580" style="OLC"> <paragraph id="H99ABB450CF794517AFD406B1692DF9A4"><enum>(4)</enum><header>Adjustment for inflation</header><text>In the case of any taxable year beginning after December 31, 2018, the dollar amount in paragraph (1) shall be increased by an amount equal to—</text> <subparagraph id="H964A7B8905DE4B20A04D7B86DBE79667"><enum>(A)</enum><text>such dollar amount, multiplied by</text> </subparagraph><subparagraph id="H61C330A7E38B48D7887642F1A85A2F19"><enum>(B)</enum><text display-inline="yes-display-inline">the cost-of-living adjustment determined under section 1(c)(2) for the calendar year in which the taxable year begins, by substituting <quote>calendar year 2017</quote> for <quote>calendar year 2016</quote> in subparagraph (A)(ii) thereof.</text> </subparagraph><continuation-text commented="no" continuation-text-level="paragraph">If any amount as increased under the preceding sentence is not a multiple of $1,000,000, such amount shall be rounded to the nearest multiple of $1,000,000.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HCE20313C5E7F4020A2BB8B5C797D2717"><enum>(4)</enum><header>Coordination with section 481</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/448">Section 448(d)(7)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HB987DF0660224858A192CE852AA0C61A" style="OLC"> <paragraph id="HA6EB3F5AA1034388920B155566ED0E08"><enum>(7)</enum><header>Coordination with section 481</header><text display-inline="yes-display-inline">Any change in method of accounting made pursuant to this section shall be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H14DA66F172AF4A329C074A97B8EB5FD3"><enum>(5)</enum><header>Application of exception to corporations engaged in farming</header> <subparagraph id="HB4757F23092C4E65B35808660F495D16"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/447">Section 447(c)</external-xref> is amended—</text> <clause id="H53C694DA4DF1488B95CAABBEBFCD1AB6"><enum>(i)</enum><text>by inserting <quote>for any taxable year</quote> after <quote>not being a corporation</quote> in the matter preceding paragraph (1), and</text> </clause><clause id="HC2BA9565645D4B2081671E78B5E1045D"><enum>(ii)</enum><text>by amending paragraph (2) to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HA123724E8AC742019E45D2371A540373" style="OLC"> <paragraph id="H2211EA006C4E4468933F241C85730EBA"><enum>(2)</enum><text display-inline="yes-display-inline">a corporation which meets the gross receipts test of section 448(c) for such taxable year.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </clause></subparagraph><subparagraph id="H1D06AE86B0964EDCB8343BAA6A900826"><enum>(B)</enum><header>Coordination with section 481</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/447">Section 447(f)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H9FFF0DDD625045D09D7BDB85ABCADCC0" style="OLC"> <subsection id="HCD35223393194C80B74D7D1A2AC6F506"><enum>(f)</enum><header>Coordination with section 481</header><text display-inline="yes-display-inline">Any change in method of accounting made pursuant to this section shall be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph><subparagraph id="H19C585B83C124B599083934AFE08BB12"><enum>(C)</enum><header>Conforming amendments</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/447">Section 447</external-xref> is amended—</text> <clause id="H4500ED241AD14AE8BE1BCCE0D5A05D4D"><enum>(i)</enum><text>by striking subsections (d), (e), (h), and (i), and</text> </clause><clause id="HEB08525E0F2B494F8D66CE3D11E67595"><enum>(ii)</enum><text>by redesignating subsections (f) and (g) (as amended by subparagraph (B)) as subsections (d) and (e), respectively.</text> </clause></subparagraph></paragraph></subsection><subsection id="HC866C5B64C1B44A6977D71150AA9BF6D"><enum>(b)</enum><header>Exemption from UNICAP requirements</header> <paragraph id="HF2A71CC28CC443E992B8D4EEC2ED9D6F"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/263A">Section 263A</external-xref> is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="HB0B511CE80FF4A78BFD9A53A0853F0CE" style="OLC"> <subsection id="H5FFF96128EB4442092507215E51DF642"><enum>(i)</enum><header>Exemption for certain small businesses</header> <paragraph id="HF7B7023AE2114E869898D8493ED91CE6"><enum>(1)</enum><header>In general</header><text>In the case of any taxpayer (other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3)) which meets the gross receipts test of section 448(c) for any taxable year, this section shall not apply with respect to such taxpayer for such taxable year.</text> </paragraph><paragraph id="H944D325F41394F6DACE5A333292584C8"><enum>(2)</enum><header>Application of gross receipts test to individuals, etc</header><text>In the case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be applied in the same manner as if each trade or business of such taxpayer were a corporation or partnership.</text> </paragraph><paragraph id="H9CDD42C24A474A808FB2E19FB0AC23FC"><enum>(3)</enum><header>Coordination with section 481</header><text>Any change in method of accounting made pursuant to this subsection shall be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H5B784029029E4DE9B4FD8EBA6123D0F0"><enum>(2)</enum><header>Conforming amendment</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/263A">Section 263A(b)(2)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H6AA1096488D4409188438CD86782C770" style="OLC"> <paragraph id="H53C7109A9C0F49EE99E7B8F81694310F"><enum>(2)</enum><header>Property acquired for resale</header><text display-inline="yes-display-inline">Real or personal property described in section 1221(a)(1) which is acquired by the taxpayer for resale.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="HFE71F84327DC4717BA7DE3779B099AF8"><enum>(c)</enum><header>Exemption from inventories</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/471">Section 471</external-xref> is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="HEEF807F90FAB428FA911CBC7249091E2" style="OLC"> <subsection id="H304CF4C772F24596AB7DC6BDEA5366AC"><enum>(c)</enum><header>Exemption for certain small businesses</header> <paragraph id="HC6A05515E785412F804AB9CE75378F19"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any taxpayer (other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3)) which meets the gross receipts test of section 448(c) for any taxable year—</text> <subparagraph id="HD2DDA0B0CEB445A0937FACECE47E0505"><enum>(A)</enum><text>subsection (a) shall not apply with respect to such taxpayer for such taxable year, and</text> </subparagraph><subparagraph id="H053763962FFD4EA4BA74B69D696A2A73"><enum>(B)</enum><text>the taxpayer’s method of accounting for inventory for such taxable year shall not be treated as failing to clearly reflect income if such method either—</text> <clause id="HC3CD961A149D43E58E950D921BD9879C"><enum>(i)</enum><text>treats inventory as non-incidental materials and supplies, or</text> </clause><clause id="H8B03FDF3E8EE46F7A47CE66EDD08BF99"><enum>(ii)</enum><text>conforms to such taxpayer’s method of accounting reflected in an applicable financial statement of the taxpayer with respect to such taxable year or, if the taxpayer does not have any applicable financial statement with respect to such taxable year, the books and records of the taxpayer prepared in accordance with the taxpayer’s accounting procedures.</text> </clause></subparagraph></paragraph><paragraph commented="no" id="H9885680F08134B61B4D961AFDB55BCA7"><enum>(2)</enum><header>Applicable financial statement</header><text>For purposes of this subsection, the term <term>applicable financial statement</term> means—</text> <subparagraph commented="no" id="H22D76A5EB1834B5DB3BAD5D2EED6E8B3"><enum>(A)</enum><text>a financial statement which is certified as being prepared in accordance with generally accepted accounting principles and which is—</text> <clause commented="no" id="H0A80073A31C2460FB56E9896AFF8CEAE"><enum>(i)</enum><text>a 10-K (or successor form), or annual statement to shareholders, required to be filed by the taxpayer with the United States Securities and Exchange Commission,</text> </clause><clause commented="no" display-inline="no-display-inline" id="HCC55B37E0C5646C2903A13AD681B6552"><enum>(ii)</enum><text display-inline="yes-display-inline">an audited financial statement of the taxpayer which is used for—</text> <subclause commented="no" display-inline="no-display-inline" id="H0CC0524007A24138AAE66CE470A543D2"><enum>(I)</enum><text display-inline="yes-display-inline">credit purposes,</text> </subclause><subclause commented="no" display-inline="no-display-inline" id="H95FBFDC0E54344529361FE562972A048"><enum>(II)</enum><text display-inline="yes-display-inline">reporting to shareholders, partners, or other proprietors, or to beneficiaries, or</text> </subclause><subclause commented="no" display-inline="no-display-inline" id="H64F5DFC15DF14E79BA411CF62D0B625E"><enum>(III)</enum><text display-inline="yes-display-inline">any other substantial nontax purpose,</text> </subclause><continuation-text commented="no" continuation-text-level="clause">but only if there is no statement of the taxpayer described in clause (i), or</continuation-text></clause><clause commented="no" id="H92A16126B51F4B798835C093591FF733"><enum>(iii)</enum><text>filed by the taxpayer with any other Federal or State agency for nontax purposes, but only if there is no statement of the taxpayer described in clause (i) or (ii), or</text> </clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H3C42515D70FF4590B5BFDD0FEB95EC54"><enum>(B)</enum><text>a financial statement of the taxpayer which—</text> <clause commented="no" id="H5818E128631B4C3D8E903F35C74C93EA"><enum>(i)</enum><text>is used for a purpose described in subclause (I), (II), or (III) of subparagraph (A)(ii), or</text> </clause><clause id="H15A4DF5DD16547A3982C60A712A0F3C5"><enum>(ii)</enum><text>filed by the taxpayer with any regulatory or governmental body (whether domestic or foreign) specified by the Secretary,</text> </clause><continuation-text continuation-text-level="subparagraph">but only if there is no statement of the taxpayer described in subparagraph (A).</continuation-text></subparagraph></paragraph><paragraph id="H2DB71A2ED6A14E4CB95508C7FDD2E50E"><enum>(3)</enum><header>Application of gross receipts test to individuals, etc</header><text>In the case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be applied in the same manner as if each trade or business of such taxpayer were a corporation or partnership.</text> </paragraph><paragraph id="H07723EAC08414FE3BE10F7A50FA34DC4"><enum>(4)</enum><header>Coordination with section 481</header><text>Any change in method of accounting made pursuant to this subsection shall be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H30B36749729B47FE98078DCFD7ED29D1"><enum>(d)</enum><header>Exemption from percentage completion for long-term contracts</header> <paragraph id="HC1E1FED5FD684C68B44CFB3698246830"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/460">Section 460(e)(1)(B)</external-xref> is amended—</text> <subparagraph id="HC56BE64ED56643039A4B7509074932F4"><enum>(A)</enum><text>by inserting <quote>(other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3))</quote> after <quote>taxpayer</quote> in the matter preceding clause (i), and</text> </subparagraph><subparagraph id="H61DECBCB41DC4BDAAFA6AAA9B873FD91"><enum>(B)</enum><text>by amending clause (ii) to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HEF7C5F60013347A0BC6AA658A802E12E" style="OLC"> <clause id="HB1881EB9DA674F9B84CA74C959EEBEE9"><enum>(ii)</enum><text display-inline="yes-display-inline">who meets the gross receipts test of section 448(c) for the taxable year in which such contract is entered into.</text></clause><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph><paragraph id="H1B4232983F51499990FFEF5AF4C2989E"><enum>(2)</enum><header>Conforming amendments</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/460">Section 460(e)</external-xref> is amended by striking paragraphs (2) and (3), by redesignating paragraphs (4), (5), and (6) as paragraphs (3), (4), and (5), respectively, and by inserting after paragraph (1) the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H00084F0E144C4634A7B5E95AE749E421" style="OLC"> <paragraph id="H03502E9F07D84347A6B1EB79AFF23041"><enum>(2)</enum><header>Rules related to gross receipts test</header> <subparagraph id="HDD7CCACE197446E3B32B168B9FA127F0"><enum>(A)</enum><header>Application of gross receipts test to individuals, etc</header><text>For purposes of paragraph (1)(B)(ii), in the case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be applied in the same manner as if each trade or business of such taxpayer were a corporation or partnership.</text> </subparagraph><subparagraph id="H57B91D302BFB4CE0BEC37F7E59F48ABB"><enum>(B)</enum><header>Coordination with section 481</header><text display-inline="yes-display-inline">Any change in method of accounting made pursuant to paragraph (1)(B)(ii) shall be treated as initiated by the taxpayer and made with the consent of the Secretary. Such change shall be effected on a cut-off basis for all similarly classified contracts entered into on or after the year of change.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H859CAB39815F4F5C9D5CDA1BA5490115"><enum>(e)</enum><header>Effective date</header> <paragraph id="H27085EA6F43C4C279D79E5BE92B44F5B"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </paragraph><paragraph id="HDFBC47622B9945979C13D8702D3ABC42"><enum>(2)</enum><header>Preservation of suspense account rules with respect to any existing suspense accounts</header><text>So much of the amendments made by subsection (a)(5)(C) as relate to <external-xref legal-doc="usc" parsable-cite="usc/26/447">section 447(i)</external-xref> of the Internal Revenue Code of 1986 shall not apply with respect to any suspense account established under such section before the date of the enactment of this Act.</text> </paragraph><paragraph commented="no" id="HD8AB4C5EFB144A8FB2D5A9B37BFA1271"><enum>(3)</enum><header>Exemption from percentage completion for long-term contracts</header><text display-inline="yes-display-inline">The amendments made by subsection (d) shall apply to contracts entered into after December 31, 2017, in taxable years ending after such date.</text> </paragraph></subsection></section><section id="H41BCD8C155F24ADCB4A896CC25F04E1A"><enum>3203.</enum><header>Small business exception from limitation on deduction of business interest</header> <subsection id="HB461E1200B4E469595DA24EBA515FF0F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 163(j)(2), as amended by <external-xref legal-doc="usc" parsable-cite="usc/26/3301">section 3301,</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H071B11B7E1424EAF9EC0DA93F6CE1D64" style="OLC"> <paragraph id="HF63647A9C1DA4AF78F09AB7F26C554E3"><enum>(2)</enum><header>Exemption for certain small businesses</header><text display-inline="yes-display-inline">In the case of any taxpayer (other than a tax shelter prohibited from using the cash receipts and disbursements method of accounting under section 448(a)(3)) which meets the gross receipts test of section 448(c) for any taxable year, paragraph (1) shall not apply to such taxpayer for such taxable year. In the case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be applied in the same manner as if such taxpayer were a corporation or partnership.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H4BC2D2B410F24699B359336B96653622"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="HF9ABBF130C3E46D7A29B25EE2E21FA5C"><enum>3204.</enum><header>Modification of treatment of S corporation conversions to C corporations</header> <subsection id="H79795555CC954314BFBB1F9E34369BB1"><enum>(a)</enum><header>Adjustments attributable to conversion from S corporation to C corporation</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/481">Section 481</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="HC1B88758B3DF47789B12BE79F0B42E70" style="OLC"> <subsection id="H8E87531F1B874A50A2223E461057D677"><enum>(d)</enum><header>Adjustments attributable to conversion from S corporation to C corporation</header> <paragraph id="H023193B0444B491CB52BE3A535A44881"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of an eligible terminated S corporation, any adjustment required by subsection (a)(2) which is attributable to such corporation’s revocation described in paragraph (2)(A)(ii) shall be taken into account ratably during the 6-taxable year period beginning with the year of change.</text> </paragraph><paragraph id="H7724474E8A3C4B1FB3B2C5BF8E083B3E"><enum>(2)</enum><header>Eligible terminated S corporation</header><text>For purposes of this subsection, the term <quote>eligible terminated S corporation</quote> means any C corporation—</text> <subparagraph id="H4B1A3D44B3C84ABFBFF7DE5D1CE659BA"><enum>(A)</enum><text>which—</text> <clause id="H067419D2CA384940B73855ADD1A2EBD2"><enum>(i)</enum><text>was an S corporation on the day before the date of the enactment of the <short-title>Tax Cuts and Jobs Act</short-title>, and</text> </clause><clause id="H3B252AAEFBE846FCAA55E7DB83E165C2"><enum>(ii)</enum><text>during the 2-year period beginning on the date of such enactment makes a revocation of its election under section 1362(a), and</text> </clause></subparagraph><subparagraph id="H21AB283E7B144542A9A6511E89FC2A59"><enum>(B)</enum><text>the owners of the stock of which, determined on the date such revocation is made, are the same owners (and in identical proportions) as on the date of such enactment.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HF5A951B70E5F4CE8B2BE80F386266CD5"><enum>(b)</enum><header>Cash distributions following post-termination transition period from S corporation status</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/1371">Section 1371</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="HBFE6FBDDE4814C69A7217B9069440ED7" style="OLC"> <subsection commented="no" id="HE2A6D23226FA4B85A3D76993C5B7669C"><enum>(f)</enum><header>Cash distributions following post-termination transition period</header><text>In the case of a distribution of money by an eligible terminated S corporation (as defined in section 481(d)) after the post-termination transition period, the accumulated adjustments account shall be allocated to such distribution, and the distribution shall be chargeable to accumulated earnings and profits, in the same ratio as the amount of such accumulated adjustments account bears to the amount of such accumulated earnings and profits.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection></section></subtitle><subtitle id="H445009B1C70D40719E67699AA138A334"><enum>D</enum><header>Reform of business-related exclusions, deductions, etc.</header> <section id="HCD16CA4352BB4A7A894774DEC98262FD"><enum>3301.</enum><header>Interest</header> <subsection id="H11E6B79810FB4B0DAAB8BC836995866E"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/163">Section 163(j)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H5921BE28847E49C78BEC45BD5D2BB97F" style="OLC"> <subsection id="H4387B733E89C4775AC51C2DB9E8741EC"><enum>(j)</enum><header>Limitation on business interest</header> <paragraph id="H89F5EA9718AE43A59302A0095E69C18D"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any taxpayer for any taxable year, the amount allowed as a deduction under this chapter for business interest shall not exceed the sum of—</text> <subparagraph id="HD6402199A48545B18C28ED7CA164685C"><enum>(A)</enum><text>the business interest income of such taxpayer for such taxable year,</text> </subparagraph><subparagraph id="H91BFBF4A30DC400B9E9834A31D46877B"><enum>(B)</enum><text>30 percent of the adjusted taxable income of such taxpayer for such taxable year, plus</text> </subparagraph><subparagraph id="HE9CC586D55AB40CCA3C756392BE1F66A"><enum>(C)</enum><text display-inline="yes-display-inline">the floor plan financing interest of such taxpayer for such taxable year.</text> </subparagraph><continuation-text continuation-text-level="paragraph">The amount determined under subparagraph (B) (after any increases in such amount under paragraph (3)(A)(iii)) shall not be less than zero.</continuation-text></paragraph><paragraph id="HCFFB7C7984084FB39BB09F94A395DB28"><enum>(2)</enum><header>Exemption for certain small businesses</header><text>For exemption for certain small businesses, see the amendment made by section 3203 of the <short-title>Tax Cuts and Jobs Act</short-title>.</text> </paragraph><paragraph id="H42328E17901F4D41B78512DA5608865C"><enum>(3)</enum><header>Application to partnerships, etc</header> <subparagraph id="H64C8542DCF5C4D4DA66BFEADF7982FB1"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any partnership—</text> <clause id="H785DF37005C14BF2B18EE39ACCD49C40"><enum>(i)</enum><text>this subsection shall be applied at the partnership level and any deduction for business interest shall be taken into account in determining the non-separately stated taxable income or loss of the partnership,</text> </clause><clause id="HA3ABC9FB8DDE49B1914964745E3B3A2D"><enum>(ii)</enum><text>the adjusted taxable income of each partner of such partnership shall be determined without regard to such partner’s distributive share of the non-separately stated taxable income or loss of such partnership, and</text> </clause><clause id="HFA7F546AF0BE4F36B28C45C188FFC1F6"><enum>(iii)</enum><text>the amount determined under paragraph (1)(B) with respect to each partner of such partnership shall be increased by such partner’s distributive share of such partnership’s excess amount.</text> </clause></subparagraph><subparagraph id="H537B6776B8814073B49F9947C00E9A63"><enum>(B)</enum><header>Excess amount</header><text>The term <quote>excess amount</quote> means, with respect to any partnership, the excess (if any) of—</text> <clause id="H176B570CAC654E6C9D2CF5865AEF8453"><enum>(i)</enum><text>30 percent of the adjusted taxable income of the partnership, over</text> </clause><clause id="HC53CDB7031BC40B096C08B4601443103"><enum>(ii)</enum><text>the amount (if any) by which the business interest of the partnership, reduced by floor plan financing interest, exceeds the business interest income of the partnership.</text> </clause></subparagraph><subparagraph id="H0AF19FA8A45D4ABB933E34C4BF60781F"><enum>(C)</enum><header>Application to S corporations</header><text display-inline="yes-display-inline">Rules similar to the rules of subparagraphs (A) and (B) shall apply with respect to any S corporation and its shareholders.</text> </subparagraph></paragraph><paragraph id="HC7314AAD48904E948D6752FFCB663FB5"><enum>(4)</enum><header>Business interest</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>business interest</quote> means any interest paid or accrued on indebtedness properly allocable to a trade or business. Such term shall not include investment interest (within the meaning of subsection (d)).</text> </paragraph><paragraph id="H2EC529AE4A0A48EA9351F4F4D4D95ED0"><enum>(5)</enum><header>Business interest income</header><text>For purposes of this subsection, the term <quote>business interest income</quote> means the amount of interest includible in the gross income of the taxpayer for the taxable year which is properly allocable to a trade or business. Such term shall not include investment income (within the meaning of subsection (d)).</text> </paragraph><paragraph id="HE803479E60EE49F5BD4B86F46EF327E3"><enum>(6)</enum><header>Adjusted taxable income</header><text>For purposes of this subsection, the term <quote>adjusted taxable income</quote> means the taxable income of the taxpayer—</text> <subparagraph id="HA49D780F3B6E4B08A7BD8B9758929A6C"><enum>(A)</enum><text>computed without regard to—</text> <clause id="HD975798F111C40B88B97BB5F53EA5125"><enum>(i)</enum><text display-inline="yes-display-inline">any item of income, gain, deduction, or loss which is not properly allocable to a trade or business,</text> </clause><clause id="H09C6ED642BFD4E448CA66B06AB16D3F5"><enum>(ii)</enum><text>any business interest or business interest income,</text> </clause><clause id="H433BD4CDA723480CA4BA078F43B842F8"><enum>(iii)</enum><text>the amount of any net operating loss deduction under section 172, and</text> </clause><clause id="H6CE28F8DFC194A52934EC79704083745"><enum>(iv)</enum><text>any deduction allowable for depreciation, amortization, or depletion, and</text> </clause></subparagraph><subparagraph id="H448C368AA15D462F97481663463CCE94"><enum>(B)</enum><text>computed with such other adjustments as the Secretary may provide.</text> </subparagraph></paragraph><paragraph id="H4C6CE879834644D8A424E42441C0D7CB"><enum>(7)</enum><header>Trade or business</header><text>For purposes of this subsection, the term <quote>trade or business</quote> shall not include—</text> <subparagraph id="HB850F084C95C43ADB9B71002358C55D0"><enum>(A)</enum><text>the trade or business of performing services as an employee,</text> </subparagraph><subparagraph id="HA1FB51D9C65F45259D3CA138910CE033"><enum>(B)</enum><text>a real property trade or business (as such term is defined in section 469(c)(7)(C)), or</text> </subparagraph><subparagraph id="HAB9BB38D8B7344E598F2535191C0240F"><enum>(C)</enum><text display-inline="yes-display-inline">the trade or business of the furnishing or sale of—</text> <clause id="H1F64693C89B343BBB82F7919962FE5C5"><enum>(i)</enum><text>electrical energy, water, or sewage disposal services,</text> </clause><clause id="HD784279AC9A64F108F314587A7FF5AA7"><enum>(ii)</enum><text>gas or steam through a local distribution system, or</text> </clause><clause id="H47C45DF17A74457394B28B644C08BB60"><enum>(iii)</enum><text>transportation of gas or steam by pipeline,</text> </clause><continuation-text continuation-text-level="subparagraph">if the rates for such furnishing or sale, as the case may be, have been established or approved by a State or political subdivision thereof, by any agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of any State or political subdivision thereof.</continuation-text></subparagraph></paragraph><paragraph id="HCCC016C68ADD49F08DF82404A0535FC3"><enum>(8)</enum><header>Carryforward of disallowed interest</header><text>For carryforward of interest disallowed under paragraph (1), see subsection (o).</text> </paragraph><paragraph id="H8B310AD79A9F4F58811BBBE12009181C"><enum>(9)</enum><header>Floor plan financing interest defined</header><text display-inline="yes-display-inline">For purposes of this subsection—</text> <subparagraph id="H55202566A7AB49ECAF04239CECABFF5A"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>floor plan financing interest</quote> means interest paid or accrued on floor plan financing indebtedness.</text> </subparagraph><subparagraph id="H04C4CE2A1E454C938CD5106CF9D094B6"><enum>(B)</enum><header>Floor plan financing indebtedness</header><text>The term <quote>floor plan financing indebtedness</quote> means indebtedness—</text> <clause id="HBD7CC80458CA478F806508F645FB0684"><enum>(i)</enum><text>used to finance the acquisition of motor vehicles held for sale to retail customers, and</text> </clause><clause id="HAF315732FA634500AAEAAE07352031F2"><enum>(ii)</enum><text>secured by the inventory so acquired.</text> </clause></subparagraph><subparagraph id="H6FA9ABBC4E1E40F1AC4B20AAEDD1DB66"><enum>(C)</enum><header>Motor vehicle</header><text display-inline="yes-display-inline">The term <quote>motor vehicle</quote> means a motor vehicle that is any of the following:</text> <clause id="HD79A1A831B1549CE92981391DB9FBA0F"><enum>(i)</enum><text>An automobile.</text> </clause><clause id="H9BACEE9042A5476584C7AF3DE15C8790"><enum>(ii)</enum><text display-inline="yes-display-inline">A truck.</text> </clause><clause id="H5C36B519CA84462CB8F5581ECBDC7039"><enum>(iii)</enum><text>A recreational vehicle.</text> </clause><clause id="H5378E909E04D4C2380DD530708D26C12"><enum>(iv)</enum><text>A motorcycle.</text> </clause><clause id="HAE1160E84D9C4F488ED53C38625163D7"><enum>(v)</enum><text>A boat.</text> </clause><clause id="H48B897FCD7CC466AB3111CBE9443A980"><enum>(vi)</enum><text>Farm machinery or equipment.</text> </clause><clause id="HD2DA966CB77D4121BAAC733A4FAB6521"><enum>(vii)</enum><text>Construction machinery or equipment.</text></clause></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H39C4CEF7D41841ACB55FF6F0869E334B"><enum>(b)</enum><header>Carryforward of disallowed business interest</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/163">Section 163</external-xref>, after amendment by section 4302(a) and before amendment by <external-xref legal-doc="usc" parsable-cite="usc/26/4302">section 4302(b),</external-xref> is amended by inserting after subsection (n) the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H2D143D37C72B44DAAA1BDA80813A64C1" style="OLC"> <subsection commented="no" id="H3B1C965E418C48B7813976F907423C77"><enum>(o)</enum><header>Carryforward of disallowed business interest</header><text display-inline="yes-display-inline">The amount of any business interest not allowed as a deduction for any taxable year by reason of subsection (j) shall be treated as business interest paid or accrued in the succeeding taxable year. Business interest paid or accrued in any taxable year (determined without regard to the preceding sentence) shall not be carried past the 5th taxable year following such taxable year, determined by treating business interest as allowed as a deduction on a first-in, first-out basis.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HA507AE82AA3E4717BAC7A9FEF7D0056C"><enum>(c)</enum><header>Treatment of carryforward of disallowed business interest in certain corporate acquisitions</header> <paragraph id="HCB5EFFB31AD54F66BBE46609D74BBEDD"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/381">Section 381(c)</external-xref> is amended by inserting after paragraph (19) the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H46BA45D64FD44B4EB6866230F9CAECE3" style="OLC"> <paragraph id="H3E6C56CCDBBA497895CA878E9396016D"><enum>(20)</enum><header>Carryforward of disallowed interest</header><text display-inline="yes-display-inline">The carryover of disallowed interest described in section 163(o) to taxable years ending after the date of distribution or transfer.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HE9C09164E63C4E48837B368799A93A18"><enum>(2)</enum><header>Application of limitation</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/382">Section 382(d)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HC4330B8C18944DE3A947E5BD82282312" style="OLC"> <paragraph id="H974FCD2DFCF04491A6C03777ED50BFC5"><enum>(3)</enum><header>Application to carryforward of disallowed interest</header><text display-inline="yes-display-inline">The term <quote>pre-change loss</quote> shall include any carryover of disallowed interest described in section 163(o) under rules similar to the rules of paragraph (1).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H1D6B7655B11C4B96BD0F1480D80A23CD"><enum>(3)</enum><header>Conforming amendment</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/382">Section 382(k)(1)</external-xref> is amended by inserting after the first sentence the following: <quote>Such term shall include any corporation entitled to use a carryforward of disallowed interest described in section 381(c)(20).</quote></text> </paragraph></subsection><subsection id="H75FFD53F1DB34E849A0E86FDEA8797EF"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="HEF09AC95994B445E8379ED725D939DD2"><enum>3302.</enum><header>Modification of net operating loss deduction</header> <subsection id="HC19EA1F006914832ADC9874937486BB0"><enum>(a)</enum><header>Indefinite carryforward of net operating losses</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/172">Section 172(b)(1)(A)(ii)</external-xref> is amended by striking <quote>to each of the 20 taxable years</quote> and inserting <quote>to each taxable year</quote>.</text> </subsection><subsection id="HDFAA2F31A7D746ED870F6D738557FA55"><enum>(b)</enum><header>Repeal of net operating loss carrybacks other than 1-year carryback of eligible disaster losses</header> <paragraph id="H40C9B69ACCA6499788E1EAA038B559CD"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/172">Section 172(b)(1)(A)(i)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H6E2A4D4CBD8B4BBDA960471B51613D71" style="OLC"> <clause id="H6535F331464046DC9E5589E438A487DA"><enum>(i)</enum><text display-inline="yes-display-inline">in the case of any portion of a net operating loss for the taxable year which is an eligible disaster loss with respect to the taxpayer, shall be a net operating loss carryback to the taxable year preceding the taxable year of such loss, and</text></clause><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HC48AB9DDFD184E5ABB25C73C4386FA5C"><enum>(2)</enum><header>Conforming amendments</header> <subparagraph id="H0B615C48F238430880DFEF8195CA29F1"><enum>(A)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/172">Section 172(b)(1)</external-xref> is amended by striking subparagraphs (B) through (F) and inserting the following:</text> <quoted-block display-inline="no-display-inline" id="HB124BF1527A045C38A2E23C72D61761A" style="OLC"> <subparagraph id="HC3BB91B3B0664C1CB7A51DFBDCF684FE"><enum>(B)</enum><header>Eligible disaster loss</header> <clause id="H448E8E3F8A4840D091C75C2B4D5C50DB"><enum>(i)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of subparagraph (A)(i), the term <quote>eligible disaster loss</quote> means—</text> <subclause id="H34723DC490594DCF976D7A4A60F91F2B"><enum>(I)</enum><text>in the case of a taxpayer which is a small business, net operating losses attributable to federally declared disasters (as defined by section 165(i)(5)), and</text> </subclause><subclause id="H631D2BF5A15D468A8631A8820684803B"><enum>(II)</enum><text>in the case of a taxpayer engaged in the trade or business of farming, net operating losses attributable to such federally declared disasters.</text> </subclause></clause><clause id="HE78A226439514B70B4448DB554BD1CBF"><enum>(ii)</enum><header>Small business</header><text display-inline="yes-display-inline">For purposes of this subparagraph, the term <quote>small business</quote> means a corporation or partnership which meets the gross receipts test of section 448(c) (determined by substituting <quote>$5,000,000</quote> for <quote>$25,000,000</quote> each place it appears therein) for the taxable year in which the loss arose (or, in the case of a sole proprietorship, which would meet such test if such proprietorship were a corporation).</text> </clause><clause id="H5FD82EEF5C5B43DD897B9D68D9EFBD0F"><enum>(iii)</enum><header>Trade or business of farming</header><text>For purposes of this subparagraph, the trade or business of farming shall include the trade or business of—</text> <subclause id="H76E9BA5A271B4409A5230CB22CD3AAB7"><enum>(I)</enum><text display-inline="yes-display-inline">operating a nursery or sod farm, or</text> </subclause><subclause id="H036B31E29211454C9224C4CBB602F949"><enum>(II)</enum><text>the raising or harvesting of trees bearing fruit, nuts, or other crops, or ornamental trees.</text> </subclause><continuation-text continuation-text-level="clause">For purposes of subclause (II), an evergreen tree which is more than 6 years old at the time severed from the roots shall not be treated as an ornamental tree.</continuation-text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph><subparagraph id="H47C80642098842089EC06FC9A7AE5FFE"><enum>(B)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/172">Section 172</external-xref> is amended by striking subsections (f), (g), and (h).</text> </subparagraph></paragraph></subsection><subsection id="H077B405D1A564F69A7216B20FBAA3BF7"><enum>(c)</enum><header>Limitation of net operating loss to 90 percent of taxable income</header> <paragraph id="H2345479A479A494DB2E711721FD746DB"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/172">Section 172(a)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H0034D87FD406410AB2989C6C9CCE1B12" style="OLC"> <subsection id="H23245C778A7C4ED9A712A45E7B10C733"><enum>(a)</enum><header>Deduction allowed</header><text display-inline="yes-display-inline">There shall be allowed as a deduction for the taxable year an amount equal to the lesser of—</text> <paragraph id="HB4502B071A534E3BB52267C5340C666E"><enum>(1)</enum><text>the aggregate of the net operating loss carryovers to such year, plus the net operating loss carrybacks to such year, or</text> </paragraph><paragraph id="HCA71BC0FEC584FD2A1F9673645BAB82F"><enum>(2)</enum><text>90 percent of taxable income computed without regard to the deduction allowable under this section.</text> </paragraph><continuation-text continuation-text-level="subsection">For purposes of this subtitle, the term <quote>net operating loss deduction</quote> means the deduction allowed by this subsection.</continuation-text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HED1C3E73422A430FAB685A6BF344A999"><enum>(2)</enum><header>Coordination of limitation with carrybacks and carryovers</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/172">Section 172(b)(2)</external-xref> is amended by striking <quote>shall be computed—</quote> and all that follows and inserting</text> <quoted-block display-inline="yes-display-inline" id="HCA0E96132F0C4855B8715D25790E4097" style="OLC"> <text>shall—</text><subparagraph id="H03435BA7C3904DD28EBBA251C2ACB988"><enum>(A)</enum><text display-inline="yes-display-inline">be computed with the modifications specified in subsection (d) other than paragraphs (1), (4), and (5) thereof, and by determining the amount of the net operating loss deduction without regard to the net operating loss for the loss year or for any taxable year thereafter,</text> </subparagraph><subparagraph id="H8180F06190BA4D72A11524043880FCAE"><enum>(B)</enum><text>not be considered to be less than zero, and</text> </subparagraph><subparagraph id="HFEE684F18E4A4F4493FDC79EB7AF4440"><enum>(C)</enum><text>not exceed the amount determined under subsection (a)(2) for such prior taxable year.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HCDB429E76A5745BBA249FB29A1B1D17E"><enum>(3)</enum><header>Conforming amendment</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/172">Section 172(d)(6)</external-xref> is amended by striking <quote>and</quote> at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting <quote>; and</quote>, and by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="H2FA97C34437E424D9F3BD870A80F936D" style="OLC"> <subparagraph id="H9D573624630C4DF2A5DA9CFBB5E5C3ED"><enum>(C)</enum><text display-inline="yes-display-inline">subsection (a)(2) shall be applied by substituting <quote>real estate investment trust taxable income (as defined in section 857(b)(2) but without regard to the deduction for dividends paid (as defined in section 561))</quote> for <quote>taxable income</quote>.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H40CBFDB26A384772A4C96CC3147399BE"><enum>(d)</enum><header>Annual increase of indefinite carryover amounts</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/172">Section 172(b)</external-xref> is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HC12903E7E9C840489313B24FDDBBBAAA" style="OLC"> <paragraph id="H8A4F1F329E2F46CE85385C4A9EDE66DA"><enum>(3)</enum><header>Annual increase of indefinite carryover amounts</header><text display-inline="yes-display-inline">For purposes of paragraph (2)—</text> <subparagraph id="HB29219AD3B3F4D4591C492EEDED3E46E"><enum>(A)</enum><text>the amount of any indefinite net operating loss which is carried to the next succeeding taxable year after the loss year (within the meaning of paragraph (2)) shall be increased by an amount equal to—</text> <clause id="H7AF46948BC684D36AA2870526268783D"><enum>(i)</enum><text>the amount of the loss which may be so carried over to such succeeding taxable year (determined without regard to this paragraph), multiplied by</text> </clause><clause id="H30E1C555DE9C4D91AB2B8752F57EF6D8"><enum>(ii)</enum><text>the sum of—</text> <subclause id="H95D0323CE1D445B8B15BFE7718C23FAD"><enum>(I)</enum><text>the annual Federal short-term rate (determined under section 1274(d)) for the last month ending before the beginning of such taxable year, plus</text> </subclause><subclause id="HBBADDC4BEB80466FBD36A5930E795B26"><enum>(II)</enum><text>4 percentage points, and</text> </subclause></clause></subparagraph><subparagraph id="HC7C2DC41405B4DA4BFB4254F85545108"><enum>(B)</enum><text>the amount of any indefinite net operating loss which is carried to any succeeding taxable year (after such next succeeding taxable year) shall be an amount equal to—</text> <clause id="H3FC952D684824174BE580355AE4D8406"><enum>(i)</enum><text>the excess of—</text> <subclause id="H5B449214B7BF45C5BC5704DCBBD5E303"><enum>(I)</enum><text>the amount of the loss carried to the prior taxable year (after any increase under this paragraph with respect to such amount), over</text> </subclause><subclause id="H3BA515DB63ED43FEAA4F394FA67EE869"><enum>(II)</enum><text>the amount by which such loss was reduced under paragraph (2) by reason of the taxable income for such prior taxable year, multiplied by</text> </subclause></clause><clause id="H4CF8BA434D3C4BDEA4EAF84213C2FAD9"><enum>(ii)</enum><text>a percentage equal to 100 percent plus the percentage determined under subparagraph (A)(ii) with respect to such succeeding taxable year.</text> </clause><continuation-text continuation-text-level="subparagraph">For purposes of the preceding sentence, the term <quote>indefinite net operating loss</quote> means any net operating loss arising in a taxable year beginning after December 31, 2017.</continuation-text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HF75880E2B0FF48D68CE6924DB04351FB"><enum>(e)</enum><header>Effective date</header> <paragraph id="HA98CBD93D37248C8B8589876A98C44F8"><enum>(1)</enum><header>Carryforwards and carrybacks</header><text display-inline="yes-display-inline">The amendments made by subsections (a) and (b) shall apply to net operating losses arising in taxable years beginning after December 31, 2017.</text> </paragraph><paragraph id="H4D06EF1E9DA640CCAEDC9209E1549708"><enum>(2)</enum><header>Net operating loss limited to 90 percent of taxable income</header><text>The amendments made by subsection (c) shall apply to taxable years beginning after December 31, 2017.</text> </paragraph><paragraph id="H2D46BEA5ED8A474EA2CF26C9147BDDFE"><enum>(3)</enum><header>Annual increase in carryover amounts</header><text>The amendments made by subsection (d) shall apply to amounts carried to taxable years beginning after December 31, 2017.</text> </paragraph><paragraph id="HE85F1FA51A884F3CAE6CAA9B56DF6188"><enum>(4)</enum><header>Special rule for net disaster losses</header><text display-inline="yes-display-inline">Notwithstanding paragraph (1), the amendments made by subsection (b) shall not apply to the portion of the net operating loss for any taxable year which is a net disaster loss to which section 504(b) of the Disaster Tax Relief and Airport and Airway Extension Act of 2017 applies.</text> </paragraph></subsection></section><section id="HE2CE4F97A01346CE82A6E9655066523B"><enum>3303.</enum><header>Like-kind exchanges of real property</header> <subsection id="H64018123ACDC42768B0D90FE1C43BD62"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/1031">Section 1031(a)(1)</external-xref> is amended by striking <quote>property</quote> each place it appears and inserting <quote>real property</quote>.</text> </subsection><subsection id="H877F182EE1084353B6ACA4326F3E8D45"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="H69FAB390934B44A79912403D03E90A48"><enum>(1)</enum><text display-inline="yes-display-inline">Paragraph (2) of <external-xref legal-doc="usc" parsable-cite="usc/26/1031">section 1031(a)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H9CC1A99AC4684F27A9D7E4E581E04594" style="OLC"> <paragraph id="H43D467F9B6014361BD073E001BD9E9CB"><enum>(2)</enum><header>Exception for real property held for sale</header><text>This subsection shall not apply to any exchange of real property held primarily for sale.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H85F3FC1F5BC040F5AD6EE0E4D5CD9E60"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1031">Section 1031</external-xref> is amended by striking subsections (e) and (i).</text> </paragraph><paragraph id="H5128B46F2A9847A680060A587AAAB0B6"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1031">Section 1031</external-xref>, as amended by paragraph (2), is amended by inserting after subsection (d) the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="HCC17C572C41145979BC68F7781C735A5" style="OLC"> <subsection id="H95A84F3B41F7440DB5E6249FD1071D02"><enum>(e)</enum><header>Application to certain partnerships</header><text display-inline="yes-display-inline">For purposes of this section, an interest in a partnership which has in effect a valid election under section 761(a) to be excluded from the application of all of subchapter K shall be treated as an interest in each of the assets of such partnership and not as an interest in a partnership.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H296D420D05DC43DA8D54E0EC56458BBB"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1031">Section 1031(h)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H8B55CA4E05A1456D8C6EB35960ADE3DF" style="OLC"> <subsection id="HE7A24FFBE07B4CE58944E4EC4311A965"><enum>(h)</enum><header>Special rules for foreign real property</header><text display-inline="yes-display-inline">Real property located in the United States and real property located outside the United States are not property of a like kind.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H2F7C7B6DC70346E9B76CA1F63EBFEB1D"><enum>(5)</enum><text>The heading of <external-xref legal-doc="usc" parsable-cite="usc/26/1031">section 1031</external-xref> is amended by striking <quote><header-in-text level="section" style="OLC">property</header-in-text></quote> and inserting <quote><header-in-text level="section" style="OLC">real property</header-in-text></quote>.</text> </paragraph><paragraph id="H4A6C0C1ADBB24F38A03F33A8249E4C7C"><enum>(6)</enum><text>The table of sections for part III of subchapter O of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking the item relating to section 1031 and inserting the following new item:</text> <quoted-block display-inline="no-display-inline" id="HA8D1251098284C6F972D7D9E26041FDE" style="OLC"> <toc regeneration="no-regeneration"> <toc-entry level="section">Sec. 1031. Exchange of real property held for productive use or investment.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection commented="no" id="H23385F43B78D4838819C6D863137281E"><enum>(c)</enum><header>Effective date</header> <paragraph commented="no" id="H6141A5B11ACD4031A3E0EB4E774D6BEC"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except as otherwise provided in this subsection, the amendments made by this section shall apply to exchanges completed after December 31, 2017.</text> </paragraph><paragraph commented="no" id="H1AA4C8715E974A58A831F8865D10F880"><enum>(2)</enum><header>Transition rule</header><text>The amendments made by this section shall not apply to any exchange if—</text> <subparagraph commented="no" id="HBA633FD027224DC0A7BD49B696636607"><enum>(A)</enum><text>the property disposed of by the taxpayer in the exchange is disposed of on or before December 31 2017, or</text> </subparagraph><subparagraph commented="no" id="H432BE9AFAEC24EAC853764C627629842"><enum>(B)</enum><text>the property received by the taxpayer in the exchange is received on or before December 31, 2017.</text> </subparagraph></paragraph></subsection></section><section id="H79E71F9CD6234414BBE45EAA07ED5593"><enum>3304.</enum><header>Revision of treatment of contributions to capital</header> <subsection id="H6DF4E5ED4113495E90C1DFF7106D5BC9"><enum>(a)</enum><header>Inclusion of contributions to capital</header><text display-inline="yes-display-inline">Part II of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by inserting after section 75 the following new section:</text> <quoted-block display-inline="no-display-inline" id="HC8D3D45C37004482A7C1578359625D77" style="OLC"> <section id="H3CF7FDEE75C14C3CB2AFFCBF8AC16905"><enum>76.</enum><header>Contributions to capital</header> <subsection id="HBA7A8F3700BD44608EF9E75128C5D614"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Gross income includes any contribution to the capital of any entity.</text> </subsection><subsection id="HE2B07B1BF30C44978A791DED4341932B"><enum>(b)</enum><header>Treatment of contributions in exchange for stock, etc</header> <paragraph id="HB40904D6251B448081D6D361D1C44270"><enum>(1)</enum><header>In general</header><text>In the case of any contribution of money or other property to a corporation in exchange for stock of such corporation—</text> <subparagraph id="H8D58C84773E0441B8BED313B4E7DF5BE"><enum>(A)</enum><text>such contribution shall not be treated for purposes of subsection (a) as a contribution to the capital of such corporation (and shall not be includible in the gross income of such corporation), and</text> </subparagraph><subparagraph id="H3A7C185736CD4891B291CEED47B821D3"><enum>(B)</enum><text>no gain or loss shall be recognized to such corporation upon the issuance of such stock.</text> </subparagraph></paragraph><paragraph id="H3AA0678AE4164A999EE8E3D2D69954ED"><enum>(2)</enum><header>Treatment limited to value of stock</header><text>For purposes of this subsection, a contribution of money or other property to a corporation shall be treated as being in exchange for stock of such corporation only to the extent that the fair market value of such money and other property does not exceed the fair market value of such stock.</text> </paragraph><paragraph id="HA0AA7C191FA64D79A6B10EF9D4AAC0C3"><enum>(3)</enum><header>Application to entities other than corporations</header><text>In the case of any entity other than a corporation, rules similar to the rules of paragraphs (1) and (2) shall apply in the case of any contribution of money or other property to such entity in exchange for any interest in such entity.</text> </paragraph></subsection><subsection id="H4F2B2A6294A043649AF8EB6B487C4F61"><enum>(c)</enum><header>Treasury stock treated as stock</header><text>Any reference in this section to stock shall be treated as including a reference to treasury stock.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H1D4B7B5D551D41698C7081F35E7B7FFB"><enum>(b)</enum><header>Basis of corporation in contributed property</header> <paragraph id="H50266D4003184B2D8AABCFD98C3938F9"><enum>(1)</enum><header>Contributions to capital</header><text>Subsection (c) of <external-xref legal-doc="usc" parsable-cite="usc/26/362">section 362</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H328FBD2CCB1D472C851B23B8C13A1B9B" style="OLC"> <subsection id="H7EF0EA47BA0D49B8B8F5C71FD7005C9A"><enum>(c)</enum><header>Contributions to capital</header><text display-inline="yes-display-inline">If property other than money is transferred to a corporation as a contribution to the capital of such corporation (within the meaning of section 76) then the basis of such property shall be the greater of—</text> <paragraph id="H4F0FC6E070554F5EA1A59F4719BDBD51"><enum>(1)</enum><text>the basis determined in the hands of the transferor, increased by the amount of gain recognized to the transferor on such transfer, or</text> </paragraph><paragraph id="H1B38E88F79FB400481AA588ACC094058"><enum>(2)</enum><text>the amount included in gross income by such corporation under section 76 with respect to such contribution.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H0B59E315FEB241F0BA9D909A0942C823"><enum>(2)</enum><header>Contributions in exchange for stock</header><text>Paragraph (2) of <external-xref legal-doc="usc" parsable-cite="usc/26/362">section 362(a)</external-xref> is amended by striking <quote>contribution to capital</quote> and inserting <quote>contribution in exchange for stock of such corporation (determined under rules similar to the rules of paragraphs (2) and (3) of section 76(b))</quote>.</text> </paragraph></subsection><subsection id="H87C6F5A2C7234FD4A67C502351594D4C"><enum>(c)</enum><header>Conforming amendments</header> <paragraph id="H66AC8910A37C4E6094BFDB57034C9F45"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/108">Section 108(e)</external-xref> is amended by striking paragraph (6).</text> </paragraph><paragraph id="HFE7CDF51999B4EFA937AD3851D61C79D"><enum>(2)</enum><text>Part III of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 118 (and by striking the item relating to such section in the table of sections for such part).</text> </paragraph><paragraph id="H80140CD8CB4E4FC4B1A0B09B528699A2"><enum>(3)</enum><text>The table of sections for part II of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by inserting after the item relating to section 75 the following new item:</text> <quoted-block display-inline="no-display-inline" id="H3E3E6561923D43DD965B89187D45306B" style="OLC"> <toc container-level="quoted-block-container" idref="HC8D3D45C37004482A7C1578359625D77" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration"> <toc-entry idref="H3CF7FDEE75C14C3CB2AFFCBF8AC16905" level="section">Sec. 76. Contributions to capital.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H624DA990814F4F409CDE5167FB4619F3"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to contributions made, and transactions entered into, after the date of the enactment of this Act.</text> </subsection></section><section id="HEAB163ACEAE44A9DB39DF8EF0FA35B20"><enum>3305.</enum><header>Repeal of deduction for local lobbying expenses</header> <subsection id="HC0A877C7DE6044AB946A37ADF1DF82C7"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/162">Section 162(e)</external-xref> 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.</text> </subsection><subsection id="H4342813F484F4CBE983FBAE4DF6F8F2E"><enum>(b)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/6033">Section 6033(e)(1)(B)(ii)</external-xref> is amended by striking <quote>section 162(e)(5)(B)(ii)</quote> and inserting <quote>section 162(e)(4)(B)(ii)</quote>.</text> </subsection><subsection id="H046DF6C431F44A8D829FEFA186B9A321"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred after December 31, 2017.</text> </subsection></section><section id="H3523E74B8CCB42B7B43625FE6B1E4E15"><enum>3306.</enum><header>Repeal of deduction for income attributable to domestic production activities</header> <subsection id="H1330E97CBE3B41C6BED205293234ED92"><enum>(a)</enum><header>In general</header><text>Part VI of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 199 (and by striking the item relating to such section in the table of sections for such part).</text> </subsection><subsection id="HAC5E1BA084E84E32BEC355E9CB2910AA"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="H84ADA9869AE24538BBD9A83FB0019701"><enum>(1)</enum><text>Sections 74(d)(2)(B), 86(b)(2)(A), 137(b)(3)(A), 219(g)(3)(A)(ii), and 246(b)(1) are each amended by striking <quote>199,</quote>.</text> </paragraph><paragraph id="H0B533DB112AA4408B2F56B71D15AABA8"><enum>(2)</enum><text>Section 170(b)(2)(D), as amended by the preceding provisions of this Act, is amended by striking clause (iv), by redesignating clause (v) as clause (iv), and by inserting <quote>and</quote> at the end of clause (iii).</text> </paragraph><paragraph id="HFE16C5842A0748ACB148D0BA9C989A91"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/172">Section 172(d)</external-xref> is amended by striking paragraph (7).</text> </paragraph><paragraph id="H746868F29A3E4C57A662AC58FB9D475D"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/613">Section 613(a)</external-xref> is amended by striking <quote>and without the deduction under section 199</quote>.</text> </paragraph><paragraph id="H19DD7D1DD2784FAF90DFD42198393E2B"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/613A">Section 613A(d)(1)</external-xref> is amended by striking subparagraph (B) and by redesignating subparagraphs (C), (D), and (E) as subparagraphs (B), (C), and (D), respectively.</text> </paragraph><paragraph id="H5BD1C4419DB5438EBEBB9B5335213CB4"><enum>(6)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1402">Section 1402(a)</external-xref> is amended by adding <quote>and</quote> at the end of paragraph (15) and by striking paragraph (16).</text> </paragraph></subsection><subsection id="H199EFB7CDECE4EBA84156D3CBD480370"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section commented="no" id="HC36FBE641F4F4E2090CE975BF2B79E1D" section-type="subsequent-section"><enum>3307.</enum><header>Entertainment, etc. expenses</header> <subsection commented="no" id="HC5FEC9086EF24ADC9A0C594C56E210B2"><enum>(a)</enum><header>Denial of deduction</header><text display-inline="yes-display-inline">Subsection (a) of <external-xref legal-doc="usc" parsable-cite="usc/26/274">section 274</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HD53627A7D5F34D7D9D636BE88D86FDB3" style="OLC"> <subsection commented="no" id="HF4CEB83D30AF4CB29AABF7214179B7FB"><enum>(a)</enum><header>Entertainment, amusement, recreation, and other fringe benefits </header> <paragraph commented="no" id="H5D413B8C0CB74DA7893EB31AAC9362F6"><enum>(1)</enum><header>In general</header><text>No deduction otherwise allowable under this chapter shall be allowed for amounts paid or incurred for any of the following items:</text> <subparagraph commented="no" id="H7A9C5E9DE1074CA59F4F1B590AFF110B"><enum>(A)</enum><header>Activity</header><text>With respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation.</text> </subparagraph><subparagraph commented="no" id="HF255156AB46945B0ACAC9342FBD72267"><enum>(B)</enum><header>Membership dues</header><text>With respect to membership in any club organized for business, pleasure, recreation or other social purposes.</text> </subparagraph><subparagraph commented="no" id="H65DE026142EB41DBA0A9458149ECB138"><enum>(C)</enum><header>Amenity</header><text display-inline="yes-display-inline">With respect to a de minimis fringe (as defined in section 132(e)(1)) that is primarily personal in nature and involving property or services that are not directly related to the taxpayer’s trade or business.</text> </subparagraph><subparagraph commented="no" id="H7C78D2ACDBAA49C88AE6776B9AB72B10"><enum>(D)</enum><header>Facility</header><text>With respect to a facility or portion thereof used in connection with an activity referred to in subparagraph (A), membership dues or similar amounts referred to in subparagraph (B), or an amenity referred to in subparagraph (C).</text> </subparagraph><subparagraph commented="no" id="HD02BED2538B640169F5B2F9025BDC67A"><enum>(E)</enum><header>Qualified transportation fringe and parking facility</header><text display-inline="yes-display-inline">Which is a qualified transportation fringe (as defined in section 132(f)) or which is a parking facility used in connection with qualified parking (as defined in section 132(f)(5)(C)).</text> </subparagraph><subparagraph commented="no" id="H1DE5770D252543BF8F714890D27224F8"><enum>(F)</enum><header>On-premises athletic facility</header><text display-inline="yes-display-inline">Which is an on-premises athletic facility as defined in section 132(j)(4)(B).</text> </subparagraph></paragraph><paragraph commented="no" id="H8F917CF32A3F4D87A9C7B2BC2A04226C"><enum>(2)</enum><header>Special rules</header><text>For purposes of applying paragraph (1), an activity described in section 212 shall be treated as a trade or business.</text> </paragraph><paragraph commented="no" id="H30BB28F802914D1987BEB94994CBDBB6"><enum>(3)</enum><header>Regulations</header><text display-inline="yes-display-inline">Under the regulations prescribed to carry out this section, the Secretary shall include regulations—</text> <subparagraph commented="no" id="H5FBAA454FF10425F908736DA5C910937"><enum>(A)</enum><text>defining entertainment, amenities, recreation, amusement, and facilities for purposes of this subsection,</text> </subparagraph><subparagraph commented="no" id="H5ADC835959BE48ACBFDA29CB266C5DA2"><enum>(B)</enum><text>providing for the appropriate allocation of depreciation and other costs with respect to facilities used for parking or for on-premises athletic facilities, and</text> </subparagraph><subparagraph commented="no" id="H2CD089E9D38A4A63B6B9DABCDF32A12E"><enum>(C)</enum><text>specifying arrangements a primary purpose of which is the avoidance of this subsection.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="H754FB4A1FE944874A5A1B6F2639BBB7F"><enum>(b)</enum><header>Exception for certain expenses includible in income of recipient</header> <paragraph commented="no" id="HC7D7E1AEA83B4EDF9E2F82726E9EC4B6"><enum>(1)</enum><header>Expenses treated as compensation</header><text>Paragraph (2) of <external-xref legal-doc="usc" parsable-cite="usc/26/274">section 274(e)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HC0CB0E835A814467A2C777FC192166FC" style="OLC"> <paragraph commented="no" id="H379DBA4BFF544AF88ABEC0849332E953"><enum>(2)</enum><header>Expenses treated as compensation</header><text>Expenses for goods, services, and facilities, to the extent that the expenses do not exceed the amount of the expenses which are treated by the taxpayer, with respect to the recipient of the entertainment, amusement, or recreation, as compensation to an employee on the taxpayer’s return of tax under this chapter and as wages to such employee for purposes of chapter 24 (relating to withholding of income tax at source on wages).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph commented="no" id="H503D2AE4667F4072A59349BD1E8DE752"><enum>(2)</enum><header>Expenses includible in income of persons who are not employees</header><text>Paragraph (9) of <external-xref legal-doc="usc" parsable-cite="usc/26/274">section 274(e)</external-xref> is amended by striking <quote>to the extent that the expenses</quote> and inserting <quote>to the extent that the expenses do not exceed the amount of the expenses that</quote>.</text> </paragraph></subsection><subsection commented="no" id="H4879208151954FE2A2FDFD937F477F1B"><enum>(c)</enum><header>Exceptions for reimbursed expenses</header><text>Paragraph (3) of <external-xref legal-doc="usc" parsable-cite="usc/26/274">section 274(e)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H276A06F00B274E37BA117BE8239305F0" style="OLC"> <paragraph commented="no" id="HCB268203819441F9BEF4DE69906A0193"><enum>(3)</enum><header>Reimbursed expenses</header> <subparagraph commented="no" id="H57AE82C671594C3B85880E93A991EA28"><enum>(A)</enum><header>In general</header><text>Expenses paid or incurred by the taxpayer, in connection with the performance by him of services for another person (whether or not such other person is the taxpayer’s employer), under a reimbursement or other expense allowance arrangement with such other person, but this paragraph shall apply—</text> <clause commented="no" id="H9AE9F91134054D7D970DE4E2528D5001"><enum>(i)</enum><text>where the services are performed for an employer, only if the employer has not treated such expenses in the manner provided in paragraph (2), or</text> </clause><clause commented="no" id="H5DA9B901D55D401AB4D23131BBDD4A48"><enum>(ii)</enum><text>where the services are performed for a person other than an employer, only if the taxpayer accounts (to the extent provided by subsection (d)) to such person.</text> </clause></subparagraph><subparagraph commented="no" id="HC5062FA3F91C4479906F7C24388A8826"><enum>(B)</enum><header>Exception</header><text display-inline="yes-display-inline">Except as provided by the Secretary, subparagraph (A) shall not apply—</text> <clause commented="no" id="HFD9E14A8AA174B2E88FE55B78B9EE196"><enum>(i)</enum><text display-inline="yes-display-inline">in the case of an arrangement in which the person other than the employer is an entity described in section 168(h)(2)(A), or</text> </clause><clause commented="no" id="H9E316D99FC7A42AD88C85E7C8BB59DCA"><enum>(ii)</enum><text>to any other arrangement designated by the Secretary as having the effect of avoiding the limitation under subparagraph (A).</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="H83DD637460AC454AAD30E6731146C0D0"><enum>(d)</enum><header>50 percent limitation on meals and entertainment expenses</header><text>Subsection (n) of <external-xref legal-doc="usc" parsable-cite="usc/26/274">section 274</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HC3E845BDD5964C5292F0FE19B358B03B" style="OLC"> <subsection commented="no" id="HADED1895660B4A2497BB22E6EEF0E6F6"><enum>(n)</enum><header>Limitation on certain expenses</header> <paragraph commented="no" id="HA881730A61CB4057B0A1F8BDC2480610"><enum>(1)</enum><header>In general</header><text>The amount allowable as a deduction under this chapter for any expense for food or beverages (pursuant to subsection (e)(1)) or business meals (pursuant to subsection (k)(1)) shall not exceed 50 percent of the amount of such expense or item which would (but for this paragraph) be allowable as a deduction under this chapter.</text> </paragraph><paragraph commented="no" id="HCB7933AF0BBC47A8B5EBED5AC79AD4E3"><enum>(2)</enum><header>Exceptions</header><text>Paragraph (1) shall not apply to any expense if—</text> <subparagraph commented="no" id="H1F2FC37C11EC4660B7038BDDB79756D4"><enum>(A)</enum><text>such expense is described in paragraph (2), (3), (6), (7), or (8) of subsection (e),</text> </subparagraph><subparagraph commented="no" id="H37F34DCF91CA43EAAFD4C0B991906698"><enum>(B)</enum><text display-inline="yes-display-inline">in the case of an expense for food or beverages, such expense is excludable from the gross income of the recipient under section 132 by reason of subsection (e) thereof (relating to de minimis fringes) or under section 119 (relating to meals and lodging furnished for convenience of employer), or</text> </subparagraph><subparagraph commented="no" id="H5DECF988CFEE4BFB9E5FAC0539DFAEC9"><enum>(C)</enum><text>in the case of an employer who pays or reimburses moving expenses of an employee, such expenses are includible in the income of the employee under section 82.</text> </subparagraph></paragraph><paragraph commented="no" id="H06CE4AB8798B403CBF9FC984D34254CC"><enum>(3)</enum><header>Special rule for individuals subject to Federal hours of service</header><text>In the case of any expenses for food or beverages consumed while away from home (within the meaning of section 162(a)(2)) by an individual during, or incident to, the period of duty subject to the hours of service limitations of the Department of Transportation, paragraph (1) shall be applied by substituting <quote>80 percent</quote> for <quote>50 percent</quote>.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="HAACB1306BB1C452D86C9212B603D1C4C"><enum>(e)</enum><header>Conforming amendments</header> <paragraph commented="no" id="H7EC2950CCC5E44C488A8A93BB030ABE7"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/274">Section 274(d)</external-xref> is amended—</text> <subparagraph commented="no" id="H0CF3AE81FFA74BBFB109BB43D5F0B88C"><enum>(A)</enum><text>by striking paragraph (2) and redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively, and</text> </subparagraph><subparagraph commented="no" id="H7890B91368B44F0E9E07C82A99E40718"><enum>(B)</enum><text>in the flush material following paragraph (3) (as so redesignated)—</text> <clause commented="no" id="HF9A2AA78DA914A59870F93DB3FD5C39E"><enum>(i)</enum><text>by striking <quote>, entertainment, amusement, recreation, or</quote> in item (B), and</text> </clause><clause commented="no" id="H4B6BD45F3718401E95DED1A9F67F296D"><enum>(ii)</enum><text>by striking <quote>(D) the business relationship to the taxpayer of persons entertained, using the facility or property, or receiving the gift</quote> and inserting <quote>(D) the business relationship to the taxpayer of the person receiving the benefit</quote>.</text> </clause></subparagraph></paragraph><paragraph commented="no" id="H17AE6352167A4C62B37F910E5346FC32"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/274">Section 274(e)</external-xref> is amended by striking paragraph (4) and redesignating paragraphs (5), (6), (7), (8), and (9) as paragraphs (4), (5), (6), (7), and (8), respectively.</text> </paragraph><paragraph commented="no" id="H185FB8DF805640ABB658A26B2375732A"><enum>(3)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/274">Section 274(k)(2)(A)</external-xref> is amended by striking <quote>(4), (7), (8), or (9)</quote> and inserting <quote>(6), (7), or (8)</quote>.</text> </paragraph><paragraph commented="no" id="HE815AE8ACCF94EC7B0B7DFAABC203793"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/274">Section 274</external-xref> is amended by striking subsection (l).</text> </paragraph><paragraph commented="no" id="HBADAA9E501334313BAB7DF38111EBA91"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/274">Section 274(m)(1)(B)(ii)</external-xref> is amended by striking <quote>(4), (7), (8), or (9)</quote> and inserting <quote>(6), (7), or (8)</quote>.</text> </paragraph></subsection><subsection commented="no" id="HE52B1BC53F264534AEEAAE30FC04902E"><enum>(f)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred after December 31, 2017.</text> </subsection></section><section commented="no" id="HFBF3011455AA40E2B66DBD85AECD0B15"><enum>3308.</enum><header>Unrelated business taxable income increased by amount of certain fringe benefit expenses for which deduction is disallowed</header> <subsection commented="no" id="H9DB40A9AED924B96AF20935A1B844DFA"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/512">Section 512(a)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HE4CAAD2BD56A4C6EA089036F989186EC" style="OLC"> <paragraph commented="no" id="H3826628C1F9D414F9FD79963AFA06F15"><enum>(6)</enum><header>Increase in unrelated business taxable income by disallowed fringe</header><text display-inline="yes-display-inline">Unrelated business taxable income of an organization shall be increased by any amount for which a deduction is not allowable under this chapter by reason of section 274 and which is paid or incurred by such organization for any qualified transportation fringe (as defined in section 132(f)), any parking facility used in connection with qualified parking (as defined in section 132(f)(5)(C)), or any on-premises athletic facility (as defined in section 132(j)(4)(B)). The preceding sentence shall not apply to the extent the amount paid or incurred is directly connected with an unrelated trade or business which is regularly carried on by the organization. The Secretary may issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this paragraph, including regulations or other guidance providing for the appropriate allocation of depreciation and other costs with respect to facilities used for parking or for on-premises athletic facilities.</text> <continuation-text commented="no" continuation-text-level="paragraph"></continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="HD295E9069A554A8B8ED1CF6C981BF7C7"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to amounts paid or incurred after December 31, 2017.</text> </subsection></section><section id="HB72C8FF6F00148B9967578DC5D2B2C73"><enum>3309.</enum><header>Limitation on deduction for FDIC premiums</header> <subsection id="HF76E04B2AA7447F4A3F5B5143714A9FB"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/162">Section 162</external-xref> is amended by redesignating subsection (q) as subsection (r) and by inserting after subsection (p) the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H45035DE35C574825833A22A5F896B1D7" style="OLC"> <subsection id="H46905F5B653E42C48C37671BD858BF3E"><enum>(q)</enum><header>Disallowance of FDIC premiums paid by certain large financial institutions</header> <paragraph id="HEB952C59358240D99F392A2FB8DDC265"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">No deduction shall be allowed for the applicable percentage of any FDIC premium paid or incurred by the taxpayer.</text> </paragraph><paragraph id="H99F4C2A70BAB47C39D644F6FE173CD39"><enum>(2)</enum><header>Exception for small institutions</header><text display-inline="yes-display-inline">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.</text> </paragraph><paragraph id="H7053D1346F6B4D67B32D4A33C756DC21"><enum>(3)</enum><header>Applicable percentage</header><text>For purposes of this subsection, the term <quote>applicable percentage</quote> means, with respect to any taxpayer for any taxable year, the ratio (expressed as a percentage but not greater than 100 percent) which—</text> <subparagraph id="H7FDDAB45A6784057983B0CB1AC290035"><enum>(A)</enum><text>the excess of—</text> <clause id="H15133A02A1CA4064923BDFC875798480"><enum>(i)</enum><text>the total consolidated assets of such taxpayer (determined as of the close of such taxable year), over</text> </clause><clause id="H9CDAB363C58B4D9B9BC7903104A8B18A"><enum>(ii)</enum><text>$10,000,000,000, bears to</text> </clause></subparagraph><subparagraph id="H3011406620E64D7598B454F3FA1EA081"><enum>(B)</enum><text>$40,000,000,000.</text> </subparagraph></paragraph><paragraph id="HC73126A129194D63B374900535D11311"><enum>(4)</enum><header>FDIC premiums</header><text>For purposes of this subsection, the term <quote>FDIC premium</quote> means any assessment imposed under section 7(b) of the Federal Deposit Insurance Act (<external-xref legal-doc="usc" parsable-cite="usc/12/1817">12 U.S.C. 1817(b)</external-xref>).</text> </paragraph><paragraph id="H6B307A068B36446F9927A459CFFF95E6"><enum>(5)</enum><header>Total consolidated assets</header><text>For purposes of this subsection, the term <quote>total consolidated assets</quote> has the meaning given such term under section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (<external-xref legal-doc="usc" parsable-cite="usc/12/5365">12 U.S.C. 5365</external-xref>).</text> </paragraph><paragraph id="H62C3B2E106B8476FA0C0FE2291494998"><enum>(6)</enum><header>Aggregation rule</header> <subparagraph id="HD7A3E792D7A54627A9AE0B36C18A29FC"><enum>(A)</enum><header>In general</header><text>Members of an expanded affiliated group shall be treated as a single taxpayer for purposes of applying this subsection.</text> </subparagraph><subparagraph id="H5E9DA6756EFA4C91AB36A6E1990CDDFC"><enum>(B)</enum><header>Expanded affiliated group</header><text display-inline="yes-display-inline">For purposes of this paragraph, the term <quote>expanded affiliated group</quote> means an affiliated group as defined in section 1504(a), determined—</text> <clause id="H36D35A899A5B4F699FFB6884050F9D2D"><enum>(i)</enum><text>by substituting <quote>more than 50 percent</quote> for <quote>at least 80 percent</quote> each place it appears, and</text> </clause><clause id="H05C8CA629E1C449E80BEFD5D5E368C66"><enum>(ii)</enum><text display-inline="yes-display-inline">without regard to paragraphs (2) and (3) of section 1504(b).</text> </clause><continuation-text continuation-text-level="subparagraph">A partnership or any other entity (other than a corporation) shall be treated as a member of an expanded affiliated group if such entity is controlled (within the meaning of section 954(d)(3)) by members of such group (including any entity treated as a member of such group by reason of this sentence).</continuation-text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HE2F71DCEA4E3496AB335F90E6F144C7A"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H6D109C7C47A74C9F8140511C9FEC8224"><enum>3310.</enum><header>Repeal of rollover of publicly traded securities gain into specialized small business investment companies</header> <subsection id="HE64D332B48794008BACAA287A7A32211"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part III of subchapter O of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 1044 (and by striking the item relating to such section in the table of sections of such part).</text> </subsection><subsection id="HB3FEB42892EA42CEB85E4C2A9C6CF302"><enum>(b)</enum><header>Conforming amendments</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1016">Section 1016(a)(23)</external-xref> is amended—</text> <paragraph id="H684648A8B85349E4B196181CC9567868"><enum>(1)</enum><text>by striking <quote>1044,</quote>, and</text> </paragraph><paragraph id="HDE39F026A3D4405DABD00CE7F41AD61E"><enum>(2)</enum><text>by striking <quote>1044(d),</quote>.</text> </paragraph></subsection><subsection id="H0F73EABD18BE4F52B9B2693407B8953B"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to sales after December 31, 2017.</text> </subsection></section><section id="H443F3F72D7CE457BBBAFADA2015CC455"><enum>3311.</enum><header>Certain self-created property not treated as a capital asset</header> <subsection id="H8CAB3646D9B442F88F69FDE3A5AE43E8"><enum>(a)</enum><header>Patents, etc</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/1221">Section 1221(a)(3)</external-xref> is amended by inserting <quote>a patent, invention, model or design (whether or not patented), a secret formula or process,</quote> before <quote>a copyright</quote>.</text> </subsection><subsection id="HAC14D799E4114E4E9211F75256665AE3"><enum>(b)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/1231">Section 1231(b)(1)(C)</external-xref> is amended by inserting <quote>a patent, invention, model or design (whether or not patented), a secret formula or process,</quote> before <quote>a copyright</quote>.</text> </subsection><subsection id="HDABFC87555E642D6BFA7A2E3D5BD4AB7"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to dispositions after December 31, 2017.</text> </subsection></section><section id="H99C5D10B0C114574AAC4D15D09B0080F"><enum>3312.</enum><header>Repeal of special rule for sale or exchange of patents</header> <subsection id="HC5E794EB45DF4E7480F807002834B426"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part IV of subchapter P of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 1235 (and by striking the item relating to such section in the table of sections of such part).</text> </subsection><subsection id="H7063E47A65134D9F86C93B23B9E7EEEC"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="HBD1F2BC738A8402F94358E3B1A65601B"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/483">Section 483(d)</external-xref> is amended by striking paragraph (4).</text> </paragraph><paragraph id="HDEAE1CDA57EC4937B4158AE8F005A146"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/901">Section 901(l)(5)</external-xref> is amended by striking <quote>without regard to section 1235 or any similar rule</quote> and inserting <quote>without regard to any provision which treats a disposition as a sale or exchange of a capital asset held for more than 1 year or any similar provision</quote>.</text> </paragraph><paragraph id="H618D2FECD39F4FFCB36329E830C0DCB2"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1274">Section 1274(c)(3)</external-xref> is amended by striking subparagraph (E) and redesignating subparagraph (F) as subparagraph (E).</text> </paragraph></subsection><subsection id="HCB5FDAC5545C4C8096E23F6629A69F40"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to dispositions after December 31, 2017.</text> </subsection></section><section id="H098F0C5A4FF84F7C9158D775FC095693"><enum>3313.</enum><header>Repeal of technical termination of partnerships</header> <subsection id="H94FEC30201F6490FB24BD19A1F732F21"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/708">section 708(b)</external-xref> is amended—</text> <paragraph id="HC26F6E0E8A634B5EAFDC9B9B50084EC9"><enum>(1)</enum><text>by striking <quote>, or</quote> at the end of subparagraph (A) and all that follows and inserting a period, and</text> </paragraph><paragraph id="HBA6BBB5E8C214BBB91DEDCD3006415C6"><enum>(2)</enum><text>by striking <quote>only if—</quote> and all that follows through <quote>no part of any business</quote> and inserting the following: <quote>only if no part of any business</quote>.</text> </paragraph></subsection><subsection id="H9F3F18F16F034CA083F00219A09C35E4"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to partnership taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H10F69CD5A0C845EB88357A193D1E42FB"><enum>3314.</enum><header>Recharacterization of certain gains in the case of partnership profits interests held in connection with performance of investment services</header> <subsection id="H0F8D70E0B4154CD4BDB7355381A32ADA"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part IV of subchapter O of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended—</text> <paragraph id="H2B78BBB7C0BA41FC97289F4267077FD6"><enum>(1)</enum><text>by redesignating section 1061 as section 1062, and</text> </paragraph><paragraph id="H97E17D7922124838876D5ACEE57DDC2E"><enum>(2)</enum><text>by inserting after section 1060 the following new section:</text> <quoted-block display-inline="no-display-inline" id="HF0AE921227DE4857ADB69D9EF6124DFA" style="OLC"> <section id="H6F18C3663B88443992D92DBE7B60A945"><enum>1061.</enum><header>Partnership interests held in connection with performance of services</header> <subsection id="H1869167BBB3A4833A91BCB61CCF42E2C"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">If one or more applicable partnership interests are held by a taxpayer at any time during the taxable year, the excess (if any) of—</text> <paragraph id="HF2CD1BCCD0A64A63B5BFD3B8EF370860"><enum>(1)</enum><text>the taxpayer’s net long-term capital gain with respect to such interests for such taxable year, over</text> </paragraph><paragraph id="HF437DD0E3AB448D7A5E7492BEBCB02F8"><enum>(2)</enum><text>the taxpayer’s net long-term capital gain with respect to such interests for such taxable year computed by applying paragraphs (3) and (4) of sections 1222 by substituting <quote>3 years</quote> for <quote>1 year</quote>,</text> </paragraph><continuation-text continuation-text-level="subsection">shall be treated as short-term capital gain.</continuation-text></subsection><subsection id="H6488746394A1486BADF8037E7AE532C6"><enum>(b)</enum><header>Special rule</header><text>To the extent provided by the Secretary, subsection (a) shall not apply to income or gain attributable to any asset not held for portfolio investment on behalf of third party investors.</text> </subsection><subsection id="H148FDEE63E714162B6D3AE11EAE719B8"><enum>(c)</enum><header>Applicable partnership interest</header><text display-inline="yes-display-inline">For purposes of this section—</text> <paragraph id="HA2D0CFEC28D94CDEB31F8E9CB75169B8"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except as provided in this paragraph or paragraph (4), the term <quote>applicable partnership interest</quote> means any interest in a partnership which, directly or indirectly, is transferred to (or is held by) the taxpayer in connection with the performance of substantial services by the taxpayer, or any other related person, in any applicable trade or business. The previous sentence shall not apply to an interest held by a person who is employed by another entity that is conducting a trade or business (other than an applicable trade or business) and only provides services to such other entity.</text> </paragraph><paragraph id="H506442A045F74ED48A0B5363732C969F"><enum>(2)</enum><header>Applicable trade or business</header><text display-inline="yes-display-inline">The term <quote>applicable trade or business</quote> means any activity conducted on a regular, continuous, and substantial basis which, regardless of whether the activity is conducted in one or more entities, consists, in whole or in part, of—</text> <subparagraph id="HD4CD501EE5B74DD19D0915684EFAEC7A"><enum>(A)</enum><text>raising or returning capital, and</text> </subparagraph><subparagraph id="H1784E0AFCFE64637814A1DD8136F0F1E"><enum>(B)</enum><text>either—</text> <clause id="H3DC2D1D6082D4D21B74DA4B4544055F1"><enum>(i)</enum><text>investing in (or disposing of) specified assets (or identifying specified assets for such investing or disposition), or</text> </clause><clause id="HBA204AFC3AA24590A6AF624CDAF8AE7F"><enum>(ii)</enum><text>developing specified assets.</text> </clause></subparagraph></paragraph><paragraph id="HD849A879871F41DAAE6DFF5B9628F055"><enum>(3)</enum><header>Specified asset</header><text>The term <quote>specified asset</quote> means securities (as defined in section 475(c)(2) without regard to the last sentence thereof), commodities (as defined in section 475(e)(2)), real estate held for rental or investment, cash or cash equivalents, options or derivative contracts with respect to any of the foregoing, and an interest in a partnership to the extent of the partnership’s proportionate interest in any of the foregoing.</text> </paragraph><paragraph id="H36954F07BFFD4065B16DFBCBFC00CB93"><enum>(4)</enum><header>Exceptions</header><text>The term <quote>applicable partnership interest</quote> shall not include—</text> <subparagraph id="H26D35923EA194A21838ADB61CCA44A49"><enum>(A)</enum><text>any interest in a partnership directly or indirectly held by a corporation, or</text> </subparagraph><subparagraph id="H3A0CB0000FC74340AA82C52781B57AF1"><enum>(B)</enum><text>any capital interest in the partnership which provides the taxpayer with a right to share in partnership capital commensurate with—</text> <clause id="H35E3C77F24E149C6942C941A8E3EA50C"><enum>(i)</enum><text>the amount of capital contributed (determined at the time of receipt of such partnership interest), or</text> </clause><clause id="HA190FFCD537E47C3B35D110E404884D9"><enum>(ii)</enum><text>the value of such interest subject to tax under section 83 upon the receipt or vesting of such interest.</text> </clause></subparagraph></paragraph><paragraph id="H63E705219E174764AADD4F4958181D94"><enum>(5)</enum><header>Third party investor</header><text>The term <quote>third party investor</quote> means a person who—</text> <subparagraph id="H66F257B9C3AB4946B72DD3B44587984D"><enum>(A)</enum><text>holds an interest in the partnership which does not constitute property held in connection with an applicable trade or business; and</text> </subparagraph><subparagraph id="H64A36D2364114A5492E93648556FCFEB"><enum>(B)</enum><text>is not (and has not been) actively engaged, and is (and was) not related to a person so engaged, in (directly or indirectly) providing substantial services described in paragraph (1) for such partnership or any applicable trade or business.</text> </subparagraph></paragraph></subsection><subsection id="H7B6B22CFF4AA4137B075B7A6887825DC"><enum>(d)</enum><header>Transfer of applicable partnership interest to related person</header> <paragraph id="HEAAC20E21DA24D65A9DA11672DAF46F0"><enum>(1)</enum><header>In general</header><text>If a taxpayer transfers any applicable partnership interest, directly or indirectly, to a person related to the taxpayer, the taxpayer shall include in gross income (as short term capital gain) the excess (if any) of—</text> <subparagraph id="H821ECA2DD74A4539A166728B82AF4A11"><enum>(A)</enum><text>so much of the taxpayer’s long-term capital gains with respect to such interest for such taxable year attributable to the sale or exchange of any asset held for not more than 3 years as is allocable to such interest, over</text> </subparagraph><subparagraph id="H1150356ACC3444C7A58B751BAC99AF70"><enum>(B)</enum><text>any amount treated as short term capital gain under subsection (a) with respect to the transfer of such interest.</text> </subparagraph></paragraph><paragraph id="H6F9B9D6AB91149A0BF6B8820271EEAF9"><enum>(2)</enum><header>Related person</header><text>For purposes of this paragraph, a person is related to the taxpayer if—</text> <subparagraph id="HC48014592A1246779155D86929F80948"><enum>(A)</enum><text>the person is a member of the taxpayer’s family within the meaning of section 318(a)(1), or</text> </subparagraph><subparagraph id="H4E462A4B99F44410AF3CD0ACB4B1224F"><enum>(B)</enum><text>the person performed a service within the current calendar year or the preceding three calendar years in any applicable trade or business in which or for which the taxpayer performed a service.</text> </subparagraph></paragraph></subsection><subsection id="H8647A4DC88364FDAB84AE58397D4B076"><enum>(e)</enum><header>Reporting</header><text>The Secretary shall require such reporting (at the time and in the manner prescribed by the Secretary) as is necessary to carry out the purposes of this section.</text> </subsection><subsection id="H3D4BB90431EF47CDB7E49D10E605AF6B"><enum>(f)</enum><header>Regulations</header><text>The Secretary shall issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this section</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H73868EBDAF4247608660BE7C52C687A4"><enum>(b)</enum><header>Coordination with section 83</header><text display-inline="yes-display-inline">Subsection (e) of <external-xref legal-doc="usc" parsable-cite="usc/26/83">section 83</external-xref> is amended by striking <quote>or</quote> at the end of paragraph (4), by striking the period at the end of paragraph (5) and inserting <quote>, or</quote>, and by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HA7F1C05A4C544096AC6C8D1C0541500A" style="OLC"> <paragraph id="H1BC6DA23E3AD407F80675EDB088317F6"><enum>(6)</enum><text display-inline="yes-display-inline">a transfer of an applicable partnership interest to which section 1061 applies.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H3D566C82B5524952B410445C81615681"><enum>(c)</enum><header>Clerical amendment</header><text display-inline="yes-display-inline">The table of sections for part IV of subchapter O of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking the item relating to 1061 and inserting the following new items:</text> <quoted-block display-inline="no-display-inline" id="HF6E7CF61687A4201A3DFDAA686F7D234" style="OLC"> <toc container-level="quoted-block-container" idref="HF0AE921227DE4857ADB69D9EF6124DFA" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration"> <toc-entry idref="H6F18C3663B88443992D92DBE7B60A945" level="section">Sec. 1061. Partnership interests held in connection with performance of services.</toc-entry> <toc-entry level="section">Sec. 1062. Cross references.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H4EF74592D04A4728906568E92C8565C2"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H057E49B330114FC0A4DD78F34EB2EB00"><enum>3315.</enum><header>Amortization of research and experimental expenditures</header> <subsection id="H5BC320BE833340E3A6F6FE2D1FAE2D25"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/174">Section 174</external-xref> is amended to read as follows:</text> <quoted-block id="H53E218E9038F4251A6D2B623C9C13E8F" style="OLC"> <section id="H1F4E3182E7004D6BB532F4E7CF2E4894"><enum>174.</enum><header>Amortization of research and experimental expenditures</header> <subsection id="HF86EC90922C64F1E9AC01A229EB4C510"><enum>(a)</enum><header>In general</header><text>In the case of a taxpayer’s specified research or experimental expenditures for any taxable year—</text> <paragraph id="HC604BDCE51BC4BAEA011937EC46F81CD"><enum>(1)</enum><text>except as provided in paragraph (2), no deduction shall be allowed for such expenditures, and</text> </paragraph><paragraph id="HAE731BCFE50342F6A148909532A834E0"><enum>(2)</enum><text>the taxpayer shall—</text> <subparagraph id="H3780B7F86210476790A340FBF8CE3165"><enum>(A)</enum><text>charge such expenditures to capital account, and</text> </subparagraph><subparagraph id="H150449F421674BA78EF72FFF2752B836"><enum>(B)</enum><text>be allowed an amortization deduction of such expenditures ratably over the 5-year period (15-year period in the case of any specified research or experimental expenditures which are attributable to foreign research (within the meaning of section 41(d)(4)(F))) beginning with the midpoint of the taxable year in which such expenditures are paid or incurred.</text> </subparagraph></paragraph></subsection><subsection id="HC6292774C17A456C84478FE2947A1BF0"><enum>(b)</enum><header>Specified research or experimental expenditures</header><text>For purposes of this section, the term <quote>specified research or experimental expenditures</quote> means, with respect to any taxable year, research or experimental expenditures which are paid or incurred by the taxpayer during such taxable year in connection with the taxpayer’s trade or business.</text> </subsection><subsection id="H0F1913F8C7A945748A100DBC31E73FA8"><enum>(c)</enum><header>Special rules</header> <paragraph id="HBE0F6742B53E43D19937C6965964F8AA"><enum>(1)</enum><header>Land and other property</header><text>This section shall not apply to any expenditure for the acquisition or improvement of land, or for the acquisition or improvement of property to be used in connection with the research or experimentation and of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc.) or section 611 (relating to allowance for depletion); but for purposes of this section allowances under section 167, and allowances under section 611, shall be considered as expenditures.</text> </paragraph><paragraph id="H888FF8EF45DD447B8C13C888E70689D8"><enum>(2)</enum><header>Exploration expenditures</header><text>This section shall not apply to any expenditure paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral (including oil and gas).</text> </paragraph><paragraph id="H74B6BF1BCF5149B79C74D33E163705FE"><enum>(3)</enum><header>Software development</header><text>For purposes of this section, any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure.</text> </paragraph></subsection><subsection id="HFC1C2CFE90934AA3B3374D5D4BBE24F7"><enum>(d)</enum><header>Treatment upon disposition, retirement, or abandonment</header><text>If any property with respect to which specified research or experimental expenditures are paid or incurred is disposed, retired, or abandoned during the period during which such expenditures are allowed as an amortization deduction under this section, no deduction shall be allowed with respect to such expenditures on account of such disposition, retirement, or abandonment and such amortization deduction shall continue with respect to such expenditures.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H1E6FA563AB5941E396A5840712D604DE"><enum>(b)</enum><header>Clerical amendment</header><text>The table of sections for part VI of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking the item relating to section 174 and inserting the following new item:</text> <quoted-block display-inline="no-display-inline" id="H25BF8A735C974A50BDD2A4FACB71A9D6" style="OLC"> <toc regeneration="no-regeneration"> <toc-entry level="section">Sec. 174. Amortization of research and experimental expenditures.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H54CEE8675D94424996488CC5CFF47533"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2022.</text> </subsection></section><section id="H6F5A88CF2D2C456694594FD7E0B3FFB6"><enum>3316.</enum><header>Uniform treatment of expenses in contingency fee cases</header> <subsection id="H0389BA07594C426CA8B29BAA834EE511"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/162">Section 162</external-xref>, as amended by the preceding provisions of this Act, is amended by redesignating subsection (r) as subsection (s) and by inserting after subsection (q) the following new subsection:</text> <quoted-block id="H733FB7B34E7E4C5CB6C9C4020BD8B2C8" style="OLC"> <subsection id="H66E9011F0FF74AC991ED93D5067F7031"><enum>(r)</enum><header>Expenses in contingency fee cases</header><text>No deduction shall be allowed under subsection (a) to a taxpayer for any expense—</text> <paragraph id="HAA12453476CD498EB472EF84C7B662ED"><enum>(1)</enum><text>paid or incurred in the course of the trade or business of practicing law, and</text> </paragraph><paragraph id="H4D96B4525714441BA31776BE937F4B64"><enum>(2)</enum><text display-inline="yes-display-inline">resulting from a case for which the taxpayer is compensated primarily on a contingent basis,</text> </paragraph><continuation-text continuation-text-level="subsection">until such time as such contingency is resolved.</continuation-text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H4B1620E8E3AF47678868090F4D8AA772"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to expenses and costs paid or incurred in taxable years beginning after the date of the enactment of this Act.</text> </subsection></section></subtitle><subtitle id="HC10AE33F57894220865C444C982D9263"><enum>E</enum><header>Reform of business credits</header> <section id="H447447AEA34442BAA2BB9A86BEC4112A"><enum>3401.</enum><header>Repeal of credit for clinical testing expenses for certain drugs for rare diseases or conditions</header> <subsection id="HE0ADE3B001D947B9BCF7E988625A690B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 45C (and by striking the item relating to such section in the table of sections for such subpart).</text> </subsection><subsection id="HC5625A2874D64495A6C1CEF8BC089D09"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="H17C7E135DF3846CFA413962032860780"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/38">Section 38(b)</external-xref> is amended by striking paragraph (12).</text> </paragraph><paragraph id="H4380EEA11B674F6F955C900B03BE4356"><enum>(2)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/280C">Section 280C</external-xref> is amended by striking subsection (b).</text> </paragraph><paragraph id="H64C07E9A999A4988917DBD938F8FAF5D"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6501">Section 6501(m)</external-xref> is amended by striking <quote>45C(d)(4),</quote>.</text> </paragraph></subsection><subsection id="H46E9BFC125464788A1E07FF08F8D5E0D"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H81387AA3B6234AA39E7CFCFD3A9B980E"><enum>3402.</enum><header>Repeal of employer-provided child care credit</header> <subsection id="H0539845E9FA149188B4BF0AAF49D877B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 45F (and by striking the item relating to such section in the table of sections for such subpart).</text> </subsection><subsection id="H2668D01C854C49C7B18D3B372AEEBF38"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="HB8F83851456E48A4B3BC1D66BD1A48A5"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/38">Section 38(b)</external-xref> is amended by striking paragraph (15).</text> </paragraph><paragraph id="H2F834DBC95294FA8B1DA21BCF1669267"><enum>(2)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/1016">Section 1016(a)</external-xref> is amended by striking paragraph (28).</text> </paragraph></subsection><subsection id="HD95A008DD962418BA26402153A7FAB2A"><enum>(c)</enum><header>Effective date</header> <paragraph id="HDF6DF90DEE194739A77DF884CE9FCFE0"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </paragraph><paragraph id="H692B793DDF11472B94F67B6052F1910B"><enum>(2)</enum><header>Basis adjustments</header><text>The amendment made by subsection (b)(2) shall apply to credits determined for taxable years beginning after December 31, 2017.</text> </paragraph></subsection></section><section id="HD68484D5161F4876BB0D0F0268F9570B"><enum>3403.</enum><header>Repeal of rehabilitation credit</header> <subsection id="H0D2E1CFD78E24B4A80784D2DCA86CB2D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart E of part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 47 (and by striking the item relating to such section in the table of sections for such subpart).</text> </subsection><subsection id="H7AC482BE0BDF4497B2A7DBE602228FB1"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="H51AD20D66FAE41E1BA606037F5F14CBE"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/170">Section 170(f)(14)(A)</external-xref> is amended by inserting <quote>(as in effect before its repeal by the <short-title>Tax Cuts and Jobs Act</short-title>)</quote> after <quote>section 47</quote>.</text> </paragraph><paragraph id="H6D7DE90FA8834F91A57D95561CCF42D1"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/170">Section 170(h)(4)</external-xref> is amended—</text> <subparagraph id="H01BF5E4AF0034752B15D1A11BA0EC461"><enum>(A)</enum><text>by striking <quote>(as defined in section 47(c)(3)(B))</quote> in subparagraph (C)(ii), and</text> </subparagraph><subparagraph id="HC1ABE09638844F52BD6FE34F4953F5F5"><enum>(B)</enum><text>by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="HA36A07E1261044D69E5234FC0F734D83" style="OLC"> <subparagraph id="HCCE8172F06474C81B32E420F80B8185E"><enum>(D)</enum><header>Registered historic district</header><text display-inline="yes-display-inline">The term <quote>registered historic district</quote> means—</text> <clause id="HC3189950BB144236ADEA854D78961FBF"><enum>(i)</enum><text>any district listed in the National Register, and</text> </clause><clause id="HBBCF0B0853134DF9A37DB5AD883BE8A9"><enum>(ii)</enum><text>any district—</text> <subclause id="H252969425F29497BA7F49500117CA247"><enum>(I)</enum><text>which is designated under a statute of the appropriate State or local government, if such statute is certified by the Secretary of the Interior to the Secretary as containing criteria which will substantially achieve the purpose of preserving and rehabilitating buildings of historic significance to the district, and</text> </subclause><subclause id="HE068F201F8D24791B0D1F0BB794F8FCB"><enum>(II)</enum><text>which is certified by the Secretary of the Interior to the Secretary as meeting substantially all of the requirements for the listing of districts in the National Register.</text></subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph><paragraph id="HD333D702E45A45F1A00B5F60250CA07F"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/469">Section 469(i)(3)</external-xref> is amended by striking subparagraph (B).</text> </paragraph><paragraph id="HB731FB0B3A0641C6A9FA23232E98D035"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/469">Section 469(i)(6)(B)</external-xref> is amended—</text> <subparagraph id="HB4656E1A301E4DDAB157F4708E3447EB"><enum>(A)</enum><text>by striking <quote>in the case of—</quote> and all that follows and inserting <quote>in the case of any credit determined under section 42 for any taxable year.</quote>, and</text> </subparagraph><subparagraph id="H2A7F6A07923F4C3FBB2466860030A7AB"><enum>(B)</enum><text>by striking <quote><header-in-text level="subparagraph" style="OLC">, rehabilitation credit,</header-in-text></quote> in the heading thereof.</text> </subparagraph></paragraph><paragraph id="HD2B1B154BA96471AA9B0CA938F48567A"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/469">Section 469(k)(1)</external-xref> is amended by striking <quote>, or any rehabilitation credit determined under section 47,</quote>.</text> </paragraph></subsection><subsection id="H08FBC4EAD1A34C21B004A3202D99BD1D"><enum>(c)</enum><header>Effective date</header> <paragraph id="H034A5EB7B9CF4B89B11482BD8B71FA39"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraph (2), the amendments made by this section shall apply to amounts paid or incurred after December 31, 2017.</text> </paragraph><paragraph id="HAD3787F7D601461B9A8DEC0456613695"><enum>(2)</enum><header>Transition rule</header><text display-inline="yes-display-inline">In the case of qualified rehabilitation expenditures (within the meaning of <external-xref legal-doc="usc" parsable-cite="usc/26/47">section 47</external-xref> of the Internal Revenue Code of 1986 as in effect before its repeal) with respect to any building—</text> <subparagraph id="H89754E8C1A8046E0B642B60593D24E79"><enum>(A)</enum><text display-inline="yes-display-inline">owned or leased (as permitted by <external-xref legal-doc="usc" parsable-cite="usc/26/47">section 47</external-xref> of the Internal Revenue Code of 1986 as in effect before its repeal) by the taxpayer at all times after December 31, 2017, and</text> </subparagraph><subparagraph id="HDE15B1B2993D4A06996627D1594446F6"><enum>(B)</enum><text>with respect to which the 24-month period selected by the taxpayer under section 47(c)(1)(C) of such Code begins not later than the end of the 180-day period beginning on the date of the enactment of this Act,</text> </subparagraph><continuation-text continuation-text-level="paragraph">the amendments made by this section shall apply to such expenditures paid or incurred after the end of the taxable year in which the 24-month period referred to in subparagraph (B) ends.</continuation-text></paragraph></subsection></section><section id="HB670C95593564BEE9275C8B9B909A89C"><enum>3404.</enum><header>Repeal of work opportunity tax credit</header> <subsection id="H9A809EE3D8DD4543BD1D0CFDC2013DB3"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart F of part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 51 (and by striking the item relating to such section in the table of sections for such subpart).</text> </subsection><subsection id="H0C28ADC4B7C14DFABA6270FD859479AF"><enum>(b)</enum><header>Clerical amendment</header><text>The heading of such subpart F (and the item relating to such subpart in the table of subparts for part IV of subchapter A of chapter 1) are each amended by striking <quote>Rules for Computing Work Opportunity Credit</quote> and inserting <quote>Special Rules</quote>.</text> </subsection><subsection id="HA59325BA353640AA8DD20F47215AF09E"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred to individuals who begin work for the employer after December 31, 2017.</text> </subsection></section><section id="H72C019046C604521A16F3252B905DF6D"><enum>3405.</enum><header>Repeal of deduction for certain unused business credits</header> <subsection id="H31F46489358F48B59998B30A51D16DA6"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VI of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 196 (and by striking the item relating to such section in the table of sections for such part).</text> </subsection><subsection id="H4CA0528F217243D3BDACF3F3098E0A59"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section commented="no" id="HF6BB373CFCA24EF8B3DA34D9E8B12C10"><enum>3406.</enum><header>Termination of new markets tax credit</header> <subsection id="HA074F397D8EC4B02A46DF53B7A2B61AF"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/45D">Section 45D(f)</external-xref> is amended—</text> <paragraph id="HBA8E7D350BF24A6B9018D7E80C25278A"><enum>(1)</enum><text>by striking <quote>2019</quote> in paragraph (1)(G) and inserting <quote>2017</quote>, and</text> </paragraph><paragraph id="HAAB8BC2876DB455CAA04F74202179CD0"><enum>(2)</enum><text>by striking <quote>2024</quote> in paragraph (3) and inserting <quote>2022</quote>.</text> </paragraph></subsection><subsection id="H00DE5A2BD3444FFEAA03B9D83BDBFF61"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to calendar years beginning after December 31, 2017.</text> </subsection></section><section commented="no" id="H6F5C81F70B3A4F8281C7313E03410EDD"><enum>3407.</enum><header>Repeal of credit for expenditures to provide access to disabled individuals</header> <subsection id="H30877A32AB1B4ABF8ADF78921D148D2B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 44 (and by striking the item relating to such section in the table of sections for such subpart).</text> </subsection><subsection id="HC2DC095B316F426EAAE0B74A92DFE22E"><enum>(b)</enum><header>Conforming amendment</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/38">Section 38(b)</external-xref> is amended by striking paragraph (7).</text> </subsection><subsection id="HDC01DD71E0504DDCBCC6C28DC697A170"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H148DE800B0904966AE9E098A51A42D24"><enum>3408.</enum><header>Modification of credit for portion of employer social security taxes paid with respect to employee tips</header> <subsection id="H559382558E0F4BD3B0BB2EC1DAE90D5E"><enum>(a)</enum><header>Credit determined with respect to minimum wage as in effect</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/45B">Section 45B(b)(1)(B)</external-xref> is amended by striking <quote>as in effect on January 1, 2007, and</quote>.</text> </subsection><subsection id="H6FE4EC6948D54502A00A3E3E3E8FF02B"><enum>(b)</enum><header>Information return requirement</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/45B">Section 45B</external-xref> is amended by redesignating subsections (c) and (d) as subsections (d) and (e), respectively, and by inserting after subsection (b) the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H5555951F596F424EA608868E168BD60B" style="OLC"> <subsection id="H6E2F880BEC4C4F0FA96AEE56167EB6AA"><enum>(c)</enum><header>Information return requirement</header> <paragraph id="H61C0C9F742754A72861C078219A363E3"><enum>(1)</enum><header>In general</header><text>No credit shall be determined under subsection (a) with respect to any food or beverage establishment of any taxpayer for any taxable year unless such taxpayer has, with respect to the calendar year which ends in or with such taxable year—</text> <subparagraph id="H7797E087A73D4861B0DD24955CD647A5"><enum>(A)</enum><text>made a report to the Secretary showing the information described in section 6053(c)(1) with respect to such food or beverage establishment, and</text> </subparagraph><subparagraph id="H8297DEECA1C84FC1A6E4AD5E26370209"><enum>(B)</enum><text>furnished written statements to each employee of such food or beverage establishment showing the information described in section 6053(c)(2).</text> </subparagraph></paragraph><paragraph id="H7532338B3DEF4E49976112A9FE55588B"><enum>(2)</enum><header>Allocation of 10 percent of gross receipts</header><text>For purposes of determining the information referred to in subparagraphs (A) and (B), section 6053(c)(3)(A)(i) shall be applied by substituting <quote>10 percent</quote> for <quote>8 percent</quote>. For purposes of section 6053(c)(5), any reference to section 6053(c)(3)(B) contained therein shall be treated as including a reference to this paragraph.</text> </paragraph><paragraph id="H9E52CA9BCFA14AE080BA16D44B036EED"><enum>(3)</enum><header>Food or beverage establishment</header><text>For purposes of this subsection, the term <quote>food or beverage establishment</quote> means any trade or business (or portion thereof) which would be a large food or beverage establishment (as defined in section 6053(c)(4)) if such section were applied without regard to subparagraph (C) thereof.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H3F01F8ECBBA64A578FA35B7B312B169D"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section></subtitle><subtitle commented="no" id="HCCC561126AF041B9B626CA47E12B437B"><enum>F</enum><header>Energy credits</header> <section id="H12D17877E2184423B6DFC39BB5FCF5D2"><enum>3501.</enum><header>Modifications to credit for electricity produced from certain renewable resources</header> <subsection id="HE9EB6E473FEF4A5E81AB0BCC32A43E34"><enum>(a)</enum><header>Termination of inflation adjustment</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/45">Section 45(b)(2)</external-xref> is amended—</text> <paragraph id="HE1B11F8D66AA415CA5ABDCC3DD2A9D3C"><enum>(1)</enum><text>by striking <quote>The 1.5 cent amount</quote> and inserting the following:</text> <quoted-block display-inline="no-display-inline" id="H948C4ACEA2684430A1128400F817BDB6" style="OLC"> <subparagraph id="HBFC7E793304B434E9ED1EC65BA1C3E60"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The 1.5 cent amount</text></subparagraph><after-quoted-block>, and </after-quoted-block></quoted-block> </paragraph><paragraph id="HE3E9EA1E3BE24E31B30AAE1A58AE8536"><enum>(2)</enum><text>by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="H75EDCE4C4CA94763A6144361F51BA317" style="OLC"> <subparagraph id="HC00E0F909AC34F66A40EC90F7233908E"><enum>(B)</enum><header>Termination</header><text display-inline="yes-display-inline">Subparagraph (A) shall not apply with respect to any electricity or refined coal produced at a facility the construction of which begins after the date of the enactment of this subparagraph.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="HD6E6ABFAC13F442296B5B8E8C3A8F8E5"><enum>(b)</enum><header>Special rule for determination of beginning of construction</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/45">Section 45(e)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HFCC1A3883A4D405C8F8632E9C89C0018" style="OLC"> <paragraph id="H833D24475F334377B642AF29F5420C25"><enum>(12)</enum><header>Special rule for determining beginning of construction</header><text display-inline="yes-display-inline">For purposes of subsection (d), the construction of any facility, modification, improvement, addition, or other property shall not be treated as beginning before any date unless there is a continuous program of construction which begins before such date and ends on the date that such property is placed in service.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HCC760E3A95C04040BFDB50FBFF857385"><enum>(c)</enum><header>Effective dates</header> <paragraph id="H72DFA64F26084A75B524FB87A0C325C4"><enum>(1)</enum><header>Termination of inflation adjustment</header><text display-inline="yes-display-inline">The amendments made by subsection (a) shall apply to taxable years ending after the date of the enactment of this Act.</text> </paragraph><paragraph id="H61C450A7510D48C588BC4EEE05A1B6D6"><enum>(2)</enum><header>Special rule for determination of beginning of construction</header><text>The amendment made by subsection (b) shall apply to taxable years beginning before, on, or after the date of the enactment of this Act.</text> </paragraph></subsection></section><section id="H9BA43FE561E64C5E80C8EE5D151F39F5"><enum>3502.</enum><header>Modification of the energy investment tax credit</header> <subsection id="H0B2F7B7BF8F748569B21113595E73FE6"><enum>(a)</enum><header>Extension of solar energy property</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/48">Section 48(a)(3)(A)(ii)</external-xref> is amended by striking <quote>periods ending before January 1, 2017</quote> and inserting <quote>property the construction of which begins before January 1, 2022</quote>.</text> </subsection><subsection id="H4CD58315AD084F05B7A7A39B1CBB9104"><enum>(b)</enum><header>Extension of qualified fuel cell property</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/48">Section 48(c)(1)(D)</external-xref> is amended by striking <quote>for any period after December 31, 2016</quote> and inserting <quote>the construction of which does not begin before January 1, 2022</quote>.</text> </subsection><subsection id="H9EA1FCF79A2C486FA5537A50DAD00B6D"><enum>(c)</enum><header>Extension of qualified microturbine property</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/48">Section 48(c)(2)(D)</external-xref> is amended by striking <quote>for any period after December 31, 2016</quote> and inserting <quote>the construction of which does not begin before January 1, 2022</quote>.</text> </subsection><subsection id="HF58B240EDF8F43C28179EAD814A03B88"><enum>(d)</enum><header>Extension of combined heat and power system property</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/48">Section 48(c)(3)(A)(iv)</external-xref> is amended by striking <quote>which is placed in service before January 1, 2017</quote> and inserting <quote>the construction of which begins before January 1, 2022</quote>.</text> </subsection><subsection id="HE26F2842A2F74DEEBCAD016361EB99F2"><enum>(e)</enum><header>Extension of qualified small wind energy property</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/48">Section 48(c)(4)(C)</external-xref> is amended by striking <quote>for any period after December 31, 2016</quote> and inserting <quote>the construction of which does not begin before January 1, 2022</quote>.</text> </subsection><subsection id="HD003877392744C96AA8DFFFD7324C7D9"><enum>(f)</enum><header>Extension of thermal energy property</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/48">Section 48(a)(3)(A)(vii)</external-xref> is amended by striking <quote>periods ending before January 1, 2017</quote> and inserting <quote>property the construction of which begins before January 1, 2022</quote>.</text> </subsection><subsection id="HC32060EFE1D84B92BF2F452DF65AADF0"><enum>(g)</enum><header>Phaseout of 30 percent credit rate for fuel cell and small wind energy property</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/48">Section 48(a)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H80180B13DE1644A8A8D5EDDE515A4CFC" style="OLC"> <paragraph id="H8D0A95B0F6E8476DA536ABC66D7B48C8"><enum>(7)</enum><header>Phaseout for qualified fuel cell property and qualified small wind energy property</header> <subparagraph id="H5A753BBA608841709B94FC48C54F7720"><enum>(A)</enum><header>In general</header><text>In the case of qualified fuel cell property or qualified small wind energy property, the construction of which begins before January 1, 2022, the energy percentage determined under paragraph (2) shall be equal to—</text> <clause id="H5389CC8A736E414ABA6E79106F820A15"><enum>(i)</enum><text>in the case of any property the construction of which begins after December 31, 2019, and before January 1, 2021, 26 percent, and</text> </clause><clause id="H9F0DCD15669F4F0284C88101C178F99E"><enum>(ii)</enum><text>in the case of any property the construction of which begins after December 31, 2020, and before January 1, 2022, 22 percent.</text> </clause></subparagraph><subparagraph id="HE91DA12331BD48AB8E31F0B2EABFB038"><enum>(B)</enum><header>Placed in service deadline</header><text display-inline="yes-display-inline">In the case of any qualified fuel cell property or qualified small wind energy property, the construction of which begins before January 1, 2022, and which is not placed in service before January 1, 2024, the energy percentage determined under paragraph (2) shall be equal to 10 percent.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H93D8C7A3B6674C038EF08618B1DE50CC"><enum>(h)</enum><header>Phaseout for fiber-optic solar energy property</header><text>Subparagraphs (A) and (B) of section 48(a)(6) are each amended by inserting <quote>or (3)(A)(ii)</quote> after <quote>paragraph (3)(A)(i)</quote>.</text> </subsection><subsection commented="no" id="H824CBAACB31C4B80B3925AAACE8DFF0D"><enum>(i)</enum><header>Termination of solar energy property</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/48">Section 48(a)(3)(A)(i)</external-xref> is amended by inserting <quote>, the construction of which begins before January 1, 2028, and</quote> after <quote>equipment</quote>.</text> </subsection><subsection commented="no" id="H53C7F1BE1A3444EF93A98A5E7BC69D98"><enum>(j)</enum><header>Termination of geothermal energy property</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/48">Section 48(a)(3)(A)(iii)</external-xref> is amended by inserting <quote>, the construction of which begins before January 1, 2028, and</quote> after <quote>equipment</quote>.</text> </subsection><subsection id="H3B749BCE4CB4462AA50C89A90020D6F1"><enum>(k)</enum><header>Special rule for determination of beginning of construction</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/48">Section 48(c)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HAB553C81CA40453FAA81C6B4544383F8" style="OLC"> <paragraph id="H6537220C74E2480BB95FBAB90AABD5B5"><enum>(5)</enum><header>Special rule for determining beginning of construction</header><text display-inline="yes-display-inline">The construction of any facility, modification, improvement, addition, or other property shall not be treated as beginning before any date unless there is a continuous program of construction which begins before such date and ends on the date that such property is placed in service.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H0E515624EDBE4C75990CBF50D113DA70"><enum>(l)</enum><header>Effective date</header> <paragraph id="H28F4E08494D142448CAD3378991BB7A3"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to periods after December 31, 2016, under rules similar to the rules of <external-xref legal-doc="usc" parsable-cite="usc/26/48">section 48(m)</external-xref> of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).</text> </paragraph><paragraph id="HC37DB5AFF6CD4C5ABFFC8D0D505065B5"><enum>(2)</enum><header>Extension of combined heat and power system property</header><text>The amendment made by subsection (d) shall apply to property placed in service after December 31, 2016.</text> </paragraph><paragraph id="H952EFF0B343D498FBA5D4964256EF18E"><enum>(3)</enum><header>Phaseouts and terminations</header><text>The amendments made by subsections (g), (h), (i), and (j) shall take effect on the date of the enactment of this Act.</text> </paragraph><paragraph id="HDBF6969A7A324441B4E9EB6349CB4E66"><enum>(4)</enum><header>Special rule for determination of beginning of construction</header><text>The amendment made by subsection (k) shall apply to taxable years beginning before, on, or after the date of the enactment of this Act.</text> </paragraph></subsection></section><section id="H245BCDE64644430A904362E52AE6EB6C" section-type="subsequent-section"><enum>3503.</enum><header>Extension and phaseout of residential energy efficient property</header> <subsection id="HF5716BB5F9934670BA0CF1A3018839EA"><enum>(a)</enum><header>Extension</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/25D">Section 25D(h)</external-xref> is amended by striking <quote>December 31, 2016 (December 31, 2021, in the case of any qualified solar electric property expenditures and qualified solar water heating property expenditures)</quote> and inserting <quote>December 31, 2021</quote>.</text> </subsection><subsection id="H7B8A2DA88D2948328CEA077595655FCC"><enum>(b)</enum><header>Phaseout</header> <paragraph id="HB63E7D113986496D9AA4548FB3274774"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraphs (3), (4), and (5) of section 25D(a) are amended by striking <quote>30 percent</quote> each place it appears and inserting <quote>the applicable percentage</quote>.</text> </paragraph><paragraph id="H58D00390F6024FDB825CB42078CA6D41"><enum>(2)</enum><header>Conforming amendment</header><text>Section 25D(g) of such Code is amended by striking <quote>paragraphs (1) and (2) of</quote>.</text> </paragraph></subsection><subsection id="H35B17844BFEC4D69916F604839707708"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to property placed in service after December 31, 2016.</text> </subsection></section><section id="H12474238A97E4436930178294A12959D"><enum>3504.</enum><header>Repeal of enhanced oil recovery credit</header> <subsection id="HAAF0E7C06DA6450EBD76969BD21B14F7"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 43 (and by striking the item relating to such section in the table of sections for such subpart).</text> </subsection><subsection id="H957332E3A1144AD491EF6221DD34A473"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="H1B81AE19E3124D959943E4CC32A5CE8E"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/38">Section 38(b)</external-xref> is amended by striking paragraph (6).</text> </paragraph><paragraph id="HBDACD92652204D6AA720F6CA436D6189"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6501">Section 6501(m)</external-xref> is amended by striking <quote>43,</quote>.</text> </paragraph></subsection><subsection id="H638CCBF8A790442ABCE2F4712FD41231"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="HD887767882A44071A722DF8F17AA59BE"><enum>3505.</enum><header>Repeal of credit for producing oil and gas from marginal wells</header> <subsection id="HCA4E66474031416AB3A9C5F8613A59E4"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 45I (and by striking the item relating to such section in the table of sections for such subpart).</text> </subsection><subsection id="H238CED75134D41579987D4F171DC3808"><enum>(b)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/38">Section 38(b)</external-xref> is amended by striking paragraph (19).</text> </subsection><subsection id="HB88933D7ADBC439E8D65FB719A1C2182"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="HCB7A80B28E184774841A11A4FE3AF60E" section-type="subsequent-section"><enum>3506.</enum><header>Modifications of credit for production from advanced nuclear power facilities</header> <subsection id="H4F3D5AD252AA44BA901F8CA5C769819F"><enum>(a)</enum><header>Treatment of unutilized limitation amounts</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/45J">Section 45J(b)</external-xref> is amended—</text> <paragraph id="H1B176063D8BB48079F35ED4A5D1096BF"><enum>(1)</enum><text>in paragraph (4), by inserting <quote>or any amendment to</quote> after <quote>enactment of</quote>; and</text> </paragraph><paragraph id="HC116A230A2384AB7918BDFB7E1C1ACAE"><enum>(2)</enum><text>by adding at the end the following new paragraph:</text> <quoted-block id="HBEF99705380B4109A7682C704ED5B1B7" style="OLC"> <paragraph id="H4908CACD9278494288629E43A06E4996"><enum>(5)</enum><header>Allocation of unutilized limitation</header> <subparagraph id="H0F1602A1059F4D1984229CE3260E0C34"><enum>(A)</enum><header>In general</header><text>Any unutilized national megawatt capacity limitation shall be allocated by the Secretary under paragraph (3) as rapidly as is practicable after December 31, 2020—</text> <clause id="H2222D43F7C5943E69C4BC081D36B2B8E"><enum>(i)</enum><text>first to facilities placed in service on or before such date to the extent that such facilities did not receive an allocation equal to their full nameplate capacity; and</text> </clause><clause id="HAB599518B8E249F8BE8B5E5C6E0016A1"><enum>(ii)</enum><text>then to facilities placed in service after such date in the order in which such facilities are placed in service.</text> </clause></subparagraph><subparagraph id="H77A27A928A7F4E4EACE103D6D2D4C47F"><enum>(B)</enum><header>Unutilized national megawatt capacity limitation</header><text>The term <quote>unutilized national megawatt capacity limitation</quote> means the excess (if any) of—</text> <clause id="H40BFB5B8A9E045A28BB8945E032C6298"><enum>(i)</enum><text>6,000 megawatts, over</text> </clause><clause id="HBCF6AC62F7B6409F9201FDF9E13B40EF"><enum>(ii)</enum><text>the aggregate amount of national megawatt capacity limitation allocated by the Secretary before January 1, 2021, reduced by any amount of such limitation which was allocated to a facility which was not placed in service before such date.</text> </clause></subparagraph><subparagraph id="H6EB7A604D45B4C14A40CE9448BB7745A"><enum>(C)</enum><header>Coordination with other provisions</header><text>In the case of any unutilized national megawatt capacity limitation allocated by the Secretary pursuant to this paragraph—</text> <clause id="HB462A9EC813A41FE844F9CB42625B846"><enum>(i)</enum><text>such allocation shall be treated for purposes of this section in the same manner as an allocation of national megawatt capacity limitation; and</text> </clause><clause id="HCEAD0F57D52941FDB6BE580EEE709C9C"><enum>(ii)</enum><text>subsection (d)(1)(B) shall not apply to any facility which receives such allocation.</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H67E3BA27B35A4CA8A3D11484AB52C3A1"><enum>(b)</enum><header>Transfer of credit by certain public entities</header> <paragraph id="HBA3903C2CA794E18BC59AC6CA6A67554"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/45J">Section 45J</external-xref> is amended—</text> <subparagraph id="H18CA66E351254AD690EBB274739321C0"><enum>(A)</enum><text>by redesignating subsection (e) as subsection (f); and</text> </subparagraph><subparagraph id="H2FDF95091A1646AEA76EE17DD6839F6D"><enum>(B)</enum><text>by inserting after subsection (d) the following new subsection:</text> <quoted-block id="HEAB2B13112EC4368A14508FD625FDCE6" style="OLC"> <subsection id="HC0AC7B2DDA3942319B4475171DAAC8B0"><enum>(e)</enum><header>Transfer of credit by certain public entities</header> <paragraph id="H69753C421F04477E8354701ED1C7692D"><enum>(1)</enum><header>In general</header><text>If, with respect to a credit under subsection (a) for any taxable year—</text> <subparagraph id="H286E340E622648F39A57FB1AEDDF1B08"><enum>(A)</enum><text>the taxpayer would be a qualified public entity; and</text> </subparagraph><subparagraph id="H86254D4C5A9641EDA368DF2CE6897E25"><enum>(B)</enum><text>such entity elects the application of this paragraph for such taxable year with respect to all (or any portion specified in such election) of such credit,</text> </subparagraph><continuation-text continuation-text-level="paragraph">the eligible project partner specified in such election (and not the qualified public entity) shall be treated as the taxpayer for purposes of this title with respect to such credit (or such portion thereof).</continuation-text></paragraph><paragraph id="H32026B055ECB461C9CC1D7E21A0D0E28"><enum>(2)</enum><header>Definitions</header><text>For purposes of this subsection—</text> <subparagraph id="H4B00AE2F2DDF4627824141475BDC8915"><enum>(A)</enum><header>Qualified public entity</header><text>The term <quote>qualified public entity</quote> means—</text> <clause id="HF6A6FD00B0884D838C40ECFB49913110"><enum>(i)</enum><text>a Federal, State, or local government entity, or any political subdivision, agency, or instrumentality thereof;</text> </clause><clause id="H0152F0E7F4144F319730A3CDB795C2C0"><enum>(ii)</enum><text>a mutual or cooperative electric company described in section 501(c)(12) or section 1381(a)(2); or</text> </clause><clause id="H83826D520CE34B3683909C7627024043"><enum>(iii)</enum><text>a not-for-profit electric utility which has or had received a loan or loan guarantee under the Rural Electrification Act of 1936.</text> </clause></subparagraph><subparagraph id="H81864EF6592B4529ADEBDA37ED18AB97"><enum>(B)</enum><header>Eligible project partner</header><text>The term <quote>eligible project partner</quote> means—</text> <clause id="HAC2DE1A08A3B41F6B164027D62933CC2"><enum>(i)</enum><text>any person responsible for, or participating in, the design or construction of the advanced nuclear power facility to which the credit under subsection (a) relates;</text> </clause><clause id="H6E047A7C22904B169DD810AD99CC5BE2"><enum>(ii)</enum><text>any person who participates in the provision of the nuclear steam supply system to the advanced nuclear power facility to which the credit under subsection (a) relates;</text> </clause><clause id="HD93EA71CE5D64F53A2B9A7962C743509"><enum>(iii)</enum><text>any person who participates in the provision of nuclear fuel to the advanced nuclear power facility to which the credit under subsection (a) relates; or</text> </clause><clause id="H99505CC4908E442DB366C67248B7774C"><enum>(iv)</enum><text>any person who has an ownership interest in such facility.</text> </clause></subparagraph></paragraph><paragraph id="HC864E31C30A24B518476521E5CCBD69B"><enum>(3)</enum><header>Special rules</header> <subparagraph id="H0A9C486B9F484CFDB7A09AC0CEFE2AF1"><enum>(A)</enum><header>Application to partnerships</header><text>In the case of a credit under subsection (a) which is determined at the partnership level—</text> <clause id="H8BCA1407415E4930936862A1D3E21DDF"><enum>(i)</enum><text>for purposes of paragraph (1)(A), a qualified public entity shall be treated as the taxpayer with respect to such entity’s distributive share of such credit; and</text> </clause><clause id="H2D51099E8E87449D94A2EEF0CFB0EF50"><enum>(ii)</enum><text>the term <quote>eligible project partner</quote> shall include any partner of the partnership.</text> </clause></subparagraph><subparagraph id="H19E2964E5F264015A6482AD0151557DA"><enum>(B)</enum><header>Taxable year in which credit taken into account</header><text>In the case of any credit (or portion thereof) with respect to which an election is made under paragraph (1), such credit shall be taken into account in the first taxable year of the eligible project partner ending with, or after, the qualified public entity’s taxable year with respect to which the credit was determined.</text> </subparagraph><subparagraph id="H9C2A2AD79CE54D70A1A228AC2ABDD419"><enum>(C)</enum><header>Treatment of transfer under private use rules</header><text>For purposes of section 141(b)(1), any benefit derived by an eligible project partner in connection with an election under this subsection shall not be taken into account as a private business use.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph><paragraph id="HA7C93D008AC740E6A2BC85C4B2204DD9"><enum>(2)</enum><header>Special rule for proceeds of transfers for mutual or cooperative electric companies</header><text>Section 501(c)(12) of such Code is amended by adding at the end the following new subparagraph:</text> <quoted-block id="H46F90068F67A4A379F150206EAEF953B" style="OLC"> <subparagraph id="H0E9DDC223D4F43868C6B1FC30D4E1F30"><enum>(I)</enum><text>In the case of a mutual or cooperative electric company described in this paragraph or an organization described in section 1381(a)(2), income received or accrued in connection with an election under section 45J(e)(1) shall be treated as an amount collected from members for the sole purpose of meeting losses and expenses.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="HEB03120797EF4A039A438EEC0EBE28B8"><enum>(c)</enum><header>Effective dates</header> <paragraph id="H58E4A8C660AC4140BCCD048A22F1B917"><enum>(1)</enum><header>Treatment of unutilized limitation amounts</header><text>The amendment made by subsection (a) shall take effect on the date of the enactment of this Act.</text> </paragraph><paragraph id="H906D7EFFAF694F7E9BCC867B7FC45B43"><enum>(2)</enum><header>Transfer of credit by certain public entities</header><text>The amendments made by subsection (b) shall apply to taxable years beginning after the date of the enactment of this Act.</text> </paragraph></subsection></section></subtitle><subtitle id="HA8959B5D2F5E4EDB809AEAAA2BBE72C1"><enum>G</enum><header>Bond reforms</header> <section id="HEE2D0FA9956F437CB902FDD0FC2A9F70" section-type="subsequent-section"><enum>3601.</enum><header>Termination of private activity bonds</header> <subsection id="HA49892E17F67435C9EAA7954A5A815C3"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/103">section 103(b)</external-xref> is amended—</text> <paragraph id="H58F2CCBC82B34E62B98A865DA48F4C3D"><enum>(1)</enum><text>by striking <quote>which is not a qualified bond (within the meaning of section 141)</quote>, and</text> </paragraph><paragraph id="H6A6A33E9CB984B3C98D619E8DEA50993"><enum>(2)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">which is not a qualified bond</header-in-text></quote> in the heading thereof.</text> </paragraph></subsection><subsection id="H76FFF162535B415389745D073EC10723"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="H278C21AB91DC4926A51AB8F0FE8C9C5F"><enum>(1)</enum><text display-inline="yes-display-inline">Subpart A of part IV of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking sections 142, 143, 144, 145, 146, and 147 (and by striking each of the items relating to such sections in the table of sections for such subpart).</text> </paragraph><paragraph id="HE944FAF29DE248B9A1F29D0D80047F37"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/25">Section 25</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H0ADFFC3F691146C0AAC9CDF2E73276B5" style="OLC"> <subsection id="H0031A59865144A5BA93C03A212D8D749"><enum>(j)</enum><header>Coordination with repeal of private activity bonds</header><text display-inline="yes-display-inline">Any reference to section 143, 144, or 146 shall be treated as a reference to such section as in effect before its repeal by the <short-title>Tax Cuts and Jobs Act</short-title>.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HCA94E82A52D0482392FDBC9FCD0BD696"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/26">Section 26(b)(2)</external-xref> is amended by striking subparagraph (D).</text> </paragraph><paragraph id="HD7DB99D5EE3E4517A71232498FE8CFAF"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/141">Section 141(b)</external-xref> is amended by striking paragraphs (5) and (9).</text> </paragraph><paragraph id="H352CF2C2C9FA498E85027382B96FAAA6"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/141">Section 141(d)</external-xref> is amended by striking paragraph (5).</text> </paragraph><paragraph id="H1707EEC0D1B04F46A6E825313B4FD9DE"><enum>(6)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/141">Section 141</external-xref> is amended by striking subsection (e).</text> </paragraph><paragraph id="H9419CA8D0E1445059ADC7843754319D8"><enum>(7)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/148">Section 148(f)(4)</external-xref> is amended—</text> <subparagraph display-inline="no-display-inline" id="HDC2E1783AC9E4453889680A63B9831AF"><enum>(A)</enum><text>by striking <quote>(determined in accordance with section 147(b)(2)(A))</quote> in the flush matter following subparagraph (A)(ii) and inserting <quote>(determined by taking into account the respective issue prices of the bonds issued as part of the issue)</quote>, and</text> </subparagraph><subparagraph id="H3FBCBD0D4C9543BEBB1DC5B6B57D70D2"><enum>(B)</enum><text>by striking the last sentence of subparagraph (D)(v).</text> </subparagraph></paragraph><paragraph commented="no" id="H68484ABAF5F340FABF52110F2A6B08A4"><enum>(8)</enum><text display-inline="yes-display-inline">Clause (iv) of <external-xref legal-doc="usc" parsable-cite="usc/26/148">section 148(f)(4)(C)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H1F21F035081A4137B86D9CFE8728592B" style="OLC"> <clause commented="no" id="HDF0C0D613BFB43D4A0747DA29853598A"><enum>(iv)</enum><header>Construction issue</header><text display-inline="yes-display-inline">For purposes of this subparagraph—</text> <subclause commented="no" id="HD38508176C8E486FB1E1B794F4377DAA"><enum>(I)</enum><header>In general</header><text>The term <quote>construction issue</quote> means any issue if at least 75 percent of the available construction proceeds of such issue are to be used for construction expenditures.</text> </subclause><subclause commented="no" id="HCF313E5AD90B497A8E651835CCD29F4C"><enum>(II)</enum><header>Construction</header><text>The term <quote>construction</quote> includes reconstruction and rehabilitation.</text></subclause></clause><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H00191489F9124793A0D67927E42C299E"><enum>(9)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/149">Section 149(b)(3)</external-xref> is amended by striking subparagraph (C).</text> </paragraph><paragraph id="H931A6F46E17A45EF804524F807CF16E7"><enum>(10)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/149">Section 149(e)(2)</external-xref> is amended—</text> <subparagraph id="H80B4820DA4F6462DB7B320B0F58FD21C"><enum>(A)</enum><text>by striking subparagraphs (C), (D), and (F) and by redesignating subparagraphs (E) and (G) as subparagraphs (C) and (D), respectively, and</text> </subparagraph><subparagraph id="HAAEA8D85A5C741849A85B56D82CEB7EB"><enum>(B)</enum><text>by striking the second sentence.</text> </subparagraph></paragraph><paragraph id="H9CA560573A564A11A74DB00239C224D9"><enum>(11)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/149">Section 149(f)(6)</external-xref> is amended—</text> <subparagraph id="HE012CD1BA828457CA5A904D94D69911E"><enum>(A)</enum><text>by striking subparagraph (B), and</text> </subparagraph><subparagraph id="H6521DE7B535041C58899254782FBFDD6"><enum>(B)</enum><text>by striking <quote>For purposes of this subsection</quote> and all that follows through <quote>The term</quote> and inserting the following: <quote>For purposes of this subsection, the term</quote>.</text> </subparagraph></paragraph><paragraph id="H09221EFEF63341C39527968F3E96AA4D"><enum>(12)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/150">Section 150(e)(3)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H8CF559C8924244AE967BC4F6F9429E88" style="OLC"> <paragraph id="HC93E0C9A3954445287A0C6EBDD16E189"><enum>(3)</enum><header>Public approval requirement</header><text display-inline="yes-display-inline">A bond shall not be treated as part of an issue which meets the requirements of paragraph (1) unless such bond satisfies the requirements of section 147(f)(2) (as in effect before its repeal by the <short-title>Tax Cuts and Jobs Act</short-title>).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H2213A6F05A8C408384CA95527B3ED303"><enum>(13)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/269A">Section 269A(b)(3)</external-xref> is amended by striking <quote>144(a)(3)</quote> and inserting <quote>414(n)(6)(A)</quote>.</text> </paragraph><paragraph id="H000CE8FF6EAE442BB2AC741678C24841"><enum>(14)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/414">Section 414(m)(5)</external-xref> is amended by striking <quote>section 144(a)(3)</quote> and inserting <quote>subsection (n)(6)(A)</quote>.</text> </paragraph><paragraph id="HA602C7AD57D1498187FE470146770206"><enum>(15)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/414">Section 414(n)(6)(A)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HA67BB6E46E3149E391860B34F1856BDE" style="OLC"> <subparagraph id="H05692A3A90FA4177A2352C1C8557D7CE"><enum>(A)</enum><header>Related persons</header><text display-inline="yes-display-inline">A person is a related person to another person if—</text> <clause id="H69CA5CD0A3D5465AA023D0C783A143B3"><enum>(i)</enum><text>the relationship between such persons would result in a disallowance of losses under section 267 or 707(b), or</text> </clause><clause id="HE3E671B99A4E459AB2CE7CC57FBB1DC0"><enum>(ii)</enum><text>such persons are members of the same controlled group of corporations (as defined in section 1563(a), except that <quote>more than 50 percent</quote> shall be substituted for <quote>at least 80 percent</quote> each place it appears therein).</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HE35D82C2B8004422B295B856D17FE7E8"><enum>(16)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6045">Section 6045(e)(4)(B)</external-xref> is amended by inserting <quote>(as in effect before its repeal by the <short-title>Tax Cuts and Jobs Act</short-title>)</quote> after <quote>section 143(m)(3)</quote>.</text> </paragraph><paragraph id="H974B34D3B94745C7B87C213B2082F688"><enum>(17)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6654">Section 6654(f)(1)</external-xref> is amended by inserting <quote>(as in effect before its repeal by the <short-title>Tax Cuts and Jobs Act</short-title>)</quote> after <quote>section 143(m)</quote>.</text> </paragraph><paragraph id="H4721C69692E64250BD0DFE700A4476B0"><enum>(18)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/7871">Section 7871(c)</external-xref> is amended—</text> <subparagraph id="H6CC408B628434019B6AA0319FC59E88C"><enum>(A)</enum><text>by striking paragraphs (2) and (3), and</text> </subparagraph><subparagraph id="H1DCF8332413D4CDE828AF5336D9E743D"><enum>(B)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">tax-exempt bonds.—</header-in-text></quote> and all that follows through <quote>Subsection (a) of section 103</quote> and inserting the following: <quote><header-in-text level="subsection" style="OLC">tax-exempt bonds.—</header-in-text>Subsection (a) of section 103</quote>.</text> </subparagraph></paragraph></subsection><subsection id="HE893B946D5344D828E59DCDF3B4BC381"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to bonds issued after December 31, 2017.</text> </subsection></section><section commented="no" id="H37810D72128A4DA69E1FCA7BE1E54697"><enum>3602.</enum><header>Repeal of advance refunding bonds</header> <subsection commented="no" id="HB5FE25AAB3004A8B886802057A2B0816"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/149">section 149(d)</external-xref> is amended by striking <quote>as part of an issue described in paragraph (2), (3), or (4).</quote> and inserting <quote>to advance refund another bond.</quote>.</text> </subsection><subsection commented="no" id="H3081FACDAE7143CF94A8D12CFFF8EFDF"><enum>(b)</enum><header>Conforming amendments</header> <paragraph commented="no" id="H6E2CCB85E2854B5FA49B67340D05B1EE"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/149">Section 149(d)</external-xref> is amended by striking paragraphs (2), (3), (4), and (6) and by redesignating paragraphs (5) and (7) as paragraphs (2) and (3).</text> </paragraph><paragraph commented="no" id="HA8745A831AF14810911873A8905A11C4"><enum>(2)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/148">Section 148(f)(4)(C)</external-xref> is amended by striking clause (xiv) and by redesignating clauses (xv) to (xvii) as clauses (xiv) to (xvi).</text> </paragraph></subsection><subsection commented="no" id="H7B13B299F68F42879FDE7CE1B3077A82"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to advance refunding bonds issued after December 31, 2017.</text> </subsection></section><section commented="no" id="HF1FB637FA2214D858EC907D0C22DA369"><enum>3603.</enum><header>Repeal of tax credit bonds</header> <subsection commented="no" id="H3BDD719042F94204ADA55E02B9364E2E"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part IV of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking subparts H, I, and J (and by striking the items relating to such subparts in the table of subparts for such part).</text> </subsection><subsection commented="no" id="H9AB8913FF3064E978EC1648DE7C49529"><enum>(b)</enum><header>Payments to issuers</header><text>Subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/65">chapter 65</external-xref> is amended by striking section 6431 (and by striking the item relating to such section in the table of sections for such subchapter).</text> </subsection><subsection commented="no" id="H22826E3976194537BF0BCDCE1D374CF6"><enum>(c)</enum><header>Conforming amendments</header> <paragraph commented="no" id="HE21203CFC4884CD28EADC1C2AC4BA1D6"><enum>(1)</enum><text>Part IV of subchapter U of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 1397E (and by striking the item relating to such section in the table of sections for such part).</text> </paragraph><paragraph id="HDF85488EF1C84305B1F8748063437C40"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/54">Section 54(l)(3)(B)</external-xref> is amended by inserting <quote>(as in effect before its repeal by the <short-title>Tax Cuts and Jobs Act</short-title>)</quote> after <quote>section 1397E(I)</quote>.</text> </paragraph><paragraph commented="no" id="H98ABC639920B477A86B0A9F3DC598D2A"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6211">Section 6211(b)(4)(A)</external-xref> is amended by striking <quote>, and 6431</quote> and inserting <quote>and</quote> before <quote>36B</quote>.</text> </paragraph><paragraph commented="no" id="HBCD5A105C108466BA23749440F3278B7"><enum>(4)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/6401">Section 6401(b)(1)</external-xref> is amended by striking <quote>G, H, I, and J</quote> and inserting <quote>and G</quote>.</text> </paragraph></subsection><subsection commented="no" id="HDB3C3B95459646CA93CF09C29F00706A"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to bonds issued after December 31, 2017.</text> </subsection></section><section commented="no" id="H0E4A003C479646A0AEEFAF0F36EB0D56"><enum>3604.</enum><header>No tax exempt bonds for professional stadiums</header> <subsection id="H51BEC421403344498B0BF0C028563D51"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 103(b), as amended by this Act, is further amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H95C76271CDBC4E839900736E59DB2178" style="OLC"> <paragraph commented="no" id="H20C82C7D90BB4C079A1398A50E99777D"><enum>(4)</enum><header>Professional stadium bond</header><text display-inline="yes-display-inline">Any professional stadium bond.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HBF6DB17F415342DBADB2A0BEF2380B16"><enum>(b)</enum><header>Professional stadium bond defined</header><text>Subsection (c) of <external-xref legal-doc="usc" parsable-cite="usc/26/103">section 103</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H68B577659C3E403580111B384863D454" style="OLC"> <paragraph id="HCBF56EB70E794B9583D32FF3451A1FA3"><enum>(3)</enum><header>Professional stadium bond</header><text display-inline="yes-display-inline">The term <quote>professional stadium bond</quote> means any bond issued as part of an issue any proceeds of which are used to finance or refinance capital expenditures allocable to a facility (or appurtenant real property) which, during at least 5 days during any calendar year, is used as a stadium or arena for professional sports exhibitions, games, or training.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H3459B1B53FF44032953B859B5658F3D9"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to bonds issued after November 2, 2017.</text> </subsection></section></subtitle><subtitle id="HA7786BB2E03349CC8F49D6CF8C82A6A0"><enum>H</enum><header>Insurance</header> <section id="H92D40C5CF29E40528D79452214486929"><enum>3701.</enum><header>Net operating losses of life insurance companies</header> <subsection id="HB42153048D614EDE91929E9F847272B0"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/805">Section 805(b)</external-xref> is amended by striking paragraph (4) and by redesignating paragraph (5) as paragraph (4).</text> </subsection><subsection id="HDD01C56C5C584DC68F68077BD0D42A0A"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="H5FA4B4DDA87E43F6A1DE6232394956BA"><enum>(1)</enum><text>Part I of subchapter L of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 810 (and by striking the item relating to such section in the table of sections for such part).</text> </paragraph><paragraph id="H9298D20E681A48DFAC1AE255BB1A8A2C"><enum>(2)</enum><text>Part III of subchapter L of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 844 (and by striking the item relating to such section in the table of sections for such part).</text> </paragraph><paragraph id="HB337F957BD1849A6B199C3FDA437894B"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/381">Section 381</external-xref> is amended by striking subsection (d).</text> </paragraph><paragraph id="H6A550010E4074E428FAAD0D5E16DE12D"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/805">Section 805(a)(4)(B)(ii)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H7709CE934EF44CB18415FDEC31353DA1" style="OLC"> <clause id="HF3076B788E2745FD866447BA88612428"><enum>(ii)</enum><text display-inline="yes-display-inline">the deduction allowed under section 172,</text></clause><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HE40CC155794348EF924EAE71155BA46D"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/805">Section 805(a)</external-xref> is amended by striking paragraph (5).</text> </paragraph><paragraph id="HFF0AB44F3EEE45D39330B2E788EB1EB5"><enum>(6)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/953">Section 953(b)(1)(B)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H7146EAA6FEF240A1815C07D92D58176E" style="OLC"> <subparagraph id="H14B5B99439BE45D8B05E330FE9B51293"><enum>(B)</enum><text display-inline="yes-display-inline">So much of section 805(a)(8) as relates to the deduction allowed under section 172.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H0CFFBCD5F24B423683E25E625216D0E1"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to losses arising in taxable years beginning after December 31, 2017.</text> </subsection></section><section id="HB7C34DAB444441AE973D430FD363475C"><enum>3702.</enum><header>Repeal of small life insurance company deduction</header> <subsection id="H6906931A39C94F3289E6650D8EA9AE75"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part I of subchapter L of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 806 (and by striking the item relating to such section in the table of sections for such part).</text> </subsection><subsection id="HE16404AFD08A42EEACC25D8CD048CA72"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="H5E8C90D5677A474C8F49AE0135BA2A68"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/453B">Section 453B(e)</external-xref> is amended—</text> <subparagraph id="H97E95F1841E64F86A88E3D00CDD787CC"><enum>(A)</enum><text>by striking <quote>(as defined in section 806(b)(3))</quote> in paragraph (2)(B), and</text> </subparagraph><subparagraph id="HCDC9042C65894271822806B8DDF79C5B"><enum>(B)</enum><text>by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H2781E98AC6174A72B95B96A0F0DC0824" style="OLC"> <paragraph id="H3BC046E482D545B8BE170B892480ADEE"><enum>(3)</enum><header>Noninsurance business</header> <subparagraph id="H4834675BADC64E7F814D40345B744A47"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>noninsurance business</quote> means any activity which is not an insurance business.</text> </subparagraph><subparagraph id="HF1B9EC11D44B408EBB1A27ADF8FDF4EE"><enum>(B)</enum><header>Certain activities treated as insurance businesses</header><text>For purposes of subparagraph (A), any activity which is not an insurance business shall be treated as an insurance business if—</text> <clause id="HA7908A93A1ED4465A6B0B4E3CA21C91C"><enum>(i)</enum><text>it is of a type traditionally carried on by life insurance companies for investment purposes, but only if the carrying on of such activity (other than in the case of real estate) does not constitute the active conduct of a trade or business, or</text> </clause><clause id="H65F3C3C664DA470B8D38383E0154BEC2"><enum>(ii)</enum><text>it involves the performance of administrative services in connection with plans providing life insurance, pension, or accident and health benefits.</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph><paragraph id="HA3F13C6CD8704B258C88B7F1252DCCD3"><enum>(2)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/465">Section 465(c)(7)(D)(v)(II)</external-xref> is amended by striking <quote>section 806(b)(3)</quote> and inserting <quote>section 453B(e)(3)</quote>.</text> </paragraph><paragraph id="H409FC4EE54A740EB809DD57935A41253"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/801">Section 801(a)(2)</external-xref> is amended by striking subparagraph (C).</text> </paragraph><paragraph id="H76B6256B48E345AC812A4DF051FC26E7"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/804">Section 804</external-xref> is amended by striking <quote>means—</quote> and all that follows and inserting <quote>means the general deductions provided in section 805.</quote>.</text> </paragraph><paragraph id="HF46530299BBF4980B6F4A9C99C77DF9E"><enum>(5)</enum><text>Section 805(a)(4)(B), as amended by <external-xref legal-doc="usc" parsable-cite="usc/26/3701">section 3701,</external-xref> is amended by striking clause (i) and by redesignating clauses (ii), (iii), and (iv) as clauses (i), (ii), and (iii), respectively.</text> </paragraph><paragraph id="H0FE9DA618A3A4D36BA09AF2AD3F32945"><enum>(6)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/805">Section 805(b)(2)(A)</external-xref> is amended by striking clause (iii) and by redesignating clauses (iv) and (v) as clauses (iii) and (iv), respectively.</text> </paragraph><paragraph id="H99A4BC63527444A18B87F0C6B8C30D9D"><enum>(7)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/842">Section 842(c)</external-xref> is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively.</text> </paragraph><paragraph id="H0BD006B5897B4685B3EB16DAF80C5E52"><enum>(8)</enum><text>Section 953(b)(1), as amended by <external-xref legal-doc="usc" parsable-cite="usc/26/3701">section 3701,</external-xref> is amended by striking subparagraph (A) and by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively.</text> </paragraph></subsection><subsection id="H0F85BA6C1A534E93A8A37DB1346D879B"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H7FFA165EF37849DD9454C9C57C05DF1C"><enum>3703.</enum><header>Surtax on life insurance company taxable income</header> <subsection id="HA4B0A340E26B42E89EEF2C3A3ACB36E0"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/801">Section 801(a)(1)</external-xref> is amended—</text> <paragraph id="H89AAF99B7D224A49AE5E6E33395ED6A1"><enum>(1)</enum><text>by striking <quote>consist of a tax</quote> and insert</text> <quoted-block display-inline="yes-display-inline" id="HF193F513A74940699C0494C6BB11E9FC" style="OLC"> <text>consist of the sum of—</text><subparagraph id="H377C207D1625434CAA35EAB91D7BBA97"><enum>(A)</enum><text display-inline="yes-display-inline">a tax</text></subparagraph><after-quoted-block>, and</after-quoted-block></quoted-block> </paragraph><paragraph id="HB4F352E2F4024A5ABE283AE76EE56765"><enum>(2)</enum><text>by striking the period at the end and inserting <quote>, and</quote>, and</text> </paragraph><paragraph id="H073FC9684A8F4EEBA585ABA25B8AF6DB"><enum>(3)</enum><text>by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="H7C50A4114A1D4E71B47FCBACF93AE587" style="OLC"> <subparagraph id="H098F6A93DC134077B0B74C1E955CBC79"><enum>(B)</enum><text display-inline="yes-display-inline">a tax equal to 8 percent of the life insurance company taxable income.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection></section><section id="H8AD3B87CF89444A7B059632F1F5DE7AD"><enum>3704.</enum><header>Adjustment for change in computing reserves</header> <subsection id="H3500E0C7EE2D44A2B089B5C53FE79742"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/807">section 807(f)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H158345A655284F898477CE6F6D6DB103" style="OLC"> <paragraph id="H227410DAC14F413DAEC85AE59290D341"><enum>(1)</enum><header>Treatment as change in method of accounting</header><text display-inline="yes-display-inline">If the basis for determining any item referred to in subsection (c) as of the close of any taxable year differs from the basis for such determination as of the close of the preceding taxable year, then so much of the difference between—</text> <subparagraph id="H9CEACEA441954140AD80F6F4A3A76F97"><enum>(A)</enum><text>the amount of the item at the close of the taxable year, computed on the new basis, and</text> </subparagraph><subparagraph id="H4BE4C7FDEB4045BEB9F2FE7BBD274B86"><enum>(B)</enum><text>the amount of the item at the close of the taxable year, computed on the old basis,</text> </subparagraph><continuation-text continuation-text-level="paragraph">as is attributable to contracts issued before the taxable year shall be taken into account under section 481 as adjustments attributable to a change in method of accounting initiated by the taxpayer and made with the consent of the Secretary.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H54D930A090D4433CB7E98D92914A43E8"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H0602E06BE4D14A0D8C7702ED775654A3"><enum>3705.</enum><header>Repeal of special rule for distributions to shareholders from pre-1984 policyholders surplus account</header> <subsection id="H54C22A8290624E9193332A4B48ED731F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part I of subchapter L is amended by striking section 815 (and by striking the item relating to such section in the table of sections for such subpart).</text> </subsection><subsection id="HAA858CFDB183401DA5DA3BBC62E79DC6"><enum>(b)</enum><header>Conforming amendment</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/801">Section 801</external-xref> is amended by striking subsection (c).</text> </subsection><subsection id="H0BFE1340385E40798B1C9094B7C07EDE"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection><subsection id="HABFAC21DD03146139349C05FCABC7D7C"><enum>(d)</enum><header>Phased inclusion of remaining balance of policyholders surplus accounts</header><text>In the case of any stock life insurance company which has a balance (determined as of the close of such company’s last taxable year beginning before January 1, 2018) in an existing policyholders surplus account (as defined in <external-xref legal-doc="usc" parsable-cite="usc/26/815">section 815</external-xref> of the Internal Revenue Code of 1986, as in effect before its repeal), the tax imposed by section 801 of such Code for the first 8 taxable years beginning after December 31, 2017, shall be the amount which would be imposed by such section for such year on the sum of—</text> <paragraph id="H4A17781BAC3C425C8A232FB0295C5061"><enum>(1)</enum><text>life insurance company taxable income for such year (within the meaning of such section 801 but not less than zero), plus</text> </paragraph><paragraph id="HBD87515090DF4444BAD26FA06F07E7B2"><enum>(2)</enum><text><fraction>1/8</fraction> of such balance.</text> </paragraph></subsection></section><section commented="no" id="HC257FD9D5AD148A8AA4E2E857E93A903"><enum>3706.</enum><header>Modification of proration rules for property and casualty insurance companies</header> <subsection commented="no" id="HA0C051F9E74F4051B03DB45EB8B83F46"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/832">Section 832(b)(5)(B)</external-xref> is amended by striking <quote>15 percent</quote> and inserting <quote>26.25 percent</quote>.</text> </subsection><subsection commented="no" id="H4488798D92174CA5A434C9284EFC51D7"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section commented="no" id="H7AC1F7B4560849849FA201D09AB67EF8"><enum>3707.</enum><header>Modification of discounting rules for property and casualty insurance companies</header> <subsection commented="no" id="H1895288C52844994B74BA62E8AE716E6"><enum>(a)</enum><header>Modification of rate of interest used to discount unpaid losses</header><text>Paragraph (2) of <external-xref legal-doc="usc" parsable-cite="usc/26/846">section 846(c)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HFD8A906E1A984BB09D7F029D5CA487C1" style="OLC"> <paragraph commented="no" id="HBEA72C5CD5284237B809EB3AED1CF9DC"><enum>(2)</enum><header>Determination of annual rate</header><text>The annual rate determined by the Secretary under this paragraph for any calendar year shall be a rate determined on the basis of the corporate bond yield curve (as defined in section 430(h)(2)(D)(i)).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="HF8101F0D78BA4BFCBFBC337239F1E97F"><enum>(b)</enum><header>Modification of computational rules for loss payment patterns</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/846">Section 846(d)(3)</external-xref> is amended by striking subparagraphs (B) through (G) and inserting the following new subparagraphs:</text> <quoted-block display-inline="no-display-inline" id="H6D7DFB26526A4695B72BEC7A51D6F138" style="OLC"> <subparagraph commented="no" id="H33C5AB30676A49499D050AE589E60E61"><enum>(B)</enum><header>Treatment of certain losses</header><text>Losses which would have been treated as paid in the last year of the period applicable under subparagraph (A)(i) or (A)(ii) shall be treated as paid in the following manner:</text> <clause commented="no" id="H939273D35BBA4271B26A4985E1A4A6AF"><enum>(i)</enum><header>3-year loss payment pattern</header> <subclause commented="no" id="H1441045C60EF4464A705A0CD46BCD6B6"><enum>(I)</enum><header>In general</header><text>The period taken into account under subparagraph (A)(i) shall be extended to the extent required under subclause (II).</text> </subclause><subclause commented="no" id="HE7FEC5E1F5704491BC453B75B18A8D25"><enum>(II)</enum><header>Computation of extension</header><text>The amount of losses which would have been treated as paid in the 3d year after the accident year shall be treated as paid in such 3d year and each subsequent year in an amount equal to the average of the losses treated as paid in the 1st and 2d years after the accident year (or, if lesser, the portion of the unpaid losses not theretofore taken into account). To the extent such unpaid losses have not been treated as paid before the 18th year after the accident year, they shall be treated as paid in such 18th year.</text> </subclause></clause><clause commented="no" id="H7CECBF5D84324F4FB1C792B8C0BFD085"><enum>(ii)</enum><header>10-year loss payment pattern</header> <subclause commented="no" id="H2939278430BE422494921DE07D58AD84"><enum>(I)</enum><header>In general</header><text>The period taken into account under subparagraph (A)(ii) shall be extended to the extent required under subclause (II).</text> </subclause><subclause commented="no" id="HA4D6C3225FE745E18365B02D525EE021"><enum>(II)</enum><header>Computation of extension</header><text>The amount of losses which would have been treated as paid in the 10th year after the accident year shall be treated as paid in such 10th year and each subsequent year in an amount equal to the amount of the average of the losses treated as paid in the 7th, 8th, and 9th years after the accident year (or, if lesser, the portion of the unpaid losses not theretofore taken into account). To the extent such unpaid losses have not been treated as paid before the 25th year after the accident year, they shall be treated as paid in such 25th year.</text></subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="HD1D24EA2C93E46CABAD52781D9AAD825"><enum>(c)</enum><header>Repeal of historical payment pattern election</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/846">Section 846</external-xref> is amended by striking subsection (e) and by redesignating subsections (f) and (g) as subsections (e) and (f), respectively.</text> </subsection><subsection commented="no" id="HF6CC5BC2E76D46AC9F01AC67CBDE8E98"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection><subsection commented="no" id="H87CC5AF0C54F4549868930FB3B2793A7"><enum>(e)</enum><header>Transitional rule</header><text>For the first taxable year beginning after December 31, 2017—</text> <paragraph commented="no" id="HBE7E5C2B9FC7452199D3EE0BC840FC6A"><enum>(1)</enum><text>the unpaid losses and the expenses unpaid (as defined in paragraphs (5)(B) and (6) of <external-xref legal-doc="usc" parsable-cite="usc/26/832">section 832(b)</external-xref> of the Internal Revenue Code of 1986) at the end of the preceding taxable year, and</text> </paragraph><paragraph commented="no" id="HD347E3BF3A264F2FA813B456A34B58D4"><enum>(2)</enum><text>the unpaid losses as defined in sections 807(c)(2) and 805(a)(1) of such Code at the end of the preceding taxable year,</text> </paragraph><continuation-text commented="no" continuation-text-level="subsection">shall be determined as if the amendments made by this section had applied to such unpaid losses and expenses unpaid in the preceding taxable year and by using the interest rate and loss payment patterns applicable to accident years ending with calendar year 2018, and any adjustment shall be taken into account ratably in such first taxable year and the 7 succeeding taxable years. For subsequent taxable years, such amendments shall be applied with respect to such unpaid losses and expenses unpaid by using the interest rate and loss payment patterns applicable to accident years ending with calendar year 2018.</continuation-text></subsection></section><section id="H98DF2216884C4D72A20EAC44DB19E0C7"><enum>3708.</enum><header>Repeal of special estimated tax payments</header> <subsection id="HF09DA0AC562E4739B54B2436FD3441C7"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part III of subchapter L of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 847 (and by striking the item relating to such section in the table of sections for such part).</text> </subsection><subsection id="H77E2BB5F8F184A14B22255A0BE6614D9"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section></subtitle><subtitle id="H57749B75E28945DEAD113B2FF1AFE7F2"><enum>I</enum><header>Compensation</header> <section id="H13A5288844FE44D580F5BDDD95606017" section-type="subsequent-section"><enum>3801.</enum><header>Modification of limitation on excessive employee remuneration</header> <subsection id="H3A6ED986A53A4437866CEE7932650FA6"><enum>(a)</enum><header>Repeal of performance-based compensation and commission exceptions for limitation on excessive employee remuneration</header> <paragraph id="HBB506F880300484EA8203BB64AC05328"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/162">Section 162(m)(4)</external-xref> is amended by striking subparagraphs (B) and (C) and by redesignating subparagraphs (D), (E), (F), and (G) as subparagraphs (B), (C), (D), and (E), respectively.</text> </paragraph><paragraph id="H06AAB6DA919045CB8F267874ED386445"><enum>(2)</enum><header>Conforming amendments</header> <subparagraph id="H5047696768934FE0B0C916BBE90E5C08"><enum>(A)</enum><text>Paragraphs (5)(E) and (6)(D) of section 162(m) are each amended by striking <quote>subparagraphs (B), (C), and (D)</quote> and inserting <quote>subparagraph (B)</quote>.</text> </subparagraph><subparagraph id="H0CB7B2ADB28A464F86FC8F08E596CE6D"><enum>(B)</enum><text>Paragraphs (5)(G) and (6)(G) of section 162(m) are each amended by striking <quote>(F) and (G)</quote> and inserting <quote>(D) and (E)</quote>.</text> </subparagraph></paragraph></subsection><subsection id="H450AF22C6EE7497BA39A340AFB0A070C"><enum>(b)</enum><header>Expansion of applicable employer</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/162">Section 162(m)(2)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HED59DC0EBD8A40EB8B7EC1523589F74F" style="OLC"> <paragraph id="HDF3FCC321B68400F9202624D91B12193"><enum>(2)</enum><header>Publicly held corporation</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>publicly held corporation</quote> means any corporation which is an issuer (as defined in section 3 of the Securities Exchange Act of 1934 (<external-xref legal-doc="usc" parsable-cite="usc/15/78c">15 U.S.C. 78c</external-xref>))—</text> <subparagraph id="H1491052D7C30406E91D9E163F22230A2"><enum>(A)</enum><text>the securities of which are required to be registered under section 12 of such Act (<external-xref legal-doc="usc" parsable-cite="usc/15/78l">15 U.S.C. 78l</external-xref>), or</text> </subparagraph><subparagraph id="HF604385D2A074DA083048B5713008AE4"><enum>(B)</enum><text>that is required to file reports under section 15(d) of such Act (<external-xref legal-doc="usc" parsable-cite="usc/15/78o">15 U.S.C. 78o(d)</external-xref>).</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H9A5E9C4557A0428FA0881919A1DC3181"><enum>(c)</enum><header>Modification of definition of covered employees</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/162">Section 162(m)(3)</external-xref> is amended—</text> <paragraph id="HCD4B4746CFA74E00BAB186E0420A2A8C"><enum>(1)</enum><text>in subparagraph (A), by striking <quote>as of the close of the taxable year, such employee is the chief executive officer of the taxpayer or is</quote> and inserting <quote>such employee is the principal executive officer or principal financial officer of the taxpayer at any time during the taxable year, or was</quote>,</text> </paragraph><paragraph id="H41AAAED5025E422D801D1C20E21B0C7D"><enum>(2)</enum><text>in subparagraph (B)—</text> <subparagraph id="H782C6B8101BC4B039415CFC0A5CEFFD9"><enum>(A)</enum><text>by striking <quote>4</quote> and inserting <quote>3</quote>, and</text> </subparagraph><subparagraph id="HFC39D0BC2D1648D1B570BB6C94DF6984"><enum>(B)</enum><text>by striking <quote>(other than the chief executive officer)</quote> and inserting <quote>(other than the principal executive officer or principal financial officer)</quote>, and</text> </subparagraph></paragraph><paragraph id="HE9525034811A419783083FD1DD734BC5"><enum>(3)</enum><text>by striking <quote>or</quote> at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting <quote>, or</quote>, and by adding at the end the following:</text> <quoted-block display-inline="no-display-inline" id="H0BA225D5AD75445FBED20C8A0D5219F5" style="OLC"> <subparagraph id="HDB0B20AE1C90475A83ACD39C1632CFCD"><enum>(C)</enum><text display-inline="yes-display-inline">was a covered employee of the taxpayer (or any predecessor) for any preceding taxable year beginning after December 31, 2016.</text> </subparagraph><quoted-block-continuation-text quoted-block-continuation-text-level="paragraph">Such term shall include any employee who would be described in subparagraph (B) if the reporting described in such subparagraph were required as so described.</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="HD249009C01254DEEB2F0CE3FD2754506"><enum>(d)</enum><header>Special rule for remuneration paid to beneficiaries, etc</header><text>Section 162(m)(4), as amended by subsection (a), is amended by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="H2517327665F641F3BFA62A5493DE71A7" style="OLC"> <subparagraph id="HACAAB35E939E490DB9CB104B455154E0"><enum>(F)</enum><header>Special rule for remuneration paid to beneficiaries, etc</header><text display-inline="yes-display-inline">Remuneration shall not fail to be applicable employee remuneration merely because it is includible in the income of, or paid to, a person other than the covered employee, including after the death of the covered employee.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H8B3E4C6FA6F44B54891BFD9DE665C9ED"><enum>(e)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="HE70423075BBE41348799A9FE0E6CF8D2"><enum>3802.</enum><header>Excise tax on excess tax-exempt organization executive compensation</header> <subsection id="H2C4E8954963E44B4BD8B2C38B243C10D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subchapter D of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/42">chapter 42</external-xref> is amended by adding at the end the following new section:</text> <quoted-block display-inline="no-display-inline" id="HBC07700AE21B4A709F491B2DAB32B568" style="OLC"> <section id="H059FE978FC924A5EB101E4A99D1F649D"><enum>4960.</enum><header>Tax on excess tax-exempt organization executive compensation</header> <subsection id="HA5EC858B23AC4A0882FF142BC8D1E268"><enum>(a)</enum><header>Tax imposed</header><text display-inline="yes-display-inline">There is hereby imposed a tax equal to 20 percent of the sum of—</text> <paragraph id="H9AEC1020420041E989678BCADA0CB326"><enum>(1)</enum><text>so much of the remuneration paid (other than any excess parachute payment) by an applicable tax-exempt organization for the taxable year with respect to employment of any covered employee in excess of $1,000,000, plus</text> </paragraph><paragraph id="H85474BB16AEC441E9D90BE89667DD4B3"><enum>(2)</enum><text>any excess parachute payment paid by such an organization to any covered employee.</text> </paragraph></subsection><subsection id="HDC3D12FFBBBE4B6FA3267D6016AE6925"><enum>(b)</enum><header>Liability for tax</header><text display-inline="yes-display-inline">The employer shall be liable for the tax imposed under subsection (a).</text> </subsection><subsection id="HA1BA244B07B7486EBD72A1C4A2D79728"><enum>(c)</enum><header>Definitions and special rules</header><text>For purposes of this section—</text> <paragraph display-inline="no-display-inline" id="H57A3A366A62C4DDAB4DDC659A31BE2B3"><enum>(1)</enum><header>Applicable tax-exempt organization</header><text>The term <quote>applicable tax-exempt organization</quote> means any organization that for the taxable year—</text> <subparagraph id="H38410F432590459DB678C8D7823365F5"><enum>(A)</enum><text>is exempt from taxation under section 501(a),</text> </subparagraph><subparagraph id="HDE5D8D40A4F74DA884308F0B3D705578"><enum>(B)</enum><text>is a farmers’ cooperative organization described in section 521(b)(1),</text> </subparagraph><subparagraph id="HF0CDC154588449D39847D0B9AA115396"><enum>(C)</enum><text display-inline="yes-display-inline">has income excluded from taxation under section 115(1), or</text> </subparagraph><subparagraph id="H0A3463207D3E46BC9F296A0F6BBB46A3"><enum>(D)</enum><text>is a political organization described in section 527(e)(1).</text> </subparagraph></paragraph><paragraph id="HB707B61E3BB74A4880760977F1FA068F"><enum>(2)</enum><header>Covered employee</header><text>For purposes of this section, the term <quote>covered employee</quote> means any employee (including any former employee) of an applicable tax-exempt organization if the employee—</text> <subparagraph id="H32299384DBF34E219DB04FB62E841CE0"><enum>(A)</enum><text>is one of the 5 highest compensated employees of the organization for the taxable year, or</text> </subparagraph><subparagraph id="HBE1B9BE18BF54ACCB656E2B710286B5C"><enum>(B)</enum><text>was a covered employee of the organization (or any predecessor) for any preceding taxable year beginning after December 31, 2016.</text> </subparagraph></paragraph><paragraph id="H6C63B8DFC82A41CF87CF2042C8F54C11"><enum>(3)</enum><header>Remuneration</header><text>For purposes of this section, the term <quote>remuneration</quote> means wages (as defined in section 3401(a)), except that such term shall not include any designated Roth contribution (as defined in section 402A(c)).</text> </paragraph><paragraph id="HE1F6BAB3AF0C43F4B49B4F6E4FC76A2A"><enum>(4)</enum><header>Remuneration from related organizations</header> <subparagraph id="H734ACEBEE04C4870BCC17DF9F95B6C14"><enum>(A)</enum><header>In general</header><text>Remuneration of a covered employee paid by an applicable tax-exempt organization shall include any remuneration paid with respect to employment of such employee by any related person or governmental entity.</text> </subparagraph><subparagraph id="H3893FF21DCC9426687715AEC9AB2BA77"><enum>(B)</enum><header>Related organizations</header><text>A person or governmental entity shall be treated as related to an applicable tax-exempt organization if such person or governmental entity—</text> <clause id="H8BB1A371C5A140A5AEAB7ADE4C4DDD38"><enum>(i)</enum><text>controls, or is controlled by, the organization,</text> </clause><clause id="HCDBEFE97781C445EBC04EA977CBF2E27"><enum>(ii)</enum><text>is controlled by one or more persons that control the organization,</text> </clause><clause id="H386BE7B561884340B717E2C23D6A3C15"><enum>(iii)</enum><text>is a supported organization (as defined in section 509(f)(2)) during the taxable year with respect to the organization,</text> </clause><clause id="HE23E6504A214435AB0BE78DCF582217E"><enum>(iv)</enum><text>is a supporting organization described in section 509(a)(3) during the taxable year with respect to the organization, or</text> </clause><clause id="H54AF9D794E1D42E480005C238834FC5D"><enum>(v)</enum><text display-inline="yes-display-inline">in the case of an organization that is a voluntary employees’ beneficiary association described in section 501(a)(9), establishes, maintains, or makes contributions to such voluntary employees’ beneficiary association.</text> </clause></subparagraph><subparagraph id="H4082CC71093E400BAFD1AC6D10ECB9C3"><enum>(C)</enum><header>Liability for tax</header><text>In any case in which remuneration from more than one employer is taken into account under this paragraph in determining the tax imposed by subsection (a), each such employer shall be liable for such tax in an amount which bears the same ratio to the total tax determined under subsection (a) with respect to such remuneration as—</text> <clause display-inline="no-display-inline" id="H3554C5ED043447E28A30FEADDB229C2C"><enum>(i)</enum><text>the amount of remuneration paid by such employer with respect to such employee, bears to</text> </clause><clause display-inline="no-display-inline" id="H4687972A84F24E79BCA08225B577AF99"><enum>(ii)</enum><text>the amount of remuneration paid by all such employers to such employee.</text> </clause></subparagraph></paragraph><paragraph id="H89A8ABF14FB34A85957CEDA42E0990DD"><enum>(5)</enum><header>Excess parachute payment</header><text display-inline="yes-display-inline">For purposes determining the tax imposed by subsection (a)(2)—</text> <subparagraph id="H2D66E1F79B09477B8AD63B680E138D65"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>excess parachute payment</quote> means an amount equal to the excess of any parachute payment over the portion of the base amount allocated to such payment.</text> </subparagraph><subparagraph id="H07ED8D85DC4849EDB531111732DA8CFB"><enum>(B)</enum><header>Parachute payment</header><text>The term <quote>parachute payment</quote> means any payment in the nature of compensation to (or for the benefit of) a covered employee if—</text> <clause id="H5EBDF19F276A4009B86D63E55FF21103"><enum>(i)</enum><text>such payment is contingent on such employee’s separation from employment with the employer, and</text> </clause><clause id="H82180CF65E88476BBA1D1FE2692B1BBB"><enum>(ii)</enum><text>the aggregate present value of the payments in the nature of compensation to (or for the benefit of) such individual which are contingent on such separation equals or exceeds an amount equal to 3 times the base amount.</text> </clause><continuation-text continuation-text-level="subparagraph">Such term does not include any payment described in section 280G(b)(6) (relating to exemption for payments under qualified plans) or any payment made under or to an annuity contract described in section 403(b) or a plan described in section 457(b).</continuation-text></subparagraph><subparagraph id="HEF36D615EB3D49A6A2D56CEB5F80AF74"><enum>(C)</enum><header>Base amount</header><text>Rules similar to the rules of 280G(b)(3) shall apply for purposes of determining the base amount.</text> </subparagraph><subparagraph id="H24FD39ED2B2143158BEDA7832CFE0482"><enum>(D)</enum><header>Property transfers; present value</header><text>Rules similar to the rules of paragraphs (3) and (4) of section 280G(d) shall apply.</text> </subparagraph></paragraph><paragraph commented="no" id="H6D79E6FB323B4B74B14E10310CDF48ED"><enum>(6)</enum><header>Coordination with deduction limitation</header><text>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.</text> </paragraph></subsection><subsection id="H348AD7B6D2D14F3F9C995DB34551A65B"><enum>(d)</enum><header>Regulations</header><text>The Secretary shall prescribe such regulations as may be necessary to prevent avoidance of the purposes of this section through the performance of services other than as an employee.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HE9688DED41BD4094970C1A6190B7D563"><enum>(b)</enum><header>Clerical amendment</header><text display-inline="yes-display-inline">The table of sections for subchapter D of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/42">chapter 42</external-xref> is amended by adding at the end the following new item:</text> <quoted-block display-inline="no-display-inline" id="H7E7E5F3222EF4C1B87037B030059BCC6" style="OLC"> <toc regeneration="no-regeneration"> <toc-entry level="section">Sec. 4960. Tax on excess exempt organization executive compensation.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H7DAF15A215564AD38EF7EB1381A23167"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="HB53833B9280A4AC5AA5C151393002BAA"><enum>3803.</enum><header>Treatment of qualified equity grants</header> <subsection id="H10A9EB58562F42E491601692461F2627"><enum>(a)</enum><header>In general</header> <paragraph id="HBB87261559EC4575A09D6636909ADD90"><enum>(1)</enum><header>Election to defer income</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/83">Section 83</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H36F03A0DFBC24195A9404174872FE039" style="OLC"> <subsection id="H292B5ADA12DF40C793C8B63E58A3B186"><enum>(i)</enum><header>Qualified equity grants</header> <paragraph id="H461873EB6DB64EB09BD5A9490F8F337F"><enum>(1)</enum><header>In general</header><text>For purposes of this subtitle, if qualified stock is transferred to a qualified employee who makes an election with respect to such stock under this subsection—</text> <subparagraph id="HB8F2075939464CBCA2EC6DD597A6700F"><enum>(A)</enum><text>except as provided in subparagraph (B), no amount shall be included in income under subsection (a) for the first taxable year in which the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, whichever is applicable, and</text> </subparagraph><subparagraph id="H9FE3E1588D0146C08B0DF64CB151E59F"><enum>(B)</enum><text>an amount equal to the amount which would be included in income of the employee under subsection (a) (determined without regard to this subsection) shall be included in income for the taxable year of the employee which includes the earliest of—</text> <clause id="H43CE596AE31743D8AB00868B80B2857B"><enum>(i)</enum><text>the first date such qualified stock becomes transferable (including transferable to the employer),</text> </clause><clause id="HE80D124927974BA6B001AA1A1F03870C"><enum>(ii)</enum><text>the date the employee first becomes an excluded employee,</text> </clause><clause commented="no" id="H266DE63089E24470A0C666309CBFD9AF"><enum>(iii)</enum><text>the first date on which any stock of the corporation which issued the qualified stock becomes readily tradable on an established securities market (as determined by the Secretary, but not including any market unless such market is recognized as an established securities market by the Secretary for purposes of a provision of this title other than this subsection),</text> </clause><clause id="HA581D72273204958B6D571143A2D566F"><enum>(iv)</enum><text>the date that is 5 years after the first date the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, or</text> </clause><clause id="H38E8CE6CF3A048D3AE9C131F15421828"><enum>(v)</enum><text>the date on which the employee revokes (at such time and in such manner as the Secretary may provide) the election under this subsection with respect to such stock.</text> </clause></subparagraph></paragraph><paragraph commented="no" id="H38E1C178E7504A2591087AEECB07DEF0"><enum>(2)</enum><header>Qualified stock</header> <subparagraph commented="no" id="HA02C1C4305D04A67ADC0F35DBC6A5E17"><enum>(A)</enum><header>In general</header><text>For purposes of this subsection, the term <term>qualified stock</term> means, with respect to any qualified employee, any stock in a corporation which is the employer of such employee, if—</text> <clause commented="no" id="HE80EF22C0CAA43B3B84F6F8E08CBFAD7"><enum>(i)</enum><text>such stock is received—</text> <subclause commented="no" id="H59BD190B41AE4612BF4A642B45F0961B"><enum>(I)</enum><text>in connection with the exercise of an option, or</text> </subclause><subclause commented="no" id="H5FB70436ACB24795A39776E6F1DC1AF5"><enum>(II)</enum><text>in settlement of a restricted stock unit, and</text> </subclause></clause><clause commented="no" id="H9BBAFAB396E043CA9FC53CD318EF15F5"><enum>(ii)</enum><text>such option or restricted stock unit was provided by the corporation—</text> <subclause commented="no" id="HCE87DFE9D2994AE290303FAF7A996C3D"><enum>(I)</enum><text>in connection with the performance of services as an employee, and</text> </subclause><subclause commented="no" id="H1197BFBC1B8347608E238D4B9418A601"><enum>(II)</enum><text>during a calendar year in which such corporation was an eligible corporation.</text> </subclause></clause></subparagraph><subparagraph commented="no" id="HAF221BE3C914419F828262C75D179EE0"><enum>(B)</enum><header>Limitation</header><text>The term <term>qualified stock</term> shall not include any stock if the employee may sell such stock to, or otherwise receive cash in lieu of stock from, the corporation at the time that the rights of the employee in such stock first become transferable or not subject to a substantial risk of forfeiture.</text> </subparagraph><subparagraph commented="no" id="HFEC07468D09C44FC8DFC6391E72CFB24"><enum>(C)</enum><header>Eligible corporation</header><text>For purposes of subparagraph (A)(ii)(II)—</text> <clause commented="no" id="HCB86DA996E134528B385550D47E37E95"><enum>(i)</enum><header>In general</header><text>The term <term>eligible corporation</term> means, with respect to any calendar year, any corporation if—</text> <subclause commented="no" id="H9F74DC637CD6401A9D17A5AAEC847D6D"><enum>(I)</enum><text>no stock of such corporation (or any predecessor of such corporation) is readily tradable on an established securities market (as determined under paragraph (1)(B)(iii)) during any preceding calendar year, and</text> </subclause><subclause commented="no" id="HA7B77D978E3748DBBE433C1E4990BD29"><enum>(II)</enum><text>such corporation has a written plan under which, in such calendar year, not less than 80 percent of all employees who provide services to such corporation in the United States (or any possession of the United States) are granted stock options, or restricted stock units, with the same rights and privileges to receive qualified stock.</text> </subclause></clause><clause commented="no" id="H07432FE1B0E54A4F8D5D5445517B34D9"><enum>(ii)</enum><header>Same rights and privileges</header><text>For purposes of clause (i)(II)—</text> <subclause commented="no" id="HBFB6B34B03544ED28008FFE57316B427"><enum>(I)</enum><text>except as provided in subclauses (II) and (III), the determination of rights and privileges with respect to stock shall be determined in a similar manner as provided under section 423(b)(5),</text> </subclause><subclause commented="no" id="H5CCE204DAE1F425F9CFF3CBE07E1D8C5"><enum>(II)</enum><text>employees shall not fail to be treated as having the same rights and privileges to receive qualified stock solely because the number of shares available to all employees is not equal in amount, so long as the number of shares available to each employee is more than a de minimis amount, and</text> </subclause><subclause commented="no" id="H006A6CB5493D46B7A0517B2169F875EA"><enum>(III)</enum><text>rights and privileges with respect to the exercise of an option shall not be treated as the same as rights and privileges with respect to the settlement of a restricted stock unit.</text> </subclause></clause><clause commented="no" id="H11072C6FEF8D40E9ACAD45D002849E55"><enum>(iii)</enum><header>Employee</header><text>For purposes of clause (i)(II), the term <term>employee</term> shall not include any employee described in section 4980E(d)(4) or any excluded employee.</text> </clause><clause commented="no" id="H7655249400B54EE8BB02FEAB2D350B4F"><enum>(iv)</enum><header>Special rule for calendar years before 2018</header><text>In the case of any calendar year beginning before January 1, 2018, clause (i)(II) shall be applied without regard to whether the rights and privileges with respect to the qualified stock are the same.</text> </clause></subparagraph></paragraph><paragraph commented="no" id="HB08538E0D698455EA19B9CF3A96A5D63"><enum>(3)</enum><header>Qualified employee; excluded employee</header><text>For purposes of this subsection—</text> <subparagraph commented="no" id="HF81CB264BCCC47C7A4F40F6F9C7A6625"><enum>(A)</enum><header>In general</header><text>The term <term>qualified employee</term> means any individual who—</text> <clause commented="no" id="H4290052AFE2A40CDBD2F10BDEC4AED22"><enum>(i)</enum><text>is not an excluded employee, and</text> </clause><clause id="H3E9DA861F2864F5CA9F4D3BC9A17AED4"><enum>(ii)</enum><text>agrees in the election made under this subsection to meet such requirements as determined by the Secretary to be necessary to ensure that the withholding requirements of the corporation under chapter 24 with respect to the qualified stock are met.</text> </clause></subparagraph><subparagraph id="HA5A22DA0231C4437BD2BF2FB87201078"><enum>(B)</enum><header>Excluded employee</header><text>The term <term>excluded employee</term> means, with respect to any corporation, any individual—</text> <clause id="H156750B41E484CF88DC0F680B5052752"><enum>(i)</enum><text>who was a 1-percent owner (within the meaning of section 416(i)(1)(B)(ii)) at any time during the 10 preceding calendar years,</text> </clause><clause id="H9BFFB27172C2401891A91B04BB4D9362"><enum>(ii)</enum><text>who is or has been at any prior time—</text> <subclause id="H9D5F78BC65864663B7D432F5061810C2"><enum>(I)</enum><text>the chief executive officer of such corporation or an individual acting in such a capacity, or</text> </subclause><subclause id="HAA4E3AAE8B0B4028892C7A881116489B"><enum>(II)</enum><text>the chief financial officer of such corporation or an individual acting in such a capacity,</text> </subclause></clause><clause id="H7ACD064FEED5469D83E5821CB2221A68"><enum>(iii)</enum><text>who bears a relationship described in section 318(a)(1) to any individual described in subclause (I) or (II) of clause (ii), or</text> </clause><clause id="H03F5975D0A3C4A3EBC947220D19804FD"><enum>(iv)</enum><text>who has been for any of the 10 preceding taxable years one of the 4 highest compensated officers of such corporation determined with respect to each such taxable year on the basis of the shareholder disclosure rules for compensation under the Securities Exchange Act of 1934 (as if such rules applied to such corporation).</text> </clause></subparagraph></paragraph><paragraph commented="no" id="H723105CD46D142DF972B04E9EDEA5BB1"><enum>(4)</enum><header>Election</header> <subparagraph commented="no" id="HF978967EB43E4C6591B14DDBAA5769C9"><enum>(A)</enum><header>Time for making election</header><text>An election with respect to qualified stock shall be made under this subsection no later than 30 days after the first time the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, and shall be made in a manner similar to the manner in which an election is made under subsection (b).</text> </subparagraph><subparagraph id="HCB7A680FA8F74C1785334A3B5FC0F7E9"><enum>(B)</enum><header>Limitations</header><text>No election may be made under this section with respect to any qualified stock if—</text> <clause id="HEC0E440577344D0A9B5E41890246ADC9"><enum>(i)</enum><text>the qualified employee has made an election under subsection (b) with respect to such qualified stock,</text> </clause><clause id="H1D49B261333E4332BBC47A264352CD98"><enum>(ii)</enum><text>any stock of the corporation which issued the qualified stock is readily tradable on an established securities market (as determined under paragraph (1)(B)(iii)) at any time before the election is made, or</text> </clause><clause id="HFF7E4C142DDB4FABBD1F8165C71C6ABF"><enum>(iii)</enum><text display-inline="yes-display-inline">such corporation purchased any of its outstanding stock in the calendar year preceding the calendar year which includes the first time the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, unless—</text> <subclause id="H4FB9C0BE827F40B49FFECB1663D9E99F"><enum>(I)</enum><text>not less than 25 percent of the total dollar amount of the stock so purchased is deferral stock, and</text> </subclause><subclause id="H5227D00133CC4FDA8EEB27358EDA65CF"><enum>(II)</enum><text>the determination of which individuals from whom deferral stock is purchased is made on a reasonable basis.</text> </subclause></clause></subparagraph><subparagraph commented="no" id="H763097C0341948EFAC12A0C75FEE0C47"><enum>(C)</enum><header>Definitions and special rules related to limitation on stock redemptions</header> <clause id="H89665C7B03C844E49218DCA94458C3EB"><enum>(i)</enum><header>Deferral stock</header><text>For purposes of this paragraph, the term <quote>deferral stock</quote> means stock with respect to which an election is in effect under this subsection.</text> </clause><clause commented="no" id="HCC7FC35DED96411BB49A7BEFB6516247"><enum>(ii)</enum><header>Deferral stock with respect to any individual not taken into account if individual holds deferral stock with longer deferral period</header><text>Stock purchased by a corporation from any individual shall not be treated as deferral stock for purposes of clause (iii) if such individual (immediately after such purchase) holds any deferral stock with respect to which an election has been in effect under this subsection for a longer period than the election with respect to the stock so purchased.</text> </clause><clause id="HE64CBAB8987F4BD4900D70DC801AE66B"><enum>(iii)</enum><header>Purchase of all outstanding deferral stock</header><text>The requirements of subclauses (I) and (II) of subparagraph (B)(iii) shall be treated as met if the stock so purchased includes all of the corporation’s outstanding deferral stock.</text> </clause><clause commented="no" id="HDA0A623AA9B649368138EB59535FBA1C"><enum>(iv)</enum><header>Reporting</header><text display-inline="yes-display-inline">Any corporation which has outstanding deferral stock as of the beginning of any calendar year and which purchases any of its outstanding stock during such calendar year shall include on its return of tax for the taxable year in which, or with which, such calendar year ends the total dollar amount of its outstanding stock so purchased during such calendar year and such other information as the Secretary may require for purposes of administering this paragraph.</text> </clause></subparagraph></paragraph><paragraph commented="no" id="HEAE085CD286E4E2897D9B9F9B7226488"><enum>(5)</enum><header>Controlled groups</header><text>For purposes of this subsection, all corporations which are members of the same controlled group of corporations (as defined in section 1563(a)) shall be treated as one corporation.</text> </paragraph><paragraph id="HBC64E7204F954D59BA2E2AB36EBA3E5D"><enum>(6)</enum><header>Notice requirement</header><text>Any corporation that transfers qualified stock to a qualified employee shall, at the time that (or a reasonable period before) an amount attributable to such stock would (but for this subsection) first be includible in the gross income of such employee—</text> <subparagraph id="H11443C82F0E74FB6AA3FD4AFFA821998"><enum>(A)</enum><text>certify to such employee that such stock is qualified stock, and</text> </subparagraph><subparagraph commented="no" id="H351CE3A03A1040A98258BB953FA9E281"><enum>(B)</enum><text>notify such employee—</text> <clause id="HD712390F9D974976B0781A1BCD9475F3"><enum>(i)</enum><text>that the employee may elect to defer income on such stock under this subsection, and</text> </clause><clause commented="no" id="H1DE2BABEF4F34D9981D59D3E6E24509B"><enum>(ii)</enum><text>that, if the employee makes such an election—</text> <subclause id="H4AE9F27C46214D92B0B1233705EB2E6C"><enum>(I)</enum><text>the amount of income recognized at the end of the deferral period will be based on the value of the stock at the time at which the rights of the employee in such stock first become transferable or not subject to substantial risk of forfeiture, notwithstanding whether the value of the stock has declined during the deferral period,</text> </subclause><subclause id="H0F3DD9B9F7B14651A9EE760566358C26"><enum>(II)</enum><text>the amount of such income recognized at the end of the deferral period will be subject to withholding under section 3401(i) at the rate determined under section 3402(t), and</text> </subclause><subclause id="HB482B44752864827866B44E25BA0738C"><enum>(III)</enum><text>the responsibilities of the employee (as determined by the Secretary under paragraph (3)(A)(ii)) with respect to such withholding.</text> </subclause></clause></subparagraph></paragraph><paragraph id="H78912B376B7D41FDA37FDC9D70DB2A27"><enum>(7)</enum><header>Restricted stock units</header><text display-inline="yes-display-inline">This section (other than this subsection), including any election under subsection (b), shall not apply to restricted stock units.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H562E7957A2B5409DBDFC9C3291344879"><enum>(2)</enum><header>Deduction by employer</header><text>Subsection (h) of <external-xref legal-doc="usc" parsable-cite="usc/26/83">section 83</external-xref> is amended by striking <quote>or (d)(2)</quote> and inserting <quote>(d)(2), or (i)</quote>.</text> </paragraph></subsection><subsection id="H7C6B9591D72B48449F3F99ECC38C7AA1"><enum>(b)</enum><header>Withholding</header> <paragraph id="HC0998D7A5D794A4C85A3B10C3DF89FF2"><enum>(1)</enum><header>Time of withholding</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/3401">Section 3401</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H02C958362E0E441295E1CB1054651545" style="OLC"> <subsection id="HA21D8D92E0A140D38A2B335B39ADB1BC"><enum>(i)</enum><header>Qualified stock for which an election is in effect under section <enum-in-header>83(i)</enum-in-header></header><text>For purposes of subsection (a), qualified stock (as defined in section 83(i)) with respect to which an election is made under section 83(i) shall be treated as wages—</text> <paragraph commented="no" display-inline="no-display-inline" id="H78DFDD0EAFF34CB5AD7B81980716C6A7"><enum>(1)</enum><text display-inline="yes-display-inline">received on the earliest date described in section 83(i)(1)(B), and</text> </paragraph><paragraph commented="no" display-inline="no-display-inline" id="H62E1579DDAF1465EAF055BDFBEB75A6A"><enum>(2)</enum><text display-inline="yes-display-inline">in an amount equal to the amount included in income under section 83 for the taxable year which includes such date.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H9225F2DBD9DF44EDB1053CFAC4E49B0B"><enum>(2)</enum><header>Amount of withholding</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/3402">Section 3402</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="HF6DD9014971C4A349812D14F2B7A7C3D" style="OLC"> <subsection id="HB436ED0C60BF4EF592C46B8D50327549"><enum>(t)</enum><header>Rate of withholding for certain stock</header><text>In the case of any qualified stock (as defined in section 83(i)) with respect to which an election is made under section 83(i)—</text> <paragraph id="HB1754DF94353444F98F23E24CA610A83"><enum>(1)</enum><text>the rate of tax under subsection (a) shall not be less than the maximum rate of tax in effect under section 1, and</text> </paragraph><paragraph id="HFB419B7A4AAD46A298982F53CE4E6E7C"><enum>(2)</enum><text>such stock shall be treated for purposes of section 3501(b) in the same manner as a non-cash fringe benefit.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="HA9767A89BF764A66AE3B1C2173DE1C3A"><enum>(c)</enum><header>Coordination with other deferred compensation rules</header> <paragraph commented="no" id="H71A24B18500946E88A0695800C844908"><enum>(1)</enum><header>Election to apply deferral to statutory options</header> <subparagraph commented="no" id="HDAD07A08126B453AAA60961DDFB59241"><enum>(A)</enum><header>Incentive stock options</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/422">Section 422(b)</external-xref> is amended by adding at the end the following: <quote>Such term shall not include any option if an election is made under section 83(i) with respect to the stock received in connection with the exercise of such option.</quote>.</text> </subparagraph><subparagraph commented="no" id="H03E1A5D9B37C4D2D9F55192135A3A491"><enum>(B)</enum><header>Employee stock purchase plans</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/423">Section 423(a)</external-xref> is amended by adding at the end the following flush sentence:</text> <quoted-block display-inline="no-display-inline" id="H0DB9F61FD9484C9B9ECF19EB908214FD" style="OLC"> <quoted-block-continuation-text quoted-block-continuation-text-level="subsection">The preceding sentence shall not apply to any share of stock with respect to which an election is made under section 83(i).</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph><paragraph id="H7113F25266A149EDBC62E167B4C4D944"><enum>(2)</enum><header>Exclusion from definition of nonqualified deferred compensation plan</header><text display-inline="yes-display-inline">Subsection (d) of <external-xref legal-doc="usc" parsable-cite="usc/26/409A">section 409A</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H79307B186B6B46BEA121A2155D21B1BC" style="OLC"> <paragraph id="H019750F091914FFC87F5E4AAF4276F74"><enum>(7)</enum><header>Treatment of qualified stock</header><text display-inline="yes-display-inline">An arrangement under which an employee may receive qualified stock (as defined in section 83(i)(2)) shall not be treated as a nonqualified deferred compensation plan solely because of an employee’s election, or ability to make an election, to defer recognition of income under section 83(i).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="HCC621197C4B540A1BEB1C7595DEE899D"><enum>(d)</enum><header>Information reporting</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/6051">Section 6051(a)</external-xref> is amended by striking <quote>and</quote> at the end of paragraph (13), by striking the period at the end of paragraph (14) and inserting a comma, and by inserting after paragraph (14) the following new paragraphs:</text> <quoted-block display-inline="no-display-inline" id="H40893A5E29494D49B10CE85A803D134D" style="OLC"> <paragraph id="H3899DF28DDEB4BE1B9142F77C705E81A"><enum>(15)</enum><text>the amount excludable from gross income under subparagraph (A) of section 83(i)(1),</text> </paragraph><paragraph id="H8E014B1BFE6A4686BB734659D0511956"><enum>(16)</enum><text>the amount includible in gross income under subparagraph (B) of section 83(i)(1) with respect to an event described in such subparagraph which occurs in such calendar year, and</text> </paragraph><paragraph id="HD7E4F415A1E644539832E30249EC9F6A"><enum>(17)</enum><text>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.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HF801217794C644F8854390BB0E19BA84"><enum>(e)</enum><header>Penalty for failure of employer To provide notice of tax consequences</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/6652">Section 6652</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="HCD1B92B6AB7744AAA5FD7E851B37EC0C" style="OLC"> <subsection id="H06C1FD0363CA4305B48FFA8A1C578D20"><enum>(o)</enum><header>Failure to provide notice under section <enum-in-header>83(i)</enum-in-header></header><text>In the case of each failure to provide a notice as required by section 83(i)(6), at the time prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall be paid, on notice and demand of the Secretary and in the same manner as tax, by the person failing to provide such notice, an amount equal to $100 for each such failure, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $50,000.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="H987166A9CBF8420B8E774004A097F2D8"><enum>(f)</enum><header>Effective dates</header> <paragraph commented="no" id="H63E650D96CD64F8C8D3847D5B5CB92EF"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraph (2), the amendments made by this section shall apply to stock attributable to options exercised, or restricted stock units settled, after December 31, 2017.</text> </paragraph><paragraph commented="no" id="HBE42AEEF101E458DA0B71BE09EF8DFA2"><enum>(2)</enum><header>Requirement to provide notice</header><text>The amendments made by subsection (e) shall apply to failures after December 31, 2017.</text> </paragraph></subsection><subsection id="H7E0385952B6C454198BF431DED7CE5D8"><enum>(g)</enum><header>Transition rule</header><text>Until such time as the Secretary (or the Secretary’s delegate) issue regulations or other guidance for purposes of implementing the requirements of paragraph (2)(C)(i)(II) of <external-xref legal-doc="usc" parsable-cite="usc/26/83">section 83(i)</external-xref> of the Internal Revenue Code of 1986 (as added by this section), or the requirements of paragraph (6) of such section, a corporation shall be treated as being in compliance with such requirements (respectively) if such corporation complies with a reasonable good faith interpretation of such requirements.</text> </subsection></section></subtitle><enum>IV</enum><header>Taxation of foreign income and foreign persons</header> <subtitle id="H9F318F83FD094861BE85298E125A931E"><enum>A</enum><header>Establishment of participation exemption system for taxation of foreign income</header> <section id="H930E8478008540A8823B36775CB041D3"><enum>4001.</enum><header>Deduction for foreign-source portion of dividends received by domestic corporations from specified 10-percent owned foreign corporations</header> <subsection id="HA82B8082FF0A4764BEE6799BD672C980"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VIII of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by inserting after section 245 the following new section:</text> <quoted-block display-inline="no-display-inline" id="H2660FFA9EE6F4D65B155391800C2C666" style="OLC"> <section id="H981C4B41A21C4C448C068861415B7042"><enum>245A.</enum><header>Deduction for foreign-source portion of dividends received by domestic corporations from specified 10-percent owned foreign corporations</header> <subsection id="H97D70B3FD6E54525B03B21066D1808B3"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any dividend received from a specified 10-percent owned foreign corporation by a domestic corporation which is a United States shareholder with respect to such foreign corporation, there shall be allowed as a deduction an amount equal to the foreign-source portion of such dividend.</text> </subsection><subsection id="H88A5E1D9504D47609A6D243EAC32413E"><enum>(b)</enum><header>Specified 10-percent owned foreign corporation</header><text>For purposes of this section, the term <quote>specified 10-percent owned foreign corporation</quote> means any foreign corporation with respect to which any domestic corporation is a United States shareholder. Such term shall not include any passive foreign investment company (within the meaning of subpart D of part VI of subchapter P) that is not a controlled foreign corporation.</text> </subsection><subsection id="H5843C8B07204436CA699E28CFE5A98AF"><enum>(c)</enum><header>Foreign-source portion</header><text>For purposes of this section—</text> <paragraph id="HEC72D2E3673A469F9EE5D6D979DF43B7"><enum>(1)</enum><header>In general</header><text>The foreign-source portion of any dividend is an amount which bears the same ratio to such dividend as—</text> <subparagraph id="H55E40357921044A8916300187D8ED601"><enum>(A)</enum><text>the post-1986 undistributed foreign earnings of the specified 10-percent owned foreign corporation, bears to</text> </subparagraph><subparagraph id="H78022C56AED5434ABCAE47A335435C7A"><enum>(B)</enum><text>the total post-1986 undistributed earnings of such foreign corporation.</text> </subparagraph></paragraph><paragraph display-inline="no-display-inline" id="H057094C801604950A08EDF47EE246270"><enum>(2)</enum><header>Post-1986 undistributed earnings</header><text display-inline="yes-display-inline">The term <quote>post-1986 undistributed earnings</quote> means the amount of the earnings and profits of the specified 10-percent owned foreign corporation (computed in accordance with sections 964(a) and 986) accumulated in taxable years beginning after December 31, 1986—</text> <subparagraph id="H7AB15A6337BC4C81980B16888554A82C"><enum>(A)</enum><text>as of the close of the taxable year of the specified 10-percent owned foreign corporation in which the dividend is distributed, and</text> </subparagraph><subparagraph id="H04DDEFFC117C45E9805161F4EC372137"><enum>(B)</enum><text>without diminution by reason of dividends distributed during such taxable year.</text> </subparagraph></paragraph><paragraph id="H360CBD7580D640838DEAA69AEB504699"><enum>(3)</enum><header>Post-1986 undistributed foreign earnings</header><text>The term <quote>post-1986 undistributed foreign earnings</quote> means the portion of the post-1986 undistributed earnings which is attributable to neither—</text> <subparagraph id="H9012C47C541040C292825ACBFA8D358E"><enum>(A)</enum><text>income described in subparagraph (A) of section 245(a)(5), nor</text> </subparagraph><subparagraph id="H75D94CD367AB46FB867E80AD06E4E4CE"><enum>(B)</enum><text>dividends described in subparagraph (B) of such section (determined without regard to section 245(a)(12)).</text> </subparagraph></paragraph><paragraph id="H5A094ED9501E429F8C8A2E5D7768E2B3"><enum>(4)</enum><header>Treatment of distributions from earnings before 1987</header> <subparagraph id="HCAC87476082A478EA3003A6C37159F17"><enum>(A)</enum><header>In general</header><text>In the case of any dividend paid out of earnings and profits of the specified 10-percent owned foreign corporation (computed in accordance with sections 964(a) and 986) accumulated in taxable years beginning before January 1, 1987—</text> <clause id="HF6BF015581C2444CB4740B81FF205996"><enum>(i)</enum><text>paragraphs (1), (2), and (3) shall be applied without regard to the phrase <quote>post-1986</quote> each place it appears, and</text> </clause><clause id="HEB799853644F4195A5630DA365EF93E0"><enum>(ii)</enum><text>paragraph (2) shall be applied by substituting <quote>after the date specified in section 316(a)(1)</quote> for <quote>in taxable years beginning after December 31, 1986</quote>.</text> </clause></subparagraph><subparagraph id="HDAE8919E5D294F3DB4E57FB0F3B7FEB9"><enum>(B)</enum><header>Dividends paid first out of post-1986 earnings</header><text>Dividends shall be treated as paid out of post-1986 undistributed earnings to the extent thereof.</text> </subparagraph></paragraph><paragraph id="H98F6837405654F56A0BCAEF431D3A1E3"><enum>(5)</enum><header>Treatment of certain dividends in excess of undistributed earnings</header><text>In the case of any dividend from the specified 10-percent owned foreign corporation which is in excess of undistributed earnings (as determined under paragraph (2) after taking into account the modifications described in clauses (i) and (ii) of paragraph (4)(A)), the foreign-source portion of such dividend is an amount which bears the same ratio to such dividend as—</text> <subparagraph id="HB1BF2B1AD02547C59C56A74CF8173698"><enum>(A)</enum><text>the portion of the earnings and profits described in subparagraph (B) which is attributable to neither income described in paragraph (3)(A) nor dividends described in paragraph (3)(B), bears to</text> </subparagraph><subparagraph id="H1C5809C07A5C4AFEBA9989DE2F2DD332"><enum>(B)</enum><text>the earnings and profits of such corporation for the taxable year in which such distribution is made (computed as of the close of the taxable year without diminution by reason of any distributions made during the taxable year).</text> </subparagraph></paragraph></subsection><subsection display-inline="no-display-inline" id="H392A1896AFF44D01A002FA3481E77154"><enum>(d)</enum><header>Disallowance of foreign tax credit, etc</header> <paragraph id="HA65CC1955E5342ECB347CE39624E9AC2"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">No credit shall be allowed under section 901 for any taxes paid or accrued (or treated as paid or accrued) with respect to any dividend for which a deduction is allowed under this section.</text> </paragraph><paragraph id="H5F83DE8F6FD348CF99FAB0A7E4FB0C9C"><enum>(2)</enum><header>Denial of deduction</header><text>No deduction shall be allowed under this chapter for any tax for which credit is not allowable under section 901 by reason of paragraph (1) (determined by treating the taxpayer as having elected the benefits of subpart A of part III of subchapter N).</text> </paragraph></subsection><subsection id="H820A3DC259774B6F8FD707C2C981D6A6"><enum>(e)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H929A50C77E9D4AEEA7FA8830C814BCC3"><enum>(b)</enum><header>Application of holding period requirement</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/246">Section 246(c)</external-xref> is amended—</text> <paragraph id="HCECFEB2C4520450F9038FEDDAC8AA385"><enum>(1)</enum><text>by striking <quote>or 245</quote> in paragraph (1) and inserting <quote>245, or 245A</quote>, and</text> </paragraph><paragraph id="H8F21653BE91A4028A6F68A125AE3F6D2"><enum>(2)</enum><text>by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="H29BFF3DDB92A4CEA915267D43699512A" style="OLC"> <paragraph id="H121C9BB336724A79A105CA4B06E74F2A"><enum>(5)</enum><header>Special rules for foreign source portion of dividends received from specified 10-percent owned foreign corporations</header> <subparagraph id="H193D61677DF540089448FE33ECE37551"><enum>(A)</enum><header>6-month holding period requirement</header><text display-inline="yes-display-inline">For purposes of section 245A—</text> <clause id="H84AC4679B6FD4806A175A6B65BD89742"><enum>(i)</enum><text>paragraph (1)(A) shall be applied—</text> <subclause id="HF2595C6B460F4363A442F3D461B333F7"><enum>(I)</enum><text>by substituting <quote>180 days</quote> for <quote>45 days</quote>each place it appears, and</text> </subclause><subclause id="H7A33D0EEDBB342AF9C5E50687346FF58"><enum>(II)</enum><text>by substituting <quote>361-day period</quote> for <quote>91-day period</quote>, and</text> </subclause></clause><clause id="H58728DB0995245F9BA13052A7E091D9B"><enum>(ii)</enum><text display-inline="yes-display-inline">paragraph (2) shall not apply.</text> </clause></subparagraph><subparagraph commented="no" id="HC2FB122FBE674AD8B828619B963DA072"><enum>(B)</enum><header>Status must be maintained during holding period</header><text>For purposes of applying paragraph (1) with respect to section 245A, the taxpayer shall be treated as holding the stock referred to in paragraph (1) for any period only if—</text> <clause commented="no" id="HCA1D024A8AA64408B3F47237EB557366"><enum>(i)</enum><text>the specified 10-percent owned foreign corporation referred to in section 245A(a) is a specified 10-percent owned foreign corporation for such period, and</text> </clause><clause commented="no" id="HD261F80DF6244D3C9FEF6CE41A1E27B7"><enum>(ii)</enum><text>the taxpayer is a United States shareholder with respect to such specified 10-percent owned foreign corporation for such period.</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H5EA5031212974BC8BB150282181653A3"><enum>(c)</enum><header>Application of rules generally applicable to deductions for dividends received</header> <paragraph id="H4070648CE4D24B7FB864BD53C8EFC0E2"><enum>(1)</enum><header>Treatment of dividends from certain corporations</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/246">Section 246(a)(1)</external-xref> is amended by striking <quote>and 245</quote> and inserting <quote>245, and 245A</quote>.</text> </paragraph><paragraph id="HA736B6FF42C44617BB3FF21E6F519A0C"><enum>(2)</enum><header>Coordination with section 1059</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1059">Section 1059(b)(2)(B)</external-xref> is amended by striking <quote>or 245</quote> and inserting <quote>245, or 245A</quote>.</text> </paragraph></subsection><subsection id="HBF84CE6240A045CC970973D5D436F9C8"><enum>(d)</enum><header>Coordination with foreign tax credit limitation</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/904">Section 904(b)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HE767EC366ABE453B9DCDC56ECCE0B9EB" style="OLC"> <paragraph id="HC1F07A24A0C44B0DB77229B5A40F2C71"><enum>(5)</enum><header>Treatment of dividends for which deduction is allowed under section 245A</header><text display-inline="yes-display-inline">For purposes of subsection (a), in the case of a United States shareholder with respect to a specified 10-percent owned foreign corporation, such shareholder’s taxable income from sources without the United States (and entire taxable income) shall be determined without regard to—</text> <subparagraph id="HDB86833B253C4558995248656416DA51"><enum>(A)</enum><text>the foreign-source portion of any dividend received from such foreign corporation, and</text> </subparagraph><subparagraph id="H81C327BE550B4FF083EA281F86C8E4D6"><enum>(B)</enum><text>any deductions properly allocable or apportioned to—</text> <clause id="H0EEC8D36247644C2A03F8D2F2D5D8FD2"><enum>(i)</enum><text>income (other than subpart F income (as defined in section 952) and foreign high return amounts (as defined in section 951A(b)) with respect to stock of such specified 10-percent owned foreign corporation, or</text> </clause><clause id="H571930912BBE46A7BA78BF4493D9C1EF"><enum>(ii)</enum><text>such stock (to the extent income with respect to such stock is other than subpart F income (as so defined) or foreign high return amounts (as so defined)).</text> </clause></subparagraph><continuation-text continuation-text-level="paragraph">Any term which is used in section 245A and in this paragraph shall have the same meaning for purposes of this paragraph as when used in such section.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HFB47CDAC8BEC459D8DE9F1F662167951"><enum>(e)</enum><header>Conforming amendments</header> <paragraph id="H4D4E47BE247B486DA0113FAE1859D0A4"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/245">Section 245(a)(4)</external-xref> is amended by striking <quote>section 902(c)(1)</quote> and inserting <quote>section 245A(c)(2) applied by substituting <quote>qualified 10-percent owned foreign corporation</quote> for <quote>specified 10-percent owned foreign corporation</quote> each place it appears</quote>.</text> </paragraph><paragraph id="HF773B7592BD14E9B90638ADBC36A7CF7"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/951">Section 951(b)</external-xref> is amended by striking <quote>subpart</quote> and inserting <quote>title</quote>.</text> </paragraph><paragraph id="H9AC2349C095A44AD9F55672C5EEE4601"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/957">Section 957(a)</external-xref> is amended by striking <quote>subpart</quote> in the matter preceding paragraph (1) and inserting <quote>title</quote>.</text> </paragraph><paragraph id="HDE355AF92BDF4ED8A95890FDB82BAF75"><enum>(4)</enum><text display-inline="yes-display-inline">The table of sections for part VIII of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by inserting after section 245 the following new item:</text> <quoted-block display-inline="no-display-inline" id="HAF30E01A0F5B4C9F86637777B208D9E2" style="OLC"> <toc container-level="quoted-block-container" idref="H2660FFA9EE6F4D65B155391800C2C666" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration"> <toc-entry idref="H981C4B41A21C4C448C068861415B7042" level="section">Sec. 245A. Deduction for foreign-source portion of dividends received by domestic corporations from specified 10-percent owned foreign corporations.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H7F9CBA0797144F5D89C8F7A0A750AAE4"><enum>(f)</enum><header>Effective date</header><text>The amendments made by this section shall apply to distributions made after (and, in the case of the amendments made by subsection (d), deductions with respect to taxable years ending after) December 31, 2017.</text> </subsection></section><section id="HD091F838F07E48ACA19784315826A586"><enum>4002.</enum><header>Application of participation exemption to investments in United States property</header> <subsection id="H7CA57520DED74BA895B1DBB1802085C8"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/956">Section 956(a)</external-xref> is amended in the matter preceding paragraph (1) by inserting <quote>(other than a corporation)</quote> after <quote>United States shareholder</quote>.</text> </subsection><subsection id="H37216391B8894932870126A21A57EBA5"><enum>(b)</enum><header>Regulatory authority to prevent abuse</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/956">Section 956(e)</external-xref> is amended by striking <quote>including regulations to prevent</quote> and inserting</text> <quoted-block display-inline="yes-display-inline" id="HD5E905FCF68F4A7EBF079B22B9655112" style="OLC"> <text>including regulations—</text><paragraph id="HD92B2771C09B46E39BB650719FDAAE65"><enum>(1)</enum><text display-inline="yes-display-inline">to address United States shareholders that are partnerships with corporate partners, and</text> </paragraph><paragraph id="H18D134E18BF84B5B9E959B8BB726E47B"><enum>(2)</enum><text>to prevent</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H3ACB0A69EDAE4D13887B7A80177E484D"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2017.</text> </subsection></section><section id="H27DC4CB6B88340E198E0ACD3ACEB424F"><enum>4003.</enum><header>Limitation on losses with respect to specified 10-percent owned foreign corporations</header> <subsection id="H9D027D9A6BFB4BA8AE43863FE768EE31"><enum>(a)</enum><header>Basis in specified 10-percent owned foreign corporation reduced by nontaxed portion of dividend for purposes of determining loss</header> <paragraph id="HBE9FA887161B4D629A8097EF555F9FB0"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/961">Section 961</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H6BD1DD054BF2411F8F8B17B9E15243AE" style="OLC"> <subsection id="H1EBC92EDC8CF4F39BB29FAAD99CD9009"><enum>(d)</enum><header>Basis in specified 10-percent owned foreign corporation reduced by nontaxed portion of dividend for purposes of determining loss</header><text>If a domestic corporation received a dividend from a specified 10-percent owned foreign corporation (as defined in section 245A) in any taxable year, solely for purposes of determining loss on any disposition of stock of such foreign corporation in such taxable year or any subsequent taxable year, the basis of such domestic corporation in such stock shall be reduced (but not below zero) by the amount of any deduction allowable to such domestic corporation under section 245A with respect to such stock except to the extent such basis was reduced under section 1059 by reason of a dividend for which such a deduction was allowable.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H47AA8264F65B4EB89A126800697CA690"><enum>(2)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to distributions made after December 31, 2017.</text> </paragraph></subsection><subsection id="H363F74BAA6D84A568D906EF8784D0CB1"><enum>(b)</enum><header>Treatment of foreign branch losses transferred to specified 10-percent owned foreign corporations</header> <paragraph id="HC014DECE041C4E429B93FB6163CB07EC"><enum>(1)</enum><header>In general</header><text>Part II of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by adding at the end the following new section:</text> <quoted-block display-inline="no-display-inline" id="H081D5B86723F49CA828B946128907E8A" style="OLC"> <section id="HC25479B93DD3438C8160FE877FCDC753"><enum>91.</enum><header>Certain foreign branch losses transferred to specified 10-percent owned foreign corporations</header> <subsection id="H0D758829673542FF97699CC48AF45265"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">If a domestic corporation transfers substantially all of the assets of a foreign branch (within the meaning of section 367(a)(3)(C)) to a specified 10-percent owned foreign corporation (as defined in section 245A) with respect to which it is a United States shareholder after such transfer, such domestic corporation shall include in gross income for the taxable year which includes such transfer an amount equal to the transferred loss amount with respect to such transfer.</text> </subsection><subsection id="H8AB8A4D07E2B423FB0119904D08A5D96"><enum>(b)</enum><header>Transferred loss amount</header><text>For purposes of this section, the term <quote>transferred loss amount</quote> means, with respect to any transfer of substantially all of the assets of a foreign branch, the excess (if any) of—</text> <paragraph id="HBDA6B0B430C74DD381BDBE55A9B5320E"><enum>(1)</enum><text>the sum of losses—</text> <subparagraph id="HE9369F0250D44574ABAA9A32FDD91EA3"><enum>(A)</enum><text>which were incurred by the foreign branch after December 31, 2017, and before the transfer, and</text> </subparagraph><subparagraph id="H696BF2F7F69D47F7ACCC2FE00FC8858C"><enum>(B)</enum><text>with respect to which a deduction was allowed to the taxpayer, over</text> </subparagraph></paragraph><paragraph id="H9856EA5F3D73481CA401DDF76E251D43"><enum>(2)</enum><text>the sum of—</text> <subparagraph id="HDC821724C3574C7E8B653FC02C3B571F"><enum>(A)</enum><text>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</text> </subparagraph><subparagraph id="H96B1B001ADED488D88527428CC44ED19"><enum>(B)</enum><text display-inline="yes-display-inline">any amount which is recognized under section 904(f)(3) on account of the transfer.</text> </subparagraph></paragraph></subsection><subsection id="H3EED2D79327249008D69076DEA23C971"><enum>(c)</enum><header>Reduction for recognized gains</header> <paragraph id="H85465D6CB1CA4643B6A1489D05014AD6"><enum>(1)</enum><header>In general</header><text>In the case of a transfer not described in section 367(a)(3)(C), the transferred loss amount shall be reduced (but not below zero) by the amount of gain recognized by the taxpayer on account of the transfer (other than amounts taken into account under subsection (c)(2)(B)).</text> </paragraph><paragraph id="H7F7A6ECE1C114C9480576A57B0A97DF6"><enum>(2)</enum><header>Coordination with recognition under section 367</header><text>In the case of a transfer described in section 367(a)(3)(C), the transferred loss amount shall not exceed the excess (if any) of—</text> <subparagraph id="H523DB1FBBC4248B9B064907AB9854E8A"><enum>(A)</enum><text display-inline="yes-display-inline">the excess of the amount described in section 367(a)(3)(C)(i) over the amount described in section 367(a)(3)(C)(ii) with respect to such transfer, over</text> </subparagraph><subparagraph id="H344A9F1921244CEDBC18A34911B83F69"><enum>(B)</enum><text>the amount of gain recognized under section 367(a)(3)(C) with respect to such transfer.</text> </subparagraph></paragraph></subsection><subsection commented="no" id="HE69C751F35CC40E88D55D1677D8084FE"><enum>(d)</enum><header>Source of income</header><text>Amounts included in gross income under this section shall be treated as derived from sources within the United States.</text> </subsection><subsection id="HB4CAB1FF3A2744329B455FD7A89D7F12"><enum>(e)</enum><header>Basis adjustments</header><text display-inline="yes-display-inline">Consistent with such regulations or other guidance as the Secretary may prescribe, proper adjustments shall be made in the adjusted basis of the taxpayer’s stock in the specified 10-percent owned foreign corporation to which the transfer is made, and in the transferee’s adjusted basis in the property transferred, to reflect amounts included in gross income under this section.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H09DD9E95FE98474BA25199C0BF620C82"><enum>(2)</enum><header>Amounts recognized under section 367 on transfer of foreign branch with previously deducted losses treated as United States source</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/367">Section 367(a)(3)(C)</external-xref> is amended by striking <quote>outside</quote> in the last sentence and inserting <quote>within</quote>.</text> </paragraph><paragraph id="H229AE780D9FF41C6AC82E20203A9277C"><enum>(3)</enum><header>Clerical amendment</header><text display-inline="yes-display-inline">The table of sections for part II of subchapter B of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by adding at the end the following new item:</text> <quoted-block display-inline="no-display-inline" id="H76C9F89E7FD14F2BB53CC0BCDE4869A3" style="OLC"> <toc container-level="quoted-block-container" idref="H081D5B86723F49CA828B946128907E8A" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration"> <toc-entry idref="HC25479B93DD3438C8160FE877FCDC753" level="section">Sec. 91. Certain foreign branch losses transferred to specified 10-percent owned foreign corporations.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H54274E46F5C74D1A8A687E5350E7EC14"><enum>(4)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to transfers after December 31, 2017.</text> </paragraph></subsection></section><section id="H4025C3B4810A47879CA2ED57A9ABF9D4"><enum>4004.</enum><header>Treatment of deferred foreign income upon transition to participation exemption system of taxation</header> <subsection id="H9EBF69A0A73C49E0A3EAFB38A093433F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/965">Section 965</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H5CA452C9B0704F65A7025EC29F39306B" style="OLC"> <section id="HEF1BD17E18474BDC8FB8CF14E3E8DD4E"><enum>965.</enum><header>Treatment of deferred foreign income upon transition to participation exemption system of taxation</header> <subsection id="HF05F169401594953894AEADD10AB1C2A"><enum>(a)</enum><header>Treatment of deferred foreign income as subpart F income</header><text display-inline="yes-display-inline">In the case of the last taxable year of a deferred foreign income corporation which begins before January 1, 2018, the subpart F income of such foreign corporation (as otherwise determined for such taxable year under section 952) shall be increased by the greater of—</text> <paragraph id="HEC47A0C4FF5E45BC86C2ED2879F24EFA"><enum>(1)</enum><text>the accumulated post-1986 deferred foreign income of such corporation determined as of November 2, 2017, or</text> </paragraph><paragraph id="HF7FC707FC24E44FBAA166245ADB973A6"><enum>(2)</enum><text>the accumulated post-1986 deferred foreign income of such corporation determined as of December 31, 2017.</text> </paragraph></subsection><subsection id="HDBCA4D9C39C9420AA314E03B5E8DCA8C"><enum>(b)</enum><header>Reduction in amounts included in gross income of United States shareholders of specified foreign corporations with deficits in earnings and profits</header> <paragraph id="H812137A5DD2C44EA9A13385DB8DA1645"><enum>(1)</enum><header>In general</header><text>In the case of a taxpayer which is a United States shareholder with respect to at least one deferred foreign income corporation and at least one E&P deficit foreign corporation, the amount which would (but for this subsection) be taken into account under section 951(a)(1) by reason of subsection (a) as such United States shareholder’s pro rata share of the subpart F income of each deferred foreign income corporation shall be reduced (but not below zero) by the amount of such United States shareholder’s aggregate foreign E&P deficit which is allocated under paragraph (2) to such deferred foreign income corporation.</text> </paragraph><paragraph id="H371006C1EA5444E987D493303B2D95B9"><enum>(2)</enum><header>Allocation of aggregate foreign E&P deficit</header><text display-inline="yes-display-inline">The aggregate foreign E&P deficit of any United States shareholder shall be allocated among the deferred foreign income corporations of such United States shareholder in an amount which bears the same proportion to such aggregate as—</text> <subparagraph id="HA726D9A4A7724D1B85A8AC54C4B70352"><enum>(A)</enum><text>such United States shareholder’s pro rata share of the accumulated post-1986 deferred foreign income of each such deferred foreign income corporation, bears to</text> </subparagraph><subparagraph id="H6086BA682B3E4C598C9F1B50A180B01E"><enum>(B)</enum><text>the aggregate of such United States shareholder’s pro rata share of the accumulated post-1986 deferred foreign income of all deferred foreign income corporations of such United States shareholder.</text> </subparagraph></paragraph><paragraph id="H0E0A4F2B17154C2C96139D4F1BB20145"><enum>(3)</enum><header>Definitions related to E&P deficits</header><text>For purposes of this subsection—</text> <subparagraph id="H851292C277E84A40893655C941C7897E"><enum>(A)</enum><header>Aggregate foreign E&P deficit</header><text>The term <quote>aggregate foreign E&P deficit</quote> means, with respect to any United States shareholder, the aggregate of such shareholder’s pro rata shares of the specified E&P deficits of the E&P deficit foreign corporations of such shareholder.</text> </subparagraph><subparagraph id="HAB333A6B9C824A0DB37A178737BD6CD0"><enum>(B)</enum><header>E&P deficit foreign corporation</header><text>The term <quote>E&P deficit foreign corporation</quote> means, with respect to any taxpayer, any specified foreign corporation with respect to which such taxpayer is a United States shareholder, if—</text> <clause id="H2452481151C349B4BF1DFFC1CA76B8AB"><enum>(i)</enum><text>such specified foreign corporation has a deficit in post-1986 earnings and profits, and</text> </clause><clause id="H6CCBA2B319BC4D74BBF441CF2EEA9F2D"><enum>(ii)</enum><text>as of November 2, 2017—</text> <subclause id="H0F8FA3487B4E4A8F84089D4A5D9FD31D"><enum>(I)</enum><text>such corporation was a specified foreign corporation, and</text> </subclause><subclause id="HF88FBA7E082B4EBFB891E83123CB1C8B"><enum>(II)</enum><text>such taxpayer was a United States shareholder of such corporation.</text> </subclause></clause></subparagraph><subparagraph id="H0E4609C306434F9E8089909E18B9A2AE"><enum>(C)</enum><header>Specified E&P deficit</header><text>The term <quote>specified E&P deficit</quote> means, with respect to any E&P deficit foreign corporation, the amount of the deficit referred to in subparagraph (B).</text> </subparagraph></paragraph><paragraph id="HDCDEC141D89248CAB08CBC2EE228E030"><enum>(4)</enum><header>Netting among United States shareholders in same affiliated group</header> <subparagraph id="H02B86A7C835843B782DC70C1254804F9"><enum>(A)</enum><header>In general</header><text>In the case of any affiliated group which includes at least one E&P net surplus shareholder and one E&P net deficit shareholder, the amount which would (but for this paragraph) be taken into account under section 951(a)(1) by reason of subsection (a) by each such E&P net surplus shareholder shall be reduced (but not below zero) by such shareholder’s applicable share of the affiliated group’s aggregate unused E&P deficit.</text> </subparagraph><subparagraph id="HB51AAB34328C433CBB76528D9DCB68B8"><enum>(B)</enum><header>E&P net surplus shareholder</header><text>For purposes of this paragraph, the term <quote>E&P net surplus shareholder</quote> means any United States shareholder which would (determined without regard to this paragraph) take into account an amount greater than zero under section 951(a)(1) by reason of subsection (a).</text> </subparagraph><subparagraph id="H1B14ACD73ACC40108ECEBC88D2BEE4B3"><enum>(C)</enum><header>E&P net deficit shareholder</header><text>For purposes of this paragraph, the term <quote>E&P net deficit shareholder</quote> means any United States shareholder if—</text> <clause id="HAA2E9F8F799B45BEBE122A2843847223"><enum>(i)</enum><text>the aggregate foreign E&P deficit with respect to such shareholder (as defined in paragraph (3)(A)), exceeds</text> </clause><clause id="H2F2D7612286C4C4DB9C43D610D7B3790"><enum>(ii)</enum><text>the amount which would (but for this subsection) be taken into account by such shareholder under section 951(a)(1) by reason of subsection (a).</text> </clause></subparagraph><subparagraph id="HAA3B2810256344828962F142E8EB63E7"><enum>(D)</enum><header>Aggregate unused E&P deficit</header><text>For purposes of this paragraph—</text> <clause id="HBB21CCCA6C084E66AF15B64D0681FC35"><enum>(i)</enum><header>In general</header><text>The term <quote>aggregate unused E&P deficit</quote> means, with respect to any affiliated group, the lesser of—</text> <subclause id="HFBAE87F823664DD1B05EAB6B4E788E8E"><enum>(I)</enum><text>the sum of the excesses described in subparagraph (C), determined with respect to each E&P net deficit shareholder in such group, or</text> </subclause><subclause id="HBD6D2DD18E8E4ABB864B88498B8913F2"><enum>(II)</enum><text>the amount determined under subparagraph (E)(ii).</text> </subclause></clause><clause id="HB67723FCA4534F30B32AE22E88612904"><enum>(ii)</enum><header>Reduction with respect to E&P net deficit shareholders which are not wholly owned by the affiliated group</header><text display-inline="yes-display-inline">If the group ownership percentage of any E&P net deficit shareholder is less than 100 percent, the amount of the excess described in subparagraph (C) which is taken into account under clause (i)(I) with respect to such E&P net deficit shareholder shall be such group ownership percentage of such amount.</text> </clause></subparagraph><subparagraph commented="no" id="HD1A89E7D24BC455B916794EBE30D62DF"><enum>(E)</enum><header>Applicable share</header><text>For purposes of this paragraph, the term <quote>applicable share</quote> means, with respect to any E&P net surplus shareholder in any affiliated group, the amount which bears the same proportion to such group’s aggregate unused E&P deficit as—</text> <clause commented="no" id="H003C291066594C7C8CC4DE54A76F882B"><enum>(i)</enum><text>the product of—</text> <subclause id="HE3C5F2D88CCC4B9F941C5FDF97756143"><enum>(I)</enum><text>such shareholder’s group ownership percentage, multiplied by</text> </subclause><subclause id="H89E7925015B24C76A74EA3056756E958"><enum>(II)</enum><text>the amount which would (but for this paragraph) be taken into account under section 951(a)(1) by reason of subsection (a) by such shareholder, bears to</text> </subclause></clause><clause commented="no" id="H999C31CF60E240368C592E9C86FE89CB"><enum>(ii)</enum><text>the aggregate amount determined under clause (i) with respect to all E&P net surplus shareholders in such group.</text> </clause></subparagraph><subparagraph id="HB874D29461A04CDA9B8B8E8F68AD6660"><enum>(F)</enum><header>Group ownership percentage</header><text>For purposes of this paragraph, the term <quote>group ownership percentage</quote> means, with respect to any United States shareholder in any affiliated group, the percentage of the value of the stock of such United States shareholder which is held by other includible corporations in such affiliated group. Notwithstanding the preceding sentence, the group ownership percentage of the common parent of the affiliated group is 100 percent. Any term used in this subparagraph which is also used in section 1504 shall have the same meaning as when used in such section.</text> </subparagraph></paragraph></subsection><subsection id="H8923ECFE62E5498A9D38ECB27C1237D4"><enum>(c)</enum><header>Application of participation exemption to included income</header> <paragraph id="HA0BC87504E5949CA9798C0BB9A93A329"><enum>(1)</enum><header>In general</header><text>In the case of a United States shareholder of a deferred foreign income corporation, there shall be allowed as a deduction for the taxable year in which an amount is included in the gross income of such United States shareholder under section 951(a)(1) by reason of this section an amount equal to the sum of—</text> <subparagraph id="H60AA3DD3B4834EAD8C2AB80E9F485938"><enum>(A)</enum><text>the United States shareholder’s 7 percent rate equivalent percentage of the excess (if any) of—</text> <clause id="HC441EA77F16145CEAA91973095897E82"><enum>(i)</enum><text>the amount so included as gross income, over</text> </clause><clause id="HA061C1FC46634567BB93DC3A353DDAAB"><enum>(ii)</enum><text>the amount of such United States shareholder’s aggregate foreign cash position, plus</text> </clause></subparagraph><subparagraph id="HC72985E9E82744EE894C00CA82E41175"><enum>(B)</enum><text>the United States shareholder’s 14 percent rate equivalent percentage of so much of the amount described in subparagraph (A)(ii) as does not exceed the amount described in subparagraph (A)(i).</text> </subparagraph></paragraph><paragraph id="H007242A0116E4D59B9F1520886294BEE"><enum>(2)</enum><header>7 and 14 percent rate equivalent percentages</header><text>For purposes of this subsection—</text> <subparagraph id="H5DA8BB869C574DC480158EEA0A1880D1"><enum>(A)</enum><header>7 percent rate equivalent percentage</header><text>The term <quote>7 percent rate equivalent percentage</quote> means, with respect to any United States shareholder for any taxable year, the percentage which would result in the amount to which such percentage applies being subject to a 7 percent rate of tax determined by only taking into account a deduction equal to such percentage of such amount and the highest rate of tax specified in section 11 for such taxable year. In the case of any taxable year of a United States shareholder to which section 15 applies, the highest rate of tax under section 11 before the effective date of the change in rates and the highest rate of tax under section 11 after the effective date of such change shall each be taken into account under the preceding sentence in the same proportions as the portion of such taxable year which is before and after such effective date, respectively.</text> </subparagraph><subparagraph id="H16B3A54CE54C46EEBCD95D4BCFCDA7C6"><enum>(B)</enum><header>14 percent rate equivalent percentage</header><text>The term <quote>14 percent rate equivalent percentage</quote> means, with respect to any United States shareholder for any taxable year, the percentage determined under subparagraph (A) applied by substituting <quote>14 percent rate of tax</quote> for <quote>7 percent rate of tax</quote>.</text> </subparagraph></paragraph><paragraph id="H142A9B38C867407CBEBC3A787D62B025"><enum>(3)</enum><header>Aggregate foreign cash position</header><text>For purposes of this subsection—</text> <subparagraph id="H9728DD6B32CC47C98A338DF2C40651B0"><enum>(A)</enum><header>In general</header><text>The term <quote>aggregate foreign cash position</quote> means, with respect to any United States shareholder, one-third of the sum of—</text> <clause id="H36C90F92FBBF4510986A4DE8051DC5F6"><enum>(i)</enum><text display-inline="yes-display-inline">the aggregate of such United States shareholder’s pro rata share of the cash position of each specified foreign corporation of such United States shareholder determined as of November 2, 2017,</text> </clause><clause id="H901645CCC67941BD90B21D8985701AE9"><enum>(ii)</enum><text>the aggregate described in clause (i) determined as of the close of the last taxable year of each such specified foreign corporation which ends before November 2, 2017, and</text> </clause><clause id="H703C5F9D3BE34DF49DB8DBAD3BBDEBA5"><enum>(iii)</enum><text>the aggregate described in clause (i) determined as of the close of the taxable year of each such specified foreign corporation which precedes the taxable year referred to in clause (ii).</text> </clause><continuation-text continuation-text-level="subparagraph">In the case of any foreign corporation which did not exist as of the determination date described in clause (ii) or (iii), this subparagraph shall be applied separately to such foreign corporation by not taking into account such clause and by substituting <quote>one-half (100 percent in the case that both clauses (ii) and (iii) are disregarded)</quote> for <quote>one-third</quote>.</continuation-text></subparagraph><subparagraph id="H7D8B5A1C747C423BAA36B8064D18AE8F"><enum>(B)</enum><header>Cash position</header><text>For purposes of this paragraph, the cash position of any specified foreign corporation is the sum of—</text> <clause id="H08B7A8A0AA7444F59A19CBB15816B7D2"><enum>(i)</enum><text>cash held by such foreign corporation,</text> </clause><clause id="HD608C8E9E5B24D61B2D54343CD0FD75C"><enum>(ii)</enum><text>the net accounts receivable of such foreign corporation, plus</text> </clause><clause id="HDD5EE790F0C84263B85A1B36A9A45C40"><enum>(iii)</enum><text>the fair market value of the following assets held by such corporation:</text> <subclause id="H4DDBC03AED8C499BB5420D3506B1EEB9"><enum>(I)</enum><text>Actively traded personal property for which there is an established financial market.</text> </subclause><subclause id="H656376F2A2864996A1A6B881F4BAD5BD"><enum>(II)</enum><text>Commercial paper, certificates of deposit, the securities of the Federal government and of any State or foreign government.</text> </subclause><subclause id="HDAD8AE76737945099909BB92F78E39E9"><enum>(III)</enum><text>Any foreign currency.</text> </subclause><subclause id="HA10378ECBF824B4B833B9A3FEDB13413"><enum>(IV)</enum><text>Any obligation with a term of less than one year.</text> </subclause><subclause id="H36DEBC8DE4C9470A98EEB7CB39E1C6B2"><enum>(V)</enum><text>Any asset which the Secretary identifies as being economically equivalent to any asset described in this subparagraph.</text> </subclause></clause></subparagraph><subparagraph id="HF4E31AAAEF664152912C10208C6FEC9F"><enum>(C)</enum><header>Net accounts receivable</header><text>For purposes of this paragraph, the term <quote>net accounts receivable</quote> means, with respect to any specified foreign corporation, the excess (if any) of—</text> <clause id="H5A8CFDC0F0F34AF0960EC1014EE2B079"><enum>(i)</enum><text>such corporation’s accounts receivable, over</text> </clause><clause id="HDADDE698CC6E4CF0A7F2410A2E66D90B"><enum>(ii)</enum><text>such corporation’s accounts payable (determined consistent with the rules of section 461).</text> </clause></subparagraph><subparagraph id="H98A51015FF9F4471B4CF30088CB2BE2C"><enum>(D)</enum><header>Prevention of double counting</header> <clause id="H862EE1C35A7548BCA25117CFAF5E2F48"><enum>(i)</enum><header>In general</header><text>The applicable percentage of each specified cash position of a specified foreign corporation shall not be taken into account by—</text> <subclause id="HCEB5D3DE438447FD96195CA631513BA7"><enum>(I)</enum><text>the United States shareholder referred to in clause (ii) with respect to such position, or</text> </subclause><subclause id="H5CE39852032B419CB64C49EBEB9FB4E6"><enum>(II)</enum><text>any United States shareholder which is an includible corporation in the same affiliated group as such United States shareholder referred to in clause (ii).</text> </subclause></clause><clause id="H6F8D0068843345D4BFD363AB60733ABF"><enum>(ii)</enum><header>Specified cash position</header><text>For purposes of this subparagraph, the term <quote>specified cash position</quote> means—</text> <subclause id="H0AEDF87B444A4BDA9F8D9D7B72A4DACC"><enum>(I)</enum><text>amounts described in subparagraph (B)(ii) to the extent such amounts are receivable from another specified foreign corporation with respect to any United States shareholder,</text> </subclause><subclause id="HFFD05600C5544035B2E0B37D304CC3AC"><enum>(II)</enum><text>amounts described in subparagraph (B)(iii)(I) to the extent such amounts consist of an equity interest in another specified foreign corporation with respect to any United States shareholder, and</text> </subclause><subclause id="HE1225BCD9CCF4AD18F3A02354C1BBC99"><enum>(III)</enum><text>amounts described in subparagraph (B)(iii)(IV) to the extent that another specified foreign corporation with respect to any United States shareholder is obligated to repay such amount.</text> </subclause></clause><clause commented="no" id="HEFB409B33D0641368E3392F13739B793"><enum>(iii)</enum><header>Applicable percentage</header><text display-inline="yes-display-inline">For purposes of this subparagraph, the term <quote>applicable percentage</quote> means—</text> <subclause id="H12CEEF784875460BBC0EF1ADAB976FC4"><enum>(I)</enum><text>with respect to each specified cash position described in subclause (I) or (III) of clause (ii), the pro rata share of the United States shareholder referred to in clause (ii) with respect to the specified foreign corporation referred to in such clause, and</text> </subclause><subclause id="H6070BEF5989D4942B1736BCD9417F2BD"><enum>(II)</enum><text>with respect to each specified cash position described in clause (ii)(II), the ratio (expressed as a percentage and not in excess of 100 percent) of the United States shareholder’s pro rata share of the cash position of the specified foreign corporation referred to in such clause divided by the amount of such specified cash position.</text> </subclause><continuation-text continuation-text-level="clause">For purposes of this subparagraph, a separate applicable percentage shall be determined under each of subclauses (I) and (II) with respect to each specified foreign corporation referred to in clause (ii) with respect to which a specified cash position is determined for the specified foreign corporation referred to in clause (i).</continuation-text></clause><clause id="HE00C55B247FC45A187A291F10F234AEC"><enum>(iv)</enum><header>Reduction with respect to affiliated group members not wholly owned by the affiliated group</header><text>For purposes of clause (i)(II), in the case of an includible corporation the group ownership percentage of which is less than 100 percent (as determined under subsection (b)(4)(F)), the amount not take into account by reason of such clause shall be the group ownership percentage of such amount (determined without regard to this clause).</text> </clause></subparagraph><subparagraph id="HA4A8E0B4E7224B879DE32C2AB747082D"><enum>(E)</enum><header>Certain blocked assets not taken into account</header><text>A cash position of a specified foreign corporation shall not be taken into account under subparagraph (A) if such position could not (as of the date that it would otherwise have been taken into account under clause (i), (ii), or (iii) of subparagraph (A)) have been distributed by such specified foreign corporation to United States shareholders of such specified foreign corporation because of currency or other restrictions or limitations imposed under the laws of any foreign country (within the meaning of section 964(b)).</text> </subparagraph><subparagraph id="H995147AB15104498B8866A917880A3DF"><enum>(F)</enum><header>Cash positions of certain non-corporate entities taken into account</header><text display-inline="yes-display-inline">An entity (other than a domestic corporation) shall be treated as a specified foreign corporation of a United States shareholder for purposes of determining such United States shareholder’s aggregate foreign cash position if any interest in such entity is held by a specified foreign corporation of such United States shareholder (determined after application of this subparagraph) and such entity would be a specified foreign corporation of such United States shareholder if such entity were a foreign corporation.</text> </subparagraph><subparagraph id="H963D476825C8411CB7D7A43A45D8974B"><enum>(G)</enum><header>Time of certain determinations</header><text>For purposes of this paragraph, the determination of whether a person is a United States shareholder, whether a person is a specified foreign corporation, and the pro rata share of a United States shareholder with respect to a specified foreign corporation, shall be determined as of the end of the taxable year described in subsection (a).</text> </subparagraph><subparagraph id="HEF2A9FBA1F9F41A7BB678D92D21DF6B0"><enum>(H)</enum><header>Anti-abuse</header><text>If the Secretary determines that the principal purpose of any transaction was to reduce the aggregate foreign cash position taken into account under this subsection, such transaction shall be disregarded for purposes of this subsection.</text> </subparagraph></paragraph></subsection><subsection id="H7EA7AF1D974D42B3A8993FE1AE0A2EC6"><enum>(d)</enum><header>Deferred foreign income corporation; accumulated post-1986 deferred foreign income</header><text>For purposes of this section—</text> <paragraph id="H38643FC2119044B29A357AFBE7D72754"><enum>(1)</enum><header>Deferred foreign income corporation</header><text>The term <quote>deferred foreign income corporation</quote> means, with respect to any United States shareholder, any specified foreign corporation of such United States shareholder which has accumulated post-1986 deferred foreign income (as of the date referred to in paragraph (1) or (2) of subsection (a), whichever is applicable with respect to such foreign corporation) greater than zero.</text> </paragraph><paragraph id="H4A5438A6D6024E11B7C916F16A82F95D"><enum>(2)</enum><header>Accumulated post-1986 deferred foreign income</header><text>The term <quote>accumulated post-1986 deferred foreign income</quote> means the post-1986 earnings and profits except to the extent such earnings—</text> <subparagraph id="HB7123AA7AEC04FB39D947CE3259E91E1"><enum>(A)</enum><text>are attributable to income of the specified foreign corporation which is effectively connected with the conduct of a trade or business within the United States and subject to tax under this chapter, or</text> </subparagraph><subparagraph id="H3BCC6CD19F2E4B889018ECF5C262FD48"><enum>(B)</enum><text>if distributed, would be excluded from the gross income of a United States shareholder under section 959.</text> </subparagraph><continuation-text continuation-text-level="paragraph">To the extent provided in regulations or other guidance prescribed by the Secretary, in the case of any controlled foreign corporation which has shareholders which are not United States shareholders, accumulated post-1986 deferred foreign income shall be appropriately reduced by amounts which would be described in subparagraph (B) if such shareholders were United States shareholders.</continuation-text></paragraph><paragraph id="HF59E1D74F3CB410E90A62D3D1662329E"><enum>(3)</enum><header>Post-1986 earnings and profits</header><text display-inline="yes-display-inline">The term <quote>post-1986 earnings and profits</quote> means the earnings and profits of the foreign corporation (computed in accordance with sections 964(a) and 986) accumulated in taxable years beginning after December 31, 1986, and determined—</text> <subparagraph id="HF6A0DD1CB84A4687BBF69C522A100688"><enum>(A)</enum><text>as of the date referred to in paragraph (1) or (2) of subsection (a), whichever is applicable with respect to such foreign corporation,</text> </subparagraph><subparagraph id="HA1B8A796F6A64ACDB22551E301C93659"><enum>(B)</enum><text display-inline="yes-display-inline">without diminution by reason of dividends distributed during the taxable year ending with or including such date, and</text> </subparagraph><subparagraph commented="no" id="HA6CC1FADCF8F4C17BEF6013B96737994"><enum>(C)</enum><text>increased by the amount of any qualified deficit (within the meaning of section 952(c)(1)(B)(ii)) arising before January 1, 2018, which is treated as a qualified deficit (within the meaning of such section as amended by the <short-title>Tax Cuts and Jobs Act</short-title>) for purposes of such foreign corporation’s first taxable year beginning after December 31, 2017.</text> </subparagraph></paragraph></subsection><subsection id="H85210B39CF1A4B548307A05021ED1FE3"><enum>(e)</enum><header>Specified foreign corporation</header> <paragraph id="H6D935BAB8E7F4ACE963F294881D3135F"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>specified foreign corporation</quote> means—</text> <subparagraph id="HB679F6C427CD441396992A2172C9A5AB"><enum>(A)</enum><text>any controlled foreign corporation, and</text> </subparagraph><subparagraph id="H4F117AB49F19423681E44F51CE2B99FD"><enum>(B)</enum><text>any foreign corporation with respect to which one or more domestic corporations is a United States shareholder (determined without regard to section 958(b)(4)).</text> </subparagraph></paragraph><paragraph id="H1BC52F2E751A4BBB9892DFF47D158E89"><enum>(2)</enum><header>Application to certain foreign corporations</header><text>For purposes of sections 951 and 961, a foreign corporation described in paragraph (1)(B) shall be treated as a controlled foreign corporation solely for purposes of taking into account the subpart F income of such corporation under subsection (a) (and for purposes of applying subsection (f)).</text> </paragraph><paragraph id="H938E6C12E6B14E3EBAAA3B721B2834BE"><enum>(3)</enum><header>Exception for passive foreign investment companies</header><text display-inline="yes-display-inline">The term <quote>specified foreign corporation</quote> shall not include any passive foreign investment company (within the meaning of subpart D of part VI of subchapter P) that is not a controlled foreign corporation.</text> </paragraph></subsection><subsection id="H7BE8276AD1D54C3EA3683B9975EBA101"><enum>(f)</enum><header>Determinations of pro rata share</header><text display-inline="yes-display-inline">For purposes of this section, the determination of any United States shareholder’s pro rata share of any amount with respect to any specified foreign corporation shall be determined under rules similar to the rules of section 951(a)(2) by treating such amount in the same manner as subpart F income (and by treating such specified foreign corporation as a controlled foreign corporation).</text> </subsection><subsection display-inline="no-display-inline" id="HAB9E550E43C84F3FA6A5B7B2FE3CFBC8"><enum>(g)</enum><header>Disallowance of foreign tax credit, etc</header> <paragraph id="H46AF1B60481247E28BD5FC50D7944BA6"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">No credit shall be allowed under section 901 for the applicable percentage of any taxes paid or accrued (or treated as paid or accrued) with respect to any amount for which a deduction is allowed under this section.</text> </paragraph><paragraph id="H548EE248F37F4508B759A4D3E374A806"><enum>(2)</enum><header>Applicable percentage</header><text>For purposes of this subsection, the term <quote>applicable percentage</quote> means the amount (expressed as a percentage) equal to the sum of—</text> <subparagraph id="H1B2CF2E0DF8F4E8185B04778F3EC45F9"><enum>(A)</enum><text display-inline="yes-display-inline">80 percent of the ratio of—</text> <clause id="HE9C735AE12294240A0022E4EA35A829C"><enum>(i)</enum><text>the excess to which subsection (c)(1)(A) applies, divided by</text> </clause><clause id="H05D9ECA900704D9F800519FA791296AA"><enum>(ii)</enum><text>the sum of such excess plus the amount to which subsection (c)(1)(B) applies, plus</text> </clause></subparagraph><subparagraph id="H7C45FE1DADBA4C4291612D287BF3E0E8"><enum>(B)</enum><text display-inline="yes-display-inline">60 percent of the ratio of—</text> <clause id="HC7193F1B19054BEFAEC7B0710C90B88D"><enum>(i)</enum><text display-inline="yes-display-inline">the amount to which subsection (c)(1)(B) applies, divided by</text> </clause><clause id="HF6A9C02A152A49FA9CFE65C5D2B1F61E"><enum>(ii)</enum><text>the sum described in subparagraph (A)(ii).</text> </clause></subparagraph></paragraph><paragraph id="H23F514C89DE741CBBC746A4DE67B5D19"><enum>(3)</enum><header>Denial of deduction</header><text display-inline="yes-display-inline">No deduction shall be allowed under this chapter for any tax for which credit is not allowable under section 901 by reason of paragraph (1) (determined by treating the taxpayer as having elected the benefits of subpart A of part III of subchapter N).</text> </paragraph><paragraph id="HF9E74AB3CED94CAD8CE4ED52E4E5C006"><enum>(4)</enum><header>Coordination with section 78</header><text display-inline="yes-display-inline">With respect to the taxes treated as paid or accrued by a domestic corporation with respect to amounts which are includible in gross income of such domestic corporation by reason of this section, section 78 shall apply only to so much of such taxes as bears the same proportion to the amount of such taxes as—</text> <subparagraph id="H9D0A636C5A8F4A09ABB50AB7662E33F4"><enum>(A)</enum><text>the excess of—</text> <clause id="HDA7268A320804BE68F98E986F85CCB8D"><enum>(i)</enum><text display-inline="yes-display-inline">the amounts which are includible in gross income of such domestic corporation by reason of this section, over</text> </clause><clause id="H2E1FFDDAD3424BA2B8996CBE6CDD20E6"><enum>(ii)</enum><text>the deduction allowable under subsection (c) with respect to such amounts, bears to</text> </clause></subparagraph><subparagraph id="H0C03ECB491054F6FAC7E2BB1766B8E7D"><enum>(B)</enum><text>such amounts.</text> </subparagraph></paragraph><paragraph id="H62F800D08901418391C266AF62B67D16"><enum>(5)</enum><header>Extension of foreign tax credit carryover period</header><text>With respect to any taxes paid or accrued (or treated as paid or accrued) with respect to any amount for which a deduction is allowed under this section, section 904(c) shall be applied by substituting <quote>first 20 succeeding taxable years</quote> for <quote>first 10 succeeding taxable years</quote>.</text> </paragraph></subsection><subsection id="H6D05FE4E838E4C70856702DB3C7885DC"><enum>(h)</enum><header>Election to pay liability in installments</header> <paragraph commented="no" id="H956DC65230524D62A95D87DA6E8F9CF6"><enum>(1)</enum><header>In general</header><text>In the case of a United States shareholder of a deferred foreign income corporation, such United States shareholder may elect to pay the net tax liability under this section in 8 equal installments.</text> </paragraph><paragraph id="H397BA8DDFB434C1DB7FF40CD87AAC51F"><enum>(2)</enum><header>Date for payment of installments</header><text>If an election is made under paragraph (1), the first installment shall be paid on the due date (determined without regard to any extension of time for filing the return) for the return of tax for the taxable year described in subsection (a) and each succeeding installment shall be paid on the due date (as so determined) for the return of tax for the taxable year following the taxable year with respect to which the preceding installment was made.</text> </paragraph><paragraph id="HFEF1E63E27A746C5B05BE2BCC72ACF19"><enum>(3)</enum><header>Acceleration of payment</header><text>If there is an addition to tax for failure to timely pay any installment required under this subsection, a liquidation or sale of substantially all the assets of the taxpayer (including in a title 11 or similar case), a cessation of business by the taxpayer, or any similar circumstance, then the unpaid portion of all remaining installments shall be due on the date of such event (or in the case of a title 11 or similar case, the day before the petition is filed). The preceding sentence shall not apply to the sale of substantially all the assets of a taxpayer to a buyer if such buyer enters into an agreement with the Secretary under which such buyer is liable for the remaining installments due under this subsection in the same manner as if such buyer were the taxpayer.</text> </paragraph><paragraph id="H569B6D9259F642338FECD920EDB0C461"><enum>(4)</enum><header>Proration of deficiency to installments</header><text display-inline="yes-display-inline">If an election is made under paragraph (1) to pay the net tax liability under this section in installments and a deficiency has been assessed with respect to such net tax liability, the deficiency shall be prorated to the installments payable under paragraph (1). The part of the deficiency so prorated to any installment the date for payment of which has not arrived shall be collected at the same time as, and as a part of, such installment. The part of the deficiency so prorated to any installment the date for payment of which has arrived shall be paid upon notice and demand from the Secretary. This subsection shall not apply if the deficiency is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax.</text> </paragraph><paragraph id="H9CF1B25C0DC74E9C9B9AE687F4DBAB5D"><enum>(5)</enum><header>Election</header><text>Any election under paragraph (1) shall be made not later than the due date for the return of tax for the taxable year described in subsection (a) and shall be made in such manner as the Secretary may provide.</text> </paragraph><paragraph id="H5644CA99623E4F889F38C9703E94DC7D"><enum>(6)</enum><header>Net tax liability under this section</header><text display-inline="yes-display-inline">For purposes of this subsection—</text> <subparagraph id="H9CDAF1BBC5014BFD86E51A134AF136E6"><enum>(A)</enum><header>In general</header><text>The net tax liability under this section with respect to any United States shareholder is the excess (if any) of—</text> <clause id="H935E324E00654242B364681D0E881BE5"><enum>(i)</enum><text display-inline="yes-display-inline">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</text> </clause><clause id="HF9BB348B3C1D4076B795F3A681A57E8B"><enum>(ii)</enum><text>such taxpayer’s net income tax for such taxable year determined—</text> <subclause id="HDE50114D7403430680F9C5ED72C04FD9"><enum>(I)</enum><text>without regard to this section, and</text> </subclause><subclause id="HBE5AB1043C2346CAADD199EAE6ED77F2"><enum>(II)</enum><text>without regard to any income, deduction, or credit, properly attributable to a dividend received by such United States shareholder from any deferred foreign income corporation.</text> </subclause></clause></subparagraph><subparagraph id="H45C8CC1381FB4C6A8FA7A69A7DC8FE02"><enum>(B)</enum><header>Net income tax</header><text>The term <quote>net income tax</quote> means the regular tax liability reduced by the credits allowed under subparts A, B, and D of part IV of subchapter A.</text> </subparagraph></paragraph></subsection><subsection commented="no" id="HDAE0B643FD624BC9B3319697A46961F7"><enum>(i)</enum><header>Special rules for S corporation shareholders</header> <paragraph commented="no" id="HF1A9467FA56E4592B4537AE7676A1395"><enum>(1)</enum><header>In general</header><text>In the case of any S corporation which is a United States shareholder of a deferred foreign income corporation, each shareholder of such S corporation may elect to defer payment of such shareholder’s net tax liability under this section with respect to such S corporation until the shareholder’s taxable year which includes the triggering event with respect to such liability. Any net tax liability payment of which is deferred under the preceding sentence shall be assessed on the return as an addition to tax in the shareholder’s taxable year which includes such triggering event.</text> </paragraph><paragraph commented="no" id="H448BB28DFAA2477090ADC85E7B121488"><enum>(2)</enum><header>Triggering event</header> <subparagraph commented="no" id="H9FFA7166062341DD98A816498E4ED630"><enum>(A)</enum><header>In general</header><text>In the case of any shareholder’s net tax liability under this section with respect to any S corporation, the triggering event with respect to such liability is whichever of the following occurs first:</text> <clause commented="no" id="HC0638C01210440BC9BAACF97E67DB546"><enum>(i)</enum><text>Such corporation ceases to be an S corporation (determined as of the first day of the first taxable year that such corporation is not an S corporation).</text> </clause><clause commented="no" id="H94CAED4CAC5240C58A2C3C796D7EFF5C"><enum>(ii)</enum><text display-inline="yes-display-inline">A liquidation or sale of substantially all the assets of such S corporation (including in a title 11 or similar case), a cessation of business by such S corporation, such S corporation ceases to exist, or any similar circumstance.</text> </clause><clause commented="no" id="HA279180F20384DE7B302AF5B934B5B26"><enum>(iii)</enum><text display-inline="yes-display-inline">A transfer of any share of stock in such S corporation by the taxpayer (including by reason of death, or otherwise).</text> </clause></subparagraph><subparagraph commented="no" id="H60E5259C2E484558AF74C7A89F5149C1"><enum>(B)</enum><header>Partial transfers of stock</header><text>In the case of a transfer of less than all of the taxpayer’s shares of stock in the S corporation, such transfer shall only be a triggering event with respect to so much of the taxpayer’s net tax liability under this section with respect to such S corporation as is properly allocable to such stock.</text> </subparagraph><subparagraph commented="no" id="H66D3BDC7721F431AB0D8B1AB4C983059"><enum>(C)</enum><header>Transfer of liability</header><text>A transfer described in clause (iii) shall not be treated as a triggering event if the transferee enters into an agreement with the Secretary under which such transferee is liable for net tax liability with respect to such stock in the same manner as if such transferee were the taxpayer.</text> </subparagraph></paragraph><paragraph commented="no" id="HEA9E47BD2990473194A9E126D4B295DC"><enum>(3)</enum><header>Net tax liability</header><text>A shareholder’s net tax liability under this section with respect to any S corporation is the net tax liability under this section which would be determined under subsection (h)(6) if the only subpart F income taken into account by such shareholder by reason of this section were allocations from such S corporation.</text> </paragraph><paragraph commented="no" id="H6EB2203468E34E6CBA6402770AAB3956"><enum>(4)</enum><header>Election to pay deferred liability in installments</header><text display-inline="yes-display-inline">In the case of a taxpayer which elects to defer payment under paragraph (1)—</text> <subparagraph commented="no" id="H2F09EC250A8140709A4A88783890788B"><enum>(A)</enum><text>subsection (h) shall be applied separately with respect to the liability to which such election applies,</text> </subparagraph><subparagraph commented="no" id="HAD6FE7C7761B40909E0B7E911F82295C"><enum>(B)</enum><text display-inline="yes-display-inline">an election under subsection (h) with respect to such liability shall be treated as timely made if made not later than the due date for the return of tax for the taxable year in which the triggering event with respect to such liability occurs,</text> </subparagraph><subparagraph commented="no" id="H7FBE863C9D0948E2AE224BAE5D7DDD97"><enum>(C)</enum><text display-inline="yes-display-inline">the first installment under subsection (h) with respect to such liability shall be paid not later than such due date (but determined without regard to any extension of time for filing the return), and</text> </subparagraph><subparagraph commented="no" id="HB48CBFF433AF4B2F8A5AE324AED16C9A"><enum>(D)</enum><text>if the triggering event with respect to any net tax liability is described in paragraph (2)(A)(ii), an election under subsection (h) with respect to such liability may be made only with the consent of the Secretary.</text> </subparagraph></paragraph><paragraph commented="no" id="HCD6A4A358C9A42E692BB1EA20F9C2094"><enum>(5)</enum><header>Joint and several liability of S corporation</header><text display-inline="yes-display-inline">If any shareholder of an S corporation elects to defer payment under paragraph (1), such S corporation shall be jointly and severally liable for such payment and any penalty, addition to tax, or additional amount attributable thereto.</text> </paragraph><paragraph id="HCE1A0CDA2D0A4C16AA21723AF88663AE"><enum>(6)</enum><header>Extension of limitation on collection</header><text>Notwithstanding any other provision of law, any limitation on the time period for the collection of a liability deferred under this subsection shall not be treated as beginning before the date of the triggering event with respect to such liability.</text> </paragraph><paragraph id="H8FF0ABF2746646769F29E3B1243250C2"><enum>(7)</enum><header>Annual reporting of net tax liability</header> <subparagraph id="HEEF7F00D03BE4361AA912B4F079816AF"><enum>(A)</enum><header>In general</header><text>Any shareholder of an S corporation which makes an election under paragraph (1) shall report the amount of such shareholder’s deferred net tax liability on such shareholder’s return of tax for the taxable year for which such election is made and on the return of tax for each taxable year thereafter until such amount has been fully assessed on such returns.</text> </subparagraph><subparagraph id="H1E71FCE001EB427CB0017D00E0039DC3"><enum>(B)</enum><header>Deferred net tax liability</header><text>For purposes of this paragraph, the term <quote>deferred net tax liability</quote> 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.</text> </subparagraph><subparagraph id="HC3201EC6E87F409EA838F8977290AC43"><enum>(C)</enum><header>Failure to report</header><text>In the case of any failure to report any amount required to be reported under subparagraph (A) with respect to any taxable year before the due date for the return of tax for such taxable year, there shall be assessed on such return as an addition to tax 5 percent of such amount.</text> </subparagraph></paragraph><paragraph commented="no" id="H6B17322611DE4AF99764C3486DB4D455"><enum>(8)</enum><header>Election</header><text>Any election under paragraph (1)—</text> <subparagraph id="H82DAFA2621364FE9A4CE60BC6DD82914"><enum>(A)</enum><text>shall be made by the shareholder of the S corporation not later than the due date for such shareholder’s return of tax for the taxable year which includes the close of the taxable year of such S corporation in which the amount described in subsection (a) is taken into account, and</text> </subparagraph><subparagraph id="HC8E3DBE5D7294D78981C49252CB8DB7E"><enum>(B)</enum><text>shall be made in such manner as the Secretary may provide.</text> </subparagraph></paragraph></subsection><subsection id="HA6B06830E33544D9A84C719608DA0729"><enum>(j)</enum><header>Reporting by S corporation</header><text display-inline="yes-display-inline">Each S corporation which is a United States shareholder of a deferred foreign income corporation shall report in its return of tax under section 6037(a) the amount includible in its gross income for such taxable year by reason of this section and the amount of the deduction allowable by subsection (c). Any copy provided to a shareholder under section 6037(b) shall include a statement of such shareholder’s pro rata share of such amounts.</text> </subsection><subsection id="HF09D1108782C4329B0F60F8267869A43"><enum>(k)</enum><header>Inclusion of deferred foreign income under this section not to trigger recapture of overall foreign loss, etc</header><text display-inline="yes-display-inline">For purposes of sections 904(f)(1) and 907(c)(4), in the case of a United States shareholder of a deferred foreign income corporation, such United States shareholder’s taxable income from sources without the United States and combined foreign oil and gas income shall be determined without regard to this section.</text> </subsection><subsection id="HA338F79DDD5D4AC98A26CCC8D2F78EB6"><enum>(l)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H50468CE4A6D140FC9F15A76EAF1000CE"><enum>(b)</enum><header>Clerical amendment</header><text>The table of sections for subpart F of part III of subchapter N of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking the item relating to section 965 and inserting the following:</text> <quoted-block display-inline="no-display-inline" id="H4628911036644E88BB0CA346669BA07F" style="OLC"> <toc container-level="quoted-block-container" idref="H5CA452C9B0704F65A7025EC29F39306B" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration"> <toc-entry idref="HEF1BD17E18474BDC8FB8CF14E3E8DD4E" level="section">Sec. 965. Treatment of deferred foreign income upon transition to participation exemption system of taxation.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </subsection></section></subtitle><subtitle id="HC923A08A212D4371AFAB98EC60FABCCA"><enum>B</enum><header>Modifications related to foreign tax credit system</header> <section commented="no" id="HD69669E050CA4B848BF65CF276346056"><enum>4101.</enum><header>Repeal of section 902 indirect foreign tax credits; determination of section 960 credit on current year basis</header> <subsection commented="no" id="H4A0D2795197B4D798C4A2C3A5DEE90CC"><enum>(a)</enum><header>Repeal of section 902 indirect foreign tax credits</header><text display-inline="yes-display-inline">Subpart A of part III of subchapter N of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 902.</text> </subsection><subsection id="H8416A6FF57AA4107A820BFE8379E3E4E"><enum>(b)</enum><header>Determination of section 960 credit on current year basis</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/960">Section 960</external-xref> is amended—</text> <paragraph id="H15193CAF9C7B44CC91109A3F278D574C"><enum>(1)</enum><text>by striking subsection (c), by redesignating subsection (b) as subsection (c), by striking all that precedes subsection (c) (as so redesignated) and inserting the following:</text> <quoted-block display-inline="no-display-inline" id="H3041B3469B7A45D2BAF652492AA04086" style="OLC"> <section commented="no" id="HCAEB648436C248CFA8C71CB0F8C0179A"><enum>960.</enum><header>Deemed paid credit for subpart F inclusions</header> <subsection id="H604E58CC610C41D0A5443C08A7002E78"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this subpart, if there is included in the gross income of a domestic corporation any item of income under section 951(a)(1) with respect to any controlled foreign corporation with respect to which such domestic corporation is a United States shareholder, such domestic corporation shall be deemed to have paid so much of such foreign corporation’s foreign income taxes as are properly attributable to such item of income.</text> </subsection><subsection id="H1E6B5C569E124A599A9B1D70CE1AA80C"><enum>(b)</enum><header>Special rules for distributions from previously taxed earnings and profits</header><text display-inline="yes-display-inline">For purposes of this subpart—</text> <paragraph id="H4DE8F8F7090C442D93F371D08FE4ABA6"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">If any portion of a distribution from a controlled foreign corporation to a domestic corporation which is a United States shareholder with respect to such controlled foreign corporation is excluded from gross income under section 959(a), such domestic corporation shall be deemed to have paid so much of such foreign corporation’s foreign income taxes as—</text> <subparagraph id="HD5F5AD5DFC8A444AB495902430D3058C"><enum>(A)</enum><text>are properly attributable to such portion, and</text> </subparagraph><subparagraph id="H03C44CB6DC27432DA138EC710DA93224"><enum>(B)</enum><text>have not been deemed to have to been paid by such domestic corporation under this section for the taxable year or any prior taxable year.</text> </subparagraph></paragraph><paragraph id="HDA542040FBAF43BB80F2A897985B507C"><enum>(2)</enum><header>Tiered controlled foreign corporations</header><text>If section 959(b) applies to any portion of a distribution from a controlled foreign corporation to another controlled foreign corporation, such controlled foreign corporation shall be deemed to have paid so much of such other controlled foreign corporation’s foreign income taxes as—</text> <subparagraph id="HB320D4D8FDEF411B8534C5F75C47AE99"><enum>(A)</enum><text>are properly attributable to such portion, and</text> </subparagraph><subparagraph id="HF69C667A5C674684848D6AB82C2F4F81"><enum>(B)</enum><text>have not been deemed to have been paid by a domestic corporation under this section for the taxable year or any prior taxable year.</text></subparagraph></paragraph></subsection></section><after-quoted-block>,</after-quoted-block></quoted-block> </paragraph><paragraph id="H692CF089BD6F45F48F805F30B5A58DFB"><enum>(2)</enum><text>and by adding after subsection (c) (as so redesignated) the following new subsections:</text> <quoted-block display-inline="no-display-inline" id="H48B13B3072F24075BEB0E807A7163C2B" style="OLC"> <subsection commented="no" id="H0D137B6508774794A276D338BDB802FC"><enum>(d)</enum><header>Foreign income taxes</header><text>The term <quote>foreign income taxes</quote> means any income, war profits, or excess profits taxes paid or accrued to any foreign country or possession of the United States.</text> </subsection><subsection commented="no" id="HC3DA3FC1A4654F6CBAD561ED1E10C636"><enum>(e)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H2A4E757E065F416BB66A92F66D535DE0"><enum>(c)</enum><header>Conforming amendments</header> <paragraph id="HC4216E2A26D04A58AA818B3DA9335234"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/78">Section 78</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H3F658A502A6D4B0CA3EE0B6F29DD9F21" style="OLC"> <section id="H961805B312F147F58C3DD992B5E10481"><enum>78.</enum><header>Gross up for deemed paid foreign tax credit</header><text display-inline="no-display-inline">If a domestic corporation chooses to have the benefits of subpart A of part III of subchapter N (relating to foreign tax credit) for any taxable year, an amount equal to the taxes deemed to be paid by such corporation under subsections (a) and (b) of section 960 for such taxable year shall be treated for purposes of this title (other than sections 959, 960, and 961) as an item of income required to be included in the gross income of such domestic corporation under section 951(a) for such taxable year.</text></section><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H232B88092DB6477B81ADDA1ED453946F"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/245">Section 245(a)(10)(C)</external-xref> is amended by striking <quote>sections 902, 907, and 960</quote> and inserting <quote>sections 907 and 960</quote>.</text> </paragraph><paragraph id="HDCFC730B1F9C42A18F9E767A5B09D6F7"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/535">Sections 535(b)(1)</external-xref> and <external-xref legal-doc="usc" parsable-cite="usc/26/545"> 545(b)(1)</external-xref> are each amended by striking <quote>section 902(a) or 960(a)(1)</quote> and inserting <quote>section 960</quote>.</text> </paragraph><paragraph id="H9CF87F535B504BE8822BD194E040CBBC"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/814">Section 814(f)(1)</external-xref> is amended—</text> <subparagraph id="H2BAE5D72ED6140AF8971FFE6B22E23DB"><enum>(A)</enum><text>by striking subparagraph (B), and</text> </subparagraph><subparagraph id="HC0ADEE93B8ED45FEA8E094B18D6E426A"><enum>(B)</enum><text>by striking all that precedes <quote>No income</quote> and inserting the following:</text> <quoted-block display-inline="no-display-inline" id="H12A8E8AA1D1A40D0B5B3F5436E9456A5" style="OLC"> <paragraph id="H0F10FED4D3E84224BBAAC0B7FC3B1031"><enum>(1)</enum><header>Treatment of foreign taxes</header></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph><paragraph id="HC4E273439485437EAE419CBC19CDACB5"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/865">Section 865(h)(1)(B)</external-xref> is amended by striking <quote>sections 902, 907, and 960</quote> and inserting <quote>sections 907 and 960</quote>.</text> </paragraph><paragraph id="H9730E3C0834E48C0BFD19EC597E23F09"><enum>(6)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/901">Section 901(a)</external-xref> is amended by striking <quote>sections 902 and 960</quote> and inserting <quote>section 960</quote>.</text> </paragraph><paragraph id="H81F569613B1D457BBCF69055A6903EF3"><enum>(7)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/901">Section 901(e)(2)</external-xref> is amended by striking <quote>but is not limited to—</quote> and all that follows through <quote>that portion</quote> and inserting <quote>but is not limited to, that portion</quote>.</text> </paragraph><paragraph id="H0E4D5289B64B45958B3784260D7F5E6B"><enum>(8)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/901">Section 901(f)</external-xref> is amended by striking <quote>sections 902 and 960</quote> and inserting <quote>section 960</quote>.</text> </paragraph><paragraph id="H0CF55A22D92B4E3E8FCA089BE1BCEA58"><enum>(9)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/901">Section 901(j)(1)(A)</external-xref> is amended by striking <quote>902 or</quote>.</text> </paragraph><paragraph id="H7B9292FD6B574236B85756FED2DA4878"><enum>(10)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/901">Section 901(j)(1)(B)</external-xref> is amended by striking <quote>sections 902 and 960</quote> and inserting <quote>section 960</quote>.</text> </paragraph><paragraph id="H13826F1DA6224420B3B2927E88F8E773"><enum>(11)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/901">Section 901(k)(2)</external-xref> is amended by striking <quote>section 853, 902, or 960</quote> and inserting <quote>section 853 or 960</quote>.</text> </paragraph><paragraph id="H03731AE31A3E4FF5860395DF29E800C3"><enum>(12)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/901">Section 901(k)(6)</external-xref> is amended by striking <quote>902 or</quote>.</text> </paragraph><paragraph id="H6EF0F0E27A054D84901EBF1120DE7C89"><enum>(13)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/901">Section 901(m)(1)</external-xref> is amended by striking <quote>relevant foreign assets—</quote> and all that follows and inserting <quote>relevant foreign assets shall not be taken into account in determining the credit allowed under subsection (a).</quote>.</text> </paragraph><paragraph id="H6B57855E2DE749D09C3ED051F1C050D1"><enum>(14)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/904">Section 904(d)(1)</external-xref> is amended by striking <quote>sections 902, 907, and 960</quote> and inserting <quote>sections 907 and 960</quote>.</text> </paragraph><paragraph id="H473B75F197EC45B0A5C0122B92277D8D"><enum>(15)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/904">Section 904(d)(6)(A)</external-xref> is amended by striking <quote>sections 902, 907, and 960</quote> and inserting <quote>sections 907 and 960</quote>.</text> </paragraph><paragraph id="H448E0638BD7E4668A6B69B12D8ADB79B"><enum>(16)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/904">Section 904(h)(10)(A)</external-xref> is amended by striking <quote>sections 902, 907, and 960</quote> and inserting <quote>sections 907 and 960</quote>.</text> </paragraph><paragraph id="H1E2A636297FD40459682C41184C4C82E"><enum>(17)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/904">Section 904</external-xref> is amended by striking subsection (k).</text> </paragraph><paragraph id="H7A11A6EF6A1E496382ACAC8F6C0E48CF"><enum>(18)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/905">Section 905(c)(1)</external-xref> is amended by striking the last sentence.</text> </paragraph><paragraph id="HF475512C95734EDF8874F33D5BC5410C"><enum>(19)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/905">Section 905(c)(2)(B)(i)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H708D0731AB2F403380AF069B8C9C4FF5" style="OLC"> <clause id="HA3550F05A96D4E05A9D8CF47472624F3"><enum>(i)</enum><text display-inline="yes-display-inline">shall be taken into account for the taxable year to which such taxes relate, and</text></clause><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H8A26AB3B90BB4C338352E86381C8CDD8"><enum>(20)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/906">Section 906(a)</external-xref> is amended by striking <quote>(or deemed, under section 902, paid or accrued during the taxable year)</quote>.</text> </paragraph><paragraph id="H65487A5DB9384048AEE286B931596A5A"><enum>(21)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/906">Section 906(b)</external-xref> is amended by striking paragraphs (4) and (5).</text> </paragraph><paragraph commented="no" display-inline="no-display-inline" id="H4AC9DB69D0D14DB1883B6C816A7C04FE"><enum>(22)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/907">Section 907(b)(2)(B)</external-xref> is amended by striking <quote>902 or</quote>.</text> </paragraph><paragraph commented="no" id="H01CCEDD376DB40418F4DB31F2FC38D41"><enum>(23)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/907">Section 907(c)(3)</external-xref> is amended—</text> <subparagraph commented="no" id="HAD81AA659F3E420C807A107738613245"><enum>(A)</enum><text>by striking subparagraph (A) and redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively, and</text> </subparagraph><subparagraph commented="no" id="HDA1FEBFD06DF448A8610FF2169C41DCE"><enum>(B)</enum><text>by striking <quote>section 960(a)</quote> in subparagraph (A) (as so redesignated) and inserting <quote>section 960</quote>.</text> </subparagraph></paragraph><paragraph commented="no" id="HE08C20339D044DD38F55FC20F6C4E7C3"><enum>(24)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/907">Section 907(c)(5)</external-xref> is amended by striking <quote>902 or</quote>.</text> </paragraph><paragraph commented="no" id="H8AA9EA4D23BE4C288C7C181B4E644140"><enum>(25)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/907">Section 907(f)(2)(B)(i)</external-xref> is amended by striking <quote>902 or</quote>.</text> </paragraph><paragraph id="HBE90EB42CD954089AE3B43CA8361CB3B"><enum>(26)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/908">Section 908(a)</external-xref> is amended by striking <quote>902 or</quote>.</text> </paragraph><paragraph commented="no" id="H024A3AF78C184C518801D1831A7B79B9"><enum>(27)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/909">Section 909(b)</external-xref> is amended—</text> <subparagraph commented="no" id="HB948F78CE7B641E281F94D98920217D9"><enum>(A)</enum><text>by striking <quote>section 902 corporation</quote> in the matter preceding paragraph (1) and inserting <quote>10/50 corporation</quote>,</text> </subparagraph><subparagraph commented="no" id="H4F70956D709441A2846C9832507CC4D4"><enum>(B)</enum><text>by striking <quote>902 or</quote> in paragraph (1),</text> </subparagraph><subparagraph commented="no" id="HEBC64FCEC1CC49C58C4FF769AA1DA80F"><enum>(C)</enum><text>by striking <quote>by such section 902 corporation</quote> and all that follows in the matter following paragraph (2) and inserting <quote>by such 10/50 corporation or a domestic corporation which is a United States shareholder with respect to such 10/50 corporation.</quote>, and</text> </subparagraph><subparagraph commented="no" id="H1BB3003610044950B141C33BEE044FFF"><enum>(D)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">section 902 corporations</header-in-text></quote> in the heading thereof and inserting <quote><header-in-text level="subsection" style="OLC">10/50 corporations</header-in-text></quote>.</text> </subparagraph></paragraph><paragraph id="HCE7C99C517A1418C80135439F423214D"><enum>(28)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/909">Section 909(d)(5)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HA56AACF8F95243E8B7441A734F0431AB" style="OLC"> <paragraph id="H612DCB0A9FE1452C87C6B4A2EC049497"><enum>(5)</enum><header>10/50 corporation</header><text display-inline="yes-display-inline">The term <quote>10/50 corporation</quote> means any foreign corporation with respect to which one or more domestic corporations is a United States shareholder.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph commented="no" id="HD0458AAD30934DACAA50ABC78A647505"><enum>(29)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/958">Section 958(a)(1)</external-xref> is amended by striking <quote>960(a)(1)</quote> and inserting <quote>960</quote>.</text> </paragraph><paragraph id="H4ACD86051BA543078E740C1559414085"><enum>(30)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/959">Section 959(d)</external-xref> is amended by striking <quote>Except as provided in section 960(a)(3), any</quote> and inserting <quote>Any</quote>.</text> </paragraph><paragraph id="H005C8E8A3BB04701A17E00F7F02AA5B7"><enum>(31)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/959">Section 959(e)</external-xref> is amended by striking <quote>section 960(b)</quote> and inserting <quote>section 960(c)</quote>.</text> </paragraph><paragraph id="H4941413E93AE40BE930EEE5675B4E966"><enum>(32)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/1291">Section 1291(g)(2)(A)</external-xref> is amended by striking <quote>any distribution—</quote> and all that follows through <quote>but only if</quote> and inserting <quote>any distribution, any withholding tax imposed with respect to such distribution, but only if</quote>.</text> </paragraph><paragraph id="H8CC65AC97248448D9F652829C679EDC2"><enum>(33)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6038">Section 6038(c)(1)(B)</external-xref> is amended by striking <quote>sections 902 (relating to foreign tax credit for corporate stockholder in foreign corporation) and 960 (relating to special rules for foreign tax credit)</quote> and inserting <quote>section 960</quote>.</text> </paragraph><paragraph id="H7CBD28247FFF4898ADFCB1CCDF37D871"><enum>(34)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/6038">Section 6038(c)(4)</external-xref> is amended by striking subparagraph (C).</text> </paragraph><paragraph id="HD9C92663161C412197DBCE62E8BE1533"><enum>(35)</enum><text display-inline="yes-display-inline">The table of sections for subpart A of part III of subchapter N of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking the item relating to section 902.</text> </paragraph><paragraph id="H67E9258E5E6D4148A16C5FA242F1518B"><enum>(36)</enum><text display-inline="yes-display-inline">The table of sections for subpart F of part III of subchapter N of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking the item relating to section 960 and inserting the following:</text> <quoted-block display-inline="no-display-inline" id="HE82F398083214C3CB9B9326308C2EE6B" style="OLC"> <toc container-level="quoted-block-container" idref="H3041B3469B7A45D2BAF652492AA04086" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration"> <toc-entry idref="HCAEB648436C248CFA8C71CB0F8C0179A" level="section">Sec. 960. Deemed paid credit for subpart F inclusions.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H0BAE2C0A8FF846C595F408FD5F6D5321"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="H63BE21EF682D4B60955ED7A3C45363A9"><enum>4102.</enum><header>Source of income from sales of inventory determined solely on basis of production activities</header> <subsection id="HFBBC5A035D014B81B79FEBCD71766F38"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/863">Section 863(b)</external-xref> is amended by adding at the end the following: <quote>Gains, profits, and income from the sale or exchange of inventory property described in paragraph (2) shall be allocated and apportioned between sources within and without the United States solely on the basis of the production activities with respect to the property.</quote>.</text> </subsection><subsection id="H71EAF4812C1B465EBED59E8116A7D5D9"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section></subtitle><subtitle id="H329A7A52D9FD44E1987F97677C385693"><enum>C</enum><header>Modification of subpart F provisions</header> <section commented="no" id="H4E600EC38323414AB25EC6455592DF55"><enum>4201.</enum><header>Repeal of inclusion based on withdrawal of previously excluded subpart F income from qualified investment</header> <subsection id="H43155E4DEE4142C28A4E52B6D0CA6213"><enum>(a)</enum><header>In general</header><text>Subpart F of part III of subchapter N of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking section 955.</text> </subsection><subsection id="H0D6D56401C2B4A58A9C3543250CFB4BA"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="H83B11E2557A040B2B951A9075C1BC22A"><enum>(1)</enum> <subparagraph commented="no" display-inline="yes-display-inline" id="H5B4D2DBD2B074513903B338139601902"><enum>(A)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/951">Section 951(a)(1)(A)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H07B6A7C18066496F87C125AB8DCAB517" style="OLC"> <subparagraph id="H0A7022645F614903925BE4897F73B228"><enum>(A)</enum><text display-inline="yes-display-inline">his pro rata share (determined under paragraph (2)) of the corporation’s subpart F income for such year, and</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph><subparagraph id="H47E3817420784BA5A0F59419172CE4A5" indent="up1"><enum>(B)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/851">Section 851(b)(3)</external-xref> is amended by striking <quote>section 951(a)(1)(A)(i)</quote> in the flush language at the end and inserting <quote>section 951(a)(1)(A)</quote>.</text> </subparagraph><subparagraph id="HB65B1D68C1D747D7B9EE8785B5148FB8" indent="up1"><enum>(C)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/952">Section 952(c)(1)(B)(i)</external-xref> is amended by striking <quote>section 951(a)(1)(A)(i)</quote> and inserting <quote>section 951(a)(1)(A)</quote>.</text> </subparagraph><subparagraph id="H56A45C3D51B34F0187FA474CC44F0FF7" indent="up1"><enum>(D)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/953">Section 953(c)(1)(C)</external-xref> is amended by striking <quote>section 951(a)(1)(A)(i)</quote> and inserting <quote>section 951(a)(1)(A)</quote>.</text> </subparagraph></paragraph><paragraph id="HA285AB8EF86A468F80A36F05F63B3DE0"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/951">Section 951(a)</external-xref> is amended by striking paragraph (3).</text> </paragraph><paragraph id="H5E0B313C7E5748DFB733159B9A35FB8E"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/953">Section 953(d)(4)(B)(iv)(II)</external-xref> is amended by striking <quote>or amounts referred to in clause (ii) or (iii) of section 951(a)(1)(A)</quote>.</text> </paragraph><paragraph id="H20E263258092418A9C544D3400849A5A"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/964">Section 964(b)</external-xref> is amended by striking <quote>, 955,</quote>.</text> </paragraph><paragraph id="H4D0B41E496C045DDA1D8E459B4DC589C"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/970">Section 970</external-xref> is amended by striking subsection (b).</text> </paragraph><paragraph id="HB97C44BFCBAC4E768D4B1B9F5E541F0E"><enum>(6)</enum><text display-inline="yes-display-inline">The table of sections for subpart F of part III of subchapter N of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by striking the item relating to section 955.</text> </paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H3898F395366242D8B0DF739BC9A58149"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.</text> </subsection></section><section id="H75A57FE323CC4156AF6B4768BE1AF422"><enum>4202.</enum><header>Repeal of treatment of foreign base company oil related income as subpart F income</header> <subsection id="H550458A9F6B34D3B9019BE521F0DBDA5"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/954">Section 954(a)</external-xref> is amended by striking paragraph (5), by striking the comma at the end of paragraph (3) and inserting a period, and by inserting <quote>and</quote> at the end of paragraph (2).</text> </subsection><subsection id="H150FE5B7924A4274AC36F545F328C520"><enum>(b)</enum><header>Conforming amendments</header> <paragraph id="H9AC547E125B94079A9318EB40B8162F4"><enum>(1)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/952">Section 952(c)(1)(B)(iii)</external-xref> is amended by striking subclause (I) and by redesignating subclauses (II) through (V) as subclauses (I) through (IV), respectively.</text> </paragraph><paragraph id="H900B0CC1EED24A4BBFA684490005316E"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/954">Section 954(b)(4)</external-xref> is amended by striking the last sentence.</text> </paragraph><paragraph id="HFF9F171B39F14A6AA16B53544FD48C05"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/954">Section 954(b)(5)</external-xref> is amended by striking <quote>the foreign base company services income, and the foreign base company oil related income</quote> and inserting <quote>and the foreign base company services income</quote>.</text> </paragraph><paragraph id="H020B6C47B102431F8C39165A02F3E57C"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/954">Section 954(b)</external-xref> is amended by striking paragraph (6).</text> </paragraph><paragraph id="H6D6B0FCD5F4845639B827460264E32D1"><enum>(5)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/954">Section 954</external-xref> is amended by striking subsection (g).</text> </paragraph></subsection><subsection id="H201302C1B77746FB8EB360AEC57C4A26"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.</text> </subsection></section><section id="HED57EF7B9BFC4C6DB85EEFF0FCCD2C60"><enum>4203.</enum><header>Inflation adjustment of de minimis exception for foreign base company income</header> <subsection id="HC83DC64A77E04286BAEF79155D8EE6CB"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/954">Section 954(b)(3)</external-xref> is amended by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="HFA9EA36136F94E09B9CD88D55D8357F8" style="OLC"> <subparagraph id="H38DC3D0E0F714FDE9281238ED877CF1A"><enum>(D)</enum><header>Inflation adjustment</header><text>In the case of any taxable year beginning after 2017, the dollar amount in subparagraph (A)(ii) shall be increased by an amount equal to—</text> <clause id="HBDBCD08077ED4A4B99CAD6C1B51E05CE"><enum>(i)</enum><text>such dollar amount, multiplied by</text> </clause><clause id="HCBC9B19216DE492AAAA957235738CFD1"><enum>(ii)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which the taxable year begins.</text> </clause><continuation-text continuation-text-level="subparagraph">Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $50,000.</continuation-text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H9E166C4B6A02461BBFD2F3198CACA00A"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.</text> </subsection></section><section id="H00D82B8885B74E4E884566A15593B573"><enum>4204.</enum><header>Look-thru rule for related controlled foreign corporations made permanent</header> <subsection id="HCFAE29922B984311B89933522DFDBBB2"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (6) of <external-xref legal-doc="usc" parsable-cite="usc/26/954">section 954(c)</external-xref> is amended by striking subparagraph (C).</text> </subsection><subsection display-inline="no-display-inline" id="H37FBF3E3460640FDA475D34C1482CDB1"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2019, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.</text> </subsection></section><section id="H8FB36501A71540D2B9A9472D4E5E5848"><enum>4205.</enum><header>Modification of stock attribution rules for determining status as a controlled foreign corporation</header> <subsection id="H3EC8F13CAA2E4625ABB89190C4939DC1"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/958">Section 958(b)</external-xref> is amended—</text> <paragraph id="H029192ABD7E741F78CAE1EBA9349739C"><enum>(1)</enum><text>by striking paragraph (4), and</text> </paragraph><paragraph id="HDA5C16C6E1C2422E85F76887593496A0"><enum>(2)</enum><text>by striking <quote>Paragraphs (1) and (4)</quote> in the last sentence and inserting <quote>Paragraph (1)</quote>.</text> </paragraph></subsection><subsection id="HD2963EED2CCB4955807E3CD969CFC103"><enum>(b)</enum><header>Application of certain reporting requirements</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/6038">Section 6038(e)(2)</external-xref> is amended by striking <quote>except that—</quote> and all that follows through <quote>in applying subparagraph (C)</quote> and inserting <quote>except that in applying subparagraph (C)</quote>.</text> </subsection><subsection commented="no" display-inline="no-display-inline" id="H23E1FD7EE29A46F0BAEBF6E10A2D8BEE"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.</text> </subsection></section><section id="H8A8B9830137B40C0AE7EC7D8617BC5E9"><enum>4206.</enum><header>Elimination of requirement that corporation must be controlled for 30 days before subpart F inclusions apply</header> <subsection id="H75A686962D0F4F9E9FBDFE9117915AF0"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/951">Section 951(a)(1)</external-xref> is amended by striking <quote>for an uninterrupted period of 30 days or more</quote> and inserting <quote>at any time</quote>.</text> </subsection><subsection id="H8077DE763C4346F79CA50F074FB5ED15"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendment made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2017, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end.</text> </subsection></section></subtitle><subtitle id="H92201A432DB248D59E47011BD10061DE"><enum>D</enum><header>Prevention of base erosion</header> <section id="H329B21B00B2B47DEAA7216148E19EE28"><enum>4301.</enum><header>Current year inclusion by United States shareholders with foreign high returns</header> <subsection id="HFDEBD2132D204D55A595E5C27258BC5B"><enum>(a)</enum><header>In general</header><text>Subpart F of part III of subchapter N of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by inserting after section 951 the following new section:</text> <quoted-block display-inline="no-display-inline" id="HD9440393A61D4F0FA2936390626995A5" style="OLC"> <section id="H4D20D291C74C4E0995CB41CA0FABD06C"><enum>951A.</enum><header>Foreign high return amount included in gross income of United States shareholders</header> <subsection id="H8894CDDF690B40FE8849CB1EB651B6C0"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Each person who is a United States shareholder of any controlled foreign corporation for any taxable year of such United States shareholder shall include in gross income for such taxable year 50 percent of such shareholder’s foreign high return amount for such taxable year.</text> </subsection><subsection id="H2AF37C13DA34485EAB8C8892FC178991"><enum>(b)</enum><header>Foreign high return amount</header><text>For purposes of this section—</text> <paragraph id="H4CF603D40C2941ECB7D37616CC54B85B"><enum>(1)</enum><header>In general</header><text>The term <quote>foreign high return amount</quote> means, with respect to any United States shareholder for any taxable year of such United States shareholder, the excess (if any) of—</text> <subparagraph id="H430A114C53C4407084E8512EAA7E770C"><enum>(A)</enum><text>such shareholder’s net CFC tested income for such taxable year, over</text> </subparagraph><subparagraph id="H033ED67CE0CB401AACD41A6C8D653F06"><enum>(B)</enum><text>the excess (if any) of—</text> <clause id="H05F53A9BAA494B699BC0CF012BAC4894"><enum>(i)</enum><text>the applicable percentage of the aggregate of such shareholder’s pro rata share of the qualified business asset investment of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year (determined for each taxable year of each such controlled foreign corporation which ends in or with such taxable year of such United States shareholder), over</text> </clause><clause id="HEE66E1C40B6940A6A259BD870C97AE47"><enum>(ii)</enum><text>the amount of interest expense taken into account under subsection (c)(2)(A)(ii) in determining the shareholder’s net CFC tested income for the taxable year.</text> </clause></subparagraph></paragraph><paragraph id="H20165E93808A41AFACE4AE72CCE62A25"><enum>(2)</enum><header>Applicable percentage</header><text>The term <quote>applicable percentage</quote> means, with respect to any taxable year, the Federal short-term rate (determined under section 1274(d) for the month in which or with which such taxable year ends) plus 7 percentage points.</text> </paragraph></subsection><subsection id="HC8F3E718EE1E4CCCB4D5B9865E133585"><enum>(c)</enum><header>Net CFC tested income</header><text>For purposes of this section—</text> <paragraph id="H1E86C81C8FC74008A68502756A42295A"><enum>(1)</enum><header>In general</header><text>The term <quote>net CFC tested income</quote> means, with respect to any United States shareholder for any taxable year of such United States shareholder, the excess (if any) of—</text> <subparagraph id="H78661330F4A44B3CA0F1AA6DE06391DF"><enum>(A)</enum><text display-inline="yes-display-inline">the aggregate of such shareholder’s pro rata share of the tested income of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year of such United States shareholder (determined for each taxable year of such controlled foreign corporation which ends in or with such taxable year of such United States shareholder), over</text> </subparagraph><subparagraph id="HBAB070E369524FEA896EB5A3B3FEB62C"><enum>(B)</enum><text display-inline="yes-display-inline">the aggregate of such shareholder’s pro rata share of the tested loss of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year of such United States shareholder (determined for each taxable year of such controlled foreign corporation which ends in or with such taxable year of such United States shareholder).</text> </subparagraph></paragraph><paragraph commented="no" id="H535DF5AACF8946D2B2976D0F0A3DD670"><enum>(2)</enum><header>Tested income; tested loss</header><text display-inline="yes-display-inline">For purposes of this section—</text> <subparagraph id="H685BB3DBBA3C400BB2F86211112C360D"><enum>(A)</enum><header>Tested income</header><text>The term <quote>tested income</quote> means, with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation, the excess (if any) of—</text> <clause id="H8ED34B86F93C4CEA8260977F6180AFFE"><enum>(i)</enum><text>the gross income of such corporation determined without regard to—</text> <subclause id="H57D69472224842899485C7BCC67FA5D3"><enum>(I)</enum><text>any item of income which is effectively connected with the conduct by such corporation of a trade or business within the United States if subject to tax under this chapter,</text> </subclause><subclause id="H03EC5DA5632649BD87100CAD80C964CB"><enum>(II)</enum><text>any gross income taken into account in determining the subpart F income of such corporation,</text> </subclause><subclause id="H17AB4CF4E4D04B66ACFF083456DFAC52"><enum>(III)</enum><text>except as otherwise provided by the Secretary, any amount excluded from the foreign personal holding company income (as defined in section 954) of such corporation by reason of section 954(c)(6) but only to the extent that any deduction allowable for the payment or accrual of such amount does not result in a reduction in the foreign high return amount of any United States shareholder (determined without regard to this subclause),</text> </subclause><subclause id="HE98B6B1914BD4B5E8400C255313500BA"><enum>(IV)</enum><text>any gross income excluded from the foreign personal holding company income (as defined in section 954) of such corporation by reason of subsection (c)(2)(C), (h), or (i) of section 954,</text> </subclause><subclause id="H2ACD808B8E4945D0BFED48F7315DD672"><enum>(V)</enum><text>any gross income excluded from the insurance income (as defined in section 953) of such corporation by reason of section 953(a)(2),</text> </subclause><subclause id="H7429AA476D104EE284B95E5EBB7DD91C"><enum>(VI)</enum><text>any gross income excluded from foreign base company income (as defined in section 954) or insurance income (as defined in section 953) of such corporation by reason of section 954(b)(4),</text> </subclause><subclause id="H9BDA0D432FBB426397CCB08B1FBEC44D"><enum>(VII)</enum><text>any dividend received from a related person (as defined in section 954(d)(3)), and</text> </subclause><subclause commented="no" id="HECFCC76B98A248418C92DD0F395028AE"><enum>(VIII)</enum><text display-inline="yes-display-inline">any commodities gross income of such corporation, over</text> </subclause></clause><clause commented="no" id="HD6271DBA7A7B47F2A43592FE6539A251"><enum>(ii)</enum><text display-inline="yes-display-inline">the deductions (including taxes) properly allocable to such gross income under rules similar to the rules of section 954(b)(5) (or which would be so properly allocable if such corporation had such gross income).</text> </clause></subparagraph><subparagraph id="H362874617D0740B98BBEDC15AF320AAB"><enum>(B)</enum><header>Tested loss</header><text display-inline="yes-display-inline">The term <quote>tested loss</quote> means, with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation, the excess (if any) of the amount described in subparagraph (A)(ii) over the amount described in subparagraph (A)(i).</text> </subparagraph></paragraph></subsection><subsection id="HB613399956254705B703AD5ABEC34A9D"><enum>(d)</enum><header>Qualified business asset investment</header><text display-inline="yes-display-inline">For purposes of this section—</text> <paragraph id="H5265F8434AFF47DBA02C04F5E4B97653"><enum>(1)</enum><header>In general</header><text>The term <quote>qualified business asset investment</quote> means, with respect to any controlled foreign corporation for any taxable year of such controlled foreign corporation, the aggregate of the corporation’s adjusted bases (determined as of the close of such taxable year and after any adjustments with respect to such taxable year) in specified tangible property—</text> <subparagraph id="H333E7D8776CA4E38987CDDDAEFBB6192"><enum>(A)</enum><text>used in a trade or business of the corporation, and</text> </subparagraph><subparagraph id="HEEAEA612361E498383185F8D8D58752B"><enum>(B)</enum><text>of a type with respect to which a deduction is allowable under section 168.</text> </subparagraph></paragraph><paragraph commented="no" id="H8FB65C4B0BB247C9A9B38A4B0E4FF48E"><enum>(2)</enum><header>Specified tangible property</header><text>The term <quote>specified tangible property</quote> means any tangible property to the extent such property is used in the production of tested income or tested loss.</text> </paragraph><paragraph id="H44962567A36E4ABDBEB5684214E5BBF9"><enum>(3)</enum><header>Partnership property</header><text>For purposes of this subsection, if a controlled foreign corporation holds an interest in a partnership at the close of such taxable year of the controlled foreign corporation, such controlled foreign corporation shall take into account under paragraph (1) the controlled foreign corporation’s distributive share of the aggregate of the partnership’s adjusted bases (determined as of such date in the hands of the partnership) in tangible property held by such partnership to the extent such property—</text> <subparagraph id="H73DACDE525CF41A691E29DFE0DF2BC2B"><enum>(A)</enum><text>is used in the trade or business of the partnership,</text> </subparagraph><subparagraph id="H8CF57E221B414CBA82BC70B0B996F680"><enum>(B)</enum><text>is of a type with respect to which a deduction is allowable under section 168, and</text> </subparagraph><subparagraph id="H8636FF3BEA2545FCB06526BDD0356DD0"><enum>(C)</enum><text>is used in the production of tested income or tested loss (determined with respect to such controlled foreign corporation’s distributive share of income or loss with respect to such property).</text> </subparagraph><continuation-text continuation-text-level="paragraph">For purposes of this paragraph, the controlled foreign corporation’s distributive share of the adjusted basis of any property shall be the controlled foreign corporation’s distributive share of income and loss with respect to such property.</continuation-text></paragraph><paragraph id="HE31D26A61787437B9142DE6A856BD8DF"><enum>(4)</enum><header>Determination of adjusted basis</header><text display-inline="yes-display-inline">For purposes of this subsection, the adjusted basis in any property shall be determined without regard to any provision of this title (or any other provision of law) which is enacted after the date of the enactment of this section.</text> </paragraph><paragraph id="H7AB943853415453FAA53557EC9DCC8BA"><enum>(5)</enum><header>Regulations</header><text>The Secretary shall issue such regulations or other guidance as the Secretary determines appropriate to prevent the avoidance of the purposes of this subsection, including regulations or other guidance which provide for the treatment of property if—</text> <subparagraph id="HCC038667121F499CA1FF7A2406168967"><enum>(A)</enum><text>such property is transferred, or held, temporarily, or</text> </subparagraph><subparagraph id="HDDB165AEE26A47AFA73A4D92D2061272"><enum>(B)</enum><text>the avoidance of the purposes of this paragraph is a factor in the transfer or holding of such property.</text> </subparagraph></paragraph></subsection><subsection commented="no" id="H5F9170DA707C4D9DAE55DC9BE6681FB3"><enum>(e)</enum><header>Commodities gross income</header><text display-inline="yes-display-inline">For purposes of this section—</text> <paragraph commented="no" id="HC9949AD0E3CD4E5BBC769162BEEAFCC6"><enum>(1)</enum><header>Commodities gross income</header><text>The term <quote>commodities gross income</quote> means, with respect to any corporation—</text> <subparagraph id="HCB417ED3D8FF4B03BB0042A418D095CA"><enum>(A)</enum><text>gross income of such corporation from the disposition of commodities which are produced or extracted by such corporation (or a partnership in which such corporation is a partner), and</text> </subparagraph><subparagraph id="H1BDB62DC86B84ACCB4B914D034DF2B65"><enum>(B)</enum><text>gross income of such corporation from the disposition of property which gives rise to income described in subparagraph (A).</text> </subparagraph></paragraph><paragraph commented="no" id="H611C46F636DC4F548E95C1A3D462C850"><enum>(2)</enum><header>Commodity</header><text display-inline="yes-display-inline">The term <quote>commodity</quote> means any commodity described in section 475(e)(2)(A) or section 475(e)(2)(D) (determined without regard to clause (i) thereof and by substituting <quote>a commodity described in subparagraph (A)</quote> for <quote>such a commodity</quote> in clause (ii) thereof).</text> </paragraph></subsection><subsection id="HC76E420134AB437EA1D825BF9D26CBB8"><enum>(f)</enum><header>Taxable years for which persons are treated as United States shareholders of controlled foreign corporations</header><text>For purposes of this section—</text> <paragraph id="H148FF89B8CC840DBB1C99DB6775D84F3"><enum>(1)</enum><header>In general</header><text>A United States shareholder of a controlled foreign corporation shall be treated as a United States shareholder of such controlled foreign corporation for any taxable year of such United States shareholder if—</text> <subparagraph id="H9726255DB30842B98A7C86AE5B067BC3"><enum>(A)</enum><text>a taxable year of such controlled foreign corporation ends in or with such taxable year of such person, and</text> </subparagraph><subparagraph id="H74343F87C70041CF81A2028AA0102D51"><enum>(B)</enum><text>such person owns (within the meaning of section 958(a)) stock in such controlled foreign corporation on the last day, in such taxable year of such foreign corporation, on which the foreign corporation is a controlled foreign corporation.</text> </subparagraph></paragraph><paragraph id="H76A930E6708A452FB6FDFB8F99EFAD93"><enum>(2)</enum><header>Treatment as a controlled foreign corporation</header><text>Except for purposes of paragraph (1)(B) and the application of section 951(a)(2) to this section pursuant to subsection (g), a foreign corporation shall be treated as a controlled foreign corporation for any taxable year of such foreign corporation if such foreign corporation is a controlled foreign corporation at any time during such taxable year.</text> </paragraph></subsection><subsection id="HD727050C9BBD4C9EBE19546EAF0B4473"><enum>(g)</enum><header>Determination of pro rata share</header><text display-inline="yes-display-inline">For purposes of this section, pro rata shares shall be determined under the rules of section 951(a)(2) in the same manner as such section applies to subpart F income.</text> </subsection><subsection id="HAE1AD93D6ED04310A6798F171F0F540C"><enum>(h)</enum><header>Coordination with subpart F</header> <paragraph id="H6B1CE36383FE48698FF65346CE6D7EEB"><enum>(1)</enum><header>Treatment as subpart F income for certain purposes</header><text>Except as otherwise provided by the Secretary any foreign high return amount included in gross income under subsection (a) shall be treated in the same manner as an amount included under section 951(a)(1)(A) for purposes of applying sections 168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 961, 962, 993(a)(1)(E), 996(f)(1), 1248(b)(1), 1248(d)(1), 6501(e)(1)(C), 6654(d)(2)(D), and 6655(e)(4).</text> </paragraph><paragraph id="H3CF371466DFA4135B0208C0967352FBD"><enum>(2)</enum><header>Entire foreign high return amount taken into account for purposes of certain sections</header><text>For purposes of applying paragraph (1) with respect to sections 168(h)(2)(B), 851(b), 959, 961, 962, 1248(b)(1), and 1248(d)(1), the foreign high return amount included in gross income under subsection (a) shall be determined by substituting <quote>100 percent</quote> for <quote>50 percent</quote> in such subsection.</text> </paragraph><paragraph id="H5633DB7B7657457EB633D1407125409D"><enum>(3)</enum><header>Allocation of foreign high return amount to controlled foreign corporations</header><text display-inline="yes-display-inline">For purposes of the sections referred to in paragraph (1), with respect to any controlled foreign corporation any pro rata amount from which is taken into account in determining the foreign high return amount included in gross income of a United States shareholder under subsection (a), the portion of such foreign high return amount which is treated as being with respect to such controlled foreign corporation is—</text> <subparagraph id="HB5082E17F0AD441A9700EFA7006C5F51"><enum>(A)</enum><text>in the case of a controlled foreign corporation with tested loss, zero, and</text> </subparagraph><subparagraph id="HB589004176A4456CA786B095DD798365"><enum>(B)</enum><text>in the case of a controlled foreign corporation with tested income, the portion of such foreign high return amount which bears the same ratio to such foreign high return amount as—</text> <clause id="H8576F68640834604B264DF2A8A731DF9"><enum>(i)</enum><text>such United States shareholder’s pro rata amount of the tested income of such controlled foreign corporation, bears to</text> </clause><clause id="H39DD07431AFA4B1B9B2DC9713EA5638D"><enum>(ii)</enum><text>the aggregate amount determined under subsection (c)(1)(A) with respect to such United States shareholder.</text> </clause></subparagraph></paragraph><paragraph commented="no" id="HF495FE2F11334B4582AC0607225FC324"><enum>(4)</enum><header>Coordination with subpart F to deny double benefit of losses</header><text display-inline="yes-display-inline">In the case of any United States shareholder of any controlled foreign corporation, the amount included in gross income under section 951(a)(1)(A) shall be determined by increasing the earnings and profits of such controlled foreign corporation (solely for purposes of determining such amount) by an amount that bears the same ratio (not greater than 1) to such shareholder’s pro rata share of the tested loss of such controlled foreign corporation as—</text> <subparagraph id="HA6DAEBE1AB2149B99715C4C38EBAE87F"><enum>(A)</enum><text>the aggregate amount determined under subsection (c)(1)(A) with respect to such shareholder, bears to</text> </subparagraph><subparagraph id="H5CE685634E3A48B0956E8CFC9D56F302"><enum>(B)</enum><text>the aggregate amount determined under subsection (c)(1)(B) with respect to such shareholder.</text></subparagraph></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HC2FCDAA7F5F848E4A98016A14ADD1B10"><enum>(b)</enum><header>Foreign tax credit</header> <paragraph id="H81A318B59B254332A7389A0FB11C6A56"><enum>(1)</enum><header>Application of deemed paid foreign tax credit</header><text display-inline="yes-display-inline">Section 960, as amended by the preceding provisions of this Act, is amended by redesignating subsections (d) and (e) as subsections (e) and (f), respectively, and by inserting after subsection (c) the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H60ECB5BF14794A8ABCFC91FE5544CAD1" style="OLC"> <subsection id="HB24D723B72B34351B3412ED51DB750EB"><enum>(d)</enum><header>Deemed paid credit for taxes properly attributable to tested income</header> <paragraph id="H2F1EEB02E23E4B58B3539AF9110B22C1"><enum>(1)</enum><header>In general</header><text>For purposes of this subpart, if any amount is includible in the gross income of a domestic corporation under section 951A, such domestic corporation shall be deemed to have paid foreign income taxes equal to 80 percent of—</text> <subparagraph id="H62911CCA22F64CA4B570E5E11AA6415E"><enum>(A)</enum><text>such domestic corporation’s foreign high return percentage, multiplied by</text> </subparagraph><subparagraph id="H6AC769FCB4954CB6B89D9AC724D170B7"><enum>(B)</enum><text>the aggregate tested foreign income taxes paid or accrued by controlled foreign corporations with respect to which such domestic corporation is a United States shareholder.</text> </subparagraph></paragraph><paragraph id="H180B711E9BE34F7FB096AAB87F685D39"><enum>(2)</enum><header>Foreign high return percentage</header><text>For purposes of paragraph (1), the term <quote>foreign high return percentage</quote> means, with respect to any domestic corporation, the ratio (expressed as a percentage) of—</text> <subparagraph id="H741CE7E909C44A1B8AD4C67335BA9B57"><enum>(A)</enum><text>such corporation’s foreign high return amount (as defined in section 951A(b)), divided by</text> </subparagraph><subparagraph id="HE59ACA24B47C4E528236C1FD0407E9DE"><enum>(B)</enum><text display-inline="yes-display-inline">the aggregate amount determined under section 951A(c)(1)(A) with respect to such corporation.</text> </subparagraph></paragraph><paragraph id="H7F544AB866194B98BC8D9E682F400EE0"><enum>(3)</enum><header>Tested foreign income taxes</header><text>For purposes of paragraph (1), the term <quote>tested foreign income taxes</quote> means, with respect to any domestic corporation which is a United States shareholder of a controlled foreign corporation, the foreign income taxes paid or accrued by such foreign corporation which are properly attributable to gross income described in section 951A(c)(2)(A)(i).</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HB4BCCDE6F22E48BB9E9B7FB20D0DE79F"><enum>(2)</enum><header>Application of foreign tax credit limitation</header> <subparagraph id="HF159C855559740D8A77CCBAB32EA99E7"><enum>(A)</enum><header>Separate basket for foreign high return amount</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/904">Section 904(d)(1)</external-xref> is amended by redesignating subparagraphs (A) and (B) as subparagraphs (B) and (C), respectively, and by inserting before subparagraph (B) (as so redesignated) the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="HB155392F08B14B629548522515FCAA49" style="OLC"> <subparagraph id="HCE5FC8A502B64FC09674DB63929642ED"><enum>(A)</enum><text display-inline="yes-display-inline">any amount includible in gross income under section 951A,</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph><subparagraph id="H74358F514DEB45179A31A77548140A7F"><enum>(B)</enum><header>No carryover of excess taxes</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/904">Section 904(c)</external-xref> is amended by adding at the end the following: <quote>This subsection shall not apply to taxes paid or accrued with respect to amounts described in subsection (d)(1)(A).</quote></text> </subparagraph></paragraph><paragraph id="HCFD6989D119140838C4F7E080798FC96"><enum>(3)</enum><header>Gross up for deemed paid foreign tax credit</header><text display-inline="yes-display-inline">Section 78, as amended by the preceding provisions of this Act, is amended—</text> <subparagraph id="HD11F767E6D5B4437B01D08109C1B7AC1"><enum>(A)</enum><text>by striking <quote>any taxable year, an amount</quote> and inserting</text> <quoted-block display-inline="yes-display-inline" id="HF542BBEDA7D64986936E2AB27F907BE3" style="OLC"> <text>any taxable year—</text><paragraph id="HA90C8CB35E1841ACBD594B192EDF0535"><enum>(1)</enum><text display-inline="yes-display-inline">an amount</text></paragraph><after-quoted-block>, and</after-quoted-block></quoted-block> </subparagraph><subparagraph id="H4A6319436B40436D83638B35AA7DE047"><enum>(B)</enum><text>by striking the period at the end and inserting</text> <quoted-block display-inline="yes-display-inline" id="H7752B4D2559B4F7B97551B3AD22EFBC2" style="OLC"> <text>, and</text><paragraph id="HC37D1F969E8744BDBC87630C49D7FE05"><enum>(2)</enum><text display-inline="yes-display-inline">an amount equal to the taxes deemed to be paid by such corporation under section 960(d) for such taxable year (determined by substituting <quote>100 percent</quote> for <quote>80 percent</quote> in such section) shall be treated for purposes of this title (other than sections 959, 960, and 961) as an increase in the foreign high return amount of such domestic corporation under section 951A for such taxable year.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph></subsection><subsection display-inline="no-display-inline" id="HD5A5F832EAB744E08EB185F4129BECA1"><enum>(c)</enum><header>Conforming amendments</header> <paragraph commented="no" id="HD034A56CB3D64D3597488C104526E14B"><enum>(1)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/170">Section 170(b)(2)(D)</external-xref> is amended by striking <quote>computed without regard to</quote> and all that follows and inserting</text> <quoted-block display-inline="yes-display-inline" id="H492633634A6B47109360844D920A45FB" style="OLC"> <text>computed—</text><clause commented="no" id="HD4868197C21D482793719E460494A745"><enum>(i)</enum><text display-inline="yes-display-inline">without regard to—</text> <subclause commented="no" id="HFB0D0F63CE5A4C1F8E8855D2A1416638"><enum>(I)</enum><text>this section,</text> </subclause><subclause commented="no" id="H0745E6C6075B499484B438EFC68F14EA"><enum>(II)</enum><text>part VIII (except section 248),</text> </subclause><subclause commented="no" id="H7F9541BB7A6B4C7CA5C201F73E112D8D"><enum>(III)</enum><text>any net operating loss carryback to the taxable year under section 172,</text> </subclause><subclause commented="no" id="HB10E2A2ECF9B4C009F80D73D7A3022FD"><enum>(IV)</enum><text>any capital loss carryback to the taxable year under section 1212(a)(1), and</text> </subclause></clause><clause commented="no" id="H8D2C4C7E59AE41E8A06AFAB815EF2C39"><enum>(ii)</enum><text>by substituting <quote>100 percent</quote> for <quote>50 percent</quote> in section 951A(a).</text></clause><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph commented="no" id="HC07BF7EC43C445BDA35EC719E560C7EB"><enum>(2)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/246">Section 246(b)(1)</external-xref> is amended by—</text> <subparagraph commented="no" id="H2905BBE102FF442CA1A8706958045E6B"><enum>(A)</enum><text>striking <quote>and without regard to</quote> and inserting <quote>without regard to</quote>, and</text> </subparagraph><subparagraph commented="no" id="HAADA23EA9D8B4982B0EA84E84C403397"><enum>(B)</enum><text>by striking the period at the end and inserting <quote>, and by substituting <quote>100 percent</quote> for <quote>50 percent</quote> in section 951A(a).</quote>.</text> </subparagraph></paragraph><paragraph commented="no" id="HF11A7DC22AD8473C9F8883A6307A8F28"><enum>(3)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/469">Section 469(i)(3)(F)</external-xref> is amended by striking <quote>determined without regard to</quote> and all that follows and inserting</text> <quoted-block display-inline="yes-display-inline" id="H7C8E4DA8DD2F44C287FD7690C517583F" style="OLC"> <text>determined—</text><clause commented="no" id="H2C4F7DA3C0F04EB29BFE877F49769113"><enum>(i)</enum><text display-inline="yes-display-inline">without regard to—</text> <subclause commented="no" id="H4FF4D1EEE17A44369EA420626FA8E886"><enum>(I)</enum><text display-inline="yes-display-inline">any amount includible in gross income under section 86,</text> </subclause><subclause commented="no" id="HEFCABAA950434DE28E1F9814C1717484"><enum>(II)</enum><text>the amounts allowable as a deduction under section 219, and</text> </subclause><subclause commented="no" id="H763697471D07434BAD479AB4C140D98A"><enum>(III)</enum><text>any passive activity loss or any loss allowable by reason of subsection (c)(7), and</text> </subclause></clause><clause commented="no" id="H8856310144CF4AE7A16CE3B60858A06B"><enum>(ii)</enum><text>by substituting <quote>100 percent</quote> for <quote>50 percent</quote> in section 951A(a).</text></clause><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H57A5CEAF62AF484C88EDC9D904E31072"><enum>(4)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/26/856">Section 856(c)(2)</external-xref> is amended by striking <quote>and</quote> at the end of subparagraph (H), by adding <quote>and</quote> at the end of subparagraph (I), and by inserting after subparagraph (I) the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="H1BBC639778414242998030BACE9DA928" style="OLC"> <subparagraph id="H2DC0B9795ACB4F7EBC595D61F5F21922"><enum>(J)</enum><text display-inline="yes-display-inline">amounts includible in gross income under section 951A(a);</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H1367E989B78B456291159A18C4CC8672"><enum>(5)</enum><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/856">Section 856(c)(3)(D)</external-xref> is amended by striking <quote>dividends or other distributions on, and gain</quote> and inserting <quote>dividends, other distributions on, amounts includible in gross income under section 951A(a) with respect to, and gain</quote>.</text> </paragraph><paragraph id="H6E569C37841041F09CDEC9B35BE28EDF"><enum>(6)</enum><text display-inline="yes-display-inline">The table of sections for subpart F of part III of subchapter N of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by inserting after the item relating to section 951 the following new item:</text> <quoted-block display-inline="no-display-inline" id="H00C031EECC664825870A5AA508AA712B" style="OLC"> <toc container-level="quoted-block-container" idref="HD9440393A61D4F0FA2936390626995A5" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration"> <toc-entry idref="H4D20D291C74C4E0995CB41CA0FABD06C" level="section">Sec. 951A. Foreign high return amount included in gross income of United States shareholders.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H00290C9DC7384654B6964EEA8CA7133C"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.</text> </subsection></section><section id="HD8086032FE2D4B08AF35868B310E07C6"><enum>4302.</enum><header>Limitation on deduction of interest by domestic corporations which are members of an international financial reporting group</header> <subsection id="H7F0B953A33444C2C89A1E440776D7AC4"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/163">Section 163</external-xref> is amended by redesignating subsection (n) as subsection (p) and by inserting after subsection (m) the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H56E9F3320B3542F49CDBBA6F8E7BB6E6" style="OLC"> <subsection id="HB373F040A2974F798F24B969B66CCE47"><enum>(n)</enum><header>Limitation on deduction of interest by domestic corporations in international financial reporting groups</header> <paragraph id="HE7E6DD956DB1408BBA1C7BFDE9CA49DE"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any domestic corporation which is a member of any international financial reporting group, the deduction under this chapter for interest paid or accrued during the taxable year shall not exceed the sum of—</text> <subparagraph id="H94CE65F00C2546B3B253B4A6F8FAC444"><enum>(A)</enum><text>the allowable percentage of 110 percent of the excess (if any) of —</text> <clause id="H2911A584192045669E983B9F61846014"><enum>(i)</enum><text>the amount of such interest so paid or accrued, over</text> </clause><clause id="HC7A6FDF8A4E449F082D6117F89F326D9"><enum>(ii)</enum><text>the amount described in subparagraph (B), plus</text> </clause></subparagraph><subparagraph id="HEB35C3CA68964DD2A46F5D3D8FB2EB7B"><enum>(B)</enum><text>the amount of interest includible in gross income of such corporation for such taxable year.</text> </subparagraph></paragraph><paragraph id="H4E3AE543142C425F99CBCA2DCAF34F5A"><enum>(2)</enum><header>International financial reporting group</header> <subparagraph id="H90F4BE1050104586AF0A03D632BDC297"><enum>(A)</enum><text>For purposes of this subsection, the term <quote>international financial reporting group</quote> means, with respect to any reporting year, any group of entities which—</text> <clause id="HBC8ADE00230E4193BFE22111E10885D5"><enum>(i)</enum><text>includes—</text> <subclause id="H07F1052AEBAA4F81ADF3D27F9BB477B6"><enum>(I)</enum><text>at least one foreign corporation engaged in a trade or business within the United States, or</text> </subclause><subclause id="H5A81F3FCB44049768469204E913B0A98"><enum>(II)</enum><text>at least one domestic corporation and one foreign corporation,</text> </subclause></clause><clause id="H76A2F5CD273847278545F5E75A62DF5C"><enum>(ii)</enum><text>prepares consolidated financial statements with respect to such year, and</text> </clause><clause id="HE13BD76E8BB24D9BB4857BBEF5CFE9F5"><enum>(iii)</enum><text>reports in such statements average annual gross receipts (determined in the aggregate with respect to all entities which are part of such group) for the 3-reporting-year period ending with such reporting year in excess of $100,000,000.</text> </clause></subparagraph><subparagraph id="H1E29687DF4834C96BC78ABD5D58AA648"><enum>(B)</enum><header>Rules relating to determination of average gross receipts</header><text>For purposes of subparagraph (A)(iii), rules similar to the rules of section 448(c)(3) shall apply.</text> </subparagraph></paragraph><paragraph id="H2D9EF40CA721462397054B1BD7C3C8B0"><enum>(3)</enum><header>Allowable percentage</header><text>For purposes of this subsection—</text> <subparagraph id="HC5825A91765841EE98B1690128CBF86E"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>allowable percentage</quote> means, with respect to any domestic corporation for any taxable year, the ratio (expressed as a percentage and not greater than 100 percent) of—</text> <clause id="H968404C1F4E449209D7CA4B7FA9919EF"><enum>(i)</enum><text display-inline="yes-display-inline">such corporation’s allocable share of the international financial reporting group’s reported net interest expense for the reporting year of such group which ends in or with such taxable year of such corporation, over</text> </clause><clause id="HF92DD34A89F7452FAE6E931A0C1F5603"><enum>(ii)</enum><text display-inline="yes-display-inline">such corporation’s reported net interest expense for such reporting year of such group.</text> </clause></subparagraph><subparagraph id="HB219CAADC2B847FE852909859C077418"><enum>(B)</enum><header>Reported net interest expense</header><text display-inline="yes-display-inline">The term <quote>reported net interest expense</quote> means—</text> <clause id="H1C2FF09AA78D4466B0D405905AE942B9"><enum>(i)</enum><text>with respect to any international financial reporting group for any reporting year, the excess of—</text> <subclause id="H3AB50CBD7ADF4435AA1EEBB0B5155DF6"><enum>(I)</enum><text>the aggregate amount of interest expense reported in such group’s consolidated financial statements for such taxable year, over</text> </subclause><subclause id="H70057B32909440D2964A8C312743124A"><enum>(II)</enum><text>the aggregate amount of interest income reported in such group’s consolidated financial statements for such taxable year, and</text> </subclause></clause><clause id="H8C06822911034E4AA36ED03D938590E6"><enum>(ii)</enum><text>with respect to any domestic corporation for any reporting year, the excess of—</text> <subclause id="H46C732371DC243A8BAC5E438A182057B"><enum>(I)</enum><text>the amount of interest expense of such corporation reported in the books and records of the international financial reporting group which are used in preparing such group’s consolidated financial statements for such taxable year, over</text> </subclause><subclause id="H2C3C911A22AF4086A6601BBE5FCD3DE3"><enum>(II)</enum><text>the amount of interest income of such corporation reported in such books and records.</text> </subclause></clause></subparagraph><subparagraph id="HFFD723C9A69A43A988A762F9F8948DC0"><enum>(C)</enum><header>Allocable share of reported net interest expense</header><text>With respect to any domestic corporation which is a member of any international financial reporting group, such corporation’s allocable share of such group’s reported net interest expense for any reporting year is the portion of such expense which bears the same ratio to such expense as—</text> <clause id="H878FFF382FBF4436AAFC17F2AD18E6EE"><enum>(i)</enum><text>the EBITDA of such corporation for such reporting year, bears to</text> </clause><clause id="H486154E2C5DD4B5A93C7F446F5D24F8A"><enum>(ii)</enum><text>the EBITDA of such group for such reporting year.</text> </clause></subparagraph><subparagraph id="HA3518A2702254334A62D9C11110692DB"><enum>(D)</enum><header>EBITDA</header> <clause id="HCD5173C533764696BD7D401F5AE618E3"><enum>(i)</enum><header>In general</header><text>The term <quote>EBITDA</quote> means, with respect to any reporting year, earnings before interest, taxes, depreciation, and amortization—</text> <subclause id="H00C0013826AF495B9B33B3F504FF4959"><enum>(I)</enum><text>as determined in the international financial reporting group’s consolidated financial statements for such year, or</text> </subclause><subclause id="H759D4D1237534D2BA8B372C9B7DEA093"><enum>(II)</enum><text>for purposes of subparagraph (A)(i), as determined in the books and records of the international financial reporting group which are used in preparing such statements if not determined in such statements.</text> </subclause></clause><clause id="H7F643AB9D4964691989DF64A7EAA3618"><enum>(ii)</enum><header>Treatment of disregarded entities</header><text>The EBITDA of any domestic corporation shall not fail to include the EBITDA of any entity which is disregarded for purposes of this chapter.</text> </clause><clause id="H8D3B2F4CD6424390805DE1BDC8C8C25C"><enum>(iii)</enum><header>Treatment of intra-group distributions</header><text>The EBITDA of any domestic corporation shall be determined without regard to any distribution received by such corporation from any other member of the international financial reporting group.</text> </clause></subparagraph><subparagraph id="HDB5C716B546C4D7EA40B365FC749E041"><enum>(E)</enum><header>Special rules for non-positive EBITDA</header> <clause id="H43E4C0AE107F409082672063DFEF0502"><enum>(i)</enum><header>Non-positive group EBITDA</header><text display-inline="yes-display-inline">In the case of any international financial reporting group the EBITDA of which is zero or less, paragraph (1) shall not apply to any member of such group the EBITDA of which is above zero.</text> </clause><clause id="H68A70BB4FFD94429BE943AD740BE9BC7"><enum>(ii)</enum><header>Non-positive entity EBITDA</header><text display-inline="yes-display-inline">In the case of any group member the EBITDA of which is zero or less, paragraph (1) shall be applied without regard to subparagraph (A) thereof.</text> </clause></subparagraph></paragraph><paragraph id="H3B76374149634BE2A51E6C46C9098B55"><enum>(4)</enum><header>Consolidated financial statement</header><text>For purposes of this subsection, the term <quote>consolidated financial statement</quote> means any consolidated financial statement described in paragraph (2)(A)(ii) if such statement is—</text> <subparagraph commented="no" id="HE981CC3593BD412BB099C6C99A48EBE2"><enum>(A)</enum><text>a financial statement which is certified as being prepared in accordance with generally accepted accounting principles, international financial reporting standards, or any other comparable method of accounting identified by the Secretary, and which is—</text> <clause commented="no" id="HD817BDEC7C7C49498AF13019751777C6"><enum>(i)</enum><text>a 10-K (or successor form), or annual statement to shareholders, required to be filed with the United States Securities and Exchange Commission,</text> </clause><clause commented="no" display-inline="no-display-inline" id="H0C79FC5FFEB543E7898412C58A29A849"><enum>(ii)</enum><text display-inline="yes-display-inline">an audited financial statement which is used for—</text> <subclause commented="no" display-inline="no-display-inline" id="H89A00CE14B2148269BAF7A78BBE9AD17"><enum>(I)</enum><text display-inline="yes-display-inline">credit purposes,</text> </subclause><subclause commented="no" display-inline="no-display-inline" id="HB727A6D12D7542A497CBFCF5937CF1D0"><enum>(II)</enum><text display-inline="yes-display-inline">reporting to shareholders, partners, or other proprietors, or to beneficiaries, or</text> </subclause><subclause commented="no" display-inline="no-display-inline" id="H794A5DE9E374448992D5AB5A3B22DBF9"><enum>(III)</enum><text display-inline="yes-display-inline">any other substantial nontax purpose,</text> </subclause><continuation-text commented="no" continuation-text-level="clause">but only if there is no statement described in clause (i), or</continuation-text></clause><clause commented="no" id="H0AD910D6D3CE46C0B810561CA010A750"><enum>(iii)</enum><text>filed with any other Federal or State agency for nontax purposes, but only if there is no statement described in clause (i) or (ii), or</text> </clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HDB71D42A66B1470C8A48749389F0E957"><enum>(B)</enum><text>a financial statement which—</text> <clause commented="no" id="H8C4F45054F104484B9065D7404F0397B"><enum>(i)</enum><text>is used for a purpose described in subclause (I), (II), or (III) of subparagraph (A)(ii), or</text> </clause><clause id="H88958BFC05084D9CA3E2B6FE8455EA50"><enum>(ii)</enum><text>filed with any regulatory or governmental body (whether domestic or foreign) specified by the Secretary,</text> </clause><continuation-text continuation-text-level="subparagraph">but only if there is no statement described in subparagraph (A).</continuation-text></subparagraph></paragraph><paragraph id="H9101B5704DA94290BB17AA35EFAF94D5"><enum>(5)</enum><header>Reporting year</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>reporting year</quote> means, with respect to any international financial reporting group, the year with respect to which the consolidated financial statements are prepared.</text> </paragraph><paragraph id="HC5A9811177614E3CACB73655F01C5CBC"><enum>(6)</enum><header>Application to certain entities</header> <subparagraph id="HB3717DE56C3242D09E86EF375946F81C"><enum>(A)</enum><header>Partnerships</header><text display-inline="yes-display-inline">Except as otherwise provided by the Secretary in paragraph (7), this subsection shall apply to any partnership which is a member of any international financial reporting group under rules similar to the rules of section 163(j)(3).</text> </subparagraph><subparagraph id="HFA734A4A061A4442A93D5AD0529CBF06"><enum>(B)</enum><header>Foreign corporations engaged in trade or business within the United States</header><text>Except as otherwise provided by the Secretary in paragraph (8), any deduction for interest paid or accrued by a foreign corporation engaged in a trade or business within the United States shall be limited in a manner consistent with the principles of this subsection.</text> </subparagraph><subparagraph id="H66D0235FACE24BFD9333A685F29C63E7"><enum>(C)</enum><header>Consolidated groups</header><text>For purposes of this subsection, the members of any group that file (or are required to file) a consolidated return with respect to the tax imposed by chapter 1 for a taxable year shall be treated as a single corporation.</text> </subparagraph></paragraph><paragraph id="H43D0E8265AB64B26A7FE48C3D0E70E43"><enum>(7)</enum><header>Regulations</header><text>The Secretary may issue such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HFB3065858C1A41E8A230978B2157B6DE"><enum>(b)</enum><header>Carryforward of disallowed interest</header> <paragraph id="H3ECC72558D9C486EBE4A33854E3F4F2D"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/163">Section 163(o)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H0F9283B909E74DA0B3295C2BCED0C20B" style="OLC"> <subsection commented="no" id="H39221171A26E439EA78D4783ED8D4BD1"><enum>(o)</enum><header>Carryforward of certain disallowed interest</header><text display-inline="yes-display-inline">The amount of any interest not allowed as a deduction for any taxable year by reason of subsection (j)(1) or (n)(1) (whichever imposes the lower limitation with respect to such taxable year) shall be treated as interest (and as business interest for purposes of subsection (j)(1)) paid or accrued in the succeeding taxable year. Interest paid or accrued in any taxable year (determined without regard to the preceding sentence) shall not be carried past the 5th taxable year following such taxable year, determined by treating interest as allowed as a deduction on a first-in, first-out basis.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HC860793C06934981BF30EA54166E6D76"><enum>(2)</enum><header>Treatment of carryforward of disallowed interest in certain corporate acquisitions</header><text>For rules related to the carryforward of disallowed interest in certain corporate acquisitions, see the amendments made by section 3301(c).</text> </paragraph></subsection><subsection id="HC4BAE732C13C4BE68C5B9EE23BB5A54F"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="HC1D366D8D6F04AD1A7B5F050623CE70E"><enum>4303.</enum><header>Excise tax on certain payments from domestic corporations to related foreign corporations; election to treat such payments as effectively connected income</header> <subsection id="HCEBBA474E9DA453A80FBDDA7D2CD0F94"><enum>(a)</enum><header>Excise tax on certain amounts from domestic corporations to foreign affiliates</header> <paragraph id="H3FFAC07EE41C4881980AC7FDAB814A86"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc-chapter/26/36">Chapter 36</external-xref> is amended by adding at the end the following new subchapter:</text> <quoted-block display-inline="no-display-inline" id="HCD9AC7BE8F9549A5AF5E47C5EA3D9C5E" style="OLC"> <subchapter id="H3D53AC98756F4FD08063C8DCA28824D7"><enum>E</enum><header>Tax on certain amounts to foreign affiliates</header> <toc container-level="subchapter-container" idref="H3D53AC98756F4FD08063C8DCA28824D7" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration"> <toc-entry idref="HD08ACD66B32C4AA0B7F2E633A4766B16" level="section">Sec. 4491. Imposition of tax on certain amounts from domestic corporations to foreign affiliates.</toc-entry></toc> <section id="HD08ACD66B32C4AA0B7F2E633A4766B16"><enum>4491.</enum><header>Imposition of tax on certain amounts from domestic corporations to foreign affiliates</header> <subsection id="H1A648365986A474BA83FBF6F085325B6"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">There is hereby imposed on each specified amount paid or incurred by a domestic corporation to a foreign corporation which is a member of the same international financial reporting group as such domestic corporation a tax equal to the highest rate of tax in effect under section 11 multiplied by such amount.</text> </subsection><subsection id="H079B78A7B9FF439A803D82DAA94C90DE"><enum>(b)</enum><header>By whom paid</header><text>The tax imposed by subsection (a) shall be paid by the domestic corporation described in such subsection.</text> </subsection><subsection id="HF6B3057D04A14C158B0FB516A4FCCE88"><enum>(c)</enum><header>Exception for effectively connected income</header><text>Subsection (a) shall not apply to so much of any specified amount as is effectively connected with the conduct of a trade or business within the United States if such amount is subject to tax under chapter 1. In the case of any amount which is treated as effectively connected with the conduct of a trade or business within the United States by reason of section 882(g), the preceding sentence shall apply to such amount only if the domestic corporation provides to the Secretary (at such time and in such form and manner as the Secretary may provide) a copy of the election made under section 882(g) by the foreign corporation referred to in subsection (a).</text> </subsection><subsection id="H1F73E6E3406D4616A5BF9631FF6D261C"><enum>(d)</enum><header>Definitions and special rules</header><text>Terms used in this section that are also used in section 882(g) shall have the same meaning as when used in such section and rules similar to the rules of paragraphs (5) and (6) of such section shall apply for purposes of this section.</text></subsection></section></subchapter><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H1681D6CE740642B58C61F8C6464D4FBA"><enum>(2)</enum><header>Denial of deduction for tax imposed</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/275">Section 275(a)</external-xref> is amended by inserting after paragraph (6) the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HB787361068824193B032E551461CBD91" style="OLC"> <paragraph id="H51B15002E2AC4826875234EB7FD61489"><enum>(7)</enum><text display-inline="yes-display-inline">Taxes imposed by section 4491.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="H4CDF1B00D22641439046C5127811CAA3"><enum>(3)</enum><header>Clerical amendment</header><text>The table of subchapters for <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/36">chapter 36</external-xref> is amended by adding at the end the following new item:</text> <quoted-block display-inline="no-display-inline" id="H457A4AD6970341A29B2B7C6EFC95E055" style="OLC"> <toc regeneration="no-regeneration"> <toc-entry level="subchapter">Subchapter E. Tax on certain amounts to foreign affiliates.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H73E542BE14174945806E01C04FD0D6F8"><enum>(b)</enum><header>Election to treat certain payments from domestic corporations to related foreign corporations as effectively connected income</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/882">Section 882</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H0A55C7F585FD44FF9989E4350D30D69A" style="OLC"> <subsection id="H048B60E49E5A458680AAAF80DA1CB840"><enum>(g)</enum><header>Election to treat certain payments from domestic corporations to related foreign corporations as effectively connected income</header> <paragraph id="H27FE5F4257DC469C9DB47D1D0DB39323"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any specified amount paid or incurred by a domestic corporation to a foreign corporation which is a member of the same international financial reporting group as such domestic corporation and which has elected to be subject to the provisions of this subsection—</text> <subparagraph id="H6AFEC7B0C51C40CCA923F62DA0DE0EE6"><enum>(A)</enum><text>such amount shall be taken into account (other than for purposes of sections 245, 245A, and 881) in the taxable year of such foreign corporation during which such amount is paid or incurred as if—</text> <clause id="HE52AACAE23864952A3DFCE545CEEDDC7"><enum>(i)</enum><text>such foreign corporation were engaged in a trade or business within the United States,</text> </clause><clause id="H21D05E6D2AF142E6AFCF64488DF83B67"><enum>(ii)</enum><text>such foreign corporation had a permanent establishment in the United States during the taxable year, and</text> </clause><clause id="H7DD57527DE3F41A7BF8346BCDE30883E"><enum>(iii)</enum><text>such payment were effectively connected with the conduct of a trade or business within the United States and were attributable to such permanent establishment,</text> </clause></subparagraph><subparagraph id="H9F3D392259E347E69D25CCE4D403FA08"><enum>(B)</enum><text>for purposes of subsection (c)(1)(A), no deduction shall be allowed with respect to such amount and such subsection shall be applied without regard to such amount, and</text> </subparagraph><subparagraph id="H20EFCC1F9DD141139B6C3A99C8012EB9"><enum>(C)</enum><text>the foreign corporation shall be allowed a deduction (for the taxable year referred to in subparagraph (A)) equal to the deemed expenses with respect to such amount.</text> </subparagraph></paragraph><paragraph id="H41D1B610DC52486FAC8D27CDF5C148F3"><enum>(2)</enum><header>Specified amount</header><text>For purposes of this subsection—</text> <subparagraph id="H72CA099060B940E4BF5C5081830CDF67"><enum>(A)</enum><header>In general</header><text>The term <quote>specified amount</quote> means any amount which is, with respect to the payor, allowable as a deduction or includible in costs of goods sold, inventory, or the basis of a depreciable or amortizable asset.</text> </subparagraph><subparagraph id="HB9FA7249B58C4F0CB0FE690AC1CC42D9"><enum>(B)</enum><header>Exceptions</header><text>The term <quote>specified amount</quote> shall not include—</text> <clause id="H29619DB52DA940D5996C77D4E96F2905"><enum>(i)</enum><text>interest,</text> </clause><clause id="H5E9D21968FB34C0EA97C1F9C21C30E10"><enum>(ii)</enum><text display-inline="yes-display-inline">any amount paid or incurred for the acquisition of any security described in section 475(c)(2) (determined without regard to the last sentence thereof) or any commodity described in section 475(e)(2),</text> </clause><clause id="H4D0CEA85A7804BA5999BAECBB9EF0EEC"><enum>(iii)</enum><text>except as provided in subparagraph (C), any amount with respect to which tax is imposed under section 881(a), and</text> </clause><clause id="HEA5F94C22B97483788910341E13AB4AC"><enum>(iv)</enum><text>in the case of a payor which has elected to use a services cost method for purposes of section 482, any amount paid or incurred for services if such amount is the total services cost with no markup.</text> </clause></subparagraph><subparagraph id="HE2753E0F26F24B6F92E22BE34DCAB6EA"><enum>(C)</enum><header>Amounts not treated as effectively connected to extent of gross-basis tax</header><text display-inline="yes-display-inline">Subparagraph (B)(iii) shall only apply to so much of any specified amount as bears the proportion to such amount as—</text> <clause id="HABD72FA40D744A8FA2736399EB6AD9D7"><enum>(i)</enum><text display-inline="yes-display-inline">the rate of tax imposed under section 881(a) with respect to such amount, bears to</text> </clause><clause id="H909C25F6E30F4D0CB0CE07DDC605BFD6"><enum>(ii)</enum><text>30 percent.</text> </clause></subparagraph></paragraph><paragraph id="H3F7AE4DD1A97460AA3E0A8F76CA8CC1C"><enum>(3)</enum><header>Deemed expenses</header> <subparagraph id="HC117DD555E6D4B1BB240D12E3B6EDC5B"><enum>(A)</enum><header>In general</header><text>The deemed expenses with respect to any specified amount received by a foreign corporation during any reporting year is the amount of expenses such that the net income ratio of such foreign corporation with respect to such amount (taking into account only such specified amount and such deemed expenses) is equal to the net income ratio of the international financial reporting group determined for such reporting year with respect to the product line to which the specified amount relates.</text> </subparagraph><subparagraph id="H769EF689091949CDAA148AA13CA8C96C"><enum>(B)</enum><header>Net income ratio</header><text>For purposes of this paragraph, the term <quote>net income ratio</quote> means the ratio of—</text> <clause id="HFA88009782DA4F73B3FFB4504A837E6F"><enum>(i)</enum><text>net income determined without regard to interest income, interest expense, and income taxes, divided by</text> </clause><clause id="HDF7DB37C58214C21BBE2479D4E43AA99"><enum>(ii)</enum><text>revenues.</text> </clause></subparagraph><subparagraph id="HA80680845EB84D76BCA76E0C03260504"><enum>(C)</enum><header>Method of determination</header><text display-inline="yes-display-inline">Amounts described in subparagraph (B) shall be determined with respect to the international financial reporting group on the basis of the consolidated financial statements referred to in paragraph (4)(A)(i) and the books and records of the members of the international financial reporting group which are used in preparing such statements, taking into account only revenues and expenses of the members of such group (other than the members of such group which are (or are treated as) a domestic corporation for purposes of this subsection) derived from, or incurred with respect to—</text> <clause id="HDFEC243611FB46339373BB739C2E90F0"><enum>(i)</enum><text>persons who are not members of such group, and</text> </clause><clause id="H4652627A8171487BB10D1724CCF9D6D5"><enum>(ii)</enum><text>members of such group which are (or are treated as) a domestic corporation for purposes of this subsection.</text> </clause></subparagraph></paragraph><paragraph id="HED0D7DC1E9CE47699FA03F81A3B5204A"><enum>(4)</enum><header>International financial reporting group</header><text>For purposes of this subsection—</text> <subparagraph id="H00CBCF0FA6A1437B95BEC8B6C52E82B9"><enum>(A)</enum><header>In general</header><text>The term <quote>international financial reporting group</quote> means any group of entities, with respect to any specified amount, if such amount is paid or incurred during a reporting year of such group with respect to which—</text> <clause id="HE1B3D959CF314985BF48D06E47005F89"><enum>(i)</enum><text>such group prepares consolidated financial statements (within the meaning of section 163(n)(4)) with respect to such year, and</text> </clause><clause id="HD6C47E08A0BC4DA8A7A044C1BBA1A5A2"><enum>(ii)</enum><text display-inline="yes-display-inline">the average annual aggregate payment amount of such group for the 3-reporting-year period ending with such reporting year exceeds $100,000,000.</text> </clause></subparagraph><subparagraph id="HEBEF6963E829464496336BFF6331B398"><enum>(B)</enum><header>Annual aggregate payment amount</header><text>The term <quote>annual aggregate payment amount</quote> means, with respect to any reporting year of the group referred to in subparagraph (A)(i), the aggregate specified amounts to which paragraph (1) applies (or would apply if such group were an international financial reporting group).</text> </subparagraph><subparagraph id="H10BA801037F14DA58E43E0E1A5E41153"><enum>(C)</enum><header>Application of certain rules</header><text>Rules similar to the rules of subparagraphs (A), (B), and (D) of section 448(c)(3) shall apply for purposes of this paragraph.</text> </subparagraph></paragraph><paragraph id="HD7A5ABE058FC4711B4293AA8E9E50B17"><enum>(5)</enum><header>Treatment of partnerships</header><text>Any specified amount paid, incurred, or received by a partnership which is a member of any international financial reporting group (and any amount treated as paid, incurred, or received by a partnership under this paragraph) shall be treated for purposes of this subsection as amounts paid, incurred, or received, respectively, by each partner of such partnership in an amount equal to such partner’s distributive share of the items of income, gain, deduction, or loss to which such amounts relate.</text> </paragraph><paragraph id="H14D6C00CDC2D43F2909CE7BF81F3DBC7"><enum>(6)</enum><header>Treatment of amounts in connection with United States trade or business</header><text>Any specified amount paid, incurred, or received by a foreign corporation in connection with the conduct of a trade or business within the United States (other than a trade or business it is deemed to conduct pursuant to this subsection) shall be treated for purposes of this subsection as an amount paid, incurred, or received, respectively, by a domestic corporation. For purposes of the preceding sentence, a foreign corporation shall be deemed to pay, incur, and receive amounts with respect to a trade or business it conducts within the United States (other than a trade or business it is deemed to conduct pursuant to this subsection) to the extent such foreign corporation would be treated as paying, incurring, or receiving such amounts from such trade or business if such trade or business were a domestic corporation.</text> </paragraph><paragraph id="H6B899E4445A44246B7BE3A15AD57E2E9"><enum>(7)</enum><header>Joint and several liability of members of internal financial reporting group</header><text>In the case of any underpayment with respect to any taxable year of a foreign corporation which is a member of an international financial accounting group, each domestic corporation which is a member of such group at any time during such taxable year shall be jointly and severally liable for—</text> <subparagraph id="HD047EDB1E3B04F38B75800036AFBC093"><enum>(A)</enum><text>so much of such underpayment as does not exceed the excess (if any) of such underpayment over the amount of such underpayment determined without regard to this subsection, and</text> </subparagraph><subparagraph id="HC76C3B57190E4F7A8A0495098BD45992"><enum>(B)</enum><text>any penalty, addition to tax, or additional amount attributable to the amount described in subparagraph (A).</text> </subparagraph></paragraph><paragraph id="HD0BA421F11474D9A9AD04EAD4D75C060"><enum>(8)</enum><header>Foreign tax credit allowed</header><text display-inline="yes-display-inline">The credit allowed under section 906(a) with respect to amounts taken into account in income under paragraph (1)(A) shall be limited to 80 percent of the amount of taxes paid or accrued and determined without regard to section 906(b)(1).</text> </paragraph><paragraph id="HDCA2B3104D554483B67014AFB6950DC6"><enum>(9)</enum><header>Election</header><text>Any election under paragraph (1)—</text> <subparagraph id="HE55DDD2865A844C6838E727799BC6383"><enum>(A)</enum><text>shall be made at such time and in such form and manner as the Secretary may provide, and</text> </subparagraph><subparagraph id="H3B4ADB3901B04D92977D3A7F77D707EF"><enum>(B)</enum><text>shall apply for the taxable year for which made and all subsequent taxable years unless revoked with the consent of the Secretary.</text> </subparagraph></paragraph><paragraph id="H8E4EF70F0B19411497441AE65FE8DB10"><enum>(10)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary may issue such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance—</text> <subparagraph id="H159D50EB41154BF8B015033BF55502B5"><enum>(A)</enum><text>to provide for the proper determination of product lines, and</text> </subparagraph><subparagraph id="HF961E2F1778D48C5A232BE85D97DD9B4"><enum>(B)</enum><text>to prevent the avoidance of the purposes of this subsection through the use of conduit transactions or by other means.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HD14FB1C736E5404ABC0A3FCA10501B54"><enum>(c)</enum><header>Reporting requirements</header> <paragraph id="H4D397BDCFF97473CA0442F5F917559B0"><enum>(1)</enum><header>Reporting by foreign corporation</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/6038C">Section 6038C(b)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="H43022ED8FED34E74812A9348E3137417" style="OLC"> <subsection id="H7E54AC45A66F49C6A3A04D13D5669445"><enum>(b)</enum><header>Required information</header> <paragraph id="H9F467EB3A5A443FA8A2708A3BEE1FA5C"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The information described in this subsection is—</text> <subparagraph id="HD925EF6FF9894A259F244277BBDE5AFF"><enum>(A)</enum><text>the information described in section 6038A(b), and</text> </subparagraph><subparagraph id="H4D0F07CEB9C7415C971185AA7447481F"><enum>(B)</enum><text>such other information as the Secretary may prescribe by regulations relating to any item not directly connected with a transaction for which information is required under subparagraph (A).</text> </subparagraph></paragraph><paragraph id="HB75435D27AD04428A953490DFB22D2F1"><enum>(2)</enum><header>Certain payments from related domestic corporations</header> <subparagraph id="H53D40A39F3154E469AB9500FFA4B8E93"><enum>(A)</enum><header>In general</header><text>In the case of any reporting corporation that receives during the taxable year any amount to which section 882(g)(1) applies, the information described in this subsection shall include, with respect to each member of the international financial reporting group from which any such amount is received—</text> <clause id="H890DB4B065B84A3282E0025014E6210E"><enum>(i)</enum><text>the name and taxpayer identification number of such member,</text> </clause><clause id="HD26832DCC760437A8873F56798E606E7"><enum>(ii)</enum><text>the aggregate amounts received from such member,</text> </clause><clause id="HB3DBE7049A894E4191304D05D3A54435"><enum>(iii)</enum><text display-inline="yes-display-inline">the product lines to which such amounts relate, the aggregate amounts relating to each such product line, and the net income ratio for each such product line (determined under section 882(g)(3)(B) with respect to the international financial reporting group), and</text> </clause><clause id="H179D24F1969541A3AFEADB384075BC3B"><enum>(iv)</enum><text>a summary of any changes in financial accounting methods that affect the computation of any net income ratio described in clause (iii).</text> </clause></subparagraph><subparagraph id="HFE440305631C46B8952B534AC101CB0B"><enum>(B)</enum><header>Definitions and special rules</header><text>Terms used in this paragraph that are also used in section 882(g) shall have the same meaning as when used in such section and rules similar to the rules of paragraphs (5) and (6) of such section shall apply for purposes of this paragraph.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph><paragraph id="HFB06E0EF39A54624B7B54C8CC4B4CAE9"><enum>(2)</enum><header>Reporting by domestic group members</header> <subparagraph id="HC566A2AA5C49458EB54991513C998954"><enum>(A)</enum><header>In general </header><text>Subpart A of part III of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/61">chapter 61</external-xref> is amended by inserting after section 6038D the following new section:</text> <quoted-block display-inline="no-display-inline" id="H4FD53A18EF3E42E38264786F8CF022DC" style="OLC"> <section commented="no" id="HD5B1DFBF2AFF4DF7BBDF973FFEA27D5D"><enum>6038E.</enum><header>Information with respect to certain payments from domestic corporations to related foreign corporations</header> <subsection commented="no" id="H77B1D8587DF4486FBDF4A16F2F8B9220"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any domestic corporation which pays or incurs any amount to which section 882(g)(1) applies, such person shall—</text> <paragraph id="H9D4E636FF64D4E66B35A9FB7EEDA65F2"><enum>(1)</enum><text>make a return according to the forms and regulations prescribed the Secretary, setting forth the information described in subsection (b), and</text> </paragraph><paragraph id="H173FE00167B541D5972FBE782E7F0557"><enum>(2)</enum><text>maintain (at the location, in the manner, and to the extent prescribed in regulations) such records as may be appropriate to determine liability for tax pursuant to paragraphs (1) and (7) of section 882(g).</text> </paragraph></subsection><subsection commented="no" id="H28BC0B7806704CEA9388281BF7B0BF96"><enum>(b)</enum><header>Required information</header><text>The information described in this subsection is—</text> <paragraph id="H5F204403083945F6A5051F4D2FACF5EB"><enum>(1)</enum><text>the name and taxpayer identification number of the common parent of the international financial reporting group in which such domestic corporation is a member, and</text> </paragraph><paragraph id="HFBD5B8B5A28F431C938A5D45666DC415"><enum>(2)</enum><text>with respect to any person who receives an amount described in subsection (a) from such domestic corporation—</text> <subparagraph id="HADA6C0A7E3C448FA8B57777785C3BD69"><enum>(A)</enum><text>the name and taxpayer identification number of such person,</text> </subparagraph><subparagraph id="HD9A4975748C744E5A635407A58655231"><enum>(B)</enum><text>the aggregate amounts received by such person,</text> </subparagraph><subparagraph id="HCBB14298F1AD4DD886705F67B700F947"><enum>(C)</enum><text>the product lines to which such amounts relate, the aggregate amounts relating to each such product line, and the net income ratio for each such product line (determined under section 882(g)(3)(B) with respect to the international financial reporting group), and</text> </subparagraph><subparagraph id="H19A0792C9A82421DB0DA137FDD358239"><enum>(D)</enum><text>a summary of any changes in financial accounting methods that affect the computation of any net income ratios described in subparagraph (C).</text> </subparagraph></paragraph></subsection><subsection id="H435C394A42A34EF5BBF0E42FC68C9258"><enum>(c)</enum><header>Definitions and special rules</header><text display-inline="yes-display-inline">Terms used in this paragraph that are also used in section 882(g) shall have the same meaning as when used in such section and rules similar to the rules of paragraphs (5) and (6) of such section shall apply for purposes of this paragraph.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph><subparagraph id="HBC76C8A9CE3D440CB4D4D2FC73FCF337"><enum>(B)</enum><header>Clerical amendment</header><text>The table of sections for subpart A of part III of subchapter A of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/61">chapter 61</external-xref> is amended by inserting after the item relating to section 6038D the following new item:</text> <quoted-block display-inline="no-display-inline" id="HFD1E6C15B1B24610AD6BFC6192C6256D" style="OLC"> <toc container-level="quoted-block-container" idref="H4FD53A18EF3E42E38264786F8CF022DC" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration"> <toc-entry idref="HD5B1DFBF2AFF4DF7BBDF973FFEA27D5D" level="section">Sec. 6038E. Information with respect to certain payments from domestic corporations to related foreign corporations.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </subparagraph></paragraph></subsection><subsection id="HCD624D23DC984A73A53E8C226542A711"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred after December 31, 2018.</text> </subsection></section></subtitle><subtitle id="H4FE6D7662673459C9A942BE18DDCACD9"><enum>E</enum><header>Provisions related to possessions of the United States</header> <section id="HFFB203A618E542A4A6270E6C05CF63E6"><enum>4401.</enum><header>Extension of deduction allowable with respect to income attributable to domestic production activities in Puerto Rico</header> <subsection id="H4DCA2F6AA48841ABA1574E0A8FFC8DC0"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 199(d)(8)(C), prior to its repeal by this Act, is amended—</text> <paragraph id="H7DDFA9B97BC8489DA87F08996E15D434"><enum>(1)</enum><text>by striking <quote>first 11 taxable years</quote> and inserting <quote>first 12 taxable years</quote>, and</text> </paragraph><paragraph id="HD9C935D56AEA48FCBDB45982CB5F5C4C"><enum>(2)</enum><text>by striking <quote>January 1, 2017</quote> and inserting <quote>January 1, 2018</quote>.</text> </paragraph></subsection><subsection id="HBE7C7894D8B74E3CB476A40C0FC9D532"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2016.</text> </subsection></section><section id="H595EF0ADBE0044EE9EF3FC8234CF8DE7"><enum>4402.</enum><header>Extension of temporary increase in limit on cover over of rum excise taxes to Puerto Rico and the Virgin Islands</header> <subsection id="H5C761B7A630D481E8E1CFDCE358EAB80"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/7652">Section 7652(f)(1)</external-xref> is amended by striking <quote>January 1, 2017</quote> and inserting <quote>January 1, 2023</quote>.</text> </subsection><subsection id="H7161817BFAA8416D8D21D4FC6AEACBF0"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to distilled spirits brought into the United States after December 31, 2016.</text> </subsection></section><section id="HF524BF3406A545DBA8C2F0AAD3A6AAE9"><enum>4403.</enum><header>Extension of American Samoa economic development credit</header> <subsection id="HA7C9EEC9F8E44A3C97F0FF22E8AE9C1A"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 119(d) of division A of the Tax Relief and Health Care Act of 2006 is amended—</text> <paragraph id="H2FDBD9056D6C488B844CE772E1DB7C18"><enum>(1)</enum><text>by striking <quote>January 1, 2017</quote> each place it appears and inserting <quote>January 1, 2023</quote>,</text> </paragraph><paragraph id="H79409ABDD79A48D09818C3A10BF052F6"><enum>(2)</enum><text>by striking <quote>first 11 taxable years</quote> in paragraph (1) and inserting <quote>first 17 taxable years</quote>, and</text> </paragraph><paragraph id="H03A81503D6D34C1D80C62287DD5F019D"><enum>(3)</enum><text>by striking <quote>first 5 taxable years</quote> in paragraph (2) and inserting <quote>first 11 taxable years</quote>.</text> </paragraph></subsection><subsection id="H827AD38812324965833A9674FDBEA0C6"><enum>(b)</enum><header>Treatment of certain references</header><text display-inline="yes-display-inline">Section 119(e) of division A of the Tax Relief and Health Care Act of 2006 is amended by adding at the end the following: <quote>References in this subsection to <external-xref legal-doc="usc" parsable-cite="usc/26/199">section 199</external-xref> of the Internal Revenue Code of 1986 shall be treated as references to such section as in effect before its repeal by the <short-title>Tax Cuts and Jobs Act</short-title>.</quote>.</text> </subsection><subsection id="H8676297924FC4FE3AAF04990320BDDEF"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2016.</text> </subsection></section></subtitle><subtitle id="H35E9D52CC4C84B5394BCE2EA41F259CF"><enum>F</enum><header>Other international reforms</header> <section id="HA2AFEC1BA59847F4A7C982B23E89E22C" section-type="subsequent-section"><enum>4501.</enum><header>Restriction on insurance business exception to passive foreign investment company rules</header> <subsection id="H7432D531709848EC8F995446516E48CA"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/1297">Section 1297(b)(2)(B)</external-xref> is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="HCF363FDB7BB9471C89AC7C7E9FF3E2BC" style="OLC"> <subparagraph id="H4400AA7085484ADFA2A30BDB159BFFAC"><enum>(B)</enum><text display-inline="yes-display-inline">derived in the active conduct of an insurance business by a qualifying insurance corporation (as defined in subsection (f)),</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H516F4E117408448EB0F615796250DF79"><enum>(b)</enum><header>Qualifying insurance corporation defined</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1297">Section 1297</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H7E14FEE9C864476E9C52FEEDAC94F1F5" style="OLC"> <subsection id="H70E0FE06EB68421A83A74A035F99B8A0"><enum>(f)</enum><header>Qualifying insurance corporation</header><text>For purposes of subsection (b)(2)(B)—</text> <paragraph id="H6A987F53DF7D47C5889E638C92CDF6AC"><enum>(1)</enum><header>In general</header><text>The term <term>qualifying insurance corporation</term> means, with respect to any taxable year, a foreign corporation—</text> <subparagraph id="HF0DD23AD215F4262949FA7FE1CF6CD70"><enum>(A)</enum><text>which would be subject to tax under subchapter L if such corporation were a domestic corporation, and</text> </subparagraph><subparagraph id="HD960107C1BA34FB8829390F81C8C52CD"><enum>(B)</enum><text display-inline="yes-display-inline">the applicable insurance liabilities of which constitute more than 25 percent of its total assets, determined on the basis of such liabilities and assets as reported on the corporation’s applicable financial statement for the last year ending with or within the taxable year.</text> </subparagraph></paragraph><paragraph id="HAABDF7A11D1D45C2A2E9AA4D39C7D5ED"><enum>(2)</enum><header>Alternative facts and circumstances test for certain corporations</header><text>If a corporation fails to qualify as a qualified insurance corporation under paragraph (1) solely because the percentage determined under paragraph (1)(B) is 25 percent or less, a United States person that owns stock in such corporation may elect to treat such stock as stock of a qualifying insurance corporation if—</text> <subparagraph id="HC8303B6FFC464E90981570EA67328CC9"><enum>(A)</enum><text>the percentage so determined for the corporation is at least 10 percent, and</text> </subparagraph><subparagraph id="H06E8D80787AD4828B5494E6D0EF98B0D"><enum>(B)</enum><text>under regulations provided by the Secretary, based on the applicable facts and circumstances—</text> <clause id="HBFA986CB2EDB4217A335315C49ABF627"><enum>(i)</enum><text>the corporation is predominantly engaged in an insurance business, and</text> </clause><clause id="H6A1389307D294315BDF42659CFED10E8"><enum>(ii)</enum><text>such failure is due solely to runoff-related or rating-related circumstances involving such insurance business.</text> </clause></subparagraph></paragraph><paragraph id="HC4708AD43FA3419C9252BDF0E5EDF498"><enum>(3)</enum><header>Applicable insurance liabilities</header><text display-inline="yes-display-inline">For purposes of this subsection—</text> <subparagraph id="H80E94BCFF1444425B87C3E0F8DB0B977"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <term>applicable insurance liabilities</term> means, with respect to any life or property and casualty insurance business—</text> <clause id="H2965B5123F13416F8CCD9D6B714DD1C9"><enum>(i)</enum><text>loss and loss adjustment expenses, and</text> </clause><clause id="H3EFEA8EF5FA24F52BAA180BC7E517D63"><enum>(ii)</enum><text>reserves (other than deficiency, contingency, or unearned premium reserves) for life and health insurance risks and life and health insurance claims with respect to contracts providing coverage for mortality or morbidity risks.</text> </clause></subparagraph><subparagraph id="HEDF63F8B268340F1BD0D1A869D8EA463"><enum>(B)</enum><header>Limitations on amount of liabilities</header><text>Any amount determined under clause (i) or (ii) of subparagraph (A) shall not exceed the lesser of such amount—</text> <clause id="H154153F938C743748E52F19D4C46CE09"><enum>(i)</enum><text>as reported to the applicable insurance regulatory body in the applicable financial statement described in paragraph (4)(A) (or, if less, the amount required by applicable law or regulation), or</text> </clause><clause id="H1C630E691CEB454197D11AAB4BDCDCC0"><enum>(ii)</enum><text>as determined under regulations prescribed by the Secretary.</text> </clause></subparagraph></paragraph><paragraph id="H01FE032FAF1349818C6C9A538432C9AB"><enum>(4)</enum><header>Other definitions and rules</header><text>For purposes of this subsection—</text> <subparagraph id="H942768A4B8F04B52A53956DF1BB1CD1A"><enum>(A)</enum><header>Applicable financial statement</header><text>The term <term>applicable financial statement</term> means a statement for financial reporting purposes which—</text> <clause id="H7EF43441F4DD4E4DA3F08B25A2BC336A"><enum>(i)</enum><text>is made on the basis of generally accepted accounting principles,</text> </clause><clause id="H36BF3DF1C6354903A02D09EBA9CEB7B1"><enum>(ii)</enum><text>is made on the basis of international financial reporting standards, but only if there is no statement that meets the requirement of clause (i), or</text> </clause><clause id="H5B7A97003647491883E4F4801A5B8289"><enum>(iii)</enum><text>except as otherwise provided by the Secretary in regulations, is the annual statement which is required to be filed with the applicable insurance regulatory body, but only if there is no statement which meets the requirements of clause (i) or (ii).</text> </clause></subparagraph><subparagraph id="HAFD122023104425ABB935D2C1802FFD2"><enum>(B)</enum><header>Applicable insurance regulatory body</header><text>The term <term>applicable insurance regulatory body</term> means, with respect to any insurance business, the entity established by law to license, authorize, or regulate such business and to which the statement described in subparagraph (A) is provided.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" display-inline="no-display-inline" id="H8843734DAAEB47F3ACE9922840E03C14"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section></subtitle><enum>V</enum><header>Exempt organizations</header> <subtitle id="H456E21DF5EDE46058EB87934B5296FE7"><enum>A</enum><header>Unrelated Business Income Tax</header> <section id="HF3C420577DCC407790AC171D038BDD57"><enum>5001.</enum><header>Clarification of unrelated business income tax treatment of entities treated as exempt from taxation under section <enum-in-header>501(a)</enum-in-header></header> <subsection id="H73DDCDB64C3D47EA8822389E8298D0D8"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/511">Section 511</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H3711F2F1E85F466580DD6C9A26DB747B" style="OLC"> <subsection id="H4BC8BFA450E84489AA70DEC8FE5A9902"><enum>(d)</enum><header>Organizations and trusts exempt from taxation not solely by reason of section <enum-in-header>501(a)</enum-in-header></header><text display-inline="yes-display-inline">For purposes of subsections (a)(2) and (b)(2), an organization or trust shall not fail to be treated as exempt from taxation under this subtitle by reason of section 501(a) solely because such organization is also so exempt, or excludes amounts from gross income, by reason of any other provision of this title.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H6768AA7BE28F428C95AC95E76977FE11"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="HDC2B4E88CA6248ACABC4D2A5695D657A"><enum>5002.</enum><header>Exclusion of research income limited to publicly available research</header> <subsection id="HCCCB9283A80A47B4B28E9E564BE11A55"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/512">Section 512(b)(9)</external-xref> is amended by striking <quote>from research</quote> and inserting <quote>from such research</quote>.</text> </subsection><subsection id="HE556C1A1D1D24B239A67A55840226E8C"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section></subtitle><subtitle id="HE498B68610FA483B8E48035A85D73649"><enum>B</enum><header>Excise Taxes</header> <section id="H31AFF05E21F84CF9B5DCEFD1332DB96F"><enum>5101.</enum><header>Simplification of excise tax on private foundation investment income</header> <subsection id="HD4C98B5392974271867B3DD5EF95EB7A"><enum>(a)</enum><header>Rate reduction</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/4940">Section 4940(a)</external-xref> is amended by striking <quote>2 percent</quote> and inserting <quote>1.4 percent</quote>.</text> </subsection><subsection id="HC16E9E1D8CC1482C939BCC482123A0BD"><enum>(b)</enum><header>Repeal of special rules for certain private foundations</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/4940">Section 4940</external-xref> is amended by striking subsection (e).</text> </subsection><subsection id="H9BD529D481C84C5696444E759A5728AD"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section id="HF67E3AADBB4E4E4FA7E5E439825FE878"><enum>5102.</enum><header>Private operating foundation requirements relating to operation of art museum</header> <subsection id="H0DC2D61811EE407886EDB737F85F50F7"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/4942">Section 4942(j)</external-xref> is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="HF59EDF860A2D40DCBE74B03BD7627563" style="OLC"> <paragraph id="H11772D65C6464C8982CD63A0AB679A19"><enum>(6)</enum><header>Organization operating art museum</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>operating foundation</quote> shall not include an organization which operates an art museum as a substantial activity unless such museum is open during normal business hours to the public for at least 1,000 hours during the taxable year.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H49CAC9000D904164A28FB16D8146961F"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section commented="no" id="H9E5970EBDEB84CA49C2171E609196CBE"><enum>5103.</enum><header>Excise tax based on investment income of private colleges and universities</header> <subsection commented="no" id="H7838D59143FF491CAE13D5D4B02A9A69"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc-chapter/26/42">Chapter 42</external-xref> is amended by adding at the end the following new subchapter:</text> <quoted-block display-inline="no-display-inline" id="HFE1528EAABEE472FAD9B7FA4F09C1BC0" style="OLC"> <subchapter commented="no" id="H2B273C67E849401389FE294FD961B52C"><enum>H</enum><header>Excise tax based on investment income of private colleges and universities</header> <toc container-level="subchapter-container" idref="H2B273C67E849401389FE294FD961B52C" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration"> <toc-entry idref="H2092E78522C649CEAF0DDAC4D0E60FD3" level="section">Sec. 4969. Excise tax based on investment income of private colleges and universities.</toc-entry></toc> <section commented="no" id="H2092E78522C649CEAF0DDAC4D0E60FD3"><enum>4969.</enum><header>Excise tax based on investment income of private colleges and universities</header> <subsection commented="no" id="HCF378C7394B04556BC6DC21F7A16BD62"><enum>(a)</enum><header>Tax imposed</header><text display-inline="yes-display-inline">There is hereby imposed on each applicable educational institution for the taxable year a tax equal to 1.4 percent of the net investment income of such institution for the taxable year.</text> </subsection><subsection commented="no" id="HEBB2FF8BD6F8423DB13666E8CD23825B"><enum>(b)</enum><header>Applicable educational institution</header><text display-inline="yes-display-inline">For purposes of this subchapter—</text> <paragraph commented="no" id="H8F523936E5C84E6EA39582908B0D6994"><enum>(1)</enum><header>In general</header><text>The term <quote>applicable educational institution</quote> means an eligible educational institution (as defined in section 25A(e)(3))—</text> <subparagraph id="HC0029D45E74D4A58ABF908A092BC3907"><enum>(A)</enum><text>which has at least 500 students during the preceding taxable year,</text> </subparagraph><subparagraph commented="no" id="HE518458FB0664DA28C22D2768561B15E"><enum>(B)</enum><text display-inline="yes-display-inline">which is not described in the first sentence of section 511(a)(2)(B), and</text> </subparagraph><subparagraph commented="no" id="HC6DBB22A3ED5434ABAB29E22A3580E51"><enum>(C)</enum><text>the aggregate fair market value of the assets of which at the end of the preceding taxable year (other than those assets which are used directly in carrying out the institution’s exempt purpose) is at least $250,000 per student of the institution.</text> </subparagraph></paragraph><paragraph commented="no" id="HC15376D268E446188A5832F33FCBC4F5"><enum>(2)</enum><header>Students</header><text>For purposes of paragraph (1), the number of students of an institution shall be based on the daily average number of full-time students attending such institution (with part-time students taken into account on a full-time student equivalent basis).</text> </paragraph></subsection><subsection commented="no" id="H9EDE96317B1E4ED99CA0D1EBB8340FB4"><enum>(c)</enum><header>Net investment income</header><text>For purposes of this section, net investment income shall be determined under rules similar to the rules of section 4940(c).</text> </subsection><subsection id="HF47B2F40210842659B60D7A49589A715"><enum>(d)</enum><header>Assets and net investment income of related organizations</header> <paragraph id="H4B1C6FED029145F4A9C6DF8A9118AC1F"><enum>(1)</enum><header>In general</header><text>For purposes of subsections (b)(1)(C) and (c), the assets and net investment income of any related organization shall be treated as the assets and net investment income of the eligible educational institution.</text> </paragraph><paragraph id="HDAD2BC413B114A939740DC9E1C52A809"><enum>(2)</enum><header>Related organization</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>related organization</quote> means, with respect to an eligible educational institution, any organization which—</text> <subparagraph id="H35351E4B7F3449C4BF1445D9B0168683"><enum>(A)</enum><text>controls, or is controlled by, such institution,</text> </subparagraph><subparagraph id="H3B6F287A40244D6796F4E677259F726E"><enum>(B)</enum><text>is controlled by one or more persons that control such institution, or</text> </subparagraph><subparagraph id="H0D4FD789FDCF451C8592EE682F83E21E"><enum>(C)</enum><text>is a supported organization (as defined in section 509(f)(3)), or an organization described in section 509(a)(3), during the taxable year with respect to such institution.</text></subparagraph></paragraph></subsection></section></subchapter><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="HE7B1CF86EB6F43EA8928868D1F6EACAE"><enum>(b)</enum><header>Clerical amendment</header><text>The table of subchapters for <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/42">chapter 42</external-xref> is amended by adding at the end the following new item:</text> <quoted-block display-inline="no-display-inline" id="H098084CD4CB44B1B850EFA99AD4B0720" style="OLC"> <toc regeneration="no-regeneration"> <toc-entry level="subchapter">Subchapter H—Excise tax based on investment income of private colleges and universities</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="HC8A1473163B546B9A103772940BA1CEA"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section><section commented="no" id="HB24EF9FEECD6439ABC31057BAE281C23"><enum>5104.</enum><header>Exception from private foundation excess business holding tax for independently-operated philanthropic business holdings</header> <subsection commented="no" id="HB54D425477C844F196411C45565CF134"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/4943">Section 4943</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="HA1291B02B0454835817A8B33C816D379" style="OLC"> <subsection commented="no" id="HB198E38A12484B30B2624F3FF834D40B"><enum>(g)</enum><header>Exception for certain holdings limited to independently-operated philanthropic business</header> <paragraph commented="no" id="HC0E559DB5A3B4E2E88047988144B6007"><enum>(1)</enum><header>In general</header><text>Subsection (a) shall not apply with respect to the holdings of a private foundation in any business enterprise which for the taxable year meets—</text> <subparagraph commented="no" id="HC40471A3288A41608A951C88C87AF7BC"><enum>(A)</enum><text>the ownership requirements of paragraph (2),</text> </subparagraph><subparagraph commented="no" id="H5312065A219F47EBB089E6165F113070"><enum>(B)</enum><text>the all profits to charity distribution requirement of paragraph (3), and</text> </subparagraph><subparagraph commented="no" id="H934844CB89FA48BE931598F511EE00AA"><enum>(C)</enum><text>the independent operation requirements of paragraph (4).</text> </subparagraph></paragraph><paragraph commented="no" id="H5EC38EED7FDB4DDDB6EFACB33294FE33"><enum>(2)</enum><header>Ownership</header><text>The ownership requirements of this paragraph are met if—</text> <subparagraph commented="no" id="H626569C1D3BC4007B697D260407BE4FD"><enum>(A)</enum><text>100 percent of the voting stock in the business enterprise is held by the private foundation at all times during the taxable year, and</text> </subparagraph><subparagraph commented="no" id="HBB8B1513E23F4FDAA4DF9CF1CB0BD164"><enum>(B)</enum><text display-inline="yes-display-inline">all the private foundation’s ownership interests in the business enterprise were acquired not by purchase.</text> </subparagraph></paragraph><paragraph commented="no" id="H0815CD4F19DA4057ACA334D27AB095D3"><enum>(3)</enum><header>All profits to charity</header> <subparagraph commented="no" id="H87A15AF9C488425EAEA64B6AFD7E234A"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The all profits to charity distribution requirement of this paragraph is met if the business enterprise, not later than 120 days after the close of the taxable year, distributes an amount equal to its net operating income for such taxable year to the private foundation.</text> </subparagraph><subparagraph commented="no" id="HF40EDC54C3F54E98A07F7EE9332CE11A"><enum>(B)</enum><header>Net operating income</header><text>For purposes of this paragraph, the net operating income of any business enterprise for any taxable year is an amount equal to the gross income of the business enterprise for the taxable year, reduced by the sum of—</text> <clause commented="no" id="H1B7E057564F54B8F8F6B286627859128"><enum>(i)</enum><text>the deductions allowed by chapter 1 for the taxable year which are directly connected with the production of such income,</text> </clause><clause commented="no" id="H6FEBFC944D224C0FA1B07EC87ED03754"><enum>(ii)</enum><text>the tax imposed by chapter 1 on the business enterprise for the taxable year, and</text> </clause><clause commented="no" id="HEC4F5008EEDF463EA99BD37675E59B35"><enum>(iii)</enum><text display-inline="yes-display-inline">an amount for a reasonable reserve for working capital and other business needs of the business enterprise.</text> </clause></subparagraph></paragraph><paragraph commented="no" id="HA672B7710FEA496083F9A8A6A37AD9BE"><enum>(4)</enum><header>Independent operation</header><text>The independent operation requirements of this paragraph are met if, at all times during the taxable year—</text> <subparagraph commented="no" id="H80F73DE7278146A7BF96116025142582"><enum>(A)</enum><text>no substantial contributor (as defined in section 4958(c)(3)(C)) to the private foundation, or family member of such a contributor (determined under section 4958(f)(4)) is a director, officer, trustee, manager, employee, or contractor of the business enterprise (or an individual having powers or responsibilities similar to any of the foregoing),</text> </subparagraph><subparagraph commented="no" id="H748E91A31BFA407EBB8FF0446612BE73"><enum>(B)</enum><text display-inline="yes-display-inline">at least a majority of the board of directors of the private foundation are not—</text> <clause commented="no" id="H57D982A4E5A744C682436F43AA49C970"><enum>(i)</enum><text>also directors or officers of the business enterprise, or</text> </clause><clause commented="no" id="H61399BFE75E34ED5A13092C1904F6C29"><enum>(ii)</enum><text>members of the family (determined under section 4958(f)(4)) of a substantial contributor (as defined in section 4958(c)(3)(C)) to the private foundation, and</text> </clause></subparagraph><subparagraph commented="no" id="H00B7A019FC7C4AA3941D813A21C0A8C5"><enum>(C)</enum><text display-inline="yes-display-inline">there is no loan outstanding from the business enterprise to a substantial contributor (as so defined) to the private foundation or a family member of such contributor (as so determined).</text> </subparagraph></paragraph><paragraph commented="no" id="H280189F9F80747EAB23B481D0443DB07"><enum>(5)</enum><header>Certain deemed private foundations excluded</header><text>This subsection shall not apply to—</text> <subparagraph commented="no" id="HADFF0CABF968499CACC34A9E43CE0417"><enum>(A)</enum><text>any fund or organization treated as a private foundation for purposes of this section by reason of subsection (e) or (f),</text> </subparagraph><subparagraph commented="no" id="H78F9F15BB6364E80BB25352D8B77B674"><enum>(B)</enum><text>any trust described in section 4947(a)(1) (relating to charitable trusts), and</text> </subparagraph><subparagraph commented="no" id="H80E861830B1B4E75AA59ED26D4B0F26A"><enum>(C)</enum><text>any trust described in section 4947(a)(2) (relating to split-interest trusts).</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="HB7BB7CD89A46425897F6441436238766"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2017.</text> </subsection></section></subtitle><subtitle id="H610894A9851C4F269F34E5148CBECCCE"><enum>C</enum><header>Requirements for organizations exempt from tax</header> <section commented="no" id="H8F6717B21BE746C1B6C8F3FC56481E4A"><enum>5201.</enum><header><enum-in-header>501(c)(3)</enum-in-header> organizations permitted to make statements relating to political campaign in ordinary course of activities</header> <subsection commented="no" id="H01566FF1388548F0AB44127D3D19D81E"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/501">Section 501</external-xref> is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="H80F3AA75065E48F498C29BFB6A96FF22" style="OLC"> <subsection commented="no" id="H84AF33E79E45411080CCD39B9A0D34BC"><enum>(s)</enum><header>Special rule relating to political campaign statements of organizations described in subsection <enum-in-header>(c)(3)</enum-in-header></header> <paragraph commented="no" id="HDD96277EB8BA4AEA800A753602136689"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of subsection (c)(3) and sections 170(c)(2), 2055, 2106, 2522, and 4955, an organization shall not fail to be treated as organized and operated exclusively for a purpose described in subsection (c)(3), nor shall it be deemed to have participated in, or intervened in any political campaign on behalf of (or in opposition to) any candidate for public office, solely because of the content of any statement which—</text> <subparagraph commented="no" id="H506028A2EB9A4E5A848283B37B983F21"><enum>(A)</enum><text>is made in the ordinary course of the organization’s regular and customary activities in carrying out its exempt purpose, and</text> </subparagraph><subparagraph commented="no" id="H187BE5A5AFF04F5FAD117B484E729774"><enum>(B)</enum><text>results in the organization incurring not more than de minimis incremental expenses.</text> </subparagraph></paragraph><paragraph id="HFEF02ADB4C0C42AFAAF0F0B24C125F69"><enum>(2)</enum><header>Termination</header><text display-inline="yes-display-inline">Paragraph (1) shall not apply to taxable years beginning after December 31, 2023.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection commented="no" id="H38CF473AF1F7436C8689B7D3D75C5A0F"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2018.</text> </subsection></section><section display-inline="no-display-inline" id="HC797DA5B5D9B4EC29FAE889CF0F7F970" section-type="subsequent-section"><enum>5202.</enum><header>Additional reporting requirements for donor advised fund sponsoring organizations</header> <subsection id="HDB5F58B1504D4AE08EEE322CEC2AA24F"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/6033">Section 6033(k)</external-xref> is amended by striking <quote>and</quote> at the end of paragraph (2), by striking the period at the end of paragraph (3), and by adding at the end the following new paragraphs:</text> <quoted-block display-inline="no-display-inline" id="H46298799830F49CCA7DAAFDA2910B027" style="OLC"> <paragraph id="H61A4876807E749E581043E61D225A9DA"><enum>(4)</enum><text>indicate the average amount of grants made from such funds during such taxable year (expressed as a percentage of the value of assets held in such funds at the beginning of such taxable year), and</text> </paragraph><paragraph id="HCBE79BCF323C4A9BB6E3874D49306121"><enum>(5)</enum><text display-inline="yes-display-inline">indicate whether the organization has a policy with respect to donor advised funds (as so defined) for frequency and minimum level of distributions.</text> </paragraph><quoted-block-continuation-text quoted-block-continuation-text-level="subsection">Such organization shall include with such return a copy of any policy described in paragraph (5).</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H3510E4C91CBD41659224D37BD1AB7F84"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendment made by this section shall apply for returns filed for taxable years beginning after December 31, 2017.</text> </subsection></section></subtitle> Passed the House of Representatives November 16, 2017.Karen L. Haas,Clerk November 28, 2017Read the second time and placed on the calendar